South faces uphill battle to retain “policy space” in WTO talks

Developing countries may come under pressure to cede their policymaking flexibility in order to make any headway in the deadlocked Doha Round trade negotiations at the WTO.

by D. Ravi Kanth

GENEVA: Developing countries face an uphill battle for retaining “policy space” to pursue their respective developmental goals as the outgoing chair for the Doha negotiations on market access for industrial goods at the World Trade Organization has suggested “reductions of policy space” as an entry point for kickstarting the stalled Doha talks in agriculture, market access for industrial goods, and services.

“A potential entry point to market access negotiations,” said Ambassador Remigi Winzap, the outgoing Swiss chair for the Doha negotiations on non-agricultural market access (NAMA), “could in my view be the reduction of ‘policy space’ in all of the three main areas – agriculture, services and NAMA.”

After WTO delegates return from their summer break in September, the developing countries which are facing several roadblocks to restarting negotiations on the outstanding issues of the Doha work programme will have to come to terms with onerous demands from the United States and other major developed countries to forego “policy space”, according to several trade envoys familiar with the development.

An informal meeting of select trade ministers to be hosted by Norway on 24 October in Oslo will discuss the possible deliverables for the WTO’s eleventh Ministerial Conference, which will be held next year. Among others, the issue of policy space could figure at the Oslo meeting, according to people familiar with the development.

No convergence

In his address to an informal heads-of-delegation (HOD) meeting at the WTO on 25 July, Winzap said that “for NAMA specifically, this [policy space] could include incomplete bindings, binding overhang, and reducing water on some tariff peaks.”

“Even if not directly affecting everyday business practice, such modest steps could contribute to the relevance and predictability of the multilateral trading system and to a certain consolidation of advances made in RTAs [regional trade agreements],” he said, in his oral statement that has been circulated as a restricted job document by the WTO.

The outgoing chair lamented that “as of today, there does not seem to be any convergence in members’ positions on NAMA, nor does there seem to be any noteworthy fresh momentum on NAMA since the Nairobi Ministerial Conference.”

While a “broad section of the membership keeps showing interest in outcomes on NAMA”, the chair said, “these members do not seem to know how to take their respective issues forward in the general context of WTO’s negotiating function at present.”

The chair, however, said that there is an “objective case for multilateral NAMA negotiations” because customs duties are still being applied on about 50% of world trade.

“There continues to be tariff peaks and important discrepancies in tariff structures and concession levels of members,” he emphasized.

Further, non-tariff barriers keep increasing in numbers and complexity, Winzap said.

So far, he said, “no NAMA-demandeurs have come forward with specific proposals or requests since MC10 [the WTO’s tenth Ministerial Conference, held in Nairobi in December 2015].”

He said the developed countries, which were the demandeurs of the past, “seem to have largely satisfied – or are involved in negotiations aimed at satisfying – their NAMA interests outside WTO.”

Meanwhile, “new demandeurs” have not come into sight yet, the chair said, arguing that “traction in NAMA will be difficult to achieve as long as it is looked at on its own merit.”

“Rather, there seems to be a case for approaching NAMA in the broader context of WTO negotiations,” Winzap argued.

The chair did not make any reference to either the unaddressed Doha work programme or the Nairobi Ministerial Declaration.

Policy space at risk

The chair’s address clearly suggested that if developing countries and poorest countries want to address tariff peaks and tariff escalation in the developed countries, they will have to concede “reductions in policy space.”

In short, the chair’s address has turned the unfinished Doha Development Agenda (DDA) negotiations upside down by suggesting that the developing countries will have to make bigger ‘payments’ if they are to draw the developed countries into negotiations after the summer break.

In comparison, the Doha mandate on NAMA, in paragraph 16 of the 2001 Doha Ministerial Declaration, maintained: “We agree to negotiations which shall aim, by modalities to be agreed, to reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. Product coverage shall be comprehensive and without a priori exclusions. The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments, in accordance with the relevant provisions of Article XXVIII bis of GATT 1994 and the provisions cited in paragraph 50 below. To this end, the modalities to be agreed will include appropriate studies and capacity-building measures to assist least-developed countries to participate effectively in the negotiations.”

Winzap, however, remained  silent on whether all developed countries are uninterested in restarting the NAMA negotiations or whether just one major developed country – the US – is blocking the negotiations, according to trade officials familiar with the statement.

At the last NAMA meeting over three months ago, the US said categorically that there cannot be any Doha negotiations on industrial goods because members did not reaffirm the DDA negotiations in Nairobi.

The US maintained that it doesn’t recognize the Doha negotiations any longer, according to a negotiator present in the room.

The US argued that it doesn’t see any merit in conducting the NAMA negotiations at the WTO as it secured maximum gains in slashing industrial tariffs outside the trade body.

“The US was questioning the utility of the multilateral process,” the negotiator said, adding that it is very disturbing to witness the world’s largest economy creating hurdles at every juncture in all outstanding areas of the Doha negotiations.

Despite growing demand from several developing and some developed countries for addressing the outstanding Doha NAMA issues, the obstreperous stance of the US has put paid to any resumption of the NAMA negotiations, according to NAMA negotiators who asked not to be quoted.

Further to paragraph 16 of the Doha Ministerial Declarati  on cited above, Annex B of the 2004 July framework agreement reinforced this by stating that “negotiations on market access for non-agricultural products shall aim to reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries. We also reaffirm the importance of special and differential treatment and less than full reciprocity in reduction commitments as integral parts of the modalities.”

And in paragraph 14 of the WTO’s 2005 Hong Kong Ministerial Declaration, trade ministers agreed to “adopt a Swiss Formula with coefficients at levels which shall inter alia:

l     Reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in particular on products of export interest to developing countries; and

l     Take fully into account the special needs and interests of developing countries, including through less than full reciprocity in reduction commitments.”

Thus, the developing countries which were provided special and differential treatment and less than full reciprocity in the Doha work programme and subsequent ministerial/General Council decisions are now being advised to agree to reductions in policy space as a ‘payment’ for restarting the NAMA negotiations.

The developing countries had already agreed to several ‘payments’ during the NAMA negotiations, starting with a Swiss coefficient, voluntary tariff elimination and other onerous commitments.

After all these concessions, the developing countries are being advised by the outgoing chair of the negotiations to forego policy space – which seems like the last straw on the camel’s back. (SUNS8300)                                          

Third World Economics, Issue No. 623, 16-31 August 2016, pp8, 14