TWN Info Service on WTO and Trade Issues (June 07/28)

28 June 2007

Brazil, India give inside view of failed G4 Potsdam meeting

An intriguing inside view of why the G4's Ministerial meeting at Potsdam failed was presented to WTO members by Brazil at an informal meeting of the Trade Negotiations Committee (TNC) on 22 June.

Brazilian Ambassador Clodoaldo Hugueney Filho told the WTO members that the offers made by the United States and Europe were inadequate, while the demands they made on Non-Agricultural Market Access (NAMA) were so extreme that they would have completely eliminated the policy space needed by developing countries for their development.

The Development Round would then have become a "Market Access in Developing Countries Round," said the Brazilian Ambassador.

India, which was also part of the G4 process, also gave a brief account of why the Potsdam meeting failed. Its Ambassador to the WTO, Ujal Singh Bhatia, said that at the heart of the failure were differences between the G4 members on the meaning of the "development agenda" and how it should be reflected in the final outcome of the Round.

Below is a report of the Brazil and India statements at the TNC.  It was published in SUNS on 26 June.

Best wishes
Martin Khor
TWN

Brazil, India give inside view of failed G4 Potsdam meeting

By Martin Khor (TWN), Geneva, 25 June 2007

An intriguing inside view of why the G4's Ministerial meeting at Potsdam failed was presented to WTO members by Brazil at an informal meeting of the Trade Negotiations Committee (TNC) on 22 June.

Brazilian Ambassador Clodoaldo Hugueney Filho told the WTO members that the offers made by the United States and Europe were inadequate, while the demands they made on Non-Agricultural Market Access (NAMA) were so extreme that they would have completely eliminated the policy space needed by developing countries for their development.

The Development Round would then have become a "Market Access in Developing Countries Round," said the Brazilian Ambassador.

India, which was also part of the G4 process, also gave a brief account of why the Potsdam meeting failed. Its Ambassador to the WTO, Ujal Singh Bhatia, said that at the heart of the failure were differences between the G4 members on the meaning of the "development agenda" and how it should be reflected in the final outcome of the Round.

The accounts by Brazil and India were presented at the start of the TNC meeting which had been called to allow WTO members to discuss the sudden closure of the G4 meeting and the next steps ahead in the multilateral process.

The Brazilian Ambassador stressed that the G4 process had been meant to facilitate convergence and was not a substitute for the multilateral process. The G4 had no mandate to negotiate on behalf of the membership as a whole but could only contribute by identifying possible outcomes in some key areas.

He said that it was important to acknowledge the differences and the gaps between the participants and it did not help by pretending that there was convergence in agriculture, and that NAMA was the area over which the negotiations broke down.

In agriculture, while there were a few positive moves, such as on food aid, the fact is that in the crucial areas of domestic support and market access, what was on the table was either totally insufficient or totally unclear.

Explaining Brazil's participation in the G4, Clodoaldo Hugueney said that Brazil was not in the G4 mainly defending its own interests, as it was aware that its presence in the G4 carried with it the weight of the G20 countries and developing countries that had similar concerns with the balance of the Round. It also tried to reflect the concerns of developing countries in other areas, such as NAMA, tropical products, cotton, and preference erosion.

Brazil had taken the view that the G4 could not fully appreciate key issues of interest to developing countries not represented in the room. At the same time, such issues could not be simply ignored by the four.

At all times, Brazil had in mind what the G90 called "the development yardsticks". The Brazilian ambassador quoted from the G90-Plus Declaration of 21 June, that any "agreements must translate into positive outcomes for our trade and trade balance, improvement in production and supply capacity, and increased employment and incomes for our people".

He said that this was why Brazil was so concerned when it realized that the development dimension was being marginalised, if not totally ignored.

Describing the G4 talks on agriculture, Clodoaldo Hugueney said that any development Round with benefits to developing countries must have agriculture at its heart. It is here where the most blatant and unjustified distortions to world trade lie.

For the last four years, the G20 ceaselessly emphasized that most of the poor people in the world are farmers. They are the ones who are most affected by the massive subsidies and high tariffs that depress world prices and preclude trade of the goods they produce. Development is already a major challenge, and developing countries should not have to overcome these additional obstacles introduced by the major economic powers.

The Brazilian Ambassador went on the describe the talks on the two priorities in the agricultural negotiations: domestic support and market access in developed countries.

He said that on overall trade distorting support (OTDS), the US offer would maintain room for expenditures much above current levels, and also above any average, for any representative period since the entry into force of the Uruguay Round Agreements in 1995. This would be almost 50% more than the G20 proposal and 55% above what the US spent in 2006. The EC offer was also inadequate.

On disciplines for the Amber and Blue Boxes, the product-specific caps envisaged would permit a return to the peak spending years and would not prevent product-shifting, a key demand of the developing world.

In relation to agricultural market access, the Brazilian Ambassador said that there was never any transparency with regard to Tariff Rate Quota expansion. The formulae were obscure and the results uncertain. He added that the EC never agreed to eliminate the agricultural special safeguard (SSG), or even to revise their parameters - not now, and not any time in the foreseeable future. This would reduce even more the size of tariff cuts in the European market.

At the same time, he said, there was an effort to obtain higher agricultural tariff cuts in developing countries, in complete disregard of the principle of proportionality between average cuts, as proposed by the G20. Also, in the area of export competition, the EC did not accept any reduction commitments in volume for export subsidies.

Clodoaldo Hugueney also revealed that the developed countries insisted on having a new "peace clause." Their offers were even made contingent, in Potsdam, on a new "peace clause", something that developing countries have always said was unacceptable, he said.

[Under the "peace clause", in Article 13 of the WTO's agriculture agreement, countries using subsidies that comply with that agreement cannot be challenged by other countries under WTO agreements such as the subsidies agreement. The peace clause expired at the end of 2003.]

Speaking on the "exchange rate" between the offers and demands of the developed countries, Clodoaldo Hugueney said that for such an insufficient agricultural package, the developing countries were called upon to pay for the Round in other areas of negotiation such as in NAMA and Services.

The two major partners would retain a mutual comfort zone in agriculture. The Development Round would then become a "market access in developing countries Round".

He revealed that in NAMA, developing countries were expected to agree to very low Swiss formula coefficients; and to completely give up their policy space. What the US and the EC did in agriculture was far less than consolidation; but from developing countries, they wanted complete elimination of "policy space", and they only recognized efforts from cuts in applied levels.

Even if such a standard were used, developing countries - with a coefficient 30 - would be creating more market access, relative to trade, than the developed countries would, with a coefficient 8. He said that the developed countries demanded a NAMA coefficient of 18, which would require a 58% average cut in bound tariffs (of developing countries).

He added that the developed countries never cut their tariffs in any Round by more than 40%. Even this level of cuts was only done when their tariffs were already much lower, and there were several exceptions, particularly on products of interest to developing countries (for example, textiles and footwear).

On why the G4 meeting broke down, Clodoaldo Hugueney said that the elements on the table in Potsdam did not remotely resemble what would be required of a development Round. Such a Round, in Brazil's view, would not be the Round sought by developing countries.

Brazil did everything in the G4 to produce an outcome that would address the needs and concerns of the developing countries. The other side was not prepared to work on that basis. In any case, said the Brazilian Ambassador, the G4 was never meant to substitute the multilateral process. Brazil had not lost faith in the multilateral process. It would keep engaged with a view to achieving a successful conclusion.

However, he added, for this effort to succeed, there must be a fundamental change in attitude on the part of the developed countries. They must show their willingness to respect and fulfill the Doha mandate and to live up to its development promises.

He ended by quoting from the G20 statement, and as reaffirmed by the G90-Plus, "Developing countries' support for the urgent conclusion of the Round is contingent upon a result that, in each area of the negotiations and in the overall balance of the single undertaking, fully delivers on the commitment to make this a development round, by placing the interests and needs of developing countries, especially the least developed among them, at its heart".

The Indian Ambassador, Ujal Singh Bhatia, said that India came back from the Potsdam meeting heavily disappointed but not disheartened. India entered the G4 process fully aware of its responsibilities to the development mandate of the Round as well as of the expectations of the membership.

During the very intensive engagement within the G4, both at the Senior Official as well as at the Ministerial level, progress has been made on a number of important issues. Yet in the end, the differences among the members remained too wide to bridge. The failure of the G4 process is certainly a setback, said Bhatia. Yet India was convinced that it had lessons which can galvanise the multilateral process.

Firstly, it is necessary to highlight that the differences among the G4 should not be construed only as differences among the members of the G4. At the heart of the problem are differences regarding the meaning of the development agenda and how it should be reflected in the final outcome of the Round. This issue concerns the entire membership. If we are to achieve success in the multilateral process in the next few weeks and months, it is important that this fundamental divide is addressed by the members, stressed Bhatia.

Secondly, the intense engagement at the Senior Official level in the G4 has generated greater clarity on a number of complex negotiating issues across the negotiating agenda and specifically in the three pillars of the agriculture negotiations, added Bhatia. This progress cannot be allowed to be dissipated and India would provide such inputs in the negotiating groups.

India was firmly of the view that a successful outcome of the negotiations is within sight. But it can be within our grasp only when we are able to resolve the core political issue of the Round - how to give full effect to its development mandate, said Bhatia.

The Indian Ambassador added that the 21 June statement by various groups of developing countries was "an extremely timely and relevant reminder that we cannot push away this issue from the negotiations."

"It has served to remind us that the development issue must be frontally addressed in order for us to attain closure. On its part, India remains fully committed to this objective."