Dec 1, 1988

EARLY ACCORD ON AGRICULTURE MORE UNCERTAIN.

GENEVA, NOVEMBER 29 (IFDA/CHAKRAVARTHI RAGHAVAN) The outlook for any clearly accord at Montreal on agriculture has now become even more uncertain and difficult, after the meeting this week of the so-called "Morges group", sources at the meeting disclosed tuesday.

The "Morges group" is an informal group that has been dealing with GATT agriculture issues, and is so named after their first meeting in Morges, Switzerland.

The group has in it the representatives of the major trading nations and some of the leading third world countries.

After the meeting monday of the group, the chairman of the Uruguay round GATT negotiating group on agriculture, Mr Aart de Zeeuw of Netherlands, is reported to have remarked that his job of drawing up a report for the ministers at Montreal had now become "even more complicated than before."

While the U.S. reportedly took the position that it would rather not have any short-term accord an agriculture at Montreal than have one not satisfactory to it in terms of long-term framework, Argentina reportedly served notice that if there was no agreement on agriculture it would withhold consensus an agreements in other negotiating groups.

Some participants said that the U.S.-EEC differences on agriculture, if anything had hardened, particularly after the failure of efforts to settle their bilateral disputes on imports of hormone treated beef. The EEC is prohibiting, on health grounds, production and sale of hormone-treated beef, whether domestic or of imported origin.

The U.S. is objecting to it arguing it is disguised protection a charge that the EEC has rejected.

The EEC clearly is in no mood to agree at Montreal to anything except short-term measures.

But the Americans are not agreeable to any short-term measures, except in the context of a commitment on the long-term framework to be based on "free trade" and end to government support.

Originally they wanted this to be achieved in ten years, but now they are willing to have a longer time frame.

But the EEC is not prepared for complete elimination, only of gradual reduction.

At the Morges group meeting, it was reported that the U.S., EEC, Australia and Argentina presented papers, presumably with a view to helping the chairman drawing up the part two or recommendations to the Montreal meeting on the agriculture negotiations.

Japan, represented at the level of a vice-minister, reportedly gave indications that it was probably moving "fast" on agriculture, and away from its previous rigid stands on protection.

At the end, one participant said, while most participants appeared "pessimistic", the U.S. took the line that "Montreal is not the end of the road, and we have still two more years to negotiate".

This was interpreted by several to mean that the U.S. would much rather not have any agreement Montreal on agriculture than have one not satisfactory to it.

This U.S. line, projected by the agriculture negotiator, however reportedly took most participants by surprise, particularly since this was contrary to what the U.S. was saying in other negotiating groups, particularly services and TRIPS (Trade-Related Intellectual Property Rights) vis-a-vis Montreal.

Another source at "the meeting said Argentina, a member of the Cairns group, retorted to the U.S. stance and warned that "if there is no agreement at Montreal in agriculture, Argentina will deny consensus in other negotiating groups."

The Cairns group has tabled on November 25 a new paper before the negotiating group an agriculture calling for the application of the "freeze" concept in down payment.

However, since it was not possible to take in such new papers at this stage, in terms of the report to Montreal, the Australian delegate, Mr. Peter Fields, reportedly presented an his own responsibility a paper to the Morges group meeting that appeared to be a summary of the november 25 Cairns group paper.

This called for commitments from ministers for negotiations for "a liberal, fair and market-oriented agricultural trading system, free of trade distorting policies and practices", and among other things agree through negotiations to develop the means for "concerted, progressive and significant reductions in agricultural support and protection."

This was seen by the EEC as Australia and the Cairns group moving away from the U.S. stands, and their own previous stands, calling for ultimate "elimination" of all agricultural support and protection.

The Australian paper also envisaged negotiation is to begin in 1989 for progressive reduction of all direct and indirect subsidies and import barriers, and for new and/or amended GATT rules and disciplines to deal with market access barriers, domestic support and subsidy arrangements and export subsidies.

It specifically would have ministers reaffirm that the principle of differential and more favourable treatment to third world countries - embodied in GATT and related instruments as well as Punta del Este declaration - applied to all areas of negotiations, and modalities for its application (in agriculture) would be developed over the remainder of the round.

Also, third world countries should be exempted from contributing to "early actions" on agriculture, the Australian paper suggested.

These "early action measures" were spelt out in terms of the commitment to negotiate a long-term framework.

Among other things, they called far "an immediate freeze" an support and commitment not to increase support from current levels, and for reduction of output-based support by ten percent in each of 1989 and 1990, with minimum commitment for increased import access opportunities and reduced administered prices and export subsidies.

The Australians reportedly explained their paper as being their own, but prepared after discussions with all Cairns group members.

But Argentina reportedly presented a paper of its own, which other Cairns group members said was virtually the same as a paper it had presented at the recent meeting of the Cairns group at Budapest, but which could not be adopted there because of the stand among others of Canada.

This called for a process, in various stages, of continuous and permanent reduction of support and protection policies for agriculture, beginning January 1, 1991, and for each state to negotiate a national implementation programme for each stage.

The Argentina proposal also called for measures to cover the remaining two-years of the Uruguay round, including mechanisms for a transitional period, safeguard regime, modification of GATT rules, and provisions to compensate the last developed countries for eventual adversary effects.

In terms of short-term commitments, the Argentina paper also called for prohibition of any new protective and distorting measures with effect from January 1, 1989, and freeze on existing measures.

It also called for maintenance of existing production control measures in countries with structural agricultural surpluses due to protective measures, reduction of aggregate monetary level of output based support by ten percent in each of 1989 and 1990, and appropriate stock management with consultation with concerned exporting countries in the event of subsidy based operations.

The U.S. for its part in a paper reportedly outlined its ideas about short-term measures, but on the basis that everyone would agree on long-term framework and principles.

The short-term measures, in the U.S. view, should be "balanced", "fair" and "global":

--Balanced in encompassing market access, competition, internal support and phytosanitary regulations,

--"Fair" in that the outcome should have benefits for everyone,

--"Global" in the sense that other products should also be included.

The chairman of the negotiating group on agriculture, Aart de Zeeuw is expected to draw up and present to the Montreal meeting, on his own authority, a report on agriculture. He is expected to circulate it to the members of the group later this week.

In the meanwhile, the ministers from the quadrilateral group (U.S., EEC, Canada and Japan) are to meet in Montreal to discuss agriculture, on December 3, ahead of the opening of the meeting of the trade negotiations committee on December 3.

Also, the Cairns group ministers are holding a meeting of their own on December 4.