Sanjay Suri

VALLETTA, Malta, Nov 26 2005 (IPS) — The Commonwealth adopted a declaration Friday asking the European Union to follow the U.S. example in taking the stalled Doha development round of trade negotiations forward.

”We note the offer on agriculture made by the United States of America and express the hope that the European Union and others who maintain high levels of agricultural protection respond in the same spirit,” heads of government or their deputies said in an announcement after discussing the Commonwealth position on trade.

The resolution seeks to tip the weight of 53 Commonwealth countries (they are the Commonwealth because they were once a part of the British Empire) behind the U.S. initiative ahead of the meeting of trade ministers due in Hong Kong next month in search of a world trade agreement.

If the Commonwealth countries were to back the U.S. move – and that is a very big if – they could add up to considerable weight: the countries include Britain, India, Canada, Australia, Malaysia, South Africa, Nigeria, Pakistan and Bangladesh.

That call does, however, offer a choice between the EU and the U.S. offers, and many developing countries find neither acceptable. But differences in those proposals have brought deep divisions in the debate ahead of the Hong Kong meeting.

European Union (EU) trade commissioner Peter Mandelson has offered to cut average EU tariff on agricultural imports by 46 percent. Europe has additionally offered to cut its trade distorting farm supports by 70 percent, and to eliminate all agricultural export subsidies by an agreed date – if others offer to do the same. ”Europe’s offer provides a middle ground around which WTO members should converge,” Mandelson declared. ”A few will say that Europe has not gone far enough. But Europe’s farmers, like any others, cannot be expected to see their livelihoods negotiated out from under them. Our proposals are at the limit of what is socially tolerable in Europe and we will go no further.”

The United States, on the other hand, has proposed substantial reductions of trade-distorting agricultural support measures and tariffs in the first stage by way of market access, along with the elimination of export subsidies, to be phased in over a five-year period. In the second stage to take effect five years after implementation of the first, all remaining trade-distorting policies in agriculture would be eliminated.

The United States has proposed that developed countries cut their tariffs by 55-90 percent. The lowest tariffs would be cut by 55 percent, with cuts ranging to 90 percent for the highest tariffs. This goes considerably further than the EU offer.

The United States calls for elimination of all agriculture export subsidies by 2010. It is calling for substantial reductions in trade- distorting domestic support, with deeper cuts by countries with larger subsidies.

But subsidies on exports are only a small part of the dispute; the far bigger problem is the subsidies offered by way of domestic support for production.

The United has made specific offers for the ‘coloured boxes’ that are WTO jargon for the world of subsidies that come by way of domestic support.

These boxes started simply enough as the ‘red box’ (forbidden), ‘green box’ (permitted) and ‘amber box’ (slow down, reduce). But the agriculture agreement has no ‘red box’ at all; given the large amounts given as subsidies, who could say that anything is forbidden. It has instead a ‘blue’ one besides the ‘amber’ and ‘green’. The tricky part of agricultural subsidies are the amber and the blue boxes, and the relation between them.

The WTO says that all domestic support measures considered to distort production and trade fall into the amber box. These include measures to support prices, or subsidies directly related to production quantities. So, for purposes of negotiations and decisions, any such support measures would be considered, as it were, to be sitting in an amber- coloured box.

But measures that come accompanied with conditions or a timetable to reduce such distortions would be seen to be sitting in a blue box. So that the blue box would still contain subsidies and distorting support measures, but with a corrective mechanism tied to them. One such mechanism can be measures that require farmers to limit production.

At present, the WTO says, there are no limits on spending on blue box subsidies. Some countries want to keep the blue box as it is because they see it as a means of moving away from distorting amber box subsidies without causing too much hardship. This is so because while governments continue to spend on subsidies through the blue box, the blue box provides at least for a lid on them.

The United States has proposed cutting the aggregate measurement of support for subsidies in the amber box by 60 percent. These would be set out product-wise, based on the 1999-2001 period.

It proposes to cap measures in the blue box at 2.5 percent of agricultural production. This is, however, a large percentage, and it will enable the United States or other countries that might agree to this, to continue to provide subsidies for longer periods by tying them to reductions that could be phased out over a longer period. This way a country could meet its amber box commitments by making relatively small cuts.

But the United States has warned that ”this is not a unilateral offer – it is contingent on bold reforms from all countries participating in the WTO (World Trade Organisation) process. So that if the EU and Japan do not agree, the United States will not go it alone down this path.

Mandelson has said that cuts at the level advocated by the United States ”would have disastrous consequences.” Taken together, these developments add up again to stalemate.

For the Commonwealth, the declaration hit several fault lines straight off the press.

For a start, three Commonwealth members are also members of the European Union – Britain, Cyprus and host Malta. Britain is not only an EU member, but holds rotating presidency of the EU until the end of the year. The Commonwealth declaration was not accompanied by any declaration by the three EU members that they would adopt the Commonwealth position in opposition to the EU.

British representatives have said they back the Commonwealth position, but British statements are often at odds with their actions. British Prime Minister Tony Blair offered no indication in Malta Friday that Britain will steer away from the EU position at the trade ministers meeting due in Hong Kong next month.

And for many of the developing countries, this may not be a choice between the EU and the United States, or between amber and blue, for that matter. They could be looking for something better than what could be two bad choices.