Brown Bag Seminar The Current State of the Agricultural Trade Negotiations in the WTO Tuesday, September 16, 2003

The Current State of the Agricultural Trade Negotiations in the WTO Tim Josling Stanford Institute for International Studies Stanford University

Introduction Article 20 of the Uruguay Round Agreement on Agriculture (URAA) had committed members to initiate further negotiations by the end of Talks in the WTO on the further reform of agricultural trade started in March The agricultural negotiations were given a significant boost by the decision at the Doha Ministerial in 2001 to initiate a new general round of trade talks. An ambitious timetable for the completion of the talks was established, culminating in an agreement by January The timetable has now come into serious jeopardy, as intermediate deadlines passed without agreement, and the WTO Ministerial Meeting in Cancún missed the opportunity to get the talks back on track.

The Timetable of Agricultural Negotiations March 2000 –Establishment of Negotiating Committee and appointment of Chairman March 2000 – March 2001 –Phase I. Initial Position papers presented March 2001-Feb 2002 –Phase II. Elaborations by countries on specific topics November 2001 –Doha Ministerial confirmed and elaborated objectives and set timetable for negotiations

Timetable (contd.) March 2002 – March 2003 –“Modalities” phase. Deadline for developing modalities for further trade reform steps missed at end of March 2003 March 2003-September 2003 –Technical discussions continued –Serious negotiations begin in July at Montreal Mini-Ministerial September 2003 –WTO Ministerial in Cancun was to take stock and integrate with other aspects of the negotiations –Became a negotiation of the modalities, and failed to make necessary progress

Timetable (contd.) December 15, 2003 –Target for Senior Officials to report on progress toward modalities (in all areas of the DDA) January 2004 –Peace Clause expires (unless renewed): possibility of challenges to subsidies under SCM Agreement January 2005 –Originally scheduled end of negotiations, but now looking like 2006 as earliest date

The Search for a Modalities Draft Secretariat produced an “overview” document in Dec 2002 –identified the areas of agreement (few) and of contention (many) Chairman Harbinson produced a draft “modalities” paper in Feb 2003 intended to suggest compromises (revised in March) –Some parts of US proposal (graduated tariff cuts, curbs on STE exporters); –Some aspects of EU ideas (across the board domestic support cuts, export credits, food aid); –Some movement toward developing countries (Special Priority products, tariff escalation, special preferences)

The search continued … Harbinson draft did not elicit enthusiasm (too ambitious, not ambitious enough, unbalanced) Unable to find enough common ground to produce second draft Technical discussions continued over summer on details Harbinson produces report to TNC in July with “options” list

Possible breakthrough … EU and US agreed a joint proposal on August 13, 2003 Brazil, China and India countered with their own joint proposal, August 20 Developing Cairns Group (and others) aligned with this proposal Became G-21 by time of Cancun TNC sends draft of Cancun Conclusions to General Council in late August

What was in the General Council draft? –Market access Banded approach to tariff cuts Maximum tariff –Domestic Support Greater reductions for countries with higher subsidies Cap and reduce blue box –Export Competition Eliminate for products of interest to developing countries No deadline for elimination for others –Special and Differential Treatment Category of Special Products Special safeguard mechanism (SSM) Duty free access for some percent of developing country products

Reactions to GC draft? US thought it let developing countries avoid market opening EU concerned about deadline for end to export subsidies, and cap on support G-21 countries object to their ideas being watered down or ignored “Ugly Eight” thought it went too far in liberalization of trade

Cancun talks Facilitators appointed to seek compromises and report back to TNC George Yeo gets the agricultural portfolio (as at Seattle) African cotton initiative gets sidelined, and countered by US EU GI issues separated from agriculture

Yeo Draft remains on table Includes comprehensive approach borrowing from each of the proposals –US-EU tariff formula but with easier option for developing countries –G-21 limits on domestic support but with US-EU banded approach –US-EU line on export subsidies Proves not to be much more popular than CG draft

Market Access Reduce tariffs for developed countries as follows: (i) [...]% of tariff lines shall be subject to a [...]% average tariff cut and a minimum of [...]%; for these import- sensitive tariff lines market access increase will result from a combination of tariff cuts and TRQs. (ii) [...]% of tariff lines shall be subject to a Swiss formula with a coefficient [...]. (iii)[...]% of tariff lines shall be duty-free. [The resulting simple average tariff reduction for all agricultural products shall be no less than [...]%.]

Market Access, contd. For the tariff lines that exceed a maximum of [...]%, developed-country participants shall either reduce them to that maximum, or ensure effective additional market access in these or other areas through a request-offer process that could include TRQs. [Within this category, participants shall have additional flexibility under conditions to be determined for a very limited number of [ ] products to be designated on the basis of non-trade concerns that would not be subject to maximum.]

Market Access (Developing Countries) (i) [...]% of tariff lines shall be subject to a [...]% average tariff cut and a minimum of [...]%; for these tariff lines market access increase will result from a combination of tariff cuts and TRQs. Within this category, developing countries shall have additional flexibility under conditions to be determined to designate Special Products (SP) which would only be subject to a linear cut of a minimum of [...]% and no new commitments regarding TRQs; however, where tariff bindings are very low (below [...]%) there shall be no requirement to reduce tariffs. (ii) [...]% of tariff lines shall be subject to a Swiss formula with a coefficient of [...]. (iii)[...]% of tariff lines shall be bound between 0 and 5%, taking into account the importance of tariffs as a source of revenue for developing countries.

Market Access (Developing Countries) The applicability and/or extent of the tariff ceiling remain under negotiation, taking into account their development needs. A special agricultural safeguard (SSM) shall be established for use by developing countries subject to conditions and for products to be determined. All developed countries will seek to provide duty-free access for at least [...]% of imports from developing countries through a combination of MFN and preferential access, including particularly all tropical and other products referred to in the preamble of the Agreement on Agriculture. Participants undertake to take account of the importance of preferential access for developing countries.

Domestic Support All developed countries shall achieve reductions in trade- distorting support significantly larger than in the Uruguay Round, that will result in Members having the higher trade-distorting subsidies making greater efforts. Reductions shall take place under the following parameters: –Reduce the Final Bound Total AMS in the range of [...]% - [...]%. Product-specific AMS shall be capped at their respective average levels during the period [...]. –Reduce de minimis by [...]%.

Domestic Support, contd. Blue Box will be modified so that Members may have recourse to the following measures: (i) direct payments if: - such payments are based on fixed areas and yields; or - such payments are made on 85% or less of the base level of production; or - livestock payments are made on a fixed number of head. (ii) support under shall not exceed 5% of the total value of agriculture production in the period by [...]. Subsequently, such support shall be subject to an annual linear reduction of [...]% for a further period of [...] years.

Domestic Support, contd. The sum of allowed support under the Total AMS, (new) Blue Box and de minimis in 2000 shall be subject to a cut of at least [...]% [,including an initial cut of [...]% in the first year of implementation]. Green Box criteria shall be reviewed with a view to ensuring that Green Box measures have no, or at most minimal, trade-distorting effects or effects on production.

Domestic Support, developing countries Having regard to their rural development, food security and/or livelihood security needs, developing countries shall benefit from lower reductions of trade-distorting domestic support, longer implementation periods and enhanced provisions under Article 6.2 and the Green Box. Developing countries shall be exempt from the requirement to reduce de minimis domestic support.

Export Competition (export subsidies) Members commit to eliminate export subsidies for products of particular interest to developing countries. A list of these products shall be established for the purpose of tabling comprehensive draft Schedules. Elimination of the export subsidies for these products shall be implemented over a [...] year period. For the remaining products, Members shall commit to reduce, with a view to phasing out, budgetary and quantity allowances for export subsidies.

Export Competition (export credits) Members shall commit to eliminate, over the same period as [export subsidies are eliminated] the trade-distorting element of export credits through disciplines that reduce the repayment terms to commercial practice ([...] months), for the same products [as those for which export subsidies are eliminated] in a manner that is equivalent in effect. For the remaining products, a reduction effort, with a view to phasing out, that is parallel to the reduction in [other export subsidies] in its equivalent effect for export credits shall be undertaken.

Export Competition The provisions related to the reductions of, with a view to phasing out, all forms of export subsidies shall apply equally to all forms of export subsidies related to or provided, directly or indirectly, to, by or through export state trading enterprises. Additional disciplines shall be agreed in order to prevent commercial displacement through food aid operations. An end date for phasing out of all forms of export subsidies remains under negotiation

Why did talks break down? Ministers expressed dissatisfaction with several parts of the agricultural text Ultimate cause of breakdown of Ministerial was Singapore issues, inflexibility of EU on one hand and India and Malaysia on other Agreement on agriculture might have been possible if more flexibility on these other issues? In the end, decision was made that an agreement was not near

What is Needed to get Agreement? “Cooling off” period? But why will that help? Political will? But that also needs some stimulus, and unlikely in election year Fear of regionals/bilaterals? But not effective alternative for agriculture Importing Developing countries not in a hurry Exporting developing countries do not want to let EU and US off the hook

Conclusions Political will was in short supply for talks: countries not in a dealing mood Emphasis on EU-US deal as key proved misleading Developing countries now fully on board: have become convinced that they can have an impact Developed countries still too tied by domestic constituencies (cotton, sugar) to make the moves that could make a deal attractive