The World Trade Organisation’s scheduled discussions over the update of its agriculture agreement are fast approaching. With the deadline for a modalities agreement just a couple months away, Keith Nuthall reports on the crucial negotiation process and the subjects under discussion.

When trying to influence international negotiations that are as long and complicated as the scheduled five years of discussions over updating the World Trade Organisation’s agriculture agreement, the key is knowing when to spend money on lobbyists to intervene.

So would respectfully suggest that the next two months would be maybe the most important time for food industry interests to send some specialists to Geneva to try and tweak these talks in their favour.

Why? Essentially, because 31 March 2003 is the deadline for the 146 WTO member countries to complete a so-called ‘modalities’ agreement for the discussions; this is important, because if it is secured by consensus, it will supply binding targets for the talks on future tariff levels, import quota sizes, export subsidies and production grants. For example, if there is a modalities agreement that says agricultural quotas should be cut by 10%, then that’s that, a done deal. What the member countries then have to argue about over the next two years is how to achieve that goal, and what mix of tariff cuts will be delivered by which country. In other words, the die will be cast.

A look at the recent briefing paper from the talks’ chairman Stuart Harbinson (formerly a Hong Kong diplomat and now chef de cabinet of new Thai WTO director general Supachai Panitchpakdi), however, shows that this task will not be easy.

Typically with important and complicated international negotiations of this kind, brinksmanship is the order of the day, and all sides are holding out for the best deal until the last minute. Without deadlines, a WTO diplomat told, there would be no agreement at all. Negotiators are paid not to give up until the last minute and they will not break the habit of a lifetime at these crucial WTO talks.

Subsidies and quotas
So what’s under discussion? Harbinson’s report says that agreement on a target for tariff reductions is wide open, with no agreement in sight on the formula to be applied in a final deal. There are also members calling for the modalities agreement to include a commitment to widen import quotas for food.

Of course, these two subjects are not being discussed in isolation. Said the diplomat: “If you reduce tariffs by a considerable amount, you are then not under pressure to widen quotas by so much.” The same principle applies in other areas of the talks. He continued: “If you don’t agree to reduce export subsidies, you allow people to say we need to protect our farmers by high tariffs. You may haggle over domestic food production subsidies; if it is high, then your export subsidies may have to be low,” and so on.

On all these areas, said Harbinson, there are wide gaps in positions. “A major negotiating effort and flexibility on all sides will be of the essence in order to be able to establish modalities within the mandated time-frame,” he wrote. “The time has therefore come to take the political and operational decisions required.”

Strong words, and there has been movement, maybe as a result. Days before Harbinson’s report was issued, the European Commission issued a negotiating proposal of a 55% cut in “trade distorting domestic farm support” subsidies, if other WTO members offer similar reductions. It also offered to cut EU import tariffs on agricultural goods by 36% and export subsidies by 45%, while offering duty and quota free access for exports from least developed countries.

It sounds interesting and useful, with one proviso: this position had to be approved by the EU Council of Ministers and time will tell whether the traditionally protectionist French government will resist this plan. Paris currently has the support of the German government, but given the opportunities for levering free trade openings for manufacturers with concessions on food subsidies and tariffs, there is a large question mark over how long that support will hold.

Trade issues up for grabs
Which brings us to another large issue, the fact that the three-year-long (so far) agricultural talks have now been rolled into the general WTO Doha Development Round, where trade issues regarding all sectors are up for grabs. Some countries are seeking to link agricultural concessions to industrial trade benefits, and if they insist on this, there could be real difficulty in striking a modalities agreement in March.

The United States, for instance, last month (December) issued a comprehensive negotiating package calling for the phasing out of all tariffs on industrial non-food goods. This is a huge prize for manufacturing exporters wanting a piece of the American market and it will inevitably ratchet up the pressure on jurisdictions who most protect their food producers, for example the EU and Japan, to abandon some of this protection.

A missed deadline in March would throw the onus onto trade ministers meeting at the next summit in Cancun, Mexico in September, to strike a deal on agricultural modalities. If they failed, all that would be left would be for Harbinson to release his own negotiating guidelines, which would be a target rather than a binding commitment. If that sounds highly unlikely, it isn’t. It is what happened with the previous Uruguay Round, which led to the founding of the WTO, but which bust its timetable by years. If there is no agreement in March over food trade modalities, then this could put the WTO’s 2005 deadline for the completion of the Doha round under threat.