WTO Agriculture Proposals Tabled

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WTO Agriculture Proposals Tabled: Try Again Next Year

Disagreement on how to negotiate agriculture was a factor in the failure of the Seattle Ministerial Conference last year. However, elements of the Seattle agriculture final draft text are now appearing in country proposals presented as part of the Article 20 agriculture negotiations.

The WTO Secretariat has received proposals from the EU and the United States, as well as the Cairns group, and a joint submission by a number of developing countries.

If the recent submissions are any indication, it is going to be a long negotiation with enough fault lines to drag it into the 4th Ministerial for repackaging as a key item in a round of multilateral negotiations. The EU submitted a set of papers, including one stressing the need to retain the "Blue" box as a place to put domestic support measures associated with production limiting programmes; a paper positioning the "precautionary principle" as an issue for accommodation in WTO rules; a paper taking the high moral ground on geographical appellation and labelling, and its appropriation by "usurpers"; and a paper on animal welfare standards in the food production process. The EU indicated it would be submitting a comprehensive proposal by the end of this year.

Not to be forgotten, the 18 member Cairns Group of farm produce-exporting countries submitted a joint paper June 16 calling for agreement on a set timetable for the elimination and prohibition of all forms of export subsidies for all agricultural products. The proposal nods in the direction of Special and Differential Treatment by suggesting that there be a longer implementation timeframe for developing countries; and extension of existing special and differential treatment for developing countries under Article 9.4 of the Agreement on Agriculture until the elimination and prohibition of export subsidies are completed.

The US agenda for agricultural trade reform remains ambitious, including proposals for an agreement to end agricultural export subsidies, market access, domestic support, and a limit on the use of state trading enterprises. Building on the Seattle text, and perhaps repositioning for a broader round of negotiations, the US proposed that, in addition to a built-in time schedule in the Agreement on Agriculture, Members should reach an overall agreement by the end of 2002 and reach agreement on basic modalities at the Seattle-defined midterm of the negotiations in 2001.

The EU, strongly supported by Japan, Norway, South Korea and Switzerland, as recently as this week at a conference on non-trade concerns, argue that farming has cultural and environmental, as well as economic significance and that its fate in individual countries cannot be left to the unrestricted play of market forces. It appears that the US has moved somewhat toward bridging the gap with the EU and Japan on the issue of multifunctionality. The US proposal notes that,

While the United States is committed to working through the WTO to eliminate trade-distorting measures, the United States is likewise committed to and supports policies that address non-trade concerns, including food security, resource conservation, rural development, and environmental protection. The United States maintains that these objectives are best met through non-trade-distorting means, with programs targeted to the particular concern without creating new economic distortions, thus avoiding passing the cost of achieving these objectives to other countries by closing markets, or introducing unfair competition, or both.

This view on non-trade issues is consistent with the December 3 final draft language produced in Seattle.

A key sticking point remains in relation to the precautionary principle, in that

The United States recognizes that trade measures may be used to address legitimate health and safety concerns and does not support opening the Agreement on Sanitary and Phytosanitary Measures to negotiation.

At the same time, it bears recalling that the United States and the European Union concluded an agreement in Lisbon May 31 to establish a forum to review and assess the benefits and risks of biotechnology and prepare a report for the December 2000 U.S EU Summit. The consultative working group was established in June.

Finally, the US appears to have accepted at least in principle that developing country concerns will need to be addressed. The proposal states that the United States recognizes the special circumstances in and challenges developing countries face, and undertakes to supply proposals to help better integrate them into the world trading system.

Of particular note is the proposal to eliminate existing green/blue/amber box distinctions and replace them with exempt and non-exempt support. Non-exempt support would be subject to progressive reduction commitments. Though it does not mention a development box for developing countries, the US proposal does go some distance in addressing the critique level against developed country agricultural practices.

The classic EU - US agricultural confrontation took a twist as a group of developing countries argued that developed countries had thrown up new barriers to their agricultural exports. The paper, endorsed by eleven developing countries was submitted June 23 for the Special Session of the Committee on Agriculture.

The paper focused on Special and Differential Treatment as vital to developing countries, and presented a critique of developed country practices that have contributed to a host of problems for the developing world. The WTO Agreement on Agriculture should have given momentum to the developing world's capacity for increasing production and exports of farm produce. However, the agreement worked in a perverse way: it gave developed countries special and differential treatment instead of guaranteeing it for the developing majority in WTO.

Specific "unfair trade rule" targets included reference to the domestic and export subsidisation of products by developed countries, which exceeds that of developing countries by a wide margin. In addition, developed country tariff levels are argued to be about twice as high as those in developing economies. Not leaving anyone out, the paper argued that the EU's final bindings for the year 2000 are almost two-thirds above the actual tariff equivalent for 1989-1993. For the US, they are more than three-quarters higher. Furthermore, for major agricultural products, developed countries' tariffs are about twice as high as those of developing countries.

The same group submitted a second proposal focused on Annex 2 or Green Box "minimally distorting" subsidies. The proposal recommends collapsing all the sandboxes into one "General Subsidy" box, and a "Development" box that would be applicable only to developing countries. A number of add-in exemptions and transitions for developing countries are also envisioned.

The developing country proposal seeks sweeping special treatment, which could imperil the liberalization of agricultural markets globally. The proposal does not make an adequate case against the existing tools available to effect economic development, preferring instead to shield developing country practices from trading rules intended to apply to all Members. On the positive side, the proposal does recognize the role of developed country export subsidies as a source of challenge to the growth of domestic production and markets. As well, the plague of tariff escalation as it applies to developing country products entering developed markets is flagged.

The unstated problem with the proposal is the simple fact that should such a proposal be applicable to all developing countries, the PRC becomes a principal beneficiary, and likely undermines the bargaining with the Chinese for agricultural market access. The accession of the PRC does in some ways complicate the scope for addressing developing country issues, while paradoxically lending weight to developing country pressure for more fulsome action. It is therefore of no surprise that the leading developed countries aim to focus initiatives on the least developed countries - a group that excludes the PRC by definition and other markets offering new export potential for advanced economies.

Some participants in Geneva believe negotiations will remain at an impasse until the end of 2002 or the even the beginning of 2003. Several events are likely to influence the timing and the development of the agricultural negotiations: the 2002 general elections in France, and the lapsing of the peace clause in 2003.,/p>

It was France that rallied opposition to the draft text in Seattle, and domestic resistance to liberalization has not waned. Indeed, it may be growing. The US Department of Agriculture in particular considers the lapsing of the peace clause as key to moving the negotiations forward.

Future negotiating sessions, to be held in September, and November of 2000, will be held either directly before or directly after the WTO Agriculture Committee's regular sessions.

The timetable for the first phase of the negotiations calls for WTO members to submit proposals by the end of December 2000. It is understood that this phase could extend into early 2001. Members are free to add to their proposals after December, with a view to reviewing all the proposals prior to a "stock-taking" meeting scheduled for March 2001.

It is possible that a meeting will be held at the end of January 2001 so that members can offer initial formal responses to the proposals that have been made.

WTO members in Seattle had penciled in a December 15, 2002, deadline for completing the agriculture talks. With negotiations now being conducted under the mandate of Article 20 of the Agriculture Agreement, there is no fixed a date for concluding the process.

Essentially, there are two options on the road ahead. The first is to seek a basis to initiate a round at the 4th Ministerial Conference. The EU and Japan remain committed to this approach, and it is unlikely that they will modify the position. Inasmuch as the US and other members were negotiating at Seattle to launch a round, there seems little basis to continue resisting the obvious.

The second approach is to continue pressing forward with the sector negotiations in the hope that the lapsing of the peace clause will bring the EU and Japan to the point of genuine bargaining. This approach is fraught with danger. The prospect of a series of dispute panels being established to address everything from US export credits to EU support for Eastern and Central European accessions could heighten tensions, and raise the political stakes to the point that room for maneuver actually narrows rather than broadens.

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