FLURRY OF PROPOSALS AS AG CHAIR PREPARES DRAFT AGREEMENT, PESSIMISM NOTWITHSTANDING

WTO Members this week produced a spate of new proposals in an attempt to influence the content of the draft agreement text currently being prepared by the chair of the agriculture negotiations. Delegates expect the draft 'modalities' paper, which will set out figures and formulae for tariff and subsidy cuts and exceptions, to be circulated in the days leading up to 16 July. This week is the 'last chance' to communicate their positions before the text is issued, they said.

Geneva-based delegates appear to be giving up on making substantial headway in the Doha Round negotiations by the end of July. Agriculture Chair Ambassador Crawford Falconer (New Zealand) has reportedly indicated that he is planning to continue discussions on his text in September. A framework deal before the WTO's August holiday had been considered crucial for finalising the round by early 2008, before the US election campaign begins in earnest. Many negotiators now suggest that an accord in the near future seems highly unlikely, particularly after the acrimonious breakdown of talks among the 'G-4' major trading partners - Brazil, the EU, India and the US - in Potsdam, Germany, two weeks ago (see BRIDGES Weekly, 20 June 2007).

In contrast to the trade diplomats, some governments continue to speak of a potential breakthrough by the end of July. Asia-Pacific leaders may attempt to give a post to the Doha talks when meeting in Cairns, Australia on 5-6 July. WTO Director-General Pascal Lamy himself referred to a horizon of "the coming weeks" in a 2 July speech.

New EU proposals on market access

The EU produced two papers on market access, both dated 29 June. One dealt with the treatment of 'sensitive products', providing a complex formula for calculating the size of new import quotas that developed and developing countries would have to create in exchange for making reduced tariff cuts on such commodities.

Under the proposal size of expanded quotas would vary based on several variables, including the share of imports in domestic consumption, the extent to which the product was being shielded from regular tariff reduction rates, the elasticity of import demand, and import penetration.

Negotiators said that the EU submission was so complicated, it was impossible to understand whether it would offer trading partners any expanded market access opportunities. "It's so complex as to become incomprehensible for most human beings", said one, noting that this alone led many Members to suspect the EU was "trying to cook up the results."

The EU's other paper addressed issues such as tariff escalation, tropical and diversification products (the latter intended to help countries shift production away from illicit narcotic crops), and the special safeguard.

In particular, it proposed extra tariff cuts for cases of substantial 'tariff escalation' - when processed products are subject to higher duties than their raw materials, which can be a disincentive for poor countries to develop processing capacity.

More controversially, the EU proposed maintaining the special safeguard (SSG), a mechanism that has been used primarily by developed countries to raise tariffs above bound levels in order to defend against import surges. Developing countries have tended to oppose any such extension, as have efficient exporters such as the Cairns Group countries.

The EU once again stressed the importance of extending 'geographical indications' protection to products other than wine and spirits (say, for example, Parma ham). Countries such as Switzerland and the EU believe that commercial opportunities arising from restricting the use of names associated with particular places could help compensate their agricultural producers for subsidy and tariff cuts. Many WTO Members, especially 'new world' nations like the US and Argentina, have consistently argued that there is no mandate to address this issue in the negotiations.

Tropical products: EU rejects Cairns Group proposal

The EU rejected outright the Cairns Group's recent proposal on liberalising trade in tropical products (see BRIDGES Weekly, 14 March 2007),

Stating bluntly that it "will not consider working off the Cairns list" of tropical products eligible for the "fullest liberalisation," the EU argued instead that Members should base their discussions on a list of products that had been negotiated but never finalised during the previous Uruguay Round of talks. While this had been "the subject of intensive negotiations", the shorter Cairns Group list "had no status," it declared. The EU criticised the Cairns Group's list for including commodities such as sugar, rice, tobacco, cigarettes, potatoes, onions, ethyl alcohol, and some edible oils, saying that it could not accept their designation as 'tropical'.

The EU further suggested that Members should bear in mind "the sensitivity of certain products and the need to address preference erosion." The African, Caribbean and Pacific (ACP) group of countries has repeatedly warned that full liberalisation for tropical products, especially bananas and sugar, could, by ending their advantageous access to developed country markets (especially the EU), exacerbate the 'preference erosion' problems that Members are also supposed to address.

In a substantial break with the discussions thus far, the EU argued for considering tropical and diversification products separately. "Diversification products cannot be addressed on an MFN basis," it said. Instead, concessions "should be available only for countries engaged in effective diversification programmes."

A delegate from a proponent of greater liberalisation described the EU paper as "unhelpful," "nasty and confrontational" in tone, and an attempt to reopen several issued that had already been agreed. For example, there is absolutely no mandate for treating tropical and diversification products differently, the source said.

Monitoring and surveillance: G-20 and Cairns Group table proposals

The Cairns Group and the G-20 bloc of developing countries last month issued separate papers on improved monitoring and surveillance. Amongst other things, both focus on the need for timely notifications from WTO Members: long delays, especially on subsidies, have annoyed exporting countries, which argue that it is impossible to negotiate properly on reduction commitments in the absence of accurate, up-to-date information. While the US last notified its subsidy spending in 2001, the EU and Japan have not done so since 2003/04 and 2003 respectively.

Both papers set out a number of across-the-board requirements, as well as specific ones for market access, domestic support and export competition. Both also recognise the need for special and differential treatment for developing countries, which have warned that notification requirements can place a heavy burden on their limited administrative capacity.

The Cairns Group submission proposes an in-depth examination of Members who fail to submit timely notifications. The G-20, for its part, proposes establishing a subcommittee on monitoring and surveillance, in which tardy notifiers will be barred from asking questions or proposing issues for discussion.

Commodities: Africa Group submits new paper

The Africa Group on 2 July put out a paper on commodities, criticising the cursory treatment Falconer had given the issue in the second instalment of his 'challenges' paper identifying several parameters for a potential accord (see BRIDGES Weekly, 30 May 2007). In that document, he had simply noted that there was "very little" emerging agreement on commodity issues, and suggested that Members simply agree to provide technical and financial assistance on diversification and capacity building, and to further examine the question of producer agreements.

Calling this a step backwards, the group emphasised the importance of progress on this issue for Doha's credibility as a 'development round'. In order to tackle tariff escalation on commodities, the group's paper argued that a limit should be placed on the gap between tariffs on primary and processed products. Commodity-dependent countries would identify products of interest for this.

The group also set out draft text intended to clarify rules on international commodity agreements among producer countries, building on their June 2006 proposal. This aimed to clarify ambiguity about the legality of such agreements under existing trade rules.

Chair describes the road ahead

Sources report that Falconer has indicated that he intends to issue the new draft in the middle of the month, probably between 13 and 16 July. The draft had initially been expected sooner, but was delayed following the G-4 breakdown in Potsdam.

The chair would then allow negotiators a week to examine the text, consult with capitals and each other, and prepare reactions. On 23 July, he would begin a round of 'room F' consultations with small groups of invited ambassadors, with both open and invitation-only sessions.

Despite previous suggestions that negotiators might have to work through their traditional holiday, sources said the chair would then halt consultations for August. Work would begin again in early September, with a new round of consultations, to be followed with by a new revision of the text, potentially followed by one last version.

If, at some point later in the month, an agreement looks within reach, Lamy would probably invite some two dozen ambassadors or senior capital-based officials for a 'green room' aimed at finalising a deal. This would be the prelude to ministerial-level approval.

ICTSD reporting.