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WTO Negotiations on Agriculture

Pakistan’s Negotiating Objectives

Given that agriculture contributes to one fourth of our GDP and almost half of employment, Pakistan has a fundamental interest in further strengthening the international rules governing agricultural trade.

Whether Pakistani farmers and processors produce mainly for export (such as rice) or the domestic market (such as cotton, wheat, sugarcane), their production and investment decisions are heavily influenced by the international environment within which the Pakistani agricultural economy operates. Further growth in the agriculture sector is dependent on new markets, and both Pakistani farmers and processors benefit significantly from increases in exports.

Pakistan is using every opportunity to position our approach as the most effective means to achieve a more level international playing field. At the WTO, we have been seeking the elimination of all forms of export subsidies, the substantial reduction of trade-distorting domestic support, and real and significant market access improvements.

Pakistan’s objectives were developed after an extensive consultation with various stakeholders by the Ministry of Food, Agriculture and Livestock. A number of workshops were held. In many of these workshops, representatives of NGOs were also participated. Pakistan has put forward constructive ideas that have helped to advance the negotiations in ways that meet our objectives.

Recalling the Doha Mandate for the Agriculture Negotiations

At the fourth World Trade Organization (WTO) Ministerial Conference in Doha, Qatar in November 2001, WTO Members agreed to launch a new, broad-based round of multilateral trade negotiations known as the Doha Development Agenda. The Doha Round incorporated the agriculture negotiations, which had been launched in 2000. On agriculture, WTO Members agreed to an ambitious negotiating mandate, committing themselves 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."

WTO Members set out an ambitious timetable. However, the pace of the progress in the negotiations has been affected by numerous factors, including the complexity of the issues and differences between WTO Members on key aspects of the negotiations. At the Fifth WTO Ministerial Conference in Cancun, Mexico in September, 2003, Members were unable to reach agreement on key issues, and the conference was closed before Ministers had the opportunity to make any significant progress on agriculture.

Framework Agreement on Agriculture (July 2004)

After Cancun, WTO Members intensified their efforts and achieved an important milestone in July 2004 when they reached an agreement on a framework for the agriculture negotiations. The framework agreement, which was unanimously adopted by the WTO General Council on July 31, 2004, was part of a broader package setting out the way forward for the Doha Development Agenda (DDA). It proposed concepts and approaches to guide negotiators in working toward a package of modalities (i.e. detailed rules and commitments) in the three main areas of the negotiations - export competition, domestic support and market access.

  • The framework on agriculture clearly points in the direction of a more level international playing field. It gives us scope to continue pursuing our negotiating objectives and reflects a number of ideas that we have put forward (mostly as parts of coalitions such as G20, Cairns Group or G33 or sometimes along) over the course of the negotiations.

On the basis of the framework, negotiations intensified over the course of 2005. However, notwithstanding progress achieved in some areas (e.g. aspects of domestic support and export competition) it became clear that WTO Members would not be able to agree to a full set of modalities in time for the next WTO ministerial conference in Hong Kong, as originally planned.

The Sixth WTO Ministerial Conference (December 2005)

Pakistan participated in the Sixth WTO Ministerial Conference in Hong Kong from December 13-18, 2005. In Hong Kong, WTO Members adopted a Ministerial Declaration, which reflected progress achieved on several issues important to Pakistan’s agricultural sector. While outcomes from the ministerial conference were not as ambitious as Pakistan would have liked, the Declaration did include several commitments which are significant to Pakistan (e.g. an agreement to eliminate export subsidies by the end of 2013), and provided scope for Pakistan to pursue its objectives in key areas.

The Hong Kong Ministerial Conference established the groundwork for next steps in the WTO agriculture negotiations as WTO Members agreed to establish modalities in the three main areas of the agriculture negotiations by April 30, 2006, and further agreed to submit comprehensive draft schedules by July 31, 2006.

The WTO Doha Round - an Impasse in the Negotiations

In the winter and spring of 2006, WTO Members worked hard to reach agreement on modalities for agriculture; however, this timeframe proved too ambitious, and on April 24th, WTO Director General Pascal Lamy confirmed that the April 30th deadline would be missed.

Subsequently, an urgent, continuous and intensive negotiating process was launched. WTO Members re-doubled their efforts to resolve outstanding issues. The Chair of the Agriculture negotiations, Mr. Crawford Falconer, released a number of working papers, including a text outlining draft modalities in all three pillars, in an effort to move the negotiations forward.

On June 30 -July 1, 2006, WTO Members met at the ministerial level in Geneva to try to reach agreement. Unfortunately, the negotiations did not reach a sufficient level of detail to allow progress to be achieved. Following an intensive meeting of the G-6 on July 23 - 24, Mr. Lamy announced that the G-6 Members (U.S., EU, India, Brazil, Japan and Australia) were unable to bridge their differences and that gaps between negotiating positions remain too large to resolve at this time. The negotiations had reached an impasse on the issues of market access for agriculture and non-agricultural products and agricultural domestic support.

On July 27th, 2006, Director General Pascal Lamy made a formal recommendation to the WTO General Council to suspend the WTO Doha Round until further notice.

On November 16, 2006, following a period of increased informal discussion among WTO Members on the key stumbling blocks in the negotiations, WTO Director General Lamy obtained support from the WTO membership for technical discussions on the Doha Development Agenda to resume across all areas of the negotiations, including agriculture. Pakistan is very engaged in these activities and continues to work with other WTO Members in efforts to move the negotiations forward.

On January 27, 2007, Ministers from nearly thirty WTO Members (including Pakistan) met in Davos, Switzerland for an informal meeting concerning the WTO Doha Development Agenda negotiations. Ministers at Davos clearly expressed renewed commitment to put the negotiations back on track, recommending that WTO Director-General Pascal Lamy immediately re-launch full-scale negotiations.

Since then progress in each area of negotiations and major obstacles are outlined below: 

                                                                                                            

            CURRENT STATUS OF NEGOTIATIONS 
 

Market Access 

  • Although there is a strong convergence on the G-20 bands and thresholds, but the positions on the level of cuts is as divergent as ever.  The EU had given indications of ‘topping up’ their offer in Market Access to the tune 50%, but nothing has so far been explicitly proposed by them. On the other hand the US is not even agreeable to the 54% average tariff cuts proposed by the G-20, which according to them does not deliver the Market Access that they desire. On the top tier cut G-20 and Cairns group have given a figure of 75% to which EC and G-10 have not agreed and they do not want to go beyond 60%. US has asked for 85% cut in top tier. For the developing countries tariff cut the formula given by G-20 is considered to be the acceptable outcome for developing countries however US and EC have certain reservations regarding the tier structure. Pakistan aligns with the G-20 and Cairns group on this issue.
  • Regarding the Sensitive products; the discussions are still inconclusive as to the selection and treatment. There was a movement towards a ‘hybrid approach’ to TRQ expansion whereby both; the current level of TRQs and the domestic consumption level of the product would be used as the basis of expansion. The U.S, Cairns Group, G-20 are pushing for meaningful expansion through an increase of 5%-6% of domestic consumption in the TRQ of the concerned product, whereas the EU and G-10 want the current level of the TRQ to be taken as the basis for expansion. However lately the EC has agreed to take domestic consumption as base for expansion but they are insisting on 2-3% expansion.
  • The question of number of sensitive products is still contentious. Pakistan would like to see minimal numbers of sensitive products to be designated by developed countries and thus had been supporting the figure of 1% of tariff lines as the. Nevertheless, given the wide gap between this and 15%, proposed by the EU and G-10, it seems highly unlikely that there could be agreement on either of the two proposed numbers. It has recently been observed that and number around 4% is the landing zone. It is the treatment of the Sensitive products which needs to be carefully looked at.
  • The Tariff capping aspect of our G-20 proposal ( 100% for developed and 150% for developing countries) has acceptance from the US, EU and the Cairns Group but certain groupings like the ACP and the G-10 countries are averse to the idea of a cap on tariffs.
  • On SSM; there remain sharp differences on the trigger and scope or products to be covered by the mechanism. The G-33 proposal covering all products and a 105% volume trigger is being criticized by developed as well as some developing countries as being too broad and defensive in operation. The members of G-33 ensured (during the Room E meetings) that the SSM will not become permanent market access barrier and it will not be invoked 100s of times. The Argentina, Paraguay and Uruguay (APU) have proposed a strict position on SSM with tougher benchmarks and lesser remedies than the G-33 proposal.
  • Regarding Special Products (SPs); the G-33 proposal of at least 20% tariff lines to be designated at SPs has been criticized by developed and some developing countries as being a virtually ‘market closing’ proposal. US initially proposed only few tariff lines to be designated for SPs which was clearly and loudly criticized by developing countries. Pakistan presented a middle ground proposal on SPs according to which the SPs would be selected based on an indicator based approach but indicators would be substantiated by relevant data. The chair (in his recent paper) proposed a number of 6-8% with transparent indicators backed by verifiable data. However G-33 is now working on an indicator based approach and the number of SPs would be derived from these indicators.
 

Overall Trade Distorting Domestic Support 

  • There is a strong convergence and implicit consensus on the thresholds of the formula for reductions i.e. US $ 0-10, 10-60 and > 60 billion.
  • No consensus yet on the cuts in each band. The range of cuts proposed by different Members i.e. 31%-70 %( EU), 53%-75 %( US) and 70%-80 %( G-20) respectively are too varied. The G-20 and Cairns Group are pushing for the highest levels in the range of cuts as per the G-20 proposal.
  • There remain clear divergences on the issue of the base period for the calculation of the overall base amount of trade distorting domestic support. The US and EU have proposed years 2000 – 2004, where in the spending was highest. The G-20 and Cairns are vying for 1995-2000 being a more representative period.
  • In recent G-4 meetings US offered a figure of USD 17 billion in OTDS while G-20 is asking for USD 12 billion thus the gap remains large. It is estimated that US may come around USD 15 billion if other elements are suitable for them.
  • Pakistan wants effective and real reduction in OTDS and aligns with G-20.
 

Aggregate Measure of Support (AMS) 

  • Regarding reduction commitments in AMS, there is a strong convergence on the G-20 proposal on thresholds and cuts i.e. US$ billion 0-15, 15-25, >25 and 60%, 70%, 80% respectively. Agreement on these needs to be locked in.
  • The question of the base period also needs to be resolved, in a manner consistent with the approach in the overall trade distorting domestic support.
  • The matter of the product specific caps in the AMS still have divergences, especially on the question of the base period for product specific AMS. The US is insisting on the years 1999-2001wherein it had the highest spending, whereas the Cairns Group and the G-20 want a more representative period in order to ensure that cuts are undertaken by the subsidizers in the actual levels of spending.
 

Product specific and non-product specific de minimis 

  • The proposed range of cuts for developed countries is between 50% and 80%. The G-20 and Cairns support the higher figure being the most desirable.
  • For developing countries; the G-20 proposal that developing country Members with no AMS entitlements shall be exempt, has broad consensus.
 

Blue Box 

  • Clear divergences exist on the interpretation of the Framework Agreement, specifically on the question of whether new disciplines are required for the ‘New’ or the ‘Old’ Blue Box.
  • US and EU have proposed (and agreed) for a shrinking of the current 5% ceiling to 2.5% on the understanding that no further disciplines or criteria will be established in this Box, whereas, the G-20 and Cairns are of the opinion that a mere shrinkage of the spending limit will continue to facilitate box shifting practices and concentration of support in a few products.
 

Green Box 

  • The US and EU are still not willing to depart from the existing disciplines, although they have indicated that the concept of ‘fixed and unchanging’ base period for payments under this Box, is being considered by them.
  • On the question of the ‘development friendly’ provisions of the Green Box, as proposed by the G-20, the discussions are moving towards some positive results.
 

Export Competition 

  • The Schedule for elimination of export subsidies is being considered, whereby the G-20 has proposed that at least 50% subsidies be eliminated at the start of the implementation period and an overall reduction of 80% by 2010, with full elimination by 2013, as agreed at Hong Kong. The biggest hurdle is the question of ensuring parallel elimination of subsidies element of Export Credits and guarantee programs, STEs and Food Aid.
  • Regarding Export Credits, Export Credit Guarantee and Insurance programs; although there is agreement on the elimination of programs of more than 180 days, the U.S is seeking certain exceptions to this principle, whereas the EU is totally averse to the idea of any such exceptions. There seems to be little convergence on the disciplines for programs of less than 180 days. The most contentious issues revolve around the question of conforming the terms of export credits to those in commercial practices including Self financing repayment terms. Pakistan aligns with Cairns group proposal on this issue.
 
  • A regards Food Aid; there is more convergence on the concepts of fully grant form, non-re export and limited monetization in the context of emergency food aid. But, the disciplines for non-emergency food aid are still the subject of divergent views, specifically on the question of fully grant form, monetization, needs assessment and transition from in kind to fully cash form.
 
  • The discussions on Exporting State Trading Enterprises (ESTEs); is still fundamentally revolving around conceptual understandings, wherein the EU and the US are of the opinion that the Hong Kong declaration makes it explicit that the future use of monopoly powers is a trade distorting practice and therefore should be eliminated along with other subsidies. Canada, Australia, New Zealand and China do not agree with the above and are of the opinion that only the three practices i.e. export subsidies, government financing and the underwriting of losses need to be eliminated.
 
 

OTHER ISSUES 

Tariff escalation 

  • The developing countries are of the opinion that the issue of tariff escalation should be addressed through a formula, whereby additional across the board reductions in tariffs of semi-processed and processed products should be required to be undertaken. The EU and G-10 insist that such cuts should only be applied to tariff lines of special interest to developing countries. Pakistan is keen on this issue and following it actively so that we can get better market access of our value added agricultural exports.
 
 

Tariff simplification 

  • Most developing countries; including the G-20 and the Cairns Groups are of the position that all bound duties on agricultural products should be expressed as simple ad valorem duties. The EU and the G-10 are insisting that only highly complex forms of bound duties, such as complex matrix tariffs, shall be simplified.
 

Tropical and diversification products 

  • Most developing countries are insisting on fullest liberalization of trade in tropical and diversification products, meaning; elimination of tariffs or application of highest cuts on such tariffs and the non designation of these as sensitive products. The EU and the G-10 countries are not agreeable to this approach and have proposed a formula approach whereby certain tariff lines will be reduced to zero while others would be subject to either a cut above the tier that a product would normally fall in or the normal cut agreed upon. They are also of the opinion that they should have the option to self-designate the tariff lines in question and that these may be declared as sensitive or special products and should be treated as such.
  • The proposal by Cairns group is centerpiece of the discussions on this issues however EC and G-10 want to take Uruguay round list as the basis. Pakistan aligns with the Cairns group proposal because almost all of the products of our export interest are in the cairns group list.
 
 

Geographical Indications (GI) 

  • The EU has again reiterated the paramount importance of this issue due to its place in the EUs quality policy and want that the protection available for wines and spirits under the TRIPS Agreement should be extended to all products and that a multilateral system of notification and registration should be established.
  • The U.S along with the Cairns Group and the G-20 are of the firm opinion that this issue is already being discussed in the TRIPS Council and the Special Session of the TRIPS Council and that it should not be linked with the negotiations on Agriculture.
 

Preference erosion 

  • The EU has proposed that given the importance of long standing preferences to preference receiving countries the tariff reduction on those products should be implemented over an additional period to be agreed upon and the first year of the implementation should be deferred by an agreed number of years.
  • Most developing countries, especially the non preference receiving countries are of the opinion that this is a cross cutting issue and that the negotiations on this issue in Agriculture must be cognizant of the negotiations on this issue in the NAMA negotiations. In any event, longer and deferred implementation periods are not acceptable.
 

Cotton Initiative 

  • As agreed in the July Framework, members are willing to deal cotton as standalone and solve the issue around C-4 proposal. EC has some problems with domestic support on cotton due its constitution of EC whereby two of its members were guaranteed for support on cotton during EC accession process. Pakistan has great interest in ambitious outcome of cotton and supports the C-4 initiatives.