TWN Info Service on WTO and Trade Issues (June 07/19)

20 June 2007

Uphill job for G4 in Potsdam as other WTO members just wait

Below is an article on the situation at the WTO surrounding the G4 Ministers meeting at Potsdam, and the mood among other WTO  members at Geneva.

It was published in the SUNS of 19 June.

With best wishes
Martin Khor

Uphill job for G4 in Potsdam as other WTO members just wait

By Martin Khor (TWN), Geneva, 18 June 2007

The G4 Trade Ministers meeting starting in Potsdam on 19 June is portrayed as a "do or die" kind of event that will determine whether the WTO's Doha Round will end on schedule this year (or early next year).

But there have been several events in the past portrayed as "do or die" benchmarks that have come and gone. And the Doha Round lived on to talk another day.

Before, it was the expiry of the United States' fast track authority that gave urgency to deadlines. It can no longer be used for this purpose because the US President's Trade Promotion Authority is now certain to expire on 30 June without the possibility of a "seamless" transition to a new TPA.

Reports emanating from Washington in the past few days indicate that President Bush is not likely to get a new TPA for the rest of his term. If this is true, then the US' partners would have to take it on trust that the US Congress will somehow endorse what the US Trade Representative agrees to on the Doha agenda.

But there are bigger immediate worries confronting the G4 (the US, EU, India and Brazil) in Potsdam. The positions of the four members are still far apart on all the major issues, according to some officials who have been involved in the G4 senior officials' meeting (SOM) in Paris last week that ended on Friday.

The failure of the SOM to bridge important differences to any significant extent means that the G4 Ministers face an even steeper gradient in their uphill battle against one another and especially against time.

According to diplomatic sources in Geneva, the Paris meeting only made progress on smaller issues such how to treat food aid in the export competition pillar of the agriculture negotiations.

On the "headline issues" of overall trade distorting support (OTDS) and market access in agriculture, the wide gaps remain. According to the sources, no new figures were given on the cap in the United States' level of OTDS, which is perhaps the most important of the missing numbers in the Doha talks.

Also, there are large differences in Non Agricultural Market Access (NAMA). The US and EU are sticking to their demands that developing countries commit to a coefficient of 15 in the Swiss formula to reduce tariffs, while developed countries take on coefficient 10.

This is rejected by Brazil and India, both of which belong to the NAMA 11. Ministers of this group last Monday in Geneva reiterated their strong opposition to the 10 and 15 coefficients, and again demanded that there be at least a 25 point gap between the coefficients of developed and developing countries.

At the Paris meeting, the G4 officials also could not agree on NAMA flexibilities for developing countries. The NAMA 11 have asked that the flexibilities and the numbers for them indicated (though not finalised) in the NAMA framework be expanded.

Since the Paris prelude did not yield results, it will really be up to the G4 Ministers to pull things together if Potsdam is to succeed.

Susan Schwab, the US Trade Representative, told Reuters agency on the eve of her departure for Potsdam that "We're really hoping we can move the ball forward and ideally move it forward dramatically. The US is committed to doing our share and then some to reach a final deal."

But she also stressed that in NAMA, "if you want a development outcome, you really have to cut into applied rates." And she was quoted as saying that recent demands by developing countries to be spared any real cuts in manufacturing tariffs could be the "death knell of the Doha development round."

The USTR's statement shows up the clash of paradigms not only of goals but also of the meaning of "development" in the so-called Development Round. Most developing countries have been arguing that excessive liberalisation of their imports can lead to de-industrialisation and that thus they cannot afford significant cuts in their applied tariffs, though they can contribute cuts to their bound rates.

The USTR's understanding seems to be the opposite: that a development outcome means cuts into applied tariff rates of the developing countries. In this frame of thinking, the deeper the real cuts, the more the development that will be produced.

If there is no change of perception, or at least of this posturing, there is little possibility of Potsdam succeeding.

However, as one developing country diplomat put it today: "The Ministers are scheduled to meet for five days. That's a long time for Ministers to commit to talk. Maybe they are really serious and will come out with a deal at the end of it."

But even if the G4 clear their own hurdles and reach a deal among themselves, that is far from the end of the story. It will be hard for the G4 to sell their deal to the rest of the WTO membership.

The chairs of the agriculture and NAMA negotiations were scheduled to produce their new papers on draft modalities (texts of agreements containing commitments including tables, formulae and figures for cutting tariffs, plus flexibilities) any time now.

However, the Chairs are postponing the issuing of their papers until the G4 meeting is over, so that they can reflect any consensus that arises from Potsdam. This is also at the request of the G4, according to diplomatic sources.

The G10, which represent developed countries (including Japan, Switzerland and Norway) with more defensive interests in agriculture, on 17 June issued a document "G10 Messages to the G4" following a meeting on the same day convened in Geneva by the Japanese Minister of Agriculture, Mr. Norihiko Akagi.

The G10 reaffirmed their main priorities in the agricultural negotiations -- no tariff capping; acceptable tariff cuts in the top band (of the tariff-reduction formula) with flexibilities; and reasonable treatment and appropriate number of sensitive products.

The G10 said the round is a single undertaking and thus parallel progress is necessary in all areas including NAMA, services, rules, trade facilitation, trade and environment and IPRs.

"We should not simply compare agricultural negotiations with the NAMA negotiations without taking account of their different negotiating history and the multi-functional role of agriculture," said the message.

It added: "We would by no means accept the Chair's draft modality if it were just a reflection of the outcome of the G4 consultation. We assume that all members support a real multilateral process."

The last message reflects a fear among the G10 members that the G4 will do a deal that ignores the G10 bottom-line demands, and that the agriculture Chair will transmit the G4 decisions into a WTO text for all to accept.

The Japanese Minister is himself heading for Potsdam to try to keep track of the G4 meeting. And according to reports the G4 will invite Japan and Australia to an expanded meeting to encompass the G6 on 23 June. This, presumably, if the G4 meeting is quite fruitful and does not disband before that.

If developed countries like Japan and Switzerland are explicitly concerned that their interests could be jettisoned by the G4 process, the majority of developing countries are even more anxious and worried.

Although two developing countries are part of the G4 (unlike the old Quad which comprised only developed countries), Brazil and India are not representatives of (nor necessarily representative of) developing countries as a whole.

At the meetings of the G33 and G20 on 11 June in Geneva, at which some Ministers as well as senior officials were present, many ordinary members of the groups strongly made their views known, that there should be no watering down of the positions of the groups.

In particular, the G20 meeting was told that there must be real cuts to the applied levels of OTDS of the developed countries -- and the figure floating around for the OTDS of the US is no longer $19.7 billion, which is for 2005, but $11 billion, which WTO diplomats in Geneva generally believe is the 2006 level.

Many G20 members also insisted that the group stick to its demand that new disciplines be established for Green Box subsidies used by developed countries, and not only a strong monitoring and surveillance mechanism.

There was a concern among some G20 members that some members in the group would be willing to accept a compromise of giving up the demand for new disciplines while sticking to the demand for a monitoring mechanism, as suggested in the Chair's Challenge paper.

Without effective rules, what is there to monitor, some members were reported to have argued.

At the G33 meeting, several members asked that the group stick to its demands on Special Products (SP) and Special Safeguard Mechanism. This would include maintaining the group's position on having numbers on SP (at least 20% of tariff lines), retaining all the indicators decided at the G33 Ministerial in Jakarta, maintaining the position on triggers and thresholds for using them in the SSM, and sticking to the treatment for both SP and SSM.

"The members of the G20 and G33 sent a strong message that the positions of the groups should be maintained in the crucial negotiations ahead", said the Minister of a country belonging to both groupings, referring to both the G4 meeting and the talks scheduled for after the modalities papers are issued.

There are also strong rumblings from many WTO members that they continue to be kept out of the main show (which they identified as the G4 process), not being able to participate nor even to know what is going on.

"We don't want to be the side show, whose function is to converge' with the main performance when the big stars get their act together," said one developing country diplomat. +