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TWN Info Service on WTO Issues (July04/1)

5 July 2004

Third World Network

Dear friends and colleagues

 

WTO’S TRADE NEGOTIATIONS COMMITTEE MEETING (30 June) REVEALS MANY AREAS OF DIFFERENCES AMONG MEMBERS

 

A meeting of the WTO’s Trade Negotiations Committee (TNC) on 30 June has revealed trhat there is a lack of convergence among WTO members on key issues less than a month before they are scheduled to agree on a “framework agreement” at a General Council meeting of 27-29 July.

The TNC, which oversees the negotiations under the Doha work programme, received reports from the various negotiating bodies, and heard remarks from the members on key issues such as non-agriculkture market access (NAMA), Services, Agriculture and Special and Differential Treatment and implementation issues.

There are still sharp differences of positions among the members, especially on North-South lines.

The WTO Director-General told the meeting that a first draft of the July framework document will be circulated “within the next two weeks”.   This is now taken to mean that the draft may come out on 9 July (as earlier expected) or as late as 14 July.

The following is a TWN Report on the TNC meeting, containing summaries of the reports given by the chairs of negotiations of the various issues, and the views stated by some of the delegations.  The report is written by Goh Chien Yen, who is TWN’s legal advisor and representative in Geneva.

A separate TWN report will be issued on the discussion on the Singapore Issues held at the TNC as well as the heads of delegation meeting on 1 July.

 

With best regards

Martin Khor

TWN   

 

 

 

 

 

WTO’S TRADE NEGOTIATIONS COMMITTEE MEETING REVEALS LACK OF CONVERGENCE STILL ON MANY KEY AREAS

 

TWN Report on the TNC Meeting of 30 June 2004

1.      Background

A meeting of the WTO’s Trade Negotiations Committee (TNC) was held in Geneva on Wednesday 30 June.  The TNC is the body overseeing the negotiations under the Doha work programme.  It receives reports from the various negotiating bodies dealing with different issues.

The 13th meeting of the TNC was important, as it was being held less than a month before the General Council meeting of 27-29 July, which is scheduled to adopt a “framework agreement” on some key issues, and thus conclude the work that was left unfinished by the Cancun Ministerial meeting of the WTO in September 2003.  

At Cancun, a draft Ministerial Text was issued by the Mexican Minister, Derbez (now known as the Derbez Text), but it was not adopted because of many disagreements on it.  The Derbez text contains several annexes on various topics such as agriculture, non-agriculture market access (NAMA), Singapore issues and S&D.

During the TNC meeting, reports delivered by the different Chairs of the negotiating bodies on NAMA, Services, Agriculture and on Special and Differential treatment, and statements made by member countries revealed a lack of convergence on several key areas of work towards the July Framework Agreement.  This first draft would be a launching pad for the last phase of the process in finalising the July document.

WTO Director-General Dr Supachai Panitchpakdi reported to the TNC that a first draft of the July framework document will be circulated “within the next two weeks”.  He said this draft would be the launching pad for the last phase of finalising the document for the General Council meeting art the end of July.

There is an expectation among the WTO members that the first draft would appear on 9 July;  however there is also speculation that it could be delayed until 14 July.

The following is a summary of the some of the positions put forward on the some key issues during the meeting.  

2.   Non Agriculture Market Access (NAMA)

The Chair of the Negotiating Group on Market Access (NAMA), Ambassador Johannesson of Iceland, gave a report of the various meetings that had been held on NAMA.  He concluded:  “While the consultations did not permit me to detect and report to this Committee a common basis omn which the Group can move forward at this stage, I would nevertheless like to say that it is my perception that items on which further discussions on a NAMA modalities framework could take place are contained in Annex B of the Cancun text.”

Several developing country members however made it clear that basing the framework on the Cancun or Derbez text was not acceptable to them.

Nigeria speaking on behalf of the African Group said that the Group is “concerned” about the NAMA Chairman’s report.  The Nigerian Ambassador, Matthew Nwagwu, said the Group is of the view that the report “does not reflect the current state of play in the NAMA negotiations since it does not reflect the concerns raised by the Africa Group. We are of the view that the Derbez text alone cannot be the basis for preparing any Framework on NAMA.”   The African Group recommended strongly that “there is the need to take into consideration the positive elements and proposals that were put forward by Members...Our position therefore is that the Derbez text and other proposals including that of the African Group proposal should be the basis of preparing a Framework on NAMA and also for future work.”

Kenya associated itself with the Africa Group statement and further elaborated on the reasons why the Derbez text on NAMA (and other issues) is unsuitable for the July Framework.

Ambassador Amina of Kenya said:  “It is clear that the Derbez text on agriculture and its accompanying annex is no longer a basis for the agriculture framework. The reason is simple. The text issued in Cancun no longer reflects the technical and political realities confronting the negotiations on agriculture.  Likewise in relation to the Singapore issues, the Derbez text is also no longer a credible starting point for the July framework. I am afraid to say that the same applies to NAMA... [Therefore] the proposals and useful comments we have made post-Cancun should also be taken into consideration.”

Kenya continued:  “I wish to recall that the African trade ministers meeting held recently in Kigali highlighted explicitly the inappropriateness of the Derbez text and its annex in relation to NAMA. The text circulated at the last informal HOD states that the “proposals contained in the Derbez text and its annex on NAMA are in contradiction of the principle of less than full reciprocity as enshrined in the Doha mandate and as such would deepen the crisis of de-industralisation and accentuate the unemployment and poverty crisis in our countries.”

Brazil also pointed out that the Derbez text is inadequate for it is general where it should be specific in relation to less than full reciprocity and specific where it should have been general, in this case, with respect to the sectoral approach.

Brazil’s Ambassador, Luiz Felippe Seixas Correa, said that Derbez text is not “written in stone.” And while there are risks in opening it, there are also risks in freezing it. He emphasised that that Brazil has difficulties with the sectoral approach.

Indonesia was also against the use of the Derbez text as the basis for negotiations.  Its representative stated:  “As regards to using elements of the Annex B of the Derbez text, as the basis for an eventual framework in NAMA, my delegation shares the view expressed by the ambassador of Brazil this morning,. We would like to emphasise that Annex B is inadequate in reflecting the mandate on issues of particular interest to developing countries, whilst at the same time going beyond the mandate on certain issues of interest to developed countries. Thus we fully support the call to have better text than Annex B.”

Reiterating the clear demand by many developing country members to have all proposals made considered for the July framework India advised that “what is important here is that the framework agreement acts as a bridge between the past and the future, facilitating future negotiations without compromising members’ interests and concerns expressed in the past, carrying forward all proposals that are now on the table.”

On the other hand, some developed country members such as the EU and US felt that the Derbez text reflects a “workable compromise”.

The EU’s Ambassador Trojan urged members not to insist on specific changes, to “avoid unravelling what could be a reasonable basis to carry forward our work.” Expressing similar concerns the US accepted that the Derbez text and its relevant Annex constitute a sufficient basis for the July framework

The NAMA negotiations chair, Amb Johanssen, had also highlighted his concern that some delegations have made robust linkage between NAMA and developments in agriculture. For those delegations this link is “total”, he pointed out.

The US argued that “you cannot afford to wait for agriculture, you need movements in the other areas to ensure a balanced package.”

However, several delegations such as Indonesia, Brazil and India pointed out that there should be a linkage between NAMA and agriculture. Brazil said that it could support a level of ambition in line with the level of ambition and specificity in agriculture.

And Kenya said: “We have noticed that some members have very high ambitions in NAMA and the same have very low ambitions in agriculture. We think that the same level of ambitions should apply in both areas. There are specific sensitivities in both agriculture and NAMA and the same principles should apply.”

Bangladesh, speaking on behalf of the LDC Group, said there should be binding commitments from developed countries on duty and quota free market access for all LDC products.  Measures to counteract preference erosion also require attention.

A Geneva based trade analyst pointed out the Chair’s report on NAMA has carefully left out mentioning the existence of all areas of contention between the members such as the usage of non-linear and sectoral approach to make tariff reductions.

3.   Services

On the issue of Services, Ambassador Jara of Chile, Chair of the Special Session of the Council for Trade in Services, reported that progress in this area has been slow. He said 44 members had submitted offers so far, and that 52 members (not including the LDCs, which do not need to make any offers) have not made any initial offers and this is a cause for concern. He said that the quality of offers has been modest, and that is putting it diplomatically. He said that many members wanted that services be treated on the same level as NAMA and agriculture in the July package.

He had hoped that he could have brokered an agreement on a set of recommendations to be put forward to pursue future work, but consensus has been elusive. Members however have agreed that it is an important negotiating step in that revised offers are submitted. However, when that will be done is still uncertain given the uncertainty of the negotiations themselves and the complete lack of certainty as to when the 6th ministerial conference will be held. “This is a problematic situation”, he added.

He proposed that any package on services should include something on initial offers, on a date, on revised offers, on the quality of offers, on the modes of supply, and sector of interest for developing countries, on rule making, on LDCs and a future work program for the Council on Trade in Services Special Session ahead of the 6th minsiterial conference.

Indonesia however pointed out that “the July package should not only highlight the current stage and the level of initial offers. But also other issues that are of utmost importance to developing countries, such as technical assistance, assessment of trade in services, and the negotiation on rules-making, particularly on the emergency safeguard mechanism.”

4.      “Development issues”  (S and D and implementation issues)

On the development issues of Special and Differential treatment and implementation issues, many developing country members expressed their disappointment with the lack of progress in this area. 

India stated:  “I would like to bring to your notice, Mr Chairman, the fact that there is general and widespread dissatisfaction amongst developing countries with the lack of progress on development issues. We are concerned that there is no effective game plan for negotiating implementation issues and special and differential treatment issues. The Committee on Trade and Development can make progress on S and D issues only if there is commitment on the part of all members.

Kenya noted that “since Cancun no significant work has taken place, [and] positions have hardly changed.”  It proposed that a comprehensive work programme be set up, with cl;ear benchmarks on what needs to be done at each stage.  Kenya referred to its submission (TN/C/16 dated 5 April 2004) on behalf of the Africa Group, LDC Group, ACP Group, India and Indonesia as a practical guide in this respect, and for the Committee on Trade and Development to prepare its July package report and future work programme fro S and D.

And the Indonesia representative said: “Like many previous speakers, we are also disappointed on the lack of progress in the negotiations on development issues, especially when we are calling this round a development round. In this context, we believe that the July package must provide a clear picture on what we are going to do with the rest of the S and D proposals. In line with the principle of this being a development round, negotiations on all S and D proposals should be put as a priority in our work ahead.”

The Chair of the Special Session of the Committee on Trade and Development Ambassador Faizel Ismail of South Africa in his report to the TNC referred to the three questions he put forward before the last TNC meeting in an attempt to unlock the existing impasse on Special and Differential treatment (SDT).

Amb. Ismail informed the members that during his consultations, it has been suggested that engaging in a broader debate on underlying development issues related to SDT would assist in identifying possible areas of convergence. Some members had expressed support for such an approach, while others insisted on the need to focus on the 28 Agreement-specific proposals. Most members have stressed the need for any possible package in July to include a strong developmental component.

He then suggested the following elements that could constitute the development component of the July package: a rededication and commitment to the development dimension of the WTO and the need to ensure that the Doha Round is a genuine development round; a decision on the 28 Agreement-specific proposals on which Members had agreed in principle; and elaboration of the process that would unlock the current impasse and take the work on remaining issues forward.

However, Nigerian Amb Matthew Nwagwu speaking on behalf of the African Group, said that the group “has difficulty with the proposal by the Chairman to harvest the 28 points that were agreed to in principle. He added:  “We are of the view that they do not have any economic value or significance and further consultations are required to achieve any meaningful result on S and D. We also urge developed members to show the necessary flexibility and political will so as to achieve tangible result in this area.”

Bangladesh, speaking for the LDC Group, said the 28 S and D proposals referred to by the chair are part of the overall negotiations on S and D issues.  “It just so happens to be in a sequence that we were following, of trying to handle the easy issues at first.  The 28 proposals of Annex C of the draft Cancun text include 12 proposals of the LDCs.  We consider them as part of a broader package.”  Although the LDCs were grateful to those who took part in drawing up this package. “However at this stage we are not prepared to accept a partial package, as an early harvest.  We want to go by the whole package, a package that has economic value to us.  We must come up with language that conforms to the Doha mandate of making them precise, effective and operational.  The total package of S&D must be looked at as a whole and not piecemeal.”

The EC’s Ambassador Carlo Trojan agreed “very much with the elements [Amb Ismail] would wish to be included in the July package.” He emphasied that the “rededication and commitment to the WTO development dimension is paramount.” He added that this “should permeate as well the frameworks for modalities in Agriculture and NAMA as to ensure that appropriate responses are found to the particular challenges faced by weak and vulnerable economies in integrating more fully into the global trading system and as a result of the erosion of non-reciprocal trade preferences....the S and D toolkit is wide-ranging and should ensure that weak and vulnerable developing countries remain very much exempt from trade liberalisation commitments. The development paragraph should give a clear political message in this respect.”

With regard to implementation issues, India stressed “they seem to be in an orphaned state at present.” Consequently, some developing country members such as Brazil, Kenya and India have proposed that a specific negotiating group under the TNC be created to discuss the implementation issues.  India reiterated that “any July framework will have meaning for developing countries only if there is a feeling that S and D issues and implementation issues have been effectively dealt with.”

On implementation issues, Kenya agreed with Brazil that a separate negotiating group be set up under the TNC to finalise all outstanding implementation issues.

5.   Agriculture

Ambassador Tim Groser of New Zealand, chairman of the agriculture negotiations, gave a detailed report on agriculture to the TNC.   While identifying areas of convergences, he also pointed out several areas of divergences and potential deal-breakers. He also suggested some subjects that might be mentioned in the end-July “framework” agreement but left for negotiation afterwards.

On domestic support, according to the chairman, there is strong support emerging for “an overall reduction commitment for trade distorting support,”  that is an overall cut in the sum of de minimis, Amber Box and Blue Box supports in order that “the framework implies an effective cut in trade distorting domestic support.”

However, he pointed out that a key practical question is whether those cuts should take as their starting point, the current ceilings committed in the WTO, or the actual levels of support currently provided, which could be lower. Amb.Groser said it is unrealistic to push for the current levels to be the starting point.

On the amber box, there seems to be acceptance that there will be greater cuts where there are higher levels of support.   There is also “some resonance” for product-specific caps on AMS to ensure that support for some products are not increasing even if overall AMS level is declining.  There is also strong pressure for product-specific AMS reductions, i.e. to reduce the support for each product; but this can only be flagged at the framework stage as a possible ouotcome in a post-framework negotiation.

He also mentioned that he needed political guidance on whether complete elimination of de minimis support for developed countries can be negotiated, while there is agreement that it should be reduced.

On the blue box, Groser said he has discouraged the charge of “box shifting”, and to do so he assumes there is acceptance of the need for criteria to distinguish blue payments from the amber box, otherwise it would indeed amount to box shifting.  He said the Blue Box remains in the trade-distorting category and cannot be available for use without limit.  It may not be necessary to specify at the framework stage, what the precise limit will be.  He said some flexibility may be needed in “exceptional circumstances” to implement such possible limit.  He asked for guidance whether the framework should “foreshadow a further reduction phase and if so under what conditions.”

On the green box, he observed that there are clear signs of convergence on the need, post Framework, to review the criteria to ensure the green measures are having the desired effect of no (or at most minimal) effects on trade and production.  Such a review must ensure the basic concepts, principles and effectiveness of the Green Box remain.  Many members also consider there are “serious deficiencies” with the monitoring and surveillance of green box measures, and strengthening this would be a key element of the post-framework negotiation. 

On S and D for domestic support, Groser said there is wide acceptance that developing countries can have longer time frames and lower reduction targets.

On export competition, Groser said there was convergence that:  (a) the July framework should say that a credible end-date will be fixed in the course of this negotiation for eliminating all forms of export subsidy,  (b) that “progressive rediuctions” will be built into any formula to ensure “everything is not just postponed to the end date; (c) there will have to be “equivalent  disciplines” will be set on export credits, state trading enterprises and food aid, although there is no convergence yet on what those “equivalent disciplines” should be.

The issue of export credit and exporting state trading enterprises is difficult and a potential deal-breaker, Amb.Groser said. No one questions the principle of eliminating the subsidy component; the problem is how to identify the subsidy component, he added.   Groser said there were two broad options:  first, to agree at the framework stage to abolish the government instruments (for export credits and monopoly export arrangements) themselves;  or secondly to signal in a clearer way that they are prepared for tough language to eliminate any subsidy element in export credit and export state trading entities.  (Groser gives some details on what these subsidy elements may be).

Groser also elaborates on S and D elements of export competoition.

The issue of market access remains the most difficult of the three pillars,  Groser emphasised. The blended approach proposal from July-September 2003 has been criticized for not reflecting the widely different tariff profiles that exist between the members. It was clear a number of developing countries consider there was no way they could persuade their governments to adopt anything approaching this formula. 

This was the background, said Groser, to the move away from the blended formula.  His sense is that there is now a wide interest in exploring a “tiered approach”.   This approach would take account of the starting point of all participants (their existing bound tariffs).  “There is interest in exploring different liberalisation techniques within each band so as to afford negotiators the flexibility they need to reach agreement in the post-framework modalities stage,” he added. 

However one of the potential deal-breakers in market access is how to deal with sensitive products, their selection and treatment.  This includes the number of products, and how much freedom countries would have to select them, and how  much flexibility they should be given. Amb.Groser said the most defensive countries have positions to ensure they “have their cake and eat it”.  On the other side, exporting countries would not accept unconstrained freedom to select the number of sensitive tariff lines (not subject to the core formula) and unconstrained flexibility in treatment of such products.   

The treatment of sensitive products even at the framework stage remains a potential deal breaker for members on both sides of the argument, he warned. Because sensitive products remain such a difficult subject “getting this right, now, seems to be the critical challenge for the market access pillar,” he said, and it is also tied up with the balance of the deal that some countries are seeking such as cutting export subsidies in return for access to export markets.

Other issues include the question of a tariff cap, tariff escalation, and the special agriculture safeguard.

On developing countries, Groser said any framework will need to ensure a work  programme is in place for the post-framework stage for such matters as “special products”, the special safeguard mechanism, preferences, duty free access for LDCs and other developing countries, and no reduction commitments for the LDCs. 

On the cotton issue Amb.Groser said discussions continue in a good atmosphere, but he was not ready to make a recommendation yet on how cotton might best be treated in the structure of this negotiation and on what terms.

Nigeria speaking on behalf of the African Group during the TNC made clear the key concerns of Africa were the net food importing developing countries and LDC issu, LDC exemptions and access, longstanding preferences, SP/SSM and obstacles posed by some export competition and domestic support measures to further access of African countries with substantial export interests.   “The Group’s objective is that these issues be dealt with effectively and meaningfully and should feature prominently and in detail in any Framework agreement.”

Also, each Round of agriculture negotiations should take into account the need for appropriate policy space that would allow African countries to pursue agricultural policies that ar supportive of their development goals, poverty reduction strategies, food security and livelihood concerns.

During the TNC, some members such as the EU and US said the trade side of the cotton proposal should be handled in the agriculture negotiations. The African Group said however that cotton should be a “stand-alone” topic and not part of the “agriculture package”. An appropriate and effective solution on cotton should cover both the trade and developmental aspects of the Cotton Initiative, the Africa group added.

Indonesia, which coordinates the SP/SSM alliance of countries, said joining a consensus on agriculture would require the framework to adhere to the level of ambition and flexibilities of the Doha mandate.  This means that in domestic support there should be real substantial reduction in all forms of trade distorting support of the biggest distorters, and in export competition there should be a credible end-date to eliminate all forms of export subsidies.

Indonesia added that in market access, although all members must contribute, however developing countries must do so in a proportional manner.  The sensitivity of developed members ,must be differentiated from the real development problems faced by many developing countries.  “In this context the treatment for sensitive products for developed and developing countries must be differentiated.  In addressing sensitivities of developed members, it should not lead to providing S and D to developed countries or undermining the concept of S and D for developing countries.”

Bangladesh, speaking on behalf of the LDC Group, said the agriculture Chairman had reflected some of the group’s concerns and it hoped that two other concerns, i.e. tariff escalation and preference erosion, would also be addressed.

6.   Singapore Issues

Although the Singapore Issues do not fall under the purview of the TNC, several members made comments on these issues and how they should be treated.

A separate TWN report will deal with how these issues were discussed at the TNC as well as at the meeting of heads of delegation (HOD) on 1 July 2004.

 


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