HITCH ON SENSITIVE AG PRODUCTS DELAYING REST OF DOHA TALKS

Continuing disagreement among a dozen-odd WTO Members on how to expand trade in 'sensitive' farm products is holding up discussions in the ongoing push for a deal in the struggling Doha Round of global trade negotiations.

The highly technical, though crucial, issue has led the chair of the WTO agriculture negotiations to delay small-group meetings he had planned for this week, trade sources said. Chair Ambassador Crawford Falconer (New Zealand) is now telling delegates that he aims to a new draft deal - a revised version of his February draft text - in mid-April, they said.
Industrial goods negotiators say that the talks on non-agricultural market access (NAMA), which have more often than not proceeded with one eye on the agriculture negotiations, are also being affected by the hold-up on sensitive farm products.

In the agriculture negotiations, both developed and developing countries will be able to slate a certain number of 'sensitive' products for lesser tariff cuts, in exchange for expanded tariff quotas.

A group of five exporters (Argentina, Australia, Brazil, New Zealand, and Uruguay) and six major import markets (Canada, the EU, Japan, Norway, Switzerland, and the US), known informally as the 'friends of the chair', have been meeting sporadically under their own auspices since September to try to determine how much market access will be provided for 'sensitive products'.
The extent to which these quotas expand will be based on domestic consumption. And thus, domestic consumption data for key importing countries' has been a crucial issue. When they released this data a month ago, exporters complained that it implied even less market-opening than expected. Since then, domestic consumption data has been the focus of discussions, as the group attempts to find a compromise that will address their respective concerns (see BRIDGES Weekly, 12 March 2008).

Falconer had planned to hold informal consultations with about three dozen delegations representing the spectrum of negotiating alliances, known as 'room E' talks, from 31 March onwards. These had widely been expected to address sensitive products. They have now been postponed to the second half of this week to enable the 'friends of the chair' group to make more progress amongst each other before sharing the results of their discussions with the rest of the WTO Membership.

Privately, many delegates are now voicing fears that if the sensitive products issue is not resolved, there may be another stalemate in the upcoming talks, as happened for two weeks in the room E meetings that followed the release of Falconer's text in February. Some Members may also be withholding their remaining negotiating flexibility for use as bargaining chips in the planned 'horizontal process' - in which Members are expected to make cross-sectoral tradeoffs across agriculture and industrial goods with the aim of reaching a framework deal on cutting tariffs and subsidies.

Sensitive products: processed goods remain problematic

Members discusssed the domestic consumption data released by importers in meetings over the past two weeks, both before and after the Easter holiday on 23 March. In addition to the 'friends of the chair' group meetings, delegations also met bilaterally.

The data released by Canada, the EU, Japan, Norway, Switzerland and the US was now almost complete, one delegate indicated. Information on some products was still missing from Switzerland, and from the EU on fruit and vegetables.

Complete and final data has been a key demand of exporting countries such as Argentina. They have suggested that most of their farm export gains from the Doha Round will come from sensitive products, and have signalled that without greater clarity on quota expansion for these products, they would be loath to commit to concessions on industrial goods.

Still controversial is the methodology to be used for accounting for the share of domestic consumption represented by processed products. Importing countries have provided domestic consumption data at the broad product level (for 'sugar' or 'beef', for example). Exporters have expressed concern that, when these consumption figures are allocated between tariff lines at a more detailed level, the more highly-processed products could end up reducing the overall consumption figures for the basic commodity. Unprocessed products such as sugar or wheat represent the bulk of exporters' interests and importers' sensitivities, and are much more likely to be designated as sensitive than processed goods such as sugary drinks, biscuits or communion wafers.

Various compromise solutions have been floated recently to resolve the problem. Importers have recognised that some way needs to be found to ensure that processed products do not distort consumption figures for raw materials, and have suggested discussing possible 'coefficients' that would reduce the domestic consumption represented by processed goods.
Another option could include establishing a 'floor' that would limit the share of consumption that could be allocated to processed products for any given product - ten percent of total consumption, for example.

A third option, which one source said seemed to be commanding growing support, involved agreeing that all highly-processed products (chapter 18 and above under the 'harmonised system' of tariff lines) would represent zero domestic consumption.

Horizontal process in May?

In the NAMA negotiations, sources say that the chair will hold 'confessional' meetings with individual delegations this week and next to explore possibilities for compromise. The long-deadlocked talks recently seemed to budge a bit, when countries hinted that they might consider some ideas circulated by Stephenson for how developing countries might be able to secure wider exceptions in exchange for deeper tariff cuts, or vice versa. Sources said that Stephenson's consultations would particularly focus on a limited 'sliding scale' approach with three options for future developing country tariff ceilings paired to different figures for the proportion of products eligible to be shielded from the full force of tariff reduction.

Some sources now suggest that Falconer and Stephenson might not issue revised versions of their February draft texts until after the 20-25 April UN Conference on Trade and Development summit in Ghana. Even if revised texts were to be issued prior to that, several developing country trade officials will go to Accra for the meeting, and thus will have little time to review the drafts until afterwards. Given that delegates expect each text to be reviewed in the respective negotiating groups before a 'horizontal process' can start, serious talks involving senior officials (and ultimately ministers, if all goes well) are unlikely to even begin until May, delegates told Bridges.

ICTSD reporting.