Crawford Falconer, chairman of the agricultural talks for the WTO Doha Round, followed up his release in late December of four working documents on domestic supports with release on January 4 of eight documents on market access. Progress is being made on market access, but the large number of nuances makes it hard to grasp what the final outcome will be.
The easiest market access issue to understand is the tiered formula for tariff reductions for agricultural products for developed countries. Reductions in bound ad valorem equivalent tariffs are proposed at 48-52 percent for tariffs of 0-20 percent, 55-60 percent for tariffs of 20-50 percent, 62-65 percent for tariffs of 50-75 percent and 66-73 percent for tariffs of greater than 75 percent. Developing countries would make two-thirds of the reductions of developed countries with wider bands up to 130 percent. These are the same reductions proposed by Chairman Falconer in July of 2007. If these tariff reductions were the only item in the market access debate, it would be easy to compromise at the midpoints of the reduction ranges and go home. The tariff reductions fall short of what the Bush Administration had originally proposed and what would be good for exporting and importing countries, but the tariff reduction debate stalled out two or three years ago.
The larger battle is about the exceptions to the basic tariff reductions. Under the 2004 framework agreement that outlined the points to be negotiated, developed and developing countries are allowed to identify politically sensitive products that cannot take the standard reductions in tariff rates. Every country has some of those, and the debate is over how many products and how much deviation from the standard tariff reductions. In addition, developing countries are allowed to designate special products that would also be shielded from the full impact of tariff reductions. Progress has been made, but uncertainty of outcomes remains until the pieces are put together.
The Falconer working document on sensitive products puts the range of possible outcomes at 4-6 percent of total tariff lines or dutiable tariff lines as sensitive products for developed countries. That is far higher than the 1 percent proposed by the U.S., but much lower than the 15 percent proposed by the EU which would have made totally ineffective the general tariff reductions. Developing countries would be allowed to name an additional one-third more tariff lines as sensitive. Tariffs would be reduced by one-third, one-half or two-thirds of the scheduled reduction for that tariff line.
In return for having the sensitive product designation, countries would be required to increase market access for that product through the use of tariff rate quotas (TRQ). If the general tariff rate cut is reduced by two-thirds, market access with an increased TRQ would need to be increased by 4-6 percent of domestic consumption. A one-half reduction in the tariff cut would require a market access increase of 3.5-5.5 percent of domestic consumption. A one-third reduction in the tariff cut would require a 3-5 percent increase in access. If existing TRQs account for more than 10 percent of domestic consumption, the increased access would be only 2.5-3.5 percent. Developing countries would be required to provide only two-thirds of the access required of developed countries and self-consumption of subsistence production would not be included in the baseline estimate of domestic consumption.
The special products working document from Chairman Falconer is sketchy. The one certainty is that the number of special product allowed is to be larger than the number of sensitive products. The current consensus on sensitive products is 5.3-8 percent of either all tariff lines or dutiable tariff line. That would put the special products at a likely minimum of 6-9 percent. Beyond that there appears to be little agreement. Falconer suggests that a starting point may be that reductions in the planned tariff cuts would be the same as for sensitive products, keeping in mind that there is no mandate to increase TRQs as for sensitive products. He suggests that 7-12 percent of the tariff lines could be special products with an average tariff cut for all special products of 20 percent with a minimum cut of 15 percent and a maximum of 25 percent. The debate is further complicated by talk of “super-special” products with lower tariff reductions and the possibility of some products with no tariff reductions. Falconer implied there may not be an agreement without that option. An additional option may be to allow for some no tariff reductions in return for reducing the total number of special products for a country and vice versa. Some “transfers” between sensitive products and special products have also been proposed.
The issues on sensitive and special products are hopelessly complicated. To understand the impacts on market access, negotiators will need computers with tariff profiles of each country and informed judgments of how a country would respond to the options for sensitive products and special products.
The easiest response would be to pull the plug on the whole negotiations and go home. The fact that after six years of negotiations some developing countries want some special products to have no tariff reductions at all is an indication of how little progress has been made in understanding the benefits of freer trade. Those government leaders remain beholden to protectionist special interest groups that impoverish their fellow citizens.
Going home now would eliminate the economic good for consumers and producers that can be accomplished by lowering tariffs on the 85-90 percent of agricultural tariff lines that would be covered by the general tariff reductions. The only non-negotiable point should be that no tariff line can have a zero tariff reduction. Everything else should remain open to discussion, no matter how complicated the end product may be.