TWN Info Service on Trade and WTO Issues (July08/55)
31 July 2008
Third World Network                                                              

Trade: Schwab still blaming India and China at press briefing
Published in SUNS #6529 dated 31 July 2008

Geneva, 30 July (Kanaga Raja) -- US Trade Representative Susan Schwab said that five out of seven countries in the G7 had accepted the Lamy package put forward last Friday night, and implied that these two countries (India and China) had blocked the WTO talks in Geneva from success.

She said it was "distressing" for the US to find itself without a Doha Round agreement. The provision on the scope of a special safeguard mechanism in WTO Director-General Pascal Lamy's compromise package, which according to her deadlocked the negotiations, would have "done the trick".

Schwab was speaking at a media briefing Wednesday morning following the collapse of the WTO Geneva talks the previous evening.

She said that "tremendous progress" was made over the last week in bringing clarity to aspects of the Doha Round package in agriculture, manufactured goods and services. "We've probably moved the ball further forward in the last ten days than we have in the last eight years."

Schwab said on Friday, we really thought we had the makings of a deal. According to her, five of the seven countries in the "G7 leadership group" were prepared to accept the proposal put forward by Director-General Pascal Lamy. Unfortunately "we weren't able to capitalize on that."

She said the negotiations ultimately deadlocked on the scope of a so-called safeguard mechanism. She said that there was such a provision in the Friday compromise and "it would have done the trick. The provision would have addressed the legitimate concerns and needs of those worried about their subsistence farmers and livelihood of farmers in the event of surges of agricultural products."

"And yet, there were others who demanded more, and more included a tool to close markets," she said, adding that "it would have been a very sad commentary on a development round if the conclusion had resulted in higher barriers to trade leaving the round than those we had coming in. And quite honestly, there were some advocating that the safeguard mechanism be designed in such a way that that would have been the outcome."

She said that the issues like the trigger (in the SSM) are not just numerical debates, and those have to do with how should it be for a developing country to close its market to other developing countries, and how easy should it be for "a developing country, a recently acceded member of the WTO" to roll back or take back tariff concessions it made in its WTO accession negotiations.

What the US remains committed to is a safeguard mechanism that distinguishes between the legitimate need to address exceptional situations involving sudden damaging import surges and "a mechanism that could be abused and set back the trading system for decades to come."

She said that the irony is that all of this debate about how easy or hard it should be to raise barriers to food imports took place in the context of a global food crisis, adding that "when the last thing we should be talking about and negotiating about, or even thinking about is raising barriers to trade in food."

The USTR acknowledged that there were other important things on the table as yet unresolved such as cotton, subsidies to over-fishing, environmental goods and services, and aid-for-trade. She believed the will was there to address those. She said the US stood by its offers, and that it had put significant offers on the table.

She pointed to three factors in terms of how the issue evolves and how it is addressed - political, policy issues and practical issues. She set aside the political factors, saying that this wasn't really a political discussion. On the policy issue, she asked under what circumstances should a country be able go above its pre-Doha bindings. "Under what circumstances do you allow countries pretty much to violate one of the basic tenets of the GATT and now WTO, which is bindings."

"Under what circumstances could countries use the surge mechanism to raise the trade barriers," she asked, noting that the US did agree that there are circumstances where that could happen. "They needed to be narrowly defined so as to really address legitimate surges rather than create this huge window for countries just to vitiate or renege on three decades of trade agreements..."

The number of 140 (in relation to percentage of base imports in the SSM trigger) was the middle-point, the compromise point that was reached, she said. Referring as examples to Chinese import of soy beans over the last ten years, she said that at 140, China could have used this mechanism in 8 out of 10 years to raise their tariffs above bound rates. In case of poultry, China could have used the mechanism in 6 out of 9 years to raise tariffs. India could have used the mechanism in 3 out of 6 years to raise palm oil tariffs.

"You can imagine any number below that turning into a free-for-all where developing countries were raising barriers every year," said Schwab, adding that the trigger really was the question of how easy do you make it for countries to raise their barriers above current rates.

"I am so very sad that there were countries that felt so strongly about making it easier to raise barriers that they were willing to give up the safeguard mechanism in its entirety, because it doesn't currently exist."

In terms of going forward, she said that there are some discreet parts of the package that have been negotiated or have almost been negotiated, or where there is a consensus that they can be moved forward - duty-free quota free market access, export competition, trade facilitation, environmental goods and services.

"Some of those pieces of it, one could start moving ahead and see whether the rest can catch up or sit back and reflect how will the multilateral trading system operate going forward. It may be as Pascal has said the complexity of the cathedral that was built for the Doha Round was its own worse enemy, was its own source of demise," she said.

"You ask yourself in terms of timing, does it all have to come together at the same time because that's sort of the basic premise... Why should it have to come together at exactly the same time. We need to reflect on how we move forward, but there are ways of moving forward certainly with pieces of this, both near term and longer term."

She said that the package on Friday night was the compromise package, which had the safeguard in it and included the negotiated number, that 6 out of the 7 countries agreed to. "The fact that one or more held out for a different number - a number that differed from the one that had been agreed by all of the other parties in the room, developed and developing - was the reason this came apart."

Asked as to why the cotton issue was not addressed (in the G7) and that African Ministers were waiting for 10 days, Schwab said that the issues that were addressed by the G7 were the ones that Director-General Lamy laid out for them, recognizing "that we knew that there were other issues that would also have to be concluded, including cotton."

Asked by an Indian journalist to comment on the fact that there was never agreement on the package and that Lamy had offered a solution to break the logjam on the SSM, followed by an EU negotiator who offered a tiered structure and gave some room for both sides to move, but that the US refused to move, Schwab said "The answer is no. The answer is what you are repeating there is inaccurate, incorrect..."

"The fact of the matter is there was a package... it was a compromise package. It was negotiated within an inch of its life and it had a significant safeguard within it, in addition to modest market opening on the part of emerging markets, very significant market opening on the part of developed countries... every country in the room except one accepted it."

In terms of what happened subsequently, she said that "all of us showed flexibility except one, and one didn't show their hand..." She added that as recently as Monday afternoon, she asked participants if they could still sign on to the Friday package and move ahead with that. "5 out of 7 said yes. So, we had our compromise package." +