The elusive consensus

The Tokyo conclave of a pivotal group of WTO member-countries highlights the absence of consensus on crucial issues, especially agricultural trade liberalisation and access to essential drugs.

IT was advertised as the "development round" of global trade negotiations, but progress has so far shown little of this concern. With the clock ticking towards the next Ministerial Meeting of the World Trade Organisation (WTO) in Cancun, Mexico, Ministers from a pivotal group of countries gathered in an informal conclave in Tokyo on February 14. Representing 22 countries and the European Union (E.U.), the Ministers' overwhelming concern was with seeing that the Cancun conference does not break up in acrimony, like Seattle in 1999. But the negotiations that were launched at Doha, Qatar, in 2001 under the title of the "Doha Development Agenda", have missed vital deadlines on a number of issues of concern to the developing world. Access to essential drugs remains an area of discord. And agricultural trade liberalisation could well be the deal-breaker at Cancun.

Hard bargaining on agriculture took up a great part of the three-day conference in Tokyo. This was in recognition of the fact that the three biggest players in global trade the United States, the E.U. and Japan remain bitterly deadlocked on the issue. The Doha conference had literally gone down to the wire in formulating a consensus position on agriculture (Frontline, December 7, 2001). E.U. delegates opposed any declaration embodying the final phase-out of agricultural subsidies as an accepted goal. The Doha declaration finally set out three closely linked objectives to govern the negotiations in agriculture: securing "substantial improvements in market access; reductions of, with a view to phasing out, all forms of export subsidies; and substantial reductions in trade-distorting domestic support".

Divergences were evident in the initial reactions to the declaration. The Cairns group of countries all major agricultural exporters characterised it as an unequivocal triumph. The E.U., in contrast, claimed victory in having eliminated any reference to the end point of the negotiations in agriculture. Under the work programme on agriculture that was drawn up shortly afterwards, "modalities" or the specific targets implicit in the Doha objectives are to be worked out by March 31, 2003. Each member-state is to then submit a "comprehensive draft schedule" based on these modalities at the Cancun conference. In plain language, the broad quanta of reductions in tariffs, subsidies and domestic price support, were to be agreed by March 31, inclusive of "Special and Differential Treatment" (S&DT) provisions for developing countries. And each WTO member was to bring to the conference table at Cancun its specific plans within the agreed framework.

In December 2002, after a series of formal and informal consultations, the Chairman of the WTO Committee on Agriculture, Stuart Harbinson, put out a detailed paper reviewing the progress made. Early in February, he drafted a detailed set of "modalities" for agriculture, bravely seeking to average out the conflicting positions that had been advanced during the preceding negotiations. Reactions, as expected, were mixed. The U.S. and the Cairns group thought that the Harbinson draft went a long way towards meeting the objectives of the Doha round, though not far enough. The E.U., predictably, was lukewarm. The Harbinson draft, said E.U. Agriculture Commissioner Franz Fischler, offered a "few elements" that could bridge differences. But it lacked the "overall balance... between the different interests of members". Contrary to the U.S. and Cairns group perception, that the Harbinson draft significantly advanced the possibility of agreement, Fischler suggested that negotiations risked being slowed down. The draft, he said, rewarded the large exporting countries that have done little under the existing Agreement on Agriculture (AoA) to reduce trade-distorting policies. In a clear reference to the U.S., Fischler summed up Harbinson's approach in rather unflattering terms: "In the developed world, those that moved in a direction that is consistent with what was agreed in the previous round are penalised, while those that reversed direction are rewarded."

The Harbinson draft proposes a three-tiered approach to tariff reductions. At the upper tariff levels, cuts of an average magnitude of 60 per cent, and a minimum of 45 per cent are recommended. And at the lowest tier, the average and minimum magnitudes would respectively be 40 and 25 per cent. The period for implementation would be five years. The E.U. proposal, in contrast, follows the schedule of commitments that were arrived at in the Uruguay Round, which required average reductions of 36 per cent in tariffs over a six-year period of implementation. Harbinson similarly proposes the progressive elimination of export subsidies within a time-frame ranging between five and nine years. An initial "down payment" is recommended as a confidence-building gesture. The E.U. has been disinclined to see things this way, preferring a modest average cut of 45 per cent in subsidies and a possible phase-out for certain products, to be determined through negotiations. The E.U. has also been insistent on maintaining the various kinds of domestic support that are given to agriculture, at existing or moderately reduced levels. The Harbinson draft, however, recommends substantial changes that could over time, result in a decrease of the "Aggregate Measure of Support" (AMS) by up to 50 per cent. And the E.U. is less than enthusiastic about the scope of disciplines envisaged on food aid and export credits, which it claims have been misused in the past for capturing exports, notably by the U.S.

Such profound differences in perception were quick to emerge when the Ministers began their consultations in Tokyo. The host, Japan, which maintains a 490 per cent protective duty on rice imports and values its minuscule farming community as an influential element of national life, confessed to profound difficulties with the Harbinson draft. Faced with the initial deadlock on whether the proposals merited consideration as the basis for future negotiations, Japan provided a way out: the Harbinson draft, it said, could be a "catalyst" for early agreement on agriculture. With all the verbal ingenuity, agreement proved elusive. "There was a huge divergence of views" on agriculture, said Japanese Foreign Minister Yoriko Kawaguchi. And in providing his own summation of the meeting, U.S. Trade Representative Robert Zoellick warned Japan that it could not afford to "sacrifice" its main strengths "on the altar of rice". "Japan needs to face the reality," he said, that farmers constitute just 1.8 per cent of its population and account for no more than 2 per cent of its economy. Negotiations on agriculture have since resumed in Geneva.

With just over a month to go before the deadline for agreed "modalities", few were venturing a guess about the likelihood of success. Events since Doha have shown just how great the potential for divergences is in agriculture. The E.U. has been particularly incensed by the enactment in early 2002 of the U.S. Farm Security law, which hiked subsidies enormously. In a detailed analysis of this complicated legislation, agricultural experts within the E.U. seemed to agree that it fell foul of the existing AoA. The Farm Bill, they concluded, quite clearly put U.S. AMS beyond the AoA-determined threshold of $19 billion. By choosing to aid farmers in a "highly production-distorting way", they claimed, the U.S. had lost "any claim to be a credible force for farm policy reform in the WTO negotiations".

The E.U. soon set under way a bewilderingly complex effort to reform its Common Agricultural Policy (CAP). This is an imperative not so much of WTO membership, as of the projected expansion of the E.U. to all of eastern Europe. By 2004, when 10 new members sign up, the E.U.'s total farmland would increase by close to 30 per cent and employment in agriculture by over 50 per cent. Faced with the complexity of the transition, the E.U. has chosen to postpone substantive CAP reform until 2006. But the tasks of maintaining a precarious balance between existing members, while taking on board newcomers with entitlements of a lesser order, could set the E.U. on a specific trajectory - quite possibly at divergence with WTO requirements.

Indian delegates who participated in the Tokyo meeting came away with the suspicion that agriculture afforded few easy options. The U.S. and the E.U., they pointed out, are engaged in a competitive game of concealing their subsidies and dressing them up to make them appear WTO compliant. Stated figures of agricultural subsidies in the U.S. and the E.U. totalled no higher than around $55 billion. However, it is known from independent estimates that the cumulative global figure is in the range of $300 billion. Neither the U.S. nor the E.U. shows any inclination to make a full disclosure and bring the entire range of trade-distorting expenses to the bargaining table. Addressing the Tokyo meeting, Union Agriculture Minister Ajit Singh welcomed the tariff reduction proposals, but insisted that these alone could not solve the problem of market access for developing countries. Non-tariff measures such as sanitary and phytosanitary measures continued to be an impediment. And even if the curtailment of the AMS and the phasing out of export subsidies moved the negotiations in the right directions, they alone were not sufficient. The S&DT provisions in the Harbinson draft include a lower quantum of tariff reduction for developing countries, as also longer periods of transition. The minimum crop loss required for governments to initiate insurance schemes has also been revised to the advantage of the developing countries. And a degree of flexibility has been given for governments to maintain domestic production capacity in crops with serious food security implications.

IF agriculture remains an area rife with disagreements at a number of levels, the question of access to essential drugs pits the U.S. against virtually the entire membership of the WTO. As the last Ministerial Meeting opened in Doha in November 2001, WTO Director-General Mike Moore identified this issue as a possible "deal-breaker". The developing countries, notably India and Brazil, had then pressed for a strong set of exemptions to be inscribed into the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), to enable poorer countries to deal effectively with public health concerns. The U.S. had been resolute in its opposition, but with the E.U. inhabiting the middle ground, significant inroads were made into its recalcitrance. The outcome was the Doha Declaration on access to essential medicines, which provided approval, in principle, for the manufacture of cheap generic drugs through compulsory licensing. A key obstacle that the Doha Declaration promised to do away with was the TRIPS proscription of exports by manufacturers of cheap generic drug. That was the easy part as it turned out. Efforts to provide some substance to the Doha Declaration have since made little headway, with the U.S. bringing the exaggerated threat perceptions and unlimited profit targets of the pharmaceuticals lobby to the bargaining table. Late last year, it came up with proposals that, among other things, would limit the diseases for which the compulsory licensing clause could be invoked to a mere handful. It then sought to restrict eligibility to the least developed and low-income developing countries, thus altering the scope of the Doha Declaration, which was intended to benefit all countries with inadequate local drug manufacturing. As enabling legal provisions, the U.S. then placed on the table a complicated draft that made it essential for both the exporting and importing countries to legislate separately for each drug. Moreover, each such legislation would have a limited applicability in terms of duration.

As moral pressure mounted, the U.S. sought to delay the moment of decision. It then firmly ruled out joining any consensus that envisaged a key consultative role for the World Health Organisation (WHO), as proposed by the E.U. This scenario was repeated, with dreary predictability, at the Tokyo consultations, though Brazil also strongly expressed itself in favour of the E.U. compromise. Doha had produced a strong reaffirmation of the S&DT principle as a general principle of the WTO regime. But efforts to negotiate specific exemptions have since run aground, with a crucial December 31 deadline being missed in various areas. India, which has been a strong proponent of S&DT provisions as also for addressing the entire range of implementation issues thrown up by the Uruguay Round of negotiations faced a curious new ploy by the developed world at Tokyo. S&DT and implementation, they said, were not issues of substance, but of tactics. Strongly refuting this suggestion, Commerce Minister Arun Jaitley pointed out that S&DT and implementation were integral elements of the Doha agenda. If issues of specific concern to the developing countries under the rubric of these themes like anti-dumping, sanitary and phytosanitary measures, subsidies and technical barriers to trade were not constructively addressed, then the whole Doha agenda could unravel, he warned. With just over six months to go before the Cancun ministerial conference, that is a possibility that few would bet against.