The Hindu Business Line : WTO’s twin draft modalities on agriculture not formal proposals

The twin draft modalities on agriculture and non-agricultural market access (NAMA) released in Geneva on Tuesday by the World Trade Organisation (WTO) and the instant disappointment voiced by India are nothing unusual because as the WTO itself admits that the drafts are still not final.

These draft modalities are drawn from WTO member governments’ positions over several months of negotiations. These are not “proposals” from the New Zealand Chairperson on Agriculture Negotiations Ambassador, Mr Crawford Falconer, and the the Canadian Chairperson on NAMA Ambassador, Mr Don Stephenson, in the sense that ‘proposals’ are normally understood.

WTO has made it clear that these are not the Chair’s opinions of what would be ‘good’ for global agricultural and non-agricultural trade, but what might be accepted by all sides in the negotiations. These two drafts are the Chair’s assessment of what might be agreed for cutting tariffs and trade-distorting agricultural subsidies and related provisions. Incidentally, these are the second revisions of negotiating documents first produced in July 2007.

With the twin draft modalities now being out, delegates from WTO would take a week to study them to get back into a discussion in the respective negotiating group to be followed by senior officials and later Ministers of member countries. India expressed opposition to the twin drafts describing them as putting higher duty cuts on industrial goods on developing countries, while the agriculture text provided little succour to safeguard agricultural sector and its livelihood concern for farmers.

Differential duty cuts

On NAMA, India’s reservation stems from differentiated duty cuts proposed in Mr Stephenson’s draft. It offered developing countries to choose to reduce tariffs to a maximum of 19 to 26 per cent, a wider range than previous proposals in February 2008. But this overall range is composed of three distinct bands (19-21 per cent, 21-23 per cent and 23-26 per cent) which have their own implications for any exemptions.

Members applying the lowest range, known in WTO parlance as a coefficient, would be able to exclude up to 14 per cent of their most sensitive industrial tariff line from the full effect of the formula. In essence, the more the industrial tariffs are lowered, the greater would be the right of Governments to safeguard ‘sensitive’ items.

For the middle-band, countries would be able to either shelter up to 10 per cent of their most sensitive tariff lines, which would be subject to cuts equal to half the agreed formula reduction. Alternatively, they could exclude five per cent of all products, subject to the proviso that they do not exceed five per cent of the total value of all NAMA imports. The top band would not allow any tariff line exemptions. This differential duty cut strategy coupled with the possible offer of special treatment for South Africa and Venezuela are what prompted India to characterise the NAMA proposals as one of ‘divide and rule’ by fostering a wedge among developing countries.

Farm subsidies

On agriculture, India’s concern stems from the neglect of special products and special safeguard mechanisms, about which the Chair itself conceded that “we still remain quite divergent”. The latest draft on agriculture proposes to cut farm subsidies and extant ceilings on farm tariffs by an average of at least 54 per cent for developed countries and up to 36 per cent for poorer countries.

The WTO Chief, Mr Pascal Lamy, hailed the twin texts stating they illustrated clearly where convergence lay among the WTO members and where they had more work to do and could provide “a springboard to a new and crucial stage. We are getting closer to our end game”. But as it is too early to assess the fallout of the twin texts from a wider WTO membership with India distinctly displeased, a sense of unease still prevails. This owes itself to the fact that the original remit to let ‘substance’ decide timetable had been overtaken by a drive to meet deadlines.

However, if these countries join together and resist the attempt to put the whole exercise to “horizontal process” to be chaired by Mr Lamy before the end of this month or early June without further meeting among members, probably the larger constituency of WTO members from developing world would ensure that they do not end up with modalities thrust on them at the eleventh-hour, trade policy analysts say.

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