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TWN Info Service on WTO and Trade Issues (Oct08/10)
22 October 2008
Third World Network

Trade: Concerns over financial crisis surface at TNC meeting
Published in SUNS #6566 dated 13 October 2008

Geneva, 10 Oct (Kanaga Raja) -- Concerns over the financial turmoil currently plaguing the United States and Europe surfaced at an informal meeting of the Trade Negotiations Committee (TNC) on Friday, with several developing countries saying amongst others that the financial crisis in the developed countries would have an imbalanced impact on the developing countries.

In the response from WTO members during the informal TNC meeting, almost all those who spoke mentioned the financial crisis as having an important bearing on the WTO, and said that the WTO should guard against countries resorting to trade protectionism during the difficult times.

However, while some countries such as Mexico and Chile advocated further liberalisation through the Doha agenda as the solution, other countries such as Bolivia, Bangladesh South Africa, and Venezuela were cautious about the role liberalisation could play.

Bolivia stressed that the WTO could not retain the same agenda in light of the financial crisis but would have to change the Doha agenda to be relevant. It was against further liberalisation in services, especially financial services.

According to trade diplomats, major players such as the US, the EC, India, China and Brazil did not speak at the informal meeting.

Speaking at the informal TNC meeting, WTO Director-General Pascal Lamy said "We are meeting at a time of global financial crisis. This gives added importance and urgency to our work here."

Noting that the financial crisis may be having an impact on developing-country access to financing of imports and export, Lamy said that he is convening a meeting of the major providers of trade finance on 12 November to examine this issue and find ways to alleviate the situation if it was to deteriorate.

Trade officials said that there was wide acknowledgment at the informal meeting that moving forward with the agriculture and NAMA modalities was the best thing that could be done. There was quite a lot of support for the notion of the multilateral bottom-up approach through the negotiating groups, which members welcomed.

The members that spoke also stressed the need to avoid sliding into protectionist measures. Some said that the financial crisis is the result of overly extensive deregulation or lack of regulation in the markets, said trade officials, adding that everyone who spoke stressed their concerns about the financial crisis. Many developing countries said that they would be the ones hardest hit by this.

In his statement at the TNC, Lamy said that the WTO has over 60 years of solid experience in regulating trade opening. At a time when there are renewed calls for a better regulation in the financial area, the WTO system provides an example of how the lessons of history and experience have led to the construction of a system of international governance.

"And we have an opportunity to send a signal of our desire to strengthen it by concluding the Doha Round," he said.

Stressing that the collective commitment to the Round remains strong, Lamy nonetheless said "... it is clearly necessary to face the reality that [the] Round cannot be concluded this year. However, I believe it is still possible to reach agreement on modalities and the Ministers with whom I have spoken are all determined to push ahead."

Looking back in history, said Lamy, "we can see that the type of uncertainty which is now infiltrating the international scene can be a precursor to rising protectionist tendencies. Rising barriers at the frontier, starting with barriers to trade in goods or services, is often a tempting political option under such circumstances."

"The role of the WTO as a firewall against protectionist responses is thus vital," said Lamy, adding that "it is not so much about any direct effects on markets as for sustaining confidence in global cooperation and institutions."

The financial crisis may also be having an impact on developing country access to financing of imports and exports, the Director-General said, pointing out that just this week Brazil brought this issue to the forefront.

Lamy announced that he has convened major providers of trade finance to a meeting on 12 November to examine this issue and find ways to alleviate the situation of it was to deteriorate. This will be followed up in the Working Group on Trade, Debt and Finance at the end of November.

If there are indications that the financial situation could be having serious implications more generally for trade or the trading system, Lamy said that he will consult with the General Council Chairman on the possibility of convening a General Council meeting on the coherence mandate.

(In a letter to invitees to the 12 November meeting, Lamy said that the purpose of the meeting will be to review how the international market for trade financing is faring in view of the current very difficult conditions on international financial markets, and to examine how to maintain and improve the availability and accessibility of trade finance facilities at affordable rates for developing countries, especially low-income countries.

(Among the invitees are the Managing Director of the IMF, the President of the World Bank, the President of the Inter-American Development Bank, the President of the African Development Bank, the President of the Asian Development Bank, the President of the European Bank for Reconstruction and Development, the President of the Islamic Development Bank, as well as Citigroup, Commerzbank, Royal Bank of Scotland, JP Morgan, and HSBC.)

"Apart from the financial crisis, there are other external influences which are tending to affect our work here, or perhaps the optimism with which we are investing ourselves in it," said Lamy. "Maybe, any of these factors could provide an excuse to be tempted to throw in the towel, but in fact the reverse is true: they are all the more reason to do the deal rapidly."

Citing the G7 senior officials' meeting two weeks ago, Lamy said that they made some progress, but not yet enough to contribute possible solutions on key issues. Noting that the main item on their agenda was the SSM in agriculture, Lamy said "It is, of course, important to resolve this question, but we all know it is not the only issue in Agriculture, and Crawford [agriculture chair] has now taken up the gauntlet again in this area."

There are also key issues in NAMA and the other areas of negotiation which will need attention, he said.

All the negotiating groups have programmes of meetings and consultations over the coming weeks, said Lamy, adding that agriculture and NAMA remain key to further progress across the board.

"We do not have much time available - the end of the year is approaching rapidly. Work will continue in the Negotiating Groups over the next few weeks, and any ministerial involvement which might be necessary will take place when the moment is right," said Lamy. "There should be no doubt - we are working on Plan A, establishment of modalities. Our chances of achieving our goal are clearly less than they were in July, but they are still good enough to warrant a major effort."

According to trade officials, the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, reported to the TNC that he had held an informal open-ended session to lay out the process. He said that in terms of a textural context, the only text he is working on is Rev. 3 of the text that came out in July. He said the developments in July were real and he had a number of discussions during the course of the July meeting that gave him a pretty good indication of where members may wind up with respect to the text. But all of the discussions held in July have to be tested to see whether they still hold.

Falconer said that members are focussing most of the time on areas of the greatest divergence - Special Safeguard Mechanism (SSM), and sensitive products. With respect to the industrial countries, it is tariff quota creation. He said that tariff quota creation and tariff simplification were the areas in July that offered the starkest contrast because they were binary in terms of the possibilities there. He said that in addition to these issues as well, discussion would be on cotton, and Green Box.

The Chair said that people were engaged and he detected some progress. On the question of tariff simplification and tariff rate quota creation, Falconer said that people were going beyond the simple binary response of yes or no, and looking at compromises and ways to move forward. That said, people were not abandoning positions.

Falconer announced that he would continue with his work, and have an informal open-ended meeting (of the full membership) next Wednesday in which he will lay out in more detail what his "walks in the woods" consultations have generated.

The Chair of the NAMA negotiations, Ambassador Luzius Wasescha of Switzerland, reported that he has started up his consultative process. He has held 28 consultations so far, and what his consultations have told him is that there is a lot of work to be done, in terms of consolidating the work in respect of both substance and process. He said that he knows more about the problems. He has been able to identify more clearly the difficulties that members have. He said that one of the things that he will be working on is proposing technical answers to some of the questions that members have posed to him.

He said that he will be focussing on consolidating several textural aspects. He added that maybe after the consultations, the presence of experts and decision-makers will be required in November.

Several countries spoke following the reports of the Director-General, and the agriculture and NAMA Chairs.

According to trade officials, Mexico stressed the benefits of a quick conclusion to the Round. It said that protectionism and economic isolationism do not work.

Lesotho, speaking on behalf of the Least Developed Countries, said that although the July mini-Ministerial had seemed to be an unfortunate outcome, it would not be considered as having dealt a fatal blow to the negotiations. Time is of the essence in terms of concluding the Doha Round.

It said that the financial crisis will affect the external imbalances of developing countries, especially net-food-importing developing countries. It added that import and export financing will be affected more profoundly in developing countries. Expressing concerns about the single undertaking, Lesotho said that perhaps for LDCs, it would be good to have an early harvest of the LDC provisions particularly given the difficulties we are having economically at the moment. There would be no real impact of an early harvest for LDCs, either on the industrialized countries or the emerging economies.

Lesotho stressed that it would like to see a continuation of a transparent, inclusive and bottom-up approach, with the development dimension at the heart of it. We need to take stock of what happened in July and do what is necessary in terms of sifting and separating wheat from chaff and continue the work.

It said that the specific circumstances of the global economy must be considered particularly as they pertained to the LDCs.

Chile said that there is need to have collective solutions to the problems of high energy and food cost, the credit crisis, market volatility etc.

Cote d'Ivoire, on behalf of the African Group, said that it was pleased to see the resumption of work in the negotiating groups. It said that the undeniable gains that were obtained for the developing countries in the July package must be recorded and stabilized. Not every area has been discussed, said Cote d'Ivoire, pointing to the issue of cotton. It said that the process has started again since the July setback.

The African Group expressed worry about the contagion of the financial crisis into the real economy, and the impact this may have on developing countries and trade. It said that these concerns are already being seen about unemployment, and there will be an imbalanced impact of the crisis on developing countries. The Group supported the Director-General's efforts on the trade and finance initiative.

The events of recent weeks in terms of the markets will result in a new world economic order and an end of laissez faire policies. There is a need for regulation, it said, adding that the WTO needs to send a message to financial markets that governments can work together and take a powerful stance in favour of stability.

Peru said that the results that were achieved have to be locked in. We need to be very concerned about the effects of the financial crisis on the real economy and employment. It said that there will be an impact on supply and demand. The multilateral trading system is going to be essential to ensure that there is an element of stability with respect to global trade.

South Africa said that this is the worst financial crisis since the 1930s. It was deeply concerned about the impact this may have on the multilateral trading system which has shielded its members from protectionism. The GATT and WTO have provided a relatively cheap insurance policy against the forces of protectionism. All of us - developing and developed countries alike - need to strengthen the multilateral trading system as a bulwark against protectionism. The core objective must be to continue to strengthen the system.

We must take the development dimension into account. It should be the heart of the work programme, said South Africa. It also said that at present, the texts on agriculture and NAMA are not balanced as they should be. NAMA would require deep cuts in tariffs for developing countries and they reflect the demands of the industrialized countries, rather than those of the developing countries. Any package that emerges needs to be one that considers all members large and small players alike if it is to be sustainable.

Hong Kong-China said that it was fully committed to a successful conclusion. It wanted modalities by the end of the year.

Cuba said it was glad to see a return to the transparent, inclusive and bottom-up process. The African Group, the ACP, the LDCs, and the Small and Vulnerable Economies interests must be taken into account and must be a precondition before a successful meeting. It said that SSM is not the only issue. There needs to be a balanced outcome.

Cuba said that we are moving into a recession and this is the result of excessive liberalization and lack of regulation and speculation in the financial markets. We have to move cautiously with respect to the Doha Round.

Bolivia, represented by its senior capital-based official, Pablo Solon (who is trade advisor to President Evo Morales), said that although almost everyone expressed worry about how the financial crisis is like a tsunami, it would appear that there is yet change at the WTO, which has the same agenda as if the financial crisis has not affected the Doha agenda. He agreed that we have to guard against a revival of protectionism, but he added that further liberalisation is also not the solution, especially with regard to services and within that, financial services.

Mr. Solon said that the WTO must learn from the reality of the crisis and that the WTO should take into account this crisis and change, if it does not want to end up like the IMF which did not change and which now has only a marginal role in the financial crisis.

He stressed that the WTO must change the Doha agenda as a result of the lessons from the crisis, in order to be relevant. We don't think a "walk in the woods" will work in face of the crisis.

Turkey said that the financial crisis is a wake-up call and only a multilateral framework can overcome the destabilizing effects seen in recent weeks.

Bangladesh said that there is need to lock in the outcome of the July mini-ministerial. There should not be backtracking. There is need of an early harvest for the LDCs. Stressing that agriculture and NAMA are central, it said that there is need to look at other areas including special and differential treatment, the agreement-specific proposals as well as TRIPS.

On the financial crisis, Bangladesh said that there is concern, not strictly about enhancing market access, but about simply hanging on to the existing levels of market access that are currently in evidence today. Bangladesh also said there was need to look at the present problems in a systemic way.

Indonesia welcomed the bottom-up approach. It said that the development dimension is the key. It called on members to show flexibility on all outstanding issues, not strictly a one-issue phenomenon - the SSM.

Venezuela said that the financial crisis will lead to recession and there will be an impact on developing countries, more than on developed countries. Questions of financing in terms of world trade will be very important that they be addressed. We need to look at the entire way in which trade finance is being conducted. +

 


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