The failure of the Cancun Ministerial Meet has put brakes on the progress of negotiations on agriculture in World Trade Organization (WTO). Lack of consensus among key WTO members in the Ministerial did not allow WTO to endorse an official ‘modalities text' [1] on which Members could carry the negotiation forward. The impasse continued even after the Ministerial as WTO was forced to postpone a meeting on farm trade negotiations which was scheduled to take place on Oct 6-9, 2003. In a statement made in Geneva, Stuart Harbinson, Chairman, Committee on Agriculture (CoA) said: "in order to allow a period for reflection after the Cancún Ministerial Conference, the Special Session of the Committee on Agriculture, which was initially scheduled to take from 6 to 9 October 2003, is postponed until further notice."

Another disruption in the progress came when, during the first week of November, Stuart Harbinson resigned from the chairmanship of the WTO CoA. It might be recalled that Harbinson was instrumental in the successful facilitation of a draft outlining a new agriculture negotiating mandate, adopted by Members in 2001 at Doha. According to Bridges Weekly, the General Council (GC) Chair, Carlos Perez del Castillo indicated that a new chair will not be elected before 2004.

In spite of these setbacks, since mid-November, there have been some initiatives to bring the negotiations on agriculture back on track. During 20-21st November 2003, a group of around 30 key WTO Members held informal "green room" consultations on agriculture. Another discussion on agriculture was held during 15th -16th December 2003 as a part of WTO General Council meeting mandated by last September's Cancun Ministerial.

During these talks, the European Union delegation asked for extension of the ‘Peace-Clause' beyond 31st December 2003. The Peace Clause (Article 13 of the Agreement on Agriculture) protects countries using subsidies which comply with the agreement from being challenged under other WTO agreements. It is to be remembered that because of the protection granted by this clause, it is difficult to impose countervailing duties on subsidized imports of agricultural commodities. As mandated in the Uruguay Round Agreement on Agriculture, the peace clause is due to expire at the end of 2003. Most developing countries and countries belonging to the CAIRNS group are against the extension of this clause. Given the preponderance of subsidies in the agricultural sector of developed countries, it is not surprising that the EU is asking for an extension of this clause.

The reluctance of developed countries to cut down their subsidies became evident once again when the EU delegate refused to reveal its position on abolition of export subsidies and stated that it could not respond to this demand until it had concluded its internal consultation on the post-Cancun talks. According to Third World Network, trade diplomats are interpreting this as a sign that the EC is not yet prepared to offer a date for the elimination of export subsidies.

As far as tariff reductions on agricultural goods are concerned, a new study tabled by India in this meeting highlighted that the tariff reduction formula proposed by WTO in the draft Ministerial Declaration circulated in Cancun [2] would hurt developing countries. It might be recalled that the so called 'Derbez text' or the second revision of the draft Cancun Ministerial Text, contained a "blended approach" to tariff reduction under market access. This approach was initially proposed in the joint submission by the US and the EU and was later adopted in the official Cancun Ministerial draft. According to this arrangement, WTO Member countries would have to reduce tariffs under three categories: first, tariff lines to be cut by an average overall percentage; second, tariff lines to be reduced more drastically under a "Swiss formula" (where the higher the tariffs, the higher are the percentage cuts); and thirdly, some tariffs to be reduced to zero or near zero.

To estimate the likely outcome of this approach, India presented a simulation based study, using estimates based on tariff profiles of developed and developing countries. The results of this study show that under the aforementioned methodology, developing countries would have to undertake significantly deeper tariff reductions than developed countries. The study suggests that because the blended formula is linked to each country's tariff structure, given the difference in tariff profiles of different countries, the application of the same or a similar formula would have different impacts on different countries. The study estimates that the developed countries would have to make an approximate cut of about 30 percent under the blended formula. However, for developing countries, tariff reduction obligation would be between 30 percent to 70 percent, depending on their respective tariff profiles.

Given the disconcerting conclusions of the study, India appealed to the WTO Secretariat to undertake a more detailed simulation based study to estimate the impact of the blended formula based tariff reduction schedule on each WTO Member country. Though most developing countries supported this call by India, some developed countries, were not happy with the suggestion of carrying out the simulation studies. After the General Council Meeting, Carlos Perez del Castillo conceded that "the blended approach" in the Derbez text has been the "subject of concerns by a number of developing countries" and that further work is needed on "this or other formulas".

Apart from these developments, a noteworthy feature of post-Cancun negotiations is that the Derbez Text, which faced strong opposition from developing countries during the Cancun Ministerial, is slowly gaining some acceptance among key WTO Members. For example, at a recent summit of the Asian-Pacific Economic Cooperation (APEC) in Bangkok, the 21 APEC Members, including the US, Japan, China and Australia had agreed "to build on Chair Derbez's text of 13 September". Also, during the General Council meeting of WTO, Brazil, a prominent member of the G-21 group, was of the opinion that the Derbez text could be a starting point for the discussions. However, Brazil also pointed out that much work in many areas of the text needs to be done. According to Brazil, the provision for special and differential treatment in the Derbez text is inadequate and it has to be significantly revamped. It also criticized the text by pointing out that on the issue of domestic support, the Derbez text is extremely lenient as it allows developed countries to continue with trade distorting domestic subsidies. According to Brazil, the Derbez text should include prohibitions against shifting of subsidies from amber to blue to green boxes.

But some Members, such as India, have expressed serious objections about the Derbez text being accepted as the only basis for further agriculture trade talks. According to reports published in the Bridges Weekly newsletter, the Indian Ambassador to WTO K. M. Chandrasekhar has indicated that India would prefer a hybrid approach under which various "positive" elements from different texts, such as the Harbinson draft modalities and the various drafts Cancun Ministerial declarations would be combined.

Apart from these developments there was no major breakthrough in the negotiations after the Cancun ministerial. In most major issues countries stuck their positions expressed during the Cancun ministerial and there were hardly any movements forward. The Chairman of the General Council, told journalists after the meeting: "There was no negotiating mood. There is the persistence of difficulty on the big issues. The positive thing is that discussions went on. But there is no basis for any new text at this stage."

Some New Developments in 2004
In 2004, there seems to be a renewed interest about resuming the multilateral trade talks. In a letter dated 11th January 2004, US Trade Representative Robert Zoellick has urged members of the World Trade Organization to restart the Doha round trade talks. In this letter, Zoellick emphasizes that the focus of the renewed multilateral talks should be on the key areas of interest and recognizes "that an ambitious result in agriculture is essential for this negotiation to proceed and succeed". To outline USA's current position on some key areas of negotiations on agriculture, he points out that:

1. USA demands total abolition of export subsidies in agriculture by a certain date. According to Zoellick, as export subsidies are most trade distorting measures, final elimination of these subsidies is going to be the biggest step forward for the negotiations on agriculture. Along with total abolition of export subsidies, he also proposes to eliminate the subsidy component of export credit programs and to discipline the special privileges of State Trading Enterprises.

2. Regarding domestic subsidies, the letter suggests that amber box subsidies should be reduced substantially. Zoellick also proposes that there should be a cap on blue box subsidies. The US trade representative has not talked about imposing any cap on green box subsidies. It can be mentioned here that a significant proportion of subsidies given to the farmers in USA are given either through the Green Box measures or through the export credit route. It is not surprising that imposing stricter disciplines on these measures have been underplayed or sidestepped in Zoellick's proposals.

3. About market access for agricultural products, the letter indicates that the USA is not averse towards a 'blended approach' (an approach which will be a blend of Swiss formula and the Uruguay Round type linear tariff reduction formula) provided some conditions are met. He puts forward three conditions, they are: a) the tariff reduction formula should create substantial market access both in developed and developing countries, b) there should be an in-built provision to cap on tariff peaks and c) there should be a common tariff reduction formula for all WTO Member countries.

It is notable from this communication that USA is against the suggestion that there should be different tariff reduction formulas for developed and developing countries.

The response from EU to Zoellick's letter was on predictable lines. In their speeches at Strasbourg on 13th January, both Franz Fischler and Pascal Lamy said that EU is willing to accept a framework for negotiating modalities only if : a) amber box subsidies are disciplined more than blue box subsidies and b) all forms of export support must be disciplined. These responses are no different from the stance taken by the European Union since the current round of negotiations started in 2000. The responses of other prominent WTO members are still awaited, but it appears that in spite of the recent initiative of the US Trade representative to "explore every avenue to make 2004 not a lost year, but a year of accomplishment for the Doha Agenda and the WTO", negotiating positions are not moving any closer towards convergence than they were after the Cancun Ministerial meet.

February 10, 2004.

[1] In the current WTO trade talks on agriculture, the modalities text attempts to set terms of reference and targets (including numerical targets) for achieving the objectives set out in the Doha Ministerial Declaration of "substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support".

[2] View the draft declaration here http://www.wto.org/english/thewto_e/minist_e/min03_e/min03_draftext2_e.pdf