WTO Market Access Disciplines

The market access pillar is arguably the most complex of the Doha Round negotiations on the three pillars in the WTO Agriculture Agreement. This is not only because of the need to draft an agreement which has a sufficiently high level of ambition in terms of overall tariff cuts while allowing for various exceptions to the standard formula cuts to accommodate the sensitivity of particular products in particular countries, but also because of the need to take into account conflicting developing country interests when it comes to developed country tariff cuts. These revolve around the interactions between tariff escalation, tropical products and preference erosion.

This means that not only is the headline reduction commitment important, but also the pattern of cuts across commodities. This will be mainly determined by the tier into which each commodity’s tariff falls, but it will also be determined by the interaction of sensitive product status, speical products (for developing countries), tariff escalation cuts, tropical product cuts and preference erosion products.

Tariff Reductions – A tiered formula

Average bound tariffs still range between 35-50% for many agricultural products with much higher tariffs on particular commodities.

It was accepted from an early stage in the Doha Round negotiations that higher tariffs would be reduced more than lower ones. The Hong Kong Ministerial Conference in 2005 agreed a formula for tariff reductions and final bound tariffs will be reduced using this four-tiered formula.

Developed country Members will reduce their final bound tariffs in equal annual instalments over five years. Tariff reductions will vary between 50% (where existing tariffs are below 20%) and 66-73% (still undecided, for existing tariffs greater than 75%). The average cut on final bound tariffs for a developed country Member must be at least 54%.

Developing country Members will reduce their final bound tariffs in equal annual instalments over eight years, with reductions 2/3rds of those agreed for developed countries. The maximum overall average cut on final bound tariffs any developing country Member shall be required to undertake as a result of application of the formula inclusive of the treatment for Sensitive Products is 36%.

Sensitive Products

Each developed country will have the right to designate up to 4-6% (still undecided) of tariff lines as ‘Sensitive Products’. Where such Members have more than 30% of their tariff lines in the top band, they may increase the number of Sensitive Products by 2%. Developing country Members shall have the right to designate up to one-third more tariff lines as ‘Sensitive Products’. The number of tariff lines entitled to seek exemption as a sensitive product is a key determinant of the level of ambition of the Doha Round.

Sensitive products can benefit from a lower tariff reduction than would otherwise be warranted by the tier into which the tariff falls. Members may reduce the applicable tiered reduction percentage in final bound tariffs by one-third, one-half or two-thirds of the reduction that would otherwise have been required.

To provide for some increase in market access even for sensitive products, access for specific additional quantities at relatively low tariffs must be provided in the form of a tariff rate quota (TRQ). The precedent that sensitive products must somehow 'pay; for lower than formula tariff cuts was set in the Uruguay Round. TRQs will be expanded under Doha, depending on the size of the deviations for sensitive products from their bound tariff rates, with developing country commitments 2/3 that of the developed countries.

Special Products

Developing countries will have the ability to designate a number of special products, based on the criteria of food security, livelihood security and rural development needs. These products will be subject to more flexible tariff treatment. The July 2008 modalities point to a maximum entitlement of 20% and a minimum entitlement of 8% of tariff lines available for self-designation as Special Products, although the exact proportion has yet to be agreed. There will also be a overall average cut of 15% achieved with a minimum of 12% and a maximum cut of 20% on each tariff line, with the possibility that up to 40% of tariff lines shall be exempt from any cut.

Special Safeguard Mechanism (SSM)

Developing countries have long argued that the existing WTO safeguard provisions are not effective for them and they have sought a special safeguard mechanism to respond to import surges and low world market prices in a more flexible and easy-to-administer manner. The Framework Agreement in 2004 indicated that a special safeguard mechanism (SSM) would be established for use by developing country members of the WTO. The SSM shall have no a priori product limitations as to its availability; however, it shall not be invoked for more than [3-8] products in any given twelve month period. A price-based and a volume-based SSM shall be available.

Tariff Escalation

Tariff escalation is where an importing country protects its processing or manufacturing industry by setting lower duties on imports of raw materials and components, and higher duties on finished products. The July 2008 modalities provide that tariffs on processed products will be reduced by more than on primary products, thus reducing the degree of tariff escalation. The modalities define a list of primary and processed products. Processed products will be cut, according to the tiered formula, at the rate in the next highest tier, instead of taking the cut that would otherwise apply. These supplementary cuts will be moderated if the difference between the processed and primary product tariffs after the application of the normal tariff formula is less than 5%, or if doing so would reduce the tariff for the processed product below that applicable to the primary product. Tariff escalation treatment will not apply to ‘sensitive products’

Tariff Simplification

In contrast to non-agricultural products where simple percentage (ad valorem) tariffs are the tariff, agricultural tariffs are often quite complex combining specific and percentage elements. A final agreement has yet to be reached, but is appears possible that between 90-100% of all bound tariffs shall be expressed as simple ad valorem tariffs, and that this change would take effect from the first day of entry into force of the agreement, with phasing in arrangements for developing countries and countries with the biggest changes to make. As nearly all the EU’s agricultural tariffs are mixed or compound tariffs, this will represent a substantial overhaul of the EU’s tariff structure. Specific tariffs bear more heavily on low-value exports typically exported by developing countries, so this would be of benefit to developing country exporters.

Tropical vs Preference Products

Developing countries have sought more rapid tariff reductions on 'tropical' products of particular interest to them. At the same time, other developing countries which benefit from preferential access for their agricultural exports are worried about the erosion of the value of these preferences if tariffs are reduced too suddenly. They have sought delays in tariff reductions for preference erosion products. The problem is that many products that can be considered as ‘tropical’ are also those for which many poor countries have preferential market access. There is thus a conflict between those developing countries that want to delay tariff cuts on these goods in developed countries as long as possible, and other developing countries that have sought fast and steep reductions in import duties on the very same tariff lines under the Doha Round mandate to achieve the ‘fullest liberalisation’ of trade in tropical products.

Part of the deal that resolved the banana dispute between the EU and Latin American banana exporters in December 2009 was to agree a proposed list of products on which preference-giving countries would reduce tariffs more slowly which would potentially resolve this conundrum and thus also a list of tropical products. However, some WTO Members which did not participate in elaboration of these lists continue to have concerns about how thus agreement would affect their interests.

Links:

WTO Website – Market Access
Specific section of the WTO Agricultural Portal that presents an explanation of market access issues in the WTO

Resources:

CTA Technical Centre for Agricultural and Rural Cooperation, WTO agreement on agriculture: Implications for the ACP, Agritrade Executive Brief, 2010
Provides an update on the state of play of WTO negotiations as of April 2010 looking particularly at the implications for ACP countries.

Gifford, M. and Montemayor, R., An Overview Assessment of the Revised Draft WTO Modalities for Agriculture, International Centre for Trade and Sustainable Development
Provides an overview assessment of the implications of the revised modalities text in terms of its ambition and balance as viewed from the perspective of both developed and developing countries, and identifies the key issues which will likely require ministerial decisions.