Choosing sensitive agricultural products in trade negotiations

In the Doha negotiations, there have been widespread demands for exceptions from, or flexibility in, the application of the agricultural tariff formulas. This working paper sheds light on some of the choices involved in defining flexibilities in trade negotiations. Mainly, two key questions are considered in the paper:<br /> how countries are likely to choose such sensitive products? what are the implications of these choices for market access liberalisation?To answer these questions, the paper assesses which products WTO members are likely to designate as sensitive when given the option to do so in negotiations on agriculture.<br /><br />Most countries still maintain higher tariffs on a number of selected commodities. However, one important advance is that the number and treatment of exceptions are frequently now negotiated in advance. But there is still no mechanical way to identify the implications of allowing countries to designate a set of self-selected tariff lines as sensitive. Individual WTO members can have access to information on the effects of a tariff-cutting formula on their own tariffs, but information on the implications for other countries&rsquo; tariffs is much more difficult to obtain. In the absence of a method for assessing how such flexibilities might be used, negotiators face a black-box problem when evaluating offers from their partners. This issue has likely contributed to continuing difficulties in reaching agreement in the WTO&rsquo;s agricultural negotiations. Therefore, this paper tries to offer a potential approach to estimating these implications.<br /><br />The paper main findings are as follows:<br /> the discretion allowed for sensitive products may greatly diminish the effect of the disciplines themselves the way that the discretion for these sensitive products is used will likely be central in determining the actual outcome of formula-based negotiations for agricultural tariffs even a small number of tariff lines with relatively small tariff reductions can have dramatic, adverse effects on the size of the tariff reductions achieved while alcohol and tobacco are prominent in the list defined as sensitive, their exclusion appears to have relatively little impact on the resulting cuts in average tariffs the "depth" of flexibility appears more important than the "breadth" in terms of the number of tariff lines covered restricting the number of sensitive products on the basis of their share in total imports would result in a dramatic reduction in the loss of market access the exceptions' effects on economic welfare are much worse than their effects on market access progressive tariff formulas and exceptions may be much more rational from a mercantilist point of view than from the perspective of development