If a compromise is not found in ongoing World Trade Organization talks, the WTO director general will be asked to produce a modalities paper, predicts Paul Drazek of DTB Associates.
Drazek says a number of issues stand in the way of countries offering a proposal themselves. Tariff caps, tariff rate quota expansion of sensitive products and differential taxes must be resolved if a final agreement is to be reached.
Drazek, speaking at the U.S. Grains Council meeting, notes two significant disadvantages to U.S. trade if a new WTO agreement is not reached. The first is no new controls on EU subsidies and state trading enterprises, nor any WTO-based reason to cut domestic support programs in the United States.
He also adds that if the U.S. farm bill is cut for budgetary or other purposes, U.S. negotiators would lose significant leverage in future negotiations. He says the recent WTO ruling of serious prejudice due to the U.S. market loan program in the cotton case brought by Brazil has implications for all U.S. commodities. All U.S. support programs could potentially be challenged, although most do not appear as vulnerable as cotton.
Drazek adds that the WTO ruling on the EU moratorium of biotech crops is a message to all countries that WTO obligations cannot be ignored.