The Philippine Trade Negotiations Effort in Agriculture

1. The Philippine TradeNegotiations Effortin Agriculture TFWAR Secretariat Department of Agriculture October 4, 2005

2. The Current International Trade Environment

3. Typical Range,Average Bound Tariffs,Agriculture,post-Uruguay • Developed ~1-10% • Developing ~30-60%

4. But developed countries … • account for most of tariff peaks and mega-tariffs; • dominate the application of trade remedies such as SSG; • routinely & creatively employ NTMs (SPS) TBTs; • dominate product standards-setting protocols (OIE, IPPC); on top of unlimited Green Box measures …

5. USA, EU-15 and Japan: Bound Tariffs (2003) Source: USITC and TARIC Notes: 1. Specific tariffs were converted into ad valorem equivalents and calculated according to COMTRADE/UN export unit values. 2. N.C. – not calculated

7. 2004 Tariff Profile,Philippines

8. and … • full utilization of de minimis; • while committing to 20% reduction of trade distorting support, were thus also allowed the retention of 80% of such support + the peace clause*; and, • continue to employ direct and other forms of export subsidies. * Green Box DS measures cannot be the subject of CV duty action or other subsidy action; other DS measures w/c are in conformity w/ the provisions of AoA may be subject of CV duty actions, but due restraint is to be exercised by Members in initiating such actions (expired in 2004)

9. Major providers of trade distorting domestic support and export subsidies, as of latest notifications (million US$ equivalents) Types of domestic support measures Amber – production & trade distorting Blue – decoupled income support; considered less, but still, distortive Green – non- or least-distortive

10. … to the extreme prejudice of developing country trade interests • production & trade distorting support give developed country exports artificial but effective competitiveness in international markets; • … unsubsidized developing country exports are edged out in these markets, particularly the developed country markets; and, • highly subsidized developed country producers have more access to developing country markets than developing country small farmers.

11. Adjusting to the reality of missing the modalities Deadline, GC settles for an attempt to hammer consensus on a Framework Agreement for ministerial mandate in Cancun Doha ‘Development’ Round:ORIGINAL Timelines in Agriculture Deadline missed Nov 2001 Mar 2002 May 2002 Jul 2002 Sep 2002 Nov 2002 Dec 2002 Jan 2003 Feb 2003 Mar 2003 ~Sep 2003 COA SSs Mkt Access, Dom Suprt NG Chair’s 1st Draft Final Establishment, Modalities Doha MC Conclusion Art 20 Mandated Negotiations Cancun MC Modalities Review COA SS Export Compt’n Consideration, 1st Draft COA SSs Follow up, cross issues Crafting of Members’ Schedule of Commitments Organization, Trade Negotiations Committees

12. Doha ‘Development’ Round:Timelines in AgricultureREVISED per Cancun MC& GC Framework Decision, Geneva Deadline Missed by 2 hours End Aug 2005 Sep 2003 End July 2004 July 2005 Dec 2005 Nov 2005 July 2006 ~2007 Draft Modalities Full Modalities for HKMC GC Declaration on Framework Agreement Cancun MC Draft Schedule of Commitments Resumption of COA Special Session Breakdown • Verification of • draft schedules • -conclusion of • Doha Round, • 2007 MC? • -ratification by • Members WTO Summer Break Ministers mandate renewed Framework negotiations Hong Kong MC

13. Philippine Negotiating ObjectivesAgriculture Systemic OFFENSIVES • Continuation of the trade reform program – the developed must deliver, now • Interlinkage of commitments in the market access, domestic support, export competition pillars

14. Philippine Negotiating ObjectivesAgriculture DEFENSIVES • More meaningful & effective Special & Differential treatment (SND) for the developing as integral in all results • Adequate protection for strategic & vulnerable sectors; preservation of the residual ‘policy space’ • Full consistency of results with the Doha mandate

15. Strategic Objective & Elements Chances of attaining negotiating objectives are close to zero if engaged outside of the ‘Green Room’ – therefore, aim for ‘entry’ & participation in this exclusive process by: • Demonstrating indispensable ‘influence’ and constructively substantive contribution(s) to the debate, i.e., consistent, credible proposals enjoying significant/wide support

16. Any robust substantive contribution can only stem from a truly participative process that consistently engages stakeholders, i.e., proposals & positions must first be credible & have firm political support at home; eg., TF WAR & Core • Beyond plenary substantives & rhetorics: promotion of ferment & successful alliance-building is a potent weapon for the small

17. The Three ‘Pillars’ Food Aid Green Box QRs Export Credits Blue Box TRQs de minimis Export STEs SSGs, other TRMs Direct Export Subsidies Amber Box Tariffs Market Access Domestic Support Export Competition Non trade-distorting, can also be production distorting Still trade & production distorting Trade distorting Most trade distorting immediate elimination, prohibition harmonization reduction towards elimination

18. Negotiating Objectives: the Pillars Market Access: Offensives • Increased access of agri exports to developed country markets through SND, proportionality and progressivity • Zero tariffs in developed countries for tropical products • Faster rate of tariff reduction and shorter time frame for the developed • Developed countries must pay or open up more, in terms of TRQ/MAV volumes and/or in-quota rates for declarations of sensitive products to be exempt from the tariff reduction formula • Elimination of tariff escalation • Uniformity and increased transparency of tariff measures

19. Market Access: Defensives • Continuation of the margin of protection for sensitive products/sectors through – • Establishment of a new Special Safeguard Mechanism (SSM) to replace SSG, for developing countries only • Self-declaration of a number, to be negotiated, of Special Products (SPs) with minimal or no further commitments, for purposes of food/livelihood security and rural development • Application of proportionality in eligibility for sensitivity relative to the developed

20. Domestic Support • Substantial reductions in total trade distorting (amber + de minimis +blue) non - specific and product - specific support • Elimination of de minimis for the developed, retention for the developing • SND integrated in all provisions, flexibilities for the developing to employ all forms of support for food security, livelihood and rural development

21. Export Competition • Elimination of all forms of export subsidies and trade distorting export support measures • Disciplines on affected export competition measures, such as food aid, must not prejudice genuine need for food & development aid programs • SND provisions integrated, allowing flexibility for developing countries to promote exports

22. Negotiating Framework What outcomes do we want to achieve in this round?

23. The Three ‘Pillars’ Food Aid Green Box QRs Export Credits Blue Box TRQs de minimis Export STEs SSGs, other TRMs Direct Export Subsidies Amber Box Tariffs Market Access Domestic Support Export Competition Non trade-distorting, can also be production distorting Still trade & production distorting Trade distorting Most trade distorting immediate elimination, prohibition harmonization reduction towards elimination

24. Market Access The Three ‘Pillars’ Domestic Support … the 3 pillars that define the overall balance of reform commitments cannot be negotiated separately. …support measures are also effective forms of protection… Proposed Philippine Architecture Export Competition

25. Protection Support Reform commitments in the three pillars must necessarily be integrated and interlinked …

26. The Iceberg & The Styro Box (by Usec. S. Serrano) Philippine Framework, Negotiations Architecture

27. Tariffs alone are deceptive The Iceberg The Styrofoam Box Market Access Measures (tariffs, etc) Protection Domestic Support & Export Competition Measures Support Developed Countries Developing Countries

28. The Philippine Negotiating Effort Pillars • TF WAR, since 1998, is the stakeholder consultative-participatory assembly that deliberates positions for recommendation to the Secretary of Agriculture

29. Technical deliberations with private sector are even more important… The Philippine Negotiating Effort • TF WAR Core, since 2002, composed of volunteer technical experts from TF WAR, conducts the necessary technical & substantive work in the development of proposals & positions on issues

30. The Philippine Negotiating Effort • TF WAR Secretariat, DA Policy Research Service-based technical support group to TF WAR • Coordination & dialogue with national & international civil society groups • Real time coordination with DA staff in Geneva

31. Level of Engagement….a small country but exerts influence… • Alliances G20, SP & SSM Alliance (G33), Cairns Group in Fisheries, ‘Friends of Fish’ • Proposals • Special & Differential Treatment (with ASEAN) • Inter-linkage of Commitments • Automatic Countervailing Mechanism (with Argentina, others) • Food Security Mechanism (with Indonesia)

32. Level of Engagement • Member of the ‘Green Room’ process since Cancun, at the technical, senior official and ministerial levels • Co-coordinator & founder of the SP & SSM Alliance, the first purely developing country bloc in the WTO, with Indonesia

33. Philippine Membership in Negotiating Blocs G20 Argentina Bolivia Brazil China Chile Cuba Egypt Guatemala India Indonesia Mexico Nigeria Pakistan Paraguay Philippines S. Africa Tanzania Thailand Venezuela Zimbabwe G33 (SP & SSM Alliance) Antigua & Barbuda Barbados Belize Benin Botswana China Congo Cote d’Ivoire Cuba Dominican Republic Grenada Guyana Haiti Honduras India Indonesia Jamaica Kenya Madagascar Mautitius Mongolia Mozambique Nicaragua Nigeria Pakistan Panama Peru Philippines St. Kitts & Nevis St. Lucia St. Vincent & the Grenadines Senegal S. Korea Sri Lanka Suriname Tanzania Trinidad & Tobago Turkey Uganda Venezuela Zambia Zimbabwe Cairns Group Australia Argentina Bolivia Brazil Canada Chile Colombia Costa Rica Guatemala Indonesia Malaysia New Zealand Paraguay Philippines S. Africa Thailand Uruguay

34. Level of Engagement • Capital-based senior officials & TF Core members attend the negotiating sessions • Heavy engagement with civil society groups

35. Modalities Phase, Part 2:The Tight Stretch to Hong Kong Deadline Missed by 2 hours End Aug 2005 Sep 2003 End July 2004 July 2005 Dec 2005 Nov 2005 July 2006 ~2007 GC Declaration on Framework Agreement Draft Modalities Full Modalities for HKMC Cancun MC Draft Schedule of Commitments Resumption of COA Special Session Breakdown • Verification of • draft schedules • -conclusion of • Doha Round, • 2007 MC? • -ratification by • Members WTO Summer Break Ministers mandate renewed Framework negotiations Hong Kong MC

36. General State of Play Export Competition • Per Doha & the Framework, all forms of export subsidies must be eliminated • Export subsidies are the most trade distorting of trade measures, enabling uncompetitive firms to undercut unsubsidized competition • EU direct export subsidies ~US$5.8 billion in 2003, on grains, dairy, meat, wines, rice, sugar, among others The most advance area, as earlier political decisions have been made…

37. Export Competition • US export subsidies were estimated at UD$147 million, Switzerland at UD$292 million, Norway at US$77 million • The EU concedes that it is willing to eliminate them provided - • Other parties (i.e., US) similarly agree to eliminate subsidy elements in other export competition measures, e.g., export credits/guarantees/insurance beyond 180 days, food aid, exporting STEs (full parallelism) • EU has so far not specified any credible date of elimination as the negotiations are stalled on how to operationalize full parallelism

38. Domestic Support • Unlike export subsidies, Doha mandates only ‘substantial’ reductions in trade distorting domestic support • the 01 Aug Framework specifies a 20% 1st year downpayment together with a tiered harmonizing reduction formula to be developed • Applied levels of trade distorting domestic support – • EC15 – US$67.18 billion (US$19.7 billion green) • US – US$24.3 billion (US$49.8 billion green) • Japan – US$7.83 billion (US$24.1 billion green)

39. Domestic Support • Negotiations are still on the base levels and applicable period from which to start reductions • G20 argues that reductions start with credible numbers first in order to attain real cuts per mandate • Tiered formula, yet to be agreed, must cut proportionately more from higher levels of support • Domestic Support awaits US to accept substantial cuts on trade distorting domestic support and effective disciplines on the blue Box

40. Domestic Support • Failing in the Framework negotiations to have developed country de minimis eliminated, G20 now calls for folding this in the tiered reduction formula • Any reductions in developing country de minimis (developing country blocs failed to exempt this) must be justified, given the fact that developing countries allocate their de minimis to subsistence & resource poor farmers

41. Market Access • Major elements- • Tiered tariff reduction formula, progressivity • Sensitive products • TRQ/MAV administration • Tariff escalation • Tariff simplification • SSG • SND: SPs, SSM, trade preferences

42. Market Access: tariff reduction formula • Progressivity – higher cuts for higher tariffs • Tiered or banded approach – tariffs will be grouped into tiers based on a common ad valorem equivalency • Note: RP tariffs of even the sensitive products are no more than 40% c. 2004

43. Market Access: tariff reduction formula • Technical discussions bogged down on the ad valorem equivalent (AVE) methodology to be applied to members using specific, complex & technical tariffs (EU, Japan, Switzerland, among others), delaying negotiations on the tiered tariff reduction formula • An AVE methodology that systematically underestimates the level of protection of the non-ad valorem tariffs prejudices those already using the more transparent ad valorem tariffs • AVEs must be transparent & verifiable

44. Market Access: tariff reduction formula • The negotiations on the specifics of the tiered tariff reduction has not been completed as of July 2005 • The issue of tariff simplification towards an ad valorem only regime also still remains to be negotiated • Major disagreements on the issue of tariff caps, G10 strongly opposes and other developing countries

45. G20 proposal on the tariff reduction formula

46. Market Access: other elements • Scoping & technical discussions have started on TRQ/MAV administration, SP & SSM • TRQ administration – improving disciplines in administrative transparency on allocations, fill rates; issues related to TRQ expansion • SSM – SP & SSM Alliance (G33) proposes universal access for developing countries, simplified & responsive mechanism

47. US, EU, exporters try to limit coverage to products of subsistence farmers • Doha criteria and ‘operational guidelines/indicators vs ‘specific and objective criteria’ • attempts to link with liberalization, ‘compensation’ for availment • the only linkage: proportionality with tariff reduction formula, sensitives Special Products…EU &US attempt to waterdown…

48. clarification backloaded to post-July • Chile: link to tariff reduction commitments, definition of thresholds • exporters’ ‘sum of all fears’ Special Safeguard Mechanism

49. US & surrogates vs EU • the ‘food aid’ dilemma • US PL480, we benefit at whose expense? • can disciplines in the other elements of export competition, ie, on export credits & guarantees, discipline or eliminate the export subsidy components of ‘food aid’ programs? Food Aid

50. Despite intense negotiations, did not reach agreement on the ‘July approximation”that is intended to contribute to achieving “full/detailed modalities” by the Hong Kong MC • COA Chair, Tim Groser assessed the negotiations as stalled & pinpointed elements that require political decisions that can contribute to successful MC in HK • EU and US might collude again if things don’t move smoothly in HK (like what they did in pre Cancun by issuing a joint text scrapping the Harbinson text), even more worrisome if Japan joins this force Assessment and prospect in HK MC…