WTO Simulations on Blended Approach for Tariff Reductions in Agriculture presented to WTO MembershipL

Original Publication Date: 
16 February, 2004
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News and Updates > WTO Simulations on Blended Approach for Tariff Reductions in Agriculture presented to WTO MembershipL

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After Cancun, developing countries analyzed the so-called blended approach to tariff reform proposed in the Derbez text. The Derbez text was the basis for negotiation in Cancun. The blended approach refers to the mix of across the board cuts to tariffs (known as the Uruguay Round formula, since this was the model used in the existing Agreement on Agriculture) and weighted cuts that reduce tariffs more the higher they are to start with (known as the Swiss formula).

Some simulations suggested that the Derbez blended approach would result in severe tariff cuts for developing countries, while developed countries will be able to keep tariffs high for their sensitive products. The WTO Secretariat was requested to undertake their own simulations to illustrate what the different proposed tariff reductions for agriculture would mean in practice. These simulations have recently been presented to the membership in document number JOB(04)/1, which the Trade Information Project has posted at IATP’s trade observatory website, at:
http://www.tradeobservatory.org/library/admin/uploadedfiles/showfile.cfm?FileName=
Tariff_Reductions_for_Agricultural_Products_So.pdf

The secretariat paper provides a technical overview of the implications of the different tariff reductions proposed in the negotiations to date, as contained in the Harbinson draft negotiating text.

The major problem with the figures presented is that the WTO Secretariat used stylized tariff structures or abstract examples which may not quite resemble the actual tariff structures of the EU or the U.S. Yet these are the main proponents of the blended approach. On the other hand, the Secretariat’s simulations do reflect more or less the tariff structure of a number of developing countries. This inconsistency means the paper is not as useful as it might be to measure the likely extent of reform of EU and U.S. agriculture, particularly in comparison with the reform proposed for developing countries. Despite this weakness, the Secretariat paper illustrates how much the extent of tariff reduction that results from the blended approach depends on the initial tariff structure.

Thus the blended approach may work well for some countries, but not others, which is one of the main arguments of those developing countries that criticize this approach. These countries are also arguing that the agricultural negotiations need to include hard numbers and not just models. The Secretariat simulations show that developed countries are not likely to have to reduce their tariffs as much as most developing countries. This is because developed countries have lower overall tariffs, but very high tariffs on a few sensitive products, while developing countries rely much more heavily on across the board tariffs in their agricultural trade. The simulations also illustrate that the blended approach to tariff reform will force larger tariff reductions on some developing countries, penalizing those with the largest tariffs.

Alexandra Strickner
Institute for Agriculture and Trade Policy (IATP), Geneva Office
15 Rue des Savoises
1205 Geneva
Switzerland
tel 41 22 789 0724
fax 41 22 789 0733
www.tradeobservatory.org
www.iatp.org