TWN Info Service on WTO Issues (August 2003/20)

28 August 2003

Third World Network

Dear friends and colleagues

GENERAL COUNCIL DEBATE ON CANCUN DRAFT SHOWS CLEAR NORTH-SOUTH DIVIDE

The WTO General Council held a two-day formal meeting on 26-27 August during which the revised Cancun Ministerial Text was discussed.

Many developing countries were critical of several parts of the Draft Text, especially agriculture and non-agriculture market access (NAMA).  On Singapore issues, they liked the choice of two options but were against the inclusion of Annexes linked to the option of starting negotiations.

The US and EC in contrast gave views that were opposite to the developing countries.

Below is a report of the 26 August General Council meeting.

With best wishes

Martin Khor

North-South divide on Cancun draft at General Council

TWN Report by Martin Khor, Geneva 27 August 2003

The wide-spread feeling of dissatisfaction and disagreement of the developing countries with the draft Ministerial Text put forward on 24 August, by the Chairman of the General Council, Amb. Carlos Perez del Castillo of Uruguay, came out in a clear and unambiguous way at the meeting of the WTO General Council on Tuesday 26 August.

The North-South divide came very much to the fore in particular on the sections or parts of the Perez del Castillo draft dealing with agriculture, non-agricultural market access (NAMA) and the Singapore Issues.

In the view of many of the developing countries presented in their interventions, the proposed agriculture framework asks too little from developed countries, which are allowed to elude their commitments to reduce their protectionism, whist the developing countries are not adequately protected from dumping of artificially-cheapened subsidized exports of the rich countries.

In contrast, the NAMA framework seeks a higher “level of ambition,” requiring developing countries to drastically cut their industrial tariffs, disregarding the Doha principle of “less than full reciprocity” and special and differential treatment for developing countries.

On the Singapore Issues, many developing countries complained of the imbalance introduced by the GC chair,  in favour of the first option (to start negotiations), by the annexes (D-G) containing “modalities” that reproduce the papers or positions of the main proponents, i.e. EC and Japan. These documents containing modalities, had not been agreed to in the working groups, and in some cases were not even discussed or seen before.

Several developing countries called for either the draft text to be revised, or their own alternative positions on clarifications and issues presented as alternate options, in separate Annexes and/or in a cover letter that would contain a description of the divergent views and some of the documents.

However, the General Council Chairman, Carlos Perez del Castillo, seemed adamant that he will not alter his draft text, and would at most draft a cover letter to Ministers to explain areas of convergence and divergence.

The major developed countries took opposite positions on the substance. The EC and US claimed that they were asked to make heavier commitments than developing countries in agriculture, and that in NAMA the obligations on developing countries were too light. They pressed for revisions to ensure that developing countries would commit themselves to opening up their agriculture and industrial markets even more than proposed in the Draft.

These diametrically opposite views, gave rise to rapid counter-responses from some developing countries, namely, that the rich countries which are the big subsidisers want to perpetuate double standards in the WTO by continuing their protectionism whilst forcing developing countries into extreme forms of liberalization.

Much of the substantive discussions at the GC was on the three issues of agriculture, NAMA and Singapore Issues.

At the start, the Philippines Ambassador said that the draft took the members farther away from achieving the Doha mandate than the situation immediately after Doha.  The low level of ambition (asked of the developed countries) in agriculture was in “stark contrast” to the high ambition (asked of developing countries) in NAMA. The Philippines envoy said there is  a “stark inconsistency” in that the developed countries wanted full liberalization in NAMA but a low level of ambition in agriculture.

The Singapore Issues, in Philippines’ view,  was not linked  to other issues and should be considered on their own merits. The Philippines was not ready to start negotiations. Whilst the text presented two options and this was welcome, the Philippines was against the inclusion in the Annexes, on a selective basis, of modalities relating to the first option, namely launching of negotiations. Some of these documents (on modalities) had only made their appearance Tuesday. “Do you really believe the modalities you have included sufficiently qualify as the basis on which the Ministers have to make a decision by explicit consensus?” the Philippines envoy asked the GC chairman.

Mexico’s deputy Minister expressed dissatisfaction with the agriculture text as there was no concrete provision to eliminate export subsidies and the market access formula for developed countries was unacceptable. Mexico could not accept any reference in NAMA to a compulsory sectoral approach. On Singapore issues, Mexico appreciated the choice given of two options but did not like the modalities placed in the Annexes to advance one option.

Argentina was unhappy with the agriculture text, and said the base levels of amber box subsidies of the EC and US were US$72 billion and $19 billion respectively.  Adding a new blue box would imply increasing those numbers by around $10 billion.  The green box subsidies need to be capped. The text allows for capacity for box shifting by the developed countries, “allowing for the appearance of some things changing but in fact actually nothing changes.”

On market access, Argentina said, there is no justification to continue the special safeguard for developed countries. On export subsidies, there is enough ambiguity in the text to allow the avoidance of the Doha mandate.

On NAMA, in Argentina’s view,  the Annex B framework fell short of the Doha principle of “less than full reciprocity.”  The mandatory sectoral initiative is clearly in opposition to that mandate. The “non-linear” formula is not in line with less than full reciprocity, as it results in tariff cuts by developing countries much higher than those of developed countries. The NAMA proposal reflects much higher ambition than for agriculture.

Argentina also criticized the modalities on Singapore Issues included in the Annexes.  The text on modalities on investment, did not deal adequately with development concerns. It regretted the omission of a third alternative of a limited agreement based on peer review and voluntary cooperation in competition. The modalities on transparency in government procurement are inadequate as they are only procedural and the scope of the “transparency” concept could have implications regarding market access. On trade facilitation, Argentina was concerned about the obligations of a treaty and wanted only a non-binding agreement.

Bulgaria said it could not accept the text and was against the Chairman transmitting it to Cancun. Bulgaria could not accept the package unless there were negotiations for extending the protection of geographical indications of origin to products other than wines and spirits.

The Indian Ambassador, K.M.Chandrasekhar, said that in agriculture, it was clear from Doha that the three pillars of domestic support, export subsidies and market access were closely inter-linked. “If substantial reductions in domestic support does not take place and export subsidies are not eliminated, the distortions in international agricultural trade cannot be removed,” he said. Unfortunately, the draft text does not provide the comfort that allows  developing countries to make major contributions in market access.

India, with the Group of 19 developing countries indicated the ambition of reductions that was required of developed countries in domestic support and export competition.  But the draft did not meet these demands. “If major developed countries cannot have high level of ambition in reducing subsidies, how can they expect developing countries to ambitiously reduce their tariffs which is the only instrument available to them for protecting their farmers?”

For India, with over 650 million people dependent on agriculture for their livelihood, it is all the more important that the agricultural negotiations do not become a tool to impoverish them further.

Countering the view of some countries about the two categories of commitments being taken by Members on market access, India said that Members should realise that in any case, “there are two categories of members,” in the WTO, one with “deep pockets” who subsidise their agriculture heavily, leading to the trade distortions, and others who have no financial resources to provide support to their farmers even when required. Moreover, the framework for tariff reduction worked out by the EC and the US was tailor made to suit their tariff structure and enable them to make minimal contribution to market access while placing an “inordinately high burden” on many developing countries. Therefore, a different structure of tariff reduction for developing countries was absolutely essential. Developing countries should also not be obliged to create new Tariff Rate Quotas (TRQs) for import sensitive tariff lines in developing countries.

On NAMA, India had problems with the proposed non-linear formula and a mandatory approach to sectoral negotiations.

On Singapore Issues, India said the text with two options,  portrayed the reality of the discussions and India believed that the second option (continuing discussions to get clarifications) is the best. It was “premature” to annex the draft modalities on the four issues, when the clarification process is still not yet over. These annexes which reflect only the proponent’s position will prejudice the position of the Members holding a different view at Cancun.

In this respect, India with other countries will submit a detailed list of issues needing further clarification in the respective Working Groups and the CTG. He requested that these be annexed to the Draft as was done for the proposal submitted by some other Members.

On Special and Differential Treatment (S&DT), India said that despite repeated extension of deadlines, “we are nowhere completing the work on S&DT issues. The issues to be addressed are those relating to provisions in the current WTO agreements which have not been operationalised, and not the new rules that we may agree upon at the end of the Doha Work Programme.” India  proposed an explicit provision in the draft that the remaining agreement-specific proposals will be addressed as a matter of priority after Cancun and recommendations for decision should be submitted to the General Council by March 2004.

On implementation, Doha agreed that  negotiations on outstanding issues shall be an integral part of the Doha Work Programme. India was surprised that some Members were giving a different meaning to the word ‘negotiations’ in para 12 of the draft than in the rest of Doha Work Programme. India proposed a mechanism to address all the remaining outstanding implementation issues and to report by a specified deadline, with recommendations for decision. India was also surprised that the implementation para has been relegated to a lower spot in the draft text and urged that the order of the Work Programme, in the Doha  Declaration, be followed for the Cancun text as well.

On TRIPS, India said the progress made in the review of Art.27.3 (b) and the relationship between the TRIPS and the Biodiversity Convention, the protection of traditional knowledge and folklore, etc. should be reported to the Ministers so they can give directions.

The Malaysian Ambassador supported India’s proposal on Singapore issues, namely, that issues for further clarification be listed and placed in new annexes.

Indonesia was disappointed in agriculture that developed countries do not have to commit to reduce overall support. As the Blue Box subsidies are extended and there is no discipline on the Green Box,  the road is open for increases in overall domestic support. On export competition, the draft incorporated the US-EU deal that both export subsidies and credits can continue for the same products. This would be difficult, so the negotiations should revert to the Doha mandate that all subsidies and concessional credits be eliminated in a few years.

On NAMA, Indonesia was concerned about the non-linear formula and implied mandatory nature of sectoral initiative and proposed the deletion of  references to “non-linear” in the formula and to “participation by all participants” from the sectoral approach.

On Singapore Issues, Indonesia said it had a  problem with vague “modalities” put in Annexes. For Ministers to be on equal footing, the developing countries’ positions should also be elaborated on. It supported other developing countries’ proposals that developing countries’ concerns as stipulated in Option 2 are also fully reflected in new Annexes.

Indonesia was also critical of the services section as developing countries’ concerns and proposals that were submitted were not incorporated in the draft. Indonesia said it was critical because the services negotiations were of little value for developing countries since they had no export capacity apart from Mode 4 which is wrought with non-transparent barriers in the developed world.

On behalf of six countries (Dominican Republic, Honduras, Jamaica, Panama, Trinidad and Tobago and Indonesia) Indonesia insisted on enough flexibility so as not to jeopardise farmers’ livelihoods, food security and rural development. Whilst welcoming provisions on special products (SPs) and special safeguard mechanism (SSM), Indonesia was concerned over the very restrictive approach in the Draft to SPs. The proposed draft should be modified before forwarding it to Cancun, so as to take account of their views that SPs are a stand-alone category to be self-designated by developing countries according to their needs. On the SPs, the developing countries shall be exempt from tariff reductions and new TRQ commitments (unlike the draft which envisages reductions for SPs), and shall not be subject to tariff ceilings.

Botswana, on behalf of the ACP Group, said Annexes A and B on agriculture and NAMA (with the lack of certainty in the provisions) was a cause of concern for ACP states. On agriculture, they would like provisions on preferences, SSM, SPs and net food importing countries’ needs. The final NAMA text should allow developing countries to choose their own rate and extent of future import liberalisation, so as to minimise the adverse impact on local industries.

On Singapore Issues, Botswana introduced a new document, “Proposals on Singapore Issues for inclusion in the Draft Text for Cancun” (WT/GC/W/513) issued by 12 ACP members and some Asian countries (Bangladesh, India, Indonesia, Malaysia, Sri Lanka and Philippines). The document contains proposals in the form of a draft Ministerial text on Singapore Issues in general and on each of the issues. It recognises the concerns of developing countries about the potential serious implications of these issues on their economies, and says that the situation does not provide a basis for commencing negotiations, and decides that further clarification of the issues be continued in the respective working groups.

The Botswana Ambassador said the text is a merger of positions expressed in the ACP, Mauritius and Dhaka Declarations. He said the second option in the Chairman’s Draft contains some elements in the document of the ACP and Asian countries, and thus favourable to the ACP Group. Also, this second option seems to have the support of an overwhelming number of delegations. Thus, the ACP Group was concerned over  the inclusion of Annexes D to G which were not the subject of discussions in the last two weeks. “Their inclusion serves to create an imbalance in the text both optically and substantively” Botswana said.

Botswana also raised the issue of decision-making process for Cancun, saying the working procedures were of paramount importance to the ACP Group, and it is imperative that in Cancun the procedures for elaboration, amendment and adoption of the Ministerial Text are transparent and inclusive.

To improve the decision-making process during the Ministerial, the ACP Group proposed the adoption of procedural rules to enhance transparency and inclusiveness.

These rules should ensure that:

·        All WTO members decide on the appointment of the Chairpersons of Working Groups formed at the Ministerial Conference.

·        The draft text that forms the basis of negotiations reflects the proposals of all members or groups of members.

·        All WTO members be informed of consultations and are entitled to participate in them.

·        All issues of importance, including consideration of a proposal to extend the length of the Conference, be put before WTO members as a whole for a decision.

Botswana said it is the ACP Groups’ hope that the WTO membership will favourably consider these proposals. Given the seriousness of the issues on the Cancun agenda, procedural considerations are as essential as considerations on substantive matters.

Brazil was critical of the draft, saying it does not portend a positive outcome but relegates it to the fringes of the span of possible outcomes and points to a watering down of the Doha mandate. The Brazilian Ambassador said:  “If Ministers were to choose to split the differences over the current draft or simply fill the missing dates with two constants, the result would be a new, weaker, less ambitious mandate. It would most certainly not be a development round.”

The draft contains other serious imbalances. For example, it asks too little of developed countries in agriculture and too much from developing countries in NAMA. On agriculture, it would not have been too much to ask developed countries to eliminate subsidies since they are virtually the only subsidy providers. On market access, they can count on a linear formula for import sensitive tariff lines.

But in NAMA, despite a clear Doha mandate for less than full reciprocity, the text prefers a non-linear formula and mandatory sectoral initiatives. “Both would inevitably result in far larger tariff reductions, both in absolute and relative terms, from developing countries.

He concluded that the Draft was indeed imbalanced. He added: “As I said yesterday (at the informal HOD), it is fundamentally flawed,  According to Webster, a flaw is ‘an imperfection or weakness and especially one that detracts from the whole or hinders effectiveness.’   The more we study it, the more we become convinced that it needs balance.”

He urged the Chairman to consult to see if the text’s imbalances can be corrected. If not, then all the proposals should be listed and covered with a letter explaining the situation to the Ministers. Brazil cannot accept lowering the Doha ambition or compromise its careful balance.

Kenya said it had problems with NAMA (on the non-linear formula and the mandatory sectoral initiatives). It said some of the S&DT proposals (for decision) had no genuine value, or meaning. Kenya was critical of the Annexes for option 1 in the Singapore Issues, and would like alternative annexes elaborating on Option 2 (clarification of issues) to be included as well. It welcomed the proposals on commodities and on the cotton initiative.

The EU and US presentations were in contrast to the statements of developing countries.

Peter Carl of the EC said it had contributed by moving on all pillars in agriculture and regretted that the others did not respond to the call to also move. He said the frameworks for agriculture and NAMA were good for developing countries but it took two to tango and the developing countries had not made real effort to move.

He said there was no viable alternative to the Chairman’s text so it should go forward.  On agriculture, the Blue Box proposals were hard to accept. He criticised two approaches in market access, one for developed and another for developing countries, saying it was hard to analyse what was the market opening in developing countries, and saying the super competitive developing countries would have many times more protection than developed countries.

On NAMA, there was less ambition than on agriculture. The EU wanted a single non-linear formula and the sectoral approach should be like the ITA, which can come into effect when many countries have joined. The EU was also very disappointed on the treatment of environment.

The US said it was troubled by some comments made at the HOD meeting the previous day.

The days of a great North/South divide in the house are behind us, the US claimed.  On NAMA, the US said the text was “low on ambition” and served notice that at Cancun the US will aim to improve it to retain the needed high level of ambition.

On Singapore issues, he stressed that in trade facilitation and transparency in government procurement, the texts  reflect the discussions among Members to address potential negotiations. The US was ready to find the right modalities to permit a launch of negotiations on all the issues.

NOTE:  This report was first published in South-North Development Monitor (SUNS) of 28 August 2003.