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US-EU framework pact could remove major stumbling block

WASHINGTON, DC - A framework agreement reached by the US and the European Union for negotiating tough agricultural issues could allow the stalled World Trade Organization (WTO) negotiations to move forward, according to the senior US negotiator.

"We don't pretend that it answers every question," said Allen Johnson, chief US agricultural trade negotiator, during a recent teleconference with reporters after submitting the framework at the WTO in Geneva.

The framework, he added, "leaves many difficult issues to resolve even if all the rest of the WTO members were to accept it as a basis for negotiations."

The agricultural negotiations have already missed deadlines set by ministers in 2001 in Doha, Qatar, when they launched the WTO round, divided over drastically different US and EU approaches.

Johnson reiterated the importance of resolving the agricultural issues that have mounted over decades, recognizing that the impasse has stalled the rest of the negotiations.

"If agriculture doesn't move forward, nothing moves forward," he said.

Ministers could decide at the upcoming September 10-14 WTO meeting in Cancun, Mexico, whether to adopt the US-EU framework or some version of it.

Even with a framework agreement, though, observers say negotiators would face a daunting challenge agreeing on specific numbers and timetables before the deadline at the end of 2004.

"There are some really tough issues that have to be discussed," Johnson said. "You've got to fill in these numbers at some point."

The Doha agreement to launch agricultural call for "substantial improvement in market access, substantial reduction in trade-distorting domestic support and reductions in view of phasing out export subsidies."

According to Johnson, the framework combines elements of previously submitted US and EU proposals.

Under the framework, he said, developed countries would have to achieve reductions in trade-distorting support significantly larger than those agreed to in the Uruguay Round, with those having more trade-distorting support making a greater effort.

The most trade-distorting supports would be reduced "by a certain range" and less trade-distorting supports would be capped at 5% of the value of production.

Johnson said the framework would achieve parallel disciplines on export subsidies and export credits as developing countries have requested.

For example, some export subsidies and credits would be quickly eliminated, while others would be reduced significantly over time with a view toward eliminating export subsidies and export credits for the same commodities in the end.

Disciplines would also cover state-trading enterprises such as the Canadian Wheat Board and any food aid that interferes with commercial markets.

Johnson said each element of the proposal would contribute to substantial improvement in market access with some tariffs subjected to a Swiss formula for reducing the highest tariffs more than the lower tariffs, the US-favored approach.

Other tariffs would be subject to the approach used in the Uruguay round and favored by the EU, employing average cuts and minimum cuts.

Substantial improvement in market access in all sectors, he said, would have to be achieved either through tariff cuts or expansion of tariff-rate quotas - where imports over the quota are subject to much higher tariffs - while other tariffs would be completely eliminated or capped.

Any member that wanted to avoid a cap on some item would have to negotiate an offer for lower tariffs on other items.

Developing countries would have some "significant" safeguard measure against lower tariffs and some sort of special and differential treatment for implementation, such as a longer schedule.

"For the first time ... both parties agree harmonization is part of the formula and both parties agree that a cap is part of the formula," Johnson said. "These results are a good sign for the future."

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