Agriculture in WTO Negotiations

CRS Report for Congress
Agriculture in WTO Negotiations
Upda ted September 30, 2003
Charles E. Hanrahan
Senior Specialist in Agricultural Policy
Resources, Sc ience, and Industry Division

Congressional Research Service ˜ The Library of Congress

Agriculture i n W TO Negotiations
The W orl d Trade O rgani z at i on’s (W T O) fi ft h m i n i s t eri al conference (hel d
Septembe r 1 0 - 1 4 , 2003 in Cancun, Mex i co) ended without an agreement o n a
framework for continuing multilateral negotiatio n s on agricultural t rade
liberali z a t ion. The i nconclusive end o f t he Cancun ministerial places in doubt the
ability of WTO m ember countries to complete the current round of nego tiations by
the s cheduled J anuary 1, 2005 deadline.
WTO m ember countries launched t hi s n ew round of multilateral t rade
nego tiations in November 2001 at the W TO’s f ourth ministerial conference in Doha,
Qat ar. Because of i t s em phasi s o n i nt egrat i n g d evel opi n g c ountries into the global
trading s ys tem, the round is called t he Doha Development Agenda (DDA). The new
r o und i n corporat es agri cul t u re i n t o a com prehensi ve fram ework t h at i n cl ude s
nego tiations on industrial t ariffs, s ervices, dispute s ettlement, and other t rade issues.
The ambitiou s agenda for agricultural t rade liberalization calls for s ubstantially
i m p rovi n g m arket access, reduci n g and phasi ng out ex port s ubsi d i es, and
substantially reducing t rade-distorting domestic support.
W h i l e t h e U ni t ed S t at es and t h e E U reached agreem ent o n a broad fram ework
for negotiating agricultural t rade liberalization before t he Cancun meeting, a group
of developing countries, t he G-22 which includes B r a z i l , C h ina, India, and S outh
Africa, among oth e r s , m ade a counter-pr oposal which m akes fewer d emands on
developing countri e s than the EU-U.S. framework. T he Chairman of the C ancun
ministerial ci rculat ed a draft decl aration at t he m eet i ng t hat attempted t o reconcile
differences between developed and developi ng countries on the agricultural i ssues.
Neither the p roposals m ade b y t h e United S tates and the EU and the G-22 nor the
Chairman’s draft d eclaration p ropose s p ecific m odalities (formu l as , t argets, o r
timetables) for reducing tariffs and trade-distorting support and for phasing out
ex port s ubsidies.
W T O m eet i n gs are s chedul ed t o cont i nue, b egi nni ng wi t h an agri cul t u r e
negotiating group meeting i n Oct ober and endi ng wi t h a s eni o r l evel st ock t aki n g i n
December 2003. Amid considerable uncertainty about prospects for completing t he
round, W TO m embers, i ncluding the United S tates, the EU, the G-21 and other
countries, are taking stock and consider ing options for concluding the round. U.S.
trade offici al s also hav e i ndicat ed they will be focusing attention on bilateral and
regi onal t rade nego tiations.
Much of U.S. agriculture would benefit from further mu ltilateral t rade
liberalization, but some U.S. products might face stiffer foreign competition at home
or in third-country markets. DDA nego tiations, i f t hey result i n n ew commitments
to reduce t rade-distorting domestic support o r ex port s ubsidies, also could affect U.S.
farm programs authorized in the 2002 farm bill (P.L. 107-1 71). Any agreem ents
reached in the n ew round would b e t aken up by Congress under fast-track procedures
for l egislation t o implement trade agreem ents as spelled out in the Trade Act o f 2002
(P.L. 107-210). This report will be updated p eriodically.

Agriculturein theCancunMinisterial ..............................1
AgricultureNegotiations:MandateandTimetable ....................2
In itial Negotiating P roposals .....................................2
UnitedStates .............................................3
EuropeanUnion ...........................................4
Developing Countries ......................................4
AgriculturalPolicyReformandTradeLiberalization ..................4
EuropeanUnion ...........................................4
UnitedStates .............................................5
The M odalities P roposal ........................................5
Market Access ............................................5
Ex port C ompetition ........................................5
Domestic Support .........................................6
U.S.Reaction .............................................6
EUReaction ..............................................6
The EU-U.S. Framework P roposal ................................7
Domestic Support .........................................7
Market Access ............................................7
Ex port C ompetition ........................................7
OtherMatters .............................................8
Implications ..............................................8
The G-21 C ounter-Proposal ......................................9
Domestic Support .........................................9
Market Access ............................................9
Ex port C ompetition ........................................9
The African Cotton P roposal ....................................10
DraftDeclarationforAgriculturalNegotiations .....................10
Domestic Support ........................................10
Cotton ..................................................10
Market Access ...........................................11
Ex port C ompetition .......................................11
OtherMatters ............................................11
AgricultureNegotiations AfterCancun ............................11
Status oftheDraft Declaration ..............................11
Next Steps ..............................................12
InCongress .................................................12

Agriculture in W TO Negotiations
Agr i cul t ur e i n t he Cancun M i ni ster i a l
The W TO’s fifth ministerial conf erence (held S eptember 10-14, 2003 in
Cancun, Mex i co) ended without an a g r eement o n a framework for continuing
negotiations on agricultural t rade liberalization as wel l as a host of other trade i ssues ,
including market access for non-agricultural goods, t rade in services, W TO rules, and
dispute s ettlement. The inconclusive end o f t he Cancun ministerial places in doubt
the ability of WTO m ember countries to complete the current round of nego tiations
by the s cheduled J anuary 1, 2005 deadline.
The immediate cause of the b reakdown o f t he ministerial conference was refusal
by a group of poor developing counties t o agree with European Union (EU) d emands
to begin negotiation of multilateral rules for the so-called Singapore issues –
investment, competition, government procurem ent, an d t rade facilitation. The
meeting ended when l east-developed countri es refused absolutely t o agree to launch
negotiations on just one of the i ssues – t rade facilitation.
Bu t fundame n t al differences especially between developed and developing
countries o v e r d eveloped country farm subs ides and m arket access for agricultural
products also contributed to the failure of the round. The United S tates, in particular,
urged n egotiations that would result i n re ductions in the m ost t rade-distorting forms
o f d o m estic support, but with some flex ibility granted t o developed countries to
maintain domestic support i n production-limited p rograms, reciprocal reductions in
tariffs by all W TO members o n agr icultural p roducts, and phasing out of ex port
subsidies. In the U.S. v iew, developing countries, especially the m ore economically
advanced ones, should b egin to open t heir markets t o agricultural p roducts from both
developed and developing countries. The developing count ries, represented by the
G-21 gr o u p ( whose m embers include Argentina, Braz il, China, Egyp t, India, and
South Africa), d emanded s teeper cuts in trade-di s t o r t i ng domestic support t han
proposed by the United S tates and the EU and the elimination of ex port s ubsidies
(opposed by the EU), but without much in the way of reciprocal tariff reductions in
Viewed as symbolic of the differen ces between devel o p e d a nd developing
countries was t he issue o f t rade-distortin g domestic subsidies for cotton. A group of
four least-developed African cotton-ex portin g coun t r i e s – Be n i n , Bu r k i n a Fasso, C had,
and M ali–proposed an end t o global t rade-dis torting s ubsidies for cotton within three
years with transitional compensation t o be pai d t o producers. The United S tates, in
response, proposed a global, sectoral initia tive for cotton and tex tiles which would
have addressed s ubsidies f o r cotton and tex tiles, tariffs on fibers, t ex tiles and
clothing, and non-tariff and o ther barrier s i n t he fiber s e c t o r. Inability to reach a

compromise o n t he cotton i ssue a l s o contributed to the b reakdown o f t he Cancun
m i n i s t eri al conference.
Agr i cul t ur e Negoti a ti ons: M andate and Ti m etabl e
At the W TO’s Fourth Ministerial C onference i n Doha, Q at ar, N ovem b er 9-14,
2001, WTO m em ber countri es agreed on a decl aration t o begin a n ew round of
multilateral t rade negotiations (MTNs), i ncluding negotiations on agriculture. This
new round, because of its emphasis o n i ntegrating d eveloping countries into the
world t rading system, i s called t he Doha Development Agenda (DDA).
A first phase of agricultural t rade nego t i ations had b een underway since early
2000. The first phase produced proposals f r o m W T O member countries for
agri cul t u ral t rade l i b eral i z at i on, but no agreem ent w as reached on a w ork p rogram
or timetable for completing negotiations. The DDA incorporat es those negotiations
into a comprehensive multilateral t rade framework with an agreed upon nego tiating
m andat e and est abl i s hed b enchm arks t o b e u sed t o m easure p rogress.
The Doha M i ni st eri al Decl arat i o n m andates comprehensive nego tiations on
agri cul t u re ai m ed at : subst ant i al i m p rovem ent s i n m arket access; reduct i ons of, wi t h
a v iew t o phasing out, all forms o f ex port subsi d i e s ; a n d s ubstantial reductions in
trade-distorting domestic support. The D e c laration also p rovides t hat s pecial and
differential (S and D) treatment for d eveloping countries shall b e an i ntegral p art o f
all elements o f t he nego tiations. (S and D t reatment generally means t hat d eveloping
countries would m ake fewer or lower reduction commitments and enjoy l onger
periods of time in which t o phase in concessions or commitments.) The Decl aration
takes note o f non-trade concerns reflect ed in nego tiating p roposals o f v arious
member countries and confirms that non-trade concerns would b e t aken into account
in the negotiations.
March 31, 2003 was s et as the d eadline for reaching agreement o n “modalities”
(t argets, formulas, timetabl es , e t c . ) fo r ach i e v i n g t h e m an d a t e d a gri c u l t u re o b j ect i v es ,
but that deadline was missed. Negotiations on modalities continued as part of the
preparations for t he nex t (and f i f t h ) W TO M i n i s t eri al C onference whi ch w as hel d
September 10-14, 2003 in Cancun, Mex i co. R ather t han agree on modalities, the
objective for agricu l t u re in the C ancun ministerial was t o agree on a framework
(without numbers or formulas) for achievi ng the b road o b j ectives of the DDA for
agri cul t u re. N o agreem ent o n a fram ework was reached, however, and consequent l y,
the d eadline for concluding the DDA by J anuary 1, 2005 seems unlikely t o b e m et.
Initial Negotiating Proposals
The M arch 31 deadline was missed b ecause of the i nability of W TO m embers,
es p eci al l y the United S tates and the EU, to bridge differences in thei r respective,
initial n egotiating p roposals. 1 Agreem ent on m odalities i s a prerequisite for m oving
to the n ex t s tep i n t he process, i.e., n egotiating i nd i v i d u a l country commitments

1 Initial negotiating proposals are at
[ h t t p : / / www.wt o.or g/ engl i s h/ t r at op_e/ a gr i c _e/ n egot i _ m] .

(called s chedules or lists) for reducing t ariffs and domestic support and phasing out
ex port s ubsidies.
Un i t e d States. The United S tates p roposed th e elimination of agricultural
ex port s ubsidies; substantial red uctions in tariffs (with no country’s tariff on any
agricultural p roduct ex ceeding 25%); 20% increases i n t a r i ff-rate quotas on
agricultural imports; disciplines
o n ex port state t r ad i n g
WTO Farm Support Categories enterprises (STEs); elimination
T he WT O classifies domestic farm support policies o f the blue box (see tex t box );and reduct i ons i n t r ade-
into three colored box categories. distorting domestic support
Gr een box programs are publicly funded progr ams (“amber box ”) to no more than
(financed by direct outlays or foregone r e ve nue) 5% of each country’ s total
t h a t do not involve a t ransfer from consumers o r agricultural produ ct i o n v al ue —
have the effect o f p r oviding price support t o the objective being to m ake all
produce r s . Examples of gr een box programs are countries’ domestic support
research programs , de-c oupled income support levels comparable in relative
such as U.S. direct payments to producers t hat are terms. So-called de minimis
not continge n t on any production, envi ronmental ex em pt i ons, t hat i s, t rade-
program payments, such as the Conservation distorting s upport l ess t han 5 %
Reserve Progr am, or disaster assistance. No WT O of the t otal value o f p roduction
discip l i n es or reductions apply t o green box
programs . or, i n t he case of commodity
speci fi c s up p o rt , l ess t han 5 %
Blue box programs are direct payments made under of the commodity’s total val ue,
a production limiting progr am. T he EU is the would b e m aintained. Most of
primary user of blue box programs , making direct these changes would b e phased
payments to producers, for example, based on fixed in over 5 years. Ultimat e ly
ar e a s o r yi elds or a f ixed number of livestock. tariffs and t rade-distorting
T here a re curren t l y n o U.S. blue box programs . domestic sup port would be
Blue box progra ms a l so are not subj ect to eliminat ed.
reduction commitments.
Amber box programs are p a yments t hat are The U.S. posit ion was
c o n t i n ge n t o n p a r t icipation i n agr icultural supporte d b y t he Cairns Group
productio n , i.e., producing a crop or raising and m any d eveloping countries
livestock qualifies a farmer for government t h at a l s o want deep cut s i n
payments. Examples of U.S. a mber box programs d o m e s t i c s upport a n d t h e
are price supports for dairy, s ugar and peanuts and elimination of ex port s ubsidies.
loan deficiency payments or marketing l oan gains The17members oftheCairns
for grain, oilseed, and cotton producers. Examples group are: Argent i n a, Aust ral i a,
o f EU amber box payments are s o-call e d Bolivia, Brazil , Canada, C hile,
intervention bu ying of f arm products at prices C olombia, C osta Ri ca,
a d mi nistratively maintained above market prices. Guatemala, Indonesia,
In contrast to gr een and blue box programs , amber
box payments are s ubj ect to WT O r ed u ction Malaysia, N ew Zeal and,
commitments. Paragu ay, P hilippines, South
Afri ca, Thai l and, and U rugu ay.
T h e C airns Group and s ome
developing countries, however,
have proposed that spending on non-trade d istorting domestic support (“green box ”
measures) also b e curbed, a position t he United S tates opposes.

European Union. In sharp contrast to the U.S. and Cairns Group proposals,
the EU (and J apan and Korea) proposed “progressive and s ubstantial” reductions in
farm subsidies and agricultural t ariffs based o n t he form ul as agreed t o i n t h e U rugu ay
Round nego tiations (1986-1994). Thus tariffs would b e reduced by 36% on average
while individual t ariff lines would b e s ubject to a 15% minimum reduction. Trade-
d i s t o r t i ng domestic support (amber box ) would b e cut by 55% starting from t h e
bound commitment level i n 2006. A n ew agricultural agreement would retain t he
current allocation o f domestic support t o green, b lue, and amber box es (see tex t box ,
p. 3). The EU proposes elimination o f de minimis ex em ptions that the United S tates
says should b e reta i n e d . The volume o f ex port s ubsides, according t o t he EU
proposal, would b e cut substantia l l y, while an average 45% cut would b e m ade i n
budgetary ex p end i t u r e s for such meas ures. The EU indicates a willingn ess t o
eliminate ex port s ubsidies on products of interest to developing countries su ch as
wheat or oilseeds, provided t hat n o o ther forms o f s ubsidy (s u c h as ex port credit
gu arant ees) are provi ded b y o t h er W T O m em bers.
The EU p roposal provides for taki ng non-trade conce rns into account.
Measures, i ncluding subsidies, to promote r ural development, protect the
environment, or enhance animal welfare, t he EU says , s hould b e considered as green
box m easures and t herefore ex em pt from W TO di sci p l i n es.
Deve loping Countries. Developing countries, a large and diverse group that
constitutes t he majority of WTO m embers , i n numerous initial p roposals, called for
rapid d ismantling o f d eveloped countries ’ t rade barriers and the eliminatio n o f
production-linked domestic subsidies. Developing countries are also s eeking
ex emptions for d eveloping country domes tic support d eemed essential for economic
d e v elopment. W h ile developing countri es are s eeking s ubstantial reduction s i n
agricultural t ariffs of devel oped countries, m any are resist ant t o t he idea of reciprocal
t ari ff reduct i ons, p referri ng i n st ead t o be accorded speci al and d i fferent i al t reat m ent
which w o u l d entai l m ai ntai ning tariffs or phasing them down over l engt hy time
periods. De v e l o p i n g countries, i ncluding many of the poorest, that benefit from
preferential t reatment for t heir ex ports to developed country markets also want s uch
benefits to continue. C ountries receiving preferences fear they may l ose m arkets to
other d eveloping countries if preferential schemes are replaced with across-the-board
reduction or elimination of t ariffs.
Agricultural Policy Reform and Trade Liberalization
S o m e suggest t h at t h e s uccess o f t he agri cul t u re nego t i at i ons depends on
agri cul t u ral pol i cy reform i n t he EU and t he Uni t ed S t at es. Bot h have recent l y m ade
changes i n domes tic farm policy t hat could s ignificantly impact on the negotiations.
European Uni on. The E U h as recent l y enact ed a num ber o f s i gni fi cant
reforms i n its Common Agricultural P olicy (CAP), i ncluding substantial de-coupling
of income support from p roduction, reductions in price s upports, and a s hift of funds
from domestic support for agricultural p rodu c tion t o rural development. In W TO
termin o l o gy, t h e reforms enable the EU t o s hift substantial amber and blue box
spending into the green box which, under W TO rules, is not subject to reduction
commitments. These reforms should enable the EU to accept cuts i n t rade-distorting

domestic support o r t he reduction o f ex port s ubsid i e s i n t he Doha agriculture
United States. In the United S tates, the P resident on May 13, 2002, sign ed
into law a farm bill (P.L. 107-171) to replace the 1996 Federal A gr i c u l t u r al
Im provement and R eform, or FAIR , Act ). Critics s ay this new farm l aw could rai se
trade-distortin g domestic support above U.S. WTO commitments t o reduce s uch
spending. C ritics also argue that incl usion i n t he farm bill of new t rade-distorting
supports, s uch as p rice-triggered counter-cyclical income support, undermines the
U.S. position i n t he new round. However, the farm b ill stipulates that the S ecretary
shall, to the m ax imum ex t ent poss i b l e , make adjustments i n U.S. farm s upport t o
ensure that it does not ex ceed levels allowable under t he W T O Agreement o n
Agriculture. Moreover, U.S. trad e o ffi ci al s i nsist t hat t he United S tates has not
wavered from its negotiating objective of s ecuring substantial reductions in domes tic
subsidies, including U.S. subsidies, that distort t rade, and that congressional s upport
for agricultural t rade liberalization rem ai ns strong.
The M odal i t i e s P r oposal 2
To facilitate the p rocess o f reaching agreement o n m odalities, the chairman o f
the Agriculture Nego tiating Group, Stuart Harbinson, issued prior t o t he March 31,
2003 deadline, a s et of proposals. Harbinson’ s p roposals attempted t o s teer a middle
course bet ween t h e U.S . and EU nego t i at i n g posi t i ons, whi l e accordi n g s peci al and
differential t reatment to developing countries. C hairman Harbinson proposed
speci fic formulas and numerical target s for dealing with the t hree so-called pillars of
the agriculture nego tiations: m arke t access, ex port competition, and domestic
support. His p roposal for m odalities, universa lly criticized as being t oo specific, was
not adopted by the agriculture nego t i a t i n g group, and t he modalities d eadline was
missed. However, many ex pect that Harbinson’s m odalities report m ay be reviewed
later as a source of methods for achievi ng the DDA ‘s agricultural objectives.
Ma rket Access. Harbinson p roposed a “banded” approach to tariff reduction.
Fo r t a r i f f s great er t h an 90% ad valorem, t he si m p l e average woul d b e reduced by
60% subject to a min i m u m c u t o f 45% per t ariff line; for agricultural t ariffs lower
th a n or equal t o 90% but greater than 15%, t he simple average reduction would b e
50% subject to a minimum cut of 35% per t ariff line; and for al l agricultural t ariffs
lower t han o r equal t o 15%, t he simple av erage reduction would b e 40% subject to
a minimum cut of 25% per t ariff line.
Export Competition. Harbinson ’ s m odalities report recommended t hat
ex port s ubsidies be eliminat ed over a ten-year period . E x p o r t credit and food ai d
programs would also b e covered b y n ew rules. Repaym ent t erms for ex port credits
would be limited t o a max i m u m of s ix months but developing countries would b e
allowed l onger repaym ent p eriods. For the m ost p art, food aid would t ake t he form
of unrestricted financial grants to purchase food internationally or regi onally under
the Harbinson recommendations. H o wev er, food aid i n k ind for development

2 T he Chairman’ s r e p o r t o n modalities f or the agr icultural negotiations can be accessed at
[ h t t p : / / www.wt o.or g/ engl i s h/ t r at op_e/ a gr i c _e/ n egot i _ mod2st d r a f t m] .

projects could b e p rovided t hrough United Nat i ons food agenci es or UN food agency
projects operated b y non-government al or charitable o rganiz ations.
Domestic Support. The Harbinson modalities r ep o r t called for a 60%
reduction i n t rade-distorting (amber box ) s upport. The report also s uggested t h at
trade-distorting s upport tied t o production limits (blue box support u sed p rimarily by
the EU) be capped and then reduced by 50% over five years. The m odalities report
al so incl uded an option for eliminating t he blue box altogether by incl uding it in the
amber box category and subjecting i t t o a 60% reduction. The de minimis ex em pt i ons
would b e cut by half over five years.
U.S. Reaction. W h i l e U.S . t rade n egot i at o rs i ndi cat ed t h ey consi d ered t h e
modalities report as a reference point for further negotiations, t hey were highly
critical of spe c i f i c p roposals. Bo th U.S. and C airns Group officials s aid t he
recommendations fell far s hort o f t heir earlier proposals. U .S. criticisms, among
ot hers, were t hat t he m arket access p rovi si ons di d not resul t i n t ari ff harm oni z at i o n
(i.e., reduction t o comparable l evels ) an d t hat t he application o f t he Harbinson
ap p roach would s till leave v ery h igh t ariffs on many products, especially m eat
products. U.S. t rade officials welcomed t he elimination o f ex port s ubsidies, but they
noted t h a t the t en-year phase-out sche dule s hould b e considerably shortened.
According t o U.S. n egotiators, reduction p roposals for amber box support would
enable t h e E U t o m ai ntai n t rade-distorting blue box paym ents and t o continue to
provide considerably more trade-distorting amber box support t han could t he United
States. Under current WTO rules, U.S. amber box support i s capped at $19 billion
annual l y, w hile the EU’s i s capped at $67 billion. Under t he Harbinson p roposal,
U.S. amber box support would fall t o around $8 billion p er year , w h ile the EU’s
would be capped at $27 billion per year.
Not onl y t he Adm i n i s t r a t i on, but m any i n C ongress react ed negat i v el y t o t he
Harbinson p roposals. A p articular con cern was that the p roposed 60% reduction i n
trade-distorting, or amber box , s upport, did not “level the p layi ng field” between the
United S tates and the EU. Permitted EU t rade distorting s ubsid i e s w o u l d s till be
more than three times t he level o f p ermitte d U.S. s ubsidies. Also in the 2002 Trade
Act, C ongress had m ade p reserving ex port credit g u a r a n t e e programs a m ajor
nego tiating objectiv e. Any p roposals for tightening ex port credit p rogram disciplines
are t hus likely t o come under i ntense congressional s crutiny.
EU Reaction. The EU also reacted negatively t o t he Harbinson p roposals. In
the EU v iew, they were unbalanced and p laced most of the burden o f adjustment on
t h e E U. The E U w as part i cul arl y concer ned t hat, with t h e e x c e p t i on of adding
animal welfare s u b s idies t o t he category o f non-trade d istorting (or green box )
subsidies, the Harbinson report i gnored non-trade concerns. The EU criticized the
report’s call for the elimin at i o n o f ex port subsidies without similarly disciplining
ex port credi t p rogram s, such as U.S . ex port credi t guarant ees. E U o ffi ci al s argued
also that blue box subsidies are less trade d istorting t han amber box support and
should not be subject to the s ame reduction requirements as amber box support.

The EU-U. S . Fr a mew or k Pr oposal
As the dat e for the C ancun ministerial meeting approached, t he objective of t he
ministerial changed from agreeing on sp ecific m odalities t o reaching agreement o n
a b road fram ework for accom p l i s hi ng t h e agri cul t u re obj ect i v e s . An E U-U.S .
framework proposal put forth o n August 1 3 r e p r e s e n t s an effort to bridge the
si gn i fi cant gaps b et ween t h ei r p revi ous posi t i ons and t o provide a b asi s for agreem ent
on a way forward at C ancun. A political agreem ent on agriculture between the EU
a n d t he United S tates i s critical to the s uccess o f t he Doha round, because they a r e
the world’s largest ex porters and importe rs of agricultural p roducts. In retros p ect,
o b s ervers have not ed t h at whi l e an EU-U.S . fram ework agreem ent m ay have be e n
necessary in order t o m ove the DDA round toward agreement, it was not sufficient.
One consequence o f t he EU-U.S. agreement was to provoke a coalition o f d eveloping
countries (see below) to make a counter-p roposal that went beyond what the E U and
United S tates h ad been able to agree t o i n t heir framework proposals.
Domestic Support. The E U-U.S . fram ework agreem ent p r o poses t h at t h e
most-trade distorting domestic support measures wo u l d b e reduced according t o a
percentage range t o be negotiated. W TO m embers could u se blue-box type
paym ents based o n fix ed areas and yields (such as U.S. counter-cyclical paym ents);
or paym ents made on 85% or less of the b ase l evel of producti o n o r l i v estock
paym ents based o n a fix ed number o f animals as employed by the EU). S uch “blue
box “support could not ex ceed 5% of the t otal value o f p roduction b y t he end o f an
implementation period. De minimis ex emptions would also b e reduced. The sum o f
allowed t rade-distorting s upport, d e minimis , and blue box spending must be
sign ificantly less than the final bound level i n 2004.
Ma rket Access. Tariffs would b e reduced using a blended approach. S ome
tariff lines w o u l d b e s ubject to a Urugu ay Round type reduction formula (i.e., the
average t ari ff l evel w o u l d b e reduced by som e percent age, whi l e i ndi vi dual t ari ff
lines would be subject to a minimum p ercentage reduction) to be negotiated.
Minimum reductions here would b e counterbalanced by a combination o f t ariff cuts
and ex p anding tariff rate quotas (TRQs). S ome t ariff lines would b e reduced using
a S wi ss form ul a. and s o m e t ari ffs l i n es woul d b e dut y-free. The u se of t h e s peci al
agricultural s afeguard measure (SSM ) b y d eveloped countries remains under
negotiation, but an SSM would be established for developing countries for import-
sensitive p roducts. S ome portion o f d eveloping countries’ ex ports w o u l d receive
duty-free t reatment through a combination o f a c r o s s t he board tariff reductions or
elimination and preferential access. Developing countries would b enefit from S and
D t reatment incl uding lower t ariff reductions and l onger implementation periods.
Export Competition. Ex port s ubsidies would be eliminat ed over a period to
be negotiated for a specific lis t o f p roducts of particular interest to developing
countries. For remaining p roducts, budgetary and quantity allowances would be
negotiated. Trade distorting aspect s of ex port credits would be reduced in parallel
with ex port s ubsidies by reducing t he repaym ent t erms to commerci a l p ractice
( u s u a l l y defined as 6 months). Disciplines would b e d eveloped t o p reve n t
com m erci al d i s pl acem ent t hrough food ai d s hi pm ent s . Di s ci pl i n es endi ng si ngl e
desk ex port p rivileges, prohibitions of speci al financing privileges, and disci plines
on pricing p ractices also would b e established for ex port S TEs.

Othe r Ma tte rs . The EU-U.S. framework proposes to deny the full b enefits of
special and d ifferential t reatment to sign ificant n et agricultural ex porting countries
(such as Brazil or Argentina), while maintaining t hem for the l eas t-developed W TO
members. Issues the framework says are s till being negotiated i nclude t h e “ p e ace3
cl ause” , non-t r ade concerns, implementation p eriod, sectoral initiatives, and
geographical indications.
Implications. Many W T O m ember countries ex pressed encouragement t hat
t h e U ni t ed S t at es and t h e E U c o u l d reach agreem ent o n b road param et ers of t h e
agricultural negotiations gi ven t he stro n g d i fferences in thei r i nitial negotiating
positions. Nevertheless, both o ther developed countries, like Australia, and
developing countries, like Braz il, criticiz ed the framework because, i n t heir view, i t
did not meet the ambitious trade liberalization objectives of the Doha Ministerial
Decl aration, es peci ally with respect to trade-distorting domes tic subsidies.
Although t he EU-U.S. framework woul d require reduction s in spending on
domestic support, it would not require much , i f any, change i n farm policies. Some
have suggested that the p roposal’s blue box provision has b een structured in such a
way as t o give t he United S tates t he flex ibility to shift u p t o $10 billion i n t rade-
distorting counter-cyclical paym ents into this category. Bo th the C airns Group and
developing countrie s h a v e e x p r e s s e d d i s s a t i s f a c t i o n t h a t t h e f r a m e w o r k does not meet
the Doha mandate of substantial reductions in trade-disto r t i n g s upport. Those
countries also would like t o s ee limits placed on green box spending which t hey s ay
also can distort t rade.
The fram ework agreem en t i m p l i e s t hat t he Uni t ed S t at es h as m oved away, at
least for the time being, from its initial o b j ective of t otal elimination of ex port
subsidies. The framework calls for eliminating s uch s ubsidies o n p roducts of special
interest to developing countries and for reductions in the budgetary ex p enditure and
volume of s ubsidies on remaining products. U.S. s upporters of ex port credit
programs are likely t o b e wary o f t he framework’s proposal to “mirror” commitments
made on ex port s ubsidies with disciplines on ex port credit p rograms, particularly to
limit the repayment period for s uch credits to 6 m onths. S ome observers suggest that
U.S. willingnes s t o drop its insistence on elimination of ex port s ubsidies i s a trade-
off for limited preservation of its ex port credit program s.
There are no speci f i c n u m eri cal form ul as for t ari ff reduct i o n i n t he EU-U.S .
fram ework so i t i s di ffi cul t t o t el l how m u ch m arket access wou l d be ex panded.
Im port-sensitive p roducts would b e s u b ject to lower t ariff reductions, but lower
reductions would b e counterbalanced to some degree by ex panded T R Q s . The
framework cal l s f o r S and D treatment of developing countries, but specifically
ex empts n et agricultural ex porting countries f r o m t h e benefits of S and D. No

3 Ar ticle 13 of the WT O Agreement on Agr iculture is known as t he “peace clause” because
it preven t s mo s t challenges in WTO dispute settlement against another WTO member
country that is complying with its WT O commitments. T he peace clause expires a t t he end
of 2003. When the peace clause expires, it is p o s s i b l e t h a t WT O member countries’
subsidies could be challenged in WTO disput e settlement, especially by developing

mention i s m a d e o f d uty-free t reatment for imports from t he least d eveloped
The G-21 Counter -Pr oposal
A group of 21 developing countries put fo rth a counter-proposal to the EU-U.S.
fram e w o r k which m akes a clear distinc tion b etween what should b e required o f
developed and developing countries and woul d impose greater trade liberaliz ation
obligations on developed t han o n d eveloping country members o f t he W TO. The G-
21 counter-proposal calls for d eeper cu ts in domestic support, the elimination of
ex port s ubsidies, and emphasizes s peci al an d d ifferential t reatment in tariff
reductions and m arket opening for d eveloping countries.
Domestic Support. This group seeks d eeper cuts in domestic support t han
proposed by the EU-U.S. framework. Trade distorting domestic suppor t would b e
reduced on a p roduct s pecific b asis, t he blue box would b e eliminated, and green box
support would b e capped o r reduced for d eveloped countries. Developed countries
would r e duce de minimis support
and t he sum o f am b er box and de
G-21 Member Countriesminimis support would b e s ubject
t o a p ercent age cut .
Argent i n a E cuador P aragu ay
Bolivia Egypt P eruMa rket Access. The
Braz i l Guat em al a P hi l i ppi nesblended approach proposed by t h e
Chile India S outh AfricaEU and United S tates would be
China Indonesia Thailandused by developed countries t h a t
Colombia Mex i co Venezuel awouldalsobe requiredtoexpand
Costa R ica NigeriaTRQs and reduce i n-quota t ariff
Cuba Pakistanrates t o z ero. T h e SSM would b e
discontinued for developed
countries, b u t m aintained for
d eveloping countries. Developed
countries would p rovid e duty free
access for all t ropical products and
other p roducts of special interest to
developing countries. In contrast, t ariff reductions for d eveloping countries would
be according t o a Uruguay R ound formula, with no commitment to ex pand TRQs or
reduce i n-quota t ariff rates.
Export C o m petition. Ex port s ubsidies o n p roducts of particular interest to
developing countries would b e el iminated over a time period to be determined.
Ex port s ubsidies o n remaining products would be eliminated over another time
period to be determined. E x p o rt credit program s woul d b e regul at ed by a rul es-
based approach taking into account the n eeds o f l east d eveloped and n e t food
importing d eveloping countries.

The Af r i can Cotton P r oposal
An ex ample o f a developing country pr oposal to substanti a l l y reduce t rade-
distorting s upport i s t he proposal by four A frican countries — Benin, Burkina Faso,
Chad and M ali — to eliminate devel o p e d countries’ t rade-distorting domestic
support and ex port s ubsidies for their cotton p roducers. The four countries propose
that all W TO members’ domestic support m easures and ex port s ubsidies for cotton
be eliminated over a three-year period (J anuary 1, 2004 to December 31, 2006).
Subsidies would b e reduced in equal annual i nstallments t o at l east one-third of the
total l evel of subsidies granted. The WT O s hould establish a transitional financial
compensation m echanism i n favor of cotton-ex porting d eveloping countries affected
by the s ubsidies. Begi nning J anuary 1, 2004, and continuing until all domestic
s u pport and ex port s ubsidies h ave b een eliminated, s ubsidizing countries wo u l d
provide financial assistance equivalent to the l oss o f ex port revenue ex perienced by
the d eveloping country producers. Data from t he In ternational C ot ton Advisory
Council would b e u sed t o calculate developing country revenue losses. The p roposal,
whi ch i s o n t he agenda o f t h e C ancun m i n i s t eri al conference, does not address
adjustment problems o f d eveloped country cotton p roducers.
Draft Declaration f or Agr i cul t ur al Negoti a ti ons
Th e d e v eloping countries’ counter-p roposal reflects t he continuing
differences between developed and developing countri e s in the agriculture
negotiations. A draft decl aration for the C ancun M inisterial , circulated by t he
Chairman of Cancun meeting, but not agreed , represents an attempt t o reconcile thes e
differences and p roposes a framework for e stablishing modalities for the agriculture
Domestic Support. The draft decl aration s tates t hat t rad e d i s t orting
do m e s t i c support would b e reduced according t o a percentage range and that de
minimis ex em pt i ons woul d b e reduced al so by a n ego t i at ed p ercent age. Bl u e box
paym ent s woul d cont i nue but coul d not ex ceed 5% of t h e v al ue of a g r i c u l t u ral
production i n t he 2000-2002 period and t hereafter wou l d b e subject to an annual
linear percentage reduction for a further pe riod of years. The s um of allowed t rade
distorting s upport and de minimi s would be reduced so that it is significantly less
than the s um of de minimis , b lue box and t rade-distorting s upport i n 2000. Green
box criteria would remain under n egot iati on. Developing countries would b enefit
from S an d D treatment an d b e ex empt from de minimis reductions.
Cotton. The draft decl aration recognized the importance of cotton for a
number o f d eveloping countries and t he n eed for u rgent action t o address t rade
distortions in gl obal cotton m arkets. It instruct e d t h e W T O n egotiating groups to
begi n a consultative p rocess t o address t he distortions not only i n cotton m arkets but
in related s ect ors of m an-made fibers, tex tiles, and clot h i n g. In addition, the draft
proposed consultation b etween the W T O , t he W o rld Bank, and t he UN Food and
Agriculture organiz ation t o work with cott on-producing countries to direct programs
and resources toward diversification.

Ma rket Access. The d raft decl arat i o n al s o cal l s for a bl ended approach t o
market access with S and D t reatment for d ev eloping countries that could d esignate
speci al prod u c t s w h i c h woul d onl y b e s ubj ect t o a l i n ear cut s and n o n ew
commit ments regarding TRQs. An SSM would be established for developing
countries although an SSM for d eveloped countries would s till be under n egotiation.
Developed countries also would s eek to provide duty-free access for some minium
percent o f imports from d eveloping countri es either through t ariff elimination o r v ia
preferent i al access.
Export Competition. The draft decl aration calls for t he elimination, over
a yet to be determined time period, of ex port s ubsidies o n p roducts of special interest
to developing countries. For remaining products, W TO members would reduce, with
a v iew t o phasing out, budgetary and quantity allowances for ex port s ubsidies. The
subsidy element of ex port credits for p roducts of special interest to developing
countries would b e eliminated by reducing rep ayment terms t o commercial p ractice
(usually defined as s ix months). The s ubsidy e l e m e n t o f ex port credits for o ther
products would b e reduced in tandem with ex port s ubsidies. Additional d isciplines
t o prevent food ai d from d i s pl aci ng com m erci al s al es woul d b e agreed t o , b u t t h e
special needs o f l east d eveloped countri es and n e t f o od importing d eveloping
countries would b e t aken into considerati on. The question o f an end date for phasing
out all ex port s ubsidies would remain under n egotiation. Developing countries
woul d recei ve S and D t reat m ent for reduct i ons of ex port s ubsi d i es.
Othe r Ma tte rs . Th e d raft declaration s ays t hat l east d eveloped countries
would b e e x empt from reduction commitments and that the objective of duty- and
quota-free m arket access for products of least d eveloped c o untries would b e
ex peditiously pursued. Finally, t he draft decl arat i o n s ays t hat t he Harbi n son report
would s erve as a reference document for further work on m odalities.
Agr i cul t ur e Negoti a ti ons After Cancun
Status of the Draft Declaration. Preliminary assessments o f t h e draft
decl arat i o n reveal t h at di fferences rem ai n e s p e ci al l y bet w een devel oped and
developing countries about the n ature and ex tent of agricultural t rade liberaliz ation.
The United S tates and the EU both criticized the p roposed reduction i n b lue
box subsidies, which t hey j oin i n arguing are l es s t rade-distorting. The United S tates
and t he EU al so criticized the decl arations’s stat em ent t hat t he green box remains
“under n egotiation.” The EU m aintains that its ability to agree t o reductions in trade-
distorti n g ( a m b er box ) s upport d epends on the continuation o f b lue and green box
policies. Braz il and Australia criticized the decl aration’s continuation of the blue box
a n d t h e failure to put a cap on green box spending as inconsistent with t h e D o h a
mandate. T he African countries ex p r e s sed d issatisfaction t hat consultation rather
than immediate action was proposed in rela tion t o t heir proposal f o r ending cotton
subsidies with transitional compensation for income losses.
The United S tates criticiz ed mark et access p rovision s f o r developing
countries in the C hairman’s d raft. The United S tates argued t ha t d e v e l o p ing
c o unt ri es woul d not be requi red t o m ake s uffi ci ent m arket openi ng because t h e y

could s elect special products to be ex empt from cuts an d w ould not be required t o
T h e E U s aid t hat t he draft went t oo far i n s uggesting t hat an end date for
phasing out ex port s u b s i d i es remained under n egotiation b ecause the Doha
decl arat i o n d i d not m andat e such a d at e. Aust r a l i a and a num ber o f d evel opi ng
countries argu ed however that the d eclara tion s hould s et a t arget d ate for eliminating
ex port s ubsidies.
Both the U n i t e d S tates and the EU have i ndicat ed that , despite thei r
dissatisfaction with various propo s a l s , t he draft d ecl arat i o n for agri cul t u re coul d
serve as a basis for nego tiations. Braz il, one of the l eaders o f t h e G-21, also has
i ndi cat ed t h at agri cul t u ral n egot i at i ons coul d p roceed on t h e b asi s of t h e d raft
Next Steps. W T O m eet i n gs are s chedul ed t o cont i nue, b egi nni ng wi t h an
agriculture negotiating group meeting i n Oct ober and ending with a s enior l evel stock
taking in December 2003. Amid considerable uncertai n t y a bout prospects for
completing t he round by J anuary 2005, W TO m em bers, i ncluding the United S tates,
the EU, the G-21 and other countries, are ta king stock and considering options for
concluding the round. U.S. trade o ffic i a l s a l s o h ave i ndicated they also will be
focusing attention on bilateral and regi onal t rade negotiations.
Congress would t ake u p any agreements that result from t he Doha round of
trade n egotiations under fast t rack pro cedures (in P .L. 107-210) for congressional
consideration of l egislation t o i m p l ement trade agreem ents. In t he meantime,
according t o t h e p r o c edures established i n P .L. 107-210, Congress and t he
Administration would be consulting as nego tiations proceed. Interaction during t he
period of consultation bet ween Congress and t he Administrat i o n o n negotiating
p o s itions and s trategies would l ay the gr oundwork for congressional consideration
of an agreement. Congressional fast t rack procedures would ex p ire b y J une 1, 2005,
but could b e ex t ended i f t he President s atisfies the consultation requirements i n P .L.
107-210 and i f p rogress i s b eing made in meeting t he nego tiating objectives set forth
in the Trade Act o f 2002.