TWN Info Service on WTO and Trade Issues (July 07/06)

17 July 2007

Waiting for modalities papers, as more proposals pour in

As the Chairs of the negotiations on agriculture and NAMA were finalising their modalities papers, many groupings of countries submitted proposals to the Chairs in what seemed like a final spurt to try to get their positions reflected.

The article below is on this situation as the modalities papers were about to be released.   It was published in SUNS on 17 July.

With best wishes
Martin Khor
TWN

Waiting for modalities papers, as more proposals pour in

By Martin Khor (TWN), Geneva, 16 July 2007

The papers on modalities for agriculture and non agricultural market access (NAMA) being drafted by the Chairs of the negotiating groups on these issues have not been issued yet, missing the unofficial deadline of 13-16 July.

The papers are now expected to be issued on Tuesday afternoon, according to trade officials.

The task of Chair of the agriculture negotiations, Ambassador Falconer Crawford of New Zealand, and of the NAMA negotiations, Ambassador Don Stephenson of Canada, has been made even more complex by the several new position papers put forward in the past few days and weeks.

The proliferation of papers has been especially in agriculture. Late last week, the ACP Group submitted a comprehensive paper on its positions on agriculture to Crawford.

The Africa Group also delivered a detailed letter on a wide range of issues on agriculture to the Chair on 12 July, and a week earlier it had submitted a detailed proposal on commodities.

At about the same time, the Cairns Group and the G10 also issued papers to WTO members on market access issues in agriculture. On top of this, the G10 sent a letter on sensitive products a few days later to Falconer.

A week before, the G20 presented an Aide-Memoire on Agriculture Negotiations to Falconer, giving the group's up-to-date positions on domestic support, market access, export competition and other issues.

And at the beginning of July, the European Communities issued two documents containing proposals on certain market access issues, and on treatment of sensitive products. It had issued an earlier market access paper in mid-June.

On NAMA, the ACP Group has also presented a letter to Stephenson. It is understood that the Africa Group has also prepared its negotiating position on NAMA issues and may send a letter to the NAMA Chair giving details of its position.

The active participation at this crucial phase of negotiations of the ACP and Africa Groups is significant as they are the largest groupings representing developing countries, together with the LDC Group.

It is the first time that the Africa Group is formally putting forward a detailed negotiating paper on agriculture or on NAMA. It is also the first time the ACP Group has put forward a paper on NAMA, and also an agriculture paper with a wide range of issues (its previous paper has been on market access while the new submission also covers domestic support and export competition).

A fortnight ago, a group of developing countries including Chile, Singapore and Hong Kong had submitted a paper on NAMA, with proposals on coefficients and flexibilities which it claimed was the middle ground between the developed countries and the NAMA 11 group of developing countries.

However, a Development Declaration of the Group 90-Plus issued on 21 June supported the NAMA 11 position, thus giving credence to the NAMA 11 claim of being more representative of developing countries' position.

The ACP and Africa Groups are members of the G90-Plus, and thus their letters to the Chair on NAMA can be expected to take the same position.

The various papers show the wide gaps in positions of the different groupings on the whole range of issues, thus making it difficult for the Chairs in their attempts to seek "convergence".

Sticky issues include how much to reduce various agricultural subsidies, how much to cut tariffs in agriculture and NAMA, and what flexibilities to provide for developing countries (including through special products (SP) and special safeguard mechanism (SSM) in agriculture) as well as for developed countries (including in sensitive products in agriculture, and the issues of peace clause and extension of the existing special safeguard).

There are also complex factors such as treatment of the erosion of preferences, the special cases of developing countries with low bindings in NAMA and ceiling bindings in agriculture, as well as small and vulnerable economies and LDCs, as well as the key sectoral issue of cotton, and the question of commodities.

The African letter on agriculture is making an impact, as its section on domestic support calls for the US to cut its overall trade distorting support (OTDS) to $10 to 12 billion.

This is even below the $12.1 billion which the G20 has been asking for and which it reiterates in its latest Aide Memoire.

At the failed Potsdam meeting of G4 Ministers, the US reportedly offered $17 billion as its bound OTDS, which was unacceptable to both Brazil and India. The Indian Commerce Minister told the media that the US applied level in 2006 was below $11 billion, and thus a $17 billion bound level was an inadequate offer as it would allow the US to expand its actual subsidies.

The G20 Ministerial Declaration of 11 June had favoured "very low teens" as the final spending level for the US, which the G20 Aide Memoire indicates is a 75% cut leading to $12.1 billion.

There has been some talk of a compromise between the G20 figure and the US offer, somewhere between $14-15 billion. But the Africa Group position of $10-12 billion exerts a pull towards not only the "very low teens" but into the zone of pre-teens.

The G20 has been asking for a 80% cut in OTDS for the EU, and its Aide Memoire gives figures to show why the EU would have no difficulty to go even beyond this.

The Africa letter says that the EU and Japan should undertake a 80% cut in OTDS.

However, if the Falconer paper proposes an OTDS in the pre teens or low teens for the US, it will undoubtedly cause the US to protest. On the other hand, if a higher figure is given, it may not be acceptable to many developing countries.

The treatment of SP and SSM for use by developing countries is also politically a very sensitive issue. The Africa and ACP Groups in their new papers have lined up support for the G33 positions on both SP and SSM. The G20 is ambivalent, its Aide Memoire only mentioning the issues in a single line and in general terms.

The US as well as some developing countries have been voicing approaches that severely restricts the definition, use and treatment of these two instruments.

The US is known to be interested in (and potentially to insist on) the revival of a "peace clause" in agriculture (limiting panel cases that can be taken up on subsidies) and the EU in extension of the present agriculture special safeguard (SSG). Each is expected to support the other on their demands. The G10 in its recent paper also defended the extension of the SSG, in a revised form.

However, both the Cairns Group and the G20 in their papers are adamant that the SSG should expire. And the Africa Group has also joined in the call that there should be no "peace clause".

These are only a few of the topics on which very wide divergences exist, with little sign that there can be any narrowing let alone closing of the gaps, at least in the short term. Those following the negotiations are keenly waiting to see how the two Chairs will attempt to provide the solutions or the options that are workable and fair. +