AG: WTO MEMBERS FIRE OPENING SALVOES ON MARKET ACCESS AS COUNTDOWN TO END-JUNE BEGINS

WTO Members kicked off a fresh round of discussions on agricultural market access at the end of last week, with the clock ticking towards an end-June deadline for a framework deal. The chair of the negotiations announced on 2 June that he would suspend all small group consultations -- barring any sudden moves towards compromise -- in order to focus on preparing a document to guide the discussions on market access issues.

Market access remains one of the most divisive areas of the agriculture negotiations, as Members with high tariff barriers seek to fend off calls for cuts. While the US and the G-20 group of developing countries have long asked the EU in particular to sweeten its farm tariff offer, there have been some suggestions in recent weeks that the EU and G-20 may be moving closer together -- to the dismay of the US (see BRIDGES Weekly, 24 May 2006).

Although positions remain largely unchanged on the extent of tariff reduction and exceptions to the cuts, the 2 June meeting saw Members discuss a barrage of new documents on other market access issues. These papers -- all from members of the Cairns Group of farm exporters -- focused on tariff escalation and the administration of import quotas.

Director-General Pascal Lamy has asked agriculture chair Ambassador Crawford Falconer (New Zealand) to produce, by the week of 19 June, a detailed initial draft of a potential agreement on 'modalities' -- the figures and formulae for tariff and subsidy cuts, as well as the number and treatment of products which countries will be able to shield from the full force of tariff reduction. However, Falconer has repeatedly emphasised that Members must narrow their differences for him to be able to produce a detailed draft text. Agreement on several of the relatively minor issues in the negotiations would leave fewer decisions up to ministers and senior trade officials scheduled to meet at the end of the month, thus improving their chances of brokering a deal.

High on Falconer's priority list as he works to develop this comprehensive draft is a 'compendium' document on a range of issues in the market access talks. The paper is due to be produced this week in time for a discussion on 9 June.

New submissions, but positions remain unchanged

Canada presented a detailed proposal for addressing 'tariff escalation' -- when countries impose higher tariffs on processed products (such as chocolate) than on raw materials (such as cocoa). By discouraging movement from primary to value-added production, tariff escalation can serve as a disincentive to industrialisation in developing countries. Reminding Members that the July 2004 Framework committed them to address tariff escalation "through a formula to be agreed," the informal paper proposes a three-step process: identifying a set of primary products that face higher tariffs when processed, deciding how far along a product's processing chain to go in addressing the problem, and finally negotiating an appropriate formula to tackle escalated tariffs.

Canada suggests that the percentage tariff reduction required by the overall formula could be multiplied by a factor of 1.3 for processed products thus identified. According to the paper's hypothetical example for this approach, an oil that would ordinarily have been subject to a 60 percent tariff reduction would instead be subject to a 78 percent cut, thus pushing its final tariff level closer to the lower duty levied on the unprocessed oilseed.

The Cairns Group -- minus one member, Canada -- put forward a document on a range of market access issues. The document welcomed initiatives to address tariff escalation, and called for tariffs not expressed in terms of a percentage value -- such those expressed in 'dollars per tonne' -- to be converted and bound in ad valorem terms. It also argues that the 'Special Safeguard' in the Agreement on Agriculture -- established during the last round of trade negotiations to help governments protect farmers against import surges -- should be abolished from the start of the period for implementing Doha Round commitments. The Cairns Group argues that this safeguard was only intended to be a transitional mechanism, and is therefore no longer needed. The US, too, has called for eliminating the Special Safeguard; Members including the EU have argued for its preservation.

Notably, the submission proposes eliminating all in-quota tariffs for developed countries -- including those on the 'sensitive' products which are to be subject to shallower tariff cuts. The 'tariff rate quotas' (TRQs) maintained by many Members allow the annual entry of a certain volume of imports at a tariff rate that is lower than that for over-quota imports (but not necessarily zero). Trade sources suggest that Canada may have been reluctant to co-sponsor the paper because of its use of TRQs to regulate trade in its heavily-protected poultry, dairy and egg sectors.

An independent submission from Australia builds on the Cairns Group TRQ proposal to push for specific disciplines on the administration of import quotas. Australia has argued that Members' TRQs often go unfilled due to various administrative restrictions applied on in-quota imports.

To ensure that "the market access opportunities represented by [TRQ] commitments are made fully and effectively available," the Australian submission proposes a series of penalties for Members that consistently fail to fill their import quotas. For instance, it proposes that if a Member fails to fill a to-be-negotiated proportion of its quota in a given year -- Australia suggested 85 percent -- the underfilled portion should be added to its import quota for the following year. If it fails to meet the target over a number of consecutive years, the Member would have to reduce tariffs on out-of-quota imports to the in-quota level for at least a certain time. It would also have to reform its practices for administering TRQs in order to facilitate imports.

Although the EU and Switzerland recognised the need to discipline TRQ administration, they opposed several of the measures proposed by Australia.

Delegates will discuss market access on 9 June. Falconer has warned them that the Friday meeting could continue into the weekend. Members are set to return to the issue of export competition on 16 June, only days before the initial draft modalities text is expected.

ICTSD reporting.