Sunday, May 21, 2006

EU may give ground on tariffs in Doha Round

The EU has indicated that it may give further ground on the crucial issue of tariffs in the Doha Round of trade negotiations which are at increasing risk of collapsing altogether. However, by doing so, they have encountered resistance from some member states, while American sources think that the likely offer is insufficient. Hence the EU finds itself caught between a rock and a hard place.

The EU's current offer is to cut farm tariffs by an average of 39 per cent, an offer substantially diluted by its insistence that 8 per cent of tariff lines should be designated as sensitive and hence exempted from the cuts. The G20 group of emerging countries led by Brazil has asked for a 54 per cent overall cut, while the US is holding out for 66 per cent.

Press reports in Brussels suggest that the EU might increase its average cut to around 50 per cent. A spokesman for EU trade commissioner Peter Mandelson said that a 54 per cent cut was out of the question, but did not deny the possibility of an offer in the region of 50 per cent. There has, however, been no indication of a reduction in the percentage of tariff lines to be designated as sensitive.

The EU is also insisting on a quid pro quo, in particular a much lower ceiling for industrial good tariffs than the 30 per cent proposed by India and Brazil. The EU and US have previously asked for 15 per cent, but may be prepared to raise that figure by a few percentage points.

However, France has made it clear that it does not want further reductions in farm tariffs or subsidies without substantial concessions elsewhere. Moreover, a spokesman for the Austrian agriculture ministry (Austria is the current president) declared that 'Member states would be very surprised should there be a new EU offer on the table. A majority of member states have grave concerns.'

The office of the USTR confirmed that the EU proposal would fall well short of American demands. The US view that the EU should agree cuts of between 54 and 66 per cent and designate just 1 per cent of tariff lines as sensitive. It is this latter issue that is the difficult one as the EU could make quite substantial cuts in high tariffs and still maintain effective protection. Charles Grassley, the Iowa senator who chairs the finance committee which has lead responsibility for trade policy in the Senate, has stated, 'If Plan B is a minimalist approach, then don't bring Plan B to me.'

There's a long way to go and time is slipping away.

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