TWN Info Service on WTO and Trade Issues (Mar06/13)

20 March 2006


The lack of a breakthrough at the London meeting of the "Group of 6" Ministers on 10-11 March does not quite spell the end of hopes of a final deal by December this year. But it shows up the persistence of a deadlock which is proving extremely difficult to resolve.

Meanwhile, time runs on, with the deadline of the end of April for concluding the full modalities for agriculture and non agricultural market access (NAMA) approaching ever nearer.

Only the most optimistic can now believe that this deadline can be attained. For it to have had a chance would have required very significant progress at the London talks. Even if that had happened, other WTO members would have to be won over, and that is no easy task.

Below is an article on the implications of the current WTO talks in light of the G6 London talks.

With best wishes
Martin Khor



By Martin Khor (TWN), 13 March 2006

The lack of a breakthrough at the London meeting of the "Group of 6" Ministers last weekend does not quite spell disaster for the Doha negotiations nor the end of hopes that a final deal can be attained before the US President's fast track authority runs out.

But it indicates the persistence of a deadlock on some or several issues, which is proving extremely difficult to resolve. Meanwhile, time runs on, with the deadline of the end of April for concluding the full modalities for agriculture and non agricultural market access (NAMA) approaching ever nearer.

Only the most optimistic can now believe that this deadline can be attained. For it to have had a chance would have required very significant progress at the London talks. Even if that had happened, it would require time and effort for the G6 (the US, EU, Brazil, India, Australia, and Japan) to convince all the other WTO members to go along with whatever they had agreed to.

And that is not something that can be assumed to be easy. Most WTO members are in the dark about the negotiations going on among the G6 or the "G6 plus 4", and many are unhappy about the lack of information as well as of their participation in decision-making.

From various reports, it appears that the London talks could not make progress because the EU and the US were unable to make any meaningful new offers in agriculture, yet they and other developed countries demanded that the developing countries had to agree to very steep cuts in industrial tariffs.

The EU and the US continued to go on the offensive in NAMA, certainly as a tactic to ward off the demands for them to do more in agriculture, and probably also because they (and others like Japan) really do want significant cuts in applied tariffs in order to open up the markets not only of Brazil and India but many other developing countries as well.

The developed countries have been demanding that developing countries take on a coefficient of 10 or at most 15 for NAMA. For a developing country with an average bound tariff of 30%, a 15 coefficient requires it to slash this to 10%, thus indicating a reduction rate of 67%.

In contrast, a developed country with an average bound tariff of 5% would only have to cut its tariff by 33% to 3.3%, if a 10 coefficient is applied.

Thus, by asking for "dual coefficients" of 10 (for developed countries) and 15 (for developing countries), the developed countries are obviously disrespecting the principle of "less than full reciprocity", which is widely understood to mean, at the least, that developing countries be allowed to undertake a lower degree of tariff-reduction commitments than developed countries.

On top of this, the developed countries are arguing against the right of developing countries to fully make use of the already small "flexibilities" in the NAMA framework, such as exempting 5% of products from formula cuts or from being bound. This would steal the "special and differential treatment" from developing countries - in what is supposed to be a "Development Round."

Reports on the London talks indicate that the EU and US, joined by the other developed countries, stuck to this aggressive line in NAMA, which might have caused the Brazilian and Indian Ministers to feel outraged at the injustice of the negotiating situation.

Not only were the rich nations balking at liberalizing their agriculture (which they should have done long ago), but here they were demanding their pound of flesh from the developing countries in NAMA.

It is thus easy to understand why Celso Amorim, the Brazilian Minister, repeatedly stressed the critical need for upholding the principle of "proportionality", when he spoke at the London School of Economics and at press briefings shortly before the G6 meeting began.

Proportionality in principle means that the developed countries have to make deeper commitments to open up, and developing countries are expected to do less. In operational terms, as defined by some developing countries in the current negotiations, they will undertake to cut they tariffs by a fraction

(two thirds or less) the rate of cut of the developed countries.

This "proportionality" is also a way to push the developed countries, especially the EU, to offer higher tariff cuts in agriculture: "If you want us to do something in NAMA, you have got to do a lot better in agriculture."

In actual fact, this linking of Northern commitment in agriculture to Southern commitment in NAMA is already a big concession that the major developing countries have made.

The developed countries have already enjoyed exemptions from GATT rules for agriculture (their weak sector) for many decades (constituting a major special and differential treatment for them). Then in the Uruguay Round they had agreed to liberalise their agriculture in exchange for the developing countries accepting TRIPS, services and TRIMS agreements in the multilateral trading system.

Since in reality the developed countries exploited the loopholes in the Agreement in Agriculture and did not liberalise their agriculture (as subsidies and tariffs were still extremely high), the developing countries paid heavily in vain during the last Round. Thus, in these Doha talks, the developed countries should now effect real cuts in subsidies and tariffs without asking the developing countries to pay yet again.

But at London, the same demand was being made again by the EU and US Ministers, that India and Brazil (and presumably other developing countries too) have to cut not only their bound industrial tariffs but their applied rates significantly too, if they want some progress in agriculture.

A report by the Press Trust of India (PTI) said that Indian Commerce Minister Kamal Nath told the US and EU that the Doha talks should be wound up if concerns of the developing countries in agriculture and NAMA were not taken on board.

"We might as well wind up the talks and go home if the concerns of developing countries in the area of market access are not met," he reportedly said at the G6 meeting. Nath had told the developed countries to make their level of ambition in agriculture clear, and said developing countries would be willing to do two-thirds of that in industrial goods.

"Whatever developed countries were willing to do in agriculture, developing countries were willing to match in NAMA but here also developed countries must do 10% more," he said, according to PTI. He stressed that the principles of "less than full reciprocity" clearly meant that developed countries would offer greater percentage reductions in tariff than developing countries in average terms.

Nath added that the Hong Kong Ministerial had agreed that domestic support cuts (by the rich countries) must be effective. "For me, this is the central barometer of this Round. Otherwise any market access commitments by developing countries cannot be justified."

The London meeting discussed the results of simulations of the application of various coefficients in NAMA and percentage cuts in agriculture on the tariffs and markets of ten countries (i. e. the G6 plus four other countries). It is not known what conclusions, if any, were drawn on the simulations.

It can be expected that Brazil and India would have used the data to push forward their points on proportionality and less than full reciprocity.

The developed countries would not appear to have been moved by that. The US Trade Representative Rob Portman is reported to have said that "less than full reciprocity" remains a vague concept in the negotiations and the WTO Director-General apparently said the terms means different things to different members.

Both Amorim and Nath complained after the meeting about the unfairness of the developed countries insisting on a coefficient of 15 for developing countries.

On the other hand, the EU was not ready in London to move on agriculture. It reportedly would not improve its offer on market access, either on the thresholds for tariff bands, on tariff cuts, or on the number of sensitive products (which would enjoy less than formula cuts).

Another significant question emerging from the London meeting is whether the WTO's members are willing to consider lowering the "level of ambition" in order to allow the negotiations to conclude in time.

For the time being, no one among the G6 is openly posing the question. And the Brazilian Minister, for one, is adamant that for the Round to have any meaning at all, it must yield real results in market opening in agriculture. This means that the level of ambition must be maintained.

"If we don't have an ambitious result, we won't have a result at all," Amorim said at the end of the London talks.

He also indicated that to have an ambitious result, the "incremental approach" [in which a little progress is aimed for on various issues] would not be enough.

Brazil seems to believe that only a big push at the highest political level can give the negotiations the breakthrough it requires. Brazilian President Luiz Inacio Lula da Silva and British Prime Minister Tony Blair met in London, during the period of the talks, and tried again to get a Summit going.

They issued a joint statement calling for a meeting of heads of government to discuss the WTO talks. "A meeting of leaders will be crucial to orchestrate this breakthrough. Current offers fall well short of the deal we want."

However, there has not been any enthusiastic response to their call, which had been first made weeks ago. As of now, there is not much likelihood of a political summit to save the Round.

As for the G6 Ministers, apparently no firm date was fixed for their next meeting, but it is expected to take place sometime in April.

As it is unlikely that "full modalities" for agriculture and NAMA will be settled by the end of April, the deadline set in Hong Kong, the WTO members will eventually have to agree on what can realistically be achieved by that date, and what new deadline to set for the full modalities.