AG CHAIR TO ISSUE REVISED DRAFT TEXT BY END JANUARY

The chair of the WTO agriculture talks has told Members that he plans to circulate a revised draft 'modalities' text by the end of the month, setting out formulae and figures for tariff and subsidy cuts.

Negotiators have been keenly awaiting the detailed draft deal, which would represent an important milestone on the long and uncertain road to a Doha Round agreement on liberalising global trade. It would update a July 2007 text that provided little in the way of specifics on several issues in the talks.

At an 11 January meeting of the negotiating committee, which was open to all Members, Chair Ambassador Crawford Falconer (New Zealand) told delegates that there had been 'significant progress' in the two weeks of informal 'room E' consultations he had held since 3 January. These consultations were among 37 delegations representing a cross-section of different interests in the talks.

Signs that the EU could now consider elimination of the 'special agricultural safeguard' were particularly constructive, the chair told the meeting. This mechanism, designed to allow farm imports to be restricted in the event of import surges, has been used extensively by the EU and others to maintain high tariffs on certain products, to exporters' longstanding dismay.

Negotiators had been responding to some sixteen 'working documents' the chair had circulated from November onwards in an effort to identify areas of possible convergence in the talks (see BRIDGES Weekly, 7 November 2007). Eight papers on market access were circulated on 4 January, following four on domestic support before the WTO's December holiday.

While the chair's suggestions for the most controversial 'headline numbers' for percentage cuts to tariffs and trade-distorting subsidies remained unchanged from those in his July 2007 text, in other areas he had tried to capture progress that has emerged since September. Members have been trying to resolve a number of technical issues, such as precisely how some exemptions to standard tariff cutting obligations will operate, before sending a draft text to ministers for agreement on the most divisive questions.

Trade sources reported that the EU was pressing hard for governments to consider the upcoming revised text alongside other Doha Round issues such as industrial goods, in a so-called 'horizontal process'. This would allow countries to assess cross-sectoral tradeoffs, for instance between industrial tariff cuts and farm subsidy reduction. In contrast, the Cairns Group of efficient agricultural exporters as well as the G-20 and G-33 developing country alliances would prefer to first discuss the new text in the agriculture committee. The US was reportedly also sympathetic to the latter idea.

Market access

The talks on market access have been the most controversial, with some difficult unresolved issues such as a new 'special safeguard mechanism' for developing countries not discussed at all during the last two weeks.

A separate but similar mechanism, the special agricultural safeguard (SSG), did see some progress. Most developing countries have been unable to use this already-existing tool for technical reasons. It has been invoked mainly by developed countries to defend against agricultural import surges. Members such as the EU have used the SSG permanently to protect certain products, such as sugar, since the WTO's creation. Efficient agricultural exporters in the Cairns Group have long called for the SSG's abolition - in direct opposition to the EU, which wanted it preserved.

Now the EU appears to have softened its stance. It has proposed that the SSG could be eliminated, perhaps over a 7.5 year period rather than the standard 5 year implementation period currently foreseen for most obligations -- so long as the higher safeguard tariff on products that had benefitted from SSG protection was taken into account when calculating their new post-Doha tariff commitments.

Falconer's working document on the issue presented various options: the SSG expires from the start of the implementation period; would be applicable on a reduced number of tariff lines; or would be subject to tighter constraints.

Special products

The extent to which poor nations should be allowed to shelter 'special' products from tariff cuts has pitted the G-33 bloc of developing countries against several farm exporters, both developed and developing.

WTO Members have agreed that 'special products' will receive gentler tariff cuts on the basis of food security, livelihood security and rural development concerns, but remain divided on the number and tariff treatment of such products.

Falconer's recent working document on special products proposes allowing countries to select either 7 or 12 percent of tariff lines, to be cut by an average of twenty percent, with a minimum 15 percent cut and a maximum reduction of 25 percent. In an April 2006 'challenges paper', Falconer had envisaged allowing developing countries to select between 5 and 8 percent of their agricultural tariff lines as 'special' with slightly lower tariff cuts (see BRIDGES Weekly, 2 May 2007).

The new paper also contemplates an additional tier of another two to five percent of tariff lines, dubbed 'super-specials'. These would have to meet a lower average reduction, say 5 percent with a 10 percent maximum, with some eligible to be fully exempt from tariff cuts.

Full exemptions for some products, which the G-33 insists are essential, have met with equally vigorous opposition from exporters. "We have still to resolve the most difficult question of whether there shall be tariff lines with no cuts," Falconer wrote, although he expressed the view that some exemptions would be necessary for a deal to be reached.

The G-33, had long called for developing countries to be allowed to designate at least a fifth of their agricultural tariff lines as special with half of these exempt from liberalisation. On 14 December, it circulated a paper conceding that 20 percent of tariff lines should be the maximum rather than the minimum permitted number of special products. Of these, the G-33 said, 40 percent should be exempt from tariff cuts, another 30 percent should be cut by eight percent, and the remaining 30 percent should be cut by twelve percent. In his working document on special products, Falconer included similar figures in square brackets as a potential alternative approach.

Exporting countries, meanwhile, have continued to argue that no products should be completely exempt from tariff cuts. Some suggest that even the latest G-33 proposal could leave current duties unchanged on as much as 90 percent of imports. All special products should be required to correspond to 'indicators' demonstrating how they relate to food security, livelihood security and rural development criteria, they have argued. The need for a link to indicators would be obviated, however, by the chair's proposal for a guaranteed minimum number of special products.

Sensitive products

Also controversial have been the 'sensitive products' which both developed and developing Members will be able to shield from standard tariff cuts, in exchange for expanded import quotas. Importers such as the EU and G-10 group of countries with high tariffs have opposed Cairns Group calls for this mechanism to guarantee substantially increased market access.

Members have yet to reach agreement on the level of detail at which products should be designated as sensitive. While exporting countries had favoured designating products at the broad product level ('milk), importers have preferred using more specific sub-categories ('powdered low-fat milk'), so as to avoid using up the limited allotment of sensitive tariff lines on products that are not especially sensitive.

While importing countries have now shared with other Members their data on domestic consumption -- the agreed basis for quota expansion -- exporting countries are worried that this data remains provisional in status. They have also expressed concern that importing countries have accounted for domestic consumption of the processed forms of certain products separately from the raw materials, thereby reducing the domestic consumption base on which quota expansion will be calculated. Some exporters are thus arguing that clear information on consumption levels and quota amounts should be included in the modalities draft as an annex.

The Cairns Group also favours establishing one new quota commitment per product at the broad product level. Trade sources reported that importers appeared ready to agree to this, on condition that two quotas be established for poultry (for fresh and frozen), and beef (for high quality beef and other cuts). Some exporters are still concerned, however, that they would not know how the increased access would be shared across these sub-categories.

Domestic support

One delegate described the discussions on domestic support as being "more mature" than those on market access, with Members having managed to narrow down the outstanding issues to high-level political decisions such as the percentage cut in overall trade-distorting support (OTDS).

The chair's papers in this area covered new caps on OTDS, as well as disciplines on its composite elements - the amber box, blue box and 'de minimis' payments.

Falconer's new paper proposes that the three largest subsidisers -- the EU, the US and Japan -- lower their ceiling on OTDS spending by one third at the start of the implementation period, with other developed countries to undertake a 25 percent cut. The chair had previously suggested in his July paper that these countries would all undertake a twenty percent cut initially. Remaining reductions would be implemented in equal steps over five years.

Developing countries that provide such subsidies would be granted special treatment, with some being exempt from reduction commitments, and others benefitting from a lesser initial cut and a longer eight-year implementation period.

While the chair's July text had not proposed an initial reduction in the ceiling for amber box payments, his new working document proposed that the EU, the US and Japan undertake a initial 30 percent cut, followed by equally-sized cuts over the next four years. Other developed countries could space their cuts equally over five years. Developing countries would again benefit from a lesser cut, exemptions or an eight-year implementation period. Delegates familiar with the consultations said that Members such as Switzerland, Japan and the EU had opposed the new changes.

In Falconer's room E meetings, Members continued to debate which years should be chosen as the base period for calculating the new ceiling for US product-specific support. The US had objected to the choice of 1995-2000, the period which would be used for all other Members, preferring instead to use the 1995-2004 period when their higher overall payments would result in a higher future subsidy cap. The EU reportedly expressed concern that a special exception was being made for the US in this area.

After the revised text

Members admitted they were unsure what would happen after the chair released his draft text. One warned that the modalities draft would need to be explicit about how WTO rules would be amended so as to address Members' different concerns. Clarity on this issue, as well as on sensitive products, would be important before a 'horizontal process' is launched.

One delegate speculated that Members might have to engage in another six weeks of intensive consultations in Geneva once the new text had been released, until mid-March. Another noted that Falconer may not want to bring out his text immediately before a planned 5-6 February session of the WTO General Council, to prevent the text from dominating discussion at the meeting.

ICTSD reporting.