TWN Info Service on WTO and Trade Issues (June 07/08)

15 June 2007

Pace of WTO talks increases, and rumours of progress in G4

Below is an article dated 7 June on the situation at the WTO.

The latest figure floating for US trade-distorting support is $11 billion for 2006. That puts a new colour to the negotiations.

There are rumours of some "progress" in the G4 talks, but no confirmation.

Indications too have emrged of "lowering of ambitions" in the G4.

The NAMA meeting on 6 June focused on the tariff reduction formula.  It was quite an explosive meeting.

This article was published in SUNS on 8 June.

Best wishes
Martin khor

Pace of WTO talks increases, and rumours of progress in G4

By Martin Khor (TWN), 7 June 2007

Meetings in different formats are now taking place simultaneously at the WTO as negotiations intensify ahead of new draft modalities for agriculture and non agricultural market access (NAMA) which are expected to be issued in the next fortnight.

A growing sense of urgency is also gripping diplomats in Geneva as some key political events take place and loom ahead -- the G8 Summit in Germany today, the meeting of Brazilian Minister Celso Amorim and EU Trade Commissioner Peter Mandelson in Geneva this Saturday (9 June), the meetings of the G20 Ministers and the NAMA 11 Ministers on Monday (11 June), and the G4 Ministers meeting on 19-22 June (probably in Potsdam, Germany).

News is floating around in some diplomatic circles that talks among the G4 (bilaterally among some of the Ministers, and together at senior-official level) are moving ahead.

The corridor talk is that the United States is finally providing some numbers on domestic support, with various unconfirmed reports that its overall trade-distorting support (OTDS) maximum level could be offered at $16-17 billion.

This compares with the $23 billion that the US had offered in October 2005 and which it had maintained despite widespread criticism, since its 2005 actual OTDS level was $19.7 billion.

In recent days, it has been reported that some delegations during the small-group agriculture negotiations had stated that the actual OTDS of the US had fallen to only $11 billion in 2006.

This gives a different view of figures like $15 billion or $17 billion, which are lower than $19.7 billion but decidedly higher than $11 billion. An offer to set the bound OTDS level in the "mid-teens" is not impressive or significant, when it allows so much "water" in between the actual level of $11 billion of last year.

The G20 has asked that the US level be $12 billion while the EU has been asking for $15 billion.

There are signs that some members of the G4 are seeking to strike a deal around what they consider a "less ambitious" outcome.

On 5 June, Mandelson said in an interview in London that he is seeing a "lowering of ambition" on the part of the US on one hand and Brazil and India on the other hand. He added that he would find it hard to sustain the "maximalist" offer, if others are going to fall short of that.

In Brasilia, Amorim indicated that the demands he had been making of the US and EU in agriculture are not going to be met, and that Brazil would thus not make a better offer than what it had done in NAMA.

He said that he wanted a $12.4 billion reduction in domestic support from the US, a limit of sensitive products from developed countries to 1% of agricultural tariff lines, and a 75% cut in the highest band of farm tariffs from the EU.

"These demands probably won't be met, so Brazil's opening of its industrial sector won't be the way that they want," he told the media. He said Brazil has offered to reduce its industrial tariffs by up to 50%, and discarded the possibility of making a better offer.

A situation seems to be developing where the US and EU are making less demands on each other. According to Crawford Falconer (the New Zealand Ambassador who chairs the agriculture negotiations), the US is no longer seeking that the agricultural tariff cut in the highest band (for developed countries) be 85%. The EU is offering 60% and the G20 has been demanding 75% for that band, for developed countries.

As Amorim seemed to indicate, Brazil could be preparing itself to accept the less ambitious targets for domestic support and agricultural market access from the US and EU, and for itself to stick to a higher coefficient for NAMA in response to this less-ambitious scenario.

It is not clear what is being demanded of India, and by proxy, the G33 countries.

More pressure is expected to be applied on the G33 countries on special products (SP) and special safeguard mechanism (SSM). The recent Challenge Paper (parts one and two) by Falconer attempted to dampen the positions of the G33 on both these issues, but many G33 countries are adamant that their SP and SSM proposals have to be maintained to protect their defensive interests (food security and livelihoods of small farmers).

The US meanwhile has gone on the offensive in two other areas. On Monday, it proposed that five additional types of industrial subsidies be prohibited under the Agreement on Subsidies and Countervailing Measures (See SUNS #6265 dated 6 June 2007).

And, according to trade diplomats, the US has also informally proposed during small-group services meetings that developing countries bind their present level of "national treatment" in all sectors through commitments in Mode 3 of the GATS (General Agreement on Trade in Services). Several developing countries which have heard of this proposal have found it unacceptable.

This week, there have been small-group consultations on agriculture based on Falconer's second installment of his Challenge paper, as well as meetings in parallel on NAMA in open-ended sessions.

Early this week, the NAMA talks were on a range of issues, including treatment of unbound tariffs, and treatment of paragraph 6 countries, small vulnerable economies and recently acceded countries, where positions were still polarized
(See SUNS #6266 dated 7 June 2007).

The NAMA talks then shifted to the most contentious issue - the tariff reduction formula. On 6 June, when the talks on this began, there remained a wide gap between developed and developing countries, and the discussion was quite heated.

According to trade officials, the developed countries such as the US, the EC and New Zealand, continued to demand that there be a coefficient of 10 for themselves and a coefficient of 15 for developing countries in the Swiss formula to cut tariffs.

The US and New Zealand said that these coefficients achieve "new market flows" and they claimed that they also produce "less than full reciprocity" (LTFR).

[The LTFR principle was agreed to in the Doha mandate for NAMA. Developing countries in the NAMA 11 dispute that the 10 and 15 coefficient is in line with this principle, as the developed countries would have to cut their average tariff by 20-plus per cent while developing countries would have to cut their average tariffs by much more, i. e. 60-plus per cent.]

The EC also stated that the two coefficients were fair as they enable key developing countries to keep tariff averages 5 to 7 times higher than developed countries, according to the trade officials.

But developing countries were adamant that the coefficients proposed by the developed countries were unfair, as these allowed the developed countries to reduce their tariffs only slightly, while the developing countries would have to undertake drastic cuts, which is against the LTFR principle.

At the end of the session, the Brazilian Ambassador, Clodoaldo Hugueney, forcefully put forward the view that the position of having coefficients 10 and 15 "is not attainable, is not possible and it's out".

He said the "pain" to be caused by the tariff cuts has to be proportionate, balanced with negotiations in other areas, and has to be commensurate with what has to be achieved in this development round.

Another idea, that had previously been presented before, was put forward again by Mexico and supported by Chile and Colombia, that a higher coefficient in the formula be given to developing countries that choose not to make use of flexibilities. The main flexibility is that for 10 per cent of tariff lines, the tariff formula would only be partially applied.

The EC and New Zealand supported the idea, but some developing countries were against it, arguing that they should be entitled to a higher coefficient and also make use of the flexibilities. +