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TWN Info Service on WTO and Trade Issues (Dec05/08)

6 December 2005
 

WTO General Council agrees to put services text for Hong Kong in square brackets


The WTO's General Council agreed to show that there is no agreement on the controversial Annex on services in the draft Ministerial text to be sent to the WTO's Hong Kong Ministerial conference to be held on 13-18 December.

The significance of this is that the Hong Kong Ministerial will have to negotiate how to treat the entire Annex C on services. This will be one of the most contentious, if not the most contentious, of the issues at the Ministerial.

The developed countries wanted the draft to be retained, which would have committed the Ministers to accepting Annex C as a whole. However, many of the developing countries argued that Annex C was drafted not by the members but only by the Chair of the services negotiations (Ambassador Fernando de Mateo of Mexico) and that it contains several commitments (some of them binding) that had not been agreed to by the WTO members.

The countries wanted a clear indication that the Annex is not an agreed text, and that it should either be opened for negotiations in Hong Kong or be dropped altogether.

The decision to place square brackets around the reference to Annex C was finally taken at the end of the General Council's meeting at 10.00p. m. on Friday (2 December), after a day in which many developing countries and their groupings voiced their opposition to the services text in Annex C, and indicated they would not agree to adopt the overall draft unless it indicates that there is no agreement on Annex C.

The following is a report on the General Council meeting, during which many countries gave their views on the revised draft text for the Hong Kong Ministerial.

With best wishes
Martin Khor
TWN

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WTO General Council agrees to put services text in square brackets

By Martin Khor (TWN), Geneva, 5 December 2005

The WTO's General Council agreed to show that there is no agreement on the controversial Annex on services in the draft Ministerial text to be sent to the WTO's Hong Kong Ministerial conference to be held on 13-18 December.

The significance of this is that the Hong Kong Ministerial will have to negotiate how to treat the entire Annex C on services. This will be one of the most contentious, if not the most contentious, of the issues at the Ministerial.

The developed countries wanted the draft to be retained, which would have committed the Ministers to accepting Annex C as a whole. However, many of the developing countries argued that Annex C was drafted not by the members but only by the Chair of the services negotiations (Ambassador Fernando de Mateo of Mexico) and that it contains several commitments (some of them binding) that had not been agreed to by the WTO members.

The countries wanted a clear indication that the Annex is not an agreed text, and that it should either be opened for negotiations in Hong Kong or be dropped altogether.

The decision to place square brackets around the reference to Annex C was finally taken at the end of the General Council's meeting at 10.00p. m. on Friday (2 December), after a day in which many developing countries and their groupings voiced their opposition to the services text in Annex C, and indicated they would not agree to adopt the overall draft unless it indicates that there is no agreement on Annex C.

Following a flurry of informal consultations in the corridors of the meeting, the Council agreed to the proposal by the Chairperson, Ambassador Amina Chawahir Mohamed, that square brackets be placed around the reference to Annex C in the services section of the main body of the draft.

Paragraph 21 of the Ministerial draft will now read: "We are determined to intensify the negotiations in accordance with the above principles [and the Objectives, Approaches and Timelines set out in Annex C to this document] with a view to expanding the sectoral and modal coverage of commitments and improving their quality. In this regard, particular attention will be given to sectors and modes of supply of export interest to developing countries."

The principles referred to are contained in para 19 of the same document. They are the objectives and principles stipulated in the GATS, the Doha Ministerial Declaration, the Guidelines and Procedures for the services negotiations (21 March 2001), the services modalities for LDCs (3 Sept 2003) and Annex C of the August 2004 framework.

During the intense informal consultations, the EU wanted to start the square brackets at the words "in accordance with", while several developing countries wanted to start the square brackets with "and the Objectives" and end the brackets with "improving their quality." The compromise reached was reflected in the final outcome.

The battle over services was the main feature of the Council meeting. The rest of the draft (some of which also already contains brackets denoting lack of agreement) was accepted as a basis for text to be sent to Hong Kong.

Due to the broad opposition to the treatment of services in the revised draft (which was issued late on 1 December), the Council was faced with the choice of retaining the entire draft and sending it to Hong Kong unchanged in the names of the General Council chair and the Director General Pascal Lamy, "under their own responsibility", or changing the draft by indicating the lack of agreement on services (through brackets) and sending the changed draft to Hong Kong as one that was adopted by the General Council.

With the brackets placed in para 21, the Council members agreed that the draft could be sent to Hong Kong as a Council document. It was not directly announced, but assumed, that a revised draft, with the brackets in para 21, will be issued for Hong Kong.

At the meeting, the ACP Group, represented by Mauritius, said that the Group was concerned about the status of Annex C. While it is spelt out in the case of agriculture and NAMA that the Chairs' reports are under their own responsibility, this is not the case for the services annex, said the ACP.

Although the cover note says the annexes except for trade facilitation are not agreed upon, yet para 21 implicitly confers an accepted status to Annex C. This should be clarified, otherwise the Group requested that para 21 should be bracketed.

The Group said it had raised its concerns on many issues and at the last TNC meeting it drew attention to the shortcomings of the Ministerial draft, but "unfortunately none of these comments have found their way in your revised draft. We are concerned about this."

The Group criticized the text on agriculture for not giving any indication on how it would treat the issue of preference erosion. On NAMA, the Group underlined the importance of having a tariff reduction approach and appropriate levels of flexibilities in line with the range of development flexibilities of the ACP members. It was also seeking a trade solution to preference erosion but the draft does not indicate how it would be dealt with.

It also deeply regretted that on cotton no solution has yet been found, and stressed the need to have concrete results on this in Hong Kong.

The African Group, represented by Egypt, expressed concern with the structure of the revised draft, particularly in relation to the attachment of the Annexes. These reports with their non-agreed texts should be treated as background documents, and Ministers can then decide whether to annex any of them to their Declaration, said the Group.

The African Group expressed its continuing disappointment with many areas of the revised draft. It said that the language used to reflect the main demands and concerns of developing members, particularly in the S&D related provisions, is insufficient.

For example, in the agriculture and NAMA sections, the newly introduced language on S&D remains vague and are not treated at the same level of specificity. This is a clear manifestation of our major concern that there is a tendency to leave S&D behind as we try to move forward, said the African Group.

"In addition, we re-emphasise our strong position, shared by the majority of developing countries, that the provisions on services in para 21 do not reflect any degree of consensus. We wonder why the revised draft has kept silent on that and did not clearly reflect the non-consensus nature of those provisions, particularly Annex C. We cannot overstate the importance of this issue for the African Group."

The Group suggested that given the current status of the text, it should be brought to Hong Kong on the responsibility of the Chairs of the General Council and the TNC.

Rwanda stated that para 21 on services will have to be reformulated as it gives the impression the annex on services is agreed text. It expressed disappointment that there is hardly any progress on development issues. There is need to provide more information on development aspects, for example in the sections on agriculture and NAMA.

Rwanda regretted there is hardly any progress to show in the S&D proposals relating to LDCs, and urged members to exercise more flexibility so as to give LDCs a meaningful package. The proposals as they stand currently would not achieve this objective.

Jamaica said that the annex C on services was not agreed to and it was not able to support a transmission of the text to Hong Kong by the General Council if this was not made clear, for instance through brackets as suggested by Mauritius. It added that the imbalances in the draft should be recognized, as development concerns were not addressed.

The draft should thus be taken only as a floor on which Ministers should build. The discussion in Hong Kong should focus on the development aspects to redress the imbalance in the draft, and the final outcome should reflect a higher level of the development dimension. Jamaica mentioned the following issues that especially need attention: special products, special safeguard mechanism, less than full reciprocity, development flexibilities, preference erosion, small economies, and development issues.

Venezuela noted that the draft's cover note stated that the draft does not purport to represent agreement overall, that in some areas it reflects "a lower level of convergence," and that text in all the annexes, except for Annex E on Trade facilitation, are not agreed text and are "presented on the responsibility of the respective Chairs."

Venezuela said that since the texts in these annexes are not agreed text, it is therefore misleading and erroneous to give the impression in the main part of the draft that the Ministers have agreed to these annexes.

Moreover, despite the common status of all annexes (except Annex E) which are all presented on the responsibility of the respective Chairs and are not agreed text, the draft treats the Annexes unequally.

In relation to the section on agriculture, paragraph 4 of the draft ministerial declaration merely "takes note of the report by the Chairman of the Special Session on his own responsibility."

Unfortunately, in other paragraphs in relation to NAMA and services, the language erroneously transforms these annexes from the individual chair's reports into collective agreed basis for negotiations.

In relation to NAMA, paragraph 13 of the draft ministerial declaration, attempts to operationalise and takes onboard a specific observation made in the Chair's report, which is an un-negotiated text. This is inconsistent and more seriously it prejudices the positions of many members who have expressed disagreements.

In relation to services, said Venezuela, many delegations have repeatedly objected to the current Annex C. It pointed out the objections the countries have stated: for example, paragraph 1 on modal objectives is far too prescriptive and detailed and paragraph 7 on plurilateral negotiations obliges members to participate in such negotiations. These proposals, as many delegations have pointed out, are inconsistent with GATS and the Negotiating Guideline and undermine the flexibilities contained in them.

Consequently, many delegations have proposed to have these paragraphs redrafted to reflect their concerns. However, this has not taken place, and as such Annex C is not an agreed basis for negotiations, nor should it be mistaken to be so. This must be conveyed to the Ministers in the clearest way.

Venezuela proposed that para 21 of the body of the draft be amended to reflect that Annex C was drafted only by the Chair of the services negotiations and that there is no consensus on it.

It also proposed alternative language for para 13 of the body of the text on NAMA. It then reaffirmed that S&D and less than full reciprocity are central principles and independent from other elements. The flexibilities in paragraph 8 (of the August 2004 framework on NAMA) are not enough to deal with the sensitive and/or strategic sectors of the developing countries, and even less do they reflect their needs.

Brazil said that, "on the substance, we have very little concrete results to present to Ministers. The main reason for this is a lack of political will on the part of major developed countries to live up to the Doha mandate. A 'development round' cannot be a round in which developing countries are asked to make disproportionate concessions in relation to what developed countries are prepared to do, especially in market access.

"Agriculture and development occupy a central position in these negotiations. The Round can only succeed if in these two areas the results lead to removal of barriers and distortions that restrict export growth in developing countries and increase possibilities for active policies to promote development."

Brazil supported a specific outcome in Hong Kong in cotton that takes care of the co-sponsors of the cotton initiative.

On the text, Brazil said it had several amendments but would refrain from stating them for now. The adoption of the draft (by the Council) would be facilitated if the paragraphs referring to the annexes, especially paragraph 21 on services, reflected more clearly the status of the annexes, as documents under the responsibility of the Chairs. With this one change, the draft could be approved.

India said the draft reflects realistically the limited convergence achieved by the membership so far. Its lack of balance and unevenness have been commented upon. For all these shortcomings, it approximates the best we can achieve at this stage and is a reasonable basis for negotiations in Hong Kong.

India added that the Ministerial will have to reach for maximum possible convergence in all areas, and any a priori prioritisation of the agenda may limit Ministerial flexibility and freedom. Close attention to developing countries' concerns remains an essential condition for success. India said political direction on the following issues will enhance confidence among developing countries:

* In agriculture, effective SDT and flexibility for developing countries based on proportionality, policy space through SPs and an effective SSM;

* In NAMA, an unambiguous acceptance of the standalone flexibilities in para 8 and agreement on numbers in brackets, and in the formula, full realisation of the less than full reciprocity mandate in reduction commitments.

* In services, clear direction forward while preserving the GATS flexibilities for developing countries; the draft has a delicate inter-modal balance.

* Concrete results for LDCs; reinvigorating negotiations on other SDT proposals; gains in cotton; addressing preference erosion; launching of negotiations on TRIPS/CBD relations.

The G33, represented by Indonesia, said it shared the disappointment that there was not much substance in the draft due to lack of convergence on most elements. It is urgent for a package of measures on an early harvest on the development dimension of the Round.

In this context, the G33 believes that it is imperative that any development package whether in the agriculture context or as a whole should deliver meaningful progress on SP and SSM. The G33 has made technically robust proposals on both these issues and would be more reassured by a positive decision on them than by promises of loans to address adjustment problems.

The G33 listed issues that would comprise a minimum package on S&D for it: provisions on SPs related to designation and treatment; provisions on SSM reflecting an effective and responsive mechanism to address situations of increased imports and falling prices; guarantees that the tiered formula for tariff reduction will have appropriate SDT elements through higher thresholds for developing countries and adequate proportionality in levels of reduction commitments; and exemption for developing countries from reduction of de minimis support.

 


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