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Tariff Negotiations i n Agriculture: Seeking a Compromise

This symposium explores the difficulties and objectives of market access in agriculture tariff negotiations, discussing different formulae and principles for achieving compromise. It also addresses the challenges of balancing ambition and flexibility.

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Tariff Negotiations i n Agriculture: Seeking a Compromise

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  1. Tariff Negotiations in Agriculture: Seeking a Compromise WTO Public Symposium Geneva, 26 May 2004 Panos Konandreas, FAO Geneva Office www.fao.org and www.faologe.ch pkonandreas@unog.ch

  2. Outline: Seeking a Compromise • the pivotal importance of market access • why difficulties on market access • operational objectives on market access • how different formulae score vs these objectives • basic principles on how to achieve objectives • balancing ambition and flexibility: bring in “economics” • implications for the Framework text pkonandreas@unog.ch

  3. Market access: make or break issue • market access most controversial issue from the very beginning • probably 75% of negotiating time spent on it • make or break issue and not only in agriculture • Chair of SSCoA: no convergence on blended formulaor any other approach • “2/3” framework by July? unlikely • compromise in market accessis imperative for meaningful framework text pkonandreas@unog.ch

  4. One of the difficulties:lack of clarity • proposed formulaedid not spell out what would be achieved and how different members affected • much left to interpretation • e.g. blended formula thought to be compromise • but, infinite number of possible outcomes depending on parameter choice • same formula interpreted as overly ambitious or too flexible, depending on the assumptions made • “blend” thought to be the main advantage, but also became the main drawback • uncertainty not conducive to compromise pkonandreas@unog.ch

  5. Another difficulty:focusing on the “tool” • proposed approaches placed too much emphasis on the formula (“tool”) to be used • this led to outright likes and dislikes of certain “tools” (UR vs Swiss is typical) • inflexible positions on including or avoiding a particular “tool” w/o regard to possible effects • too little emphasis on defining in concrete terms the basic principles of what is to be achieved – the shape of the final outcome pkonandreas@unog.ch

  6. Fundamental difficulty: ambition vs flexibility • Para 13 of the Doha Declaration • long-term objective market-oriented trading system through fundamental reform • “substantial improvements in market access” • SDT for developing countries • NTCs will be taken into account • contradiction embedded into the Doha language • balancing ambition and flexibilitymain issue during the long negotiating process • extremely difficult to arrive at operational set of objectives that accommodate both pkonandreas@unog.ch

  7. Operationalizing Doha:generally understood objectives • substantial reduction of the average level of tariffs • reduction of tariff peaks (and tariff escalation) • accommodation of country-specific concerns on particular products: • for developing countries expressed as SPs on the basis of food security and rural development considerations • for developed countries expressed as “sensitive” products, inter alia on NTC grounds • SDT for developing countries, implying less onerous commitments compared to those of developed country members pkonandreas@unog.ch

  8. The starting point:initial tariff profiles pkonandreas@unog.ch

  9. Initial tariff profiles :main patterns • average bound tariffs of dev’d generally less than dev’g • spread of bound and applied for dev’d several-fold that of dev’g • max applied tariffs for dev’d high; equal to bound • opposite for dev’g; significant gap between bound and applied (“water in tariffs”) • tariff profiles of dev’d highly skewed with many tariff lines at zero or single-digit levels and another set at very high levels • these differences have implications on the relative impact of different tariff cut formulae pkonandreas@unog.ch

  10. UR formula:too much flexibility • how does it score in achieving the four objectives? • yes • marginally - can actually increase relative tariff peaks (spread between low and high tariffs) • yes • yes • fails to achieve effective market access, which essentially would come from reducing tariff peaks • Opposed by those members that expected substantial market access and had preference for a Swiss-type formula pkonandreas@unog.ch

  11. Swiss formula:harmonizing tariffs pkonandreas@unog.ch

  12. Swiss formula:too much ambition • how does it score in achieving the four objectives? • yes, but highly uneven both within dev’d and between dev’d and dev’g • yes, dramatically for both dev’d and dev’g • not at all • no; in fact the opposite, with average cuts for dev’g much greater than for dev’d • Swiss fails in two key objectives: • concerns with sensitive and special products • SDT for developing countries • it accomplishes what the UR did not and vice versa • hence, need for middle ground pkonandreas@unog.ch

  13. Harbinson formula:first attempt to compromise pkonandreas@unog.ch

  14. Harbinson formula:too ambitious? • How does “banded” formula score? • Yes • Yes • No (possibly Yes for developing countries with the envisaged SP provision) • Yes • tougher than pure UR and less ambitious than pure Swiss • rejected by both sides of the spectrum but more from those favouring UR • 70+ broadly-based alliance against it • major dividing issue in March 2003 modalities deadline pkonandreas@unog.ch

  15. Blended formula:second attempt to compromise pkonandreas@unog.ch

  16. Blended formula:outcome highly unpredictable • difficult to gauge in relation to objectives: • yes, but highly uneven within dev’d and between dev’d and dev’g • no; to some extent if the UR category is very narrow • yes, if the UR category is wide enough • no; because of initial tariff profile, dev’g would make higher cuts of bound tariffs • everything depends on parameters assumed • proponents hoped that ambiguity could foster a compromise with much to be negotiated later • sceptics felt that the uncertainty would prejudice a negotiated outcome against their interests • essentially what proponents thought as the main advantage of blended formula (flexibility it offered in its application by individual members) also became its major drawback pkonandreas@unog.ch

  17. Seeking a compromise:basic principles • unrealistic to expect a complete specification of the tariff reduction formula at this stage, but • some degree of certainty/clarity essential for an approach to receive general acceptance • what clarity? Focus not on the ‘tool’ but on the shape of the final outcome: • clarity on reduction commitments • clarity on SDT provisions • clarity on flexibility vs ambition pkonandreas@unog.ch

  18. Seeking a compromise:clarity on reduction commitments • Rejection of some formulae because of substantial differences in the resulting overall average reduction between members • clarity is needed on what would amount to “substantial improvements in market access”, in terms of the overall average tariff reduction level • would that be comparable to that attained during the UR or higher average cut? • would it be the same for all members (aside from SDT differences, see below)? pkonandreas@unog.ch

  19. Seeking a compromise:SDT provisions • UR: SDT concerned levels of reduction commitments and implementation periods • need to clarify how differentiation of additional provisions envisaged would apply in practice • general principle could be a “differentiated symmetry” whereby all commitments by dev’g are by, say 1/3, less onerous • the case for different formula is weak • but, application of same formula with different parameters would be essential in order for a formula to yield desired differentiated outcomes pkonandreas@unog.ch

  20. Seeking a compromise:flexibility at a price • remove the uncertainty on how flexibility would play in practice • introduce some “economics” into the specification of flexibility • supply side: a price is placed to what is being offered • demand side: allow the demandeurs to get the flexibility they wish by paying a fair price for it pkonandreas@unog.ch

  21. Flexibility at a price:key specification elements • first element is notion of a member-specific “flexible maximum” or “ceiling” tariff based on the tariff profile of each member; this level is relative and flexible in the sense that could be exceeded at a cost • second element is to introduce a measure of the effort made (or not made) in complying with that maximum and institute a reward (and penalty) proportional to that effort pkonandreas@unog.ch

  22. Flexibility at a price:calculating non-compliance Initial tariff for product x Full compliance Partial compliance Final tariff for product x Residual non-compliance “Ceiling” tariff Overall average final tariff pkonandreas@unog.ch

  23. Flexibility at a price:how it works pkonandreas@unog.ch

  24. Flexibility at a price:what it achieves • takes into account diff. in tariff profiles and relative effort made to reduce tariffs of sensitive products • designation of sensitive products not necessary; avoids contentious “self-declaratory” option • automaticity in the penalty (additional TRQ) to be applied in cases of non-compliance • build-in incentive to reduce tariffs of sensitive products as penalty is proportionally reduced • build-in phasing-out mechanism (product by product basis); provision does not become a permanent feature pkonandreas@unog.ch

  25. Seeking a compromise:implications for Framework • while ambiguity is desirable at this stage of the negotiations, some minimum certainty is also necessary • but certainty not by focussing on a formula: subject to interpretation and counterproductive at this stage • Framework text should focus on better defining the general shape of the final outcome in terms of: • clarity in reduction commitments • clarity on SDT provisions • clarity on flexibility allowed and associated penalties • these principles can be translated into legal language in Framework text by using the approach suggested • have some ideas on this, but better leave it to the negotiators! pkonandreas@unog.ch

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