Jan 22, 1987


GENEVA, JANUARY 20 (IFDA/CHAKRAVARTHI RAGHAVAN) – The United States and EEC appear to be moving in the direction of reaching an understanding on the broad approaches to negotiations on agricultural trade, including on national policies, but are still far apart on problems of procedure and presentation,

This is the assessment of diplomatic sources after Monday's meeting here of the so-called Morges Group, and informal group on agriculture of some ten countries, named after Morges, a town near Geneva in Switzerland, where the group first met.

The group includes Argentina, Australia, Brazil, Canada, EEC, Finland (for Nordics), India, Japan, New Zealand, and the U.S.

Diplomatic sources said that while some participants felt that the meeting had failed to send "positive signals" to agricultural producers, others agreed that positive foundation for negotiations had been laid, that national policies where more and more going in the direction of market-oriented approach, and that there was more willingness on all sides to work for solutions to the problems facing agriculture.

The Morges Group originally came together in the context of the 1982 GATT work programme and the GATT Committee on Trade in Agriculture (CTA), as an informal group to help remove some of the road-blocks in formulating the negotiating issues in agriculture.

It has long been dormant, its last meeting having being held in July 1985.

It has now been revived at the instance of the U.S. and EEC. The group is expected to meet more frequently in future, to serve as an informal forum for ironing out difficulties in negotiations on agriculture in the new GATT round.

Monday’s meeting is reported to have been devoted consider problems of negotiations in the area of agriculture in the Uruguay round and both matters of substance and procedure are reported to have been discussed.

It was attended by top policy-level officials of some of the key countries and protagonists.

The meeting perhaps also served as a cover for bilateral talks between the U.S. and EEC. This is apart form their negotiations over their dispute on U.S. grain exports to the EEC, arising out of the loss of markets for U.S. agricultural exports following Spain’s accession to the EEC.

The U.S.-EEC negotiations on that dispute on Sunday did not produce any results, but some of the participants of the "Morges Group" appear to have come away with the impression that both sides are striving to find some solution, and avoid an outbreak of trade war that neither can win. Such a war would cast a dark shadow over the entire efforts to get the Uruguay round negotiations started.

The final efforts in resolving the U.S.-EEC dispute will be undertaken later this week in Washington where top EEC negotiators led by Director-General of external relations, Willy De Clerc, and his advisors will be meeting the U.S. trade representative Clayton Yeutter and other U.S. officials.

The U.S. is demanding that, as compensation for loss of markets for its grain in Spain because of application of the EEC’s common agricultural policy, the EEC should import four million tonnes of corn, of which imports form the U.S. would be about three million tonnes.

The EEC, while conceding compensation to U.S., is willing to allow only 1.4 million tonnes arguing that the loss to U.S. in grain exports is made up by the new opportunities opened up for its manufactured exports because of the lower EEC tariffs on manufactures, while previously Spain had high tariffs on such imports.

The U.S. has not so far accepted this argument, insisting that a larger part of the compensation for damage to its agricultural exports worth 400 million dollars should be in form of agricultural trade.

Other exporters who have lost the Spanish market, like Argentina is waiting to see how the U.S.-EEC dispute is settled. Argentina for example has said that it has lost by way of exports (corn, maize, fishing products, etc.) to Spain 180 million dollars.

Participants in the Morges Group said that while they had no inkling of the nature and progress of the U.S.-EEC, were now saying that its outcome would not affect the efforts in GATT to get the Uruguay round negotiations going.

To get the negotiations going, GATT negotiators have to approve in the Uruguay round’s Group of Negotiations in Goods (GNG) detailed negotiating plans, structures and other organisational details, and establish a surveillance mechanism for standstill and rollback.

While the U.S. has been virtually trying to dilute the standstill and rollback commitments it undertook at Punta del Este, and also secure a weak surveillance mechanism, it was reported at the Morges Group meeting as having suggested extension of the standstill commitment to agriculture.

Such an extension would mean, for example, that the EEC would be unable to alter its variable levies on agricultural imports, a mechanism used to ensure imported products do not sell cheaper than domestic.

In the preparations for the Punta del Este meeting, the extension of the standstill commitment to agriculture had been sought by a number of agricultural exporting countries. But in the final compromise at Punta del Este this was given up.

The EEC would appear to have turned down U.S. efforts to expand the standstill commitment, insisting that there could be no elaboration or change in the Punta del Este text.

The U.S. is reported to have pushed for the start of actual negotiations on agriculture early in 1988, and for this to be made known now, by including it in the detailed negotiating plans.

The EEC is however reported to have rejected this, insisting that the negotiating plans and structures, and the various phases of negotiations should be the same for all subjects, and one should not be seen to be accelerating while others are going at a slower pace.

The EEC representatives reportedly have said that while they would have some leeway and room for manoeuvre on substance in the course of negotiations, they have little room now either in presentation or procedures.

As envisaged now, the negotiating plans deal only with the first phase in each of the subject areas, to be devoted to detailed study and formulation of issues. In the second phase, protagonists will be called upon to formulate their proposals, subsequently negotiations will take place on the basis of proposals on issues identified.

The U.S. is keen to provide some visibility for start of negotiations in agriculture early in 1988, a presidential election year in the U.S., so that hard-pressed republican candidates for various offices could derive some benefit.

For some of the EEC countries, and particularly France, 1988 is also election year, and it would not do for them to be appear to be yielding to the U.S. on this issue.

The U.S. and some of the Southern Hemisphere temperate zone agricultural exporters would like to focus the negotiations on the question of export subsidies.

However the EEC wants all the issues and ideas formulated in the Punta del Este declaration to be addressed, including domestic production support policies and programmes that result in increasing production an thus creating surpluses, as also various national domestic policies, whether maintained by some kind of GATT waiver or otherwise.

Some participants said that the EEC and several others appeared to favour a broad approach to the negotiations, while a few like Japan and the Nordics have some problems and would prefer negotiations on the basis of "specificity of agriculture" – an euphemism for saying the formal GATT rules should not apply, and protection of domestic production should be the basis.

There is also reported to have been some detailed exchange of views on other substantive issues like access to markets, and internal and international prices as a measure of protection.

The Morges Group meeting is also reported to have discussed the kind of data and information that would need to be collected for the agriculture negotiations.

While the U.S. reportedly favoured use of the OECD studies on agriculture protection and its costs, others were sceptic and were critical of the methodology of the OECD study.

The Morges Group appears to have agreed on more frequent meetings, at least twice or thrice a year, and to have chairmanship rotate according to the alphabetic order. Argentina is to chair the next meeting, to be held sometime in May/June, before the annual western economic summit in Italy.

There was however no consensus on expanding the Morges group, to bring in more of the membership of the Australian sponsored "Cairnes Group" of the so-called non-subsidising agricultural exporters.

The U.S. is reported to have turned down the idea, noting the need to keep the informal group small and compact, and that expanding the group by including one or the other country would mean pressures from others excluded.

The efforts to at least include Thailand, a major rice exporter, appears to have failed for the same reason, since this would have meant including South Korea (sponsored by Japan), and the need to bring in some of the smaller Europeans like Austria or Switzerland.