INTERNATIONAL: Doha round hangs on farm talks

Analysis

Agriculture remains the most important and most contentious issue in the Doha trade round (see INTERNATIONAL: Zoellick letter brightens trade outlook - January 29, 2004). Weeklong negotiations on agriculture re-commence on March 22 in Geneva, starting from a text drawn up by Luis Ernesto Derbez, chairman of the Cancun meeting. This is a revised version of proposals that largely reflected a pre-Cancun agreement between the EU and the United States. The text also takes some account of counter-proposals to the EU-US understanding by the G20 group of developing countries led by Brazil and India (see INTERNATIONAL: WTO benefits from 'G22' emergence - October 6, 2003).

Proposals. Earlier proposals and the Derbez text all focus on the three kinds of policy measures that most affect trade in agricultural goods, along with the general issue of special treatment for developing countries:

1. Market access. The 2001 Ministerial Declaration that launched the Doha Round requires "substantial improvements" in market access. The last major multilateral negotiations, the Uruguay Round of 1986-94, replaced most non-tariff barriers to agricultural trade by (generally very high) import duties. Key issues now are:

   • whether to focus on a broadly uniform lowering of duties or instead on sharply cutting the very highest duties;
   • the extent to which developing countries should match cuts by developed countries; and
   • possible exceptions to the cuts.

   Derbez proposes a 'blended' approach that would allow different kinds of cuts to be applied to different product groups: the price of keeping high tariffs on imports of some products would be more drastic cuts in protection for others. For a few key products, developing countries could offer only minimal tariff cuts.

   Participants on the defensive in the negotiations (Europe, Japan, South Korea, developing-country associates of the EU, and other developing countries such as India concerned to protect large rural populations) prefer flat percentage tariff cuts, which would leave intact high protection for sensitive products. They dislike proposals that would set maximum tariffs and require proportionately greater cuts in high tariffs. Developing countries also believe the blended approach requires them to cut tariffs more than developed countries.

2. Export subsidies. The Doha Declaration calls for "reductions of, with a view to phasing out, all forms of export subsidies". The EU is the major user of direct subsidies; Washington is accused of subsidising through export credits and aid. US Trade Representative Robert Zoellick and others believe the negotiations will succeed only if a firm date is set for complete phase-out.

   The EU is so far offering only to phase out subsidies on some products of interest to developing countries. The United States now accepts that it would have to make commitments on export credits. Many countries otherwise on the defensive in the negotiations do not subsidise exports, and are little concerned by the issue.

3. Domestic support. The Doha Declaration promises "substantial reductions in trade-distorting domestic support". WTO rules classify agricultural subsidies as one of three types:

   • 'Amber Box' are clearly trade-distorting and subject to reduction.
   • 'Blue Box' are those linked to production-limiting programmes.
   • 'Green Box' are non-trade-distorting, such as payments for research and extension services.

   Derbez proposes percentage cuts in total Amber Box support (and no increase in support for individual products); limits on, and better definition of, Blue Box support; and a review of Green Box exemptions.

   Unsurprisingly, negotiating positions reflect countries' present subsidy practices. European countries, Japan and South Korea will try to keep Amber Box cuts to the minimum; the EU will also defend the Blue Box exemptions. Caps on subsidies for particular products such as sugar and dairy products will be resisted when beneficiary producers have political clout. Expanded coverage of the Green Box to cover subsidies for such purposes as protection of the landscape would suit those advocating 'non-trade concerns'. Some developing countries want a new 'Development Box' that would allow them to use subsidies denied to developed countries.

4. Special treatment. Developing countries are to receive "special and differential" treatment. What this means in practice remains controversial. Previous negotiations have applied broadly the same rules to all participants, except that developing-country commitments have been lower, and have taken effect over longer periods (see INTERNATIONAL: Doha in doubt over concessions issue - December 6, 2002). (Least-developed countries have been exempt from commitments.) The Derbez text follows this approach, but it is resisted by some developing countries, with vocal support from non-governmental organisations arguing for 'food sovereignty'.

   The G20, which includes both major agricultural exporters and countries interested mainly in maintaining protection for their farmers, has reconciled members' interests by proposing liberalisation only by developed countries. This position is not sustainable. Zoellick has warned that attempts to meet special problems of poorer and less-developed countries will be "stymied" if every such provision automatically applies to all developing countries.

5. Cotton demands. Demand by four African countries for an end to subsidies for developed-country cotton producers were a factor in the Cancun breakdown. The issue, which essentially concerns US domestic subsidies, may well be rolled into the agricultural negotiations. Informal talks between African trade ministers, and United States and EU delegations ended yesterday in Kenya. The meeting appears to have failed to lead to the emergence of any substantive proposals.

Prospects. The immediate aim for the negotiations is, as at Cancun, to arrive at a "framework" agreement that sets broad parameters for the final package agreement on agriculture, leaving details such as the percentage reductions to be made in tariffs and subsidies for later bargaining. Even this modest aim will be hard to achieve, given prevailing differences and EU and US preoccupations in the coming months. Any agreement will require compromises that fall well short of the declared aims of the major agricultural exporters and the G20. Agreement to set a date for phase-out of export subsidies would in itself be a major achievement.