India & World Trade Organization (WTO)

State of Play on Agriculture Negotiations in the Doha Round WTO



I. Agriculture

The agriculture negotiations apply to the products covered under the Agreement on Agriculture (AOA) of the World Trade Organisation (WTO), namely, all basic agricultural products, the products derived from them and all processed agricultural products. This also includes wines, spirits, tobacco products, fibres such as cotton, wool and silk and raw animal skins for leather production. Fish and fish products and forestry products are not included.

The three main elements or “pillars” of the Agreement on Agriculture (AOA) and the negotiations are: (i) market access, (ii) domestic support and (iii) export competition. The Doha Ministerial Declaration of November 2001 committed Members to comprehensive negotiations aimed at: substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support. Special and differential treatment for developing Members is also intended to be an integral part of the modalities.

The Chair of the Committee on Agriculture (Special Session) brought out a fourth revision of draft modalities for agriculture on 6 December 2008. Discussions on this text began in September 2009. From July 2009, the Chair has been conduction discussions along two tracks: namely, data requirements for implementing modalities and issues bracketed or otherwise annotated in the draft agriculture modalities text issued on 6 December 2008. The discussions in the first track are aimed at identifying the base data that needs to be annexed with modalities and devising the formats in which this data will be presented.

The main elements of the draft agriculture proposals are summarized below:

II. MARKET ACCESS

The customs tariff is the duty charged on the import of any good into the domestic territory of a country. The negotiations at the WTO are on bound customs tariffs, which are the ceiling rates notified to the WTO, while the tariffs which are actually applied by the customs authorities on imports into a country are the applied customs tariffs. The applied tariffs cannot ordinarily exceed the bound customs tariffs in the WTO Member countries.

Developed countries would have to reduce their bound tariffs in equal annual instalments over five years with an overall minimum average cut of 54%. Developing countries would have to reduce their final bound tariffs in equal annual instalments over ten years undertaking a maximum overall average cut of 36%.

Both developed and developing Members would have the flexibility to designate an appropriate number of tariff lines as Sensitive Products, on which they would undertake lower tariff cuts. Even for these products, however, there has to be “substantial improvement” in market access, and so the smaller cuts would have to be offset by tariff quotas allowing greater access for imports. The three issues being negotiated, therefore, are the number of Sensitive Products, the tariff cuts they are to take and the compensatory access through tariff quotas.

While this flexibility is available to both developing and developed countries, it is particularly important for developed countries to be able to protect their commercially sensitive tariff lines.

III. Special Products

This is a special and differential treatment provision that allows developing countries some flexibility in the tariff cuts that they are required to make on a designated number of products. This is critical for countries such as India to meet their food and livelihood security concerns and rural development needs.

The revised draft modalities of 6 December 2008 propose an SP entitlement of 12% of agricultural tariff lines. The average tariff cut on SPs is proposed as 11%, including 5% of total tariff lines at zero cuts.

IV. Special Safeguard Mechanism

This is another special and differential treatment provision exclusively for developing countries that gives them the right to have recourse to a Special Safeguard Mechanism (SSM) based on import quantity and price triggers. The SSM is important for developing countries in order to protect their poor and vulnerable farmers from the adverse effects of an import surge or price fall.

The safeguard duties under the proposed SSM would be triggered by either an import quantity trigger or a price trigger. The trigger for invoking the SSM determines when the safeguard duty can be imposed. If the import quantity trigger is set too high, the SSM loses all efficacy because it can then only be used in the most exceptional circumstances. The same holds true if the price trigger is set too low.

The main issues being discussed are: (a) the trigger: i.e. when the mechanism would be applicable; (b) the size of the remedy: i.e. how high overall duties can go above the MFN tariff; and (c) duration of the remedy and whether safeguard duties could be applied in consecutive years. In July 2008, discussion was essentially centred on the second part, namely, the circumstances in which the pre-Doha bound rates could be breached. Exporting countries wanted an initial trigger of 40% i.e imports had to be at least 140% of the previous period imports before the country would impose a safeguard duty. The G-33 (and India) argued that this was far too high a trigger, effectively denying them recourse to the SSM.

Unreasonable restrictions on the SSM in terms of very high triggers and inadequate remedies defeat the very objective of protecting poor, vulnerable farmers in developing countries. Given its objectives, it must be a simple and effective mechanism. The exporting countries on the other hand are seeking to ensure market access into developing countries by trying to limit such provisions. The G-33 coalition has been striving to ensure an effective safeguard instrument.

The G-33 has circulated a set of documents in the WTO. These documents call for refocusing discussions on the development dimension of the measure and offer a response based on the Group’s technical analysis to various restrictive elements being proposed by the SSM opponents.

V. Tariff Capping

This is primarily a developed country concern, particularly some countries belonging to the G-10, namely, Japan, Iceland, Switzerland and Norway. These countries impose prohibitively high tariffs on their agricultural products. Tariff capping would bring down these very high tariffs, over and above what would be required by the tariff reduction formula. While these developed countries are not prepared to accept this, on the other hand, on industrial goods, the Swiss coefficient in the tariff reduction formula limits all new bound tariffs to levels below the coefficient (except for the products under flexibilities).

VI.Tariff Simplification

This is an entirely developed country concern, particularly for the EU, Norway, Switzerland and Canada. These countries use a large number of non-ad valorem (NAV) tariffs on their agricultural imports. Developing countries, on the other hand, rely predominantly on ad valorem (AV) duties. NAV duties act as an additional layer of non-transparent protection. As these are used mainly by developed countries, they act as a barrier to market access for developing country exports. In contrast, in the case of industrial goods, the draft modalities propose 100% tariff simplification.

VII. Tropical and Diversification Products and long-standing preferences

The mandate of the Doha Round committed Members to addressing the issue of achieving the fullest liberalisation of trade in tropical agricultural products. The draft modalities, accordingly, propose faster and deeper cuts on such products. In the WTO agriculture negotiations, the proponents are 10 Latin American countries (the Tropical Products Group). They want the EU, US, Switzerland, Japan and some of the other developed country importers to take faster and deeper cuts on tropical products.

The mandate also recognized the importance of longstanding preferences and said that the issue of preference erosion would be addressed. As per the modalities being discussed, the tariffs on products in an agreed list, on which certain countries have been accorded preferences in imports, would be cut over a longer period and/or take lower cuts. The proponents here are countries belonging to the African-Caribbean-Pacific (ACP) Group.

The two groups involved thus have competing interests. While the Tropical Products Group want faster and deeper liberalization, the ACP Group is seeking to protect its preference margins.

Discussions in the WTO on this subject are focused on two aspects: (i) the methodology for reducing tariffs on tropical products and preference products and (ii) deciding on the number of products to be included in each list. These discussions have, however, taken place mainly amongst the EU, US, the Tropical Products Group and the ACP Group.

While India is not a member of the Tropical Products Group, India too has export interests in many of the products and has been demanding that the matter should be discussed in a more transparent manner amongst the larger WTO membership. India has also been negotiating to protect its own interests in tropical product exports.

Progress on the subject was closely linked with an agreement relating to the import of a particular tariff line of bananas. On 15 December 2009, an agreement was signed amongst the ACP, the EU and the Tropical Products Group, namely, the “Geneva Agreement on Trade in Bananas”. As per the Agreement, the EU shall maintain an MFN tariff-only regime for the importation of bananas. Thus, there will be no more quotas for the ACP countries. The EU will:

· cut its MFN import tariff on bananas in eight stages, from the current rate of €176/tonne to €114/tonne in 2017 at the earliest; and

· make the biggest cut first, by €28/tonne to €148/per tonne, once all parties sign the deal.

In return, Latin American countries will:

· not demand further cuts in the framework of the Doha Round of talks on global trade once it resumes;

· settle several legal disputes pending against the EU at the WTO, some dating back as far as 1993.
Once the European Parliament gives its consent to the deal, the EU will bind its new tariff schedule – meaning it commits not to raise tariffs above the new rates. The conclusion of the Banana deal signals that rapid progress will also be made on Tropical Products and Preference Erosion.

VIII. DOMESTIC SUPPORT

The Agreement on Agriculture distinguishes between support programmes that stimulate production directly, and those that are considered to have no direct effect. Domestic support that has a direct effect on production and trade has to be cut back.

The draft modalities propose cuts in the Overall Trade-distorting Domestic Support (OTDS) as well as cuts or caps on the individual categories of domestic support, referred to as Amber Box, Blue Box and Green Box support.

The current proposal is for a 70% cut in OTDS by the US and 80% by the EU. A 70% cut brings US OTDS to about US$ 14.5 billion, from their current ceiling of US$ 48.2 billion. This is still well above their estimated applied level of US$ 7 billion in 2007.

IX. Cotton

This issue is of prime importance to Burkina Faso, Benin, Mali and Chad (the Cotton 4). The C-4 proposal on the table implies an 82.2% cut in domestic support for cotton by the US.

Apart from the C-4, it is of significance to Brazil and India also, both major exporters of cotton. In India, cotton is also a politically sensitive subject. This issue has seen very little multilateral discussion at the WTO.

X. EXPORT COMPETITION

In terms of the draft proposals of 6 December 2008 , developed countries are required to eliminate all forms of export subsidies by 2013. Developing countries have to do so by 2016.

Under the WTO’s Agreement on Agriculture, developing countries had the flexibility to provide certain subsidies, such as subsidising of export marketing costs, internal and international transport and freight charges etc. According to the current proposals, this provision would continue to be available to developing countries till 2021 i.e. 5 years beyond the year 2016 when they would be required to phase out all other forms of export subsidies.

India’s Priorities in the Agriculture Negotiations

Safeguarding the interests of low income and resource poor agricultural producers remains paramount for India. In this context, the following issues are vital:

· Overall tariff reductions on bound rates of not more than 36%;

· Self-designation of an appropriate number of Special Products guided by indicators based on the three fundamental and agreed criteria of food security, livelihood security, and rural development needs;

· An operational and effective Special Safeguard Mechanism to check against global price dips and import surges, which is more flexible than the existing special safeguard available mainly to developed countries;

· Substantial and effective cuts in OTDS by the US and the EC and tighter disciplines on product-specific limits on AMS and the Blue Box;

· Simplification of non-ad valorem tariffs on agricultural products, by the developed countries, as has already been done by developing countries;

· Capping of tariffs on agricultural products, over and above the tariff reduction formula, to address the issue of some very high tariffs imposed by some developed countries on agricultural products; and

· Safeguarding India’s export interests in the negotiations on tropical products and preference erosion.

India has been working constructively with her coalition partners in developing country groupings such as the G-20 and the G-33 in order to achieve an outcome in the agricultural negotiations that would fully reflect the level of ambition of the Doha mandate and the interests of developing countries.

(Source: Ministry of Commerce,GOI)