Jun 13, 1991


GENEVA, JUNE 11 (BY CHAKRAVARTHI RAGHAVAN) – Two days of informal discussions on agriculture export subsidy issues at the GATT this week have shown little evidence that the majors are ready to come to grips with the serious issues holding up negotiations in the Uruguay Round, participants in the talks reported Tuesday.

However, they said, it was possible that the talks here were just a smokescreen and that U.S. and EC are negotiating bilaterally elsewhere and, once they reach some understanding, it would surface in the Uruguay Round negotiating processes.

GATT sources said that GATT Director-General Arthur Dunkel, who is chairing the agricultural group discussions, would put forward a "framework paper" at a suitable time.

However some participants and observers said that, if as in the past, some very non-transparent discussions and consultations were conducted to formulate the paper, and the tabling the "paper" is postponed to the end, and everyone attempts "crisis scenarios" as happened at Brussels, it could easily become another fiasco.

At last week's OECD Ministerial meeting in Paris, the Ministers agreed that the Uruguay Round must be brought to a substantial and comprehensive conclusion as early as possible, preferably by end of the year.

The Ministers, according to the official communique, recognised that to achieve this goal "political decisions to overcome major existing differences were needed by all participants without delay, the pace of negotiations must be intensified in all areas, and substantial progress must be achieved by the end of the year".

The communique also spoke of the determination of the Ministers "to build on earlier progress to achieve a wide-ranging, substantial, balanced and global agreement and a complementary institutional strengthening of the GATT system".

On agriculture, they took note of the OECD secretariat report that support to agriculture in 1990, measured in Producer Subsidy Equivalents (PSEs) had increased in 1990, involving an estimated transfer of $300 billions from taxpayers and consumers and that structural surpluses had again re-emerged in the OECD area for most commodities, confirming that the temporary "more balanced" market situation of 1988 and 1989 were primarily due to droughts or to impact of supply-control efforts.

The communique also said that the Ministers confirmed "their commitment to achieving substantial progressive reductions of agricultural support and protection, in particular in the context of the Uruguay Round, through the framework approach set forth in the Mid-Term Review" and that to this end they had agreed "to conduct negotiations to achieve specific binding commitments" in the each of the areas of domestic support, market access and export competition and reach agreements on sanitary and phyto-sanitary issues. Account is also to be taken of "non-trade concerns" of participants.

The informal consultations on agriculture (a key issue on which the Brussels meeting collapsed), chaired by Dunkel, have been held on the basis of a checklist of issues for "technical work on export competition" suggested by him.

At two earlier meetings after the restart of the talks, similar "technical" work had been done in the areas of domestic support and border protection, but without either coming to grips with the problems or technical discussions paying the way for serious negotiations and agreements, some participants complained.

The informal talks Monday and Tuesday are to be followed up by formal meetings of the group Wednesday and, as per the calendar and work programme agreed to last week, could extend into next week.

The checklist (running into 20 pages including annexes) raises issues relating to definition of export subsidies in agriculture that would be subject to the terms of the final agreement, the modalities of commitments, means to avoid circumvention of commitments while maintaining adequate levels of food aid and reinforcement of GATT rules and disciplines.

Dunkel’s checklist has raised the idea of the definition of "subsidies" in agriculture being different from the definition for non-agricultural (manufactured) products in the General Agreement and the Tokyo Round subsidies code and the draft agreement in the Uruguay Round.

The European Community is one of those resisting the idea of the same concept of subsidies for manufactures being applied to the agriculture sector. In addition, the EC without defining "subsidy" for agriculture also favours listing of the specific practices that would not be covered.

This idea and logic, as also a separate definition of agricultural subsidies would appear to have been rejected not only by the U.S. and Cairns group members in their discussions, but some of the other countries too who felt that such an approach far from leading at some future point into integration of the trade now outside GATT rules (like agriculture and textiles) could in fact lead to separate regimes of managed trade and sanctioned "grey area" measures.

In his paper, Dunkel has suggested that one of the purposes of an "agreed definition" of export subsidies in agriculture would be to determine what level or quantity of exports of a product should be considered "subsidised" and thus subject to commitments, and also provide a means to determine what budgetary outlays or revenues foregone would be subject to commitments.

A problem facing the agricultural negotiators is that whatever the "numbers" of export subsidy reduction to be agreed, at the end there would still be subsidisation in the range of 70 (if the EC's offer prevails) to 10 percent (if the U.S. offer prevails), apart from the U.S. support to its farmers through the so-called offset programmes' which it contends is no subsidy at all.

In the GATT framework, export subsidies are not permitted for manufactured exports and the ICs have committed themselves to it (though there are still many arguments as to what is or what is not a subsidy). While permitting subsidisation of exports of "primary products", the GATT currently merely stipulates that a contracting party should not grant directly or indirectly a subsidy that operates to "increase the export" of a primary product from its territory in a manner resulting in "more than an equitable share" of world export trade - all concepts that have defied any common understanding over the last 40 years of GATT history.

Even over the more than 4 years of Uruguay Round talks, little effort was made to discuss and resolve these "technical" issues essentially because in such matters the dividing line between "technical" and "substance" is illusory and understandings in one inevitably close options on the other.