WILL WTO AG NEGOTIATORS LEAP THROUGH 'WINDOW OF OPPORTUNITY'?

As trade diplomats entered the much-vaunted January to March 'window of opportunity' for making progress in the troubled Doha Round of WTO talks, they made several positive noises about the possibility of moving ahead. However, while they claimed some progress on technical issues, broad agreement remains elusive on farm subsidy and tariff cuts, as well as on the number and extent of exceptions to these. Meanwhile, an informal brainstorming process among a handful of Member countries has come up with three imaginary scenarios for how a deal might be struck.

Most trade observers consider that a breakthrough during the first quarter of the year is critical if the US Congress is to be enticed into renewing the Bush administration's 'trade promotion authority' before it expires at the end of June (see related story, this issue).

At an 8 January press conference following an EU-US summit in Washington, US Trade Representative Susan Schwab stated that negotiators are "clearly making progress," while her EU counterpart Peter Mandelson observed that a series of meetings in the US capital had given both of them "renewed confidence that the Doha deal is doable and that it can be done within the narrow timeframe that has opened up." The two officials had also attended an earlier meeting between US President George W Bush and European Commission President José Barroso. Mandelson noted afterwards that the two leaders had demonstrated the sort of political will that would be essential to completing the Doha negotiations.

Mandelson warned that negotiators would be "in real danger" if they failed to break the deadlock "in the first quarter of this year." Schwab, however, emphasised that the substance of the negotiations would matter more than any timelines: "Nobody is going to reach an agreement on the basis of an artificial deadline if the content isn't there that is substantively and politically viable," she said.

Speaking in Geneva a few days later, Schwab also seemed to lower expectations of any major advance in the immediate future by categorically stating that negotiators had "a long way to go for a breakthrough".

Washington's top trade official nonetheless noted that a succession of meetings between WTO Members at different levels of government had led to some progress. She indicated that these meetings had sought to enable negotiators to "get behind some of the bumper sticker numbers that hung us up in July" - the hotly contested average percentage cuts for farm subsidy and tariff reductions - by building consensus on technical issues that would permit Members to "move up the ladder" towards some of the more intractable negotiating challenges.

This appears to be premised on the notion that Members may feel more able to accept a particular average reduction to either tariff or subsidy cuts if they are clearer about the extent to which other rules and exceptions will allow them to continue protecting or subsidising specific products.

Trade sources in Geneva suggested that EU and US negotiators may have made some progress on technical issues around the treatment of 'sensitive products', which both developed and developing countries will be able to slate for gentler tariff treatment in exchange for creating new import quotas. However, significant differences are believed to remain between them on tariff cuts. A substantial divide also remains between some major farm exporters - including the US - and those developing countries that would like to shield a limited number of 'special products' from the full force of tariff cuts on the basis of food security, livelihood security and rural development concerns.

Both Schwab and Mandelson have stressed that progress in the talks would require more than an agreement between Brussels and Washington. Mandelson warned that all Members would have to work together, and not rely on "some EU/US bilateral deal being cooked up and then passed out to the rest of the WTO." Schwab, for her part, has stressed that the larger WTO membership must be involved, comparing the negotiations to a "tremendously complicated… three-dimensional chess game".

Trade officials in Geneva nonetheless pointed out that, since July 2006, developing countries had repeatedly emphasised that the onus was on developed countries to make the first move to restart the blocked talks.

'Non-G6' discuss outline of possible Doha Deals

A document describing different potential compromise scenarios or 'landing zones' that could win Members' support, was circulated to the so-called 'non-G6' or 'Oslo' group of countries in December. The 'non-G6' is a group of mid-sized countries with a range of different interests in the agriculture negotiations, comprising Canada, Chile, Indonesia, Kenya, New Zealand and Norway (see BRIDGES Weekly, 25 October 2006). The sobriquet is meant to differentiate them from the 'G-6' group of key players - Australia, Brazil, the EU, India, Japan and the US - whose inability to agree on farm subsidy and tariff cuts led to the negotiations' suspension in July.

Sources indicated that the document, although produced by New Zealand, did not reflect that country's position, nor that of any of the other non-G6 participants. The document was simply put forward as part of a brainstorming process.

The scenarios represent packages of concessions on domestic support and market access at three different broad levels of ambition, varying in terms of the size of subsidy and tariff cuts and the extent of exceptions. Although the scenarios did provide details on some of the specific flexibilities and rules for tariff and subsidy cuts, they did not touch upon other key areas - such as special products and the 'special safeguard mechanism', which would allow developing countries to guard against import surges.

Under the least ambitious 'scenario A', the document foresees a 65 percent cut in US overall trade distorting support, to USD 17 billion. The current US proposal would cut its own ceiling level for these subsidies by 53 percent, to roughly USD 22.5 billion - still higher than the USD 19.7 billion spent in 2005. EU subsidies would be cut by 70 percent, which corresponds to what it has tabled in the negotiations.

In return, the EU (and other developed countries) would have to cut tariffs by an average of 52-54 percent. This is close to the 54 percent average tariff reduction sought by the G-20 group of developing countries. It is also higher than Brussels' original proposal of 39 percent, as well as slightly above an informal offer of about 51 percent which it made immediately before the talks collapsed in July 2006. Countries would be allowed to shield 5 to 8 percent of their tariff lines as 'sensitive products', and would have to expand tariff rate quotas for these products by 2-3 percent of domestic consumption - closer to the EU's aims than to those of the US.

The most ambitious 'scenario C' option envisages an 80 percent subsidy cut by the EU and a 70 percent subsidy cut by the US, which would cap its subsidy spending at USD 15 billion. While this would exceed the subsidy cuts proposed by the EU, which has called for a 60 percent cut in US and Japanese subsidies and an 70 percent cut in its own, it is close to the reductions sought by the G-20, which seeks an 80 percent cut in EU subsidies and a 75 percent cut by the US and Japan. The scenario would impose a 60 percent average tariff cut - closer to the 66-odd percent sought by Washington. Under scenario C, countries would be allowed to designate no more than 4 percent of their products as sensitive, and would have to expand tariff rate quotas for these products by at least 6 percent of domestic consumption.

A medium ambition 'scenario B' would permit the US to cut subsidies by somewhere between 65-70 percent, reducing spending limits to between 15 and 17 billion USD. Tariffs would be reduced by a figure between 55 and 59 percent, and countries would be allowed to designate 4 or 5 percent of their products as sensitive, and would have to expand tariff rate quotas by between 3 and 5 percent of domestic consumption.

The non-G6 are expected to be meet again this week. A broad of trade negotiators will also meet on 22 January, the date scheduled for the next in the series of informal 'fireside chats' convened by agriculture negotiations Chair Crawford Falconer (New Zealand). Around twenty ambassadors usually attend these meetings.

ICTSD reporting.