TWN Info Service on Trade and WTO Issues (July08/47)
29 July 2008
Third World Network

Trade: US attack on China, India sours the mood at WTO talks
Published in SUNS #6527 dated 29 July 2008

Geneva, 28 July (Martin Khor and Kanaga Raja) -- The fate of the July 2008 WTO talks still hung on the balance in the early evening of Monday 28 July as a meeting of the G7 fought on a few critical issues including special products (SP), special safeguard mechanism (SSM) in agriculture as well as sectoral initiatives in non agricultural market access (NAMA) and other issues. The newly formed G7 comprises US, EU, Japan, Australia, Brazil, India and China.

The mood at the WTO this morning turned tense and sour as the United States launched a frontal attack on China and India. Its official David Shark claimed India "rejected the package" (the one-page paper that WTO Director General Pascal Lamy had produced at the G7 and Green Room meetings last Friday) while China had "walked away from it." And that their actions threw the Doha Round into the "gravest jeopardy."

China responded strongly, saying that the US was in no position to point fingers when its farm domestic support (OTDS) ceiling of $14.5 billion (in the text) gave it a lot of policy space and moreover its many other sensitivities were also covered. China, in contrast, had already lowered its agricultural bound tariffs to lower than even some developed countries, and it was now prepared to lower its NAMA tariffs so that the applied rates drop by 30%. India gave a point by point view of the various outstanding issues.

The SP/SSM issues have taken center stage, with about 100 developing countries represented by various groups (G33, Africa, ACP, LDCs, SVEs) issuing a statement on Sunday night criticizing the Lamy draft's points on SP and SSM, and asking for changes to these as well as to the agriculture modalities paper of 10 July.

Many other issues also remained unresolved by Monday afternoon, including cotton and preference erosion in NAMA. Although an agreement on the banana issue was signed between the EU and the Latin American exporting countries, the ACP Group has been upset by both the substance and the process of that deal (since they were not consulted in the deal), and are asking for their views to be taken into account.

New texts on agriculture and NAMA are expected to be produced on Monday night. They are scheduled to be tabled for discussion on Tuesday at the Green Room and perhaps in the TNC. Many delegations, including from key developing countries, are very worried that they will have almost no time to study the texts, but will be called on to adopt them to save the July talks and the whole Round.

Late on Monday afternoon, US Trade Representative Susan Schwab came down from the G7 meeting and told reporters: "We are concerned about the direction a couple of countries are taking this. We had on Friday night a real path forward to a successful Doha round." She said there had been a delicate balance in the text and 6 out of 7 countries had then embraced the outcome. If one thread is pulled, the deal would unravel, she said.

At that time one country was not party to the agreement and now a second country is backtracking on commitment it made, and there is a real risk as that country is advocating selectively reopening the package, she said. (She was obviously referring to India and China respectively). The US will continue to bring it back to a form where we can have a successful outcome, she said.

Indian Commerce Minister Kamal Nath came down half an hour later and said that when the package was presented last Friday it was clear that India had not agreed with it, and India made this clear to all. "We said India has serious concerns about Trade Distorting Support and the non-mention of cotton. We were hoping from Friday that we would see some movement on OTDS and on SSM. The SSM is an issue for 90 countries and is a safeguard to protect the poorest of the poor. It also protects the poor from subsidised products. We have not seen the operationalisation of the treatment of SSM. On cotton which is an agreed matter, discussions still continue."

Nath said when the paper was distributed on Friday India stated it does not agree with the paper. There was no ambiguity in what India had said. It has been said that some large and emerging countries are the problem. India is large, I cannot deny that, and India is emerging, he said. But it is not a problem.

The Schwab and Nath statements on Monday evening had been foreshadowed by the very open spat at the TNC in the morning.

After the finger-pointing speech by the US, the Chinese Ambassador Sun Zhenyu told the informal TNC meeting: "We have tried very hard to contribute to the success of the round. It is surprising that at this time, the US started this finger pointing. I am surprised because they are now talking about cotton, sugar, rice of China as if we are not going to make any more efforts there."

China explained what it has contributed to this round. It said that due to its accession negotiations, its tariff in agriculture on average is now 15.2% bound at this level, "which is lower than the average of the European Union, lower than Canada, lower than Japan, lower than quite a number of developed countries on average." On NAMA, China said that its average is 9%, bound at that level. "And in this round, we will cut about 30% in applied level. So, we are making contributions of 50% of the total developing countries in terms of applied rate cut."

China also said that in OTDS, "the US now is spending $7 to 8 billion this year or last year, maybe a little bit more to 10 billion, but they are offering $14.5 billion with a lot of policy space for the US." It also said that the US can never expand its TRQ to the level of China's TRQ quantities, which are 9 million tons for wheat, 7 million tons for corn, 5 million tons for rice.

India said that important issues remain to be resolved. In NAMA, India was somewhat confused regarding new aspects being raised on the Sectorals issue. It stressed that the voluntary nature of the mandate has to be preserved at all costs. In addition, issues regarding South Africa and Argentina remain to be addressed.

In agriculture, India said that at the top of its list of unresolved issues are the issues of SPs and SSM. These issues concern the bulk of the membership and need to be addressed urgently, said India, pointing to the joint statement that the G33, African Group, ACP and the SVEs issued Sunday highlighting the main aspects which remain to be addressed. "Unless these are resolved, modalities cannot be achieved."

India also said that it is difficult to understand why some developed countries should resist tariff simplification when developing countries, both in Agriculture and in NAMA, are moving towards 100% simplification. It was also disappointed to note that the cotton issue remains unresolved.

Indonesian Trade Minister, Mari Pangestu, who coordinates the G33, said there is progress and there is the making of an acceptable package. But as many have mentioned, since this is not a take it or leave it package, there are many parts that need to be resolved since all have certain sensitivities which have not been adequately addressed. "Note that this is not just developing countries, but we have heard that some developed countries have expressed concerns with regard to sensitivities, even in paragraphs and footnotes. These sensitivities have to be addressed and the conversation should include those that have these sensitivities.

"As the minister from Norway has indicated, we are ready to be invited to talk about the remaining unresolved issues that are still sensitive to find a resolution. We are waiting and ready to talk. Therefore we are very disappointed to hear the blame game tone taken this morning by one country mentioning specifically other countries and even certain products. This is not constructive and certainly counterproductive.

"We at the G33 and the countries mentioned have indicated a readiness to be constructive and positively engaged and ready to find a resolution. The US had mentioned that the package was accepted by a majority of countries. But at the same time a majority of countries - the G33, the African Group, the SVEs and the ACP - still have problems with parts of the package since they feel their sensitivities have not been adequately addressed.

"Indonesia also still has concerns with the new text proposed on sectorals in NAMA and we are seeking clarification to ensure that the non mandatory principle is maintained. "Furthermore, in all this we need time to respond and evaluate. Let us not use the time pressure to lead us to adopting a take it or leave it approach to the package. Let us reflect on this. We remain committed to a successful outcome of these negotiations. We are not blocking negotiations. We just need more time so that the sensitivities of a majority of us are adequately addressed."

Meanwhile, the WTO spokesman Keith Rockwell said that new revised draft modalities texts on agriculture and NAMA are expected to be issued by Lamy late Monday. Lamy said to the TNC that there will be no surprises.

His aim is to encapsulate in these texts as much as possible the convergences that have emerged. Obviously, issues remain to be resolved, which may be left out at this stage. On issues where there is no convergence now, these will be left blank.

In his statement to the TNC, Lamy listed the areas on which there has been some significant convergence.

According to Rockwell, there is broad agreement on tropical products, and on preference erosion in agriculture. On sensitive products for developing countries, there will be modifications that have been largely agreed to the existing text. There is an understanding on the Special Safeguard for the developing countries, said Rockwell.

There is broad understanding as well on the question of in-quota tariffs, and an understanding on the question of overall trade-distorting support for developing countries and scheduling that support, said the WTO spokesman, adding that on export prohibitions and restrictions, there will be improvement to the transparency provisions in the current text.

With respect to the under-fill mechanism (paragraph 4, Annex E of the current text), there is new language there. On export competition, Rockwell said that it appears as though these issues have been largely settled. There is also convergence on the question of state trading enterprises.

There remain outstanding issues, added Rockwell, mentioning the creation of new TRQs. But there is also concern among many members on the question of tariff simplification and this will require a decision by Ministers at the political level. On the issue of cotton, Rockwell said that the agriculture chairman Crawford Falconer and the Director-General are devoting considerable attention to this issue today.

On NAMA, Rockwell said that there is language now that will strengthen the Hong Kong Ministerial Declaration pertaining to duty-free, quota-free market access for least developed countries. On the question of non-reciprocal preferences, there has been some inclusions of new tariff lines pertaining to the US and EU, but there is no convergence on this as yet. He said that there seems to be agreement on the treatment of Bolivia with respect to notification to the Council on Trade in Goods. There has been favourable consideration given to Mongolia's request that it be treated as a low-income economy in transition in the category of small and vulnerable economies.

On the question of South Africa and the partners of the Southern African Customs Union (SACU), Rockwell said that there is not yet consensus on the request of South Africa for additional flexibilities, but there is widespread support for additional flexibilities. The question is largely about the number. With respect to Venezuela, there has been no convergence as yet. Consultations are continuing.

On sectorals, Rockwell said that there is a reaffirmation among members on its non-mandatory nature. Consultations are proceeding with respect to new language. On the question of small and vulnerable economies, progress has been made and convergence is close. The outstanding issue is the target average in the top bands. There is a growing convergence as well on product coverage. On the question of recently acceded members (RAMs), consultations are ongoing and the question is the additional implementation period for RAMs - will it be three years or four years. On the question of Oman and its relationship to the WTO as part of the Gulf Cooperation Council, these consultations are ongoing.

The Director-General said that he believes that this represents significant progress. He said that "We now have a question of hours because the clock is against us."

Minister Jonas Store of Norway briefed members on the TRIPS-related issues. He said that he is continuing his efforts to explore whether we might find a way forward which would not prejudice members' positions on the most contentious points, such as the relationship of these issues, particularly the question of TRIPS/CBD and the GI extension - the relationship of these issues to the single undertaking and the legal form of an outcome.

He hoped that nevertheless, he could find a solution which could give satisfaction to all members and enable work to move ahead positively. It is his impression that there is an increasing acceptance that this is the way forward, and that we still have a considerable way to go to find agreement and encapsulate it in language. +