EU business, farmers criticise new WTO proposals

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Despite optimism from World Trade Organisation officials that new negotiating drafts presented on 19 and 20 May will act as a “springboard” towards achieving a global trade pact, the EU and its major trading partners have reacted cautiously.

The new negotiating drafts cover trade in agricultural and industrial goods – the two major sticking points in the troubled seven-year WTO negotiation process. 

Minor advances on agriculture 

WTO mediators say they offer fresh compromises and additional clarity on certain key issues of contention, including on how countries can protect certain “sensitive” agricultural products from large tariff cuts. 

Developed countries would be able to maintain higher protection levels for up to 6% of their farm goods – slightly less than the 8% hoped for by the EU but more than the 2% the US was insisting on – while committing themselves to an overall quota for imported products. 

As regards farm tariffs and subsidies, the texts vary little from earlier versions, proposing an average cut of 54% in customs duties on agricultural imports in developed countries and 36% in developing nations. The EU would be required to reduce its farm subsidies by 75-85%, while the US and Japan would have to cut them by 66-73% – much more than the 53% cut originally proposed by the US. 

Continued divergence on industrial goods 

The new draft on industrial trade foresees a slightly lower cap of 7-9% for developed economies on manufactured goods. It also offers increased flexibility to emerging economies, such as China, Brazil and India, in the hope of bridging a deal between the North, keen to open up new market opportunities in these fast-growing economies and the South, keen to protect its infant industries. 

According to the text, about 30 developing countries would be able to choose from three options: 

  • Capping their customs duties at 19-21%, while being able to exclude up to 14% of their most “sensitive” industrial goods; 
  • a cap at 21-23%, while shielding up to 10% of their sensitive tariff lines, or; 
  • a maximum of 19-21%, while being able to exclude 5% of all products provided this does not represent more than 5% of the overall value of total industrial imports. 

The text also offers special treatment for new WTO members, allowing them to phase in tariff cuts over long periods of time (up to 18 years for countries like China, which joined in 2001), something which European and American businesses say is unacceptable. 

"These revised negotiating texts illustrate clearly where convergence lies among the WTO members and where we have more work to do," said WTO director-general Pascal Lamy."We are getting closer to our end game," he added. 

EU Trade Commissioner Peter Mandelson told Reuters he believes the texts "contain significant new elements reflecting the substantial progress that we have made in negotiations over the recent period". 

"The key trade-offs are there for us to make," he added. He further stressed the importance of the Doha Round in the context of the current global food crisis, saying a successful conclusion of negotiations was an essential part of solving the food supply problems and recent sharp rises in cereal prices. 

"If we want to tackle the underlying causes of the food crisis, then we have to bring about a fundamental reform of agricultural trade in the world. The vehicle for doing that is the Doha talks," he said. "If we fail in those talks then we will have missed a major opportunity to bring about that fundamental reform." 

But Europe's largest business lobby said it was "very concerned" at the draft text on industrial goods. Indeed, it points out that the proposals would enable emerging economies to shield entire industrial sectors from tariff cuts – de facto keeping European companies out of the market. "That could lead to a total carve-out of whole sectors," said a representative of BusinessEurope

The group also rejected the idea that a country such as China would be able to benefit from such long phase-in periods for cutting its import duties. "The current draft would appear to provide China, the world's second-largest exporter of industrial goods, up to 18 years to phase in its tariff cuts. That is far too high," stated the group. 

European farmers are also unhappy with the drafts, saying they stood to lose at least €30 billion a year under the new proposals and that this would not be made up by gains in the industry or services sectors. "From what we see, Europe is not getting anything like that back on industrial goods and certainly not on services," said Shelby Matthews, chief policy adviser for the European farmers' association Copa-Cogeca

The Doha Development Round, which aims to liberalise global trade and extend the benefits of globalisation to developing countries, was launched by Ministers of WTO member countries in November 2001 in the Qatari capital, Doha. 

Talks have been continuing on and off over the past six years. But they reached a low point in July 2006 when WTO Director-General Pascal Lamy formally suspended negotiations after members failed to achieve any kind of convergence on the reduction of farm subsidies and cutting tariffs on industrial and agricultural products. 

Negotiators nevertheless agreed to restart talks in January 2007. Yet progress has remained limited, with countries failing to achieve a deal on ''modalities'' – the contentious formula and figures for calculating tariff and subsidy cuts. 

They now hope to finalise talks before the end of 2008, ahead of the change in the US administration, which experts fear could postpone a deal for years. 

  • 26 May 2008: EU trade ministers to discuss the drafts with Trade Commissioner Mandelson at the General Affairs and External Relations Council.

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