AG: POSITIONS HARDEN ON SPECIAL PRODUCTS, SPECIAL SAFEGUARD MECHANISM

WTO Members are failing to converge on special treatment for developing countries in the Doha Round agriculture negotiations. Countries largely repeated established positions on theses issues earlier this week. The chair of the negotiating committee on 15 April even suggested that the talks were going "backwards."

Particularly controversial at the committee meeting, open to the entire WTO Membership, were the treatment and number of 'special products' that developing countries will be able to shield from standard tariff cuts on the basis of food security, livelihood security and rural development needs. Also prominent was the 'special safeguard mechanism' (SSM), which developing countries will be able to use to raise tariff levels temporarily in the event of an import surge or price depression.

Many members believe that an anticipated 'horizontal process' of trade-offs between negotiations on industrial goods, agriculture, and possibly also services cannot begin without greater clarity on special products and the SSM, which a large number of developing countries see as critical to the outcome of the talks on agriculture.
If negotiations make enough progress, Chair Ambassador Crawford Falconer (New Zealand) suggested that he may issue a revised draft text for a potential deal around the end of April.
Sources say that WTO Members are tentatively aiming to resolve enough issues on agriculture and industrial trade to make it possible for ministers to meet starting the week of 19 May to finalise the compromises necessary for a deal. However, without movement on special products and the SSM it is unlikely that ministers would be in a position to strike an accord on agriculture by then.

Exporters circulate new proposal on special products

A group of exporting countries (Australia, Canada, Costa Rica, Malaysia, New Zealand, Paraguay, Thailand, United States and Uruguay) last week circulated a paper calling for allowing developing countries to designate no more than 8 percent of tariff lines as 'special' - in contrast to the 20 percent favoured by the G-33 group.

As per the new proposal, half of these 'special' tariff lines would be subject to a 25 percent cut, and the other half would undertake a 15 percent reduction.

Countries could be allowed to fully exempt no more than 1 percent of tariff lines from reduction, provided that these did not cross certain import value and South-South trade thresholds. In this case, only 3 percent of tariff lines would be eligible for the 15 percent cut.

The G-33 group of developing countries, which has championed the notion of both special products and the SSM, has called for 8 percent of tariff lines to be exempt. In a statement, the group said that the exporters' proposal was not constructive, and that it "widens the gap" on special products.

The G-33 charged that the conditions on the reduction-exempt 'super-specials', especially the requirement that they should not account for more than 0.5 percent of a country's total imports for a product, would render the flexibility essentially meaningless.

The group also called for an "exchange mechanism" between special products and 'sensitive' products, which all countries, developed and developing, will be able to slate for gentler tariff cuts in exchange for expanded import quotas. It argues that this is necessary, since many developing countries do not have tariff rate quotas, and will not be able to fully benefit from the use of sensitive products. The exchange rate tabled by the G-33 is three to two, i.e., an entitlement to designate 3 percent of products as sensitive products should be convertible into an additional 2 percent of special products (up to a maximum of 25 percent of all tariff lines).

Sensitive products

Six countries had been expected to provide explanatory notes regarding a complex agreement that they reached two weeks ago on how to calculate tariff rate quota expansion for sensitive products (see BRIDGES Weekly, 11 April 2008).

However, due to a lack of internal agreement on sub-categorisation and sub-allocation - under which broad product categories would be split into narrow ones so that specific products can be protected - the notes were not submitted.

Tropical products and preference erosion

In recent weeks the talks on sensitive products have looked at the tension between separate mandates for speedy trade liberalisation for tropical products and steps to address the effects of the erosion of longstanding trade preferences for some of the same crops, notably sugar and bananas.

Preference beneficiaries in the group of African, Caribbean, and Pacific countries want their key export markets to designate these products as 'sensitive'. By reducing the depth of multilateral tariff cuts, this would minimise the extent to which the margin of their preferential access would be eroded.

On the other hand, the tropical products group - mostly Latin American countries that do not receive trade preferences - insists that the Doha mandate provides for the 'fullest liberalisation' of trade in tropical products.

Members of the ACP stated that there can be no hierarchy in the between tropical products and preference erosion.

During informal consultations, members of the tropical products group have met with developed countries to agree on a potential list of tropical products that would not appear on a list of sensitive products, a delegate said. The proposed list would be a compromise between the two interested groups and not one based on a strict definition of tropical products.
Special safeguard mechanism.

On the special safeguard mechanism, the G-33 softened its stance, moving away from a call for all products to be eligible for increased duties under the SSM to saying that product coverage will be equivalent to the percentage of tariff lines covered by the existing special agricultural safeguard (SSG) used primarily by developed nations.

This stance is a departure from the draft text circulated by Falconer in February. That text contained options for either all products or a given percentage to be eligible for the SSM. The G-33's recent proposal of equating the number of tariff lines eligible under the SSM with the SSG may be a move towards a compromise.

Exporting countries have opposed provisions in the SSM that would allow members to raise applied tariffs to bound levels, citing the Chilean Price Band case. In that case, the WTO Appellate Body ruled that Chile's tariffs on farm products including wheat and sugar, which varied automatically against market prices and other external factors, were not in accordance with the Agreement on Agriculture's provisions against 'variable import levies' and 'minimum import prices'.

The G-33 has stated that a sovereign nation may raise its tariffs to bound levels without it being considered a variable import levy if it is an administrative procedure, and not an automatic response. Moreover, the G-33 reiterated that for the SSM to be effective, additional duties would have to be able to push tariffs beyond bound levels if necessary.
Next steps

The Chair proposed three possible alternatives in the preparation for the text expected in the week of 28 April.

The text could include the six-country compromise on sensitive product data verbatim, an alternative proposal, or a new compromise that would allows minister to make tradeoffs in mid-May.
The 15 April meeting is set to be reconvened at the end of the week, since delegations were not able to complete their interventions. Until then, intensive consultations on special products, tropical products, and preferences are set to continue.

ICTSD reporting.