TWN Info Service on WTO and Trade Issues (Aug05/3)

2 August 2005


At the WTO's Trade Negotiations Committee (TNC) on 28 July, several developing countries expressed many concerns about the state and
substance of the WTO negotiations, as well as the process which they found to be not transparent or participatory.

Below is the second report of the TNC meeting.  The first report has been sent separately in Aug05/2.

This report was published in the SUNS (South-North Development Monitor).

With best wishes
Martin Khor



Martin Khor (TWN), Geneva, 29 July 2005

The WTO's Trade Negotiations Committee at its continued meeting in the afternoon and night of 28 July, heard statements from many countries, with many expressing disappointment with the lack of outcome of the end-July General Council process, and urging that work intensify after the summer break.

The main discussions on the state of negotiations took place at the TNC, as members were requested not to repeat the same points at the General Council meeting on 29 July.

Some developing countries also made critical comments on some of the reports that had earlier been presented by the chairs of various negotiating groups and bodies.

Some countries implicitly or explicitly disagreed with some key conclusions of the Chair of the NAMA negotiating group, Ambassador Stefan Johannesson of Iceland, while others disagreed with points made by the Chair of the services negotiations, Ambassador Alejandro Jara of Chile.

Several countries or groupings were also critical of the negotiating process which they said excluded many developing countries, and many more that development concerns had fallen off the agenda.

India, represented by Ambassador Ujal Singh Bhatia, said that it was disappointed at the lack of progress and that there was a huge task in the remaining months before Hong Kong. On agriculture (and the report by the agriculture negotiations chair Tim Groser to the TNC), India said the G20 proposal on market access had already balanced the interests of exporters and countries with serious concerns of poor vulnerable farmers.

"It was not meant to be a launching pad for other parties to introduce elements of additional progressivity into the formula," said India. "Introduction of additional progressivity is neither envisaged in the framework nor warranted. Similarly, the level of ambition should not be linked to flexibilities."

India would also have liked more emphasis in the agriculture chair's assessment on the concerns of developing countries regarding special products (SPs) and special safeguard mechanism (SSM), as a sustainable outcome has to put the concerns of hundreds of millions of farmers who live on the edge of subsistence in the middle.

In NAMA, India did not share the Chair's perception of a convergence on the issue of the formula. Egypt's statement on behalf of the African Group (which had indicated support for a Swiss-type formula with a predetermined coefficient for each member qualified by its current average) made it clear that many others shared India's perception in this regard, Amb. Bhatia said.

While a Swiss type formula has been supported by members as the main modality for tariff reduction, "it is neither easy nor useful at this point to peg specific numbers to the members supporting one or the other Swiss formulae on the table," said India.

India added its disappointment at the current state of the services talks and there is urgent need for corrective action. It said it was filing an ambitious revised offer, opening a number of sectors in Mode 3 (commercial presence), including architectural services, integrated engineering, urban planning and landscaping services, veterinary services, some environmental services, distribution (excluding retail trade) and additional areas in construction and tourism, and areas in educational, management and life insurance services.

India also expressed "growing anxiety" over the development dimension of the negotiations. "We have given some attention to the S&D cluster, albeit without much progress, but have made no effort towards a collective definition of the development deliverables at Hong Kong. This task brooks no delay and should be on priority when we reassemble." An early solution to amending TRIPS agreement to give effect to the August 2003 decision (on TRIPS and health) is an urgent necessity.

Bangladesh (speaking for the LDC Group) said the LDCs were not in favour of a Round but signed on, with the only saving grace being the level of ambition, which appeared quite high and it had hoped for significant developments in many areas of negotiations. With time, the LDCs began to wonder if it was right to maintain those expectations.

Though there was talk of a July outcome or approximation, now there are only the reports of the Chairs, revealing the lack of adequate progress. Many members feel LDC concerns are taken care of through tariff reduction exemptions, flexibility in binding tariff lines etc.

But in reality the LDCs seldom benefit as "we generally have WTO-plus commitments through bilateral/regional trade agreements or unilaterally through negotiations with the World Bank or IMF. Most LDCs have little binding coverage, or the binding tariffs may be very high, but their actual applied tariffs are only 13.8%."

In the WTO negotiations, LDCs can gain only if members commit to help promote LDC products. The LDCs Livingstone Ministerial Declaration of June 2005 had asked for bound duty-free and quota-free market access for LDC products.

Another demand is full implementation of modalities in services for special treatment of LDCs. The LDC submission had not received responses and revised offers failed to take on board LDC interests. There is little movement in Mode 4. At the same time, demands are being made on LDCs to open their services sectors, which undermine the development objectives of the LDC modalities.

"Overall we register our profound disappointment at the lack of progress on many issues of concern to us," said Bangladesh. In trade facilitation, proposals do not take account of the implications for LDCs and how they would be able to implement them.

"In the SDT negotiations in the Committee on Trade and Development special session, despite major concessions from the LDC Group, there is no progress. The S&D provisions are important to us and the texts must provide economically meaningful results for us.

"On cotton, we call on members to address the concerns ambitiously, expeditiously and specifically in all three pillars of agriculture negotiations."

The LDC Group also registered its concerns about the current negotiating process. "Lately we have been observing that in many negotiations, even where we have an interest, the LDCs have not been invited."

Another concern was with the pace and manner of negotiations. "We have been noticing that small groups of Members develop understandings among themselves and bring their texts to the general Membership only at the last possible moment. This places us in an extremely difficult situation. It is only when we see the broad parameters of the negotiations that we can observe how our interests are affected. For instance, only when the formula is accepted and applied, would we evaluate the erosion of preferences. However, the scope for negotiations, both in substance and in time, is so limited that we are unable to incorporate our concerns.

"We urge the membership to ensure the proposals are tabled early in the negotiations, when there is time to discuss the issues. This would take care of both the participation element as well as the time and space for the negotiations."

Venezuela said the development dimension is the fundamental premise in the Round, and any assessment has to see how that premise is translated into fair international trade benefiting developing countries, greater market access for their products, S&D, and the development of their productive and trade capacities through trade.

On Agriculture, it said any tariff formula approach should take into account the special characteristics of each developing country, to preserve policy space for socioeconomic development. It reiterated the importance of special products and a special safeguard mechanism and tropical products and erosion of preferences. Developing countries should be exempt from reduction of de minimis domestic support.

On NAMA and the tariff reduction formula discussions, Venezuela rejected any proposal far from the Doha mandate to fully take into account the special needs and interests of developing countries, including through less than full reciprocity in reduction commitments.

"If we make simulations, using the different proposals, especially, those of developed countries, we end with disproportionate reductions on the tariff universe, further from what is tolerable for developing countries," said Venezuela.

It added that the developed countries would be affected less in terms of fiscal revenue, and they would also make less proportionate tariff cuts, with less effects on their already consolidated industries, in contrast to the effects on infant industries of developing countries. "This will be translated into a concession that constrains the future of our national enterprises and our economic development."

The NAMA negotiations on tariff reduction should take into account ensuring policy space is preserved (which the simple Swiss formula had not perceived); dependence of developing countries on customs revenue, vulnerability of small and medium enterprises in our economies, or preference erosion.

Commenting on the report of the chair of the services negotiations, Venezuela said the report by Amb. Alejandro Jara was not an objective summary of the discussions held at the services special session on 27, 30 June and 1 July. Annex 1 of the report, summarizing the debates related to sectors, modes and rules in the framework of the progress is "without precedents because it was the first time that it is included, and moreover, it does not have the green light of the Membership because we did not participate in the consultations."

It added that the report's portrayal of crisis favors the use of certain "benchmarks", as paragraph 5 stated that "a considerable number of Members recognized that the request-offer method alone is not producing the desired results." Venezuela said that "the report does not reflect the opinion of another considerable group of Members that do not share this view."

It also criticised the report's section on future work, which it said did not mention the issue of rules (even though the report had earlier stated the central importance to some members of a successful outcome on emergency safeguard measures); nor does it include an assessment of trade in services, in a general and sectoral mode.

Venezuela also referred to the intention of the chair to engage himself in intensive consultations on a broad range of issues, and remarked that recently "these consultations have been taken in an informal way impeding our following up of the process and its results, so these should not continue."

"Because of what we have exposed, before accepting this report, we request the inclusion, in the language of the report, of the opposition of many countries to the modification of the negotiation modalities in GATS, and likewise the implications and conclusions that derive from that omission. In the same way, we request the elimination of annex 1, a product of restricted consultations in which we did not participate."

Venezuela also highlighted the importance of transparency in the negotiations. The urgency to achieve agreement should not overshadow and leave behind the necessary transparency. We cannot expect to complete in two weeks the work of one year. "The progress should be an ongoing and inclusive one so to avoid the last hour syndrome in the future."

Jamaica, represented by Ambassador Ransford Smith, said it shared the disappointment of the TNC not meeting its objectives and deadlines.

On Agriculture, in the market access pillar, certain development aspects such as Special Products (SPs), a Special Safeguard Mechanism (SSM), the treatment of countries with ceiling bindings and preference erosion have received much less attention and have not moved satisfactorily. This is based on the premise that some issues must be addressed before others.

In domestic support, Jamaica had hoped that a decision would have been taken by the end of July to exempt developing countries from the requirement to reduce the de minimis. This is an opportunity missed.

In the Export Competition pillar, the export interests of small developing countries which need to make use of export credits should not be unreasonably prejudiced by new disciplines. On state trading enterprises, developing countries should be exempt from new disciplines.

On NAMA, much work has been done in certain areas such as the formula and the treatment of unbound lines. But much less work has been done on issues such as flexibilities and less than full reciprocity, which are to await the resolution of the so-called key issues. Jamaica had serious doubts about this approach.

"In NAMA, the principles of flexibilities and less than full reciprocity are stand alone issues. We are very concerned that there is the real risk that the genuine interests of members in these areas will not receive the attention that is necessary. We do not wish these issues to be addressed in a rushed, pressure cooker atmosphere."

The NAMA negotiations results should recognize the vulnerabilities of developing countries, through appropriate flexibility and moderation in commitments. This is the intent of the proposal of some CARICOM members which is attracting growing support.

"Moderation in commitments and flexibilities are fully consistent with the spirit and substance of the Doha mandate. Yet it appears to be almost an assumption that developing countries, including small vulnerable members, will be expected to make tariff cuts in this Development Round which far exceed what developed countries, with their competitive industries, undertook to make ten years ago in the Uruguay Round."

Jamaica stressed that the principle of less than full reciprocity should be a part of the core formula in order to achieve a substantial difference in outcomes in the reduction commitments of developed and developing countries. It stressed the separation of the principle of less than full reciprocity in reduction commitments and special and differential treatment as given effect through flexibilities. It was also concerned about preference erosion.

On services, Jamaica cautioned against attempts to introduce other approaches which would erode or eliminate flexibility provided under the GATS and in the negotiating modalities.

Liberalization should be approached and undertaken progressively and with due regard to the implications for building domestic capacity, preserving policy space, and strengthening and diversifying services exports. The GATS does provide scope for this kind of approach to be taken through flexibilities built into the Agreement itself. A renewed sense of commitment to this principle would help alleviate anxieties of some developing members.

Jamaica also expressed deep concern with regard to the state of the negotiations in terms of development. The development component at the current stage of the Round is sadly lacking, not only in regard to the specific development issues but also in terms of development as a cross cutting issue in the negotiations.

"Paradoxically we find that developed partners are taking defensive positions precisely in those areas and on those matters where they should be accommodating the interests of developing countries, while taking aggressive and sometimes uncompromising postures where their own interests will be served vis a vis those of developing countries, in areas such as NAMA and Services. This cannot be the road to a development outcome.

"We frankly believe that a course correction is needed. Some of our partners seem to believe that development concerns can be taken care of merely through liberalization, and more liberalization, and this lays the ground for insufficient attention to issues such as the potential for harming vulnerable domestic industries, and small farmers, the underestimating of adjustment costs and even of the potential for causing and/or deepening macro economic imbalances. Unless we act in a focussed and sympathetic way to redress these matters the Development aspect of the Round may end up being largely in the nature of a deficit."

The African, Caribbean and Pacific Group (ACP), represented by Ambassador Samuel Amehou of Benin, expressed concern about the state of the Round, with "negotiations in trouble." On agriculture, the group's concerns include preferences, special products, a tariff formula with sufficient flexibility and duty and quota free access for LDCs.

On cotton, the group called for elimination of all forms of cotton export subsidies and improving market access for international trade in cotton; clear delivery on bound, duty-free and quota-free access for cotton and its by-products for LDCs that are net cotton producers and exporters; and elimination of domestic support measures and the creation of an emergency support fund for cotton production.

On NAMA, the ACP is preoccupied with several aspects of the formula, treatment of unbound tariffs, preference erosion and flexibilities for ACP countries and non-tariff barriers.

On rules, the ACP said regional trade agreements should be formulated in a way that assists development. The deliberation on Article XXIV of GATT should confer greater flexibility for developing countries in terms of transitional periods and the degree of liberalisation and incorporate real SDT.

On trade facilitation, it is crucial that any commitments should be within the resource capacity of the developing countries. Tabled proposals should not go beyond the current mandate. Concrete actions are needed on technical assistance and capacity building.

On development issues, the ACP expressed concern over the lack of effective progress. It defined development issues as SDT, implementation issues, the situation of LDCs, small economies, commodity issues, technical assistance, capacity building, technology transfer and trade, debt and finance.

On TRIPS and public health, the ACP supported the call to amend the TRIPS Agreement with a view to put in place a permanent solution.