Agriculture talks focus on Tariffs, TRQs, amber box subsidies

by Chakravarthi Raghavan

Geneva, 27 May 2001 - Tariff quotas, tariffs, and the ‘amber box’ (trade-distorting domestic support measures, subject to reduction commitments) were the three topics that were discussed during the informal meetings of the Special Session of the Committee on Agriculture last week (21-23 May).

The three topics were among the several that have been identified in terms of the negotiations on agriculture.

In taking up the three items for discussion now, the Chair of the Agriculture Committee, Ambassador Apiradi Tantraporn of Thailand clarified indicated no order of priority, and nothing would be agreed until everything was agreed.

Other participants said that at the previous stage of the talks in the Committee, where a number of topics and items had been identified in terms of further negotiations, informal consultations on the order in which the items are to be taken up had not reached a consensus, and the Chair had chosen the three topics for discussions at this meeting, though in the absence of consensus, they might have preferred the topics being taken up in alphabetic order.

The clarification from the Chair came in some preliminary discussions where the choice of the subjects and its implications were raised by some participants.  Turkey stressed in this connection tis position that it would be unable to discuss tariffs and tariff-cuts unless there was to be meaningful reduction in export subsidies and in domestic support by the developed nations - a view that has been put forward also in their papers and presentations by India, Indonesia and a range of other developing countries.

On an issue of ‘procedure’, developing countries supported invitations being issued to the Food and Agriculture Organization and UNCTAD, who are observers, to attend the informal negotiations. However, the United States said that while it was not opposed to the two observer organizations, issues of principles were involved on whether observers should be able to attend the informal consultations/negotiations, and if so whether this was a matter to be decided by the WTO General Council or the Agriculture Committee where the negotiations are being held.

The Chair is to hold further consultations.

At a more general level, the discussions last week showed, according to some trade diplomats, the most rigid stand was that of Japan which was unwilling to move even an inch on any issue in terms of reforming its agriculture sector.

The Japanese position seemed to be independent of its general position at the level of the General Council on bringing new issues on to the agenda of the WTO.

Japan for example was against prescribing a minimum market access for everyone, irrespective of trade structures of a country and whether it was subsidising exports, while protecting the domestic market

On tariff quotas and their administration, and on which the EU, Australia, Switzerland and Japan have presented some papers, discussions showed that everyone felt there were problems arising from the tariff quota administration, but that no single method could be set as the best for administering quotas.

Some of the negotiators favoured negotiating ‘guidelines’ and taking account of ‘equity’, and broad principles such as transparency and predictability, and access for all comers etc.

Several of the Cairns Group members favoured allocation of tariff quotas on the MFN principle. Several others now enjoying preferential access in one market or other clearly wanted these to continue. A middle view was from some like India that wanted any derogation from MFN principle in allocation of tariff quotas to be notified to the Agriculture Committee.

A number of participants pointed to the problem of non-fulfilment of allocated quotas, and viewed as a problem caused by the way tariff quotas are administered.

Suggestions for remedying this ranged from carrying over of unfilled tariff quotas to subsequent years, preventing imports of out-of-quota rates until quotas are filled. The United States suggested that any unfilled tariff quotas should be allocated on an MFN basis to everyone.

A number of participants pointed to the existing WTO agreements - on import licensing etc - which had transparency and notification requirements and suggested these could be drawn upon to develop further disciplines on tariff quota administration in agriculture.

The EC, Switzerland and Norway favoured auctioning of tariff quotas, so that the quota ‘rents’ would accrue to the importing country, rather than to private parties.

The proposal did not find favour with several of the small economies, particularly those depending on single commodity exports, who found the ‘rent’ accruing to them as important for their own economies.

Questions were also raised whether such ‘auctioning’ of quotas would violate the bound commitments in tariff schedules, where there is a commitment to allow imports up to the tariff quota limit at a particular bound tariff.

On the issue of tariffs and reducing tariffs for improving market access, Turkey, India and Indonesia were among those who made clear that they were not ready to discuss any tariff reduction approach or to make any commitments or agree to any tariff reductions in the absence of meaningful reductions in export subsidies and domestic support by the developed countries. It was just not feasible for them to reduce tariffs and force their peasantry to face competition from the subsidised exports of the developed countries, and more so when these markets were in fact shut out through domestic support to their farmers.

Some of the papers and proposals in this area call for continuation of the Uruguay Round formula of an average reduction over all products and a minimum reduction for each product.

Australia has proposed a ‘cocktail’ approach of x% flat rate cut (no number specified in the paper for ‘x’) in general and a non-linear formula for higher tariffs - i.e. products having a high tariff should have more than the formula approach of tariff cuts.

Australia suggested this could be combined with expanded quotas and special and differential treatment for developing countries.

The EC approach was for flexibility, as now, so that there could be an overall tariff reduction, with each importing country free to determine the level of tariffs on individual products, subject to the overall reduction.

Japan’s position of wanting to exercise its freedom on the tariffs and their reductions, provoked a response from Chile whether Japan was willing to negotiate on anything in agriculture.

The EC pointed out that the formula adopted in the Uruguay Round had been arrived at after prolonged negotiations showed the impossibility of any other approach.

However, the Cairns group member underlined that the result of the Uruguay Round approach, and its continuation in the further stage of reforms, would leave intact tariff peaks and tariff escalations.

The United States argued strongly in favour of tariff cuts on the basis of applied tariffs, arguing that this alone would produce meaningful market access and ensure predictability.

However, a number of countries made clear that they were not ready to negotiate on the basis of applied tariffs, but only on the basis of the tariffs scheduled and bound in the Uruguay Round.

On the issue of domestic support, and ‘amber box’ measures, the Cairns group of countries argued for a ‘down payment’ of accelerated reductions and on a product basis. The EU was not prepared to accept this, and could only consider further reductions from the Uruguay Round levels after the implementation period. The EU was in favour of reduction of the de minimis level of support, something that would not hurt the EU and others who already have a high level of protection, but may hit the developing countries, who were hence very chary of the idea.

The United States wanted a review of the special and differential treatment on domestic support, set in Article 6.2 of the AoA. This exempts from reduction commitments domestic support measures of developing countries that are an integral part of development programmes, and investment subsidies generally available to agriculture in developing countries, and agricultural input subsidies generally available to low-income or resource-poor producers.

The US intention appears to be to ask developing countries who make such subsidies available to their farmers, to show that it is ‘targeted’ to their low or resource-poor farmers, and allow these subsidies only on the basis of such justification and proof - a way by which in individual cases the subsidies can be disallowed and made WTO actionable.

The discussions also showed that developing countries remained unconvinced that the various subsidies and support measures provided by the US (and identified in some recent OECD studies) were ‘non-trade distortive’ and thus not covered by the ‘amber box’ disciplines.

Several participants pointed out that if they were non-trade distorting, the level of production in the US and other developed countries should have come down by now, and prices should have risen.

Indonesia argued in the discussions that countries should be able to set off ‘negative product’ support in particular agriculture products to their ‘positive’ support.

Norway said that ‘inflation’ rates should be taken into account in relation to the various commitments under the WTO in agriculture. However, Australia said that this was provided for only in terms of (Art 18.4), for ‘excessive inflation’ to be taken into account in terms of ability of countries to abide by their domestic support commitments, and perhaps this should be clarified in terms of what would be ‘excessive’.

The United States has proposed changes in base year for calculation of AMS, but this was denounced by the EU as not acceptable.

The shifting of the base year, and the data to be provided in respect of it, would bring into play all the ‘amber box’ support measures that so far are not notified, and will come up if disputes arise after the end of the peace clause in terms of subsidies allowed by the AoA and disallowed by the WTO agreement on agriculture.

Under Art.13 of the AoA, which calls for ‘due restraint’ in disputes, domestic support measures and subsidies conforming to the AoA cannot be challenged under other provisions of the WTO until end 2003.

But in the absence of notification of the ‘amber box’ subsidies, it is difficult to challenge them.

In the Agriculture Committee itself, Argentina has been raising this issue, and demanding that the EC notify all its support measures, but the EC has been taking the position that it was not obliged to do so.

The next special session of the committee to take up other topics is set for 23-28 July. – SUNS4903

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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