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Missed WTO deadline a grave disappointment

Missed WTO agriculture deadline a grave disappointment for New Zealand

World Trade Organisation members have missed an important deadline, Trade Negotiations Minister Jim Sutton confirmed today.

Mr Sutton said agriculture reforms were vital to New Zealand, developing countries and others in the WTO. All members were going to have to make much more strenuous efforts to get an ambitious outcome, he said. WTO members failed to reach agreement on the framework for agriculture reform by the 31 March deadline.

He said that, at Doha in 2001, he and fellow WTO Ministers had set an ambitious mandate for the negotiations in recognition that fundamental reform was essential for wealthy industrialised countries and struggling developing countries alike.

"Agriculture is central to the round, and central to the prosperity of developing countries and that of New Zealand. Reform makes sense for everyone. So I'm very disappointed that our trading partners could not find the political will to reach agreement by the deadline."

Mr Sutton said New Zealand, as a member of the Cairns Group of agricultural exporting nations, has been actively pushing for an outcome in line with the Doha mandate, which calls for substantial improvements in market access, the elimination of export subsidies, and substantial reductions in trade-distorting domestic support.

"Chairman Harbinson has put draft modalities on the table that go some way to meeting the mandate. We are ready to negotiate on that text. But some WTO Members, especially the Europeans and Japan, are not prepared to move beyond their old protectionist positions.

"I know that some countries have found it difficult to show flexibility because they are focused on internal policy processes right now. But New Zealand and many others, especially developing countries, are vitally dependent on agriculture. We simply cannot afford to wait. Frankly, the huge levels of agriculture support and protection so staunchly defended by wealthy industrialised countries are a disgrace."

Looking ahead, Mr Sutton said New Zealand remained committed to the process and would be prepared to keep working to improve the Chairman's text.

"We have to keep faith with the level of ambition in the mandate. New Zealand intends to continue to do everything we can to maintain the deadlines and commitments of the wider Doha agenda."

He called for all WTO Members to do the same.

"It is inevitable that there will be a negative impact across the whole WTO Round from this failure. It is in all of our interests to get agriculture back on track as quickly as possible."

Ministers are due to meet again at the 5th WTO Ministerial Conference in Cancún, Mexico, from 10 to 14 September this year. According to the original timetable set at Doha, WTO Members are expected to table draft agriculture commitments in Schedules based on the modalities by that meeting. That is now in doubt.

Background:

WTO Agriculture Negotiations: 31 March: Q&A

Question: What are the agriculture "modalities"?

Answer: "Modalities" is WTO jargon. It means the framework or structure for new agriculture commitments by individual WTO Members ? for example, the formula for reducing tariffs, the approach that will be used to expand tariff quotas or the size of the cut to trade-distorting domestic support.

Question: How long have the agriculture negotiations been underway?

Answer: The negotiations began in March 2001 (under a provision agreed in the last WTO Round), and have since been integrated into the Doha Round launched at Doha, Qatar, in November 2001. The "modalities phase" began in March 2002.

Question: What is the mandate for the negotiations?

Answer: The mandate provides for comprehensive negotiations aimed at substantial improvements in market access; the phasing out of export subsidies; and substantial reductions in trade-distorting domestic support. Special and differential treatment for developing countries is an integral part of the negotiations. Non-trade concerns must be taken into account as provided for in the Agriculture Agreement. Three deadlines were set: the establishment of the modalities by 31 March 2003; the tabling of draft Schedules by the 5th Ministerial Conference (10-14 September 2003) and the conclusion of the Round on 1 January 2005.

Question: What are the main issues in the negotiations?

Answer: The main point of contention has been the level of ambition. While some Members have sought an ambitious outcome consistent with the mandate, other Members prefer a more modest outcome that would leave some distortions in place. While everyone agrees S&D is important, the extent of the special flexibility accorded to developing countries is also controversial. Finally, Members have disagreed over the scope of the negotiations, with some WTO Members seeking to introduce non-trade concerns such as intellectual property and quarantine issues that are not in the mandate.

Question: What is "S&D"?

Answer: "Special and differential treatment" is the flexibility given to developing countries in making new commitments, to allow them to participate fully in the reformed trading system while addressing concerns such as food security and rural development. It has traditionally taken the form of longer implementation timeframes and lower levels of cuts than for developed countries, but can also include dedicated instruments such as a special safeguard mechanism.

Question: What are "non-trade concerns"?

Answer: Non-trade concerns are issues related to, but not directly involved in, agriculture trade. The mandate provides for non-trade concerns to be taken into account as provided for in the Agriculture Agreement. The Agreement covers "economic" issues such as payments to farmers, but not "technical" issues such as standards. The EU, other European countries and Japan have sought to introduce non-trade concerns such as food geographical indications, precaution/food safety, consumer labelling and technical standards into the negotiations. New Zealand believes that they cannot be dealt with in the agriculture negotiations.

Question: Who are the biggest protectionists?

The EU, Japan and the United States are the biggest subsidisers. In recent years, the EU has spent over US$70 billion each year on trade-distorting subsidies, Japan roughly US$7 billion and the United States roughly US$17 billion. Very high tariffs (ranging from 100 percent up to nearly 1,000 percent) are found throughout the OECD but particularly in Japan, the EU, Switzerland and Canada. Combined total OECD agriculture support and protection was thus around US$310 billion last year. New Zealand does not use any trade-distorting support and our agriculture tariffs are very low (below 6 percent).

Question: What role do developing countries play in the negotiations?

Answer: Developing countries form the majority of the WTO Membership. They are increasingly vocal and active, reflected in the title of the Round (the Doha Development Agenda). Developing countries are a diverse group, ranging from "least developed" countries such as the poorest Africans through to comparatively wealthy countries such as Korea, Mexico, Singapore and Brazil. Agriculture reform is particularly important for developing countries because of agriculture's large share in GDP and employment, and its importance for food security, rural development and poverty alleviation.

Question: What is the Cairns Group?

Answer: The Cairns Group is 17 agricultural exporting nations from Oceania, South-East Asia, Africa and the Americas. All but three (New Zealand, Australia, Canada) are developing countries. Australia is the permanent Chair of the Group. The Group is committed to fundamental reform to achieve a fair and market-oriented trading system.

Question: Who has been responsible for the blockage in agriculture?

Answer: The positions of WTO Members have been far apart throughout the negotiations. Most countries (the Cairns Group, the United States and many developing countries) have focused on an outcome consistent with the Doha mandate through ambitious reforms. Many European countries and Japan, by contrast, argue for a more modest outcome that would give them flexibility to keep protecting politically-sensitive sectors. A further complication is that the European Union's focus is on internal policy reforms, which has limited its willingness to engage in the WTO.

Question: What happens next?

Answer: Agriculture Negotiations Chair Stuart Harbinson has described the failure to establish modalities by the deadline as "very serious". He has indicated that there will be an on-going informal process in an attempt to narrow differences on technical issues.

Question: What is the Ministerial meeting at Cancún?

Answer: The 5th WTO Ministerial Conference, involving all 146 WTO Ministers, will take place in Cancún, Mexico, from 10 to 14 September 2003. Issues on the agenda will include decisions on launching negotiations on investment, competition and aspects of intellectual property and trade & the environment. Ministers will also consider progress in other negotiations, including agriculture, services, industrial market access, and a range of "rules" and other issues relating to subsidies, dispute settlement, government procurement and trade facilitation.

Question: Will the agriculture failure have an impact on the rest of the Round?

Answer: It is inevitable that a failure in agriculture will have an impact elsewhere. The Round was designed to deliver an outcome that is balanced across the range of issues on the agenda. Agriculture is central to that list. Some WTO Members may accordingly be reluctant to show a high degree of flexibility in other parts of the Doha agenda, including on decisions to launch negotiations in new areas, until more progress is made in agriculture.

Question: What are the potential benefits for New Zealand from the agriculture negotiations?

Answer: Agriculture accounts for over 50 percent of New Zealand's merchandise exports, nearly 15 percent of GDP (including the processing sector) and 16 percent of employment. Improvements in market access opportunities and the elimination of export subsidies and other distorting support will bring direct and significant benefits to New Zealand's dairy, meat and horticulture sectors, in the order of hundreds of millions of dollars per year. The negotiations also pose some risks to New Zealand through the potential for the creation of new barriers to trade through spurious non-trade concerns.

Question: Why is New Zealand continuing to participate in other negotiating areas such as services if no progress is being made in agriculture?

Answer: We take the Doha mandate seriously and we will continue to participate in good faith. We have, for example, submitted New Zealand's offer in the services negotiations in accordance with the mandate. The negotiations are too important to us and developing countries to be held hostage by a small number of developed countries that seek to delay reforms in their own agriculture sectors. Nevertheless other WTO Members will have to recognise that the failure to establish deadlines will have serious implications for work in other areas. In the Doha negotiations ? as in the Uruguay Round ? nothing is agreed until negotiations conclude on all subjects.

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