Jun 20, 1991


GENEVA, JUNE 18 (CHAKRAVARTHI RAGHAVAN) – GATT Director-General Arthur Dunkel is to produce by early next week an "options" paper for reforms in world agriculture, which would set out the options before Uruguay Round negotiators for reform of world trade (and production), GATT sources said Tuesday.

The Uruguay Round Agriculture Negotiating Group, chaired by Dunkel which has been holding formal and informal talks since 10 June, on Tuesday heard a report from Dunkel on the outcome of his informal consultations in technical work on export competition/subsidy questions, as well as on the issue of special and differential treatment for Third World countries.

The next meeting of the negotiating group is set for July 22.

With Agriculture seen as the key issue for breaking the impasse in the Uruguay Round, this really would mean that despite the talk of making progress in the negotiations before GATT virtually closes down for the European summer holidays in August, real substantive negotiations would take place only in September.

Dunkel is expected to hold a further round of informal consultations of the Agriculture group by July 1 or 2, so that the key protagonists would be able to know the reactions and thinking of the others on his options paper.

It is not very clear whether the Dunkel "options" paper will address the key issue of export subsidies, an issue which he himself in his report to the Group on Tuesday admitted was "central" to the negotiations on agriculture as a whole.

With agriculture itself a key to the entire negotiations, the options on export subsidy and how these are resolved would have an important bearing on the Round itself.

Yet, Dunkel in private informal consultations would appear to have implied that his "options" paper would not deal with export subsidy issues, a view that appeared to imply to others that he was leaving it to the U.S. and EC to sort out the issue.

However, some of the Cairns group members would appear to have insisted that any option paper would have to set out the options in this area, particularly given Dunkel’s own earlier statements to the TNC about the separate commitments in each of the three areas of agricultural support - domestic support, border protection and export subsidisation.

How far Dunkel would take these views into account, remains to be seen, one of the participants said.

The Cairns group of agricultural exporters are due to meet at Manau in Brazil 8-9 July, while the G-7 Western Economic Summit is due to meet in London in the week of July 15.

GATT sources tried to disclaim that the options paper is intended to enable the G-7 to take some decisions and that he would not be forwarding it to the London meeting.

This is probably true in the sense that the paper is also intended to influence other processes and decisions.

In the Byzantian, if not Machiavellian, politics of the European Community the EC Commission, which has a negotiating mandate with little leeway, has been encouraging Dunkel to produce an option paper which the Commission can use to pressure the Council of Ministers to change the mandate and be more forthcoming.

However, EC sources say that while some flexibility was being sought and hoped for, it was difficult to see the actual "figures" in the reduction commitments going very much beyond the EC position taken so far at Brussels.

Dunkel is said to be hoping that his options paper would enable the protagonists (the U.S., EC, Japan, Cairns Group), and particularly the U.S. and EC, to reach some understandings on key issues and on the basis of which it would be possible to reach accords.

Last week, Dunkel had reported to the formal negotiating group on agriculture his assessment of the informal consultations and technical work on domestic support and border protection - a report that appeared to present an upbeat view not shared by participants.

On Tuesday he provided a similar report on export competition, the preferred GATT terminology now for export subsidy issues, which seemed to be more cautious.

He viewed as a "positive sign" that (in the five-year old negotiations) this was the first occasion that there had been a "full fledged discussion at technical level" of the issue, which was "central to the negotiations on agriculture as a whole". This, in his view, was an encouraging development, that would lead to worthwhile progress in this area.

On the issue of definition of border subsidies, the Dunkel report indicated, the various options and their merits and demerits were discussed the very broad definition in the GATT Art. XVI: 3 about subsidies operating to increase exports, and the definition relating to subsidies contingent on export performance being discussed in the subsidies negotiations, as well as the illustrative list of export subsidies or assistance practices mentioned in the Aart de Zheew (who chaired the Agriculture negotiations till Brussels) paper on Agriculture.

Dunkel said there seemed to be a willingness on part of all to use the de Zheew list as a practical basis for examining the policy coverage of specific commitments to reduce export assistance as well as for examining scope and applicability of generic definitions for particular practices.

But participants made suggestions for inclusion in the list of other practices, such as payment-in-kind or the way some practices were defined or for excluding some of the practices listed, such as for excluding subsidies on agricultural commodities incorporated into processed products, deficiency payments on products exported and general export promotion or marketing activities, Dunkel said.

There was also discussion on whether deficiency payments, the us practice of support to its farmers which is conditional on setting aside acreage and thus claimed to be not tied to production, was or was not to be viewed as an export subsidy or affecting export competition.

Dunkel said he had gained "the impression" that willingness was emerging among the negotiations "to approach this issue from a somewhat broader perspective".

The EC till now has been insisting that the U.S. practice too is support to agriculture that must be taken into account. But in its current thinking on internal reforms, the EC Commission appears to be moving in the direction of adopting this.

Whether the EC's reported willingness to move to deficiency payments system and thus accept for itself the U.S. method, would be acceptable to the Cairns group remains to be seen. For the Cairns group, facing the subsidised and dumped exports of the U.S. and EC the effect of the two practices are not different.

On the modalities for implementation, Dunkel said, discussions had centered on commitments based on budget outlays, on quantitative and on per unit of export subsidisation, and a combination of all three approaches. The discussions had focused on these not only as methods for reducing export subsidisation as such, but also for limiting or reducing scope for targeted export subsidy practices.

The discussions had enabled participants to have a better appreciation of how these would operate in theory. How they would operate in practice, he added, would depend on nature of the border measures applied as well as the base period selected, rates of reduction negotiated and conditions or sub-commitments that would govern the way the commitments would be implemented as between particular products or groups of products.

Dunkel said there was a fairly wide recognition in the consultations on the need for improved disciplines or effective arrangements to limit the scope for circumvention of commitments through subsidised or tied credit transactions.

However, he added, there were differing perceptions over the extent to which action on substantive issues involved should be pursued in the GATT negotiations on export competition.

It was suggestion in the discussions, on this, that CPs should agree to refrain from resorting to subsidised transactions in an area delimited by clear definitions of "normal commercial transactions" on the one hand and "bona fide food aid" on the other.

Another suggestion was to deal with credits and credit guarantees should be dealt in accord with provisions in illustrative list, on the understanding that substantive negotiations in this area would be taken up as appropriate once meaningful disciplines on export subsidies had been negotiated in the Round.

There were somewhat "similar perceptions" on food aid, namely, that while there should be a substantive role for CPs in prevention of circumvention of commitments negotiated, existing arrangements in area of food aid including the FAO disciplines, should be maintained, Dunkel said.

There was also "a broad measure of support" for the view that whatever arrangements were negotiated, there should be no curtailment of availability of basic foodstuffs as food aid or on appropriate concessional terms to the least developed and net food importing developing countries.

A number of specific and practical suggestions had also been put forward on how to deal with possible negative effects of reforms in this area.

As for rules and disciplines, on which participants put forth their views in clear terms but in a manner to suggest they were still feeling their way among issues on how specific binding commitments on export assistance and on domestic subsidies could be incorporated into rules and disciplines.

The issues included applicability of generic definitions and related definitions in the illustrative list of subsidies, relationship of specific commitments to existing GATT Art. XVI: 3, the applicability of concept of "serious prejudice" in the GATT in respect of the disciplines, and the general issue whether export and domestic subsidies as well as those put in the "green box" (permitted subsidies) should be actionable or countervailable and the issue of special and differential treatment.

On the pros and cons of applying to agriculture the conceptual framework of the general subsidies negotiations, Dunkel said that none of the views expressed sought extension of the general framework to agriculture without amendment. There was a general willingness to take this exploration of ideas a stage further.

As for the idea of a "cease-fire" or prohibition on extending export subsidies to producers and markets where subsidies were not currently applied, Dunkel reported that this idea had met with "some resistance" from those who believed that the right to acquire an equitable share of the world export trade should be retained unless substantive reduction and other commitments were negotiated.

Dunkel also reported to the Group that he had held consultations on the issue of special and differential treatment for the Third World countries in the area of domestic support, a principle that was part of the Round from the beginning but where there was now a clearer idea of the technical options.

The precise nature, scope and duration of the special and differential treatment remained to be agreed, he noted. But for many participants, the existing proposals for the "green box" of policies to be exempt from reduction commitments did not take account of the spectral position of the Third World countries.

But rather than expand this exempt category to include forms of support not conforming to the criteria or that might weaken the criteria, there was an emerging consensus that it might be preferable to treat the support measures in the "amber" category (measures that would be actionable in GATT) differently when used by Third World countries - either exempting them from reduction commitments for the amber category or giving a longer period for compliance.

There was some reluctance to "tamper" with established GATT practice in defining a "developing country", Dunkel reported, adding that there was however effective consensus that least developed countries should be exempt from reduction commitments.

A number of technical questions on these remained to be answered, but the main ones were basic political ones, he added.