TWN Info Service on WTO and Trade Issues (June06/26)

28 June 2006

"Sequencing the Ministerial" and Scenarios of the Stages it has to Clear

A list of issues that the WTO's Ministerial Green Room will focus on has been prepared by Pacal Lamy. It contains a sequence of how the selec list of issues is to be discussed.

There is still great uncertainity on the whole process. Many developing country delegations are worried that the Green Room discussion will not give priority to what they consider to be their important issues.

The report below gives a picture of the state of play as of 27 July, and on scenarios of the stages the negotiations may go through, with a possibility of faltering at each stage.

The challenge ultimately is for developing countries to be able to stand firm on their issues and positions, but whether the process itself will allow their voices to be heard and figure effectively is another key issue.

With best wishes
Martin Khor


Sequencing the WTO "Ministerial" and Scenarios of the Stages it has to Clear

Martin Khor (TWN): Geneva, 27 June 2006

A document listing issues to be tackled at the WTO "Mini-Ministerial" starting on 30 June, and the sequence in which the discussion will take place, was discussed in a Green Room meeting of about 30 Ambassadors with WTO Director-General Pascal Lamy on Tuesday 27 June morning.

The list and sequencing of issues in the modalities for agriculture and non-agricultural market access (NAMA) in effect sets a categorisation of topics by priority, and thus of what are the "core issues" to be resolved first.

According to a trade diplomat, the document, which was circulated by Lamy, could be amended after some delegations suggested changes that would give higher priority to issues they consider important.

The document, or an amended version, is also expected to be circulated at an informal meeting of the Trade Negotiations Committee on Wednesday morning, which was called apparently to brief Members on the programme and process for the next several days.

It is unclear what is the relation between this new document, and the modalities papers on agriculture and NAMA produced by the Chairs of the negotiations on these issues.

Meanwhile, various groupings have been holding their own meetings to prepare for the many mini-Ministerial meetings that will take place in the next week. The G20 and the G30 groupings of developing countries held meetings this afternoon. Senior officials from the G6 (the US, EU, Brazil, India, Australia and Japan) were also to meet this afternoon.

More than 60 Ministers of Trade and Agriculture are now expected to turn up in Geneva. On 29 June starting at 9.00am, a special session of the European Union's Council on General Affairs and External Relations will be held, at which the Trade and possibly Agriculture Ministers of EU states are expected. A day earlier, the EU's Committee 133 will also meet in Geneva.

The EU member states are expected to debate among themselves what mandate to give the EU Trade Commissioner Peter Mandelson, especially in relation to whether the EU can increase its offer on agriculture market access (and if so what the bottom line will be) as well as what are the demands the EU is making on its partners.

On 29 June there will also be Ministerial meetings of the G6, the G20 and the G33, while the Indian Commerce Minister Kamal Nath is also to host a dinner for developing country Ministers. The G10 Ministers will also be in town; they hold a press conference also on 29 June. On 30 June the "Ministerial Green Room" to which some 30 members are invited is to start.

Thus, 29 June will be a crucial day in which the groupings prepare for the Green Room battle ahead with their own positions on what to offer and what they are prepared to accept from others.

In the view of one developing-country Ambassador, the EU meetings will be vital for deciding the level of ambition the EU is prepared to offer and to accept.

If the member states decide to put a limit to what Mandelson can offer in agriculture, and especially if they prevent him from significantly increasing the EC offer of an average 39% cut in tariffs, then that will put a dampener on the whole negotiation ahead. On Monday, the agriculture Ministers of France and Finland called on the EU not to make any new concessions on agricultural tariff reductions.

If however the EU states allow Mandelson to raise its tariff offer to 50% or close to that, and also to significantly decrease the number of sensitive products from 8%, then this would help activate the talks.

The response of the US will then be vital. Many key countries have appealed to the US to lower the ambitions it has set for others, but the new US Trade Representative is also facing demands from a majority of Senate members that the US not lower the demands it has made on others. Whether the US will put a sufficiently better offer (and how others interpret what is a sufficient improvement) on lowering its domestic support will also be a key factor.

If the EU and US (or any one of them) are unable to improve their offers significantly, then the rest of the talks are jeopardised, and the "Ministerial" could end early.

However, if the US and EU can accept each other's positions, and can persuade the agricultural exporters to go along, then the talks will gather some momentum. The next major question will then be whether the US, EU and exporting developing countries will then get together and pressure the import-sensitive developing countries to lower their guard.

These developing countries (which are concerned about the effects of liberalisation on their farmers' livelihoods) will then face the test of defending their special products and special safeguard mechanism instruments. What tariff reduction they are prepared to undertake will also be critical.

Several diplomats expect this battle to be decisive as there are recent indications that the US in particular is serious in wanting "effective market access" to developing countries' farm markets and will thus press hard for making SP and SSM insignificant and ineffective, and for cutting the developing countries' tariffs as deeply as possible.

If this happens, and the import-sensitive developing countries stand their ground, the talks may falter at this stage.

If, however, the agriculture hurdle is cleared, the next big battle will be NAMA. The developed countries, all united in NAMA (different from agriculture where they are split) will then mount a merciless assault on the bound tariffs of developing countries, insisting that they have to be cut to the bone, i. e. to the applied levels and then below.

A few of the developing countries that feel they have got a good bargain out of agriculture may agree to very significant reductions to their bound rates, and thus to a coefficient reflecting this.

But there are many more developing countries that believe they have nothing to gain in agriculture, and even more that they have nothing to gain in net terms. They may feel it is unfair for them to bear the burden of large cuts in NAMA, when this will not be compensated outside of NAMA.

And there is the added serious complication that because of different tariff profiles, the same coefficient (if indeed a single coefficient is given for developing countries) will affect different developing countries differently. A country with an average tariff of 15% will be affected very differently compared to other countries with 40 or 60 per cent average tariff, if the same coefficient is applied to them.

The signs are that the developed countries are also not going to accept the "less than full reciprocity" principle, i. e. that developing countries can cut their tariffs at a lower rate than developed countries.

And there are other complications, such as how preference erosion, small economies, and countries with low tariff bindings, will be treated.

Thus, the battle ground in NAMA is strewn with many landmines. Even if the agriculture hurdle is cleared, the talks may not overcome the NAMA hurdle.

The draft modalities papers of the chairs of the agriculture and NAMA negotiations point out the many disagreements. It is impossible for the Ministers, even if their numbers have been made much smaller through the Green Room process, to resolve them.

This is where the Lamy documents on the sequence of discussions come in. If the bottom-up approach that the Chairs claim led to their papers (which supposedly show warts and all), the Ministers are to have their job made simpler by being asked to focus on just some issues, and not the whole range.

The "sequencing" documents seem to be setting the agenda for the Ministers according to priority issues, a return to the earlier Lamy strategy of focusing on "core modalities" rather than modalities in full.

At a Green Room meeting on Monday evening, Lamy had reportedly told the Ambassadors that there was a need for Ministers to focus on core issues, and to sequence the discussion according to the priorities.

At a continuation of the Green Room meeting on Tuesday morning, discussion centred on the document on sequencing of issues.

In the agriculture sequence, the agenda would focus on the market access and domestic support pillars.

Under Market Access, the following issues are mentioned (in order of sequence of discussion):

-- Tiered formula for tariff reductions (thresholds are cuts: developed countries; developing countries).

-- Sensitive products (Designation; Treatment (tariff cut, tariff quota expansion).

-- Special and differential treatment (Special Products (designation, treatment); Special Safeguard Mechanism (coverage, trigger and remedy).

Under Domestic Support, the following are listed:

-- Overall reduction of trade-distorting domestic support.

-- Reduction in: Final Bound Total AMS; Blue Box (cap); De Minimis Disciplines (product specific AMS caps; Other criteria for Blue Box)

-- Cotton

Annexed to the agriculture sequence for discussion is an "Agriculture Index" in which is listed a complete list of the agriculture issues, including those that are not in the Sequence part of the document.

Among the issues listed here that are missing from the Sequence document are the market access issues of tropical products, preference erosion, recently acceded members, LDCs, small vulnerable economies (SVEs), monitoring and surveillance; the domestic support issues of Green Box, recently acceded members and monitoring/surveillance; the issues of the export competition pillar; export prohibition and restrictions; commodity arrangements; and Other Issues (sectoral initiatives, geographical indications, differential export taxes).

In the document on NAMA Sequence of Discussion, there are two "Rounds" of discussion. Round One has three issues:

-- Formula and Coefficients.

-- Treatment of unbound tariffs (mark-up).

-- Flexibilities for developing countries subject to the formula (Para 8).

Round Two contains the following issues:

-- Flexibilities for developing countries with low binding coverage (Para 6).

-- Small vulnerable economies (criteria; treatment).

-- Least developed countries (Flexibilities and Market Access for LDCs).

-- Recently Acceded Members.

-- Non reciprocal preferences.

-- Implementation period.

The NAMA document comes with a NAMA Index which also includes issues not covered in Round One and Two. These include elements regarding the formula

(such as product coverage, base year and credit for autonomous liberalisation); sectoral negotiations; supplementary modalities (request and offer); non tariff barriers; appropriate studies; elimination of low tariffs; and non-agricultural environmental goods.