AG: MEMBERS DISCUSS NEW CAIRNS GROUP PROPOSALS ON SENSITIVE PRODUCTS AND TROPICAL PRODUCTS

Although negotiators at the WTO in Geneva remain impatient for news of the bilateral discussions taking place elsewhere between major trading powers, they were given something new to focus on at a 9 March meeting of the agriculture negotiating committee: two informal papers from the Cairns Group of agricultural exporters.

The proposals are the first new submissions since the Doha Round trade talks resumed a little over a month ago following their suspension last July. One outlined a method for dealing with the 'sensitive products' that would be eligible for smaller tariff cuts in return for the expansion of import quotas; the other proposed tariff cuts for tropical products and other crops that could serve to diversify production away from narcotics.

According to sources, the two documents reflected extensive behind-the-scenes discussions that had been taking place during November and December. Although the entire group backed the non-paper on tropical and alternative products, Canada did not sign on to the submission on sensitive products. Ottawa has historically sought to maintain its supply-managed production system in the poultry, egg and dairy sectors, which requires strict control of imports. The Philippines was described as "looking forward to subscribing soon to all elements" of the latter paper.

In their initial responses, Members broadly welcomed the papers as a useful contribution to the negotiations, saying that they would need more time to offer further reactions.

Sensitive products paper: a framework for negotiations?

The paper on sensitive products was intended to establish a mutually-acceptable 'architecture' or common framework, and contained blanks for the exact figures to be negotiated later. These numbers would specify, for example, the percentage of tariff lines Members would be allowed to designate as 'sensitive'; the extent to which tariff cuts will be lower than normal; and how much import quotas would be expanded as compensation.

Exporters argue that countries should pay for making smaller tariff cuts by allowing a correspondingly larger volume of imports to enter their markets at a lower tariff rate. Tariff quotas serve to guarantee a certain minimum import level. Over-quota imports face much higher duties, which could be prohibitive.

Under the broad rules set out in the paper, Members would be allowed only two options for deviating from the overall tariff reduction formula. According to the logic which the Cairns Group has used previously, the smaller deviation (or larger tariff cut) would entail a smaller future quota; the larger deviation (or smaller tariff cut) would be compensated for by a larger quota expansion. Each of the two expansions would be equivalent to a percentage of domestic consumption, for which the precise figures would be negotiated. Tariff quota expansion in developing countries would be calculated based on domestic 'marketable consumption,' which would exclude commodities grown and consumed by subsistence producers, and not sold.

The Cairns Group claimed that this approach would provide both importers and exporters greater certainty than alternative systems, such as a sliding scale of deviations and expansions.

Although the proposal would impose a tariff cap on sensitive products, it would allow Members to apply for a higher ceiling for a limited sub-set of sensitive tariff lines, if compensated for with a correspondingly larger import quota.

The paper proposes to restrict the 'sensitive' designation to products already covered by tariff rate quotas. A clause would prevent Members from creating new quotas, a process which many exporters see as cumbersome and unpredictable. Developing countries, not all of which currently use tariff quotas, would instead be allowed to backload tariff reduction commitments on sensitive products to the second half of a Doha Round implementation period, or take two extra years to implement them.

The group also stipulates that "tariff quota expansion shall be provided on a most-favoured nation basis." Recent reports have suggested that some Members fear that the bilateral consultations among major trading nations might culminate in an attempt to assign country-specific quota entitlements, raising the spectre of both legally and politically fraught negotiations at the WTO (see BRIDGES Weekly, 28 February 2007).

Tariff quota commitments agreed to in earlier negotiations - including the Uruguay Round - would be maintained separately from commitments agreed to in the Doha Round, the sponsors propose.

Sources indicate that members of the exporters' group had consulted amongst each other as well as with countries belonging to other groups. At the agriculture committee session, the G-10 group of countries with highly-protected farm sectors said that it had met with the Cairns Group the day before. Though aspects of the new paper such as tariff caps on sensitive products would be problematic, Switzerland said on behalf of the G-10, others resembled the group's own proposal.

Tropical products paper: moving towards consensus?

The Cairns Group proposes tariff cuts on tropical products and diversification products that are softer than the complete elimination of tariffs and quotas sought by a group of eight Latin American countries last year (see BRIDGES Weekly, 3 May 2006). It also builds on the latter group's work to come up with a shorter list of such products, which include bananas, sugar, mangoes, and potatoes. Trade sources suggested that the list's more precise specification of products - at the 6-digit harmonised system (HS) level rather than 4-digit - made it more likely to garner consensus.

According to the approach set out in the non-paper, developed countries would eliminate all tariffs below 25 percent on listed products. Other tariffs would be reduced by 85 percent. Developed countries would not be allowed to designate tropical products as sensitive.

The mandate to liberalise trade in tropical products has neatly split some Members. Many Latin American countries, for instance, want to see tariffs and quotas removed altogether. This is vociferously resisted by others - especially the African, Caribbean, and Pacific (ACP) group countries that have long benefited from preferential access to developed country markets for these very commodities, and thus stand to lose from across-the-board liberalisation. ACP group members would prefer that rich countries be allowed to slate tropical products as sensitive, since this would mean less erosion to their margins of preference, especially on products such as sugar, bananas, and beef.

One Geneva-based delegate from the latter group indicated that the Cairns Group had collaborated with the proponents of tropical product liberalisation to develop the proposal. The negotiator suggested that once the non-paper is eventually circulated as an informal 'job' document, both groups were expected to co-sponsor it.

Negotiators eager to "multilateralise" talks as soon as possible

Geneva-based negotiators indicated that there was an urgent need to translate the ongoing informal bilateral discussions into negotiations at the multilateral level. Some developing countries in particular voiced their concern that in the absence of broader consultations, the current discussions between a small group of countries could lead to an unacceptable deal being foisted on them at the last moment.

Comparing the negotiations to a theatre, one delegate said the 'on-stage' developments in Geneva -- the informal 'fireside chats' that negotiations chair Ambassador Crawford Falconer (New Zealand) holds with two dozen ambassadors, and the 'transparency meetings' for all Member delegations -- were important, but the real action was taking place 'off-stage' elsewhere. Geneva-based delegates had no new information on the off-stage discussions, the official said.

Sources expect Falconer to try to 'multilateralise' the talks to the broader Membership by mid-April. The chair has previously indicated his intention to issue new 'reference papers' spelling out areas of convergence and divergence on different issues in the talks (see BRIDGES Weekly, 14 February 2007). Delegates indicate that these papers are likely to appear at that time.

At the 9 March meeting, Falconer welcomed the two Cairns Group papers, describing the discussion as an important first step in resuming the multilateral process. "We've put our toe in the water today, and that was useful," he said. Next, Members must get used to being fully in the water. Another delegate described the papers as a hopeful sign, "the first shoots in the garden in the spring."

The next informal meeting open to all Members is expected to be held around 23 March.

A ministerial meeting of the G-33 group of developing countries is also due to be held from 20-21 March in Jakarta. It may be attended by representatives from the US and the EU. The Cairns Group is set to hold a ministerial gathering of its own from 16-18 April in Lahore.

ICTSD reporting.