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AGRICULTURE: NEGOTIATIONS

Find the ‘last bridge’ urgently farm talks chairperson tells negotiators in pre-Hong Kong report

The agriculture negotiations have made “relatively rapid” progress since August, the talks’ chairperson, Ambassador Crawford Falconer, says in a report to the Trade Negotiations Committee circulated on 25 November 2005. But the major differences that have prevented agreement on “full modalities” in the forthcoming Hong Kong Ministerial Conference mean there is a “compelling urgency” to seize the moment and drive the process to a conclusion as rapidly as possible, he warns.

This is his report, it has now also become Annex A of the draft ministerial text circulated to members on 26 November:

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> News item: Find the ‘last bridge’ urgently farm talks chairperson tells negotiators in pre-Hong Kong report — 29 November 2005


TN/AG/21
25 November 2005

Committee on Agriculture
Special Session

 Negotiations on agriculture

Report by the Chairman, H.E. Crawford Falconer, to the TNC

1.   The present report has been prepared on my own responsibility. I have done so in response to the direction of Members as expressed at the informal Special Session of the Committee on Agriculture on 11 November 2005. At that meeting, following the informal Heads of Delegation meeting the preceding day, Members made it crystal clear that they sought from me at this point an objective factual summary of where the negotiations have reached at this time. It was clear from that meeting that Members did not expect or desire anything that purported to be more than that. In particular, it was clear that, following the decision at the Heads of Delegation meeting that full modalities will not be achieved at Hong Kong, Members did not want anything that suggested implicit or explicit agreement where it did not exist.

2.   This is not, of course, the kind of paper that I would have chosen or preferred to have prepared at this point. Ideally, my task should have been to work with Members to generate a draft text of modalities. But this text reflects the reality of the present situation. There will be — because there must be if we are to conclude these negotiations — such a draft text in the future. I look at this now as a task postponed, but the precise timing of this is in the hands of Members.

3.   As for this paper, it is precisely what it is described to be. No more, no less. It is the Chairman's report and, as such, it goes from me to the TNC. It is not anything more than my personal report — in particular, it is not in any sense an agreed text of Members. It does not, therefore, in any way prejudge or prejudice the positions of Members on any matter within it or outside of it. And, it certainly does not bind Members in any way. It should go without saying that the agreed basis of our work is, and shall remain, the Doha Mandate itself and the July 2004 Framework on Agriculture.

4.   As to the character of the paper, I have endeavoured to reflect what I discerned as the wishes of Members when they directed me to prepare this paper. I have tried to capture as clearly as I can such conditional progress and convergence as has developed in the post-July 2004 period. In doing so, I have not tried to brush under the carpet divergences that remain, and the paper tries to be just as clear on those points. Of course, it is a summary report. As such, it cannot — and does not — recapitulate each and every detail on each and every issue. But I took from Members’ comments that they would prefer a paper which could ‘orient’ further discussion.

5.   In that regard, I hope that anyone reading this paper would be able to get a pretty clear idea of what it is that remains to be done. Members made it clear that it was not my task as Chair to prescribe what is to be done next in a programmatic way. My task was to register where we are now, but I confess to having done so with an eye to genuinely clarifying where key convergences exist or key divergences remain, rather than obscuring or overcomplicating matters.

6.   My own sense, when I review this myself, is the compelling urgency of seizing the moment and driving the process to a conclusion as rapidly as possible. We have made — particularly since August of this year — genuine and material progress. Indeed, it has come at a relatively rapid pace. It is also clear to me that it has been the product of a genuinely negotiating process. In other words, it has been a case of making proposals and counterproposals. That is why the matters covered in this report have an essentially conditional character. As I see it, the reality is that we have yet to find that last bridge to agreement that we need to secure modalities. But it would be a grave error, in my view, to imagine that we can take much time to find that bridge. As Chair, I am convinced that we must maintain momentum. You don't close divergences by taking time off to have a cup of tea. If you do so, you will find that everyone has moved backwards in the meantime. That, it seems to me, is a profound risk to our process. I would like to believe that this report at least underlines to us that there is indeed something real and important still within our grasp and we ought not to risk losing it. Our over-riding challenge and responsibility is to meet the development objective of the Doha Development Agenda. To meet this challenge and achieve this goal, we must act decisively and with real urgency.

7.   The future life of this paper, if any, is a matter entirely in the hands of TNC Members to decide. This, as I see it, is the proper safeguard of the integrity of what has come to be described as a “bottom-up” process.

  

DOMESTIC SUPPORT

8.   There has been very considerable potential convergence, albeit on a manifestly conditional basis.

Overall Cut

  • There is a working hypothesis of three bands for overall cuts by developed countries. There is a strongly convergent working hypothesis that the thresholds for the three bands be US$ billion 0-10; 10-60; >60. On this basis, the European Communities would be in the top band, the United States and Japan in the second band, and all other developed countries at least in the third band. For developing countries, there is a view that either developing countries are assigned to the relevant integrated band (the bottom) or that there is a separate band for them1.
      
  • Based on post-July 2005 proposals, there has been an undeniably significant convergence on the range of cuts. Of course, this has been conditional. But subject to that feature, a great deal of progress has been made since the bare bones of the July 2004 Framework. The following matrix provides a snapshot:

Bands

Thresholds (US$ billion)

Cuts

1

0-10

31%-70%

2

10-60

53%-75%

3

> 60

70%-80%

De Minimis

  • On product-specific de minimis and non-product-specific de minimis, there is a zone of engagement for cuts between 50% and 80% for developed countries.
      
  • As regards developing countries, there are still divergences to be bridged. In addition to the exemption specifically provided for in the Framework, there is a view that, for all developing countries, there should be no cut in de minimis at all. Alternatively, at least for those with no AMS, there should be no cut and, in any case, any cut for those with an AMS should be less than 2/3 of the cut for developed countries.

Blue Box

9.   There is important and significant convergence on moving beyond (i.e. further constraining) Blue Box programme payments envisaged in the July 2004 Framework. However, the technique for achieving this remains to be determined. One proposal is to shrink the current 5% ceiling to 2.5% 2. Another proposal rejects this in favour of additional criteria disciplining the so-called “new” Blue Box only. Others favour a combination of both, including additional disciplines on the “old” Blue Box.

AMS

  • There is a working hypothesis of three bands for developed countries.
      
  • There is close (but not full) convergence on the thresholds for those bands. There appears to be convergence that the top tier should be US$25 billion and above. There is some remaining divergence over the ceiling for the bottom band: between US$12 billion and 15 billion.
      
  • There has been an undeniably significant convergence on the range of cuts. Of course, this has been conditional. But, that understood, a great deal of progress has been made since the bare bones of the July 2004 Framework. The following matrix 3 provides a snapshot:

Bands

Thresholds   (US$ billion)

Cuts

1

0-12/15

37-60%

2

12/15-25

60-70%

3

>25

70-83%

  • There is therefore working hypothesis agreement that the European Communities should be in the top tier, and the United States in the second tier. However, while the basis for Japan's placement as between these two tiers has been narrowed, it remains to be finally resolved.
      
  • For developed countries in the bottom band, with a relatively high level of AMS relative to total value of agriculture production, there is emerging consensus that their band-related reduction should be complemented with an additional effort.
      
  • What is needed now is a further step to bridge the remaining gap in positions — particularly as regards the United States and the European Communities, it being understood that this is not a matter to be resolved in isolation from the other elements in this pillar and beyond.
      
  • On the base period for product-specific caps, certain proposals (such as for 1995-2000 and 1999-2001) are on the table. This needs to be resolved appropriately, including the manner in which special and differential treatment should be applied.

Green Box

10.   The review and clarification commitment has not resulted in any discernible convergence on operational outcomes. There is, on the one side, a firm rejection of anything that is seen as departing from the existing disciplines while there is, on the other, an enduring sense that more could be done to review the Green Box without undermining ongoing reform. Beyond that there is, however, some tangible openness to finding appropriate ways to ensure that the Green Box is more “development friendly” i.e. better tailored to meet the realities of developing country agriculture but in a way that respects the fundamental requirement of at most minimal trade distortion.

  

EXPORT COMPETITION

End Date

11.   While concrete proposals 4 have been made on the issue of an end date for elimination of all forms of export subsidies, there is at this stage no convergence. There are suggestions for the principle of front-loading or accelerated elimination for specific products, including particularly cotton.

Export Credits

12.   Convergence has been achieved on a number of elements of disciplines with respect to export credits, export credit guarantee or insurance programmes with repayment periods of 180 days and below. However, a number of critical issues remain 5.

Exporting State Trading Enterprises

13.   There has been material convergence on rules to address trade-distorting practices identified in the July 2004 Framework text, although there are still major differences regarding the scope of practices to be covered by the new disciplines. Fundamentally opposing positions remain, however, on the issue of the future use of monopoly powers. There have been concrete drafting proposals on such matters as definition of entities and practices to be addressed as well as transparency. But there has been no genuine convergence in such areas.

Food Aid

14.   There is consensus among Members that the WTO shall not stand in the way of the provision of genuine food aid. There is also consensus that what is to be eliminated is commercial displacement. There have been detailed and intensive discussions, some of which have even been text-based, but not to a point where a consolidated draft text could be developed. This has been precluded by Members clinging to fundamentally disparate conceptual premises. There are proposals that in the disciplines a distinction should be made between at least two types of food aid: emergency food aid and food aid to address other situations. However, there is not yet a common understanding where emergency food aid ends and other food aid begins, reflecting concerns that this distinction should not become a means to create a loophole in disciplines. A fundamental sticking point is whether, except in exceptional, genuine emergency situations, Members should (albeit gradually) move towards untied, in-cash food aid only, as some Members propose but other Members strongly oppose 6.

Special and Differential Treatment

15.   Framework provisions for special and differential treatment, including with respect to the monopoly status of state trading enterprises in developing countries and an extended lifetime for Article 9.4, have been uncontroversial, but details remain to be established.

Special Circumstances

16.   Work on the criteria and consultation procedures to govern any ad hoc temporary financing arrangements relating to exports to developing countries in exceptional circumstances is not much developed.

  

MARKET ACCESS

Tiered Formula

  • We have progressed on ad valorem equivalents 7 . This has successfully created a basis for allocating items into bands for the tiered formula.
      
  • We have a working hypothesis of four bands for structuring tariff cuts.
      
  • There has been very considerable convergence on adopting a linear-based approach for cuts within those bands. Members have, of course, by no means formally abandoned positions that are even more divergent 8 . We need now to narrow the extent of divergence that remains. This will include whether or not to include any “pivot” in any band.
      
  • Members have made strong efforts to promote convergence on the size of actual cuts to be undertaken within those bands. But, even though genuine efforts have been made to move from formal positions (which of course remain), major gaps are yet to be bridged. Somewhat greater convergence has been achieved as regards the thresholds for the bands. Substantial movement is clearly essential to progress 9 .
      
  • Some Members continue to reject completely the concept of a tariff cap. Others have proposed 10  a cap between 75-100%.

Sensitive Products

  • Members have been prepared to make concrete — albeit conditional — proposals on the number of sensitive products. But, in a situation where proposals extend from as little as 1% to as much as 15% of tariff lines, further bridging this difference is essential to progress.
      
  • The fundamental divergence over the basic approach to treatment of sensitive products needs to be resolved 11 . Beyond that, there needs to be convergence on the consequential extent of liberalisation for such products.

Special and Differential Treatment

  • Just as for developed countries, there is a working hypothesis of four bands for developing countries. There is no disagreement on lesser cuts within the bands. A certain body of opinion is open to considering cuts of two-thirds of the amount of the cuts for developed countries as a plausible zone in which to search more intensively for convergence 12 . But significant disagreement on that remains, and divergence is, if anything, somewhat more marked on the connected issue of higher thresholds for developing countries 13 .
      
  • Some Members continue to reject completely the concept of a tariff cap for developing countries. Others have proposed 14  a cap at 150%.
      
  • For sensitive products, there is no disagreement that there should be greater flexibility for developing countries, but the extent of this needs to be further defined 15 .

Special Products

  • Regarding designation of special products, there has been a clear divergence between those Members which consider that, prior to establishment of schedules, a list of non-exhaustive and illustrative criteria-based indicators should be established and those Members which are looking for a list which would act as a filter or screen for the selection of such products. Latterly, it has been proposed (but not yet discussed with Members as a whole) that a developing country Member should have the right to designate at least 20 per cent of its agricultural tariff lines as Special Products, and be further entitled to designate an SP where, for that product, an AMS has been notified and exports have taken place. This issue needs to be resolved as part of modalities so that there is assurance of the basis upon which Members may designate special products.
      
  • Some moves toward convergence on treatment of Special Products have been made recently. Some Members had considered that special products should be fully exempt from any new market access commitments whatsoever and have automatic access to the SSM. Others had argued there should be some degree of market opening for these products, albeit reflecting more flexible treatment than for other products. In the presence of this fundamental divergence, it had clearly been impossible to undertake any definition of what such flexibility would be. Genuine convergence is obviously urgently needed. There is now a new proposal for a tripartite categorization of Special Products involving limited tariff cuts for at least a proportion of such products which remains to be fully discussed. It remains to be seen whether this discussion can help move us forward.

Special Safeguard Mechanism

  • There is agreement that there would be a special safeguard mechanism and that it should be tailored to the particular circumstances and needs of developing countries. There is no material disagreement with the view that it should have a quantity trigger. Nor is there disagreement with the view that it should at least be capable of addressing effectively what might be described as import “surges”. Divergence remains over whether, or if so how, situations that are lesser than “surge” are to be dealt with. There is, however, agreement that any remedy should be of a temporary nature. There remains strong divergence however on whether, or if so how, a special safeguard should be “price-based” to deal specifically with price effects.
      
  • There is some discernible openness, albeit at varying levels, to at least consider coverage of products that are likely to undergo significant liberalisation effects, and/or are already bound at low levels and/or are special products. Beyond that, however, there remains a fundamental divergence between those considering all products should be eligible for such a mechanism and those opposing such a blanket approach.

Other Elements

17.   There has been no further material convergence on the matters covered by paragraphs 35 and 37 of the July 2004 Framework text. The same may be said for paragraph 36 on tariff escalation, albeit that there is full agreement on the need for this to be done, and a genuine recognition of the particular importance of this for commodities exporters. Certain concrete proposals have been made on paragraph 38 (SSG) and met with opposition from some Members.

18.   Concrete proposals have been made and discussed on how to implement paragraph 43 of the July 2004 Framework on tropical and diversification products. But there remains divergence over the precise interpretation of this section of the July Framework 16  and no common approach has been established.

19.   The importance of long-standing preferences pursuant to paragraph 44 of the July 2004 Framework is fully recognised and concrete proposals regarding preference erosion have been made and discussed 17 . There seems not to be inherent difficulty with a role for capacity building. However, while there is some degree of support for e.g. longer implementation periods for at least certain products in order to facilitate adjustment, there is far from convergence on even this. Some argue it is not sufficient or certainly not in all cases, while others that it is not warranted at all.

  

LEAST-DEVELOPED COUNTRIES

20.   There is no questioning of the terms of paragraph 45 of the July Framework agreement, which exempts least-developed countries from any reduction requirement. The stipulation that “developed Members, and developing country Members in a position to do so, should provide duty-free and quota-free market access for products originating from least-developed countries” is not at this point concretely operational for all Members. At this stage, several Members have made undertakings. Proposals for this to be bound remain on the table 18 .

  

COTTON

21.   While there is genuine recognition of the problem to be addressed and concrete proposals have been made, Members remain at this point short of concrete and specific achievement that would be needed to meet the July Framework direction to address this matter ambitiously, expeditiously and specifically. There is no disagreement with the view that all forms of export subsidies are to be eliminated for cotton although the timing and speed remains to be specified. Proposals to eliminate them immediately or from day one of the implementation period are not at this point shared by all Members. In the case of trade distorting support, proponents seek full elimination with “front-loaded” implementation 19 . There is a view that the extent to which this can occur, and its timing, can only be determined in the context of an overall agreement. Another view is that there could be at least substantial and front-loaded reduction on cotton specifically from day one of implementation, with the major implementation achieved within twelve months, and the remainder to be completed within a period shorter than the overall implementation period for agriculture 20 .

  

RECENTLY-ACCEDED MEMBERS

22.   Concrete proposals have been made and discussed, but no specific flexibility provisions have commanded consensus.

  

MONITORING AND SURVEILLANCE

23.   A proposal has been made but there is no material advance at this point.

  

OTHER ISSUES

24.   On paragraph 49 (sectoral initiatives, differential export taxes, GIs) certain positions and proposals have been tabled and/or referred to. They are issues that remain of interest but not agreed.

25.    At this point, proposals on paragraph 50 have not advanced materially.

26.   In the case of small and vulnerable economies, a concrete proposal has been made recently. It has not yet been subject to consultation.

27.   There is openness to the particular concerns of commodity-dependent developing and least-developed countries facing long-term decline and/or sharp fluctuations in prices. There is, at this point (where, overall, precise modalities are still pending), support for the view that such modalities should eventually be capable of addressing effectively key areas for them 21 .

  

Notes:
1.
On the proposed basis that cut remains to be determined for those developing countries with an AMS. In any case, there is a view (not shared by all) that cuts for developing countries should be less than 2/3 of the cut for developed countries. back to text
2. The exact extent of the flexibility to be provided pursuant to paragraph 15 of the July 2004 Framework remains to be agreed. back to text
3. Of course, this needs to be viewed as illustrative rather than overly literally, if for no other reason than that these are conditional figures. For instance, while the European Communities has indicated it could be prepared to go as far as 70% in the top tier, they make it clear that this is acceptable only if the United States will go to 60% in the second tier. The United States for its part, however, has only indicated preparedness to go to that 60% if the European Communities is prepared to go as high as 83% — which it has not indicated it is prepared to do. back to text
4. One Member has proposed the year 2010 for “export subsidies”, with accelerated elimination for “specific” products. Another group of Members have proposed a period “no longer than five years” for all forms of export subsidies, with “direct” export subsidies subject to front-loading within that period. back to text
5. This includes, but is not limited to: exemptions, if any, to the 180 day rule; whether the disciplines should allow for pure cover only or also permit direct financing; the appropriate period for programmes to fully recover their costs and losses through the premia levied from the exporters (principle of self-financing — there needs to be convergence between position which range from one year to fifteen years); the disciplines regarding special circumstances; and the question of special and differential treatment, including whether, as some Members argue, developing countries should be allowed longer repayment terms for export credits extended by them to other developing countries and the specifics of differential treatment in favour of least-developed and net food-importing developing countries. back to text
6. This fundamental divergence has effectively precluded convergence on such matters as what disciplines, if any, should be established with respect to monetization of food aid or the question of the provision of food aid in fully grant form only. The importance of operationally effective transparency requirements is generally acknowledged, but details have still to be developed, particularly those relating to the role of the WTO in this context. Further work is required to clarify the role of recipient countries and relevant international organizations or other entities in triggering or providing food aid. back to text
7. The method for calculating the AVEs for the sugar lines is still to be established. back to text
8. At one end of the spectrum, as it were, a “harmonisation” formula within the bands; at the other end “flexibility” within the formula. back to text
9. The matrix below is an illustrative table that portrays the extent of divergences that remain, even on the basis of post-August 2005 proposals. This does not entirely cover all the subtleties of those proposals to utilize a “pivot” (although most are in fact within the ranges tabulated), but is intended to convey a snapshot of the status of average cuts proposed post-August. back to text
 

 

Thresholds

Range of cuts (%)

Band 1

0% - 20/30%

20-65

Band 2

20/30% - 40/60%

30-75

Band 3

40/60% - 60/90%

35-85

Band 4

>60/90%

42-90

10. As an element in certain conditional proposals on overall market access, tabled post-July 2005. back to text
11. Some see this as being tariff quota based and expressed as a percentage of domestic consumption, with proposals of up to 10%. Others propose pro rata expansion on an existing trade basis, including taking account of current imports. Some also propose no new TRQs, with sensitivity in such cases to be provided through other means, e.g. differential phasing. There is also a proposal for a “sliding scale” approach.  back to text
12. In this pillar, as well as in the other two, there is general convergence on the point that developing countries will have entitlement to longer implementation periods, albeit that concrete precision remains to be determined. back to text
13. The matrix below is an illustrative table that portrays the extent of divergences that remain, just on the basis of post-August 2005 proposals. back to text
 

 

Thresholds

Range of cuts (%)

Band 1

0% - 20/50%

15-25*

Band 2

20/50% - 40/100%

20-30*

Band 3

40/100% - 60/150%

25-35*

Band 4

>60-150%

30-40*

*There is also a proposal that cuts for developing countries should be “slightly lesser” than the upper tariff cuts for developed countries shown in the preceding table (i.e.: “slightly lesser” than 65, 75, 85 and 90%).
14. As an element in certain conditional proposals on overall market access, tabled post-July 2005. back to text
15. While the eventual zone of convergence for developed countries undoubtedly has a bearing in this area, it has been proposed by a group of Members that the principles of sensitive products generally and for TRQs specifically should be different for developing countries. Another group of Members has proposed, in the post-August period, an entitlement for developing countries of at least 50% more than the maximum number of lines used by any developed Member. This would (based on developed country proposals) amount to a potential variation between 1.5% and 22.5% of tariff lines. This latter group has also proposed that products relating to long-standing preferences shall be designated as sensitive and that any TRQ expansion should not be “at the detriment of existing ACP quotas”. This particular view has been, however, strongly opposed by other Members which take the firm position that tropical and diversification products should not at all be designated as sensitive products.  back to text
16. It is argued by some Members that this is to be interpreted as meaning full duty- and tariff quota-free access, but by others as less than that. back to text
17. Note 15 above refers. back to text
18. It is also proposed that this should be accompanied by simple and transparent rules of origin and other measures to address non-tariff barriers. back to text
19. Concrete proposals have been made, with a three-step approach: 80% on day one, an additional 10% after 12 months and the last 10% a year later.  back to text
20. A Member has indicated that it is prepared to implement all its commitments from day one and, in any case, to autonomously ensure that its commitments on eliminating the most trade-distorting domestic support, eliminating all forms of export subsidies and providing mfn duty- and quota-free access for cotton will take place from 2006. back to text
21. This would appear to include in particular such a matter as tariff escalation, where it discourages the development of processing industries in the commodity producing countries. The idea of a review and clarification of what the current status is of GATT 1994 provisions relating to the stabilisation of prices through the adoption of supply management systems by producing countries, and the use of export taxes and restrictions under such systems is also on the table. Proponents would seek something more than this such as more concrete undertakings in the area of non-tariff measures and actual revision of existing provisions. There is, at this point, no consensus in these latter areas, but an appreciation at least of the underlying issues at stake. back to text

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