A guide to the WTO Framework Agreement.

A week or so ago, I “predicted”:http://www.inquit.com/article/290/wto-framework-looks-safe that the ‘framework’ agreement for the continuation of the WTO negotiations looked ‘safe’, despite the inevitable “manoeuvring”:http://www.inquit.com/article/294/manoeuvring-on-the-framework-text of WTO membergovernments to set the best possible spin on future directions, from their own perspective. My assessment was confirmed, although it was a minority view—to judge from the much more skeptical view of “the majority experts”:http://www.inquit.com/article/295/experts-gloomy-on-wto-agriculture-framework in Geneva and in Members’ captials. Good! In the following, I attempt a first evaluation of the Framework Agreement. The history of it’s development has been covered elsewhere– in earlier stories “here”:http://www.inquit.com/article/305/second-grosser-text and “here”:http://www.inquit.com/article/297/wto-framework-text-to-be-revised and diligently recorded on a daily basis by “Ben Muse”:http://www.acsalaska.net/~benmuse/blog/. My earlier “explanation”:http://www.inquit.com/article/286/a-guide-to-the-annex-on-agriculture of what was going on in the Annex on Agriculutre remains relevant, too, because the main elements of that proposal have not changed in the final agreement. h4. Why the Framework was ‘safe’ By far the most difficult component of the framework was the text on Agriculture; the same topic that would have been the most difficult hurdle to jump in Cancún, had the African/Caribbean group not first tripped-up on a tiny bump : the ‘Singapore’ issues[1]. Member governments found a solution this week in Geneva to the conundrums of negotiating modalities for agriculture that would probably have eluded them last September.  There were two key reasons:

*A compelling offer*
The EU’s decision to stop being _coy_ about its future farm support program and to acknowledge that it was prepared not only to _reduce_ but to _eliminate_ export subsidies by a certain date created a huge counterweight to hesitation. The threats (from France) that it might try to reverse the decision once the current Commission has stepped-down (next November) made it obvious to negotiators that they had to ‘lock-in’ the Commission offer as soon as possible

*The right ‘parents’*
There’s no advantage comparable to the advantages of birth. The proposed text on agriculture at Cancún—the infamous ‘”joint text”:http://www.inquit.com/article/185/eu–us-plan-will-keep-barriers-in-place’—was a *bastard child* of a hasty elopement by the EU Trade Commissioner and the US Trade Representative about a fortnight before the Ministerial Meeting. It was an ugly pastiche of devices intended to accomodate EU and US agricultural policies without putting too much pressure on either.

The Annexe on Agriculture to the Framework agreement, however, is a *more robust hybrid*. It reflects not only wide consultations by the Chairman of the negotiating group on Agriculutre, but the private consensus of the ‘Five Interested Parties’ (the *FIPS* are Australia, Brazil, EU, India, USA) on how to move forward on agriculture. Of course, in any co-operative venture like the WTO, the _exercise of influence_ by a small ‘inside’ group is likely to provoke disquiet among members who are ‘outsiders’ . But on this occasion, a _ménage_ comprising the most influential ‘stakeholders’ on the issue of agriculture ensured that, when the proposals finally saw the light of day, they had sufficient momentum to survive.

My own prediction that the framework was ‘safe’ followed information that, following their first discussion of the Chairman’s proposals, none of the FIPS members intended to dissent from it. *Bing*!

h4. Where are we headed on agriculture? Although the Framework agreement is more robust, its ambitions are not much greater than those evident at Cancún, apart from the elimination of export subsidies by progressive steps. This Framework is more credible than the proposed Cancún agreement on the modalities of reform because the proposals on domestic support and market access, especially, are simpler and more straight forward. It also provides for an extended monitoring and surveillance mechanism that may help minimize the circumvention and ‘inventive arithmetic’ that plagued the implementation of reforms in the Uruguay Round. But there is no overall ambition: the Framework does not tell us by how much the detailed agreements still to be reached will cut barriers to world agricultural markets or reduce trade-distorting payments such as those on Cotton.

Market access
Cutting barriers to imports is the key to reform of world trade in agriculture[2]; abusive export subsidies and excessive support for the local farm industry _cannot be sustained_ in the face of import competition. The Framework repeats the committment of WTO member countries at Doha to ‘substantial’ improvements in market access, but it’s still not clear what that means. All that the Framework does is lay down a way eventually to implicitly define ‘substantial’, but in doing so it’s _much_ more concerned with *maintaining protection* for certain highly protected markets than with creating new opportunities for healthy competition in world food trade.

In one of the _shabbier fictions_ of the Framework, the Market Access section _says_ that it is based on a ‘single approach’ but then immediately creates different approaches for *three different categories* of agricultural product : normal, ‘sensitive’, and ‘special’.
# tariff protection for *normal* products will be cut ‘substantially’ by a method that cuts highest tariffs by more than lower tariffs. This is the ‘harmonization’ approach I “described”:http://www.inquit.com/article/286/a-guide-to-the-annex-on-agriculture in the first version of the Frameork. The Framework doesn’t say how big the cuts will be nor what a high tariff is or what a low tariff is. It does not mention the possibilty of expanding any tariff quotas applied to ‘normal’ products, so the cuts to higher tariffs could well do no more than *take out the “water”* from some high tariffs, having no impact at all on import competition
# Members may designate a number (to be agreed) of *sensitive products* on which they will have to achieve ‘substantial’ but somehow _less_ substantial cuts in border barriers. They will do this by a combination of tariff cuts and expansion of tariff quotas; the Framework suggests that the smaller the tariff cut, the bigger the expansion of tariff quota
# So-called *special products* are a number (to be agreed) of product lines nominated by developing countries that will enjoy still greater ‘flexibilty’—that is, even less danger of facing additional import supply. Developing countries will also access a ‘Special Safeguard Mechanism’ that will allow them to temporarily reduce imports into any agricultural product market.
Domestic support
The general principle in reduction of trade-distorting domestic supports to farm production is that the *highest levels* of support for production in any country are *cut by more* than the lower levels of support: _harmonization_ again. The Framework does not say by how much these trade-distorting supports will be cut but puts most of it’s efforts into defining ways to prevent _circumvention_ of whatever cuts are eventually agreed including by reducing the _de minimis_ support programs that, at present, do not have to be counted when considering what support to cut.

The most hotly contested issues surround the *blue box*. These are supports that would fall into the ‘trade distorting’ (_amber box_) category except for the fact that they are being used to _put a lower ceiling_ on the level of trade distorting production under particular programs such as the EU’s livestock culling programs. As a result of changes to the way the ‘blue box’ is defined, the USA will be able to include its ‘counter-cyclical’ payments to farmers in the blue box although these payments—such as the provisions of the US Farm Bill (2002) on peanuts—don’t require any level of production at all, and therefore don’t impose an explicit production ceiling.

The size of the blue box will be capped at 5 percent of some historical total value of agricultural production (to be agreed). This is, of course, a _huge_ number of dollars in the USA, EU or even Japan.
Export Subsidies
All forms of trade distorting government support for exports of agriculture (subsidies, subsidized export credits, subsidies delivered through state-sponsored export trading companies, food aid that has a commercial aspect) *will be eliminated* in (possibly un-equal) annual steps by a “credible end date.” This latter phrase suggests that the end for all subsidies may be further off, for example, than the end of the implementation period for market access cuts.

[ … to be continued] h4. Is there any progress on NAMA or services? h4. ‘Development’ and ‘implementation’: the big issues at Doha fn1. It may seem provocative to say that the ‘Singapore issues’—competition, investment, transparency in government procurement and trade facilitation—were only a ‘bump’. But consider how quickly EU Trade Commissioner Lamy extracted agreement from his Ministerial bosses to pull most of them off the table in a last-minute attempt to keep the Cancún meeting on the rails. He would not have even considered trying to by-pass problems on agriculture. fn2. Opening up markets, as I argued “here”:http://www.inquit.com/article/206/access-is-the-key-to-trade-reform and in my recent “pamphlet”:http://www.inquit.com/article/283/market-access-matters for the Australian National Farmers’ Federation, grows global demand, creating a bigger ‘pie’ in which everyone’s share is more generous.

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