CCP 05/CRS.2

Table of Contents

I. DEVELOPMENTS IN THE WTO NEGOTIATIONS ON AGRICULTURE

II. FAO SUPPORT TO THE NEGOTIATIONS

ANNEX - Regional clarification workshops on WTO negotiating issues

I. DEVELOPMENTS IN THE WTO NEGOTIATIONS ON AGRICULTURE

1. The timetable as agreed in the WTO Doha Ministerial Declaration of November 2001 which launched the current Doha Round of multilateral trade negotiations (MTNs) provided that the modalities for the commitments of WTO Members in agriculture aimed at “substantial improvements in market access; reductions of, with a view of phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support” would be established no later than 31 March 2003, that members would submit comprehensive draft commitments based on these modalities by the Fifth Session of the Ministerial Conference, and that the Round would be concluded by 1 January 2005. However, as the negotiations on the “modalities” have remained protracted, and at times deadlocked, all of these deadlines have been missed.

2. Because of the difficulties in achieving agreement on the modalities, attention was shifted in mid-2003 to negotiating an outline or “framework” to be used to complete the modalities. Several framework proposals were submitted before and during the Fifth WTO Ministerial Conference which took place 10-14 September 2003 in Cancun, Mexico. However, that conference ended in deadlock. Work was resumed in early 2004 and on August 1^st a “framework” agreement was finally reached in Geneva¹. The next stage is to agree on the full “modalities”, which will in turn be used to work out the final agreement on revised rules, and individual countries’ commitments including the extent to which tariffs would be cut and subsidies reduced or eliminated, and over what implementation period. Meanwhile, the final deadline for completing the negotiations, 1 January 2005, was officially postponed on 1 August 2004, without a new date set.

3. The 1 August 2004 framework agreement represents a significant milestone in the negotiations on agriculture. The framework has settled some political issues and on others has given broad political direction to the negotiations. For example, it says clearly that all forms of export subsidies (including those relating to government-supported export credits, food aid and activities of state trading enterprises which have similar effects) will be eliminated by a “credible” date. On market access, it spells out clearly the key principles of the approach for cutting tariffs (e.g. a single approach will be applied to all countries based on a tiered and progressive formula so that tariffs in higher tiers have steeper cuts), including exceptional treatment for “sensitive” and “special” products, and affirms that a new contingency measure for developing countries (a Special Safeguard Mechanism – SSM) will be established (to deal with import surges and import price falls).

4. On domestic support, the framework outlines in detail the approach for reducing trade-distorting supports: there will be cuts from “bound” levels (i.e. each country’s ceiling of permitted support level) in both the overall level of support (Amber Box, de minimis and Blue Box combined) and in two of the sub-components - Amber Box and de minimis support. Blue Box support, currently unlimited (but tied to production-limiting programmes), will be expanded to include payments not tied to production (e.g. payments to offset fluctuations in farm prices) and capped at no more than 5 percent of the value of a country’s agricultural production over a period to be agreed upon. The overall level of support and Amber Box support will be cut using a tiered formula, so that higher supports have deeper cuts. There will be a 20 percent cut (“down payment”) in overall support in the first year and caps on Amber Box product-specific support. Also, the criteria for classifying certain domestic supports as falling in the Green Box (i.e. as having no or minimal trade-distorting effects) will be reviewed and clarified.

5. Other issues dealt with in the Framework include: special and diferential treatment for developing countries (which is not dealt with as a separate item but is taken into account in each of the three “pillars” - export subsidies and competition, market access, and domestic support); least-developed countries (they will not be required to make reduction commitments, and developed countries as well as developing countries “in a position to do so” should provide duty-free and quota-free market access for LDCs’ exports); the “cotton initiative” (cotton will be reflected in work on all pillars — members agree to achieve ambitious and quick results as well as to set up a sub-committee to work specifically on this topic); least-developed and net food-importing developing countries (NFIDCs) - the framework says the final agreement on export credit, credit guarantees, and insurance programmes will make appropriate provision for these countries; long-standing preferences (the issue of preference erosion will be addressed); and non-trade concerns (the framework’s introduction confirms that these will be taken into account). Some “issues of interest but not agreed” (i.e. sectoral initiatives, differential export taxes and geographical indications) are noted in the Framework. No mention is made of the “peace” clause (art. 13 of the AoA) in the August 2004 Framework text.

6. The “post-framework” phase of the negotiations is now focused on elaborating the technical details related to establishing the operational basis for numerical formulas and commitments and for designing disciplines within the guidelines of the Framework agreement. The objective of the Chair of the agriculture negotiations is to achieve agreement on “first approximations” to the modalities by the end of July 2005 so that members can move to the next set of political decisions that will need to be taken (perhaps at the 6th WTO Ministerial Conference in Hong Kong in December 2005) on the numerical targets, formulas and disciplines to be contained in the “full modalities”.

7. Work is being carried out through week-long meetings scheduled almost every month in Geneva. The recent negotiating session (14-18 March 2005 “agriculture week”) marked the completion of the first assessment of all issues contained in the August Framework text. While progress has been made on many issues, areas of difficulty have also emerged which could slow down the process.

8. On market access, difficulties have arisen over the methodology to use for converting specific duties to ad valorem equivalents. At issue is what price data to use (e.g. individual country import unit values or world unit values) in the conversion formula - (country import unit values which are generally higher than world unit values would imply lower ad valorem equivalents). Failure to agree on a methodology would hold up work on the tiered formula for reducing tariffs, agreed to in the Framework, as it would not be possible to place specific tariffs into the different tiers to be defined. A related issue of disagreement is whether members will be allowed to revert to specific duties after the application of the reduction formula.

9. Work on export subsidies and competition has generally progressed well. However, differences have emerged over how the elimination of export subsidies (and in parallel, subsidized export credit) would be implemented. Some members call for some form of “front loading” (i.e. deeper cuts in earlier years, or at least a large “down payment” cut in the first year), while others favour equal annual reductions. Still others call for separate reduction schedules for key products in order to avoid subsidies being shifted between products. In the area of domestic support, the main contentious issues relate to the method for setting caps on Amber Box supports for specific products; “additional” criteria for the Blue Box (e.g. the possibility of further disciplines) to ensure that such payments are less trade-distorting than AMS measures; and review and clarification of Green Box domestic supports (e.g. the possibility of further disciplines) so that they have minimal or no trade-distorting effects. How quickly progress can be made on all these issues remain to be seen. Meanwhile, a series of “mini-ministerial” meetings involving various groups and combination of WTO members is taking place, outside the formal WTO context, to give political impetus to this phase of technical work and negotiations.

II. FAO SUPPORT TO THE NEGOTIATIONS

10. FAO support to member countries for the multilateral trade negotiations is provided through the Umbrella II Trade Capacity Building Programme which is implemented by all FAO departments and field offices under the leadership of the Economic and Social Department ². The general objective of this Programme and other FAO activities is to support Members, particularly developing countries and countries in transition, for their effective participation in multilateral trade negotiations on agricultural, fishery and forestry products, as well as their integration into global trade for such products, with special focus on linkages between agriculture, economic development and poverty reduction and food security. FAO delivers assistance through the provision of analyses and technical information on issues related to the negotiations (e.g. through the dissemination of trade policy technical notes and briefs, other publications, and through the FAO trade website³), the organization of technical workshops at the regional and national levels on issues in the negotiations, as well as, round tables and symposia for trade negotiators in Geneva. Institutional and human resource capacity building support is also provided to assist countries to adjust to, and comply with, international trade agreements and standards.

11. As a follow up to the August 2004 WTO Framework agreement, FAO has organized more than 7 regional “clarification” workshops on some of the technical issues of current interest in the negotiations. These have benefited around 300 officials from some 121 countries (see Annex). A large number of national level support activities have also been delivered. In addition, more than a dozen trade policy technical notes and briefs on issues in the negotiations have been, or are being, prepared and are being widely disseminated (see Annex). Other “learning” opportunities including round tables for the benefit of agriculture trade policy-makers and negotiators in Geneva are also part of planned activities in support of the evolving phases of the negotiations (see Annex). Lastly, medium-term support for capacity building on standards has been tremendously expanded, including in collaboration with WTO and other relevant international organizations.

12. The programme is funded from a variety of sources, including through the regular budget as part of the regular programme activities of participating FAO units (e.g. through the PAIA system). However, critical funding for the programme has been provided by voluntary extra budgetary contributions of member countries. Substantial funding in support of the programme has been provided by Japan, UK, Sweden, Norway, Netherlands, Canada and Ireland.

ANNEX

Regional clarification workshops on WTO negotiating issues

Trade policy technical notes and briefs on commodity-specific and cross-cutting issues relating to the WTO negotiations

International roundtables and symposia

During 2005, several roundtables will be held in Geneva for agriculture trade policy-makers and trade negotiators with the objective of presenting the findings of FAO analyses of relevance to the issues in the negotiations. Some of the topics to be addressed will include:

• Market Access and special safeguard mechanism (SSM)
• Domestic support and export competition
• Special and differential treatment (including preferences)
• Commodity-specific issues

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¹ WTO, Doha Work Programme: Decision Adopted by the General Council on 1 August 2004, Annex A: Framework for Establishing Modalities in Agriculture (WT/L/579).

² FAO, FAO support to the WTO negotiations: Trade-related capacity building programme for agriculture, fisheries and forestry (Umbrella Programme – II), (FAO, Rome, 2004). This document lists all individual FAO divisions contributing to the implementation of the Umbrella II Programme.

³ www.fao.org/trade