AG CHAIR TO DRAFT 'REFERENCE PAPERS' ON ISSUES WHERE SOME CONVERGENCE APPARENT

Following a week of discussions, agriculture negotiations Chair Ambassador Crawford Falconer (New Zealand) told Members at an informal meeting on 17 February that he would start producing 'reference papers' on the handful of issues where there had been some convergence, in an effort to keep the talks on track towards the end-April deadline for an agreement on tariff and subsidy cuts set out in the Hong Kong Ministerial Declaration. He warned, however, that the negotiations had not entered "the zone of a deal" on these 'modalities.' Delegates had spent much of the week in consultations on the set of questions about each unresolved issue in the farm trade talks that Falconer had circulated to them on 9 February (see BRIDGES Weekly, 15 February 2006).

Some negotiators praised the questions for helping to ensure that Members talked about the issues that required attention as opposed to simply repeating long-held positions, while others suggested that they didn't prevent delegations from simply focusing on the issues in which they were interested. In any case, they generally described the discussions as concrete and constructive.

Falconer has said that the 'reference papers' are intended to evolve, on the basis of Members' input, into draft modalities. They will outline the structure of the modalities, i.e., the general approach to be taken to specific issues, while leaving the decisions about the precise numerical values to political decision makers if necessary. Delegates report that these 'reference papers' are welcome so long as they reflect emerging consensus rather an attempt by Falconer to push positions forward. They agreed on the need for text-based negotiations for making progress in the negotiations.

Food aid disciplines a step closer

The week's talks were most successful with regard to food aid, specifically on how to prevent it from distorting export competition -- part of the Hong Kong mandate to eliminate all forms of export subsidies by 2013. Falconer said that a "shadowy outline" of a deal was emerging on the issue. This will likely be reflected in his reference paper on the subject.

Members discussed the parameters of a 'safe box' through which to provide food aid during genuine emergencies, which ministers agreed in Hong Kong should be protected. Sources indicate that delegates discussed whether solicitations for emergency aid by intergovernmental organisations should be sufficient to make it qualify for the safe box, with some suggesting that what constitutes an "emergency" may need to be defined more clearly. Furthermore, they appeared to recognise that the safe box should also cover situations in which donor governments need to act before international organisations have time to declare an emergency.

As for non-emergency situations, Members continued to debate whether food aid should only be given in cash form, and whether in-kind aid could be 'monetised' (sold by recipient governments to raise money) or even re-exported. Falconer suggested that Members seemed more willing to discuss compromise than before. For example, supporters of monetisation seemed more open to discussing potential disciplines to reduce the chances that aid might displace commercial sales.

Falconer: "nothing particularly new" on domestic support

No convergence appeared on disciplines for the 'new blue box,' created in the July 2004 Framework (WT/L/579), which in the future is to cover price-related support such as the US counter-cyclical payments to farmers, which rise when world market prices fall. Positions also remain essentially unchanged on the need for disciplines for the 'old' blue box, which allows compensation for production-limiting measures. As before Hong Kong, some Members, including the US, advocated capping blue box spending at a lower level, while the others wanted more far-reaching measures, such as new disciplines on grants made through this box.

Members of the Cairns Group of agricultural exporters, as well as the G-20 coalition of developing countries, are also seeking to tighten existing criteria for 'green box' support, which will remain unlimited and exempt from reduction commitments. In addition, developing countries have proposed elaborating new criteria that would make it easier for them to support development objectives. These negotiations bore little fruit.

Discussions on the base year or period on which to calculate product-specific 'amber box' support levels were similarly inconclusive -- several countries want to use subsidies notified during the 1995-2000 period for implementing Uruguay Round commitments. Sources report that US, in contrast, would prefer a 1999-2001 base period, since this would take into account some of its newer farm subsidy programmes.

In spite of the continuing lack of convergence, Falconer indicated that he would prepare a reference paper on these issues.

No agreement on sensitive products

Market access remains the most difficult area of the agriculture negotiations. No common ground emerged on the treatment of 'sensitive products,' which, under the July 2004 Framework, all Members may designate for cuts lower than those required by the formula so long as they provide 'substantially better' market access for them through a combination of tariff rate quota (TRQ) expansion and tariff reduction. Current proposals on the number of sensitive products vary between 1 and 15 percent of all tariff lines, and have been the subject of heated disagreement.

The treatment of these products -- basically, how to provide the substantial increase in market access -- has also proved contentious. Several countries want Members to raise TRQs to a level equivalent to a certain percentage of total domestic consumption of the product concerned. Some, including the G-10, have called for allowing Members to make tariff reductions smaller than the already-lower level required for sensitive products in exchange for expanding TRQs by a correspondingly higher amount.

Delegates report that the US is not enthusiastic about TRQ expansion, since it believes that tariff reductions would do a better job of providing the substantial improvements in market access that it is seeking. It tabled an informal document saying that Members should not be allowed to trade lower tariff reductions against higher TRQ expansions for sensitive products.

In the same proposal, the US states that it wants TRQ expansion to be based on both domestic consumption and the extent to which the tariff cut for a particular sensitive product deviates from what it would have been under the regular tariff reduction formula. It operationalises this to express TRQ expansion as the sum of two components: a 'base' increase that is equal to a certain percentage of domestic consumption, and an additional percentage (also of domestic consumption) that rises in proportion to the extent of the deviation from the formula. In sum, more flexibility in tariff treatment for sensitive products would mean larger TRQ expansions.

Falconer said there would be little point in trying to draft his own paper on the subject, since there had been little change in Members' positions.

Discussions on the special safeguard mechanism (SSM), which were effectively based on an October paper from the G-33, were inconclusive as well (see BRIDGES Weekly, 2 November 2005).

Some issues remain unresolved with regard to the conversion of 'specific' duties based on import volumes into percentage based 'ad valorem equivalents' (AVEs). Members agreed in May 2005 on a broad mathematical approach for AVE conversion, which is a prerequisite for classifying tariffs into the tiers in the reduction formula, but left the treatment of sugar undecided, along with procedures for verifying each others' AVE calculations (see BRIDGES Weekly, 11 May 2005). It was decided at the gathering that the Secretariat would organise a meeting to resolve outstanding issues on the matter.

New proposal on cotton

Benin, Burkina Faso, Chad, and Mali submitted a new proposal (TN/AG/GEN/12) calling cotton subsidies to be cut more deeply and more rapidly than domestic support to other products. The four proponents of the WTO work programme on cotton called for the reduction in trade-distorting domestic support to be three times higher than the cut agreed for domestic support in general, and the implementation period to be one third as long. This would be accomplished by linking the general reduction formula to a coefficient 'c' when calculating cuts to cotton subsidies.

How cotton subsidies might be cut by three times more than overall domestic support is unclear, since for the proposals on the table, this would entail reductions of the order of 150 to 210 percent. However, sources suggest that the four countries are, in coming weeks, likely to spell out how this coefficient 'c' would translate into a higher level of than that for other products. Major cotton subsidisers such as the US reportedly did not comment on the proposal.

Some process-related concerns emerged at the meeting. Cuba and Sri Lanka wondered out loud about whether their views had been represented in consultations to which they had not been invited. Some delegates suggested that countries not belonging to significant regional or other groupings in the negotiations risked being left on the margins of the discussions.

The next official 'agriculture week' is set to begin on 20 March.

ICTSD reporting; "WTO Chair seeks sufficient progress to begin drafting of agriculture texts," WTO REPORTER, 16 February 2006.