TWN Info Service on Trade and WTO Issues (July08/29)
23 July 2008
Third World Network

Trade: Differing views from South and North Ministers at WTO
Published in SUNS #6523 dated 23 July 2008

Geneva, 22 July (Martin Khor) -- There were clearly different priorities on the minds of Ministers and senior officials from developed and developing countries when they spoke at the first two days of the World Trade Organisation's week of decision on establishing modalities on agriculture and non-agriculture market access (NAMA).

Several developing-country Ministers spoke on the imbalances they found in the Chairs' texts on agriculture and NAMA (issued on 10 July), and on the need for developed countries to show more commitment especially in reducing their agricultural subsidies. They complained about the biases against developing countries in pressuring them to open their agriculture, industrial and services markets, too extremely, which would adversely affect their local producers and their development.

On the other hand, Trade Ministers of the EU, Japan and the US spoke on how they were undertaking serious commitments, and how in return they need the developing countries to contribute in giving real market access in all three areas.

The speeches were made at the "informal Trade Negotiations Committee meeting" to which all WTO members are invited. The TNC meeting is taking place each morning. In contrast, only selected countries (some 30-40) are invited to attend the "real negotiations" or the so-called Green Room meetings, held in the afternoon and evening.

China's Commerce Minister Mr. Chen Deming said there are quite a few imbalances in the agriculture and NAMA texts that require urgent solution. Agriculture is at the core of the Doha negotiations and developing countries put agricultural issues at the top of their national economic development agenda. For China, making a rational policy choice on issues that have significant bearings on the livelihood of eight hundred million farmers is not only an issue of economic consequence, but an issue of political importance as well.

In the texts, the interests of developing members are yet to be fully addressed in areas such as the cut on OTDS, Sensitive Products, Special Products, TRQ administration, in-quota tariff rate reduction and SSM. Therefore, the texts need to be further improved.

Given the soaring prices of global agricultural products, the key Members are now in a better position to, and should, make substantial cuts in their trade-distorting domestic support. The issues on SPs and SSM must be addressed to meet the needs of millions of poor subsistence farmers.

On NAMA, said the Minister, some issues are still pending, such as the lower coefficient for developed Members, anti-concentration, sectorals and preference erosion. Proper solutions have to be found.

India's Commerce Secretary Mr. G. K. Pillai called for the developing countries' core concerns on livelihood and food security to be taken fully on board through special products and special safeguard mechanism. On NAMA, the outcome must respect the less than full reciprocity (LTFR) mandate and that developing countries can retain their policy space to protect infant and vulnerable industries.

India also expects a strong outcome from the services signalling conference. Although it had indicated positive response on some requests, "we are yet to receive strong signals in reciprocation. In the absence of such signals, we will find it difficult to sustain our enthusiasm while negotiating agriculture and NAMA."

On Rules, India said that despite repeated requests, it had not received a revised text addressing the serious imbalances. On fishery subsidies, India, China and Indonesia had tabled a draft text for Ministerial decision.

On TRIPS, the joint submission by over 100 countries highlights the expectations of a large majority of members that the Ministers will give guidance on the three issues for negotiations as part of the single undertaking.

Venezuela's Minister of Trade said his country had joined some others to oppose the NAMA text from the start, as it was not in accordance with the mandate of less than full reciprocity of Doha. In fact, the LTFR principle had been inverted by the text against the developing countries. The percentage reductions in average tariffs for developing countries are double that of developed countries, which is opposite to the mandate of paragraph 16 of the Doha Ministerial Declaration.

Venezuela said that with the Swiss formula and the combination of the coefficient and flexibilities, it is not possible to have a contribution from Venezuela that is in line with the mandate, which explains why it asked for more flexible treatment, especially since it had special characteristics.

In services, Venezuela reiterated its position to reject the idea of a new text, which is outside what was contemplated in the Hong Kong Declaration. The recent text was produced by a small group of countries and covers only the needs of developed countries. It called on the Chair of the services negotiations to limit himself to produce only a report on the status of negotiations, and he must not indicate that there is no consensus to present a new text.

On the process, Venezuela said it was not clear how delegations not invited to the Green Room can evaluate the output of the meeting. The informal TNC session were not adequate since there were only oral reports of the Green Room and the format of meetings is not positive for developing countries. Venezuela added that it was time to rethink the legitimacy of the exercise.

On agriculture, Venezuela said there is not special and differentiated treatment for developing countries in 3 areas. The push to get developing countries to reduce their tariffs are very harmful to producers, while developed countries are not committed to reduce their subsidies. The draft on special safeguard mechanism imposes limits to its use, such as that the duty cannot be raised above the Uruguay Round levels, which cancels the effectiveness of the SSM. And the draft also seeks to impose too many limits to the used of the special products.

Brazil's Foreign Minister Celso Amorim told the TNC meeting that the late former GATT Director General Mr. Arthur Dunkel, "once said to us, when we were preparing for the final steps of the Uruguay round that he was aiming at the Everest and I asked him, since we were in Geneva, if it would not be more realistic to aim at the Mt. Blanc. So, all those who have lived in Geneva know there is a false Mt. Blanc, which unfortunately is called the "Mt. Blanc des Anglais". So my only fear is that people might be asking for the Everest but delivering the "Mt. Blanc des Anglais".

Amorim said he came to Geneva with the best disposition to conclude the negotiation of the modalities on agriculture and NAMA, so that we can finish the Round this year. A deal is possible, but this would require a lot of hard work. We must keep ambition and we must also be realistic. We must above all not believe in myths.

He said some important points are open in agriculture, although we often hear that agriculture is almost ready. He listed the following: OTDS reduction - the margins are still very large; flexibility for phase-in of amber subsidies reduction; policy space for blue box subsidies limits; reduction on cotton subsidies (and cotton goes even beyond the question of subsidies); tariff capping - we don't know actually where we will be; increase of the number of products eligible for sensitivities - the so-called quota creation, which establishes a zone of indetermination in the agriculture texts; size of tariff quotas; tariff simplification; in-quota duties; special safeguards; other duties and charges. All these things show very clearly that the idea that the text in agriculture is almost ready is certainly a myth.

Amorim added that reading the agriculture text, we can take the conclusion that, despite of all the good effort, that text was built on a logic of accommodating exceptions rather than seeking ambition. Almost 30 of the paragraphs in the agriculture text establish specific carve-outs for specific countries.

"The NAMA text, on the contrary, was built on the logic of forcing countries, especially developing ones, out of comfort zones. Although some flexibilities were lately introduced, the logic of the NAMA still has a totally different nature. "I will say here that the attempt to extract an additional price in terms of anti-concentration or disguised mandatory sectorals would overload the negotiation and make a conclusion impossible... If we opt for the more development friendly option whenever we have it, we will have an easy way to success. If we do not, we may have a tortuous way to failure."

Bangladesh's Minister for Commerce, Dr. Hossain Zillur Rahman, said the recent abnormal price hikes has adversely affected the economy of Bangladesh by sharply raising import costs. For example, only a year ago, Bangladesh needed to export two and half dozen shirts to import a barrel of oil, but now it has to export four and half dozens. Thus even to maintain our current level of activities, we need greater access to the world market.

Hossain Rahman said the key issue for Bangladesh is DFQF (duty free quota free status) which provides commercially meaningful market access and offset preference erosion that LDCs such as Bangladesh will suffer as a result of the envisaged tariff reduction under NAMA and Agriculture negotiations.

He added that there is a need to help these LDC sustain their performance by providing additional incentives, rather than penalise them for their hard-won successes which are likely to be undermined under the proposals in the current texts. The question is what signals does multilateral trading system transmit to LDCs if their hard-earned small successes become their worst enemies?"

He urged the Members to liberalise their service markets in areas and in modes of supply of export interest to LDCs as promised by Members as part of LDC modalities.

European Trade Commissioner Peter Mandelson said this is a moment of decision. "There is also a sense of negotiating fatigue of the sort that has indicated the end of trade rounds in the past. As we all know, after the summer, the political window will close."

The key question as I see it is whether, based on the texts, the necessary balance of effort can be achieved between developed and developing countries - apart from the poorest and most vulnerable. Developing countries must feel that this deal does them justice. I believe it will." On the European side, he said that on agriculture, the EU will be the major net loser in any deal. On agricultural support, the EU will slash its overall subsidy ceiling by almost 100 billion euros.

There is now full transparency on the volumes of new access that we will extend through TRQs for any potential sensitive products. We have front-loaded commitments on farm export subsidies and are ready as part of a deal to eliminate them completely and for good.

In NAMA, Europe will cut every tariff line, without flexibilities - no exceptions, no loopholes - for 1000 billion euros of imports.

"On services, too, our offer is unparalleled and we are ready to go even further, especially on developing country priorities, so long as we get clear commitments to proportionate offers from others." It also insisted the deal must include Geographical Indications.

Mandelson said whereas the EU gave clear indications of which agricultural products will be affected by cuts, we have no idea in NAMA which products will be sheltered. That has left us with far too little clarity as to what exactly we can expect to gain from the Round.

"We need bankable assurances that flexibilities will not shelter entire sectors. Hence our insistence on an anti-concentration clause. Why should European industries like cars and textiles see their tariffs slashed to less than 6% at home while the tariff protection of the same sectors remains untouched or barely affected in the fastest growing economies in the world?

"Only a limited number of developing countries must accept tariff cuts imposed by a NAMA coefficient. They must be real. These cuts must provide some new market access in practice. That is the political bottom line. Nothing else will work for us. Nothing else will close the deal."

US Trade Representative made a brief and general statement, along the lines of her press briefing, saying that the US would take a leadership role but others must contribute. (See SUNS #6522 dated 22 July 2008).

Japan also asked explicitly for developing countries to open their markets. It said the agriculture results would cause domestic pain to Japan and to sell the Round to its domestic constituencies it must have gains in NAMA, services and rules big enough to offset the pain in agriculture.

"In NAMA we definitely need coefficients and range of flexibilities that can deliver real improvements in market access, a substantively meaningful anti-concentration clause and indications on participation in sectoral initiatives in sectors such as electronics/electricals and chemicals. +