Diplomats in Geneva are attempting to come up with a common position on the most difficult—but most important—issue in reform of agricultural trade policies: improving access to highly protected agricultural markets. Unfortunately, they are concocting a terrible mess of ‘optional’ and’banded’ tariff cuts that is so filled with incomprehensible options that it is moving away from the basic rationale of multilateral trade liberalization. The texts making their way around the room are almost indecipherable: collections of square-bracketted ‘cascades’ of cuts to different bands of tariffs. ‘Bands’ are defined by the ad-valorem percentage incidence of the duty. The cuts are defined as # a series of Swiss formula cuts or
# (alternatively) a combination of Swiss formula + ‘straight’ linear cut + an expansion of the tariff-quota ‘window’ for entry of goods at a minimal in-quota tariff rate, or
# (optionally for a ‘limited number of sensitive tariff lines’)no cut in the bound tariff but a larger tariff-quota expansion than in (2) This ‘flexibility’ in the application of tariff cutting formulae may apply either to the tariff as a whole or to different ‘bands’ of tariffs in different ways. Furthermore, developing countries will have different (lower) co-efficients of cut both in the ‘straight’ cut and in the Swiss formula cuts. The also have additional ‘flexibility’ in the use of ‘special product’ categories that may be exempted from market access cuts altogether, plus a ‘special safeguard mechanism’ that will, presumably, amount to the same thing on an ‘as needed’ basis. This scholastic crafting of ‘flexibility’ is a neurosis. The GATT and WTO rounds of trade liberalization serve an important political need, not an economic one. A framework of simultaneous, reciprocal, predictable cuts in import barriers by all Member economies enables governments to cooperate to reduce protection in the face of domestic interests that oppose opening markets to import competition. Unless there is a clear sense of balanced “give and take” in the exchanges on market access, the WTO negotiations lose their attraction. That is precisely what is happening, now, in Geneva. The ‘banded’ formula proposals are far too complex to allow any Member to readily assess their impact on the tariffs of its trading partners. They therefore don’t provide the sort of prima facie reciprocal framework that is the only reason for engaging in multilateral trade liberalization—as opposed to cutting your own tariffs in your own time and at your own pace as domestic circumstances demand, or allow. Of course, the negotiators’ political masters, the Trade Ministers, should have taken the helm by now and put an end to this tailoring of finer and finer options for ‘flexibility’. But, as was evident at Cancún, they have not the stomach to do so. The best current guide to the debate is probably the “briefing”:http://c.moreover.com/click/here.pl?r169217851 from ITCSD. They have also produced an excellent background guide to the bewildering differences between different groups in the negotiations; available “here”:http://www.agtradepolicy.org/output/resource/agriculturenegotiations11.pdf in PDF format. fn1. A ‘Swiss’ formula—not a Swiss proposal in this negotiation—is the application to each ad-valorem tariff of a proportional cut in which the proportion is greater the higher the initial tariff rate. This means high tariffs are cut by more than low tariffs.
Peter Gallagher is student of piano and photography. He was formerly a senior trade official of the Australian government. For some years after leaving government, he consulted to international organizations, governments and business groups on trade and public policy.
He teaches graduate classes at the University of Adelaide on trade research methods and the role of firms in trade and growth and tweets trade (and other) stuff from @pwgallagher