WTO MEMBERS WELCOME AG CHAIR'S PAPER, BUT CRITICISE 'BALANCE'

WTO Members have welcomed a recent paper seeking to challenge them to work harder to find common ground beyond their entrenched positions in the deadlocked Doha Round agriculture talks.

During a six-hour informal meeting on 7 May, Members from a cross-section of interest groups expressed their appreciation of the 'challenges' paper prepared by the chair of the agriculture negotiations, Ambassador Crawford Falconer (New Zealand) (see BRIDGES Weekly, 2 May 2007). While welcoming its overall contribution to the negotiating process, many criticised what they perceived as specific weaknesses in the paper, arguing that the text was 'imbalanced'.

In later comments to the press, the chair interpreted this as a positive omen. "Nobody had a good thing to say about the paper - so I think we're in business!" he wryly stated. "The paper deliberately kicked just about as many shins as possible… I was greatly relieved that nobody said that they welcomed the paper in all its details."

In that sense, he suggested, the paper had succeeded in its goal of challenging Members to engage with each other seriously on the outstanding issues in the talks. "Everybody was doing what I would've expected," he said, "which is now, actually, negotiating…. they are all now trying to tug the blanket firmly to their side of the bed."

Members' comments had reassured him that his paper had for the most part accurately identified the range of possible configurations in which consensus could plausibly be found, he suggested. While negotiators had argued that agreement should be found at one end or the other of any given spectrum, few had challenged the choice of the range itself, he said.

'Balance'

Some delegates' comments supported his claims. "Everyone, from their own angle, thinks it's unbalanced" said one: "in that sense, he's done a good job." Others, however, pointed out that not all areas received equal criticism: whereas the US claimed that the paper had not focused enough on improving market access, all other Members argued that more attention to subsidy cuts was needed instead. Developing countries also argued that the paper was more cautious about offending developed country sensitivities than it was about those of developing countries.

The G-20 group of developing countries that favour reform of developed country agriculture pointed out in a statement that "balance will not be found by averaging negotiating positions". Instead, the group argued, "balance can only be found by reference to the mandate and to the outcome in other areas of the negotiations."

Back to Geneva

A statement from the group of least-developed countries described the chair's paper as a tool for "re-awakening the hitherto dormant multilateral process." Developing country delegates in general welcomed the fact that the text had apparently brought the negotiating process back to Geneva, after months of fruitless waiting for a breakthrough from the small-group consultations among the 'G-4' major trading powers (the EU, US, Brazil and India).

Despite persistent rumours of progress, no clear results have yet emerged from the G-4 process, leading other WTO Members to call ever more vociferously for the talks to be 'multilateralised' again, through the inclusion of the wider membership. Arguably, the chair's paper may have achieved this goal, by reinvigorating the negotiating process in Geneva.

While one delegate suggested that a 1-3 May meeting of the G-4 in London had focused more on "mapping out differences" than on bridging them, another trade source familiar with the discussions stated more bluntly that "there was not a lot of progress… negotiators 'went over the ground'" rather than identifying a clear way forward. Indeed, given that the London meeting was intended to be preparatory to a ministerial gathering from 17-18 May in Paris, "you could fear a bit for Paris."

At the same time, to the extent that the G-4 had managed to move closer on some areas, the chair's paper could have reflected this more clearly, the source said. Instead of reflecting areas where some consensus had been reached, and urging progress on others, the paper seemed at times to be disconnected from the G-4 process.

Members "re-engaged"

At the 7 May meeting, the chair estimated that over fifty members had made interventions providing their reaction to his paper. Trade sources indicated that in most cases delegates simply restated their established positions. However, Members were "re-engaged," the chair observed in comments afterwards to the press. His paper had "got the adrenalin running" again.

While a number of countries argued that they could not accept the paper as a basis for negotiations, the chair responded by saying that this was not the purpose of the text. Rather, it sought to challenge delegates to respond to concrete options for achieving consensus, with the aim of identifying possible ways forward.

Market access: flexibilities remain controversial

The G-33 group of developing countries, which favours providing developing countries with substantial flexibility to protect their agricultural 'special products' (SPs) on the basis of food security, livelihood security and rural development criteria, argued that the paper was biased towards developed countries in its treatment of market access. "There is a clear imbalance between market access for developed countries and that for developing countries," the group claimed.

It also criticised the chair's decision to focus on the number of special products that developing countries would be allowed, to the exclusion of any discussion of the 'indicators' which are meant to guide their selection. The group argued instead that negotiators should focus on both numbers and indicators. Furthermore, the "streamlined list of indicators" that G-33 ministers had agreed on at their 20-21 March meeting in Jakarta (see BRIDGES Weekly, 28 March 2007) should form the basis of discussions, as these had "been supported by the African Group, ACP and SVEs, and so, almost the entire developing world."

The US - which, along with other exporting countries, has opposed substantial flexibility for SPs - argued that "a 'number of lines' filter could be a useful tool as part of an overall approach that also involves indicators." Previously, the US has proposed that developing countries be allowed to designate no more than five tariff lines as special products.

In separate comments, one G-33 delegate was critical of the chair's attempt to interpret the mandated "more flexible treatment" for special products as meaning that no exemptions would be allowed, as well as of his suggestion that all such tariff lines be cut by at least ten to twenty percent. The group's statement argued that "this is very restrictive compared to various flexibilities that you have offered on sensitive products as well as domestic support."

The US also suggested that countries be permitted higher deviation from the tariff cut if fewer special products are chosen, longer staging for SP tariff cuts, and combining smaller tariff cuts with tariff rate quotas, particularly for products with high tariffs. Other exporting countries, such as Thailand, Malaysia, Costa Rica and Paraguay expressed their opposition to the G-33's views.

Trade sources also reported that the G-10 group of countries with highly-protected agricultural sectors (such as Switzerland, Norway and Japan) expressed their dissatisfaction with the paper's discussion of sensitive products, saying that the five percent limit proposed by the chair went beyond the bounds of what they would be able to accept. The G-33 also argued that, while Members had agreed to provide special and differential treatment for developing countries, the paper did not make clear what this would mean for sensitive products.

Domestic support: US singled out

A number of groups and individual Members commented that the paper had been insufficiently demanding on the 'domestic support' pillar of the agriculture negotiations, dealing with subsidy cuts. Referring to the chair's statement that agreement on the cut in overall trade-distorting domestic support would be found "certainly below 19 [billion USD] and somewhere above the very low teens," the G-20 argued that "what should be discarded are the "high teens" and that the "lower teens" actually reflect the only possible centre of gravity." The US is currently offering to cut its maximum permitted total subsidy spending by some 53 percent, to $22 billion - more than the $19 billion it currently spends, and well above the G-20's proposal for a 75 percent cut, which would reduce US spending to around $12 billion.

The G-33 similarly noted that the chair's paper would mean that overall trade-distorting support in "one of the major agricultural subsidisers could remain much higher than the current levels of subsidies."

The US instead argued that while they recognised the need "to make a further contribution" in this area, "there are limits as to what is realistic." The US also argued that the paper failed to appreciate "the primary importance of the market access pillar over the export competition and domestic support pillars" - an argument that was vociferously rejected by other Members such as the EU, which emphasised the need to strike an equal balance across all three areas.

The chair sought to clarify the language in his paper, explaining to Members that "below $19 billion" meant $18 billion, and the "low teens" meant double digits (rather than thirteen or above). He had meant to warn negotiators that calling for the US to cut subsidy spending to below $10 billion would not be accepted, he said.

The US also argued that Members should bear in mind that the amber box caps and blue box disciplines discussed in the chair's paper are "not intended to be additional cuts". In contrast, the G-20 emphasised that "at lower levels of cuts, disciplines become ever more essential". Many developing countries are concerned that any new agreement is effective in preventing developed country subsidisers from maintaining high levels of support on specific products by simply shifting support programmes between different WTO categories, in the absence of any substantive reform of these programmes' effects on trade or production.

Export competition

At the meeting, the EU repeated its demands for parallel treatment of the different elements within the export competition pillar. WTO Members agreed in 2005 to phase out export subsidies by 2013, which the EU accepted on the condition that similar forms of export competition (such as export credits, or US food aid) be disciplined as well.

Trade sources indicated that the EU may seek to extend the 2013 deadline, now that the deadline for concluding the Doha negotiations has been delayed. The chair's paper nonetheless assumes that the 2013 date remains valid, and that the implementation period must be shortened as a result.

The US welcomed some of the chair's suggestions on food aid - such as the idea that organisations other than the WTO should define what constitutes an emergency situation. US food aid has been criticised by other Members such as the EU, who argue that it often constitutes a form of disguised export subsidy. The US nonetheless opposed the notion that Members should move towards providing cash-based aid, rather than providing in-kind donations. A statement by the least-developed countries emphasised that such aid should be in fully grant form.

Cotton

Cotton-producing countries welcomed the chair's text, suggesting that it had successfully achieved its goal of provoking reactions. Whilst indicating that the US reaction did not contain any great surprises, they noted the need for a systemic solution to the sector's problems, and welcomed the support they received from other country groupings in the 7 May meeting.

'Radical thought'

Delegations reacted cautiously to the chair's "radical" proposal for developing countries to "drop the complicated flexibilities… and just go for a straight overall average cut," comparable to that which applied in the previous Uruguay Round of world trade negotiations. The G-20 indicated that they would examine the proposal's implications "and react at a later stage."

The Chinese delegation was more forthright in response to the idea, stating simply that they "don't believe it would help the negotiation."

One trade source confided that "people are sceptical. Many don't think it's viable at this stage." A simple average tariff cut was not necessarily seen as being better for developing countries, the source said.

Intensive consultations

The chair told Members that he would be bringing out a 'second instalment' of the paper on 14 May, covering various issues he had not addressed in his first paper. The paper had not included specific comments on special treatment for recently-acceded Members or for small and vulnerable economies; on Green Box subsidies; on the special safeguard mechanism that developing countries could use to defend themselves against import surges; on tropical product liberalisation and preference erosion, commodities, and a number of other issues.

Falconer also said that he intends to launch intensive 'Room F' consultations with small groups of invited negotiators, in the fortnight beginning 21 May.

Trade sources indicated that they expected to have a revised 'modalities' text by mid-June, setting out formulas and figures for tariff and subsidy cuts, and exceptions to them. This would provide time for discussion of the text before the WTO's customary summer break in August, which in turn could allow the Doha round to be concluded by the year end. Trade sources nonetheless cautioned that the US timeframe may be different, with negotiating stances dictated as much by domestic discussions as by the need for agreement by July.

ICTSD reporting.