Progress in WTO agriculture negotiations

Just in time for the infor­mal Min­is­te­r­i­al meet­ing in Dalien, Chi­na, the G‑20 group includ­ing the biggest devel­op­ing coun­tries has pro­duced a pro­pos­al on the most con­tentious issue in the Doha round nego­ti­a­tions: improve­ments in mar­ket access for agri­cul­tur­al prod­ucts. It comes on top of a new Aus­tralian pro­pos­al that also shows move­ment towards a mid­dle-ground on the infa­mous ‘tiered’ tar­iff cuts. Nei­ther pro­pos­al has yet been wide­ly dis­trib­uted. I’ve cre­at­ed a .zip file that you can “down­load here”: with a copy of the G‑20 pro­pos­al and a paper that theAus­tralians cir­cu­lat­ed to the Cairns Group out­lin­ing the pro­pos­al they revealed in the 4–6 July Agri­cul­ture Nego­ti­at­ing group. The main com­po­nents of the G‑20 approach: # Five tar­iff bands for devel­oped coun­tries, four for devel­op­ing coun­tries
# A tar­iff ‘cap’ of 100% for devel­oped and 150% for devel­op­ing coun­tries
# Lin­ear tar­iff cuts in each band. A lin­ear cut is a sim­ple pro­por­tion­al reduc­tion to each tar­iff in the band: so, for exam­ple, the final rate will be 80% of the ini­tial rate if the lin­ear cut is 20% in that band.
# High­er thresh­olds for each band and small­er cuts for devel­op­ing coun­tries
# ‘A very lim­it­ed, stan­dard num­ber’ (inte­ger?) of tar­iff lines (but at what lev­el of the HS clas­si­fi­ca­tion?) may be des­ig­nat­ed as sen­si­tive prod­ucts. Num­ber may be dif­fer­ent in each mar­ket
# The spe­cial agri­cul­tur­al safe­guard (SSG) that was avail­able to devel­oped coun­tries to be elim­i­nat­ed but a new safe­guard mech­a­nism should be cre­at­ed for devel­op­ing coun­tries
# Non ad-val­orem tar­iffs should be bound at their ad-val­orem equiv­a­lents: this means no more obscure pro­tec­tion by use of spe­cif­ic duties (e.g. cents per kg). The main com­po­nent of the new Aus­tralian approach to mar­ket access cuts is a step away from the ‘Swiss-type’ har­mo­niz­ing for­mu­la that is still, for exam­ple, the offi­cial posi­tions of the Cairns Group and the USA (in dif­fer­ent forms). The Aus­tralians have float­ed an idea for han­dling the tiers that removes the empha­sis on the ‘thresholds’—where a small dif­fer­ence in a tar­iff across the thresh­old between ‘bands’ could see a big change in the rate of tar­iff cut. They have pro­posed using a for­mu­la that smoothes out the rate of cut as tar­iffs rise through the thresh­olds with the rate ris­ing only slight­ly across each thresh­old but increas­ing steadi­ly across the whole tar­iff band. Their paper for the Cairns group includes an illus­tra­tion and a for­mu­la for achiev­ing this. The Aus­tralian pro­pos­al, like the G‑20 pro­pos­al, is a form of lin­ear cut but the ‘line’ describes a more-or-less smooth slope, while the G‑20 has a series of five or six steps. The most dis­ap­point­ing aspect of the last round of dis­cus­sions in Geneva—and “appar­ent­ly still”:–00000e2511c8,i_rssPage=9d5b9ebe-c8bc-11d7-81c6-0820abe49a01.html in Dalien—is the refusal of the Euro­pean Com­mu­ni­ties to move away from an insis­tence on the dis­cred­it­ed ‘Uruguay Round’ approach to tar­iff cuts in each ‘band’. The Uruguay Round approach is an _average cut across all tar­iffs in the band with a stat­ed min­i­mum cut to each tar­iff. So, for exam­ple, if there were three tar­iffs in a band (there’ll be dozens, in real­i­ty) of 60%, 90%, and 110% and the aver­age cut tar­get for that band were 40%, then the aver­age (86.6% ini­tial­ly) would have to be cut to 51.9% (60 per­cent of the ini­tial aver­age). But this could be achieved by mak­ing actu­al cuts of 30, 0, and 74 per­cent­age points in the cur­rent tar­iffs. That is, the most “sen­si­tive” prod­uct with a cur­rent 90% rate of pro­tec­tion might not be cut at all. The safe­guard is the ‘min­i­mum cut’; each rate under the ‘Uruguay Round’ approach has to be cut by some min­i­mum amount. But in the Uruguay Round the over­all aver­age was 36% and the min­i­mum 15% for devel­oped economies. The result­ing tar­iff cuts were wide­ly crit­i­cized as minis­cule and dec­o­ra­tive rather than substantial.

At first glance

The G‑20 approach could be trade lib­er­al­iz­ing depend­ing on the selec­tion of thresh­olds and the size of the lin­ear cuts. The prob­lem is, as ever, that the­cur­rent tar­iff rates in the EC and Japan espe­cial­ly (but also in the USA) are so high for some prod­ucts that the rate of any lin­ear cut would have to be set at scary lev­els in order to bring the pro­tec­tion down to lev­els where imports could occa­sion­al­ly com­pete. The con­ver­sion of spe­cif­ic duties to ad-val­orem equiv­a­lents has illus­trat­ed how high the lev­els of pro­tec­tion real­ly are. For exam­ple, in the dairy sec­tor we find spe­cif­ic rates for cer­tain prod­uct cat­e­gories trans­late into astro­nom­i­cal lev­els of pro­tec­tion: |Econ­o­my|Prod­uct|AVE^#^ (%)|
|EC|Fresh cheese|100|
|Japan|Dairy spreads|550|
|Japan|Whey powder|660| ^#^ _Ad-val­orem Equivalent_ To bring these tar­iffs down to even mod­er­ate lev­els the lin­ear cuts will have to be of the order of 90 per­cent. The G‑20 pro­pose a ‘tar­iff cap’ of 100% for devel­oped coun­tries, but this will still leave mar­kets for these hum­ble pow­ders, yogurts and but­ters as tight­ly guard­ed as the Mona Lisa. One of the most valu­able sug­ges­tions in the G‑20 paper is that the ad-val­orem equiv­a­lent duties should be bound in their ad-val­orem for­mat. That is, not re-con­vert­ed to spe­cif­ic rates after the appli­ca­tion of the tar­iff for­mu­las. This would remove the absurd trick­ery that the spe­cif­ic rates imple­ment. They allow even bound duties to vary inverse­ly as prices change on world mar­kets. But the bet­ting among nego­tia­tors in Gene­va is that to many pow­er­ful forces are addict­ed to this dirty game that the spe­cif­ic duties will sur­vive, albeit at low­er lev­els. The .zip file men­tioned above also includes the lat­est G‑20 paper on export sub­si­dies. More on this later …

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