Gearing up for Hong Kong: First Woman to Take the General Council Towards the Next WTO Ministerial

Original Publication Date: 
17 February, 2005

CONTENTS

  1. Intense Negotiations as 2005 Gets Underway
  2. The Negotiations: Agriculture, Industrial Products And Services
    1. Agriculture: the politics of technical issues
    2. NAMA: on the path to de-industrialisation of developing countries
    3. Services: the new stumbling block to the Doha Development Agenda
  3. Noticeable Changes in the WTO
    1. Will the procedural changes in the negotiations stop the use of ad hoc informals?
    2. First African woman chosen to head the WTO's General Council
    3. Historic moment for global civil society

INTENSE NEGOTIATIONS AS 2005 GETS UNDERWAY

January and February have been non-stop at the WTO. The last week of January was taken up with formal proceedings and presentations of the four WTO Director-General candidates, both within the WTO and, for the first time, outside the WTO. The following weeks were negotiations on market access for industrial products, a three-week session on services negotiations, a week of agriculture negotiations, a meeting of the Trade Negotiations Committee (TNC), all culminating in a General Council where the Members for the first time elected a woman as Chairperson, Ambassador Amina Mohamed of Kenya. New Chairpersons for other WTO Bodies were also elected.

(list of selected Chairpersons at www.wto.org <outbind://14/www.wto.org> , see reference below).

Governments are undecided about how to characterize progress in the last weeks of meetings. Some WTO Members, as well as the Secretariat, say there was visible progress on agriculture and some movement on non-agricultural market access (NAMA). All agree that the lack of movement on Services is a significant concern: many Members have yet to make their initial offers, yet May 2005 was the proposed deadline for revised and improved offers.

A closer look at agriculture and NAMA suggests progress has been limited in those areas, too. Much of the "so-called" progress in the negotiations was about process not substance. The Chair of the Committee on Agriculture, New Zealand's Ambassador Tim Groser, has a lot of support for his three-stage process of open-ended meetings, technical consultations and smaller group meetings. (See Geneva Update October 2004 and December 2004 for further details of the process). Groser's success influenced the Chairperson of the NAMA negotiations, Ambassador Stefan Johanesson, to adopt similar procedures in his negotiating group. While these changes should be welcomed as a positive first step towards improving internal transparency and greater inclusion of the Membership, it is still too early to tell whether this new approach will actually stop the informal processes, which are held at the margin of the WTO and exclude the majority of delegations, and whether the increased number of meetings will be too onerous a burden on smaller delegations.

In the light of the July General Council meeting last year, where a Framework Agreement was signed that renewed impetus for negotiations on the Doha Agenda, many NGOs commented that Ministerials would perhaps be downgraded by negotiators in favour of talks in Geneva, where public pressure can be held at a distance. The prediction seems to have been

accurate: WTO Members are tentatively aiming for draft modalities by August and are again setting the July General Council as the key moment for agreement. If last year is any guideline, the July General Council will be an important political moment in the current round and could determine in advance the outcome in Hong Kong.

THE NEGOTIATIONS: AGRICULTURE, INDUSTRIAL PRODUCTS AND SERVICES

AGRICULTURE: THE POLITICS OF TECHNICAL ISSUES The three topics on the agenda for the February 15-17 negotiating session of the Committee on Agriculture were export credits, tariff quota administration and the conversion of specific tariffs into percentage tariffs, or ad valorem equivalents (AVEs). (see Geneva Update October 2004 for further details on the issue of AVEs). Chair Groser distributed a draft text on each of these issues for discussion (available at www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> see links below).

Negotiations on export credits and tariff quota administration were technical. Some developing countries called for special treatment in export credits, especially for net-food importing developing countries. Malaysia proposed allowing developing countries some subsidized credit to promote trade among developing countries. Discussion on tariff quota administration focused on expanding existing quotas and addressing the current under-use of quotas. For a variety of reasons, many quotas for import access at lower tariff levels are not fully used.

However, it is the question of choosing a methodology for the conversion of specific tariffs into AVEs that is turning out to be one of the most contentious issues in the market access negotiations. What many Members initially thought was a purely technical exercise has become highly politicized. Lack of progress in this area is preventing further movement on other market assess issues, such as deciding a formula for tariff reduction commitments, the criteria for sensitive and special products, and the special safeguard mechanism for use by developing countries.

Specific tariffs are most commonly used by developed countries, including the E.U. and the United States. The purpose of converting these specific tariffs into AVEs is to achieve a uniform tariff measure to simplify the implementation of a formula for cutting tariffs. The problem is that depending on the methodology for conversion, there can be great variation on the final calculation of the AVE. If the conversion methodology produces very high AVEs, then the tariffs will be subject to deeper cuts when the tariff cutting formula is applied. Conversely, if the conversion methodology produces low AVEs then the tariffs will be subject to lower cuts.

The E.C., which has been the main stumbling block on this issue, strongly opposed Chair Groser's draft text on the methodology for converting specific tariffs into AVEs, and submitted a response to the membership (available at www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> see link below). A new political dynamic was brought into the discussions by some African and Caribbean preference-receiving countries who are concerned about the potential impact of the conversion methodology on their preferential access. They called on Members to consider and address the issue. Developing country groupings discussed the preferential access issue among themselves and the concerned countries are expected to submit their own proposal to resolve the problem.

Chairman Groser is determined to settle the issue of AVEs quickly. He will hold a consultation for all members on February 25 to try reach an agreement. Members say they aim to conclude negotiations on the issue at the mini-Ministerial scheduled to be held in Mombasa, Kenya from March 2-4.

Chairman Groser has also been busy in the newly established Cotton Sub-Committee, which held its first meeting on 16th February. The purpose of the meeting was to set out the sub-committee's work programme. At the meeting, Chairman Groser warned Members that the cotton issue is important enough to decide the fate of the Doha negotiations. He made a prediction that without a result on cotton, negotiations on the round as a whole would fail. The meeting was suspended as a result of U.S attempts to broaden the work programme and to include issues such as textiles, industrial market access, trade facilitation etc... The sub-Committee will resume its meeting on February 28.

NAMA: ON THE PATH TO DE-INDUSTRIALISATION OF DEVELOPING COUNTRIES The Chairman of the Negotiating Group on Market Access, Iceland's Ambassador Stefan Johannesson, has set a very intensive timetable for non-agricultural market access (NAMA) negotiations. Negotiating sessions are to be held almost every month between now and the Hong Kong Ministerial, for five days at a time. In addition, as noted above, Chairman Johannesson has proposed a similar process to that being used in agriculture, to deepen the discussion on technical issues and to find out where the most contentious issues are.

The decision to use a new process seems to be a response to the continued lack of movement on NAMA talks, with many delegations restating the same positions and almost no convergence on the key issues: the formula for tariff reductions, the treatment of unbound tariffs, the issue of sectoral initiatives, non-tariff barriers and preferences. Despite the lack of movement, Chairman Johannesson plans is to have draft modalities ready by July.

>From the outset, it was clear that the agenda for the NAMA negotiating

session was overloaded. The agenda included defining which products are covered under NAMA, how to treat unbound tariffs, how to convert specific tariffs into AVEs, examining available data on trade flows, discussing flexibilities for developing countries in sectoral initiatives, the elimination of low duties (also known as nuisance duties), the issue of non-reciprocal trade preferences, and non-tariff barriers. Given the scope of the agenda, it is not surprising that Members did not make progress. Most of these issues are highly technical and are not well understood by many Members. In essence, this single negotiating group is attempting to tackle and agree what used to take up an entire round for the General Agreement on Tariffs and Trade before the Uruguay Round, and what these previous WTO rounds have failed to complete: the liberalization of trade in industrial products. The ambition of libersalisation being sought by developed countries, combined with existing trade rules, are inadequate for countries that are still in a process of developing and diversifying their economies.

Furthermore, the attempt to carry our such a process alongside a range of other issues, including agriculture, services, intellectual property, trade facilitation etc... truly overloads small delegations not only with increased meetings but also with an increased volume of jargon and technical issues.

Developed countries are promising to eliminate tariff peaks, high tariffs and tariff escalation. They have also promised to demand "less than full reciprocity" from developing countries in return. At this stage though, there is no indication of how to operationalise less than full reciprocity and in many cases developing countries are being asked to make greater concessions than their developed countries counterparts.

The question of a formula for tariff reduction is the main area of contention. Annex B of the July Agreement proposes a formula that will harmonize each country's tariff structure: a so-called Swiss formula or a non-linear formula. This cuts highest tariffs by a larger percentage than lower tariffs, with a view to making tariffs more even across the whole economy. This would have the advantage of eliminating tariff peaks, high tariffs and tariff escalation in developed countries but it would imply developing countries making deeper tariff cuts than developed countries since they have higher bound and applied tariffs. This would have a disastrous impact on many developing country industries since they often need high tariffs to protect and develop certain sectors and to strengthen their industrial base overall. Their development needs are not best served by treating all sectors alike, especially as many developing countries have very uneven industrial sectors, where some are relatively advanced while most are still very underdeveloped.

One proposal under negotiation is to use two coefficients for the tariff reduction formula, one for developed countries and one for developing countries. Developing countries have consistently rejected this approach, rightly arguing that the formula will not provide enough flexibility to address their need for higher tariffs on sensitive industries. On the other side, the U.S. and the E.C. were demanding a single coefficient for all countries. At the World Economic Forum, held in late January in Davos, Switzerland, the U.S. showed the first signs of considering the possibility of two coefficients for the formula, however, they made it clear this concession would be in exchange for less flexibility for developing countries in other areas.

In the context of NAMA, the question of non-tariff barriers (NTBs), including rules of origin, anti-dumping rules, technical barriers to trade

(TBT) and sanitary and phyto-sanitary measures (SPS), is gaining increasing relevance. The main concerns of developing countries in this area are:

developed countries unwarranted use of a variety of non-trade barriers to block imports and their lack of capacity to understand and adapt their products to meet required standards. For years, a number of NGOs and international agencies have proposed that developing countries'

participation in international standard-setting bodies must be funded and that donors should provide assistance to help developing countries adapt their exports to meet standards as they are adopted. In this Round, Korea has proposed to have a notification mechanism and peer-review of standards and NTBs more widely. Developed countries are the principal users of NTBs, but some NTBs could play a useful role in achieving development goals.

Rules to manage the question of NTBs should not foreclose on this possibility.

The Africa Group is preparing a proposal on preferences in the context of NAMA, which is on the agenda for the next session. Other agenda items for the next session include analysis of notification of NTBs, how to treat unbound tariffs and the conversion of specific tariffs into AVEs.

SERVICES: THE NEW STUMBLING BLOCK TO THE DOHA DEVELOPMENT AGENDA Services negotiations are still ongoing but current reports indicate almost no progress and no significant increase in the number of offers tabled.

There is increasing concern that Services is going to become the stumbling block to progress in the negotiations. It is becoming more and more unlikely that Members will meet the May 2005 deadline for revised and improved offers.

NOTICEABLE CHANGES IN THE WTO

WILL THE PROCEDURAL CHANGES IN THE NEGOTIATIONS STOP THE USE OF AD HOC INFORMALS?

There seems to be overall support for the three-stage process adopted by Chairman Groser in the Agricultural negotiations. Chairman Groser is taking positive steps to be more inclusive. During one of the technical group meetings on agriculture, at Egypt's request, the meeting was broadcast to some delegations who could not attend in person.

However, while these are important steps, success can only be judged by the extent to which new processes replace the use of informal and ad hoc meetings held outside the formal calendar of the WTO, to the exclusion of most Members.

By this standard, there is no sign of change. On January 29, about 30 trade

ministers met during the World Economic Forum in Davos. Then, on January

30, U.S. Trade Representative Robert Zoellick hosted a smaller meeting attended by the E.C., Australia, Brazil, Hong Kong, Kenya, South Africa and Egypt. India and China were invited but did not attend. Such meetings are exactly the kind of meetings that Chairman Groser's new process is designed to avoid.

On February 12, the U.S. hosted a Senior Officials Meeting and invited around 30 countries (agenda available at www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> see reference below). The meeting discussed the conversion of specific duties into AVEs for agriculture, the formula for tariff reduction in NAMA and how to accelerate the services negotiations. The purpose was to lay-out a "road map" for Hong Kong and to provide inputs for the mini-Ministerial planned for early March in Kenya. (Washington Trade Daily report available at www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> see reference below)

The next unofficial negotiating session will be the Kenyan Mini-Ministerial.

The agenda there, which will include discussions on the conversion methodology for AVEs in agriculture and how to advance the negotiations on NAMA. Several other mini-Ministerials are planned throughout the year.

FIRST AFRICAN WOMAN CHOSEN TO HEAD THE WTO'S GENERAL COUNCIL In an important moment at the WTO, the first woman was elected to chair the WTO's General Council. Ambassador Amina Mohamed of Kenya was reported to have made a very passionate speech about the significance of the moment not only for women but also for Africa.

She is expected to make her speech publicly available on the wto website www.wto.org <outbind://14/www.wto.org>

HISTORIC MOMENT FOR GLOBAL CIVIL SOCIETY

Civil society took an historic leap forward by requesting the four candidates for the WTO's top position, the Director-General, present themselves to the public to outline their vision for world trade. The hearing was organized by three NGOs: the Institue for Agriculture and Trade Policy (IATP), Oxfam International, and 3D ® Trade - Human Rights - Equitable Economy. While the formal proceedings at the WTO took place behind closed doors, the civil society hearing was webcast live around the world on the website of IATP.

Three of the four candidates attended the civil society hearing: Pascal Lamy of France, Jaya Krishna Cuttaree of Mauritius, and Luiz Felipe de Seixas Corrêa of Brazil. Carlos Perez del Castillo of Uruguay sent his regrets.

During the meeting, termed a "beauty contest' by Lamy, the candidates responded to questions on their commitment to improving transparency within the WTO, the negative impacts of the world trading system, the role of the Director General in securing an agreement at the next WTO Ministerial, safeguards against the increasing market power of multinational corporations, and helping farmers in developing countries who have been hurt by agricultural trade.

Importantly for civil society groups, the candidates chose to make their views known to a wider group of stakeholders. It was certainly an important step forward for increased transparency and accountability. All three candidates agreed that civil society relations enriched the work of the WTO, and all said they would continue links with NGOs if appointed to the top job. (The detailed minutes of the meeting are available at

www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> )

Important Dates:

2-4 March, Mini-Ministerial, Mombassa, Kenya

14-19 March, Negotiating Group on Market Access

14-19 March, Negotiating Group on Agriculture

17-19 March, G20 Meeting, India

13-20 April, Negotiating Group on Agriculture

20-22 April, WTO Public Symposium

25-30 April, Negotiating Group on Market Access

30 May-4 June, Negotiating Group on Agriculture

6-11 June, Negotiating Group on Market Access

20-28 June, Services Negotiations

11-16 July, Negotiating Group on Agriculture

12-24 July, Services Negotiations

Resources:

Chair Groser's texts on Conversion into AVEs and Export Credits is available

at:

http://www.tradeobservatory.org/library.cfm?refid=48628 <http://www.tradeobservatory.org/library.cfm?refid=48628>

The EC response to the AVE text is available at:

http://www.tradeobservatory.org/library.cfm?refid=48629 <http://www.tradeobservatory.org/library.cfm?refid=48629>

Minutes of the Civil Society Hearing for WTO Director-General Candidates:

http://www.tradeobservatory.org <http://www.tradeobservatory.org/>

List of newly appointed Chairpersons

http://www.wto.org/english/news_e/pres05_e/pr396_e.htm <http://www.wto.org/english/news_e/pres05_e/pr396_e.htm>

These documents will soon be available at www.tradeobservatory.org <outbind://14/www.tradeobservatory.org> :

Agenda of the Senior Official's Meeting Hosted by the US

Washington Trade Daily Report on Senior Officials Meeting

Chair Groser's text on Tariff Quota Administration

Carin Smaller

Project Officer, Trade Information Project Institute for Agriculture and Trade Policy, Geneva Office

15 rue des Savoises

Geneva 1205

ph: +41 22 789 0734

fax: +41 22 789 0733

csmaller@iatp.org

www.iatp.org <outbind://14/www.iatp.org>

www.tradeobservatory.org <outbind://14/www.tradeobservatory.org>