FACTBOX: Sensitive products in the WTO's Doha round

July 22 - The treatment of politically sensitive food products is one of the trickiest issues in the agriculture talks in the World Trade Organization's (WTO) Doha round to open up world trade.

This technical issue is extremely complex but its outcome will determine potentially the biggest gains from the round in market access for food exporters such as Australia and Uruguay.

Ministers are meeting from July 21 to agree the outlines of a deal in agriculture and industrial goods. The farms talks are taking place on the basis of a draft text revised on July 10 by the chairman of the agriculture talks, New Zealand's WTO ambassador Crawford Falconer.

TARIFFS

The draft negotiating text for agriculture, revised by the chairman of the talks, New Zealand's WTO ambassador Crawford Falconer, on February 8, envisages cuts in tariffs on agricultural products according to a formula.

If a country reduces its tariffs, it makes it easier for exporters in other countries to sell in its market, but increases competition for its own producers. So lower tariffs can foster trade but with a political cost at home.

The formula prescribes steeper cuts on higher tariff bands. Developed countries make bigger cuts than developing countries.

FLEXIBILITIES

One of the main waivers of this type is for "sensitive products". Both developed and developing countries can declare a product sensitive, for political reasons, and get a smaller cut in tariffs.

Developed countries would be able to designate 4-6 percent of their products as sensitive, or 6-8 percent if more than 30 percent of their products are in the top band of the tariff formula. The tariff on these products would be cut by one third, one half or two thirds of the formula cut.

Developing countries would be able to designate one third more of their products as sensitive, i.e. 5.3-8 percent. The reduced tariff cut would be the same as for developed countries.

THE PAYMENT

In return for this smaller tariff cut, countries must let in a quota of the product at a lower tariff, the lower of 0-15 percent or a 50-70 percent cut for developed countries, and half that for developing, with no or smaller cuts for new members.

How this quota is calculated is one of the trickiest questions in the talks, and of vital interest to food exporters.

For developed countries this quota would be 4-6 percent of domestic consumption of the product if the full two-thirds deviation is applied, and 3-5 percent if one third is used.

For developing countries, the quota expansion would be two thirds of the volume for developed countries.