Expert panel voices its views on Bali package

Assessing the state of play of WTO talks to craft an outcome for the Bali ministerial meeting, a panel of trade officials and experts convened as part of the recent WTO Public Forum decried the lack of progress on issues of interest to developing countries.

by Kanaga Raja

GENEVA: None of the issues of importance to developing countries have seen any traction in the consultations and negotiations at the WTO on any of the three pillars of a potential Bali outcome, according to panellists at a WTO Public Forum session here.

The potential outcomes or “deliverables” for the Bali Ministerial Conference taking place this December have been identified as a trade facilitation accord (being pushed by the US); tariff rate quota (TRQ) administration, food security and export competition issues in agriculture; and development/least developed country (LDC) issues.

The panel session, held on the last day of the 1-3 October Public Forum and titled “WTO at a Crossroads: Bali Outcomes for Development”, was organized by the Our World Is Not for Sale (OWINFS) network of civil society organizations and the Third World Network.

The panellists included Ambassador Faizel Ismail of South Africa, Ambassador Jayant Dasgupta of India and Vice Yu of the Global Governance for Development Programme at the Geneva-based South Centre. The session was moderated by Deborah James of the Washington-based Centre for Economic and Policy Research (CEPR) and coordinator of the OWINFS network.

Deliverable or not?

Ambassador Faizel provided at the outset an overview of the Bali package, the underlying issues for the Bali Ministerial Conference – the future of the Doha Round and the future of the multilateral trading system itself – and the “new narrative” on trade.

On the Bali “deliverables” in agriculture, he said that after many discussions, members arrived at three possible deliverables: TRQ administration, agricultural export subsidies, and food security.

The TRQ in agriculture, he underlined, is not about market access per se but on increased transparency on agricultural import quotas that was reached in the Uruguay Round Agreement on Agriculture. On this, he said, the G20 developing-country grouping had put forward a proposal to make (the administration of) these quotas more transparent because they are not very transparent in many developed countries and consequently limit the extent to which countries are able to export to those markets.

“This [issue of TRQ] was seen as the easy one because in the last few months, everyone said ‘well this can be done’,” he said. There were a few voices of concern and dissent but the majority of countries felt they could do it.

In the last few weeks though, according to Ambassador Faizel, the United States suddenly said “well we are willing to do this provided the developing countries, particularly the big emerging countries like China and others, also implement this provision and ensure that they not only make it transparent but pay attention to the extent to which they fill these quotas – the so-called underfill mechanism.”

And the US wanted to ensure that the so-called special and differential treatment (S&D) provision of the proposal put forward by the G20 changes its nature.

According to the South African trade envoy, China has taken the view that it does not want to be excluded from S&D, and the G20 agreed that it should maintain its position that there should be S&D on TRQ administration.

This TRQ issue was a rather simple proposal, Ambassador Faizel said, adding that WTO Director-General Roberto Azevedo had sent a letter a few days earlier to trade ministers in which he said he was very troubled by the differences that members had on this issue because this was supposed to be an easy one in the negotiations.

On the much more important question of (agricultural) export subsidies, Ambassador Faizel told the participants in the panel session that the G20 had put forward some very “modest” proposals. He recalled that in 2005 all members had agreed at the Hong Kong Ministerial Conference that they shall eliminate export subsidies by 2013, which is this year, “but of course, there has been no traction on this” and the G20 decided instead to ask for subsidies to be at least reduced by half.

“And on this proposal, there has been no traction at all because all the major providers of export subsidies in the developed world say that this will be very difficult politically for them to accomplish. So, that’s not going anywhere,” stressed Ambassador Faizel.

On the issue of food security, he said that here too there is a big debate. “Fortunately, we have focused the debate on one issue, which is the possible ‘peace clause’ [for] those countries who fall foul of the current Agreement on Agriculture (AoA) that does not cater sufficiently for developing countries who have public food stocks and procure [for stocking] food grains from small farmers.”

There is recognition that there is a problem with the current Agreement and that something needs to be done, “but many countries are reluctant to provide any permanent solution and so the peace clause is a temporary solution – an interim solution – that is being discussed at the moment, but we still have a long way to go on this.”

“So, on the agriculture pillar, we don’t seem at this stage to be able to fulfill all three of the deliverables; and whether we will be able to deliver at least one of the three is not very clear at this stage,” Ambassador Faizel asserted.

Major differences

On the issue of trade facilitation (TF), he said that while this is a controversial negotiation, all members are working on this, and there have been intense processes of textual negotiation. There is a Rev.17 of the text which is heavily bracketed (brackets indicate areas on which there is no consensus) – about 400 brackets still – but there is a potential agreement on the table which members are negotiating.

According to the trade envoy, the basic issue here is that there are two sections in the draft agreement. In Section I (on commitments), members are trying to agree to some new disciplines to add value to existing World Customs Organization (WCO) guidelines on how countries should manage their customs systems.

Of course, he said, the disciplines that are being proposed, mainly by developed countries, are to encourage developing countries to modernize their customs systems to facilitate trade, and there are many proposals on the table that are being negotiated. Some are quite complex and they envisage very sophisticated mechanisms for import and export of goods through customs. Some of these will require additional support and technical assistance for those countries which are at a lesser level of development.

He also pointed to a Section II which provides for S&D and some flexibilities for developing countries, allowing them to implement over a longer period, and it does hold the promise, in Category C of Section II, of technical assistance and capacity to those countries that need it.

“However, there are a number of problems at the moment,” said Ambassador Faizel. In Section I, there are a number of proposals that are “still wide open”.

Some of them have to do with differences among some of the major developed countries over their different respective systems – for example, an authorized operator scheme of the European Union, where it has proposed to provide special favours and special transit measures for those traders who are frequent traders. The US and many other advanced countries like Singapore have a different system.

“So, we have been discussing even up to last week how to find a way of accommodating among the advanced countries the differences in their systems. So, we’ve not yet agreed on that and that has little to do with many of the poorer developing countries.”

Similarly, he added, there are major differences among the developed countries on issues like advance rulings. The US has a very ambitious proposal on the table and the EU can’t meet the high expectations of the US on that, and many other countries as well.

There is also another proposal like this by the US on expedited shipments to provide special services for companies like FedEx, UPS and others, and some major developed countries have difficulties with this proposal, “not to speak of many of the poorer developing countries who will have to raise substantially their current level of customs modernization to meet this very high standard”, he said.

On Section II, Ambassador Faizel said that the main dispute that is on the table, which is not resolved and on which there are a number of brackets, relates to the promise made in the mandate.

In this context, he referred to the mandate on TF in Annex D of the outcome of the Hong Kong Ministerial Conference. In that document, there was a provision agreed by the ministers that those countries that require assistance will only be required to implement any of the agreements in Section I if the necessary capacity and technical assistance is provided to them.

“Currently, the United States and many of the other developed countries are unwilling to sign on to such a provision because they say that the current policies on aid and technical assistance [don’t] allow them to commit to some recurring financial commitment and they feel also that this will provide a loophole for countries who don’t want to or are unwilling to implement some of the provisions to put these implementation obligations into section C,” Ambassador Faizel underlined.

Development and LDC issues

On the so-called development issue, he said, two major questions have been discussed. One is to implement the so-called (28) S&D proposals that have been on the table since 2001. On this, developing countries, particularly from the African Group, took a view that many of the proposals that were agreed to by developed countries in the past were of a low economic value, and they were reluctant to sign on to this. But even these 28 proposals were being reopened by many developed countries and “at this stage, these are unlikely to be in the Bali package.”

He noted that there is another S&D proposal that could be of value to developing countries – the monitoring mechanism. This is a mechanism that would allow developing countries to review existing S&D provisions with a view to strengthening them, making them more effective and, if necessary, revising them. But negotiations are going on at the technical level on this, he said, adding that “it’s very slow and we don’t have much time. So, we’re not sure whether there will be a substantial outcome on this.”

On the LDC issues, he drew attention to the four issues that are on the table. On DFQF (duty-free, quota-free market access for LDC products), he said, “We’ve heard from the biggest country, the United States, that this is not doable. We heard that many months ago and there have been many statements on it. So, there hasn’t been any traction on it.”

On the issue of cotton, he said that these are the poorest countries in Africa whose economies rely on cotton, and that the cotton market has been highly distorted, undermining their production. “There has been no movement,” he said.

He noted that there has been a little bit of movement and some discussion on rules of origin, “but again this is not substantial.”

With respect to the services waiver for LDCs, he said that “at this stage, we don’t see any substantial outcome that would provide any real additional market access to LDCs in services.”

“So, on the LDC issues, there is not likely to be much traction and deliverables in Bali,” Ambassador Faizel stressed, adding that “overall, it looks like many of the issues are still wide open...”

Underlying questions

On the underlying issues at Bali, he was of the view that there are two such issues. One is the question of what happens to the Doha Round. There was a discussion on this at the last WTO Ministerial Conference in 2011.

On this, he said, there were two views. One view could be summed up as: “Well, too much time has passed. The [Doha] Round is obsolete and it’s not doable anymore.” The dominant view amongst many of the thinkers and writers in the developed countries is that the Round is dead.

However, he noted that if one reads the outcomes of 2008, it will be seen that the majority of the developing countries had an opposite view, highlighting in particular the development dimension of the Round which included many of the concerns of the developing countries arising from the weaknesses and imbalances of the Uruguay Round.

“Those concerns still remain valid,” he said, further highlighting the concern that the last agreement on agriculture in the Uruguay Round remains highly imbalanced and that many implementation problems of the Uruguay Round still remain on the table.

He noted that these are mandated in the current Doha Round and that many of these issues are of concern. Many promises were also made in the Doha Round, for example, to provide DFQF to LDCs.

“And many of these things will be lost if the Round is simply allowed to sink into the sand,” Ambassador Faizel said, adding that it remains a big debate and there is a huge difference between members about the future of the Round.

The second issue is about the future of multilateralism itself, he said. He noted that US Trade Representative Michael Froman indicated that members had agreed at the 2011 Ministerial Conference that “we shall move on and discuss fresh and new approaches”.

However, Ambassador Faizel countered, actually that had not been agreed, but was only one view. And there were other views by more than 100 countries that insisted “we should retain and strengthen multilateralism as we know it”.

But the new fresh view (of some) says that the single undertaking as we know it is passe, and that it doesn’t work anymore because there are too many countries, agreement cannot be reached, there are too many issues on the table, and what should be tried is to agree to one thing at a time. And the first thing on which agreement should be sought is trade facilitation. Ambassador Faizel also mentioned in this context the issue of environmental goods and services, which is of interest to developed countries.

The second thing that the new approach says is that there are too many members in the WTO – 159 – and they cannot come to an agreement among themselves. On this view, what really needs to be done is to bring together a group of like-minded countries first in a so-called plurilateral setting because a “high-standard” agreement is more likely to be attained this way; once an agreement is reached, it can then be multilateralized by getting others on board. Ambassador Faizel noted that in the area of services, there is a plurilateral process going on at the moment (negotiations on the so-called Trade in Services Agreement).

“Global value chains”

Commenting on the “new narrative” on trade, Ambassador Faizel said it is linked to a new idea that has been germinating over the last three or four years – the idea that the world has changed and is now dominated by what are called “global value chains”, where multinationals like Apple, Walmart and others operate across borders and nothing is produced in one country anymore but produced across many countries. And for any country to develop, so the theory goes, they need to link up to these value chains, and if they want to link up and benefit from it, they have to remove all barriers between countries that are involved in this chain so that they can facilitate greater efficiency of trade and investment, and then they will improve their welfare.

Further citing the new narrative, he said that one of the key instruments to achieve this is trade facilitation, because trade facilitation will help improve the flow and increase the efficiency of trade. Also, the new narrative says that tariffs are less important – it’s all about trade facilitation – and services are more important than goods, so let’s not worry about agriculture and all that. Let’s look at services and improve services and remove all the barriers to services trade.

According to Ambassador Faizel, the new narrative also says that plurilaterals are the way to go, because multilateralism as we know it today – 159 countries – doesn’t work anymore. The narrative also points to a number of new issues that are more important like investment (and services) – because in this “global value chains world”, investment needs to flow across and services need to flow across – and state-owned enterprises should all be abolished.

He noted that in the ongoing negotiations on a Trans-Pacific Partnership Agreement, many of these ideas are germinating on the new gold standard on each of these issues – intellectual property, services and state-owned enterprises. After there is agreement on this – as well as in the new mega-bilateral free trade agreement between the EU and the US – these ideas will be brought to the WTO, where those countries that are not part of those agreements will have to gradually accept the new gold standard that is developed.

“That is the new trade narrative that is on the table,” said Ambassador Faizel. He said, however, that there are other views on this – in the outcome of the 2011 Ministerial Conference, the majority of developing countries had a different view. Their view was that “we need to stick to the principles of fairness, equity, of balanced rules, of inclusiveness and of a development-oriented multilateral trading system”, he concluded.

Internal and external balance

Speaking on the issue of trade facilitation, Vice Yu of the South Centre said that if one looks at the way the developing countries have been approaching these discussions – ever since the discussion about the mandate in 2004 and the launch of the TF negotiations in 2005 – they have been pushing for two things in terms of the TF negotiations.

One, according to Yu, is that there must be internal balance within the TF negotiations in terms of the balance between the rules that would come out that supplement what the WCO has put together and the articles in the GATT, and S&D and the provision of technical assistance that would match what the developing countries should do in terms of implementing and complying with the new rules that would be set up.

Over and above that, he added, there was also the issue of external balance which developing countries sought. In this regard, he noted that TF came into the Doha Development Agenda (DDA) only in 2004, and that the other parts of the DDA also had to be moving along at the same time as one moves along on the TF negotiations. So, that meant that there needed to be progress in agriculture, in services, on the LDC issues, on S&D, on implementation-related issues and other parts that were relevant to development.

“And that kind of approach then underlay the approach that developing countries have been taking for quite some time on TF,” said Yu, adding that this approach was based on the idea that “facilitation of trade is important for developing countries not least because it should help developing countries improve their industrial capacity and ... the ability of their industries in terms of producing goods for export.”

But as the negotiations move along, what is seen in terms of the shaping of the Section I text (on commitments) is a move into a more narrow focus on the simplification, harmonization and standardization of trade procedures, in effect trying to create new rules that would require developing countries, for example, to raise their customs procedures to standards that developed countries are already implementing.

“And so, the burden of implementation and the burden of compliance, if you look at it that way, will actually be falling more on developing countries than it would fall on developed countries, to a great extent.”

If one looks at the way that the new rules are being crafted, a lot of these will actually involve facilitating the flow of imports into developing countries rather than the flow of exports out of developing countries to major markets, said Yu. This could then have a downside effect on the ability of developing countries to pursue their own industrialization objectives, in terms of the industries that they would want to set up.

He pointed out that the other major issue that is related to the development agenda in the DDA in relation to trade facilitation is that a lot of the provisions being negotiated hold significant administrative and institutional burdens for developing countries, and LDCs in particular, whose customs and customs-related institutional mechanisms might not be as advanced compared to those of developed countries.

One of the key issues in the TF negotiations is the issue of compliance with the mandate in Annex D, he said, noting, amongst others, that Annex D also said that developed countries committed themselves to providing developing countries with the support that would be needed in order for them to actually build implementation capacity. This was the promise, but so far, unfortunately, the promise has not been kept, Yu stressed.

Deborah James of the OWINFS network summarized: “It seems like while so far we’ve heard a lot of the developing-country agenda is being sort of pushed off, not discussed, not having a lot of traction, this trade facilitation is an area that seems to be moving forward and having traction and getting pushed a lot, even though it wasn’t part of the original DDA agenda.”

Post-Bali scenario

Ambassador Jayant Dasgupta of India, speaking on the post-Bali scenario and the future of multilateralism, said that “the problem that confronts us is not so much about Bali, it is about post-Bali. It is about what do we do with the Doha Round.”

He said that it all started with agriculture, where it was envisaged that there would be reforms “and that we would carry on with them and that we would review them periodically.”

“Now, that is something which did not get implemented and it has taken us all these 12 years to come to some sort of an agreement on agriculture which lies gathering dust on the shelves because the developed-country perspective is that only if the single undertaking ever comes through, that could be part of the package, but till that time, it will have to wait, gathering more and more dust,” he said.

This is the most important development outcome that could have been delivered, he stressed, adding that the developing countries, especially the poorer amongst them, have a very large proportion of their population dependent on agriculture.

He lamented a situation in which “export subsidies continue to distort international trade, … food aid continues to flow and distort domestic trade and agricultural production in the poorer countries, [and] domestic food aid in the developed countries, which disburse billions of dollars, continue to find their way”. In the Uruguay Round Agreement on Agriculture, various loopholes were provided in the Green Box so that a large number of subsidization programmes could be parked there and could be protected from any challenge in the WTO.

He noted that if one looks back, what was almost concluded without any square brackets was the pillar of export competition, which covered export subsidies, export credit guarantees and food aid. There was no dispute remaining on this and everything had been sorted out, of course, not to the full satisfaction of either side. “But that is not being sought to be harvested in this Bali package,” Ambassador Dasgupta underlined.

On what is being sought to be harvested from a development perspective, he pointed to the LDC issues, adding that the LDCs are primary product producers and they have a problem in terms of capacities, investments, resources, product diversification and industrialization. Whatever little they produce, they would like any surplus to be exported so that they can develop and grow, and use that for investing and have some kind of industry.

The problem is that that has to come through market access provided in other countries, he said, adding that DFQF lies at the heart of it. He said that it is very heartening that many developed countries have given DFQF already. The EU gave it in 2000 through the Everything But Arms initiative, and developing countries like India did it five years ago.

“But there is a problem when the largest market [the US] finds it difficult to give that to the LDCs, something which the LDCs have been clamouring for since 1996,” he said, adding that this is a development issue which is falling, or has fallen, off the table for the near future, definitely for Bali.

He noted that there is a very concerted effort to project trade facilitation as primarily an LDC issue and a poorer-developing-country issue, “but we have a different opinion about that, especially the form in which it is now taking shape.”

On the second thing that the LDCs have asked for, he noted that there are four LDCs and 32 other African countries that are deeply concerned about cotton subsidies – domestic and export subsidies which distort the international market and provide a hindrance to their export of this cash crop which they need as a source of income. “That is blocked completely. No way [to a solution],” he asserted.

Ambassador Dasgupta pointed to services as the third avenue of getting market access, saying that in this area, the poorer countries, especially the LDCs, have a problem relating to highly skilled manpower.

Those larger developing countries which have a reserve of, or some strength in, highly skilled manpower are finding it extremely difficult to get access in Mode 4 of services provision (movement of natural persons) in countries where there is a shortage and where there is a demand.

Referring to Mode 4, he said that it is not the highly skilled professionals that perhaps India, the Philippines, China and many other developing countries have been asking for more than a decade. Pointing out that it is the semi-skilled and lower-skilled people, he said: “Will there be a kind of access provided? I don’t think it is going to take place in the near future.”

Fourthly, Ambassador Dasgupta said that if DFQF is given, then the rules of origin governing that should be framed in such a manner that they are simple to use and operational. The LDCs have floated a paper on rules of origin with a great deal of difficulty, and are facing a lot of resistance. The reaction to that is that “it has to be non-binding and non-prescriptive. That is where the negotiations are” on this fourth item of the LDC proposal.

As to what is over and above this as part of the so-called development package, Ambassador Dasgupta pointed to two issues, one being the monitoring mechanism for S&D provisions. He noted that there is a “very palpable tension” on this because there is one side which says “you can only review the effectiveness of implementation of the S&D provisions”. So, the S&D provisions will stand where they are and the implementation will be there and the effectiveness of the implementation is all that can be reviewed in the monitoring mechanism.

This was not the way the monitoring mechanism was conceived of and then articulated by the developing countries, said Ambassador Dasgupta. Referring to the WTO General Council decision of 2002 and the events leading up to it, he said that it was about strengthening the S&D provisions, and that if they had implementation and monitoring, it was only a part of it.

“We really don’t know whether we would have anything meaningful coming out of this discussion leading up to Bali.”

Secondly, he pointed to the 28 agreement-specific proposals, noting that the South Centre has shown how the proposals that were made before the 2003 Cancun Ministerial Conference got distorted in the WTO by a small group of countries and when they went into Cancun for adoption, they had been “mutilated beyond recognition”. Even then, there was no consensus in the WTO to put them forward, and it was left to the ministers at Cancun to take a decision on this. “Obviously, that decision never got taken.”

It came back and the African Union, which was the proponent of most of these proposals, presented a long paper in June 2006 which said that most of these proposals, in the form in which they came out of Cancun, have no economic value. According to Ambassador Dasgupta, the African Group has said very clearly that in order to further this process of moving towards Bali and beyond, “if we have to accept these 28, please give all the 28, no questions asked. Don’t reopen them.” They have also said clearly that “you can’t cherry-pick amongst those 28 and say that ‘Alright this is what we are prepared to give and not the others’”.

That is where the last bit of the development package is now positioned, said Ambassador Dasgupta.

On the issue of agriculture, he said that the issue of export subsidies is extremely important and is at the heart of the whole development issue, “but we have heard very discouraging and disappointing responses to that right from the beginning ... We don’t know what shape it will take, whether a mere political declaration of goodwill etc or good intentions or [whether] it will be something more concrete.”

On the G33 proposal on food security, Ambassador Dasgupta said that this is something that cannot wait till the conclusion of the Doha Round, stressing that this has to be resolved.

He noted that in the face of “really great intransigence” on the part of a few of the developed countries, the G33 has put forward a compromise solution by way of a “peace clause” that it could live with till a permanent solution is found.

“We don’t know where we will go. We are keeping our fingers crossed and of course harbouring a lot of hope that it will get resolved in a satisfactory way,” he said.

On the issue of trade facilitation, he said that the whole endeavour is to show that it is a great deal for the developing countries and that it is the best deliverable agenda for the development of the poorer countries.

“It is not so,” Ambassador Dasgupta said, adding that the whole thing is about harmonizing. “Who are the proponents? If it was so good, the proposals would have come in a flurry – in a rush – from the developing countries. They have not,” he said, pointing out that most of the proposals have come from the developed countries.

In concluding the session, Deborah James summarized that for the developing countries, it is about fixing the current system that is so unfair, by making the S&D provisions operational and effective, allowing developing countries to provide some of the same kind of food subsidies that developed countries are allowed to provide in the WTO to promote food security, and disciplining developed countries’ export subsidies.

Yet, she added, we have the developed countries and primarily the corporate lobbies behind them pushing these other agreements such as on trade facilitation, which is  not even  part of the original mandate, and moving ahead with the Trade in Services Agreement (TISA) and the Information Technology Agreement (ITA).

These are really all about getting more market access for transnational corporations based in developed countries, she said. (SUNS7671)

Third World Economics, Issue No. 555, 16-31 Oct 2013, pp5-9