AWAITING DRAFT MODALITIES TEXT, MEMBERS STILL DIVIDED ON AG MARKET ACCESS

Only a week before ministers are set to arrive at WTO headquarters in Geneva in an attempt to hammer out an agreement on some central aspects of the Doha Round negotiations, Members remain profoundly divided on agricultural market access.

Agriculture negotiations Chair Ambassador Crawford Falconer (New Zealand) is expected to release an initial draft 'modalities' text very shortly. These 'modalities' would include formulae and figures for tariff and subsidy cuts, as well as exceptions to them. A meeting to discuss the text has been scheduled for 23 June. Several Members have issued new informal papers on a number of market access issues, in an attempt to ensure that their concerns are reflected in Falconer's document.

Falconer suggested last week that the G-20's proposed tariff cuts could provide the basis for an eventual Doha Round compromise (see BRIDGES Weekly). This did not find favour with some Members. For instance, while the EU and the G-10 feel that the 54 percent average farm tariff cut sought by the G-20 is unacceptably deep, US officials have indicated that they find the group's proposal too mild -- especially for developing countries.

US says G-20 tariff cuts too low, but change possible?

Deputy Assistant US Trade Representative Jason Hafemeister told the press in Geneva on 16 June that the G-20 proposal was inadequate, particularly with regard to developing countries (it has proposed that they make an average reduction of no more than 36 percent). He noted that the G-20 would require developed countries to cut the highest tariffs by 75 percent while developing countries do so by 40 percent, describing the difference as "a vast gap."

"It's certainly by no means agreed that the [G-20's] level of cuts are going to be acceptable," the senior agriculture negotiator continued. "In fact, they're not even necessarily in the middle ground. For developing countries, the G-20 have not offered very much at all." While Hafemeister said that tariff reductions by developing countries should be "something less" than those by rich ones, he did not specify any proportional relationship between the two. Several Members, including the EU and the G-20, believe that developing countries should have to make cuts roughly two-thirds the size of those made by rich countries.

While defending the G-20's position last week, India's top trade negotiator Gopal Pillai appeared to concur at least partially with the EU's recent accusations that the US was virtually alone in demanding deeper tariff cuts. Reuters quoted Pillai as saying on 15 June that "the rest of the world could reach an agreement on a modestly ambitious outcome. The real problem is going to be the US." He defended moderate tariff cuts, arguing "a modest deal is good. Everybody will get something. You have to realise that you will not get everything you want."

The US may in fact be showing signs of flexibility on farm tariffs. Citing "informed sources," Washington publication "Inside US Trade" reported on 21 June that the Bush administration had decided to lower its demands from the average reductions of around 66 percent it has been seeking to something closer to the G-20's 54 percent. However, other sources have suggested that these reports may not be accurate. The USTR, for its part, remains committed to its stated positions. "An unbalanced result, that is less market access, more cuts in domestic support, will not result in a successful conclusion of the negotiations," said spokesperson Neena Moorjani later that day.

Nevertheless, the top Democrat on the House agriculture committee, Congressman Collin Peterson (Minnesota), issued a statement criticising the rumoured changes in position. If the reports were true, he said, the Bush administration "is now suggesting that [US farmers] have to give up the one thing they promised American agriculture -- increased market access."

US still looking for new peace clause

Hafemeister indicated that a new 'peace clause' was still an "important" objective for the US, though he declined to comment on whether this would be one of Washington's basic conditions for a deal. Under a peace clause, Members would agree to exempt most kinds of farm subsidies from legal challenge in the WTO for a certain period of time.

The US argues that this immunity is necessary for farmers implementing subsidy reforms. Indeed, since the first peace clause expired at the end of 2003, several countries have successfully used WTO dispute procedures to force changes to rich country subsidy programmes. For instance, Brazil has won high-profile cases against US cotton subsidies, and, along with Thailand and Australia, against EU sugar policies. A number of other cases are believed to be in preparation, and might be prosecuted if the Doha Round negotiations do not yield an agreement. Developing countries are loath to give up the ability to take or threaten legal action against subsidies, and Members such as Brazil, Costa Rica and Colombia vehemently opposed the idea of creating a new peace clause when the US first proposed doing so last autumn.

Members submit last-minute proposals

After discussing export competition at the 16 June meeting of the agriculture negotiating committee, Members returned to market access.

Several of the interventions at the meeting sought more flexible treatment on liberalisation commitments. Speaking on behalf of 'small and vulnerable economies' (SVEs), Barbados argued for either a special tariff reduction formula for SVEs, or an agreement that would cut all developing country tariffs relatively gently -- that is, less than the cuts proposed by the G-20. Many developing countries have long resisted mechanisms that could differentiate among developing countries at the WTO. A 19 June informal paper from the African, Caribbean, and Pacific (ACP) Group also called for tariff cuts well 'south' of the G-20 proposal. The ACP Group has proposed a 24 percent average tariff cut by developing countries, compared to the 36 percent reduction sought by the G-20.

Kenya proposed that countries which had negotiated high "ceiling" levels for all of their tariffs when binding them during the Uruguay Round should be given more lenient treatment, since otherwise these tariffs would all automatically fall into the tier of the reduction formula slated for the steepest cuts. A week ago, Canada suggested that countries with such concerns could potentially be required to make the steepest reductions to no more than a quarter of their tariff lines.

The EU contended that the agriculture modalities text should include reference to 'geographical indications' -- most notably, providing all products with the extra level of protection currently accorded only to wine and spirits. While a few Members supported this proposal, others -- including Australia, Argentina, and the US -- argued that there was no mandate to address this issue in the agriculture negotiations.

Uruguay and Costa Rica criticised the EU's suggestion, made in its 16 June paper, that some tropical products could be exempted from tariff cuts, or subjected to low reductions. They emphasised that the mandate to address "the long-standing commitment to achieve the fullest liberalisation" of trade in these products could not be reconciled with such exemptions. The two countries, along with some other Latin American Members, have been pushing for deep tariff cuts on tropical products.

Waiting for draft modalities text

Delegates indicate that they expect Falconer's forthcoming draft modalities text to be similar to the recent 'compendium' papers on market access and export competition, albeit without his personal observations. They believe that it is improbable that the document will suggest possible compromises, and that it will likely encompass all Members' positions by including them in square brackets.

Some sources are pessimistic about Members' chances of striking an agreement on modalities by the end of June as planned. Reuters reported that Brazilian Foreign Minister Celso Amorim admitted on 20 June that there were "lots of doubts" about whether a deal could be wrapped up by then. He pointed to the need for the US "to move substantially on domestic support" as a precondition for progress in the round. The EU would have to be more specific about what was truly entailed by its recent hints about sweetening its market access offer and "do a little more," he added (see BRIDGES Weekly, 24 May 2006).

Hafemeister also cast some doubt on the end-June deadline, saying that "there are no real hard and fast deadlines in front of us," except for the "real deadline" to conclude the round by the end of the year. "Certainly the conventional wisdom is that... we've got to make substantial progress, certainly past modalities," before the WTO's summer break in August. "Whether that's June or July, I'm not particular, but I do think we need to get it done in that frame."

ICTSD reporting; "Bush presses Europe for deep farm subsidy cuts," REUTERS, 15 June 2006; "Brazil sees doubts about WTO farm deal in June," REUTERS, 20 June 2006.