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TWN Info Service on WTO and Trade Issues (Dec05/04) 

5 Dec 2005


Developing countries voice concerns on Hong Kong draft at TNC

A range of developing countries voiced their concerns over the draft Hong Kong Ministerial text at a meeting of the Trade Negotiations Committee (TNC) Wednesday, 30 November 2005.

The Group of 33 developing countries expressed concern over the idea of presenting to Ministers at Hong Kong, a text that reflects the Chair's own assessment of elements where convergence exists.

The African Group also expressed disappointment over the draft Ministerial Declaration, saying that it disregards the interests of the African Group as conveyed in the Cairo Declaration and the Arusha Declaration as well as in previous statements made by the Group at the TNC.

The African Group expressed concern over the structure of the draft Declaration, saying that the Group was very uncomfortable with the idea of annexing texts that are not consensually agreed upon, and in some cases not even negotiated.

Brazil said the result is disappointing and the draft is an insufficient basis for progress towards completing the Round next year. This was due not to the process but the lack of political will. Brazil also strongly criticized the positions taken by some developed countries which turn the logic of the Round "upside down".

Below is a report of the meeting.

With best wishes
Martin Khor
TWN

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Developing countries voice concerns on Hong Kong draft at TNC


By Kanaga Raja (SUNS), Geneva, 1 December 2005

A range of developing countries voiced their concerns over the draft Hong Kong Ministerial text at a meeting of the Trade Negotiations Committee (TNC) Wednesday, 30 November 2005.

The Group of 33 developing countries expressed concern over the idea of presenting to Ministers at Hong Kong, a text that reflects the Chair's own assessment of elements where convergence exists.

The African Group also expressed disappointment over the draft Ministerial Declaration, saying that it disregards the interests of the African Group as conveyed in the Cairo Declaration and the Arusha Declaration as well as in previous statements made by the Group at the TNC.

The African Group expressed concern over the structure of the draft Declaration, saying that the Group was very uncomfortable with the idea of annexing texts that are not consensually agreed upon, and in some cases not even negotiated.

Brazil said the result is disappointing and the draft is an insufficient basis for progress towards completing the Round next year. This was due not to the process but the lack of political will. Brazil also strongly criticized the positions taken by some developed countries which turn the logic of the Round "upside down".

The TNC meeting also heard an overall assessment by the Chair Pascal Lamy as well as reports by the Chairs of the various negotiating bodies.

Lamy told the meeting that "although we have recalibrated the level of ambition specifically for Hong Kong, it is very important that this not be just a review session but it be a springboard for completing the round by the end of next year."

He said that he will continue the 'bottom up' approach and that he will not spring any surprises on members.

He recalled his three classifications of the various texts. Those that had a degree of convergence that was reflected in the text, were the DSU review, trade facilitation and technical cooperation.

Those segments of the text that are in Ministerial Declaration form even though they have not been fully agreed, he said, included services. As to questions that have been more delicate, he referred to agriculture, NAMA and Special and Differential Treatment proposals with respect to the LDCs.

As to his consultations on implementation-related issues, he said that on the question of extension of Geographical Indications and the relationship between the TRIPS and the CBD, there was no progress to report. The same went for balance of payments, customs valuation, market access, safeguards, and technical barriers to trade.

At a press briefing Wednesday, the WTO spokesperson Keith Rockwell said that through various consultations among members, there have been extensive efforts being made to improve the draft text, but positions have not changed noticably in respect of the key issues of agriculture and NAMA as well as the five Agreement-specific LDC proposals.

During the discussions on the services text, he said, while there was support coming from some members on this being an advancement and striking a balance, there were others who said that the text had gone too far.

As to what exactly to put to ministers, he said there has been reluctance on the part of some members to discuss ranges of numbers. Many members believed that without greater balance across the modes, getting into specific numbers might be too problematic. There is also recognition that there has to be some direction given from the Geneva process to ministers so that their work could be facilitated in Hong Kong.

One of the things that is being talked about is questions to ministers that would help focus the debate but exactly what those questions would be have not been agreed, Rockwell said.

The Chairs of the various negotiating bodies presented their reports to the TNC.

Both the Chairs of the agriculture negotiations and the NAMA negotiations said that it was extremely important that members move forward. With respect to the three elements in NAMA - the formula, flexibilities for developing countries and treatment of unbound tariffs - the Chair of the NAMA negotiations, Ambassador Stefan Johannesson of Iceland, was of the view that these need to be cracked, otherwise there would be no chance of making progress in any of the other areas. The Chair of the services negotiations, Ambassador Fernando de Mateo of Mexico, said that he had made clear in his report that members were concerned with both the quality and quantity of offers. He said that through four stages of consultations and meetings, the text on services has gradually taken on the shape of a Ministerial Declaration.

However, some problems remain. Ways of indicating progress in numerical targets have not been acceptable to a large number of countries because of questions concerning the compatibility of a new approach to these negotiations and the GATS agreement, and the negotiating mandate as spelled out in the Doha Declaration.

He added that there had also been some concerns expressed over the notion of having discussions in a plurilateral format and that he was aware of this. But this, he said, was something that members themselves were free to do and he could not prohibit them from doing this. On balance, he added, there was realization that there was a need for an acceleration of the process.

The Chair of the negotiating group on rules, Ambassador Valles Galmes of Uruguay said that there had been progress made on the anti-dumping talks, where members were working on issues of transparency, the scope of investigations, and anti-circumvention. On the question of subsidies, there was a need for more proposals, since the discussions there are not as ripe as elsewhere. On fisheries subsidies, he said that there has been progress made and emerging support on disciplines including the prohibition of certain subsidies that could contribute to over-fishing. On RTAs, there has been progress made on the issue of transparency, but the systemic questions are lagging behind.

With respect to negotiations on the multilateral register for wines and spirits in the TRIPS Council Special Session, the Chair of the negotiations, Ambassador Manzoor Ahmad of Pakistan, said that there was lack of convergence on the two issues of participation and the legally binding nature of the system.

The Chair of the Special Session of the Committee on Trade and Development, Ambassador Faizel Ismail of South Africa, said that it was still possible to obtain agreement on the five LDC Agreement-specific proposals on special and differential treatment (SDT). There was however disagreement in relation to the 38 category-II proposals that are in the 88 Agreement-specific proposals on SDT. There is disagreement on how to deal with this, with some members seeking to have them taken up in the Special Session of the CTD while others said that they could not be negotiated in isolation and that they belong in the negotiating groups.

Many countries also spoke at the TNC meeting.

Mexico said that the problem is that "we do not have agreement on objectives for Hong Kong and after Hong Kong and that we do not have much time remaining."

The Philippines, speaking on behalf of the G33, said that it was deeply concerned with the idea of presenting to Ministers at Hong Kong a text that reflects the elements where convergence currently exists, according to the Chair's own assessment. It must be stressed that any opening shown by members to achieve convergence on certain areas is conditional on other issues in the negotiations being solved in a satisfactory manner. This is particularly true for special and differential treatment and development issues which are of paramount importance to the G33.

The Philippines added that it would be tremendously difficult for the Group to join any consensus decisions coming out of Hong Kong, if such decisions are matched with mere acknowledgement of the need for flexibility that contribute little to advancing concrete solutions to the underlying concerns of developing countries.

The G33 said that a minimum package on special and differential treatment (SDT) in agriculture at Hong Kong should include provisions on Special Products (SPs) related to both designation and treatment which need to be addressed in tandem; provisions on Special Safeguard Mechanism (SSM) reflecting that the mechanism will be effective and responsive to the needs of developing countries, build on existing instruments, and allow developing countries to address situations of increased imports and falling prices.

Furthermore, there should be guarantees that the structure of the tiered formula for tariff reduction have in-built the appropriate SDT elements through, among others, adequate proportionality in the level of reduction commitments; and exemption of developing countries from commitments to reduce de minimis support, either on a stand-alone basis or as part of reduction of overall trade-distorting support.

Egypt, speaking on behalf of the African Group, said that African countries in particular stand to lose most from any possible slowdowns or deadlocks towards the conclusion of the round. The Group expressed disappointment about the draft Ministerial Declaration, as it largely disregards in many of its areas the interests and concerns of the African Group repeatedly conveyed as contained in the Cairo Declaration, the Arusha Declaration, the letter directed from the Group to the Chairpersons of the TNC and the General Council on 8 November, and several statements made on behalf of the Group before the TNC throughout recent months.

The Group believed that the structure and format of the draft contain questionable issues of fundamental importance. It said that it was very uncomfortable with the idea of annexing texts that are not consensually agreed upon, and in some cases not even negotiated. "We strongly believe that an appropriate annex to a Ministerial Declaration should contain the comprehensive compilation of full modalities for the different negotiating tracks of the round."

"If convergence is not to be reached, we should not opt for an alternative that aims at artificially improving the image of the multilateral trading system at the expense of the fundamental interests and long-term developmental concerns of developing countries."

"Instead, and in a truly development oriented round, we believe that development should be put forward rather than being kept hostage to progress in other tracks. In this context, we propose that the development elements of the document (Job 05/298) be brought into the Draft Declaration."

Developmental concerns should be given a special status within the single undertaking so that developing countries can assess the potential gains and acquire the necessary guarantees as early as possible to be able to continue the negotiations on equal footing.

Egypt said that the main elements of the Draft Declaration that would be satisfactory to the African Group are that first, all the annexes, and their related references in the main text, should be excluded.

In the main text, on special and differential treatment, a language reflecting the African proposal submitted on 23 November (JOB 05/305) should replace the existing provisions of paragraphs 17 to 20. The issue of the outstanding SDT proposals can only be resolved if the proposals are brought back under the CTD, rather than being scattered across working groups and negotiating bodies.

As regards agriculture, on export competition, the text must decide upon the elimination of all forms of export subsidies on agricultural products by 2010. On domestic support, some clear language should be provided on the tightening of the criteria for the Green Box and Blue Boxes, as well as the development of disciplines to prevent box shifting with the elimination of the de minimis support for developed countries.

On market access, Egypt said, the operationalization of the principle of proportionality in the reduction of tariffs is a necessary condition for any agreed text. The text should also provide clear guidance on the establishment of appropriate modalities for the designation and treatment of SPs and SSM, longstanding preferences, issues relating to Net Food Importing Developing Countries and LDCs as with other elements of the negotiation. It must also exempt LDCs from any reduction commitments in agriculture.

On cotton, Egypt said that it is about time to finalize a text that specifically refers to the elimination of export subsidies on cotton by the end of this year and the reduction of domestic support measures that distort trade on cotton, within a clear and reasonable time frame.

On NAMA, Egypt said that the Declaration must contain an agreement on elements of an appropriate formula that takes into account developmental, financial and trade needs and concerns of developing countries based on the principle of less than full reciprocity and special and differential treatment. Such an agreement should not link the provisions on flexibilities for developing countries to other elements including the formula and less than full reciprocity. Furthermore, the conditions stated in Para 6 of the August 2004 Decision's Annex B should be relaxed to give the concerned developing countries adequate flexibilities to pursue their development and industrial objectives.

On services, the African Group said that the modalities contained in Annex C do not only go far beyond the objective of progressively higher level of liberalization, but would also increase the current imbalance in the services negotiations and direct it to a perilous path.

In this context, Egypt said that the African Group in addition to many other developing countries, have repeatedly cautioned against having a draft Ministerial Declaration that would contain a prescriptive language on multilateral qualitative objectives and plurilateral negotiations, as stated in Annex C. This would clearly impinge on the progressive nature of the GATS and its Negotiating Guidelines as well as the flexibilities provided for developing countries.

Mauritius (on behalf of the ACP) recalled that at the last meeting of the Heads of Delegation, it had serious concerns on the reports made by the Chairs on their own responsibility and which are being annexed to the Ministerial Declaration. It considered that it is not appropriate to annex the Chairman's reports for agriculture and NAMA, to the draft Ministerial Declaration.

On agriculture, the notion of 'balance' should be incorporated in paragraph 3. Indeed, it is critical that any agreement reached at or after Hong Kong is equally balanced in terms of issues of vital importance for the ACP, in particular, the issue of longstanding preferences. The ACP will agree to a decision on agriculture if the issue of erosion of preferences is fully and effectively addressed in the Ministerial Declaration.

For the ACP, the Ministerial text should also be balanced in terms of the tariff reduction formula, the issue of proportionality, thresholds for the bands, selection and treatment of sensitive products, special products, SSM and issues relating to Net Food Importing Developing Countries and LDCs.

On NAMA, Mauritius expressed reservations on paragraph 34 and 35 of the Chairman's report. Limiting the NAMA objective for Hong Kong to the three elements - the formula, paragraph 8 flexibilities and unbound tariffs - means that the crucial issue of preference erosion is being left aside.

Nepal (on behalf of the LDCs) made an intervention similar to that of the African Group.

Brazil, represented by Ambassador Clodoaldo Hugueney, said that in substantive terms, the result is disappointing. The ministerial draft is "an insufficient basis for completing the round by next year." The problem is not the process, but lack of political will. No process can make up for this.

Brazil also referred to the paper on "Reclaiming development" that was issued by nine developing countries at the CTD. The paper stressed that a development round requires the removal of trade distortions in trade that inhibit developing countries' exports.

"It also requires an understanding of the defensive concerns of developing countries in areas like TRIMS, TRIPS and NAMA," said Brazil. "There is need for increased policy space to promote development; there is need to reduce policy space for subsidies that displace exports from and domestic production in developing countries. Contributions in agriculture, NAMA and services must be commensurate with the level of development."

These ideas were agreed to in Doha but have gone astray, and the proposals by some developed countries "turn the logic of the Round upside down", added Brazil. "They offer 'water' cuts in domestic support, minimal cuts in agricultural and industrial tariffs, few or no new commitments in services and very little in SDT. In exchange they ask for disproportionate reductions in developing country tariffs, new commitments in services that are completely at odds with the mandate and structure of the GATS. No wonder that the prospects for Hong Kong are what they are."

On agriculture, Brazil said the G20 proposal remains on the table and it also supports the position of the four African cotton-producing countries. On NAMA, lack of convergence is in part a reflection of the situation in agriculture but there are also obstacles within the NAMA negotiations.

On NAMA, Brazil said the Chair's report gives an overview of attempts by some members to deviate from the Doha mandate and July framework. "The debate on flexibilities is illustrative," said Brazil. Instead of building on what was agreed in para 8 of the July framework on NAMA, attempts were made to turn that paragraph into the sole repository of provisions aimed at developing countries.

"This SDT provision is likely to have a much smaller impact than even the least generous proposals on sensitive products in agriculture," said Brazil. "Yet some Members insist that this provision somehow neutralizes the unambiguous mandate for less than full reciprocity in reduction commitments. Adding insult to injury, developed countries have offered to make only minimal cuts to their own tariffs."

As an example, said Brazil, if the developed countries applied a Swiss 10 coefficient and Brazil applied Swiss 30, the average cut for all tariff lines in the EC and US would be smaller than the average cut for the 10% of Brazilian tariff lines 'protected' under para 8. For the remaining 90% of Brazil's tariff lines, the average cut would be roughly twice as large as that of the EC and US.

The first condition for progress is therefore that we respect the mandate, added Brazil. In the short term, to make progress, it would be best to remove the brackets in paragraph 8. Further advance can be made towards the final structure of the formula by reiterating the less than full reciprocity principle.

On services, Brazil said the draft represents a delicate balance. Putting aside the reference to numerical targets was wise as it proved to be the most contentious issue, with firm opposition from a large number of developing countries. Brazil shared some of the concerns of other developing countries on Annex C and was prepared to improve it. It could work with the text provided no attempt is made to reintroduce numerical targets.

Brazil said that there is a lack of homogeneity with respect to various elements of the draft Ministerial text. The agriculture and NAMA reports should be forwarded as background documents. The other annexes, except for trade facilitation, do not constitute consensus texts and remain under the Chairs' responsibility.

Brazil suggested that if there are no objections to these documents, they should be retained as annexes to the Declaration or their content be incorporated in the main body of the Declaration. "If the text of any annex is objected to in whole or in part, it could be retained in brackets and give rise to negotiations in Hong Kong."

Brazil also asked for clarity about the organization of the Hong Kong meeting. The procedures should be announced in advance and discussed by members.

China supported the statements of the G33 and the African Group on the point that LDCs should have duty-free and quota-free market access. China also wants the TRIPS and health issue resolved. It was keen to see something more on the newly acceded members.

India said that the development dimension needs to be brought back to the center of the negotiations and that there was also a need to ensure inclusiveness and transparency as members move to Hong Kong and at the Ministerial itself. It supported the Philippine statement on behalf of the G33.

India said that it will be extremely difficult for any agreement to be reached if the development dimension was not there. On services, India would like to see a balanced outcome. On NAMA, it wanted to see less than full reciprocity and special and differential treatment. There must also be more reflection in the text on the relationship between the TRIPS and the CBD.

Switzerland, speaking for itself, said that the draft text is a fair reflection of the level of progress. The annexes on services, trade facilitation and rules have partially redressed the imbalances that were in the July 2004 framework.

Speaking for the G10, Switzerland said that agriculture is the engine of the negotiations, but progress needs to be made across all modes if the engine is to function properly. Work is needed on the number of bands in domestic support and market access in agriculture as well as parallelism in export competition.

The US said that the draft text reflects the level of progress. "It is important to use Hong Kong as a fleeting opportunity to work our way out of the stagnant situation we find ourselves in now." It urged members to focus on the key issues, and that agriculture and NAMA are the areas that need the most short-term attention, as they need to be advanced. Parameters are also needed on the tariff cutting formula, on reduction and elimination of trade distorting domestic support and on export competition.

On NAMA, the US said that it was important to devote energy to finding those elements of the formula that could be agreed. On services, the US said that there is need to intensify discussions and the chair's text is a platform to do future work.

Australia, on behalf of the Cairns Group, said that it was committed to a bottom up approach. Hong Kong is not the place to review progress but is an opportunity to build on what has been done and improve the long-term outlook for global agricultural trade.

 


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