Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



What is the "Package of Elements" that WTO D-G Lamy Talks about?

On July 26, 2008, the World Trade Organization Director General, Pascal Lamy, announced that the informal discussions that took place during the week of July 21, 2008 had resulted in a "package of elements".  This "package of elements" is a signal that the Doha Round of discussions had not sunk into the abyss of failure and we do not have Ministers returning home angry and frustrated. Ironically, there is little news coverage setting out what was the results of the week of meetings.  So, one must conclude that this "package of elements" is acceptable (and by "acceptable, I do not mean that it has caused all WTO Members to cheer, it merely can be stomached and is, therefore, acceptable" for now).

The "package of elements" is a compromise position derived from the latest drafts of 1) the Agricultural Modalities (covers reductions in tariffs and levels of subsidies relating to agricultural products, but does not cover fisheries) and (2) the Non-Agricultural Market Access Modalities (covers tariff reductions for non-agricultural goods).  To be clear, the "package of elements is not a summary of what was tabled at the July 2008 meeting.  Further compromise is required from what was tabled as a position by the various Ministers in attendance.

While there does not yet appear to be a public documents entitled "the package of elements", the news reports are that the package includes the following:

  • The United States will reduce its maximum levels of annual subsidies paid to farmers (primarily relating to cotton, corn and ) from the bound levels (meaning acceptable levels according to the WTO Agreement on Agriculture) from $48 Billion/year by 70% to $15 Billion/year (some reports place the new level at $$14.5 Billion, 14.4 Billion, and $14 Billion);
  • The European Community will reduce its farm subsidies by 80% to 22 Billion Euros;
  • Both the United States and the European Community would be allowed to maintain tens of billions of dollars worth of ‘green box’ farm subsidies, which are deemed not to distort trade or production;
  • Developed countries would have to cap agricultural tariffs for non-sensitive agricultural products at 100 percent, although they would be allowed to exceed that ceiling for 1 percent of tariff lines in return for compensation such as making a greater-than-normal expansion to tariff rate quotas for all sensitive products;
  • Developed countries would reduce agricultural tariffs by 70-percent for the highest farm tariffs levied by developed countries (those above 75 percent, which fall into the top band of the tiered tariff reduction formula);
  • Developed countries will be permitted to designate 4 percent of their agricultural tariff lines as ’sensitive’ or eligible for lower tariff cuts. (Countries with very high tariff levels, like Switzerland and Norway, are entitled to an extra 2 percent);
  • However, for these sensitive products, developed countries would have to expand import quotas enough to provide exporters with new access opportunities equivalent to 4 percent of domestic consumption levels;
  • Developing countries will be entitled to shield 12% of the tariff lines for "special" agricultural products from big cuts in import tariffs (in order to protect small farmers producing staple foods);
  • With respect to the "special" agricultural products, developing countries would be entitled to exempt 5 percent of tariff lines from tariff cuts;
  • Developing country WTO Members who recently acceded to the WTO, such as China, would be allowed to designate 13 percent of tariff lines as special, with a 10 percent average tariff cut;
  • Developing countries may be able to avail themselves of emergency safeguard mechanisms to protect such farmers if the developed country  experiences a sudden increase in levels of agricultural imports by 40% or more and the level of safeguard surtaxes (that is increases in rates of duties) would be allowed to go beyond Uruguay Round bound levels by 15 percentage points;
  • The NAMA reductions would be based on "co-efficients";
  • The developed countries' coefficients would be 8;
  • Developing countries are required to reduce industrial tariffs (under the NAMA negotiations) by a three-option ’sliding scale’ being, an average of 20, 22, or 25% subject to an ability to shelter certain sensitive products (the Financial Times reports "[this aspect of the] proposal, backed by the group of seven big negotiating partners, was put to a wider meeting of 30-35 WTO Members. Officials said most countries accepted it as a basis for discussion, although several – including Argentina, which wants more leeway to protect its manufacturers – continued to have reservations. Talks about the proposal will continue over the weekend");
  • If a developing country selects a co-efficient of 20, that developing country would be allowed to either (1) subject 14 percent of tariff lines to cuts that are half as high as those required by the formula, covering 16 percent of manufacturing imports by value or (2) exempt 6.5 percent of tariff lines from cuts altogether, accounting for 7.5 percent of import value;
  • If a developing country selects a co-efficient of 22, that developing country would be required to make ‘half-formula cuts’ for 10 percent of tariff lines and import value, or full exemptions for 5 percent of both; and
  • If a developing country selects a co-efficient of 25, that developing country would have the least amount of flexibility and would have to follow the formulas for industrial tariff reductions (no tariff lines would be exempted); and
  • In order to prevent certain developing countries from concentrating their tariff reductions (e.g. in the auto sector), the developing countries would be required to apply full tariff cuts to either 20 percent of tariff lines or 9 percent of import value within each HS chapter.

The "package of elements" covers only goods and does not cover services.  It also does not cover intellectual property and trade remedies (anti-dumping and countervailing measures).

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