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TWN Info Service on WTO and Trade Issues (Jul 05/11)
26 July 2005
Third World Network
www.twnside.org

WTO AGRICULTURE TALKS IN THE "FIPS-PLUS" PROCESS

Much of the negotiations going on in the past week at the WTO has been on agriculture. However most of the WTO members have been in the dark on what is happening as the discussion has been on an exlusive basis, among about 12 to 14 WTO members, in what is known as an "extended FIPS" group.

Below is a report on the agriculture process and on the positions on some issues of some of the countries involved in it.

with best wishes
Martin Khor
TWN

WTO agriculture talks centre on "FIPS-plus" process

By Goh Chien Yen, Geneva, 25 July 2005

Negotiations on agriculture in the World Trade Organisation have been taking place in a small group involving 14 WTO member countries (known as the extended FIPs, five interested parties) since last Thursday night to explore possible convergence on several disputed issues in advance of the General Council meeting on 27 and 29 July.

The meeting has been dubbed an "extended FIPS" or "FIPS-plus" process, referring to extra members being added to the core group of "five interested parties" (the United States, European Union, India, Brazil and Australia) that have been meeting regularly on agriculture issues.

The other members involved in the meeting, chaired by Tim Groser, chair of the Special Session of the Committee on Agriculture, and which is taking place outside the WTO, are Argentina, Korea, Japan, China, Benin, Malaysia, Switzerland, Indonesia and Canada.

Most other WTO members that are not invited to the meeting were mainly in the dark as to the discussions.

According to trade diplomats, the "extended FIPS group" held discussions on market access, domestic support and sensitive products on Thursday and Friday, on food aid and state trading enterprises on Saturday and on domestic support Monday.

On Friday afternoon, Brazilian Ambassador Luis Felipe Sexias Correa told journalists at the WTO that "at this point the [agriculture] negotiations are too difficult and there is no movement."

From his viewpoint, the developed countries had not shown signs yet of moving. He said that at the mini-Ministerial at Dalian, the EC said that they would put in a written proposal on market access, but it had not yet done so. The US had not signaled its intention to move in domestic support, especially on the new blue box. And the G10 grouping of countries was articulating well known positions and not moving at all, he added.

According to another trade diplomat who attended the FIP-plus meeting, the US had indicated that the domestic support discussions had already been exhausted and nothing more could be developed at this stage unless there is movement on market access.

Earlier, Groser, in a meeting with G33 members on 20 July, had mentioned that the two outstanding problems in the negotiations presently were whether the EC would be able to compromise on the formula for reducing tariffs, and whether the US would move on the issue of blue box domestic subsidies.

According to a diplomat, Groser indicated that the US was seeking a linkage between EU willingness to move on the market access formula and its own willingness to move on reducing overall domestic support (which also affects the blue box support).

The US would like one more band in the tiered formula proposed by the G20 for making reductions in domestic support, so that it can take advantage of a lower band with a lower rate of reduction, according to the diplomat.

During the FIP-plus discussion on market access at the end of last week, the US suggested a mixed formula for making tariff reductions, according to diplomats. In this mixed formula, tariff lines which fall into the higher band(s) would be reduced using a Swiss formula, those lines in the middle band(s) would be cut be using a linear formula, and those lines which are in the lower band(s) would be subjected to a Uruguay Round approach. Under an Uruguay Round approach these tariff lines would be subjected to an average target level of reduction with minimum cuts per tariff line.

On the tiered formula for making tariff reductions, the US proposed four bands for both developed and developing countries with the following thresholds: 0-20%, 21-40%, 40-60%, and tariff lines above 60% in the fourth band.

According to a trade diplomat, the US also suggested two other possible options: to use the G20 proposal of a linear formula cut in each band with further adjustments to ensure deeper cuts; and to apply the concept of progessivity in each band.

At the meeting, the EC reportedly agreed with the G20 proposal of having linear cuts in each band. However, it wanted further flexibilities as well. On the point of additional flexibilities, Australia and the US disagreed with the EU arguing that members already have recourse to sensitive products.

The EC also proposed three bands in the tiered formula for making tariff reductions with differing thresholds for developed and developing countries. For the developed countries, the thresholds for the three bands are: 0-20%, 20-100% and above 100%. For developing countries, the EC proposed the following thresholds: 0-30%, 30-150% and lines above 150%. In addition, the EC said that developing countries would be making two-thirds of the cut that would be required for developed country members.

[The G20 had earlier, at the Dalian Mini-Ministerial, presented its proposed tariff-reduction formula. This involves the following elements. Firstly, developed countries' tariffs are to be categorized in 5 thresholds (0-20%; 21-40%; 40-60%, 61-80%; and above 80%). There would be 4 thresholds for developing countries: 0-30%; 31-80%. 81 to 130% and above 130%.

Secondly, there would be linear cuts for lines in each threshold, with the rate of reduction being steeper, the higher the threshold. Thirdly, the rates of reduction for developing countries would be lower than those for developed countries.

Finally, the G20 proposed that developed countries would cap their tariffs at 100% and developing countries at 150%.]

Members of the G10 present at the FIPS-plus meeting supported the EC proposal. However, they rejected the G20 proposal on tariff capping.

The G20 members present at the FIPs plus meeting said that they wanted to see the EC proposal in writing.

On the issue of sensitive products which was discussed in the FIP plus meeting on 22 July, the G10 submitted drafting language for a "first approximation" that could be adopted by members during the General Council meeting.

On the selection of sensitive products, the G10 proposed the following text: "Each Member may designate an appropriate percentage number [n], to be negotiated, of tariff lines to be treated as sensitive. This number will vary according to its tariff structure including existing commitments for these products."

On the treatment of sensitive products, the G10 proposed the following: "Sensitive products shall be taken out of the tariff reduction formula for other products. The magnitude of market access improvement for sensitive products will be less than that for other products.

"Market access improvement for these products will be achieved through a standard combination, to be negotiated, of tariff cut and TRQ commitments for each product. Deviations from the standard combination will be possible along a sliding scale system, to be negotiated."

The G10 also proposed during the meeting that "sensitive products shall be taken out of the tariff reduction formula for other products and put into a separate box, regardless of their tariff levels." This was supported by the EC.

However, the US and Canada wanted to see linkages between tariff reduction for sensitive products with the main formula for making tariff cuts for other products.

A smaller group of countries continued to meet on 23 July to discuss the issues of food aid and state trading enterprises. Today, the extended FIPS group was to extend its discussion on domestic support, and possibly market access.

An informal meeting of heads of delegation is scheduled for 26 July, during which Groser is to report to members on the outcomes of the consultations..