Concern among developing countries on DG consultations in WTO

The WTO Director-General held closed-door meetings in May with a select group of trade envoys in which only market access issues were said to have been broached. This has raised apprehension that the contentious question of farm subsidies which harm developing-country agriculture is being sidelined in a bid to conclude the Doha Round trade talks by year’s end.

by Chakravarthi Raghavan

GENEVA: There is increasing concern among developing countries over the “growing attempts” by the WTO Director-General (DG) and the major developed countries to wind up the Doha Round in time for the WTO’s Nairobi Ministerial Conference by focusing only on issues of market access for agricultural and industrial products, without addressing and resolving issues of domestic and export subsidies in agriculture, which adversely impact on farmers in poorer countries, trade envoys said.

Some of them said that there also appear to be subtle attempts to split China and India, which so far have been resisting these efforts to focus on market access issues and ignore the huge trade-distorting agricultural subsidies of developed countries.

In a scenario more reminiscent of the bad old days of the pre-WTO trading system, of very restricted “green room” meetings where a few developing countries are sought to be isolated and pressured to force down an accord on the broader membership, the WTO DG Roberto Azevedo has been apparently having closed-door meetings with trade envoys from the United States, the European Union, China, India, Brazil, Australia and Japan.

These meetings, according to those familiar with the discussions, are focusing only on market access issues for agricultural and non-agricultural products, being pushed by the United States.

Some trade envoys told the South-North Development Monitor (SUNS) that the meetings are discussing “new ideas” on market access, based on a combination of average cut as well as a cut on the average existing tariff level for reducing tariffs on agricultural and industrial products.

This has raised serious questions as to whether attempts are being made to bury all the existing Doha Round mandates in order to conclude the Round by the end of this year, in time to proclaim success at the WTO’s 10th Ministerial Conference, which will take place in Nairobi in December.

“Clearly, there is an attempt to run away with market access results based on an average cut in agriculture products while postponing the outcome on domestic support [subsidies] till the last minute of the 10th Ministerial Conference,” according to a developing-country trade envoy familiar with the DG’s “green room” meetings.

“One major developed country [the US] doesn’t want to discuss domestic support at this juncture as it could raise questions on its trade policy initiatives,” said another trade envoy.

Azevedo reportedly held three rounds of green room meetings with the seven countries on 6-12 May to discuss only market access in agriculture and industrial products.

On 8 May, the DG held a larger green room meeting of over two dozen trade envoys on issues concerning services and the development dossier in the Doha Development Agenda (DDA).

During the discussions on market access in agricultural and non-agricultural goods, the chairs of the respective negotiating bodies under the Doha Round – Ambassador John Adank of New Zealand (agriculture) and Ambassador Remigi Winzap of Switzerland (NAMA – non-agricultural market access) – along with the WTO General Council Chair, Ambassador Fernando de Mateo of Mexico, were present and took part in the marathon meetings.

Prior to the DG’s green room meetings with the seven countries, a large majority of developing and least-developed countries had insisted at the WTO Trade Negotiations Committee meeting on 27 April (see TWE No. 592/593) that the post-Bali work programme with precise modalities must be largely based on all the existing Doha Round mandates beginning with the 2001 Doha Ministerial Declaration.

The mandates also include the 2004 July Framework agreement, the 2005 Hong Kong Ministerial Declaration and the 2008 revised draft modalities for the agriculture and NAMA negotiations.

In sharp contrast, the developed countries, led by the United States, had raised numerous concerns on the previous mandates while insisting that the work programme must be based on a “recalibrated” approach. The EU consistently propagated what it has been calling a “simplified” approach, but without spelling out the elements of such an approach.

The developed countries have largely coordinated their positions to give short shrift to the previous mandates, particularly the 2008 revised draft modalities, trade envoys suggested, with some suggesting that there is an element of disarray among African envoys in the absence of strong leadership in Geneva and back home.

“New approach”

Against this backdrop, the DG has reportedly focused on a “new approach” based on average formula without specifying any figures that would be used for such a formula. Azevedo asked the seven countries to spell out their views, said trade officials familiar with the meeting on 6 May.

The average formula framework had been proposed at the agriculture meetings in April by Paraguay and then Norway. But these proposals did not fly, as they failed to secure any support from the developing countries, particularly China and India. China had accused Paraguay of acting as a front for some developed countries who are promoting the average formula framework so as to deny the flexibilities (for developing countries).

Clearly, the average formula framework is seen as a death knell for the tiered formula approach that the former chair of the agriculture negotiations Ambassador Crawford Falconer of New Zealand had suggested in the 2008 revised draft modalities. That tiered approach was aimed at reducing the sensitive agriculture tariffs in the developed countries. Developing countries also had to bring down their tariffs based on the tiered framework and in return, they were provided flexibilities through increased entitlement for sensitive products and special products.

The DG’s emphasis on average formula is thus seen as a clear ruse for the developed countries to protect their sensitive tariffs, said a former trade envoy from an industrialized country. “An average low tariff cut will help industrialized countries to shelter their sensitive tariff products,” the envoy argued.

The US, the EU, Australia and Japan have favoured the average formula approach for different reasons. While Australia, which is the coordinator for the Cairns Group of agriculture exporters, had suggested an aggressive market access approach in the past, Canberra is now willing to change course in line with the interests of other developed countries, said an agriculture negotiator familiar with the discussions.

However, India and China told the DG that while they are willing to consider new approaches, they prefer that the 2008 revised draft modalities remain as the basis. The two countries sought to know how the flexibilities will be treated in the event the average framework is to be adopted.

India also pointed out that it would prefer the tiered approach with flexibilities as compared to the average framework which might have an uneven impact on its tariffs, said negotiators familiar the discussions.

The two developing countries, particularly India, also raised concerns as to whether the average formula approach would address tariff peaks, tariff escalation and tariff capping. These are long-pending issues that the Tokyo Round negotiations in the 1970s failed to address, and were placed on the agenda of the subsequent Uruguay Round. They again were not tackled in the Uruguay Round’s Marrakesh treaty (which established the WTO), but developing countries accepted the “good faith” assurances of the developed countries then that the agriculture reform process, while needing a long timeframe for implementation, was now irreversible and that these issues would be addressed as part of the process.

These assurances were renewed and are a fundamental part of the Doha Round negotiations and mandate, but all of that is again sought to be brushed away.

At the DG’s meetings with the seven countries, there was considerable discussion on what will happen with regard to special products and the special safeguard mechanism for developing countries.

Apparently there was a suggestion that only China must be given entitlement to designate a few special products while other developing countries must not have these products because the level of ambition is said to be already lowered with the average cut, trade officials told SUNS.

The suggestion for a few special products for China came from the DG, said a trade official from an industrialized country.

This is being seen as an effort by Azevedo to break the unity of China and India in attacking domestic agricultural subsidies of the US and other industrial countries affecting the poor farmers in these and other developing nations.

In the area of industrial products, the seven countries discussed what is called “a cut from the average” given in the Swiss formula that was proposed in the 2008 revised draft modalities. There was no clarity as to how the cut on average would compare with the Swiss formula and whether the associated flexibilities for developing countries in the NAMA tariff reduction commitments would be retained as they are in the 2008 revised draft modalities, trade officials said.

The US has maintained that with the proposed “recalibration” to reduce the overall level of ambition in market access for agriculture and industrial goods, there should be no demands for any additional flexibilities.

Silence on subsidies

However, the most puzzling aspect of the DG’s meetings with the seven countries is that there was no discussion at all on domestic support and export competition in agriculture, developing-country trade envoys told SUNS. The US has said there is nothing to discuss in domestic support while the DG has made no effort to discuss the issue despite demands from India and China.

The 2008 revised draft modalities had suggested a figure of $14.5 billion for the US Aggregate Measurement of Support (AMS). But, with the current American farm bill enacted last year, the US AMS will go well beyond $14.5 billion.

Azevedo also did not discuss commitments on export competition in which the EU and the US remain major culprits, said a trade official.

The WTO’s Appellate Body had ruled that the domestic subsidies and export-financing schemes for cotton producers in the US had adversely affected global cotton trade. The ruling was handed down in a dispute launched by Brazil and was adopted by the WTO’s Dispute Settlement Body, but is yet to be implemented by the US, which has been “buying off” affected Brazilian farmers by means of lump-sum payments to Brazil.

In a dispute on sugar subsidies, the Appellate Body had passed strictures against the EU.

In a nutshell, Azevedo’s specific focus only on market access without discussing all the outstanding issues in the domestic support and export competition pillars has raised more questions about the integrity of the process being adopted, several trade envoys told SUNS. (SUNS8023)                              

This article was written with inputs from D. Ravi Kanth.

Third World Economics, Issue No. 594, 1-15 Jun 2015, pp2-4