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P Shinoj 1 and Linu Mathew Philip 2
The latest drafts on agricultural negotiations and non-agricultural market access (NAMA) released on May 19, 2008, do not add much to the previous texts circulated two months ago. The two new texts come in the context of the US Farm Bill passed by both the Senate and House and US President will not have the power to veto it, leaving hardly any room for further negotiation. All other countries agree to move ahead without the US, that is very unlikely. In spite of these uncertainties, there is an urgency in the negotiation which stems from the food prices which have been soaring for the past two years and it is being made to believe that trade can break this jinx. If there is a reason to believe that prices of food are rising on account of a lack of 'deal', then there is more reason to know why food prices have been depressive for more than ten years. The latest draft definitely makes an attempt to comprehensively address the development issues and all kudos to Ambassador Crawford Falconer for revising the drafts in an intelligent manner. If we look back from the impasse in July 2006, substantial progress has been made whether it's divergence or reduction in square brackets. The talks are still on, cutting the finer edges of the blueprint for the final deal in agriculture. Talks have moved from the three pillars in AoA viz domestic support, market access and export competition to more diverse issues like elimination of export subsidies, cotton initiatives, food aid and preference erosion. However, with clear uncertainty on NAMA negotiation it seems very difficult how horizontal process will move ahead and balanced ambition will emerge through para 24.
The latest agreed tiered reduction formula for trade distorting domestic support (OTDS), envisages a reduction range of 75 to 85 per cent for those countries where the base OTDS is greater than US $60 billion and that of 66 to 73 per cent for those with a base OTDS between US $10 billion and US $60 billion. These proposed ranges are still under square brackets, which means further negotiations are required to reach the final number. Notwithstanding these range it is still less for a country like the US with a net producer support estimate of over US $40 billion and a subsidy cap of US $13 to 16 billion will remain meaningless in light of the Farm Bill provision of US $288 billion. It is, therefore, important for developing countries like India to maintain a tough stand in this issue as huge farm subsidies do not provide fair playing field for the million of small farmers in India in the international market.
Similar to that of OTDS, a tiered linear reduction formula with maximum overall average cut of 36% is required by any developing country with special flexibilities to recently acceded member (RAM). The developed country members are given a right to designate up to 4-6 per cent of their tariff lines as sensitive products, which is bereft of any criteria, and developing countries too are allowed up to a one-third more of tariff lines as 'sensitive' products but they need to accede to quotas with respect to the deviation they are in. The developed countries have a better edge as they have the flexibility of manipulating their domestic consumption and deny access either through lower fill or NTBs. The tariff escalation provision though will not bind India since it's a developing country but the provision of the link of International Commodity Agreement need to be further examined on how effective it will bring in more access of processed commodities into the developed countries.
The provision of 'Special Products' is indeed a victory for the developing countries as it allows flexibility of incorporating non-trade development concerns in market access but the divergence on the exact percentage and treatment options still hangs without any convergence. The unity of developing country groups like G-33 and G-20 has definitely contributed to these initiatives. This provision was originally accepted by the WTO in the Hong Kong Ministerial Declaration and it gives the developing countries the right to self designate an appropriate number of tariff lines as 'Special Products' guided by the indicators based on the criteria of food security, livelihood security and rural development. However, one of the most critical setbacks comes from the 'Special Safeguard Mechanism' (SSM) since the provisions as suggested are very limited and reflect clear unfairness as the SSG currently being used by developed countries can go up to 1.5% which would mean close to 15 tariff lines which is more than 4-8 tariff lines for SSM. Under SSM, the developing and least developed countries will have the option to take safeguards by temporarily imposing additional market access barriers on the import of a particular product when faced with sudden surge in its imports. In fact, the provision of SSM should have been made available for all the tariff lines that elicit a price or volume trigger. More than that, the volume and price triggers defined in draft are also highly restrictive. According to the present recommendation, a price trigger would be elicited only when the price of a commodity falls by at least 30%. The G-33 proposal in which India is also a party, has asked for a 5-10 per cent slump in prices for the price trigger to fall in place. Even though volume based SSM is also available, it is contended that the volume based measures are more cumbersome and difficult to avail due to various procedural complexities involved. In this context, more negotiations and tough bargaining is required for meeting India's legitimate requirements. With all said and done, agricultural negotiations are progressing far better than the NAMA but many brackets are still to be negotiated. The WTO has proposed to hold a ministerial meeting of the members by the end of June this year and even though the revised text is said to be a blueprint for the final agreement, the developing countries should not accede to a deal unless all development issues are comprehensively addressed.
1 Scientist, National Centre for Agricultural Economics and Policy Research (NCAP), New Delhi - 110012; pshinoj@ncap.res.in
2 Research Officer, Centad (Centre for Trade and Development)
June 7, 2008
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