TWN Info Service on WTO and Trade Issues (May15/11)
25 May 2015
Third World Network  

Transparency by others, secrecy for WTO
Published in SUNS #8025 dated 21 May 2015
 
Geneva, 20 May (D. Ravi Kanth) -- The World Trade Organisation's Director-General Roberto Azevedo is apparently upset that his meetings with trade envoys from seven developed and developing countries to discuss the benchmarks in the market access pillars of agriculture and industrial goods for concluding the Doha Development Agenda (DDA) negotiations by the end of this year are being reported in some publications, including SUNS, according to people familiar with the development.
 
An exasperated Director-General was unhappy as to why closed-door deliberations among seven countries - the United States, the European Union, China, India, Brazil, Australia, and Japan - cannot be kept or remain confidential, said a trade official from South America.
 
For a Director-General, who constantly chants the mantra of a "bottom-up and transparent" process, the comment in the SUNS on 19 May [see "Concern among developing countries on DG consultations", by Chakravarthi Raghavan in SUNS #8023 dated 19 May 2015] is a breach of confidentiality because it raised some fundamental questions on how a market access package is being constructed without discussing the trade-distorting domestic and export subsidies to suit the interests of the two trans-Atlantic trade giants, the official said.
 
More importantly, the article in SUNS challenged the basis for the "average cut in tariffs or a cut on the average existing tariff level" for reducing tariffs on agriculture and industrial products, in total disregard to the tiered formula in the 2008 revised draft modalities for agriculture products and the so-called Swiss formula for the industrial products.
 
The article raised questions on who were the proponents of these average-cut based formulae and whether the Director-General is echoing them at the behest of the two dominant developed country members - the US and EU.
 
[Perhaps, DG Azevedo, and others (members or officials) wanting secrecy for their talks and making a fetish of it, would do well to read the FT blog on 19 May by such an ardent supporter of the WTO and the opening up of markets for TNCs and their investor rights, including for FT owners Pearson, a TNC, has said on President Obama's insistence on secrecy for the TPP, "Five arguments against the self-defeating secrecy of the Trans- Pacific Partnership". What is true of the TPP (which because of its secrecy and efforts to advance the interests of TNCs over everyone else's) has been abandoned by free trade enthusiasts (ranging from former Chair of the Evian Group to Alan Beattie now) is even more true of the WTO. It will not be the Doha Round alone that will be a casualty, but the WTO itself, and the US will lose more than others. -- SUNS]
 
The Director-General's meetings were attended by the General Council Chair Ambassador Fernando De Mateo of Mexio, the two heads of agriculture and non-agriculture market access (NAMA) negotiating bodies - Ambassador John Adank of New Zealand and Ambassador Remigi Winzap of Switzerland respectively.
 
Almost a week after the Director- General's meeting with the seven countries, the chair of the Doha NAMA negotiating body Ambassador Winzap issued a note in which he has suggested five "potential approaches" that were brought to his attention.
 
"Besides the request and offer approach submitted by Argentina and discussed in March, the following potential approaches have been brought to my attention," Ambassador Winzap said in the note, without revealing the proponents of these approaches.
 
So far, only two members - Argentina and Paraguay - proposed different approaches. Argentina had proposed a request and offer approach while Paraguay had circulated a proposal on average and minimum cut for the agriculture products.
 
Both these approaches were rejected by a large majority of developing and least-developed countries which have consistently demanded that the DDA negotiations must be concluded on the basis of the 2008 revised draft modalities in agriculture and industrial goods.
 
Despite the rejection of the Paraguayan proposal, Norway had submitted an almost identical proposal to the chair of the Doha agriculture negotiations, which is yet to come up for discussions.
 
Against this backdrop, it doesn't require rocket science to discern the proponents of the NAMA chair's latest note.
 
The five "potential approaches" mentioned by Ambassador Winzap are:
 
i. Increasing the coefficients of Rev. 3 (the 2008 revised draft modalities for industrial products) for developing and developed Members.
 
(The coefficient in the Rev. 3 draft for the developed countries was 8 and between 20 and 25 for the developing countries with a set of flexibilities such as certain percentage of unbound tariffs or a percentage of tariffs without cuts for sensitive products);
 
ii. Taking the average of line by line reductions according to Rev. 3, using the coefficients 8 for developed and 25 for developing Members (but without flexibilities), as starting point for applying a cut of the overall tariff average;
 
iii. Same as under (ii), but starting from a reduced reference level (e. g. average of cuts multiplied by a number smaller than 1);
 
iv. Taking the average of line by line reductions according to Rev. 3, using the coefficients 8 for developed and 25 for developing Members (without flexibilities), as starting point for applying an average cut of tariff lines; and
 
v. Following an approach for the so-called formula applying Members similar to what Rev. 3 envisaged for other Members, such as SVEs (i. e. grouping Members according to levels of their existing bound tariff averages).
 
The chair did not explain how he arrived at these five approaches, whether through a top-down or bottom-up process. In the informal open-ended meetings he held with members at large, these approaches hardly figured as they are indicated now in the Chair's note.
 
Clearly, it is easy to surmise that the chair's note is based on what one major industrialised country wants to do, a developing country trade official said.
 
During the 2008 negotiations, the US was unhappy with a coefficient of 8 because it would cut into its peak tariffs in textiles and apparel products and leather products which are around 40%.
 
The US wants to get not only a high coefficient so that it can protect some of these peak tariffs but more importantly it wants to ensure that there are no flexibilities for developing countries, the developing country official said.
 
Many developing countries had accepted the 2008 revised modalities on the basis that it was a compromise in which they would undertake higher cuts than the industrialised countries in their bound tariffs but also avail of the entitlement for small percentage of sensitive products. Even then, South Africa and Argentina had some fundamental concerns on the 2008 NAMA modalities.
 
Therefore, it is not clear what is the underlying rationale of the chair's proposal, the official said.
 
In his note, the chair said that "the NAMA negotiations need to take account of today's international environment, in particular the fact that market access negotiations in WTO are "competing" with such negotiations in RTAs, which impacts the ambition level in WTO."
 
"I also mentioned as a further determinant the very different tariff profiles of Members - the difficulty being that whatever approach is chosen, the implications may be quite different for different Members... Both observations also apply in agriculture," the NAMA chair argued.
 
This raises two fundamental questions.
 
First, is the chair adhering to the existing Doha mandates or trying to conceive an approach that is suitable for industrialised countries?
 
The 2001 Doha Ministerial Declaration, the 2004 July Framework Agreement, the 2005 Hong Kong Ministerial Declaration, and the unsettled 2008 revised draft modalities are all premised on the development dimension of the Doha Round.
 
For example, the 2004 July Framework Agreement and the 2005 Hong Kong Ministerial Declaration had called for " less than full reciprocity [LTFR]" in which the developed countries undertake higher reduction commitments than the developing countries.
 
While the LTFR-based approach was followed in the negotiating modalities proposed by the former chair Ambassador Crawford Falconer of New Zealand in agriculture through a bottom-up process, it was an open secret that the approach was torpedoed by then chair of the Doha NAMA negotiations Ambassador Don Stephenson of Canada who had resorted to a top-down approach.
 
The developing countries grudgingly accepted the broad parameters of those 2008 revised draft NAMA modalities as a compromise. Now the chair's note raises a further question whether even that compromise would be respected, said an official familiar with the negotiations.
 
And second, at a time when the Director-General and major industrialised countries are pushing for a "re-calibration" framework, which aims to lower the level of ambition to conclude the Doha trade negotiations by the end of this year, why is the chair suggesting that the level of ambition in NAMA must correspond to what is being done by some members in the regional trade agreements (RTAs), the official asked.
 
Ambassador Winzap emphasised that "Members are looking at market access in NAMA and in agriculture in a more parallel way than in the past."
 
He went on to raise several questions such as: "What could that mean? Comparability by taking as starting points Rev. 3 in NAMA and Rev. 4 in agriculture? Comparability by moving to formulas based, both in NAMA and agriculture, on an average cut of tariff lines or on cutting the overall tariff average? Should the chosen approach be the same in NAMA as in agriculture or could it be different?"
 
The chair is conspicuously silent on what happens to the internal balance of the agriculture negotiations between the three pillars such as trade distorting domestic subsidies, market access, and export competition and whether it is proper to treat only the market access pillar without considering the other two pillars.
 
Also, the DDA negotiations were premised, and this has been repeatedly reiterated, on the understanding that agriculture will decide the level of ambition. But now there is no clarity on what happens to trade-distorting domestic subsidies in agriculture because the United States cannot bring down its aggregate measurement of support below US$14.5 billion because of its latest farm law which came into force last year.
 
Also, it is not clear what happens to the balance within NAMA between tariff reduction commitments on the one side, and the removal of non-tariff barriers on the other.
 
The chair said that he doesn't see much traction in NTBs and "I understand that it is difficult to advance on NAMA NTBs as long as we do not see progress on the tariff side."
 
Here again a major industrialised country remains opposed to any discussion on NTBs at this juncture, said a trade official who is familiar with the negotiations.
 
"At this stage, it would certainly be helpful if there were not any upfront rejection of ideas," the Swiss chair emphasised.
 
It is intriguing why the chair chose to make such a statement even before the discussion began on the issue, the official added.
 
Also, Ambassador Winzap maintained that "the work on the NAMA tariff side needs to be pursued in relation to what is going on in Agriculture. Therefore, I will also further coordinate my work with the Chair of the Agriculture negotiation and the Head of the TNC."
 
In a nutshell, the chair's note falls in line with what the Director-General wants to do at this juncture. The DG, who was the former Brazilian trade envoy to the WTO and who had maintained that the 2008 modalities in agriculture are the final landing zones, is now determined to put the Doha trade negotiations to bed by the end of this year so as to ensure that the developed countries walk away without undertaking significant commitments in agriculture.
 
Perhaps, having obtained for free from the developing countries, the gift to the US and EU of the Trade Facilitation Agreement (TF was a part of the Doha Single Undertaking), he now wants to achieve the same and wind up the Doha Round, more so when the African nations appear to be in difficulties, torn between the need to secure a fair deal for themselves, and supporting from a sense of African solidarity, Kenya's need to show success at Nairobi for the Ministerial Conference. +