The July 2004 package and August decision

Ten months later the Cancún deadlock was broken. Shortly after midnight on 1 August 2004, the WTO’s 147 member governments approved a package of agreements that includes an outline (or “framework”) to be used to complete the “modalities” on agriculture. The deal was struck after delegations negotiated intensively day and night for two weeks, culminating in a gruelling, non-stop session involving key ministers and ambassadors, that began at 5pm on Friday 30 July and lasted almost 24 hours. During the fortnight, there were several meetings of heads of delegations, intensive consultations and countless gatherings of various groups, with a number of trade ministers participating.

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This briefing document explains current agricultural issues raised before and in the current negotiations. It has been prepared by the Information and Media Relations Division of the WTO Secretariat to help public understanding about the agriculture negotiations. It is not an official record of the negotiations.

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This briefing document explains current agricultural issues raised before and in the current negotiations. It has been prepared by the Information and Media Relations Division of the WTO Secretariat to help public understanding about the agriculture negotiations. It is not an official record of the negotiations.

Although agriculture was not the immediate cause of the Cancún deadlock, major differences in agriculture remained barely below the surface. Resolving many of these was the key to the July 2004 breakthrough on all subjects in the Doha Development Agenda.


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Political build up 

The first efforts at compromise had already started two months before the September 2003 Cancún meeting, with various attempts to draft a framework. But it was not until early 2004 that key members representing a range of opposing positions really put their heads together to try to resolve their differences. Work resumed in the agriculture negotiations meetings at the WTO and the atmosphere grew more optimistic. However, the real political drive came from meetings of groups of ministers in various regional and other forums. WTO Director-General Supachai Panitchpakdi was often a participant. They talked and talked, and more importantly they listened. And they issued statements designed to push the talks forward as well as to stress their concerns. It was this political activity that fed the optimism in the “special” negotiating sessions of the Agriculture Committee

Individual initiatives were crucial. US Trade Representative Bob Zoellick wrote to WTO ministers on 11 January 2004. Essentially a call to arms, his letter shared with his fellow ministers his “common sense” assessment of the state of the negotiations and how all WTO members might work together to advance the Doha Agenda. He suggested focusing on the key areas of agriculture, industrial goods and services, with work to develop frameworks by midyear and a WTO ministerial that could be held by the end of the year (that last point proving over-optimistic).

EU Commissioners Pascal Lamy and Frans Fischler followed up on 9 May with a letter outlining concessions the EU was willing to make, including to negotiate a date for the end of export subsidies, and to drop three of the four “Singapore” issues (leaving the less contentious trade facilitation on the table) — so long as other members were willing to give ground on issues of interest to the EU both within agriculture and outside, such as market access for industrial goods and services.

Key ministers flew round the globe in their search for compromise. So did Director-General Supachai. He clocked up a quarter of a million air miles between September 2003 and July 2004, attending virtually all gatherings of trade ministers and paying particular attention to developing countries with six trips to Africa and four trips to Latin America and the Caribbean.

The meetings included: least-developed countries’ trade ministers meeting in Dakar, Senegal in early May 2004; the OECD ministerial meeting in Paris, 13-14 May; the African Union trade ministers’ conference in Kigali, Rwanda in late May; the APEC trade ministers’ meeting in Pucón, Chile in early June; and the UNCTAD Conference in São Paolo, 13-18 June.

By then a smaller group of key ministers and officials had already met in London on 30 April. This group evolved into an even smaller group, the Five (Australia, Brazil, the EU, India and the US), who met in Paris and São Paolo on the sidelines of the OECD and UNCTAD conferences and continued to work for compromise through to the end.


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The negotiations in Geneva: March 2004 

Meanwhile, in Geneva the first “agriculture week” after Cancún was 22-26 March 2004, and it marked a new approach. It is described in some detail here as an indication of the approach and the mood at this stage. Most of the week was left open for delegations and groups of delegations to meet and negotiate among themselves. The new chairperson, Ambassador Tim Groser of New Zealand encouraged this by announcing he would take a back seat. He said his role would be to concentrate on the process, leaving the content up to members. He said he would only attend discussions as an observer, since the time had come for members to negotiate with each other and not with the chair. Describing the approach as experimental, Amb. Groser called for a transition from an initial phase in which members stated their positions and translated these into negotiating proposals, to a “problem solving phase”.

To demonstrate that it was time to move on, he showed delegations a large pile of documents, which were a sample of papers received from members and groups of members. He said 52 formal negotiating proposals, 32 Secretariat background papers, 99 unofficial papers and several “framework” drafts had been received. “These are facts on the ground”, Amb. Groser said. There was a window of opportunity to make progress by the summer break (end of July), and no purpose would be served if the time was spent repeating the papers or making procedural points on their status, he cautioned.

So the week opened with a formal session simply confirming Amb. Groser as the negotiations’ new chairperson. “Transparency” meetings were held on the Wednesday (24th) and Friday (26th) morning, so that delegations could report back to the full membership on their consultations.

During the rest of the week the meetings were private and between groups of members (the Cairns Group, the G-10 which includes Switzerland and Japan, the G-20 group of developing countries that includes Brazil, India and South Africa, the “G-33” group led by Indonesia and pressing for special treatment for developing countries, the African Group, the African-Caribbean-Pacific group, a group of recent new members), or key individual members such as the US, EU, Japan, etc.

By the end of the week, the overwhelming mood was that the tone of the negotiations had changed, and for almost the first time delegations were listening to each others’ concerns. There was also strong praise for the new way the meetings were organized, with its focus on delegations negotiating among themselves. But the discussions had not quite entered the “problem-solving” mode that Amb. Groser sought. Members said they now needed to reflect on what they had heard.

Of the three “pillars” (export subsidies and competition, domestic support and market access), many identified market access as technically the most difficult. Delegations agreed to try for a “framework” (probably without numbers) by the end of July, and four more series of meetings were scheduled: one in April, two in June and one in July. (The July meeting was eventually absorbed into consultations under the General Council, with a session specifically to discuss the agriculture annex on 21 July.)

The chairperson’s assessment. Amb. Groser stressed that his assessment was based mainly on what delegations had told him, but also on meetings he observed and on conversations with individual delegations. This, he said, was the prevailing opinion:

1. Overall: there was now a much better “interaction” and understanding between the political process (i.e. ministers and capitals) and the Geneva process. Without the right political input, work in Geneva “will not be possible” , he said. But the framework itself would be negotiated in Geneva “or it will not be done anywhere,” Amb. Groser said.

2. Process: the week’s approach was seen as productive and a welcome move away from speech making and coalition building. Many delegations reported a welcome shift into “listening mode”, but not yet into “problem-solving” mode (i.e. real attempts to narrow gaps) — this still lay ahead.

3. Objective and timetable: there was a consensus to aim for a “framework” (i.e. key points of what would later be more detailed principles or “modalities” of the final agreement) before the summer break (i.e. at the latest by July 2004).

4. Deeper underlying understanding: Amb. Groser said delegations understood better that the “framework” would be a staging point on the road to “full modalities”, and the two are not separate — they are points along a “continuum” starting with the mandate, passing through the “framework” and then the “full modalities” and ending with final agreement and commitments.

Amb. Groser said there was also a “working hypothesis” that the framework might not include numbers (such as percentage reductions or coefficients in formulas), even though some members were still unconvinced. They argued that the numbers might be needed to give a degree of certainty about how deep the cuts would be. But Amb. Groser said this might not be the case. (For example, if the formulas include a lot of flexibility, having numbers in the formulas does not offer much certainty about the result in detail.) Rather, “we need to work on the basis of conditional trust,” he went on, based on the Doha mandate as “the political anchor”. Amb. Groser’s assessment was that delegations could live with some uncertainty in the framework so long as there was no inconsistency with the level of ambition of the mandate for the negotiation as set out in the Doha Declaration of 2001.

5. Substance: The chair’s role was to focus on the process; the content would come from the members, he said. And the members were reporting that while there was a need to keep a balance between the three pillars, progress on the pillars was not equal. Although export competition (export subsidies etc) and domestic support both face difficult political decisions, there was a clear view among a majority of delegations that far more work was needed on market access — “not even the outline of a possible basis for a political decision is evident on market access”, he said.

And although little had been said on cotton during the week — partly because some key members were at a workshop on cotton in Benin — he had not ignored this. Some procedural issues still needed to be resolved, he said.

6. Outside agriculture: Amb. Groser also urged heads of delegations to work on the negotiations in other subjects as well. Agriculture could not work in a vacuum — although there was considerable momentum, if there was a lack of progress in other areas “we could get cut off at the knees”.

The discussion. Almost all speakers endorsed the chairperson’s assessment and praised the process. One (Mauritius) spoke of expecting to find a lot of “red lights” but finding instead many “green lights”. Another (EU) said its delegation had wondered at the beginning what members would do for a whole week, only to find the week to be so busy that it had passed at a “cracking speed”.

They acknowledged that market access was the biggest problem. Many commented on the “blended” formula. This was first introduced by the US-EU draft framework the previous August and modified in several subsequent drafts. Under this approach, tariffs would be divided into three groups. One group would be made duty-free, the tariffs in another group would be reduced by a simple average with a minimum reduction per product (the Uruguay Round approach), and in the third they would be reduced by the “Swiss formula” (a harmonizing formula that reduces higher tariffs by greater amounts and simultaneously sets a maximum final tariff rate, see Tariffs: “modalities” phase).

The Cairns Group (Australia as spokesman) said it was unconvinced by the blended formula. What was important is to ensure substantial improvements in market access for products, and not numbers that are an illusion of improved market access, the group said.

The G-10 (Switzerland speaking) argued that the blended formula did not provide enough flexibility. This group also stressed that it opposed setting ceilings for tariff rates and having to expand all tariff quotas. The EU said the blended approach provided enough flexibility to cover all issues, including non-trade concerns and special treatment for developing countries, and with appropriate numbers to offer a high level of ambition as well. The US also said the picture would be clearer when the numbers were inserted, but after the framework stage was over.

Some groups’ priority concerns were accepted in principle by others. For example most speakers agreed that developing countries should be allowed to give special treatment to a category of special products (see under “tariffs and tariff quotas” and “developing countries”). Differences remained about the conditions that would apply. The EU accepted a call from China and other new members that they were already undergoing reforms and had low tariff rates and therefore should not have to face the same scale of reductions as older members.

India said it accepted that all members will have to contribute to reform, but others will have to accept that some countries are unable to contribute as much because of developmental constraints.

Concluding, the chairperson said that while discretion was essential at a such a delicate phase of the negotiations, transparency was also necessary. Countries could make difficult compromises, but not if they were ambushed with unexpected demands, he said.


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April and June 2004 

A similar approach was adopted for the 20-23 April and 23-25 June meetings. By now attempts at compromise were well underway, both in Geneva and outside, and the efforts of the Five ( Australia, Brazil, the EU, India and the US) and others were starting to be felt. Progess had been made and even accelerated, but too slowly, chairperson Tim Groser said at the end of the June meetings.

Also by now, the most difficult subject was clearly market access. It is an issue that directly affects all members, unlike export subsidies and domestic support where only some members have reduction commitments. Ambassador Groser observed that people were willing to explore others’ ideas without necessarily accepting them. This included variations of the “tiered approach” (a visual representation of the tiered approach can be found here) Ambassador Groser said he was careful not to ask anyone to accept the approach because to do so could lead to premature rejection. Progress was also reported on “parallelism”, the demand by some members, that subsidized export credit, subsidized food aid, and state trading exporters should be disciplined in parallel with the disciplines on export subsidies. (Details of the chairperson’s assessment can be found in his report to the 30 June meeting of the Trade Negotiations Committee. See minutes in document TN/C/M/13.)

Process: By the June meetings Ambassador Groser was organizing some of his own meetings including consultations among groups of countries carefully selected to represent all active groups in the negotiation. For example, he reported that one consultation involved Australia, Brazil, Canada, China, Costa Rica, the EU, India, Indonesia, Japan, Rep. of Korea, Mauritius, New Zealand, Nigeria, Norway, South Africa, Switzerland, Thailand, Tanzania, Trinidad and Tobago, the US, and Uruguay. (This included one or more representatives of the Cairns Group, the G-10, G-20, G-33, the African Group, the least-developed countries, and the ACP countries.)

He described the need to tread a delicate balance between (1) the need to be transparent and to include everyone in the negotiations, and (2) the need to let difficult ideas develop before exposing them more widely. A newly planted, delicate flower could wilt and die if it is exposed to too much sunlight, he said, and therefore transparency is “cumulative” — a clearer picture gradually emerges for the membership as a whole to see and to think about before they have to decide whether to accept or reject the ideas.


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The July package 

In the last week of July, the external and internal negotiations merged as around 30 ministers came to the WTO in Geneva for the General Council meeting that would eventually seal the deal. It was never easy, and the time pressure became intense as General Council chairperson Shotaro Oshima (Japan’s ambassador to the WTO) and Dr Supachai Panitchpakdi worked round the clock, holding consultations and drafting and re-drafting possible compromise texts. They were assisted by the chairs of the key negotiating groups — agriculture (Ambassador Groser), non-agricultural market access (Ambassador Stefán Jóhannesson of Iceland), trade facilitation (WTO Deputy Director-General Rufus Yerxa), and development issues (Faizel Ismail of South Africa).

A first draft of the decision was circulated on 16 July, with the latest version of the draft agriculture framework in Annex A. One “drop-dead” deadline passed on Friday 30 July when a second draft was circulated, and even a further 24 hours was not enough. It was not until early on 1 August that exhausted ministers and ambassadors finally lifted all their objections. Only then could consensus be reached on the third draft of the decision that is now officially document WT/L/579, circulated on 2 August 2004. Only then could they get a decent night’s sleep.


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The August 2004 framework 

In the decision, the seven-page section on agriculture is Annex A. But within the main part of the text are also a section on cotton, and confirmation that the 1 January 2005 deadline will not be met and that the next Ministerial Conference will be held in December 2005 in Hong Kong, China.

Annex A, the “Framework for Establishing Modalities in Agriculture”, gives some shape to the modalities that will emerge from the next phase of the negotiations. It describes key features of the modalities without going into all the detail. For example it does not spell out the exact formulas to be used — only the underlying principles — and it does not include most of the figures that will eventually be used to determine the precisely how much reform is to be achieved.

Therefore the introduction says the framework makes the talks more precise. It underscores the “level of ambition” of the Doha mandate, which is cited at various points in the text. For example phrases such as “substantial reductions” and “substantial improvements” are used repeatedly, and throughout there are references to “special and differential treatment” for developing countries being “integral”. The framework also stresses that the balance of the outcome will only be found at the end of the negotiations — a balance both between agriculture and other subjects (the “single undertaking”), and within agriculture itself. The three pillars are connected, part of the whole deal, and must be balanced equitably, the text says. The introduction also reiterates issues such as development and non-trade concerns. The framework includes a short paragraph on “monitoring and surveillance”: this will be improved by amending Article 18 of the Agriculture Agreement, to “ensure full transparency”, including prompt and complete notifications on market access, domestic support and export competition. Developing countries’ concerns on this will be addressed.

For more information:
> The July package, summaries of meetings, and the agreed framework.


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After the framework: modalities 

The framework had settled some political questions, such as whether to negotiate the end of export subsidies. In many other issues, it gave broad political direction to the negotiations, such as an outline of the approach for cutting tariffs. Many technical details now needed to be sorted out so that members can move to the next set of political decisions that need to be taken later in this phase, and agree on “full modalities”. And so, when work resumed in October 2004, after the summer break, members got down to the task.

Week-long negotiations meetings were initially scheduled almost every month from October 2004 to July 2005. By November, a pattern had emerged. The formal meetings (the formal “Special Sessions” of the Agriculture Committee), usually at the end of the week, were mainly for taking decisions and for members to put some of their comments on the record. Informal meetings (informal “Special Sessions”) were for general comments and assessments, and for first readings of each technical issue. Consultations at a more technical level (“open-ended” consultations, meaning all members could attend, in a smaller room) allowed delegates to go into some highly specialized questions in greater detail. Some delegates said they benefited from hearing the discussion among their more specialist colleagues. Chairperson Tim Groser described these consultations as the “centrepiece” of the technical phase. He emphasised the need to use a smaller room in order to produce a friendly and workmanlike atmosphere, even if this put some limits on the number of people each delegation could have in the room. Specialist consultations among a smaller, representative group. Here specialists would delve deeper into the issues raised in the larger meetings, in order to contribute to the larger technical consultation, which would remain the “centrepiece”.

Ambassador Groser said he would adapt the process continuously, responding to members’ comments. He stressed the need for both transparency (so that all members are kept informed) and efficiency — the need to deal with some particularly complex issues in consultations among the members most concerned and in groups of manageable size. Any output from smaller group consultations would have to be approved by the full membership. He described his role as a manager, keeping water flowing at an appropriate rate through the three “locks” of the informal meetings and consultations. Too much water (i.e. too many topics) would flood the system; too little would hold back the flow too much.

Most members supported the process, but some asked the chairperson to ensure they were more appropriately represented in the small group consultations — he agreed. After the first meetings, some members with smaller delegations also said they had difficulty preparing for all the topics, both within their own delegations and within their coalitions. Chairperson Groser responded by trimming his proposed list slightly.

This technical phase started with discussions of: converting specific duties to ad valorem equivalents; exporting state trading enterprises; subsidized food aid; disciplines for subsidized export credit, guarantees and insurance, for 180 days or less; review and clarification of Green Box domestic supports; tariff quota administration; the base for tariff quota expansion; tropical products and goods produced as substitutes for narcotics; the method for setting caps on Amber Box supports for specific products; and the base period for commitments on domestic support.

On some issues the talks progressed well. One example was export credit, which built on work already undertaken and reflected in an attachment to the July 2003 version of draft modalities (the “Harbinson text”, TN/AG/10 and TN/AG/10/Corr.1). Other issues proved more political. Ambassador Groser cited the November discussion of the Green Box as one example.

(Click here for detailed lists of topics discussed.)

(To be continued...)


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