Lamy’s WTO proposal would see subsidies slashed to the advantage of many LDCs [AFP]
Proposals drawn up by Pascal Lamy, the WTO’s director-general, which led the 153 negotiating countries in Geneva to extend talks in order to hammer out a formal agreement based on the stalled Doha Round which began seven years ago.
EU to slash farming subsidies by 80 per cent, and see its maximum subsidy threshold fall to a maximum of €24bn ($38bn).
Japan and the US to cut trade-distorting domestic support by up to 70 per cent, taking the total US subsidies to $14.5bn.
Other developed countries will cut support by 50-60 per cent, to be implemented within five years.
Export subsidies to be eliminated by 2013, following 2005 agreement at Hong Kong WTO summit.
The highest tariff band (75 per cent or more) will be cut by 70 per cent, meaning a tariff of 100 per cent would be cut to 30 per cent.
Developing economies would face a minimum average of 36 per cent, while least developed countries (LDCs) would not be obliged to make any cuts.
Developed countries would be able to define four per cent of their total tariff lines as “sensitive products,” which would have smaller cuts.
Developing countries would have greater flexibility and be able to designate 5.3 per cent of all tariff lines as sensitive products.
In return, countries would also have to accept an import quota of such sensitive products, equalling four per cent of the domestic consumption of the product in question.
Developing countries could designate 12 per cent of tariff lines as “special products” for reasons of food security or rural development.
Any tariff cuts on these products would not exceed 11 per cent, and five per cent of the products would be shielded from any cuts at all.
A so-called special safeguard mechanism (SSM) would allow developing countries to increase tariffs by up to 15 per cent over present levels if there is a surge in imports over 40 per cent.
Developed countries will not have any recourse to any safeguards after seven years.
Industrial products, or “non-agricultural market access” (Nama), is the other main bone of contention in the Doha round.
Rich countries are seeking greater market access in the developing world, in exchange for concessions on agriculture.
Lamy has proposed that about 30 developing countries reduce industrial tariffs on the basis of a coefficient formula between 20 and 25 (the lower the coefficient, the greater the cut).
Under this so-called Swiss formula, emerging economies such as Brazil or India would cut their industrial tariffs to an average between 11 and 12 per cent.
Developing countries would also be able to shelter up to 14 per cent of products as “sensitive” depending on which coefficient they use, though it would not be possible to block off any sector in its entirety from tariff cuts.
The EU has lobbied hard for this clause, particularly Germany which fears its car manufacturing industry could otherwise be threatened by booming developing economies such as China and India.
The anti-concentration clause would apply to either 20 per cent of a country’s products in a sector, or alternatively nine per cent of total trade volume in a sector.
Developed countries would have five years to implement the cuts, and developing countries 10 years.
Recent members of the WTO – including China – would benefit from a further grace period of three to four years.