WTO Farm Talks: Paraguay Tariff Cut Paper Outlines Formula, Request-Offer Approach

12 March 2015

A new informal paper from Paraguay to cut farm tariffs under the WTO’s Doha Round of trade talks could allow developed countries to maintain exceptionally high “tariff peaks,” but still help kick-start more detailed talks on tariff and subsidy cuts, trade sources have said.

The proposal, which was discussed at a small group consultation two weeks ago, is set out in an unofficial “non-paper” which has been seen by Bridges. It builds on a recent Argentinean proposal for countries to exchange concessions through a “request and offer process,” blending this with aspects of the tariff cut formula approach adopted in previous draft Doha negotiating texts. (See Bridges Weekly, 19 February 2015)

Because the new proposal would cut farm tariffs by an average figure, instead of applying steeper cuts to tariffs in a higher “band,” developed countries could continue to maintain exceptionally high market access barriers on a few “sensitive” products, trade sources told Bridges.

However, even delegates with misgivings about the specific details of the proposal said they felt that the paper could help move negotiators toward more detailed discussions and away from exchanging mutual recriminations.

“It got people to go beyond ‘We like Rev.4; we don’t like Rev.4,” one trade source said.

Developed countries: 54 percent average cut

Under the proposed approach, developed countries would cut farm tariffs by 54 percent on average, with a minimum cut of 20 percent for each tariff line.

This would then be supplemented with a demand-driven request and offer process over a two-month period.

Developed countries would also be able to shield a proposed maximum of five percent of particularly sensitive tariff lines from cuts greater than the required 10 percent reduction, Paraguay has proposed.

In contrast, high tariffs greater than 75 percent would have been cut by as much as 70 percent under proposed disciplines set out in the latest draft Doha “modalities” text – a blueprint for subsidy and tariff formula cuts and exceptions that was tabled by the then-chair of the agriculture negotiations in 2008.

“For higher tariffs, the difference is quite significant,” one delegate said.

The draft Doha deal would have allowed developed countries to shield up to four percent of tariff lines as “sensitive,” in exchange for expanded market access through import quotas. However, in developed countries these would still have been subject to a minimum 23 percent cut.

Paraguay proposes that members should have to open or expand import quotas on products shielded by tariffs above 100 percent in developed countries, or by tariffs above 130 percent in developing countries. The informal proposal does not specify the size of the quota opening that would be required, but the inclusion of square brackets suggests this could be determined in further negotiations.

However, the draft proposal would require in-quota tariffs to be cut by 50 percent or to a 10 percent threshold, depending on which resulted in a lower final tariff.

Exemption for LDCs

Least developed countries (LDCs) – the poorest members of the WTO – would not have to undertake any tariff cuts, the Paraguay document indicates.

Other flexibilities would also take into account developing country concerns. Developing countries would undertake a proposed average cut of 36 percent, while countries classed as “small, vulnerable economies” (SVEs) or “very recently acceded members” (VRAMs) would apply an average 24 percent cut.

The proposal does not suggest a specific rate of tariff cuts to be undertaken by recently acceded members (RAMs) – a group which included China, which joined the WTO in 2001, and was set to be accorded more flexible treatment under the 2008 draft modalities text.

Developing countries other than SVEs and VRAMs would still have to cut each tariff line by a minimum of 15 percent, Paraguay proposes.

Developing countries would also be allowed to shield a maximum of 12 percent of their tariff lines from any cuts greater than the required minimum cut of ten percent, the informal paper says.

The 2008 Doha text included specific provisions allowing developing countries to protect 12 percent of tariff lines as “special products,” which would be subject to gentler cuts or exempt altogether, on the basis of food security, livelihood security, and rural development criteria.

Requests and offers

After members have submitted offers than conform to these minimum disciplines, they would exchange requests for further market access concessions with other countries in a subsequent stage of negotiations, Paraguay says.

Members receiving a request will be able either to accept the offer, to decline it or instead make a counter-proposal.

When members make a request, they should also expect to have to make a suggested offer to their trading partner to match the proposed concession they seek.

Developed countries, along with developing countries in a position to do so, should give due consideration to requests to expand access to their markets for those products of particular interest to LDCs and SVEs, the proposal says.

At the end of the process, countries would submit a revised offer that takes into account the concessions made in the request and offer stage of the negotiations, and the resulting improvements in market access would be made available to all members on a multilateral basis.

Basis for further talks?

Trade sources familiar with the proposal told Bridges that it seeks to ensure “minimum market access achievements for all members.” Countries with small markets have historically been wary of proposals to exchange concessions through bilateral requests and offers, fearing that they could lose out on market access gains as a result.

Developing countries in particular have also feared that strong-arm tactics from more powerful trading partners could place them under pressure to make concessions in areas which the government had sought to protect from trade opening.

The hybrid approach put forward by Paraguay could help “to guarantee transparency,” sources said.

Several delegates welcomed Paraguay’s initiative, with one saying that the proposal could become “a basis for market access moving forward.”

Others cautioned that countries with highly-protected farm sectors, such as members of the G-10 negotiating coalition, had not reacted positively to the proposed new disciplines.

At the same time, some members of the Cairns Group of agricultural exporters – to which Paraguay also belongs – also expressed concern that the proposal could lead to substantially lower market access gains than those that would result from the disciplines set out in the 2008 draft text.

Domestic support: tensions remain

One trade official told Bridges that the US has said it is unwilling to accept the farm subsidy cuts set out in the 2008 draft Doha deal if China, India, and other large developing countries do not also reduce their levels of trade-distorting domestic support.

John Adank, the New Zealand ambassador chairing the farm trade negotiations, convened informal consultations on the subject among a small group of members last Friday. Officials familiar with the talks described them as “tense.”

During the meeting, the US referred to a study by one private law firm claiming that subsidy programmes in five emerging economies violate their WTO commitments, sources said. (See Bridges Weekly, 26 February 2015). The Chinese negotiator disputed the numbers in the report, one delegate said.

China also underscored that its trade-distorting farm subsidies are substantially below US levels on a per capita basis, sources told Bridges.

Others argued that the difficult exchanges were a sign that countries were at last engaging with controversial issues that were likely to be at the heart of any eventual trade deal.

“People are having the conversations that need to be had, even if those are sometimes difficult,” one trade source said.

The informal meeting came only two days after some members of the Cairns Group presented a revised document on domestic support levels at the regular meeting of the WTO Committee on Agriculture.

The paper updates data on domestic support for the top ten global agricultural trading powers, building on a similar document that was presented last year. (See Bridges Weekly, 27 March 2014)

Adank to consult members

Adank is now set to hold an informal meeting of the agriculture negotiating committee, which will be open to all members, on Friday 20 March. The talks will focus on both market access and domestic support, ahead of a July deadline for reaching agreement on a work programme on the remaining Doha Round negotiating issues.

That same day, the chair is convening a dedicated session on the question of public stockholding for food security. The meeting is aimed at moving forward discussions on an eventual “permanent solution” to concerns that developing countries have raised over the impact of price inflation on their ability to purchase food at administered prices as part of these schemes.

One delegate told Bridges that the organisation’s credibility depended on making progress soon on the long-running Doha Round talks.

“To use a cricketing metaphor, the organisation needs to get some runs on the board,” the source said.

ICTSD reporting.  

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