What was the stumbling block that caused the negotiation process to stall earlier?
The US has indicated that it is not prepared to improve its offer in domestic support until it has a better understanding of what agricultural tariff cuts were proposed. The EU, on the other hand, said it is not prepared to improve its offer on agricultural products until it has a better sense of how the US will cut its domestic support. As the EU seemed to be demonstrating more flexibility on the agriculture side, the US seemed to be moving in a different direction, partly due to their elections coming up, and support is a sensitive issue in an election year in many countries. So by July the kind of flexibility we thought we would see from US in the beginning of last year seemed to have dissipated.
So is the US to blame for the talks failing?
There was a general feeling in Geneva that the suspension was a direct result of the US being unable to improve its offer. But I think the issue is much more complex. The US improving its offer on domestic support is a critical element of restarting the negotiations, but this is certainly not the only issue that needs to be addressed. After the negotiations were suspended there was a lot of reflection amongst member states and a growing concern on how much was going to be lost in these negotiations if we couldn’t get them restarted.
Where does South Africa fit in?
SA has been part and parcel of this process. On agriculture our positions are subsumed in the G20. The single most important issue for South Africa has to do with industrial tariffs. On this issue we are particularly concerned that some of the proposals put forward by industrial countries are looking for highly ambitious tariff cuts on industrial products, which are disproportionate to the cuts developed countries are prepared to take in percentage terms. We are prepared to make a contribution by cutting our tariffs on industrial products, but cuts have to be proportional and we cannot be expected to take cuts that are deeper than those in developed countries. They have to be consistent with our industrial policies and take into account that we have quite severe employment issues in South Africa. South Africa remains committed to a positive outcome in the round. I believe that developed countries as the main economies need to provide leadership in terms of making the first moves on domestic support and market access, and developing countries would also make a positive contribution to the round.
So what issues need to be addressed to get talks back on track?
The outstanding issues revolve around domestic and the types of support that industrial countries provide to their farmers. The other question is that of agricultural tariffs or market access in agriculture. On the issue of domestic support and market access, there is an interesting set of dynamics. The US appears to be much more sensitive about cuts in the kind of support it provides its farmers, while the EU is more sensitive on questions of reducing agricultural tariffs. In October 2005 the US offered to reduce their support ceiling to billion. If you look at the spending rates of the US over past 10 years, in most years, it has been less than billion in support. But because of the nature of support, it can increase dramatically depending on what happens to world market prices in key commodities such as cotton, maize, soya and sugar. As the world price falls in any one of these, you see an increase in support in any one of these areas.
The other important issue is that there are very few rules in international trade that prevent countries shifting support from one commodity to another. So in particular years, let’s say the price of cotton drops and US farmers feel they are not getting the price they want, support for cotton will kick in. Next year it could shift to another product. Since 2003 the EU has been in a process of reforming its common agricultural policy, and as part of this has shifted the kinds of support provided. Although the EU support is much larger historically, the type of support it has been providing is less and less trade- or production-distorting. As a result the EU has a lot more space to make commitments in the WTO to reduce, quite significantly, the levels of domestic support it provides. The levels are probably the same, but the nature of support has changed, and this allows the EU much more flexibility in negotiations to make deeper cuts. In October 2005 the EU put forward a proposal that it was prepared to cut agricultural tariffs by about 39%. But it had conditions attached to that offer. It argued that it would need to have variation in the 39% on certain sensitive products. The EU also indicated that it wanted a certain percentage of the products designated as sensitive, and that these would not be subject to the average cut. Against that background, the G20 has been working intensely at a political, practical and technical level to find constructive solutions to this dilemma. The G20 proposed a framework for domestic support that would reduce the US support levels to around billion. The G20 also proposed a range of new laws that would limit the amount of support that can be shifted between products, and exercise some discipline on the absolute level of support that can be provided for any one product.
What are the prospects of this happening?
I think there is a positive move to resume the negotiations. The US will need to improve its offer on domestic support beyond the billion ceiling it offered. What that level is we are not sure, but they need to improve that. The EU needs to agree to a 54% cut on tariffs but much more importantly, in market access, we need to have a much clearer idea on the treatment of sensitive products. Getting an agreement on this set of issues is going to be critical. What is critical is that the US had a seat change in the US congress and to date, as we understand, there hasn’t been a clear focus on how the US plans to re-engage in the Doha round. On the EU side, French elections are coming up and this will also have an influence. Again, there is a gentle sense that we are in a better position now. |fw
