OECD: UNITED STATES CRITICIZED, BUT HOLDS FIRM

UNCLAS SECTION 01 OF 04 PARIS 000347

SIPDIS

FROM USOECD

STATE FOR EUR/ERA
USDA FOR FAS/DHANKE/ACOFFING/JLAGOS
STATE PASS USTR FOR ASTEPHENS

E.O. 12958: N/A
TAGS: EAGR ETRD OECD
SUBJECT: OECD: UNITED STATES CRITICIZED, BUT HOLDS FIRM
ON BLOCKING PUBLICATION OF SUGAR REFORM PAPER



1. SUMMARY: The 55th session of the Working Party on
Agriculture and Trade (JWP) of the Organization for
Economic Cooperation and Development (OECD) concluded
on November 7 after one full day of discussion at OECD
headquarters in Paris. There actually was little
contention among delegations for most items on the
agenda, including papers on the commodity impacts and
the household-level impacts of agricultural policy
reforms and on tariff preferences, with Members
generally exhibiting willingness to get the documents
to the next step. The most significant debate occurred
over the sugar paper ("An Analysis of Sugar Policy
Reform and Trade Liberalization,"
COM/AGR/TD/WP[2004]54/REV2),with many delegations --
including the "friendlies" (i.e., Canada, New Zealand,
Australia, and Mexico) -- questioning and/or attacking
the U.S. decision to block declassification. As the
meeting came to an end, the general atmosphere was
tense, with many of the frustrations voiced against the
U.S. position on the sugar paper appearing to linger in
the minds of most of the delegations. It was finally
decided to have the Committee on Agriculture (CoAg),at
its meeting beginning later that month, review the
Joint Working Party's discussion and the decision to
block the sugar paper. END SUMMARY.


2. The draft Agenda (COM/AGR/TD/WP/A[2005]44) and
draft summary record of the 54th Session
(COM/AGR/TD/WP/M [2005]19) were both adopted as
presented.

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The Impacts of Trade and Agricultural Policy Reform
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3. Commodity Market Impacts of Trade and Domestic
Agricultural Policy Reform (For Discussion and
Declassification) (COM/AGR/TD/WP(2005)12/REV1): The
United States began the discussion by stating that the
paper was sensitive, since trade negotiators believed
that any work that distinguishes winners and losers
would not be helpful in Geneva. In addition, the
United States noted that further technical work is
needed. Other delegations supported the idea that the
paper still needs further editing, but none threatened
a political block provided that the author incorporated
their comments. France had the most substantial edits,
focusing on semantics such as when the text repeatedly
interchanged words like "export support" with "export
subsidies" (which it argued could mean different
things),as well as when the paper failed to take into
account preferences or price volatility within its
analysis. Canada was a little annoyed that the
Secretariat continued to inappropriately analyze

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Canadian cheese, since it had mentioned this
discrepancy at the last JWP meeting. Australia and New
Zealand had a few technical comments, while the EC
asked for the writers to better clarify the overall
presentation. The Secretariat said it would work with
Canada and the other delegations to get the changes
made, and then directly confronted the U.S. comments
by stating for the record that the United States had
placed a political block on the paper, hoping that at
the beginning of 2006, in January, the United States
would be more willing to approve declassification.


4. Global, National, and Household Effects of Trade
and Agricultural Policy Reform (For Declassification)
(COM/AGR/TD/WP[2005]45): Most delegations supported
declassification, adding only a few comments or
questions on the document. Those delegations that gave
full support included the Netherlands, Canada, New
Zealand, Denmark, and Australia. Nonetheless, others
asked for more time for review, including France,
Germany, and the EC. France and Germany differed on
what aspects to edit: France believed that the
methodology was not realistic, since the writers
extrapolated the results of developed countries to less
affluent nations, while Germany argued that the methods
showed relevant conclusions, but that explanations were
lacking. Mexico had difficulty with the study as well,
saying that it would declassify if its concerns were
met, but gave no verbal critique and instead submitted
written comments. The United States was the only
delegation that mentioned the political sensitivity of
the document for the Doha Development Round of
negotiations in the World Trade Organization (WTO),and
again asked for publication to be delayed until early

2006. However, the United States also provided
comments on modeling and errors in the Mexican case
study on farming communities, particularly on ejido
communities. The Secretariat, again a little perturbed
at the U.S. position, said it would continue to work
with the delegations in an effort to have
declassification approved under the written procedure
by mid-January, and hoped that there would be no other
holdups. Delegations were given two weeks to submit
comments in writing.

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Agricultural Tariff Preferences
--------------


5. Agriculture Non-reciprocal Tariff Preferences by
Quad countries (For Discussion and Declassification)
(COM/AGR/TD/WP[2005]15/REV1): The general consensus
from most of the delegations was that this paper was
too sensitive for publication before the WTO
Ministerial meeting in Hong Kong in December 2005. For
example, the EC focused on the realism of the tariff
models, arguing that the document has high political
sensitivity, but said it could entertain a
declassification proposal after December. France
commented more on the trade flows and whether the study
could concentrate on which liberalized products would
more greatly benefit less affluent nations. Japan and
Canada had similar sentiments. Noting that, with a low
MFN rate, those countries that had preferential access
would lose benefits, they requested more elaboration of
this aspect within the paper. Canada in particular
pushed to have the Secretariat model the actual
outcomes after the Doha negotiations have finished.
The United States opined that both the AgLink and
GTAPEM models have limitations and may not be the most
appropriate tool for this study. Moreover, the United
States also declared this paper to be sensitive and
said that it would revisit the possibility of
declassification after January, but preferably in six
to nine months. After acknowledging every delegation's
comments, the Secretariat singled out the U.S.
political block and inquired whether the United States
would be willing to consider declassification in
January. After the United States agreed to consider
declassification at a later time, the Secretariat
refrained from asking the other delegations the same
question. The consensus was to ask delegations to send
in written comments within two weeks and to hold a
written procedure for declassification sometime in
January.


6. Summary of Expert Meeting on how to Model the
Impacts of Preferential Trade Arrangements and how to
Improve the Directorate's Empirical Trade Modeling
Tools (For Information) (COM/AGR/TD/WP/RD[2005]46):
There was very little discussion on this agenda item,
with the EC noting how timely it was to get scholarly
input from the OECD on future trade issues. The United
States stated that analysis using models other than
AgLink and GTAPEM may be useful to better understand
the questions that the writers pose.


7. For which Countries and Commodities do
Agricultural Preferences Matter? (For Discussion)
(COM/AGR/TD/WP [2005]47): Most countries had issues
with the methodology used in the study. Canada was the
only Member that supported the paper. France jokingly
wondered if it had read the same document and asked the
authors to analyze: 1) more developing countries; 2)
how preferences affect exporters; and 3) the effects of
quota rents. Norway agreed with France and wanted the
analysis to concentrate on the before and after effects
of liberalization. New Zealand questioned the actual
data since it believed the quota rents were too high.
The EC was particularly sensitive to the study's
critique of its sugar program and said that its
objective was not to make countries such as Fiji depend
on sugar; rather, its programs were set up to encourage
diversification. Later, the EC delegation roughly
criticized Australia, which questioned portions of the
EC's soapbox lecture, and continued for a second time
to rehash its logic. The United States stated that the
paper was put on OLISnet (the OECD's internal website)
too late for review and regretfully had no comments.
The Secretariat promised to work with the delegations
to address their concerns and to use quota rents within
its analysis. This sparked a ten-minute debate between
France and the Secratariat, since France wanted
preferences to be analyzed first and quota rents
second. In the end, France promised to meet
bilaterally with the Secretariat, but still appeared
irked that its request had not been initially
acknowledged.

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FDI and Trade in the Food Sector
--------------


8. Linkages between Foreign Direct Investment, Trade
and Trade Policy: An Economic Analysis with
Application to the Food Sector (For Discussion and
Declassification) (COM/TD/AGR/WP[2004]45/REV1): Little
dialogue took place between delegations since everyone
agreed to support declassification of this analysis.
Canada and the EC were particularly favorable towards
the document, whereas France, Poland, and the United
States had technical comments, albeit ones that could
easily be addressed in a revised version. France
argued to have both the French and English versions
declassified at the same time, once the writers
incorporated all the comments, which every delegation
agreed to.

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Sugar Paper: U.S. Objection to Declassification under
Fire
-------------- --------------


9. Other Business: An Analysis of Sugar Policy Reform
and Trade Liberalization (For Declassification)
(COM/AGR/TD/WP [2004]54/REV2): The Secretariat stated
that it was going to add the sugar paper to the JWP
agenda and kindly thanked the Netherlands, Canada, and
Australia for their comments. Afterward, the
Secretariat redirected its attention to the United

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States, noting that the latter had blocked
declassification in the written procedure. The United
States responded multiple times to questioning from
different delegations, explaining that we could not
declassify now because of the sensitivity of the topic.
The EC provided the most stinging remarks, pointing out
that the United States had objected to six papers thus
far in 2005 and opining that the United States has
misused the OECD's resources by agreeing to a working
agenda and then blocking it. Both the EC and Denmark
asked if the issue could be placed on the agenda of the
JWP's parent body, the Committee for Agriculture
(CoAg). Most of the "friendlies" also spoke against
the U.S. decision, with Australia and Canada offering
the least scathing remarks and wondering when the topic
of sugar would be less sensitive. New Zealand
completely agreed with the EC, and supported asking for
the U.S. decision to be discussed at the CoAg. (A
"friendlies'" meeting had been held before the JWP at
the U.S. Mission, and the invited delegations made
clear then that they would not support the U.S.
position on the sugar paper.) France decidedly
remained quiet and composed, although in a side
conversation with the U.S. delegation, admitted to
having problems with declassification. Adding more
fuel to the fire, Agriculture Director Tangermann
stated that the paper had been planned in the Program
of Work and Budget (PWB) for some time and that the
intention to release it publicly had been clear from
the outset. He believed that staff morale will be
seriously affected, since it would be uncertain if any
of their work would be published if the current
precedent continues. In the end, it was agreed to
refer the matter to the CoAg for discussion.


10. Facilitating Adjustment: Sector Experiences from
Agriculture, Telecommunications, and Chemical
(TD/TC/WP[2005]28): The "Other Business" agenda item
included the discussion of a new paper that would
follow up on the Trade and Structural Adjustment
Project (which was completed and presented to the May
2005 Ministerial Council Meeting). The Secretariat,
responding to a question posed by the United States,
confirmed that other developed countries would be
included in the work. Afterward, the Secretariat
briefly gave a summary of an outreach activity in
Manila, the Philippines, that concentrated on trade
liberalization. The conference went particularly well,
and the OECD hopes to do another similar event in the
Latin America and the Caribbean in 2006.

MORELLA