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.