March 16, 2001 / Inside US Trade / Vol. 19, No. 11
The U.S. has floated a new proposal aimed at breaking the impasse in negotiations on China's accession to the World Trade Organization by allowing China greater leeway on limits to domestic subsidies to farmers, according to informed sources.
The new U.S. proposal would set a limit on the amount of domestic agriculture support that is higher than the ceiling set for developed countries, which the U.S. had sought to impose on China, but below a higher cap allowed for developing nations, according to informed sources. The new limit falls in between the five percent figure and the 10 percent-limit set for developing countries, sources said. One informed source said the U.S. proposed an eight percent target. The U.S. had previously sought to bridge the gap by allowing China a five-year transition down to the lower developed country ceiling, which is set at five percent of the value of agricultural production.
The compromise plan allows China to continue to assert developing country status, which it has claimed as a matter of principle, while in effect being subject to tighter rules, an informed source said. This source said that it was China who had originally proposed the idea of a compromise limit in between the five and 10 percent limits. It was not clear whether the new plan would include a phase-down transition period, but sources said the new compromise limit would serve as the ultimate limit for China on agricultural domestic support.
U.S. Trade Representative Robert Zoellick said last week the U.S. had floated "new ideas" to China aimed at reaching agreement on the agriculture issue. The U.S. is hearing conflicting signals from Beijing on WTO accession and the new U.S. proposal is an effort to determine whether China is serious about becoming a member, he said in a March 9 press conference.
"I have been personally engaged on the agriculture issue, given its importance, along with [Agriculture] Secretary [Ann] Veneman, and we have made some suggestions to our Chinese counterparts to see whether they are indeed willing to move forward," Zoellick said in a press conference with European Trade Commissioner Pascal Lamy.
U.S. trade officials made the proposal on agriculture in a meeting in Washington last week with a working-level Chinese delegation, a U.S. trade official said. That delegation, which sources said is still in town, has not yet responded to the new proposal pending consultations with officials in Beijing, the official said. Zoellick himself did not participate in the meetings with the Chinese delegation, the official said.
Talks on the agriculture issue, as well as outstanding issues including services may resume this week or next, but the initiative is up to China at this point, the official said. China's chief trade negotiator Long Yongtu is expected to arrive in Washington, DC next week, according to an informed source.
Zoellick emphasized that even if the agriculture deadlock were broken, other problems remain in the services sector, where the U.S. is working closely with the EU. "For a new Administration we are trying to seize this issue and now it will be up to the Chinese to see whether they want to [move forward]," he said.
Agriculture groups late last year pressed the U.S. to hold China to the lower five percent threshold, but had agreed to the U.S. proposal for a five-year phase-down. Since the issue threatened to derail accession negotiations in January, a number of agricultural representatives have taken a softer line, asserting that the benefits of getting China in the WTO and implementing the market access concessions it made to the U.S. are more important. They argue that since current Chinese domestic support measures amount to about 2 percent of production, China has little potential for substantially boosting its subsidies. But others argue China can easily shift its resources, particularly if there is an "uproar" in the countryside. The new U.S. offer comes without consultations with agriculture groups, some of whom said they remained adamant that China should be held to the five percent limit.
At issue in the agriculture talks is the level of domestic support considered trade-distorting that is exempt from reduction commitments. Developing countries' trade-distorting support--subisidies that depress prices or boost production--is capped at 10 percent of the value of agricultural production, and, for crop-specific support, up to 10 percent of the crop's value. For example, subsidies granted for acreage under cultivation would generally be under the cap set according to the value of total production, and subsidies granted based on production of specific commodities are capped under crop-specific limits. Developed countries have a lower five percent cap, but for economies like the U.S. and the European Union, this is on top of existing domestic support measures subject to gradual reduction commitments.
The agriculture issue was not addressed in the U.S.-China bilateral agreement struck in November 1999 to pave the way for China accession.
In a related development, Senate Finance Committee Chairman Chuck Grassley (R-IA) said late last week that European Union commissioner Pascal Lamy signaled he believed the U.S. needed to be more flexible on China's agriculture obligations. "It is his feeling that they are not going to give on this point [of domestic supports]," Grassley said after a March 8 meeting with Lamy. He said that he believed the EU will not take a hard line in the agriculture fight. "I would suggest if [the EU] takes a line at all, it would not be a harder line."
Grassley said he has urged Lamy and others not to allow China to enter the WTO as a developing country with respect to agricultural obligations. At the last round of accession talks in January, the EU floated a package compromise that allowed China to provide agricultural domestic support up to the higher ceiling allowed developing countries.
c Inside Washington Publishers:
