TWN Info Service on WTO and Trade Issues (Apr06/8)

9 April 2006

No easy road to WTO's end-April deadline

The WTO's Director General Pascal Lamy is travelling over the world visiting key capitals in an effort to get countries to agree to some deal that would come together at the end of April.

The mechanism for this is a Ministerial Green Room of some 30 members to be held at the WTO HQ in Geneva 29 April to 5 May.

But the road to end-April is bumpy. The meeting in Rio of the Ministers of Brazil, EU and US did not produce a breakthrough. Lamy's visit to India was interesting, with protests by farmers and a seeming rebuff by the Indian Minister to the Director General's insistence that India make an offer to cut its industrial tariffs at the applied rate. In the US, an important congressman said that there was no hope for the Doha Round due to irreconcilable differences.

Below is a report on the plans for end-April and Lamy's visit to India.

With best wishes
Martin Khor


No easy road to WTO's end-April deadline

By Martin Khor (TWN), Geneva, 6 April 2006

The WTO's Director General Pascal Lamy by all accounts is sticking to the end-April deadline for reaching agreement on modalities for agriculture and non-agriculture market access (NAMA).

Lamy was greeted with some skepticism when he first announced his determination not to move the deadline (set by the Hong Kong Ministerial) to July, which according to wide belief is the "real deadline" for finalizing the modalities, if the Doha negotiations are to end on time in December.

During his visit to India this week, Lamy stuck to April as the "moment of truth" for the Round. However, new hurdles have come up in recent days to make the prospect of an end-April success more distant.

At a "Green Room" meeting of several Ambassadors before his India trip, Lamy confirmed that he intended to convene a meeting of some 30 Ministers in Geneva within the period 29 April to 5 May.

The "mini-Ministerial Super Green Room" may not aim to resolve all outstanding problems, but could be used to reach agreement on the sticky market-access issues in agriculture and NAMA of tariff-cutting formulae, numbers and coefficients as well as the extent of flexibilities (for exceptions from the formula reductions). If this succeeds, then other issues can be resolved later.

But it is doubtful if this would be acceptable to many WTO members who have been insisting that their own serious concerns be settled at the same time as the formulae. These include treatment of special products and special safeguard mechanism for developing countries in agriculture, treatment of small economies in NAMA, and the problems facing preference receiving countries whose preference margins would be affected by rapid liberalization.

"The end-April plan is taking shape as a repeat of the July package of 2004," said a developing country Ambassador. "Lamy hopes that 30 Ministers in a Green Room will reach a deal and that it would then be formalized through a General Council meeting."

This is premised on the belief that the majority of Members who are not invited to the Super Green Room will quietly accept whatever comes out of it. But at the Trade Negotiations Committee meeting last month, the influential Group of 33 (representing over 40 developing countries) had issued a compliant against the exclusive decision-making process and warned that this affected legitimacy and may cause difficulties for the Round's success.

There is the other big issue of whether a deal is possible, even within a Green Room meeting of a few Ministers.

Lamy had a tough time in India. His message in Delhi, that India, Brazil and South Africa must relent on industrial tariffs in order for the US and EU to move on agriculture did not go down well.

This is especially since he bluntly added that India would have to cut its applied industrial tariffs. This is similar to the demand being made by the EU, US, Japan and other developed countries, a demand that has been rebuffed by the developing countries who say that negotiations must stick to reduction of bound (and not applied) rates, which has been the traditional practice of GATT and WTO, and which is in the mandate of the July 2004 framework on NAMA.

The massive distortions in agriculture have been a legacy of the success of the rich counties in having agriculture exempted from the GATT rules for over four decades, and of the loopholes in the Agreement on Agriculture which allow continuance of high protection in the North.

The developing countries have already paid heavily and unfairly in the Uruguay Round (by accepting the TRIPS, TRIMS and services agreement and by agreeing to give up quantitative restrictions and to cut their own tariffs and curb their subsidies in agriculture) for this "concession" of the North in agriculture.

And now they are being asked by developed countries to pay very heavily yet again (with drastic tariff cuts in NAMA, more tariff reductions in agriculture, and new negotiating methods to pressurize them to open up in services), in exchange for the developed countries to consider liberalizing their agriculture, which they should have done many decades ago without all this "payment" in the first place.

Lamy, by asking India to cut not its bound but its applied tariffs in industrial products, is taking on the line of the rich nations. He is implying that India (and thus other developing countries as well) should accept a low coefficient in the Swiss formula in NAMA, which in the case of India would lead it to cut industrial tariffs by 50-70 per cent or more.

In exchange for this, the EU and US would be asked to cut their "bound" agricultural subsidies and tariffs substantially. But what this means in real terms (even after the numbers are put in) is uncertain, because so many loopholes in the agriculture agreement would remain that would allow new barriers to creatively come up (such as shuffling domestic subsidies to permitted categories like the "Green Box") to block market access.

No wonder Lamy received a cool official reception and an unfriendly reception from farmers and NGOs in Delhi.

Indian Commerce Minister Kamal Nath, responding to Lamy's lecture on the need for India to cut applied rates, said that since the WTO negotiations are taking place on bound rates, India does not want to shift the focus to actual or applied rates, according to a Financial Express report.

"Since the developed world took its time in developing their industries before opening up, India cannot be expected to act in haste. Our industries need similar flexibilities", said Nath. "We cannot compromise the interests of our small-scale sector and infant industries."

While Lamy warned the "moment of truth" would come in the next few weeks, Nath in contrast said "while timeless and deadlines are important, this cannot be at the cost of the development content of the Doha Round."

Lamy faced less polite criticism from farmers and civil society leaders at a forum organized by UNCTAD and the Commerce Ministry. A protesting youth leader got up at the meeting and threw black badges and papers towards Lamy who was on the dais with an UNCTAD official and the Commerce Ministry secretary, according to a press report.

Representatives of farmers' organizations and Devinder Sharma, head of the Food Security Forum, told Lamy that the WTO had failed to get the developed countries to reduce even a penny of their agricultural subsidy. Instead, the WTO is forcing the developing countries to reduce their tariffs, giving greater access for the West's agri-corporations.

With the removal of quantitative restrictions as a result of the WTO's agriculture agreement, the Indian farmers are further pushed into debt as agricultural imports increased, said the civil society leaders.

They accused developed countries of wanting to industrialise Indian agriculture, thereby reducing small subsistence farmers to become farm labour on their own land.

Among the demands voiced at the meeting with Lamy was for India to be allowed to re-impose quantitative restrictions to check food imports, and for agriculture to be taken out of the purview of the WTO.

Lamy admitted the agricultural subsidies of the developed countries are unfair and have to be changed if the WTO talks are to succeed, said the news reports.

Over 500 farmers protested against Lamy's visit and blocked his way to a conference hall. The Indian Coordination Committee of Farmers' Movement issued a statement saying Lamy's visit to Brazil and India was "an indicator he wants to leaders of the G20, who have shown willingness to further their own interests without regard to the interests of other countries both in Geneva in July 2004 and at Hong Kong last December, to be ready to play the same game during the negotiations in late April."

The statement criticized the present informal process of negotiations, under Lamy's supervision, which excludes a large majority of member states in WTO decision-making, which has "just become a secretive, closed-door activity attempting to achieve progress on various contentious issues in the name of all the 150 member states."

"In the last 11 years of the WTO regime, the Indian farmers and farming have suffered a lot," said the statement. "During this period more than 50,000 farmers have committed suicide because of WTO induced policies of our government."

The farmers' leaders said the 60 million farmers are being forced to compete with highly subsidized, big and corporate farmers of the West. "With the removal of quantitative restrictions, Indian farmers have been exposed to cheap subsidized agricultural imports, which has devastated the rural economy, forcing farmers to leave agriculture. Instead of helping poor farmers of the Third World, the WTO is biased for the rich farmers and corporations of the developed countries."

Lamy also met industry leaders at a meeting with the Federation of Indian Chambers of Commerce and Industry (FICCI). In a letter to Lamy, the FICCI president Saroj Poddar urged the WTO to keep developing countries' interests in mind when framing rules on tariff reduction.

According to FICCI, the flexibilities provisions (in NAMA) are important to address concerns of small-scale industries and sensitive sectors, and there should be no trade offs between flexibilities and "less than full reciprocity" in tariff commitments.

FICCI added that the attempt by developed countries to change the basis of NAMA negotiations from bound duty to applied rate is a matter of concern. "This is totally unacceptable to us because in the same July framework, members agreed that tariff reduction commence from bound rates. We need to stick to that."

With regard to demands from a few members that India give greater market access, Poddar told Lamy that India already provided "real market access", with peak customs duty having declined over the years to 12.5%, resulting in a surge of imports. Indian industry wanted tariff reduction to be done in a phased manner to allow industry necessary time and space for adjustment.

It is not only in India where there is skepticism about whether Lamy's push to get quick results would succeed.

The US Congressman, Bill Thomas, who is chair of the House Ways and Means Committee, said last Monday in Washington that opposition to the WTO's trade agenda was mounting and may be too strong to overcome.

He said the Doha Round was beset by obstacles. "The US and EU have irreconcilable differences and when you have irreconcilable differences, the best thing you can do is to call it off." He said the US should not put most of its resources on the Doha Round, but shift focus instead to bilateral agreements. "The music has stopped, and we need to get off the merry-go-round".

US Trade Representative Rob Portman is not upbeat either, saying on Tuesday he was pessimistic the 30 April deadline would be met. Portman said he was discouraged by the lack of progress at last week's meeting he had in Rio de Janeiro with the EU's Trade Commissioner and Brazil's trade minister. On Thomas's call to shift attention from the WTO to bilateral talks, Portman said "We can do both."