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Revised Cancun draft text sets stage for failure?

Geneva, 25 Aug (Chakravarthi Raghavan) - The Chairman of the WTO General Council, Amb. Carlos Perez del Castillo of Uruguay put forward Sunday evening a revised draft Cancun Ministerial Text that fails to meet the key ‘development’ objectives of the Doha Ministerial Declaration (DMD), and in fact favours the major industrialized nations and is weighted against the developing world, thus setting the stage for a failure at Cancun.

The revised draft has been put forward by the Chairman on his own responsibility, and is to be considered at the General Council meeting Monday and Tuesday, beginning with an informal Heads of Delegation level meet Monday afternoon, and then at the formal General Council meeting.

It is not very clear how the documents, and the different positions of countries or groups of them, will get reflected in the draft or brought in some other form before the Cancun Ministerial.

A nearly 2-year-old proposal of the Like-Minded Group for clear procedures to handle the preparatory process and the conduct of the Ministerial has not been acted upon by the General Council. The substance of these proposals have also been put forward as a separate text last week on behalf of the African, Caribbean and Pacific (ACP) group of countries members of the WTO.

Developing country diplomats who got the revised draft on Sunday evening, were in consultations with their capitals and/or awaiting instructions. They expressed in private comments their disappointment, but were non-committal on how this would play out at the Cancun Ministerial and beyond, pending instructions from capitals.

[At the informal HOD, Brazil’s Amb. Luiz Felipe de Seixas Correa, said the Doha round is about agriculture, about development, and if there was not enough movement and in the right direction, the Doha Round will be put at risk at Cancun. And if they moved in the wrong direction, the Round will fail. From this perspective, he said, the revised draft was fundamentally flawed. In agriculture, it relied heavily on the US-EC text, reflecting the line of least resistance of the two largest subsidisers, and showed a bias in favour of developed countries even in details. The revised draft also fell short of Doha on NAMA, asking too much from developing countries. On implementation, only the extension of protection of GIs among implementation issues have been singled out for mention. The revised draft provides no balanced approach, gives precedence to the views of some developed countries, and has fundamentally changed the Doha mandate. For success in the Round and Cancun, the key words were ‘inclusiveness’ and ‘compatibility’ with level of ambition set at Doha, on both counts the revised draft failed.]

If the ‘framework’ set in the revised draft were to prevail, and the Cancun Ministerial meeting accepts it, the two issues of great concern to the developing countries, the ‘implementation’ issues and the Special and Differential Treatment (S&DT) one, will get effectively sidelined and buried into some future work programme, if and when the current round of negotiations concludes.

The implementation issues - which in the Doha Declaration and its work programme came ahead of even the agriculture issue, and became a part of the single undertaking - have now been demoted and come after agriculture, non-agricultural market access, services, rules, TRIPS negotiations, Environment, DSU and S&DT, and is being shoved on to the General Council.

The S&DT issue too has an annex of decisions on a number of items, at best some partial or minor issues of the many formulated by developing countries, with no real commitment to tackle and reach agreements on the large number of remaining ones, or setting a time-frame for it. The WTO has missed several deadlines on this issue.

The modalities frameworks in agriculture and non-agricultural market access will in effect leave the developing world and its poor as marginalised, if not more, than before, with the developed doing little on agriculture and finding news way to protect and compete unfairly, while demanding (and almost getting) the moon on NAMA.

On the Singapore issues of investment, competition policy, government procurement and trade facilitation, the Ministers at Cancun, have the choice of either sending the issues back for more study or launch negotiations on the basis of procedural modalities.

However, the formulations on the four subjects, clearly recognizes the lack of consensus, and has under each of the subjects presented two options: launching talks on the procedural modalities (formulated by the EC and Japan) or acknowledging there is no basis for commencement of negotiations and sending the issues for further clarifications in the working groups.

In all the other areas covered by the Doha mandate, and on none of which there is a clear consensus, the formulations do not present the positions of various countries or groups.

In agriculture, a key and contentious area, where the major industrialized nations are providing vast subsidies (that in fact benefit the large agri-business) and are far from ‘reforming’ agricultural trade, the revised draft and its annex on agriculture has adopted the framework approach (mainly based on the US-EC framework), and fails to tackle the major loopholes that enable the US and EC to continue support by various devices.

At best, some of the EU and Japan ‘blue box’ supports could come under some marginal disciplines and cut-backs, while the American socalled setaside programmes of support ($180 billion written into law for the next decade) will remain unimpaired.

The draft text provides under various headings, a reaffirmation of the Doha mandate, with ministers taking note of the progress made and gives a framework for further negotiations in annexes.

Agriculture: The paragraph agrees to intensify work to translate the Doha mandate into reform modalities, and for conclusion of the talks on modalities by an unspecified date, and parties submitting comprehensive draft schedules by another unspecified date. It more or less follows the US-EC framework approach, but with some specifics for domestic support reduction, and envisaging reductions on ‘blue box’ payments to farmers, some disciplines on ‘green box’ payments (no details), and some slightly vague Special and Differential treatment provisions for developing countries.

In terms of the modalities, the annex sets out a framework under the three headings of domestic support, market access (tariff cuts formulae approach), export competition (subsidies and credits), and provisions for Special and Differential Treatment under each of the headings.

The annex provides for all developed countries to achieve reductions in trade-distorting support significantly larger than in the Uruguay Round, and with Members having the higher trade-distorting subsidies making greater efforts. It sets the parameters for reductions (but the actual figures are to be negotiated, and are left blank within square brackets).

The Final Bound Total AMS is to be reduced in the range of [...]% - [...]%.; the de minimis support reduced by [...]%; the blue box supports (under Art.6.5 of the Agreement on Agriculture) is to be modified, enabling members to make direct payments if such payments are based on fixed areas and yields; or such payments are made on 85% or less of the base level of production; or livestock payments are made on a fixed number of head.

Such support is not to exceed 5% of the total value of agriculture production in the 2000-2002 period by [...]. Subsequently, such support shall be subject to an annual linear reduction of [...]% for a further period of [...] years. Also, the sum of allowed AMS support and de minimis is to be reduced so that it is significantly less than the sum of de minimis payments under Art.6.5 (the blue box or direct payments based on fixed area and yields, or on 85% or less of base level of production or livestock payments on fixed number of head) and the final bound AMS level in 2000.

(The US-EC paper envisages on this last, the year 2004.)

The chairman’s text in the annex also brings in ‘green box’ payments for disciplining and reductions, but does not give any details beyond “criteria remain under negotiation”.

Having regard to their development, food security and/or livelihood security needs, developing countries are to benefit from special and differential treatment, including lower reductions of trade-distorting domestic support in terms of the formula set out above, longer implementation periods and the domestic support provided in terms of Art. 6.2 of the AoA and of the Green Box.  They are also to be exempt from the requirement to reduce de minimis trade-distorting domestic support.

Under Market Access, where the DMD calls for “substantial improvements in market access”, the annex sets out some parameters for negotiations and commitments:

·        the formula applicable for tariff reduction by developed countries is to be a blended formula, with each element of it contributing to substantial improvement in market access: i) [...]% of tariff lines are to be subject to a [...]% average tariff cut and a minimum of [...]%; for these import-sensitive tariff lines market access increase will result from a combination of tariff cuts and TRQs; ii) [...]% of tariff lines are to be subject to a Swiss formula coefficient [...]; (iii) [...]% of tariff lines shall be duty-free. * for the tariff lines that exceed a maximum of [...]% developed-country participants shall either reduce them to that maximum, or ensure effective additional market access in these or other areas through a request-offer process that could include TRQs. * the issue of tariff escalation is to be effectively addressed.

The use and duration of the special agricultural safeguard (SSG), remains under negotiation.

Developing countries are to benefit from S&DT, including lower tariff reductions and longer implementation periods. The formula for tariff reductions by developing countries are to be :

i)    [...]% of tariff lines to be subject to a [...]% average tariff cut and a minimum of [...]%; for these import-sensitive tariff lines market access increase will result from a combination of tariff cuts and TRQs. Within this category, developing countries are to have additional flexibility under conditions to be determined to designate Special Products (SP) which would only be subject to a linear cut of a minimum of [...]% and no new commitments regarding TRQs; ii) [...]% of tariff lines are to be subject to [...]% average tariff cut and a minimum of [...]%; and iii) [...]% of tariff lines are to be subject to [...]% average tariff cut and a minimum of [...]%. As an alternative to ii) and iii), [...]% of tariff lines are to be subject to a Swiss formula coefficient of [...].

The applicability and/or extent of the provisions on tariff lines exceeding a maximum (reducing to the maximum or effective market access through request-offer for TRQs) remain under negotiation.

A special agricultural safeguard (SSM) is to be established for use by developing countries subject to conditions and for products to be determined.

All developed countries will seek to provide duty-free access for at least [...]% of imports from developing countries through a combination of MFN and preferential access.

Participants are also to undertake to take account of the importance of preferential access for developing countries.

Under the third pillar of reform, export competition, where the DMD calls for “reductions of, with a view to phasing out, all forms of export subsidies”, disciplines are to be established on export subsidies, export credits, export state trading enterprises, and food aid programs. The reduction commitments shall be applied in a parallel manner according to the following parameters:

On export subsidies, members are to commit to eliminate over a [...] year period export subsidies for the products of particular interest to developing countries (to be specified) [...]; and for the remaining products, members are to commit to reduce, with a view to phasing out, budgetary and quantity allowances for export subsidies.

As for export credits, for products of particular interest to developing countries, members are to commit to eliminate, over the same period (as export subsidies), the trade-distorting element of export credits through disciplines that reduce the repayment terms to commercial practice ([...] months); and for the remaining products, parallel to the reduction of budgetary and quantity allowances for export subsidies, a reduction effort for equivalent effect for export credits is to be undertaken.

The reductions of, with a view to phasing out, all forms of export subsidies mentioned in paragraphs 3.1 and 3.2 will occur on a schedule that is parallel in its equivalence of effect on export subsidies and export credits.

The efforts and disciplines related to the reductions of, with a view to phasing out, all forms of export subsidies under paragraphs 3.1, 3.2 and 3.3 above are to apply equally to all forms of export subsidies related to or provided, directly or indirectly, to, by or through export state trading enterprises.

Additional disciplines are to be agreed in order to prevent commercial displacement through food aid operations.

The end date for phasing out of all forms of export subsidies remains under negotiation.

Strengthening of Article 12 of the Agreement on Agriculture on export prohibitions and export restrictions (on their effects in third markets) are to be addressed in the negotiations.

Developing countries are to benefit from longer implementation periods for reductions of, with a view to phasing out, all forms of export subsidies.

Until the completion of the phasing out of all forms of export subsidies, developing countries are to continue to benefit from the special and differential treatment provisions of Article 9.4 of AoA.

Participants are also to ensure that the disciplines on export credits to be agreed shall make appropriate provision for differential treatment in favour of least-developed and net food-importing developing countries as provided for in paragraph 4 of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries.

Non-Agricultural Market Access (NAMA): The revised draft declaration, reiterates the Doha mandate, and in an annex sets out the framework for modalities for the negotiations, asks the NAMA negotiating group to conclude negotiations and settle the modalities by a date to be set and conclude the negotiations by 1 January 2005.

The annex on the formula for NAMA modalities calls for a formula approach as the key to reducing tariffs, and reducing or eliminating tariff peaks, high tariffs, and tariff escalation. The NAMA negotiating group is to continue its work on a non-linear formula applied on a line-by-line basis, taking fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments.

As elements for the formula approach, the annex calls for: comprehensive product coverage without a priori exclusions; tariff reductions or elimination to commence from the bound rates after full implementation of current concessions; and for unbound tariff lines, the basis for commencing the tariff reductions shall be [two] times the MFN applied rate in the base year; the base year for MFN applied tariff rates are to be 2001 (applicable rates on 14 November).

Credit is to be given for autonomous liberalization provided that the tariff lines are bound on an MFN basis in the WTO since the conclusion of the Uruguay Round.

All non-ad valorem duties are to be converted to ad valorem equivalents on the basis of a methodology to be determined and bound in ad valorem terms. The negotiations are to commence on the basis of the HS96 or HS2002 nomenclature, with the results of the negotiations finalized in HS2002 nomenclature; the reference period for import data is set as 1999-2001.

As an exception, participants with a binding coverage of non-agricultural tariff lines of less than [35] percent are to be exempt from making tariff reductions through the formula. Instead, they are expected to bind [100] percent of non-agricultural tariff lines at an average level that does not exceed the overall average of bound tariffs for all developing countries after full implementation of current concessions.

The annex formula for modalities, recognizes that a sectorial tariff component, aiming at elimination or harmonization is another key element to achieving the objectives of paragraph 16 of the Doha Ministerial Declaration with regard to the reduction or elimination of tariffs, in particular on products of export interest to developing countries. It recognises that participation by all participants will be important to that effect, and therefore encourage the Negotiating Group to pursue its discussions on such a component, which includes adequate provisions of flexibility for developing-country participants.

(An earlier version of the NAMA modalities text by the NAMA chairman had required all developing countries to participate in such sectorial negotiations, while developing countries insisted that such participation had to remain voluntary.)

Developing-country participants ate to have longer implementation periods for tariff reductions, and in addition would be given the flexibility of keeping tariff lines unbound, as an exception, or not applying formula cuts, for up to [5] percent of tariff lines provided they do not exceed [5] percent of the total value of a Member’s imports. This flexibility is not to be used to exclude entire HS Chapters.

Least-developed country participants are not to be required to apply the formula nor participate in the sectorial approach: However, as part of their contribution to this round of negotiations, they are expected to substantially increase their level of binding commitments.

To enhance the integration of least-developed countries into the multilateral trading system and support the diversification of their production and export base, developed-country participants and other participants who so decide, are to grant on an autonomous basis duty-free and quota-free market access for non-agricultural products originating from least-developed countries by the year [...].

Newly acceded Members are to have recourse to special provisions for tariff reductions in order to take into account their extensive market access commitments undertaken as part of their accession and that staged tariff reductions are still being implemented in many cases. The Negotiating Group is to further elaborate on such provisions.

Pending agreement on core modalities for tariffs, the possibilities of supplementary modalities such as zero-for-zero sector elimination, sectorial harmonization, and request & offer, are to be kept open. All participants are also asked to consider the elimination of low duties.

The annex on NAMA formula for modalities, calls for intensification of work on Non-Tariff Barriers (NTBs), and encourages all participants to make notifications on NTBs by 31 October 2003 and to proceed with identification, examination, categorization, and ultimately negotiations on NTBs. The modalities for addressing NTBs in these negotiations could include request/offer, horizontal, or vertical approaches; and should fully take into account the principle of special and differential treatment for developing and least-developed country participants.

Appropriate studies and capacity building measures shall be an integral part of the modalities to be agreed. The Cancun ministerial is also asked to recognize the work already undertaken in these areas, and participants are asked to continue to identify such issues to improve participation in the negotiations.

Also to be considered as part of modalities, are issues of non-reciprocal preference erosion and high tariff revenue dependency.

The draft also covers the services negotiations (but where no specific ministerial decisions of any operational nature are called for), and on the Rules negotiations.

The negotiating group on Rules is asked to accelerate its work on anti-dumping and subsidies and countervailing measures, including fisheries subsidies, shifting from an identification of issues to seeking solutions. The group is also asked to reach a decision soon on transparency in Regional Trade Agreements(RTAs), the clarification and improvement of RTA disciplines under existing WTO provisions, and taking account of the development provisions of RTAs.

The draft takes note of progress in TRIPS on establishing a multilateral system of notification and registration of geographical indications for wines and spirits.

In a separate paragraph on implementation, the WTO DG is asked to continue his consultations on implementation issues, including on extending the GI protection to products other than wines and spirits.

The progress made on environment negotiations is noted, and the draft reaffirms the commitment to these negotiations.

The DSU negotiations are to be pursued and completed no later than May 2004, based on work done so far, including the chair’s text of 28 May and other proposals of participants. – SUNS5404

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