WTO agriculture talks chairman Crawford Falconer has at last released his draft agreement on tariffs and subsidies. The changes proposed have major ramifications for the food industry. However, the complexity of the agreement is indicative of the distance still to go before a full deal is struck. Keith Nuthall reports.
Go deeper with GlobalData
Tough tariff cuts for all kinds of food products will be required by a successful Doha Development Round at the World Trade Organisation (WTO), with their range at last becoming clearer, with the release of a draft agreement yesterday (22 June).
This ‘draft possible modalities on agriculture’ outlines solutions for all the key issues of the long running free trade negotiations, from tariff reductions to domestic production subsidy cuts. Trade ministers from around the world will now converge on the WTO headquarters in Geneva to try and strike a deal over this document, so that detailed product-by-product cuts can be proposed by 31 July.
In a note to WTO director general Pascal Lamy, agriculture talks chairman Crawford Falconer underlined that there remained “divergences” between member governments, which are reflected in the document’s 760 pairs of square brackets, which indicate a need for a decision.
The extent of the political decisions facing these ministers is made stark by the crucial section on duty reductions: the draft says all but developing countries should cut duties of between zero and 20% or 30% (a decision is needed here) by between 20% and 65% (here again, another decision required).
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe cut for duties of between either 20% or 30%, and 40% or 60%, should be between 30% and 75%. For duties between either 40% or 60%, and 60% or 90%, the reduction should be between 35% and 85%. And for the highest tariffs, of between 60%-90% and above, the reduction should be between 42% and 90%, except for countries with an as yet undetermined proportion of duties in this top tier, who would make a different – again as yet undetermined – reduction. Developing countries would have to make smaller cuts to duties.
However, this is not to say there has been no progress. The draft shows there has been agreement on establishing a cap for all tariffs, which – after all the reductions outlined above – could be no greater than between 75% and 100% – another political decision being required here, with developing countries being allowed to protect their food industries with up to 150% duties.
There has also been progress on so-called ‘sensitive’ products that member governments feel need special protection, a key issue for many European countries. Here each developed country would have the right to designate between 1% and 15% (ministers will have to pick a figure for the final deal) of their tariff lines as special. These products’ duty reductions could be between 20% and 70% less severe (another decision required) than they otherwise would be under the main duty cutting formula.
On production subsidies, the draft is at last talking dollars: where a country (or customs area – such as the European Union) has a previously agreed maximum for these above US$25 billion, the cut will be deep – somewhere between 70% and 83% – another choice required here. If it exceeds US$15 billion, cuts will be between 60% and 70%. And if it is less than US$15 billion, reductions will be between 37% and 60%. These formulae are then complicated by a series of qualifications depending on whether subsidies are deemed to artificially affect world market prices or whether they are designed to limit production, but there are proposed figures for these considerations too. The bottom line is that if a deal is done, cuts will be substantial.
Despite the number of decisions that he has left to ministers, Falconer said this was more honest than conjuring a solution out of thin air, which could be rejected swiftly.
“Brushing things under the carpet or wishing things were otherwise…is no way to resolve differences”, he said. Rather, the paper reflected intense negotiations over the past six weeks and the “substantive positions” of member governments. However, this was not a document from which to “pick and choose” elements and go back to the drawing board. “This is a ‘menu fixe’ for decision. It is no smorgasbord”, he said.
