WTO agriculture negotiations

Basics Issues Going for a result

WTO agriculture negotiations

Basics Issues Going for a resultBasics Issues Going for a result

1. Basics

2. Issues

3. Going for a result

Three pillars and all that jazz

Agriculture Agreement and current talks

Take agriculture out of the WTO? Or try to strike a deal?

WTO agriculture negotiations

Basics Issues Going for a resultBasics

1. BasicsThree pillars and all that jazz


Before 1995Agriculture exempt many GATT disciplines

Even nowsubsidies: ~ $300 bn per year ($1bn per day)

Tariffs on some products >> 100%

‘Unfair competition’Developing countries complain of ‘uneven playing field’

If distorting

Poorer countries cannot compete(imports and exports)

Access to markets blockedsouth-north, south-south, north-south, north-north

THE PROBLEM: ‘DISTORTION’

over-production low prices

Basics


10%

20%

30%

40%

50%

60%

70%

80%

Agricultural producer support (OECD)

% of value of gross farm receipts

Switzerland

Canada

Hungary

Czech R

New Zealand

AustraliaPoland

Mexico

Turkey

US

OECD

EU

Japan

Iceland

R Korea

NorwaySlovak R

1986–88 1999–2001

THE PROBLEM: ‘DISTORTION’

Basics


THE SOLUTION: TACKLE …

3. Domestic support (if trade distorting): if affecting prices, production levels

2. Export subsidies (all forms):Direct subsidies, subsidized credit, insurance, food aid, state trading

THE THREE PILLARS

1. Market access: tariffs, quotas, safeguards, etc

BUT …Acceptable policies: e.g. non-distorting subsidies

Developing countries: special treatmentBasics

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THE THREE PILLARS

• tariff cuts• flexibility in cutting tariffs• quotas to enable some market access• safeguards to deal with surges and price falls• preferences and preference erosion

Developing countries: special treatment

Market access

Basics


• export subsidies — cut and eliminate• subsidized export credit —

cut/eliminate, discipline• exporting state trading enterprises —

subsidy in disguise?• food aid — real aid or offloading stocks?


THE THREE PILLARSExport subsidies/competition

Basics



‘Three boxes’ traffic light colours

• Amber Box slow down: distorts, causing over-supply

• Blue Box:distorts, but less because production limited

• Green Box go ahead:development projects,

environmental protection, income support, insurance, etc.

No or minimal distortion

THE THREE PILLARSDomestic support

Basics


2. IssuesAgriculture Agreement and current talks

Issues


Before the WTO: the sky’s the limit

‘The inadequacy of the rules legitimizes and institutionalizes dumping’[of subsidized low-priced exports on to world markets]

3D/IATP report on human rights, agricultural trade and the WTO

AGRICULTURE AGREEMENT: levelling the field

Under the WTO:limits and reductions agreed, first step, phased for adjustment

After ‘Doha’ negotiations:more cuts +export subsidies to be scrapped

• The WTO did not invent subsidies• Governments came to GATT/WTO to try to change things

Issues


WHY WAS THE U.R. UNFINISHED BUSINESS?First reforms were modest

Cuts in subsidies and protectionThe reductions agreed in the 1986-94 Uruguay Round

NOTE Least-developed countries: no cuts

Developed Developing

value of subsidies –36% –24%subsidized quantities –21% –14%

Export subsidies

minimum cut –15% –10%average cut –36% –24%

Tariffs

6 yrs 10 yrs1995–2000 1995–2004

3 PILLARS

cuts in total (AMS) support –20% –13%Domestic support (distorting)

Issues


SUMMARY

Pre-history(before UR): only goods, almost no constraints on agriculture

Now: revised rules new commitments

TIME LINE

1995 Uruguay Round agreements,new WTO: goods, services intellectual property, … and agriculture

2001 Doha Agenda launched November

2004 Frameworks 1 August (‘July package’)

Future: rules revised again,more commitments

2006 ‘Suspension”

2003 Cancún ministerial fails September

2005 Hong Kong ministerial December

2000 Ag talks start March

Issues

2007 Modalities and end the negotiations?


• ONE MODALITY: Tariffs between 50 and 100% —cut by 75%; except 2% of these can be cut by 33%

WHAT ARE ‘MODALITIES’?The ‘method’: Whatever is needed to make

commitments

E.g.

Issues

• RESULTING WORK ON COMMITMENT (‘SCHEDULE’):apply formula to products; bargain over which exceptions

• There are modalities in all three pillars,

total 20–30 pages• After modalities, 6–9 months workon schedules of commitments

• The tighter the modalities,the shorter the time needed afterwards


HISTORY COUNTS: NEGOTIATIONS BY ‘ACQUIS’Complex talks narrow down agreement in stages

Moving to middle ground

‘Acquis’ = what has been acquired

2001 DOHA DECLARATION 2004 ‘FRAMEWORKS’ 2005 HK DECLARATION

Issues


• Uruguay Round/linear approach: gentler, more flexible

• Swiss formula: more ambitious,steeper cuts on high tariffs; with maximum (cap) set

The Swiss formula:

Z = AX/(A+X)whereX = initial tariff rateA = coefficient and maximum tariff rateZ = resulting lower tariff rate

And if you’re heavily into maths ...

MARKET ACCESS: TARIFFSThis is one of the most difficult questions

– versus –

Issues


6% per year cuts

0

20

40

60

80

100

120

140

160

Year 0 Year 1 Year 2 Year 3 Year 4 Yea r 5 Year 6

Tariff

Start 150%Start 125%Start 100%Start 75%Start 50%Start 25%Start 10%

Sw iss form ula. Coeffi cient=25

0

20

40

60

80

100

120

140

160

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Tariff

S tart 150%S tart 125%S tart 100%S tart 75%S tart 50%S tart 25%S tart 10%

Uruguay Round cuts36% average

Swiss formulacoefficient 25%

A visual indication of the difference in steepness of cuts for different starting tariffs

MARKET ACCESS: TARIFFSTARIFF FORMULAS: UR/Linear v. Swiss formula

Issues

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1. March 2003 draft ‘modalities’:UR approach in 3 bands ‘Banded’ approach

• Some products: duty-free• Some products: Swiss formula• Some products: UR approach

2. Cancún ‘frameworks’:‘Blended’ approach

• Low tariffs [<15%?] — small cuts [40% ave, 25% min]

• Middle range [15–90%?] — medium cuts [50% ave, 35% min]

• High tariffs [> 90%?] — big cuts [60% ave, 45% min]

‘Banded’

Products categorized by height of starting tariff.Higher bands: stepper cuts

‘Blended’

Products categorized by sensitivity

UR

SW

ISS

DU

TY

-FR

EE

TARIFF FORMULASAttempts to compromise

Issues


• ‘sensitive products’: flexibility for all, but ‘substantially’ better market access

Tariff formula: 4 tiers

• ‘special safeguard mechanism’ — easier, temporary; surges & price falls

• ‘special products’ — flexibility/exemptions

• more time, gentler cuts

Developing countries

• to be negotiated —which formulas, sensitive products, quotas,

etc

• ‘progressive’: higher tiers -> steeper cuts

• least-developed — no reductions

• ‘tropical products’ and narcotics replacement crops

• preferences — ‘erosion’ to be ‘addressed’

Substantial improvementsin market access for all products

‘Tiered’ (‘banded’)

Products categorized by height of starting tariff.Higher tiers: stepper cutsType of formula and thresholds for tiers? Still to be negotiated

MARKET ACCESS:2004 framework, HK Declaration

Issues


THE RADICALSConfident traders

THE CONSERVATIVESCautious traders

G–10

MARKET ACCESS: DEVELOPING COUNTRIES Some alliances and issues — major battleground

Issues

G–33‘Special products’

‘Special safeguardmechanism’

ACPPreferences

CAIRNS GROUP

G–20Compromisingcoalition

Brazil, Thailand,

Argentina, etc

Malaysia, Colombia, Costa Rica, etc

IndonesiaPakistan

Philippines

Sri Lanka, Turkey, etcChina, India, etc

Nigeria, Tanzania,

etc Kenya, Jamaica, etc

Mauritius

Rep.Korea Ch.Tapei

BangladeshCambodiaMyanmarMaldivesNepal(non-ACP LDCs)

Costa Rica, El Salvador, etc(no ACP preferences) Skip


‘Three boxes’ traffic light colours

• Amber: distort, causing over-supply. So reduce, but how much?

• Blue: distort, but has production limits. So keep, reduce, eliminate?

• Green: development projects, environmental protection, income support. Do any distort? If so, move to amber?

DOMESTIC SUPPORTReminder

Issues


Substantial cuts, all products

Overall: amber + de minimis + blue

• caps by product, cuts on some products (cotton?)

• tiered formula cuts, so that higher levels are cut more

Amber Box (AMS)

• tiered formula cut + 20% downpayment (1st year)

• flexibility for developing countries (specified)

• reduced — amount to be negotiated

De minimis

• new additional type

• max (‘cap’) at 5% of production + some flexibility

Blue Box

Green Box: easier for development; monitoring


3 tiersEU

Japan / USthe rest

(+G-10 contribution)

Amber what base period for

products?

New Blue disciplines and/or

cuts?

Green disciplines?

Cotton deeper, faster cuts

DOMESTIC SUPPORT2004 framework HK Declaration

Issues


0

20,000

40,000

60,000

80,000

100,000

Amber Box 47,318 16,862 6,705 1,305 2,258 1,383 631

De minimis 304 7,435 292 409 - - 741

Blue box 19,558 - 831 - - 984 -

S&D Art.6.2 52

Green box 19,694 49,749 24,081 4,590 2,190 548 1,177

Export subsidies 5,835 147 0 3 292 77 0

EU US Japan R.Korea Switzer-land Norway Canada

3 tiersEU

Japan / USthe rest

(+G-10 contribution)

DOMESTIC SUPPORTBasis for tiers: amber, amber+d.m.+blue

Issues


Elimination — 2013, substantial cut in ‘first half’, cotton 2006

• max 180-day repayment on credit, etc

All forms — ‘parallelism’ = same end-date for subsidized credit/ credit guarantees/ insurance/ food aid/ state trading …

• disciplines to be negotiated:• credit, to ensure not subsidized

• food aid, with ‘safe box’ for true emergencies

• exporting state trading enterprises

Developing countries — more time, gentler cuts,extra categories allowed, taking care of net food importers

• ‘Parallel elimination’ of all forms of export subsidies• Disciplines on measures with equivalent effect

EXPORT SUBSIDIES2004 framework, HK Declaration

Issues


Elimination — What timetable to meet 2013 end-date?

All forms — ‘parallelism’:

Disciplines to be negotiated:

Developing countries — some issues raised, but … later

• credit: further progress on defining commercial terms

• food aid: safe box (emergencies declared by UN, etc, but definitions too?) How to avoid commercial displacement: Cash only? No re-export/monetization/in-kind?

• exporting state trading enterprises (commercial terms? Price discrimination, monopoly power?)

Cotton — elimination settled

EXPORT SUBSIDIESCurrent technical questions

Issues

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The Cotton issue

• Cotton 4 countries: Benin, Burkina Faso, Chad and Mali

• July 2004 recommended rapid and ambitious treatment for Cotton, Creation of the Sub-

Committee on Cotton• Hong Kong: Export Subsidies

eliminated, DFQF• High Level Meeting on Cotton in

Geneva:15-16 March


The Cotton issue

• The developmental aspects of Cotton: a role for Aid for Trade?

• Challenges ahead:– Progress in the Modalities on agriculture as a whole and DS

particularly; – US Farm bill reform 2007;

– Link between the US- Brasil Dispute on Cotton and US Farm bill reform


Current developments: Chair’s text on 30 April 2007

• This “challenges paper” intend to be a trigger

• Onus on G4/G6• A possible compromise:

– for cuts by the US in domestic support: $15-17 billion

– And on sensitive products: could be between 4 and 5% of tariff lines

• Difficulties remain :– in Market Access on cuts in the higher

band:60% for EU 70 or 75% for the US– No convergence seen on special

products: G33 asking for 20%


‘Inclusive’: all coalitions represented in small meetings‘Transparent’: reps report back to coalitions

Full membership, bigger roominitial reactions/consensus

Full membership, smaller roomtechnical details/reactions(Room D)

Key players(Room F and other small groups)technical details, drafting

PROCESS

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Issues


ALTERNATIVELY: CONCENTRIC CIRCLES

‘Room F’ Small group consultations

Key players,reps. of all groupsconversational, hard bargaining, drafting

Formal plenaryFull membership

Speeches/consensus decisions

Informal meeting

All members, no recordreports from consultations, /reactions

Bilateral, very small group consultations

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Big meetings, small meetings

Issues

‘Inclusive’: all coalitions represented in small meetings‘Transparent’: reps report back to coalitions

NEGOTIATIONS CHAIRPERSONCRAWFORD FALCONER


3. Going for a resultTake agriculture out of the WTO? Or try to strike a deal?

Going for a result


• Finding a way to reach agreement

• Appreciating the range of interests

Key underlying question for negotiators:What does it take to reach a (good) deal?

DIFFICULT …

Going for a result


European Union

Small island developing states

Cairns Group Australia, NZ, S.Africa, Brazil, Argentina, Thailand, Philippines, etc

G20+/– India, Brazil, China, S.Africa, etc

G33 Indonesia, etc lobbying for ‘special products’

Africans, least-developed, ACP (together = ‘G90’, but with 64 WTO members)

‘Like minded’ India, Pakistan, Caribbean, etc

‘RAMs’ new members (‘recently acceded’ members)

G10 Switzerland, Norway, Japan, S.Korea, Ch.Taipei, etc

US-EU (summer 2003)

COALITIONS AND MAJORS

CONSENSUS-BUILDERS

The Five Australia, Brazil, EU, India, US (summer 2004)

United States

KEY PLAYERS AGRICULTUREJust a sample of the groupings …

Going for a result


1. What’s needed to achieve a result?

Result = consensus

- Reflecting all concerns

• Understanding all concerns• The negotiators’ concern:

how to sell the deal

Vital for consensus-building:

Worth studying:• Chairs’ summaries

- Selling the deal: all sharing the ‘pain’ (even if some share more than others)

Going for a result


2. Onus only on the rich?

• No consensus:only because of the US-EU?

‘Yet again rich countries are blocking progress

behind the scenes while publicly proclaiming their

willingness to reform trade so that it promotes

development. … The EU and US must immediately

change their attitude or they will fail the poor.’

Oxfam press release, 28 July 2005

• What about G-10?

• What about South-South?

Going for a result


3. The South-South debate

‘Farmers and processors who can take advantage of export opportunities tend to be larger-scale

and more capital-intensive …’

Oxfam: ‘Kicking down the door:How upcoming WTO talks threaten farmers in

poor countries’, April 2005

These farmers are poor.They lack capital.They depend on exports.Most of their exports go to

other developing countries.There are millions of them.

Wait a minute …

Going for a result

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Poor, subsistence farmers also produce for export,

including exports to other developing countries, and

the range of products they can produce is limited.

Therefore these farmers’ interests in south-south

trade also need to be taken into account

Summary: Thai Ambassador in agriculture negotiations, June 2005

• Remains difficult. If unsolved:no consensus, no reform

• G-33 understand: working on indicators for SP criteria

• G-20 appreciate this

Going for a result



• Perhaps even more difficult than SPs

Erosion of preferences

• Also bitterly debated

Complicates call for developed countries to

lower barriers

Who should they export to?

Going for a result


4. Contributions to selling the deal?

• To sell the deal, governments want to say: ‘pain is shared’

• But no need to share equally

‘For these products we really don’t have high

ambitions.’ If a case can be made about the

vulnerability of the producers, then smaller

cuts … or some other means could be used to provide no

more than a minimal amount of market access

Summary: US on SPs, in agriculture talks, July 2005

• G-33 work on SP indicators aims to make the case

Going for a result



The ‘ceiling tariffs’ issue?

• Kenya, Zimbabwe, Nigeria, Cameroon, Jamaica paper:

tariffs high, all products, as S&D

-> all their tariffs in highest band, steepest cuts, ‘undermining S&D’

Some creative thinking? E.g.

Country bound ceiling%

Kenya 100 Zimbabwe 143.4

Nigeria 150Cameroon 80

Jamaica 97.4

Going for a result



But …

Country boundapplied

%ave %

Kenya 10020.1

Zimbabwe 143.426.1

Nigeria 15053.9

Cameroon 8022.0

Jamaica 97.415.8

(all negligible variance)

‘water’

Bound tariff

Applied tariff =67-85% below bound

E.g. 50% cut

• No adjustment required• Only ‘policy space’• But sensitive products, SPs, SSM

Viable contribution to consensus-building? Depends

on value of ‘policy space’

‘Water’

Going for a result


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Average applied rate % Average bound rate cut by 15 per cent (%)

Going for a result

Water %


5. Process?

Unavoidable:Mix of plenary, informal,

small group meetings

Must be:• inclusive • transparent

‘A more democraticWorld Trade Organization which gives poor countries a stronger

voice.’http://www.maketradefair.com

-> poorer countries always represented

When deadlock in WTO:members go outside WTO

Going for a result


6. Finally: ‘Take ag. out of the WTO’?

The WTO is the only place where agricultural

subsidies are negotiated

Going for a result


And in the end …

IN THE END:Trade agreements

do not create trade

They create trade opportunities.

> The difference is significant

Going for a result


MORE ON THE WTO WEBSITE

Agriculture negotiations/Cotton Sub-Committeehttp://www.wto.org/english/tratop_e/agric_e/negoti_e.htm

or follow:www.wto.org > trade topics > (goods) agriculture negotiations

Background explanations80-page backgrounder explaining the whole negotiation. Browse or downloaded

here:

www.wto.org/english/tratop_e/agric_e/negs_bkgrnd00_contents_e.htm

or follow: www.wto.org > trade topics > (goods) agriculture negotiations > backgrounder


The World Trade OrganizationCentre William Rappard

rue de Lausanne 154CH–1211 Geneva 21

Switzerland

Tel: +41 (0)22 739 51 11Fax: +41 (0)22 739 54 58

email: [email protected]: www.wto.org

Documents

WTO agriculture negotiations