Fate of Hong Kong tied to agriculture

Updated: Oct 19 2005, 05:34am hrs
In the past few weeks, agriculture has emerged as the single most important area of negotiation in the on-going World Trade Organisation (WTO) talks.

The intense discussions on farm issues among key members in Zurich, Switzerland, last week, has signalled that the fate of the Hong Kong ministerial meet in December is tied to the narrowing of differences in agriculture among developing countries and the developed world.

Although the G-20 group of developing countries managed to score a few points in Zurich over the EU, the US and Australia, it is way too early to rejoice.

The fact that the US and Australia have agreed to drop their demand for progressivity within bands in the proposed tariff reduction formula is encouraging. However, we sho-

uld not forget that our original demand was to go in for a linear reduction formula.

In a linear formula, all tariff lines are reduced by the same proportion, irrespective of the existing tariff levels. It calls for developing countries with relatively higher level of tariffs to bring down their tariffs by the same percentage as developed countries with relatively lower tariffs.

This, however, could not be pursued as a number of developed countries including the US, Australia and Canada, were pushing for the Swiss formula which calls for steeper reduction for higher tariffs. This was unacceptable to India and a number of other developing countries as it would impose a disproportionately high reduction burden on developing countries with high tariffs.

India, as part of the G-20, settled for a banded reduction formula, which was a compromise between the linear and the Swiss formula. As per the formula, tariffs would be divided into a specified number of bands. All tariffs falling within the same band would be reduced by the same proportion (linear cut). However, tariffs falling in higher bands would attract higher cuts.

By demanding progressivity (higher cuts for higher tariffs) within the same band, the US and Australia were attempting to incorporate all properties of the Swiss formula in the banded formula. By thwarting the demand, the G-20 has managed to protect its territory.

The EUs demand for a pivot within each band, which would give countries the flexibility of keeping some tariff lineshigh, was also rejected by the G-20. This was necessary as allowing it would have given the EU the rope to maintain high tariffs on some specified products like sugar and dairy, denying market access to developing countries.

In this increased din over an appropriate formula for tariff cuts, India and the G-20 must not lose sight of the fact that the stress on this round of negotiations has to be on the reduction of subsidies, both domestic and export, by the developed countries.

With subsidies given by OECD countries totalling roughly $360 billion each year, developing countries dont stand a chance of competing against them in an open market unless subsidies are substantially reduced.

The G2-0 countries have to make it clear that they will not tolerate mere jugglery of subsidies between boxes and would not settle for anything less than subsidy cuts in absolute terms. They should also not agree to tariff reduction till the developed countries mention clearly the date by which they are ready to get rid of their subsidies.

Agriculture is the most vulnerable sector for many developing countries as the livelihood of millions depend on it. The developed world should not be allowed to forget that.