Doha Negotiations current state of play

1
Doha Negotiations current state of play

• Lecture 22
• Economics of Food Markets
• Alan Matthews

2
Reading

• Hong Kong Declaration Annex A
• Agricultural chair Falkoners subsequent
  reference papers and draft modalities
• Gifford paper for IPC

3
Lecture objective

• To outline the most recent negotiating offers
  following the July 2004 Framework Agreement
• To assess the outcome of the Hong Kong
  Ministerial meeting for December.
• To identify the key issues as negotiations resume
  in February 2007

4
Market access what needs to be decided?

• The tiers (how many? Which thresholds?)
• G20 proposal at Dalien accepted as basis for
  discussion
• The tariff reduction formula within each tier
• Linear cut, progressive linear cut, Swiss
  formula, Uruguay Round approach (allows for
  flexibility)
• Sensitive products
• How many, and what treatment?
• Crucial the overall level of ambition

5
The AVE (ad valorem equivalent) issue

• Specific and mixed tariffs have to converted into
  AVEs to know into which tier they fall
• AVE conversion is straightforward for some tariff
  lines Members use the 'unit value' method in
  these cases, basing the conversion on notified
  import values in the WTO Integrated Database
  (IDB) and import volumes.
• Complications arise where preferences or tariff
  quotas are involved. In such cases, import prices
  often differ significantly from the world prices
  compiled in the UN commodity trade statistics
  (ComTrade) database.
• Agricultural exporters would like to see the
  conversion based on the lower world prices, which
  would lead to higher AVEs, and eventually,
  steeper tariff cuts.

6
The AVE (ad valorem equivalent) issue

• Members agreed on the use of a "filter" that
  would compare IDB prices with global prices in
  the United Nations' Comtrade database. In cases
  where the differences between the IDB and
  Comtrade figure for a given product is less than
  40 percent, the IDB figure will be used. For
  products where the difference is greater than 40
  percent, AVE calculations will be made using both
  the IDB and Comtrade figures if the calculations
  result in AVE tariffs where the difference is
  less than 20 percent, the IDB calculation will be
  accepted.
• The problem concerns products where the price
  differences are so great that they "pass through"
  the filter. Initial agreement to split the
  difference between the IDB and Comtrade prices
  for these goods based on a weighted average of
  75/25, with the higher weight given to the
  Comtrade data. The deal reflected a compromise
  between the EU's original insistence on an even
  50/50 weighting and the Cairns Group's insistence
  on and 80/20 weighting favoring the Comtrade
  data.
• Special provisions made for a small number of
  products such as bovine and sheep meats, sugar,
  and processed products such as cocoa powder,
  wines and spirits, and certain cheeses. For the
  processed goods, the weighting would be fixed at
  an even 50/50, while for meats the weighting
  would be fixed 90/10 in favor of the Comtrade
  data. Import prices for sugar would be fixed
  entirely in reference to international prices in
  the London and New York markets.

7
The Dalien offers

• Around July 2005

8
G-20 market access proposalJuly 2005
9
US market access proposalJuly 2005
10
EU market access proposalJuly 2005
11
Zurich 10 Oct 2005 proposals

• US, EU and the G20 all made proposals
• The US proposal was for two stage process
• Initial stage of significant reductions in
  tariffs and trade-distorting domestic support,
  and elimination of export subsidies, over five
  years
• Five year reductions pause to review effects
• Further 5 years to eliminate remaining tariffs
  and trade-distorting support

12
US market access proposal

• The US filled out the extent of the cuts it
  proposed for the four identical bands for
  developing and developed countries -- below 20
  percent, 20-40 percent, 40-60 percent, and above
  60 percent.
• It would have tariff cuts rise progressively
  through each band, with developed countries
  making reductions of 55-65, 65-75, 75-85, and
  85-90 percent respectively within the four bands.
  
• The US did not specify the depth of tariff cuts
  it would seek from developing countries, but said
  that they would only be "slightly" lower than
  those undertaken by developed countries.
• It also suggested capping developed country
  tariffs at 75 percent and limiting the number of
  'sensitive products' that Members can designate
  for relatively low tariff reductions to one
  percent of dutiable tariff lines.

13
US market access proposal Oct 2005
14
G20 market access proposal

• Average minimum tariff reduction of 54 percent in
  developed countries and an average maximum tariff
  cut of 36 percent in developing countries.
• To accomplish this, the G-20 proposes
  establishing different sets of tiers for
  developing and developed countries, coupled with
  higher tariff cuts for the latter.
• The G-20 proposal says that the different
  thresholds and tariff reductions are necessary to
  ensure that developing countries do not end up
  with a disproportionate burden of commitments.

15
G-20 market access proposal Oct 2005
16
EU market access proposal

• Now proposed four tariff bands. Cut tariffs on
  products in the lowest band by 20 percent, rising
  to 50 percent for tariffs above 90 percent (60
  if there is flexibility).
• Linear cuts (giving up UR approach). Some limited
  flexibility around a linear cut in some bands
  (pivoting).
• Signalled that it was willing to lower its number
  of sensitive products from ten to eight percent
  of tariff lines, but the 160 products that this
  would cover remained far higher than the one
  percent figure put forward by the US.
• Accepted the G-20's proposed farm tariff caps of
  100 percent for developed countries and 150
  percent for developing ones.

17
EU market access proposal 10 Oct 2005
18
EU market access proposal 28 Oct 2005
19
EU market access offer28 Oct 2005

• Mandelson claims EU offer will lead to 46
  reduction in its average agricultural tariff
  (cutting from average 23.0 to 12.0), US claims
  39
• Offer is subject to conditionalities
• NAMA Swiss formula with ceiling of 10 for
  developed countries(15 for developing)
• Services complementing the request/offer
  approach with ambitious individual, mandatory
  numerical targets
• Progress on the development agenda package of
  agreement-specific proposals, Trade Related
  Assistance package, duty-free and quota-free
  access for LDCs

20
EU proposal treatment of sensitive products

• Sensitive products should result in substantial
  market access that is still lower than would be
  implied by full tariff cut through TRQ increases
• Increase in TRQ is
• Tariff cut deviation
• market access coefficient
• /(1 AVE)

• Example I
• AVE tariff 25
• Normal tariff cut 35
• Applied cut for sensitive product 15
• Tariff cut deviation 20
• Market access coefficient 0.8
• TRQ increase
• 12.8

21
EU proposal treatment of sensitive products

• Example II
• AVE tariff 100
• Normal tariff cut 60
• Applied cut for sensitive product 35
• Tariff cut deviation 75
• Market access coefficient 0.8
• TRQ increase
• 30.0

• Minimum deviation of one-third and maximum
  deviation of two-thirds of the tariff cut in the
  band within which the line falls
• TRQ increase expressed as a percentage of current
  imports of the tariff line in question
• Special Safeguard Clause kept for beef, poultry,
  butter, fruits and vegetables, sugar

22
Market access proposals - summary

• EU proposal is less ambitious (60 cut on tariffs
  over 90) than either G-20 or US proposal, both
  of which have higher percentage reductions kick
  in earlier because the tiers are set at lower
  levels.
• The G-20 would have developed countries impose a
  75 percent cut on tariffs above 75 percent.
• The US, for its part, prefers an even deeper cut
  of about 90 percent for tariffs above 60 percent.
  
• EU proposal to shelter 8 of products as
  sensitive products with minimum 33 cut of
  required tariff band contrasts with G-20 and US
  proposal for 1 sensitive products and minimum
  70 cut of required tariff band.
• US and G-20 also object to the pivot proposal
  now confined to one band

23
Domestic support proposals

• EU-US Joint proposal August 2003
• Substantial reductions in Amber Box
• Reduction in de minimis support
• Blue Box support capped at 5 of total value of
  agricultural production
• No capping or reduction of Green Box support

24
Framework Agreement July 2004 Domestic support
proposals

• Strong element of harmonisation higher levels of
  trade-distorting support will be subject to
  deeper cuts
• Substantial reduction in Overall Distorting
  Support from bound levels ( AMS Blue Box de
  minimis) according to a tiered formula
• 20 cut (downpayment) in bound ODS level in first
  year
• Bound AMS to be reduced substantially using
  tiered approach
• Product-specific AMS will be capped at their
  respective levels and there will be reductions in
  some product-specific support
• De minimis to be reduced
• Blue Box criteria expanded to allow payments
  linked to price but not to production (US counter
  cyclical payments) but capped at 5 of total
  value of production
• Green Box criteria to be reviewed and clarified,
  ensuring its basic effectiveness is maintained
  and that non-trade concerns are taken into account

25
EU domestic support offerZurich 10 October 2005

• 70 reduction in AMS
• Acceptance that EU will be in the top tier of AMS
  cuts with smaller cuts for other countries (note
  that tiers are determined by absolute
  expenditures, not percentage importance)
• 65 and possible more reduction in de minimis
• Willingness to cap Blue Box at less than 5
• Commitment to negotiate on product-specific caps

26
EU domestic support offer28 October 2005

• Proposes three tiers with cuts of 70, 60 and
  50. Accepts EU will be in top tier and US in
  second tier, provided it makes sufficient efforts
  in other aspects
• Proposes three tiers for ODS with cuts of 70,
  60 and 50 with EU in the top tier
• De minimis support reduced by 80
• Blue Box commitment as before (5 cap) but need
  to develop tighter disciplines on the new
  price-related supports
• Only clarification of Green Box criteria accepted

27
G20 domestic support proposal

• Three tiers for both ODS and AMS cut by 80, 70
  and 60 respectively.

28
US domestic support proposal

• Three tiers for AMS, with cuts of 83, 60 and
  37 (justified as reducing the dispartiy in
  allowed AMS between the US and the EU from 41 to
  21)
• Blue Box cap at 2.5
• De minimis cut by 50
• Agree to product-specific AMS caps
• Three ODS tiers to be cut by 75, 53 and 31
  respectively.

29
Framework Agreement export competition

• Export subsidies to be eliminated
• Export credits longer than 180 days eliminated
  and specific disciplines on short term credits
• Trade distorting practices of export STEs
  including government financing eliminated. Future
  use of monopoly power to be subject to
  negotiation.
• Food aid to be disciplined. Providing food aid
  only in grant form to be addressed.

30
EU export competition offer28 October 2005

• Reiterates commitment to phase out export
  subsidies, by an end date to be agreed
• Calls for short-term export credits to be
  disciplined by preventing government financing
• Eliminate export STE privileges including
  monopoly powers, single desk selling, price
  pooling etc.
• Food aid to be given only as cash and not
  in-kind.

31
US export competition proposal

• Export subsidies to be eliminated by 2010 with
  accelerated elmination for specific products
• Elimination of monopoly rights and financial
  privileges for export STEs
• Accepts tighter disciplines on non-emergency food
  aid, but rejects cash only
• Bring export credit programmes in line with
  commercial terms
• End differential export taxes

32
Non-trade concerns (raised by EU)

• Food safety, and Article 5(7) of the SPS
  Agreement on precautionary principle
• Mandatory labelling (presumably with respect to
  GMOs and animal welfare) and Geographical
  Indications
• Food security for developing countries
  (Development Box)
• Protecting the environment (but no specific
  demands multifunctionality yesterdays game)
• Rural development but no specific demands
• Animal welfare specific demand for inclusion of
  support payments in the Green Box

33
Prospects post-Hong Kong December 2005

• US commitment to successful outcome doubtful
  despite Bush rhetoric
• Farm lobby and Congress deeply suspicious (e.g.
  CAFTA vote)
• Trade Promotion Authority runs out mid 2007
• Developing countries (G20) may feel no deal is
  better than a bad deal
• Concerns of weakest developing countries must be
  addressed (e.g. cotton)
• EU the champion of a Development Round
• But agriculture ministers (i.e. France) keeping
  tight rein on the negotiators

34
Prospects post-Hong Kong December 2005

• Failure of Doha
• URAA lives on, without the protection of the
  Peace Clause
• Regional integration agreements
• e.g. Mercosur
• Litigation rather than negotiation?
• US upland cotton
• EU sugar
• EU bananas
• GMOs?

35
Prospects post-Hong Kong December 2005

• Doha successfully concluded 2006
• Implementation into early 2010s, when export
  subsidies finally eliminated
• Further CAP reform before end of the decade?

36
Update after Hong Kong

• Progress in the Ministerial Declaration
• End date for export subsidies (with parallel
  disciplines to be agreed by 30 April 06)
• Some clarity on the modalities for domestic
  support reductions
• Minimal progress on market access
• Duty free and quota free access for least
  developed countries
• Compromise on the cotton initiative
• Aid for trade package