AG: MEMBERS TRYING TO BRIDGE GAPS ON TROPICAL PRODUCTS, PREFERENCE EROSION

WTO Members appear willing to try to bridge persistent differences on how to liberalise trade in tropical products while also addressing the effects of trade preference erosion, the chair of the agriculture negotiations said on 19 May, following consultations with negotiators from about 20 delegations.

Both sets of consultations were based on 'reference papers' that Chair Ambassador Crawford Falconer (New Zealand) had circulated to delegations earlier in the week. He has already produced such documents on most of the issues in the agriculture negotiations, identifying convergence, continuing divisions, and possible paths to compromise. Falconer intends for these reference papers to serve as the basis of an eventual draft agreement.

In one of his recent reference papers, Falconer acknowledged that there was "clearly going to be some overlap" between the two issues, since the negotiations have involved a few of the same products.

However, the two mandates have neatly placed some Members in opposing camps: while some want developed countries to remove all tariffs and quotas on 'tropical products' such as sugar and bananas, others have long benefited from trade preferences for these very commodities, and thus stand to lose from across-the-board liberalisation. While the preference beneficiaries would like rich countries to be able to slate these products for lower tariff cuts, thus preserving more of their margin of preference, the others would like to prohibit the same products from being designated as 'sensitive.' The latter tend to argue that preference erosion should only be dealt with through aid payments and other assistance.

Falconer calls for 'realism' on tropical products

The July 2004 Framework commits Members to pursue the "full implementation of the long-standing commitment to achieve the fullest liberalisation of trade" in tropical farm products as well as crops that farmers could grow instead of narcotics - so-called 'diversification products.'

Members still need to identify which products will qualify, and agree on their treatment. Falconer told the 19 May meeting of all delegations that negotiators generally agreed with his assessment that agreement on an exhaustive list was unlikely, given the lack of time available and the fact that Members had not been able to agree on one in the half-century history of the multilateral trading system.

One approach under consideration would have Members establish a "core set" of products that individual countries could build on when scheduling specific liberalisation commitments. Since some products are controversial, Falconer suggested in his paper that "we could begin by developing a list of products for which agreement exists," before deciding on any others. He pointed to rice's absence from Members' different lists of tropical products as an example of the "realism" that would be necessary for Members to reach a compromise. Sources report that the chair is encouraging Members to differentiate between products that currently face high barriers - the lowering of which would be politically controversial and economically significant - and those that do not.

Falconer's paper said that Members' positions on the treatment of tropical products were "quite some way from a realistic approach zone." In it, he suggested that while the mandate for 'fullest liberalisation' would be "difficult to reconcile with something that is less than the 'default' liberalisation treatment," the complete elimination of duties and quotas sought by a group of eight Latin American countries was also unrealistic (see BRIDGES Weekly, 3 May 2006). For instance, he observed, developed countries were not likely to eliminate all tariffs on sugar as part of the Doha Round.

Although participants at the small-group meeting did repeat their past positions, one negotiator said that Members could recognise -- informally -- that it would be hard to eliminate tariffs and quotas on all products, as Falconer suggested. They could then focus on pursuing duty- and quota-free access for tropical products where it was achievable. For the rest, they could try to agree on some sort of treatment that would still be beyond the requirements of the overall formula, but not go as far as complete liberalisation.

Preference erosion problems should not be overstated

Falconer said that the problems posed by the mandate to address preference erosion should not be overstated, since only a handful of products would be significantly affected, generally with respect to a single export market (the EU in most cases, the US for a handful).

The chair's paper referred to a March 2006 publication by the WTO Secretariat that found that there were 12 Members for which losses from preference erosion would exceed four percent of their total agriculture exports to the EU, the US, Japan, and Canada. For these countries, which included Cameroon, Fiji, Guyana, and Mauritius, sugar and bananas would account for the lion's share of lost revenue - close to 80 percent -- although Botswana and Namibia stood to suffer reductions in their beef exports to the EU. For other products, Falconer told delegates that the issue was "a solution in search of a problem."

In its mandate on preference erosion, the July 2004 Framework asks Members to refer to the provisions set out in Paragraph 16 of the 'Harbinson text,' the draft agreement put together in March 2003 by its namesake, the then-chair of the agriculture negotiations, in preparation for the Cancun Ministerial Conference later that year (TN/AG/W/1/Rev.1).

This text, which was never adopted when that meeting ended in collapse, asked Members granting tariff preferences to maintain them "to the maximum extent technically feasible" while implementing their liberalisation commitments. It also provided for this implementation to be delayed and carried out over a longer period for products "of vital export importance for developing country [preference] beneficiaries." To be eligible, products would have had to account for a certain minimum percentage - the text contained the figure 20, in brackets - "of the total merchandise exports of any [preference] beneficiary." It also called for preference-granting countries to provide targeted technical assistance to beneficiaries.

Some countries believe that steps taken to help preference beneficiaries should be limited to 'non-trade' measures such as aid and technical assistance.

Falconer's paper noted that some ideas not present in the Harbinson text had also been proposed. These included lower tariff reductions for affected products, possibly by having preference-granting countries select them as 'sensitive.'

Allowing sugar and bananas to be designated as 'sensitive' would be anathema to the countries pushing for duty- and quota- free access for tropical products. The chair has suggested that the divisive issue of whether or not Members would be able to designate tropical products as 'sensitive' could be left to ministers. A draft agreement text could simply include a bracketed section (signifying a lack of agreement) stating that they could not; ministers would decide whether or not to retain it.

Members are expected to focus on domestic support and market access over the next two weeks.

ICTSD reporting.