No enthusiasm for radical agricultural reforms

WTO members remain at odds over the extent to which agricultural markets are to be further opened up.

by Chakravarthi Raghavan

GENEVA: Informal and formal talks at the WTO on market access in agriculture, with a view to drawing up modalities for the agriculture negotiations under the Doha work programme, have shown an impasse between the main protagonists as well as others, according to trade diplomats and officials.

Looking beyond the market-access issues, several developing-country negotiators said that generally they saw no great enthusiasm among the members for any radical approach (being pushed by some of the Cairns Group members), but were rather in favour of gradual reforms and liberalization as set in the Uruguay Round approach.

The discussions on market access have brought out that the United States and the Cairns Group (a group of agricultural exporter countries) favour the “Swiss formula” (formula proposed by the Swiss for the tariff negotiations on industrial products under the old GATT, a harmonization approach for narrowing the gap between high and low tariffs), while the Europeans (which maintain protectionism in agriculture) favour the Uruguay Round approach (average tariff cuts).

The WTO negotiations on agriculture are being run on the three pillars of export subsidies, market access and competition, and domestic support. In terms of the Doha work programme and decisions of the Trade Negotiations Committee, the negotiators are to agree on a modalities paper by March 2003.

As an initial step, Stuart Harbinson of Hong Kong China (now the chef de cabinet of WTO Director-General Supachai Panitchpakdi), who has been chairing the agriculture negotiations, is to prepare and provide a first draft by the end of this year.

In a summary of the discussions (on the market-access issues) read out by him at a formal meeting of the Special Session of the Committee on Agriculture on 6 September, Harbinson said that despite the detailed discussions in the talks (informal inter-sessional consultations on 29-30 July, and informal preparatory talks on 2-3 September), in some areas not enough detail has been provided to enable him to prepare a first draft of the modalities paper.

Trade officials said that in any event any modalities paper would leave blanks (or indications like X) to be filled in by negotiations. Nevertheless, it seemed clear that unlike the “rabbit” that Harbinson pulled out of the hat to help push through a declaration at last year’s Doha Ministerial Conference (where both the US and the EC were agreed), it would be more difficult to push through a modalities paper on agriculture - where the US and the EC have strongly opposed views, and there are also a large number of other players.

Any attempt to get the large number of developing countries on board would require elaboration on the issue of special and differential treatment in general, and its application in agriculture in particular.

Formula for tariff cuts

On market access and tariff cuts, while the opposing positions were formulated by the US and Cairns Group on the one side and the EC on the other (in fact not so much in terms of clear proposals, but rather in rejecting the Swiss formula and advocating continuing the “reform process”), not very many others appear to have taken a clear position, though some like India reportedly said that given the problems they already face, they could not support a Swiss formula or even any more cuts.

Some trade diplomats said that the US appears to have brought some pressure to bear on several of the non-Cairns Group developing countries here (and more so on those whose capitals have not paid much attention so far to the problems or have been far too involved and dependent on the US in other areas), asking them not to come out in opposition to the US position.

As a result, several appear to have contented themselves with comments implying that whether it be the Swiss formula or the Uruguay Round approach, the tariff cuts are for the developed countries to undertake, while, as far as developing countries are concerned, special and differential treatment should apply. The support for the Swiss formula voiced by Cuba, the Dominican Republic, Honduras, Kenya, Pakistan, Sri Lanka and Zimbabwe perhaps fell in this category.

Some of the newly acceded countries to the WTO, including China, also took the position that they have made more concessions for their accession and should not be called upon to undertake still more.

Apart from the formula to be adopted for tariff cuts, there were also discussions on converting specific duties into ad valorem duties before applying tariff cuts. Specific duties are duties which are levied on the basis of the quantity of imports, e.g., in terms of dollars or euros per tonne, whereas ad valorem duties are levied as a percentage of the value of imports.

Costa Rica in a paper contended that specific duties are non-transparent and provide considerable protection to domestic producers when prices fall.

The Cairns Group, India and several other developing countries wanted all specific tariffs in agriculture to be converted into ad valorem duties. The US, which itself has some specific tariffs on key products, apart from some levies by its constituent states, as on orange juice in Florida, supported to some extent the conversion of specific duties into ad valorem duties, but it was also clear that it would leave itself some loophole for exceptions.

The EC, Japan and other agricultural protectionists argued, however, that specific tariffs have advantages, in that traders know what they are going to pay, and converting them to ad valorem duties would be too complicated.

Several developing countries insisted that they should be exempt from reduction commitments, for example on food staples, so that they could ensure food security.

On the question of tariff quotas, most of the participants appeared to seek an expansion. Some of the Cairns Group members wanted, as a final objective, the elimination of tariff quotas and having only tariffs. Some Cairns Group members (New Zealand, Canada and, to some extent, Brazil and Chile) as also China wanted expansion of tariff quotas linked to levels of domestic consumption. Japan and Korea were among those who wanted recalculation of their tariff quotas to reflect more-up-to-date domestic consumption. Australia and others opposed any reduction in existing tariff quotas.

As for in-quota tariffs (tariffs to apply to products up to the tariff quota limit), some like New Zealand, Australia and Brazil wanted these to be zero. Some others including Thailand and Hungary argued that an above-zero in-quota tariff would help to narrow the gap between in-quota and out-of-quota tariffs, so that ultimately there could emerge a tariff-only barrier. Japan, China and the EC were opposed to any zero in-quota tariffs, except in terms of preferential access for the least developed countries.

A number of proposals related to tariff quota administration. Members of the Cairns Group wanted the administration of tariff quotas to be based on agreed principles - and with practical, predictable and transparent methods - to allow for trade on commercial basis. The principles, from this view, should also allow for full utilization of the tariff quotas, reallocation of unused licences, phasing out allocations to specific countries, excluding imports from non-WTO members from WTO quotas, etc.

These countries also wanted to ban “auctioning” of the quotas since such a method secures the “rents” going to the governments of importing countries, exceeding their bound tariff levels.

Norway, Switzerland and others (using this approach) defended auctioning quotas as transparent.

The EC, China and others sought an indicative list of methods. The EC also wanted the negotiations to clarify whether auctioning complied with WTO rules, so that governments could use it with confidence. Japan favoured a range of allocation methods to be available to governments.

A number of developing countries wanted to be empowered to use “special safeguards” (SSGs), which under the WTO Agriculture Agreement are now an instrument available only to those members which had converted their various agricultural restrictions and support into tariffs. Special safeguards, which take the form of an increase in import duties, can be invoked by these members if the price of the import has fallen below a prescribed level or if the quantity of the import has reached a prescribed level.

The members of the Cairns Group and others opposed a proposal from Japan and Korea, supported by Israel, for a new safeguard mechanism against perishable and other seasonal products.

Some of the members - the US, Hungary and New Zealand - were opposed to tariff quotas being administered or allocated to state trading enterprises, on the ground that their monopoly power and state ownership would enable them to disrupt market access through quotas. Japan, South Korea and Indonesia were among those who disagreed.

Other market-access issues discussed included food-safety issues, mandatory labelling and geographical indications.

On food safety, the EC wanted the negotiations to clarify the essential elements rather than allow these matters to be settled by dispute panels. The elements could involve application of measures proportionate to the food safety target, non-discrimination, consistent application, and comparison of costs and benefits of alternative measures based on science. While Japan, Norway and Switzerland supported this, for other members this was not an issue for agricultural negotiations but one which fell under the Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures.

India and China were among those who complained that SPS measures were replacing tariffs as trade barriers.

The EC, Switzerland, Norway and Japan wanted labelling (to be legitimized under agriculture), arguing that this was necessary to provide information to consumers, with the labelling rules enabled to require information on “production” methods and traceability. The US, China, Cairns Group members and several others said labelling was an issue which belonged in the ambit of technical barriers to trade.

The EC wanted extension of the higher levels of protection for geographical indications of origin to be negotiated under the agriculture talks. Switzerland was happy to leave the issue for talks under the TRIPS Council, provided some progress is made there. (SUNS5188)     

From Third World Economics No. 288 (1-15 September 2002)