AGRICULTURE NEGOTIATIONS: BACKGROUNDER
August 2004 framework: market access
This was the most difficult of the three pillars to negotiate. As agriculture negotiations chairperson Tim Groser pointed out, all countries have market access barriers, whereas only some have export subsidies or Amber or Blue Box domestic supports. Therefore the range of interests involved in the market access side of the negotiations is more complex. Most governments are under pressure to protect their farmers, but many also want to export and therefore want to see others’ markets open up. Among developing countries, some are less confident about importing and exporting and take a defensive position, while others are more confident and want to see more South-South trade as well as increased exports from poorer to richer countries.
UPDATED 1 DECEMBER 2004
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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.
The framework commits members to “substantial improvements in market access for all products”. Three or four key points emerged in the bargaining over the framework: the type of tariff reduction formula that would produce the agreed result of “substantial improvements in market access”; how all countries’ sensitive products might be treated; how developing countries might be given further flexibility for their “special products” and be able to use “special safeguard” actions to deal with surges in imports or falls in prices; how to deal with conflicting interests among developing countries over preferential access to developed countries’ markets; and how to provide market access for tropical products and crops grown as alternatives to illicit narcotics. Also discussed was a possible trade-off between cuts in some developed countries’ subsidies and improved market access in developing countries.
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Tariffs: the single approach using a tiered formula
The framework does not spell out the formula; it sets the scene for the next stage of the negotiations. It states that the formula must take account of members’ different tariff structures (for example some have tariffs that vary widely from product to product, others have more homogeneous rates), and it spells out key principles for the formula, aimed at expanding trade substantially:
- “single approach”: everyone except least-developed countries has to contribute by improving market access for all products
- tiered and progressive: the formula will be based on tiers so that tariffs in higher tiers have steeper cuts (a visual comparison of the banded, blended and tiered approaches can be found here)
- reductions from “bound” rates, i.e. the ceilings that members have committed in the WTO, rather than the actual or “applied” rates, which in developing countries in particular, are often lower, sometimes considerably. (When an applied rate is much lower than the bound rate, the formula might not mean a cut in the tariff actually charged on the import, only a lower ceiling limiting the government’s ability to raise the tariff.)
- developing countries are to be given “operationally effective” special treatment
- “sensitive products”: all countries are to be allowed some flexibility in the way these products are treated, although even sensitive products have to see “substantial improvements” in market access.
Left for further negotiation are the levels and number of tiers, and the type of tariff reduction in each tier. Two controversial questions — whether the formulas should define overall maximum tariff rates (“caps”) and how sensitive products should be treated — are handled in a delicately-worded sentence: “the role of a tariff cap in a tiered formula with distinct treatment for sensitive products will be further evaluated”.
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The number of sensitive products each government may select is to be negotiated. Even for these products, there has to be “substantial improvement” in market access, which can partly be achieved by creating or expanding tariff quotas.
The fine print carefully strikes a balance between different positions by saying the final result should also reflect “the sensitivity of the product”, and it sets some criteria for negotiating the expansion of tariff quotas that are open to all members (“MFN-based”, as distinct from quotas that are set aside for selected members).
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These include: reducing or eliminating in-quota tariff rates; improving the administration of quotas (how quotas are allocated among importers or exporters); reducing or eliminating tariff escalation (higher duties on processed products than on raw materials, to be tackled through a formula); tariff simplification; and the current special agricultural safeguard (which some countries want to cease). Broadly, these remain to be negotiated.
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Special and differential treatment
The purpose of special treatment: for rural development, food security and livelihood security. Specifically, special treatment is to be given to developing countries in “all elements of the negotiation”, including “lesser” commitments in the formula, the number and treatment of sensitive products, “lesser” tariff quota expansion, and a longer implementation period.
Special products: developing countries will be given additional flexibility for products that are specially important for their food security, livelihood security and rural development. How many, how they will be selected, and how they will be treated, has to be negotiated.
Special Safeguard Mechanism (SSM): a new contingency measure for developing countries. Details are to be established.
Other issues to be addressed: the “fullest liberalization” of trade in tropical agricultural products, and products used as alternatives to illicit narcotic crops; long-standing preferences (the importance of preferences is “fully recognized” and “paragraph 16 and other relevant provisions of TN/AG/W/1/Rev.1” — the March 2003 draft “modalities” paper — “will be used as a reference”).
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‘Issues of interest but not agreed’
Includes sectoral initiatives (usually meaning scrapping duties on specific sectors), and geographical indications.
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