230. Memorandum From the Special Representative for
Trade Negotiations (Dent)
to the Executive Committee of the Economic Policy
Board1
SUBJECT
- Agricultural Stalemate in the MTN
Over seventy countries met during the last week in March to organize the work
of the MTN Agriculture Group. The U.S. and
the EC reached a deadlock on how to proceed,
and the meeting was recessed until April 15. In itself, the recess is not
damaging, but reconvening in the absence of reaching a compromise would
prevent work from taking place in the MTN on
agriculture, would continue the deadlock on the wheat reserve talks in
London, and may cause the EC to delay other
work moving forward in the MTN.
New EPB guidance is needed to enable a
practical solution to be worked out with the EC.
Attached are an options paper on the issues raised as well as background
materials.2
I would hope that these questions can be resolved on Monday, April 7, so that
there is enough time to work with the EC on
these questions before the April 15 Agriculture Group meeting.
Attachment
CURING THE MTN IMPASSE ON
AGRICULTURE
Problem
The United States and the European Communities (EC) have come to a procedural impasse on how agriculture
should be dealt with in
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the
Multilateral Trade Negotiations (MTN).
This stalemate, if allowed to continue when the Agriculture Group meets
in Geneva on April 15, poses a significant risk to the successful
negotiation of agriculture issues in the MTN and may endanger overall progress in the MTN. Either of these results would have
significant political and economic costs, both at home and abroad.
Issues
- I.
-
MTN Structure for Dealing
with Agricultural Issues.3
The United States has taken the position that there should be no
difference between the treatment of barriers affecting
agricultural trade and the treatment of barriers affecting
industrial trade. The United States therefore wishes
negotiations to take place first on general rules in the Tariff
and Nontariff Measures (NTM)
Groups that would not differentiate between industrial and
agricultural products.
The EC has argued that the
agricultural sector has special characteristics which makes it
necessary to negotiate agricultural trade barriers separately.
It therefore insists that agricultural issues be dealt with
almost exclusively by the Agriculture Group. The bureaucratic
division within the EC Commission
and the tenor of negotiating mandate approved by the member
states makes likely continued EC
insistence on a separation of agricultural issues.
The first issue is, therefore, what the
relationship should be between the functional (Tariff and
NTM) groups and the
Agriculture Group.
- II.
-
Organization of the Grains
Negotiations.
The U.S. position has been that the highest priority ought to be
assigned to the establishment of better world food security, as
agreed at the World Food Conference,4 and that ongoing negotiations on a new
International Wheat Agreement under the auspices of the
International Wheat Council (IWC) provides the most convenient institutional context
for achieving this objective. It has also been the U.S.
position, decided previously by the EPB, that any discussion in the MTN of commercial provisions
affecting grains should be delayed until progress has been made
on the negotiation of a food reserve agreement in London.
The EC position has been that
negotiation of an international agreement on grain reserves
cannot be separated from the negotiation of agreements covering
commercial or concessional trade in grains.
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Moreover, the EC points out that it has a current
mandate from the member states to negotiate agreements in the
context of the multilateral trade negotiations, but that it does
not currently have a mandate for the negotiation of a new
international wheat agreement. The EC has withheld active participation in London and
insisted that the negotiations take place solely in the MTN.
The issue posed is what the relationship should
be of negotiations affecting grains in the MTN and the negotiation on
grain reserves.
Options
Issue I.
MTN Structure for Dealing with
Agricultural Issues.
Option A. Accept the EC position that agricultural negotiations should be
primarily, if not entirely, within the jurisdiction of the Agriculture
Group.
Pro
- 1.
- The procedural impasse would be broken and work could proceed on
all aspects of the negotiations as this option would be accepted by
most countries in order to get work underway.
- 2.
- The battle lines could be drawn on specific substantive issues
with positions being taken by the U.S. which would find greater
support among other countries.
Con
- 1.
- Agriculture would be treated as an exception from general trade
liberalization rules from the outset, leading to isolation of
agricultural questions from general rules directed at trade
liberalization, thus making it more difficult to achieve U.S.
objectives in agriculture.
- 2.
- Could lead to separate, independent negotiations on industrial and
agricultural issues (thus, having two, parallel MTN’s).
Option B. Maintain U.S. position unchanged that
all negotiations (including those on agricultural issues) take place
primarily, if not entirely in the functional groups (the Tariff and
Nontariff Measures Groups).
Pro
- 1.
- This option promises the greatest tie to the work of the Tariff
and Nontariff Measures Groups and therefore can best lead to the
applicability to Agriculture of general rules directed at the
reduction of trade barriers.
- 2.
- Other agricultural exporting countries have expressed some
sympathy with this approach (if it were generally
acceptable).
- 3.
- This option best fosters trade-offs between industry and
agriculture, necessary to obtain U.S. agricultural goals, because
industry and agriculture would be treated in the same forums.
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Con
- 1.
- Neither the EC nor Japan will
accept this limitation on the competence of the method of operation
of the Agriculture Group. Would likely result in a continuation of
the impasse at the resumption of the meeting on April 15.
- 2.
- Other delegations have clearly stated that they will not support
the U.S. organizational approach if it cannot be adopted by
consensus, even though there is some sympathy for the logic of the
U.S. position.
Option C. Seek compromise formula which allows
complementary work to go forward both in the Tariff and Nontariff Groups
and in the Agriculture Group. Such a formula might include the concept
that the Agriculture Group would facilitate and complement the work in
the functional groups by making timely inputs into their work, and by
working in conjunction with these groups. The overall Trade Negotiations
Committee (TNC) could coordinate these
work programs.5
Pros
- 1.
- This is the most likely way to resolve the procedural issue so
that work can proceed. It would allow U.S. and EC to continue to interpret respective
positions in a non-prejudicial manner.
- 2.
- Would receive support from our trading partners (including Japan
which has supported the EC regarding
the competence of the Agriculture Group).
- 3.
- Would be consistent with our policy objective of treating
agricultural issues in conjunction with other issues, and would make
it easier to achieve our objective of liberalization for agriculture
as well as industry.
Cons
- 1.
- We may not succeed in persuading EC
to avoid duplicating the Tariff and NTM work in the Agriculture Group.
- 2.
- Even if they accept a compromise, EC nevertheless may try to block or delay progress in
the Tariff and NTM Groups by
resorting to delaying tactics in these groups in efforts to shift
agricultural aspects to the agriculture subgroup.
Issue II. Organization of the Grains
Negotiations.
Option A. Accept the EC position that while some technical discussions might
take place in London, negotiations on all grains questions must take
place solely in the MTN in Geneva.
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Pros
- 1.
- This would allow MTN work to
proceed on all agricultural issues as well as on grains, including
reserves.
- 2.
- This would give assurance that commercial grain issues would be
given early attention in the MTN.
Cons
- 1.
- The U.S. has been more interested than the EC in obtaining an early agreement on food reserves,
and therefore has resisted a tie between the negotiation of a
stockpiling agreement and the MTN
negotiations which could last several years.
- 2.
- The U.S. wants to minimize the extent to which the negotiation of
a reserve agreement gets tied into the conflict between the EC view of organizing world trade in
grains on the basis of government agreements and the U.S. view of
reduced government intervention in world grain trade. Tying these
issues together can complicate and delay negotiation of an agreement
on reserves.
Option B. Maintain without change the U.S.
position that work on grains in Geneva cannot begin until there is
progress in London.
Pro
- 1.
- This will keep the pressure on the EC to participate actively in the negotiation on
reserves.
Con
- 1.
- There is no indication that the current impasse will be broken if
the U.S. maintains its position unchanged on this procedural
question.
- 2.
- Ultimately the U.S. has no support for this position. Canada,
Australia and New Zealand—those closest to us—do not see grains work
in Geneva as inhibiting reserves negotiations in London.
Option C. A pragmatic compromise should be worked
out allowing the MTN agriculture work to
move forward without prejudice to, and if possible fostering, early work
on reserves, and taking advantage of the work which has been done by the
International Wheat Council.6
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Pros
- 1.
- This will allow the negotiations on agriculture to proceed, and
presents the best chance for obtaining early results on
reserves.
- 2.
- This option gives the EC the optics
of having a grains subgroup, as well as removing their concern that
they will be asked to negotiate twice on grains, and thus it
provides the basis for a compromise.
- 3.
- There is wide support for this position among third countries, and
the EC and Japan have given
preliminary indications that they can accept it.
Cons
- 1.
- The EC may be unwilling and/or
unable to agree at this time to reaching an early agreement
involving reserves.
- 2.
- The EC may insist that any early
agreement on reserves include elements of specific interest to them,
such as market stability or supply access.
