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AVE roadblock.

The agreement focused on how to calculate import tariff cuts. This is a technical formula for converting the tariffs importers currently quote in dollars, euros or other currencies per tonne, into percentages to give a starting point for cuts. Known as ad valorem equivalents (AVE), they convert specific duties into ad valorem terms because members, including the EU, have a substantial number of their tariff lines expressed as specific duties. There is no simple way of undertaking such a conversion, nor does any one method offer an absolute advantage for any one participant.

The deal is a compromise between the EU's demands and those of Brazil, leader of the G20 - a group of poorer WTO members that had pressed the EU for more market-opening, backed by Australia and other big agricultural exporters. Brazil, which had earlier accused the EU of exploiting the standoff to wring more concessions from poorer countries, said it was satisfied with the agreement - yet to be approved by diplomats from all 148 WTO member states.

The talks on agriculture were suspended on April 19 when the EU refused to go along at the last moment with the filter formula for determining the import price of the product to be used in converting non-ad valorem duties into ad valorem equivalents. The import value per unit calculated from Integrated Data Base (IDB) of WTO is to be compared directly with the world price estimate calculated from the United Nations Comtrade database. If the difference is more than 40%, then this products price will be caught in a filter formulao. Products whose difference is less than 40% will pass through, and the IDB calculation will be accepted. The products caught in the filter (40%) will now face another test. The ad valorem equivalents will then be calculated and if the difference is less than 20 percentage points, then the product will pass through. Only products that remain caught in this second filter will require some adjustment by the use of a number that is somewhere between the two.

Just three months now remain for WTO states to sew up some key deals. Its members have set themselves a July deadline for an outline agreement covering all sectors, in order to reach a new global accord by the end of next year. Failure to meet those deadlines would jeopardise the chances of a draft deal at a meeting of WTO ministers in Hong Kong in December, itself a crucial step if the negotiations are to be completed in 2006 as planned. Little time is now left for talks on finding a formula for industrial goods and the question of liberalising services, on which negotiations have fallen behind schedule. The WTO is running at least two years behind its original December 2004 target date for a new trade deal, intended to boost global economic growth by reducing barriers to trade while increasing poor countries' access to industrialised markets.


The breakthrough was welcomed by EU Trade Commissioner Peter Mandelson, who said that although it still had to be formally confirmed in Geneva, the proposal was now accepted by the countries with the greatest stake in the agriculture negotiations. oIt fully preserves the interests of the European Union. The road is now clear for rapid and substantial progress of the Doha Round across the board, including services and manufactured goodso, he said. "This is the hors d'oeuvre. The main course will be more complex and harder, but hopefully more digestible.o

France was again accused of trying to thwart the agreement. "We're mindful of the particular political problems and needs of individual needs of member states", said Mr Mandelson, when asked about how the end-May French referendum would affect the negotiations. "We have to take them into account, but they can't halt the progress on what we need to do." French Trade Minister Francois Loos denied pressuring the EU to stand its ground, but added that commitments by the US and others to rein in farm subsidies in return for earlier EU sacrifices had not been kept.

He was echoed by EU Agriculture Commissioner Marian Fischer Boel. oIt is proof of our good faith and willingness to look for imaginative solutions to move the negotiations forwardo, she said. oThroughout this process, my interest has been to kick-start the talks, while at the same time safeguarding the legitimate interests of European farmers. We must now move on rapidly and drive forward all three parts of the agriculture talks.o However, she said that the EU also expected others to move in parallel with the reform of the Common Agricultural Policy (CAP). oThis is not about market access alone. Domestic support and export subsidies must now be addressed, the EU having taken the leado, she said.

The US played a key role in brokering the compromise. "It was a significant breakthrough today", said US Trade Representative Robert Portman. "Without that...the round would have continued to be stalled.o He was cautious about the chances of an overall deal by the WTO's December deadline. "It won't be easy. There's a lot that needs to be doneo, he said, pointing out that the new focus was now on the liberalisation of services, with WTO countries due to present their final offers by the end of May.

Summing up the meeting, Hong Kong Commerce Secretary John Tsang said all ministers agreed there was "no time to lose" and had set themselves a new rendezvous for July in China. Brazilian Foreign Minister Celso Amorim said the fact that the ministers had to devote so much time to this question only underlined that agriculture was the engine of the trade talks. Australian Trade Minister Mark Vaile said there were signs major strides could be made in coming months in the Doha Round. "It's given me a renewed sense of hope that we might make some serious movements forward in time for the Hong Kong ministerialo, he said. Mr Vaile said apart from working on agricultural tariff reform, many countries that had held back on making an offer on services reform had now committed to make one by the end of May.

Oxfam, which has been very critical of what it terms EU foot-dragging, was pleased. Phil Bloomer, Head of Oxfam's Make Trade Fair campaign, said it would help governments to start talking about issues of real importance to developing countries and the millions of poor farmers that live in them. This technical issue of tariff conversion has been holding up progress on everything else. "Members must now agree on agriculture reforms that will genuinely contribute to poverty reduction. This should not be an excuse for rich countries to begin pushing for more in areas such as non-agricultural market access and services."
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Publication:European Report
Date:May 11, 2005

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