AG WEEK SEES CONSTRUCTIVE DEBATE BUT NO BREAKTHROUGHS

A week of WTO agriculture negotiations from 20-24 March did not result in any breakthroughs on the core issues of subsidy and tariff cuts, spurring more doubt about whether Members can bridge their differences in time for the end-April deadline for a comprehensive agreement on modalities. Nevertheless, agriculture negotiations Chair Ambassador Crawford Falconer (New Zealand) says the talks went somewhat better than anticipated, with delegates engaging in constructive debate on a variety of other issues, including food aid, the treatment of 'sensitive products,' and the special safeguard mechanism (SSM).

Africa and LDC Group Paper on Categorizing Food Aid

Earlier in the month, the African and Least-Developed Country (LDC) Groups circulated a submission on food aid (TN/AG/GEN/13), outlining ways in which legitimate emergency and non-emergency aid flows could be protected while simultaneously ensuring that "food aid does not... abet dumping of food or encourage displacement in recipient countries." The Hong Kong Declaration mandated Members to develop disciplines on in-kind food aid so that it cannot serve as a loophole for export subsidization, which is slated to be eliminated by 2013. It also provided for the creation of a 'safe box' for bona fide food aid... to ensure that there is no unintended impediment to dealing with emergency situations."

The sponsors of the new paper, many of them food aid recipients, stressed that new disciplines must not impede the delivery of aid to countries and communities that need it. They outlined criteria for the 'safe box' for emergency food aid, which would be exempt from disciplines. According to the paper, recipient country authorities would cooperate with international humanitarian assistance bodies to declare emergencies based on UN definitions, and assess the food needs of the people affected. The 'safe box' would cover aid flows from other Members in quantities based on the independent needs assessments for the duration of the emergency.

The proposal also sets out guidelines for 'non-emergency food aid,' which covers all donations that do not qualify for the 'safe box.' It specifies that such in-kind food aid must be demand driven, provided exclusively in the form of grants, and must not be tied to trade conditionalities. The LDC and African Group also want non-emergency food aid to take into account local market conditions, and not be re-exported. They would allow food aid to be monetised -- sold to raise money -- "in exceptional circumstances," to fund activities directly related to its delivery or the procurement of agricultural inputs.

For both categories, transparency is emphasised through notification requirements for donors and humanitarian assistance organizations.

Countries generally welcomed the proposal at a meeting of all delegations on 22 March, though there was no consensus on the classification system. Some countries wanted stronger rules on monetisation to prefer it from displacing commercial sales, or even an outright ban. Several sources referred to the discussions as a rare instance of real negotiations occurring in a plenary session with all Members present. Falconer said that the discussion on food aid was generally good, adding that the proposal would likely serve as a framework for further negotiations on the issue.

Divergence on how to expand tariff quotas for sensitive products

The issue of sensitive products, which developed and developing countries alike will be able to slate for tariff cuts lower than those required by the reduction formula, so long as they provide increased market access through a combination of tariff cuts and tariff-rate quota (TRQ) expansion, has pitted relatively protectionist Members like the EU and G-10 (net food importing, mainly developed countries), against agricultural exporters such as the US and Cairns Group countries. The precise treatment to be enjoyed by 'sensitive products' remains far from determined. Members continue to differ on the basis for expanding TRQs for sensitive products: some want it linked to domestic consumption of the product in question, others argue that it should be based on present import or existing TRQ commitments. However, the first approach does not take into account the degree of the product's 'sensitivity' to a particular Member, while the latter two would fail to produce substantial increases if original levels were low. At the 22 March gathering, the G-10 drew attention to their existing proposal based on both domestic consumption and existing TRQ levels (see BRIDGES Weekly, 1 February 2006). Brazil informed Members that the G-20 was working on a 'hybrid' approach of its own.

Costa Rica, which is part of the G-11 group of countries seeking liberalized trade in tropical products, said that the selection of sensitive products was also significant -- and that tropical products must not be designated as sensitive.

No convergence on domestic support

Agreement remained elusive on 'blue box' domestic support, as Members continued to disagree on cutting overall spending levels, product-specific caps, and new rules to govern such grants. The blue box traditionally covered trade-distorting subsidies that are linked to limits on production (the so-called 'old blue box'). It was expanded in the July 2004 Framework (WT/L/579) to cover subsidies that require no production whatsoever (the 'new blue box), allowing it to capture the US' controversial counter-cyclical payments to farmers, which rise when world market prices fall. The week did see some new views expressed: for instance, the EU indicated that it would be willing to consider product-specific spending limits, so long as other Members -- principally the US -- dropped their opposition to doing the same for new rules on blue box spending.

The 24 March session saw discussions on a new informal G-33 proposal containing specific values for additional duties that developing countries could impose under the special safeguard mechanism (SSM), a measure intended to afford developing countries a measure of protection against import surges or a collapse in import prices (see related story, this issue). Some Members found the proposed price- and volume-related trigger levels too low and the safeguard duty levels too high, and argued that such an SSM could facilitate unjustifiable protectionism.

In his report on the talks to the Trade Negotiations Committee on 28 March, Falconer strongly urged Members to speed up the pace of negotiations. Sources report that he is likely to prepare detailed 'reference papers' based on Members' proposals and views on some issues in the talks, potentially including food aid, export credits, state trading enterprises, and the blue box.

The next agriculture week is scheduled to begin on 18 April.

ICTSD reporting.