AG CHAIR PLANS NEW PAPER TO SPUR DISCUSSIONS, BUT IS WORRIED NEGOTIATORS LOSING HOPE

The chair of the troubled WTO negotiations on agriculture told delegates on 23 March that he hopes to present them with a new paper in mid-April that could serve as a focus for future discussions. Ambassador Crawford Falconer (New Zealand) has also acknowledged that there was a risk that Members might simply give up on the talks.

Speaking to journalists after a meeting of the negotiating committee, Falconer acknowledged that negotiators' morale was at a low ebb, as deep divisions persist on cutting farm subsidies and tariffs. "The danger is energy just running out", he said, reports Agence France Presse. "That's not there yet but I can see that kind of sceptical resignation in a lot of eyes at the moment."

WTO Members are becoming increasingly frustrated at the lack of visible progress in the informal consultations that have been taking place among the 'group of four' countries - Brazil, India, the US, and the EU - whose differences will need to be ironed out for any broader deal to be possible.

Many developing countries, as well as WTO Director-General Pascal Lamy, have called for the negotiations to be 'multilateralised', and for the process to be as inclusive and transparent as possible (see BRIDGES Weekly, 14 March 2007). However, there have been few practical ideas on how this could be accomplished. The 'reference paper' that Falconer has said he intends to circulate to Members between 13-20 April might serve to bring the focus of discussions back to the multilateral negotiating committee at WTO headquarters in Geneva.

During WTO Members' last big push for an agreement in the months leading up to June 2006, Falconer issued a series of 'reference papers' spelling out areas of convergence and divergence on different issues in the negotiations. He ultimately produced a compendium draft 'modalities' document (see BRIDGES Weekly, 28 June 2006). Instead of containing formulae and figures for an eventual agreement, the 74-page text reflected almost every proposal that Members had tabled, pointing to hundreds of unresolved differences covering all negotiating areas. Falconer has indicated that he intends to come up with new 'reference papers', sources said, although he has not yet indicated the topics he will start with.

The chair of the negotiations has frankly acknowledged that Members have accomplished little in terms of figuring out how to bridge their divides. Referring to the recent committee meeting, he was quoted as saying that "apart from some people appealing for help from Harry Potter, I had no new ideas in that room."

Trade sources note that Falconer is taking a risk in producing a new reference paper despite the absence of clear signals from the 'group of four' major players or even other Members about what they would like to see in it. One delegate suggested that papers from the chairs of the negotiating groups would nevertheless be less risky than another potential eventuality: a draft compromise by Pascal Lamy. The negotiator said that a text from Lamy was not likely at this juncture, and could only come after the chairs prepare texts of their own.

Cairns Group proposal on tropical products: EU critical

At the meeting, the EU criticised the Cairns Group's recent proposal for deep tariff cuts to a range of tropical products, arguing it was too ambitious (see BRIDGES Weekly, 14 March 2007). The EU claimed that the list of products on which the group was seeking tariff elimination or 85 percent cuts was too long, covering two-fifths of its agricultural tariff lines. It also said that the proposed list should not have included temperate zone products such as rice, sugar, onions, flowers and tobacco.

The EU was unhappy that the proposal seeks to prevent developed countries from designating tropical products as 'sensitive' to shield them from standard tariff cuts. It also pointed out that the proposal would lead to the erosion of trade preferences currently enjoyed by the African, Caribbean and Pacific (ACP) group countries. Cote d'Ivoire expressed support for the EU on this point. ACP countries want developed countries to be able to designate products on the Cairns Group's list, such as sugar and bananas, as sensitive in order to be able to preserve as much of their margin of preference as possible.

Other developing countries sought to emphasise that the negotiating mandates on preference erosion and the liberalisation of tropical products were separate and should not be linked.

Greater consensus on Cairns Group sensitive product proposal

There was less controversy over the Cairns Group paper on sensitive products, which both developed and developing countries will be able to slate for shallower tariff cuts in return for expanded import quotas (see BRIDGES Weekly, 14 March 2007). However, the EU did object to the proposal for quota expansion to be based on domestic consumption, rather than on existing import volumes.

More contentious was a US suggestion that Members explore the possibility of using tariff rate quotas to achieve more predictable market access. Brazil, Uruguay and other delegations objected vociferously, arguing that quotas are a last resort that might provide predictability, but would not bring about the "fair and market-oriented agricultural trading system" for which WTO Members are supposed to aim. They have stressed that new quotas ultimately created must be open to all Members on an equal basis, and not allotted to individual countries to guarantee them a certain level of exports (see BRIDGES Weekly, 28 February 2007).

Recently-Acceded Members paper, G-10 Declaration

Sources say that two other proposals were discussed only in passing. One was a declaration by the G-10 group of countries with highly-protected agricultural sectors. The declaration primarily restated the group's own concerns, expressing opposition to the introduction of a maximum 'cap' on high tariffs, and arguing that "due consideration should be given to G-10's inequitably heavy burden in tariff reductions."

The other was a request from a group of recently-acceded Members (RAMs), including China, for smaller tariff cuts and longer implementation periods than other developing countries. While some Members expressed sympathy with the RAMs, which had to make substantial liberalisation commitments in order to join the WTO, others such as Mexico and Uruguay expressed concern that the proposal went too far.

More debate was likely at the next informal meeting to which all Members are invited, which is currently scheduled for 13 April, trade sources suggested.

Fireside chat focuses on special products, SSM

At the meeting, Falconer reported to delegates on the outcome of an informal 'fireside chat' among two dozen ambassadors he had hosted on 16 March. Although this was intended to address developing country concerns more broadly, participants were reluctant to examine the issue of the tariff reduction formula in the absence of clarity about the cuts that developed countries' will likely have to undertake.

Instead, discussions focused on 'special products' and the 'special safeguard mechanism'; two controversial types of flexibilities for developing countries alone. While the former would allow them to cut a limited number of tariffs more gently on the basis of food security, livelihood security, and rural development concerns, the latter would provide them with a quick defence against import surges.

The G-33 group of developing countries has been the strongest proponents of both flexibilities. It has sought to allow developing countries to designate 20 percent of all agricultural tariff lines as 'special'. Some exporting countries have been critical of the G-33's demands, fearing diminished opportunities for export growth.

Negotiators did not shift their positions at the meeting, Falconer reported. Members would need to decide whether the underlying problems had a basis in commercial concerns, or were instead entirely political, he said. Only if it was the former could a solution be found by examining the effects of different proposals, he explained.

G-33 agrees new list of indicators for 'special products'

In a related development, ministers from the G-33 agreed on a trimmed-down list of indicators that could help in the selection of special products, at their 20-21 March meeting in Jakarta (see BRIDGES Weekly, 21 March 2007). One delegate from the bloc said that the shorter list is intended to be more capable of commanding consensus, while remaining sufficiently broad enough to enable countries to address their legitimate development concerns.

The G-33 has traditionally argued that the indicators must be illustrative and non-binding, rather than a compulsory benchmark to which prospective special products would have to conform.

The G-33's new list contains 12 separate indicators, down from the 17 that the group had identified in late 2005. Some have been cut altogether; others have simply been condensed. For instance, one indicator, dealing with a product's importance as proportionate to the total value of agricultural production or household agricultural income, regroups what had been separate indicators in the earlier version of the list. Another, dealing with a potential special product's importance to "vulnerable populations such as tribal communities, ethnic groups, women, aged people, or disadvantaged producers" is now summarised by reference to "disadvantaged or vulnerable communities and women."

As many Geneva-based delegates from the group were still returning from Jakarta at the time of the 23 March meeting, the rest of the WTO membership did not have a chance to discuss the new proposal with them. However, the issue could be on the agenda for the 13 April meeting, sources suggested.

Falconer said that the next fireside chat, on export competition, will be held around 30 March.

ICTSD reporting; "Deadlocked trade wizards call Harry Potter to the rescue," AGENCE FRANCE PRESSE, 24 March 2007.