TWN Info Service on WTO and Trade Issues (Apr07/10)

26 April 2007

Pakistans SP paper causes stir as WTO agriculture talks resume

A paper on special products by Pakistan has caused a stir at the WTO as delegations prepared for resumption of agriculture negotiations.

What is especially interesting about the paper is that it is submitted by a member of the G33 (the group of 45 countries that is the main proponent and champion of the cause of special products), yet it directly contradicts the G33 position in many aspects, and also greatly reduces the effectiveness and practical usefulness of the SP concept.

The paper is to be the subject of a WTO agriculture meeting on Wednesday.

Below is an article on the Pakistan paper and reactions from some diplomats as well as Pakistani NGOs.  It was published in SUNS on 25 April.

Best wishes
Martin Khor
TWN

Pakistan's SP paper causes stir as WTO agriculture talks resume

By Martin Khor (TWN), Geneva, 23 April 2007

The agriculture meeting this Wednesday at the WTO is expected by many diplomats to be eventful as it will be on the eve of the issuing of a "provocative" paper by the Chair of the agriculture negotiations.

Ambassador Crawford Falconer of New Zealand said that his paper would "challenge" the WTO members to review their positions, and that it would also reflect on the "centres of gravity". These gravity centres are what he presumably sees as the "middle ground" between the positions which are considered to be on the extreme.

But what is considered "extreme" and what is seen as the "middle ground" are in the eye of the beholder. What one party considers to be moderate and reasonable may be taken to be extreme by another party.

One interesting item on Wednesday's agenda is a paper by Pakistan on special products. The paper, dated 10 April, had been circulated at the last agriculture meeting on 13 April but Pakistan did not make a presentation on it and there was limited discussion on it. The Wednesday meeting will discuss it at length, and the discussion could be heated.

What is especially interesting about the paper is that it is submitted by a member of the G33 (the group of 45 countries that is the main proponent and champion of the cause of special products), yet it not only directly contradicts the G33 position in many aspects, but it also in effect greatly reduces the effectiveness and practical usefulness of the SP concept.

This has not, of course, escaped the notice of other G33 members. In fact, many of them have expressed, in their own discussions, not only disappointment but also a sense of outrage and betrayal that a fellow G33 member could present such a paper, while still being a member of the group.

"Of course, each member of the WTO has the right to present its own views," remarked the Ambassador of a G33 country today. "But we must make it clear that this paper, though submitted by a G33 member, in no way represents the view of the G33. On the contrary."

Some diplomats belonging to G33 countries are concerned that the Pakistan paper is serving the interests of the countries most opposed to the special products concept, such as the United States and a few agricultural exporting developing countries such as Thailand, that have spoken up strongly in the past against the G33 proposals.

Indeed, many of the ideas in the Pakistan paper (such as the proposal to have a list of "negative criteria" in order to weed out items from the special products category) were first put forward by these SP opponents.

These diplomats also point to the timing of the paper, just before the issuing of a new paper by the Agriculture chair. Opponents of the SP concept could be provided with a new opportunity to claim that the Pakistan paper represents a "middle ground" or "centre of gravity" on the SP issue.

Indeed, the paper does portray itself as a bridge or middle ground. It mentions the G33 position and the Thai proposal and says that it aims to "narrow the gaps between the negotiating positions."

It is strange that in attempting to bridge the gaps, the paper jumps away from the G33 position, although the author is a G33 member, and takes the opposite side.

On 21 March, a Ministerial meeting of the G33 in Jakarta adopted a Communique that reaffirmed their commitment to SP and special safeguard mechanism (including reaffirming that SSM should be available to all agricultural products). The Communique adopted a revised list of indicators for SPs, halving the number of indicators to 12.

In the 13 April agriculture meeting at the WTO, Indonesia (the G33 coordinator) explained that this streamlining of indicators was a unilateral shift in position (implying that it was a concession made as a contribution to getting the agriculture talks going) and asked for major economies to shift their negotiating stance in response.

Indonesia said that the indicators represent the "simplest and most rational approach to operationalizing the mandate for special products."

The Pakistan paper contradicts the G33 approach of countries self-designating their own SPs in accordance with the three criteria and 12 indicators. The paper comes up with its own list of 10 indicators, placed in a matrix, in which products are "scored" in line with the percentage by which they meet the criteria. Only if a product meets a minimum overall score can it be considered a "special product."

This complicated scoring system removes the simplicity of the G33 system in which countries can designate a product as a SP as long as it is in line with at least one indicator. In the Pakistan system, a product must attain a minimum benchmark score to qualify as a SP, which is contrary to the G33 system.

The Pakistan paper also proposes a second set of indicators that a product must be in line with in order to be eligible to be a SP. A product cannot be designated a SP if it was either: ( a) a staple food product where imports represent more than (80%) of domestic food consumption of that product; or ( b) a product exported by developing countries that cumulatively constitutes over (80%) of world exports of that product; or ( c) a product imported from developing countries that cumulatively constitutes over (80%) of the importing country's total import of such product; or ( d) a product that is not declared as SP in any bilateral/regional trade agreements involving the country concerned.

If this "negative list" approach is used, a country may find that many of its important products would not qualify to be SPs. The first criterion may involve an important staple food, and the country may wish to produce at least a certain minimum ratio even though not large; it would not be able to do so.

Under the second criterion, a country may heavily rely on a staple food product (for example, rice) for small farmers' livelihoods and food security, but it may not be able to designate this as a SP because the product is mainly exported by developing countries.

Regarding the fourth criterion, a country may not list a product as SP in a particular bilateral agreement for various reasons, such as that the FTA does not allow exceptions or does not have a special-product category, or the trading partner does not have export capacity for that product. Yet for this reason, the country is now unable to designate the product as SP.

The Pakistan paper's section on treatment of SPs directly contradicts the G33 position in many aspects:

(1) Pakistan proposes that all SPs are subject to the tiered tariff-cutting formula; and the reduction rate for SPs would be two-thirds the level required under the formula. This contradicts the G33 position (in its 22 November 2005 paper) that at least 50% of SPs will not be subject to tariff reduction; another 25% of SPs will be subject to 5% tariff reduction; and the remaining SPs are subject to not more than 10% reduction.

(2) Pakistan proposes all SPs be subject to a cap on maximum allowable tariff level, which would be 50% higher than for normal products. This directly opposes the G33 position that SPs shall not be subject to tariff capping.

(3) Pakistan proposes that SPs that have a tariff rate quota shall be subject to expansion though at a lower rate than the formula expansion for normal products. This directly contradicts the G33 position that SPs shall not be subject to any new tariff rate quota commitment.

(4) Pakistan proposes that SPs are not eligible to be protected under the Special Safeguard Mechanism (except when their bound tariff is 15% or less). This is directly opposite to the G33 position that SPs "shall not be precluded from recourse to the Special Safeguard Mechanism for developing countries."

The Pakistan proposals would severely restrict the eligibility (and thus the number) of products to be designated as SPs. And once a product passes the strict tests and becomes a SP, the Pakistan proposals severely restrict the benefits that the product would be able to enjoy as a SP.

The result would be to render practically ineffective the aim of having the SP concept in the first place, i. e. to promote and protect food security, farmers' livelihoods and rural development goals of developing countries.

Pakistan is not the only WTO member seeking to impose onerous conditions on the use of the SP concept. It is however the newest and most surprising, being itself a G33 member, and which apparently subscribed to the outcome of the G33 Ministerial meeting in Jakarta just a few weeks before it issued its paper contradicting that same outcome.

The United States is recognized as the main opponent of the use of the SP and SSM mechanisms by developing countries that seek to defend their farmers' livelihoods.

However, the US is itself not shy to maintain high protection, especially through domestic support measures, to shield its agricultural sector from true global competition.

And the US administration is under heavy pressure not to make any new offer on domestic support, although it is well recognized that its present offer is most inadequate.

In October 2005, the US offered to fix the maximum limit of its trade-distorting domestic support (AMS plus blue box plus de minimis) at $22.7 billion, which is above the actual level of $19.7 billion in 2005. The Doha talks have not made progress, mainly because the US has not improved on this offer.

On 12 April, 58 US Senators wrote a letter to President George W Bush stating that "Some recent press reports suggest that the US may now consider even greater cuts in our farm programs without achieving the market access ambition included in the October 2005 US proposal.

"As discussions on the Doha Round resume, we urge you to direct your negotiators not to make further concessions on domestic support but instead to insist that our trading partners put forward ambitious market access proposals that will produce sufficient market opening to ensure that any final deal will generate increased net income for American farmers and ranchers."

It would thus be difficult for the US negotiators to improve on their inadequate offer, yet the US is expected to pile on the pressure on developing countries, and especially for them to give way on SP and SSM in agriculture, as well as in NAMA.

In Pakistan, civil society groups have been critical of the government for allegedly playing along with the major developed countries. A Civil Society Declaration issued by 103 Pakistani groups during the recent Cairns Group Ministerial at Lahore on 16-18 April said that "while developing countries seem united, there is a lot of internal and external pressure to divide them."

The Pakistani CSOs claimed that the US and EU are trying to divide the developing countries' groupings by pushing some of the groups' members to raise a dissenting voice, citing as an example Pakistan's proposal on Special Products. "The paper has been seen as an attempt to divide G33 opinion and dilute the pressure maintained by the Group," said the Declaration. The Pakistani groups urged the government to come away from the influence of "international manipulating forces" and to act in the interests of the people.

In a paper prepared for a CSO convention held parallel to the Cairns Group Ministerial, the coordinator of a Pakistani trade network, Tahir Hasnain, said that many G33 members were surprised and disappointed by both the content and the procedure of the Pakistani proposal on SP.

"On the procedure, the G33 members were not aware that Pakistan intended to make such a proposal and were not told in advance before Pakistan circulated it to the WTO membership. The position in the paper is in contradiction with much of the G33 position on SPs. This has sent a very confused message since Pakistan is a member of the G33 and signed on to the G33 Ministerial Communique."