HEATED DEBATE OVER PAKISTAN'S ATTEMPT AT COMPROMISE ON 'SPECIAL' FARM PRODUCTS

WTO Members have kicked off a new attempt to try to bridge their differences in the faltering Doha Round trade talks and conclude a deal by the end of the year (see related article, this issue). Last week's meeting of the agriculture negotiating committee only served to underline how difficult it will be for them to succeed, even after five and a half years of negotiations.

The 25 April meeting focused on one of the most contentious issues in the farm trade talks: the 'special products' that developing countries will be allowed to shield from the full force of tariff cuts due to food and livelihood security and rural development concerns.

Delegates engaged in heated debate over Pakistan's most recent attempt at compromise between the poor countries anxious to maintain protection for some farm products and the agriculture exporting countries that have opposed their demands for fear of diminished commercial opportunities. Although Pakistan had circulated the paper to Members earlier in the month - to immediate condemnation from some countries - this was negotiators' first chance to discuss it in detail (see BRIDGES Weekly, 18 April 2007). Chair Ambassador Crawford Falconer (New Zealand) said that the exchanges led him to conclude that none of the options currently being talked about would garner consensus.

Two delegates saw a silver lining amidst the disagreement: at least countries were discussing new ideas, even if some of them were not widely welcomed.

Gaps wide, bridging difficult

The number and treatment of special products remains undetermined, as do the indicators that are supposed to guide their selection. The debate has divided otherwise-allied developing countries, pitting G-33 members China, India, and Indonesia against competitive exporters like Thailand and Argentina.

Members' bargaining positions vary dramatically: the G-33 group of developing countries wants to be able to designate "at least 20 percent" of all agricultural tariff lines as special, with half excluded from tariff cuts and the rest facing reductions no higher than 10 percent. Critics complain that this could cover over 90 percent of some countries' farm imports. At the opposite end of the spectrum is a US proposal to limit the number of special products to five tariff lines, which would be insufficient to cover fresh and powdered milk and cream.

In an attempt to address the concerns of developing country exporters pointing to the importance of market access to their farmers, Pakistan's proposal notably set out several 'negative indicators' for excluding commodities from eligibility for special product status. These were principally based on whether developing countries account for over 80 percent of total world exports or a country's imports of a particular product. This would put palm oil, for instance, beyond the reach of special product designation.

Pakistani Ambassador Manzoor Ahmad said that the paper also sought to provide new fodder for multilateral negotiations on the issue.

G-33 harshly critical

Pakistan belongs to the G-33, but is also part of the offensively-oriented Cairns Group of farm exporters.

Nevertheless, the rest of the G-33 was harshly critical of the proposal at the committee meeting, echoing their initial reactions upon seeing it. They described it as impractical, imbalanced, and against the negotiating mandate that Members had already agreed to.

Speaking on behalf of the group, Indonesia said that the notion of thresholds for excluding products from special product status would allow trade considerations to trump the only agreed criteria, i.e., food security, livelihood security, and rural development. It also said that the specific indicators suggested by Pakistan responded "primarily to the commercial concerns of a few exporting countries." Indonesia said that Pakistan's suggested indicators seemed to be "arbitrarily chosen" from the group's longer list of criteria linked to food and livelihood security and rural development.

The G-33 has long argued that other countries' market access priorities should not come ahead of their own developmental needs, arguing that farmers producing for export even in developing countries are in a situation less dire than subsistence farmers.

Indonesia criticised Pakistan for seeking to cut tariffs on special products by two-thirds of the proportion that would otherwise have been required, arguing that "a product is special because of food security, livelihood security, and rural development and not because of the tariff level." For the same reason, it said that special products should not be capped, even at a level higher than that for other commodities. It added that a trade-off between the number of special products and the permitted extent of deviation from the overall tariff reduction formula would penalize countries with many subsistence farmers, and thus risk contributing to increased poverty.

In response to Pakistan's proposal to deny special product eligibility to products that are not carved out of a country's bilateral or regional trade agreements, the G-33 argued that bilateral accords could not be compared to a multilateral one. The group also said that there was "no economic justification" for making special products ineligible for the special safeguard mechanism - a new tool intended to help developing countries protect farmers from import surges by temporarily raising tariffs beyond bound ceiling levels.

Many delegations expressed similar criticism, including the group of African, Caribbean, and Pacific (ACP) countries, which includes over 50 WTO Members, though many also belong to the G-33.

Other countries more supportive

Despite the criticism from the G-33, several Members intervened to praise Pakistan, expressing support for its endeavour to seek compromise, if not for its precise proposals.

Notably, Brazil, a major agricultural exporter and leader of the G-20 bloc, said that Pakistan's attempts to bridge the gaps on indicators and treatment were justified by the mandate. It has thus far been relatively inconspicuous in the negotiations on special products, seemingly preferring instead to work quietly towards a compromise.

Brazil expressed support for 'negative indicators' of the sort put forward by Pakistan, noting that the G-33's indicators could cover virtually all of its agricultural production - even nutritionally-important chicken, in spite of the country's status as the world's largest poultry exporter. Costa Rica made a comparable point.

Thailand, which has in the past called for products to be excluded from designation as special if developing countries account for at least half of world exports, thanked Pakistan for taking its concerns into account (see BRIDGES Weekly, 3 May 2006). "There exist poor farmers in exporting countries whose livelihood security depends on the exportation of farm produce," it said, with support from Uruguay.

Although the US has long demanded strong limitations on special product flexibilities - and linked this to its ability to offer greater farm subsidy cuts -- sources report that it did not enter the debate during the meeting. One negotiator told Bridges that that the US' silence was more helpful than a reiteration of its past demands would have been.

Falconer: positions need to change soon

In his concluding remarks to the committee meeting on 25 April, Falconer said that countries would need to alter their bargaining stance very soon if they are to finalise a deal by the end of the year, which is widely thought to require agreement on a framework for subsidy and tariff cuts by July. The chair expressed hope that Pakistan's paper would serve to encourage other Members to come forward with new ideas.

Five days later, Falconer circulated a paper to delegations in which he attempted to outline the "basic centre of gravity" for a deal in the agriculture talks. The rift on special products was particularly wide, he noted, warning that the issue had the potential to sink the negotiations. Acknowledging that he was "guessing perhaps even more here" than in other areas, Falconer speculated that a possible accord could allow 5 to 8 percent of farm products to be designated as special, with tariff cuts to be between 10 and 20 percent. The indicators would also have to be made more easily verifiable, he suggested.

The chair also put forward a "radical thought": instead of continuing to grapple with flexibilities, he suggested that developing countries could simply dispense with the current 'tiered formula' approach (in which higher tariffs are subject to steeper cuts) in favour of making an overall average reduction, along with a minimum cut on each tariff line. This, the approach used by all Members during the Uruguay Round, would mean that developing countries would be able to pick and choose among all of their products, making the minimum cut to the more sensitive ones and higher reductions elsewhere in order to reach the average requirement.

The agriculture committee is scheduled to meet next on 7 May.

ICTSD reporting.