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WTO talks still awaiting a compromise

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Published 30 June 2006 - Updated 04 June 2007
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agriculture tariffs WTO
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From 29 June till 3 July 2006, Ministers and representatives of the 149 members of the WTO are meeting in Geneva to find an agreement on a multilateral trade deal.

WTO Director-General, Pascal Lamy has outlined the basis for a possible agreement on modalities, base on what he terms the “magic number”: 20. 

  • On agricultural market access: Tariff cuts on agricultural goods could be based on the G20 proposal, implying cuts of around 54% for farm tariffs, which is below the US demand of 66% cuts but above the EU’s current proposal of 39%. 
  • On non-agricultural market access  (NAMA): Lamy proposes using the ‘Swiss formula’ as the tariff reduction formula for industrial goods. This would imply higher cuts for the highest tariffs and the introduction of a tariff cap. The EU and the US are in favour of a maximum tariff rate of 10% for developed countries and of 15% for developing countries, while the latter would prefer a cap of 30% which would also entail softer average cuts. Lamy has proposed an intermediate tariff cap of 20% for developing countries. 
  • On agricultural subsidies: Lamy proposes reducing the ceiling for US overall trade-distorting farm support  to below USD 20 billion. The US’s current ceiling level is USD 48.22 billion, but it only actually spent USD 19.67 billion in 2005. The US itself is proposing to cut its ceiling by 53% to USD 22.5 billion, which would in effect allow it to increase its level of subsidies. This is considered unacceptable to both the G-20 (which is demanding a reduction of 75 percent, down to USD 12 billion), and to the EU (which wants the US to make a cut of at least 60%). 
Positions: 

European Union Trade Commissioner's spokesman Peter Power said it was "extremely unlikely" to have an agreement this weekend, as positions were "too far apart" among the G6 countries.

Australian Trade Minister, Mark Vaile, has signalled that Australia could be ready to compromise in exchange for access into the valuable EU market.

On the other hand, Japanese Agriculture Minister Shoichi Nakagawa said Lamy’s idea of moving towards the G-20 proposal was “out of the question”. 

Brazilian Foreign Minister Celso Amorim said that he could not see the gaps between negotiators’ positions getting any smaller and that, if anything, they were increasing. He called the U.S. and EU positions “politically wrong and morally false”.

Indian Commerce Minister Kamal Nath threatened to “get a flight home” if Washington refused to offer deeper cuts on farm subsidies. 

Nevertheless, Washington has so far refused to back down, with US Trade Representative Susan Schwab denying recent media reports that it could be preparing to give up more in terms of domestic subsidies. 

The EU has shown more willingness to compromise; Commissioner for Trade, Peter Mandelson repeatedly signalling that the EU is willing to move “towards and close to” the G20 requests for average farm tariff cuts, so long as the US and G20 show similar flexibility.

However, despite Commissioners Mandelson and Fischer-Boel’s assertions that they have received strong support from European Member States, the EU appears divided on how far it can go in order to clinch a deal.

French Agriculture Minister, Dominique de Bussereau, responded to Commissioner Mandelson’s remarks saying “it would be a major error to suggest a further opening in market access” and that France would not accept that new offer be made. He was supported by current EU presidency holder Austria’s Agriculture Minister, Josef Proell, who said moving toward the proposal of the G-20 “is not possible for EU farmers”.

France's trade minister, Christine Lagarde, added that Mandelson was given no authorisation to improve upon Europe’s existing offer at a meeting of EU Trade Ministers prior to the consultations with its trading partners. 

Civil society groups, such as Oxfam, Friends of the Earth and War on Want have expressed their opinion that any deal done on the basis of current EU and US proposals will not result in a pro-development deal. 

Next steps: 
  • 1 August 2006:  Deadline for reaching modalities on agreement before WTO summer break
  • 31 December 2006: Deadline set to conclude negotiations 
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Background: 

Draft texts of the agreements have been circulated to the members but these still contain large voids where members have failed to find compromises. Most negotiators believe a handful of political issues (see Euractiv 26 June 2006) are crucial to unlocking the stalemate. 

Key WTO members, known as the G6 and including Brazil and India (representing the G20 group of developing countries), the European Union, the United States, Australia (representing the Cairns group of agricultural exporters) and Japan (representing the G10 group of net agricultural importers) met on the evening of 29 June 2006 for consultations on trade in farm and manufactured goods, but no real progress was made in narrowing their differences. 

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