Geneva, 28/07/2008 (Agence Europe) - As we went to press on Monday 28 July, the outcome of the WTO conference that has brought 35 ministers from the main global trading powers (representing the main negotiating groups at the WTO: G10, Cairns group, G20, G33, G90, ACP and the LDC) together in Geneva since 21 July, was still uncertain, despite a significant breakthrough on Friday 25 July on the basis of a compromise proposal made by WTO director general, Pascal Lamy. Following sterile discussions on the most sensitive points on Sunday evening in the Green Room, and despite a good level of convergence between the 153 WTO member countries on many points in the draft agreement texts, a meeting of more than five hours on Monday afternoon between the G7 trade powers (Australia, Brazil, China, USA, India, Japan and EU) did not suggest that an agreement would be reached on the progress made over the last week. At the end of the G7 meeting and before being joined by the 28 other ministers for the night session in the Green Room, the European Commissioner for trade, Peter Mandelson, and the US Representative for trade, Susan Schwab, informed the press about their concerns at the end of the meeting and alluded to a number of misgivings and the rejection of the Lamy compromise by the two big emerging countries China and India. Mr Mandelson believed that negotiations were at a “difficult and complex stage” and stated that, “some countries need more time to have a look at the different options. If there's no move, there'll by no change and no agreement”. Ms Schwab said that there was a real threat to the fragile balance they had reached the previous Friday evening. She also expressed fears about this endangering the result of the round.
In the evening, however, new compromise texts on agricultural and industrial goods (NAMA) trade liberalisation measures were expected so that discussions could conclude on Wednesday. Despite great progress in apparently intractable issues over the course of one week, various problems remain, including on the special safeguard mechanism (SSM), to provide protection (by raising duties) for developing countries in the event of massive increases in imports of one or more agricultural products of over 40% according to the Lamy compromise. The G33 countries (India, Indonesia, Philippines, etc.) believe that this level is not appropriate with Indian negotiator Kamal Nath arguing, in a meeting with the G7, for a 10% activation point of 10% in some cases. The thorny issue of the SSM has caused real division in the developing world, with South Africa, Argentina, Indonesia, the Philippines, Turkey, the African Group and the small vulnerable economies backing India, and Paraguay, Uruguay, Costa Rica and Chile joining Brazil, which supports the Lamy compromise.
By going back on several of its commitments, refusing to lower its agricultural customs duties on three key products (cotton, rice and sugar) and refusing to take part in sectoral agreements on tariff reductions on industrial goods, China also is posing a major problem for those developing countries which depend on a small number of export goods, countries such as Thailand (rice), the African countries and India (cotton) and Brazil (sugar). South Africa, Argentina and Chile, which are continuing to oppose too great an opening of their industrial markets, are also displeasing the developed countries, led by the EU. Another issue threatening the Round is cotton, which sees the C4 countries (Benin, Burkina Faso, Mali and Chad) ranged against the United States and the EU, with the former calling for an 82% reduction in domestic support for production. In addition, despite an agreement reached on Sunday between the EU and 11 Latin and Central American countries on reducing the banana import duty to €114 per tonne, with a final lowering of customs duty coming into effect only in 2016, the ACP countries are still threatening not to back the agreement on agriculture/NAMA modalities.
Pascal Lamy's fragile compromise
On the evening of Friday 25 July, Lamy put a detailed draft proposal on the nine key chapters in the “horizontal process” linking the agricultural section to the section on industrial goods (NAMA), which brought an unexpected breakthrough in talks.
Agriculture - On trade-distorting domestic support, Lamy proposed a reduction to US$14.5 billion in American domestic subsidies. On 22 July, the United States said it would do down as far as $15 billion, a 70% cut. From the EU, he wanted an 80% reduction in subsidies to €24 billion, with the agreement providing for a 10 percentage point gap between EU and US subsidies. On the market access chapter, Lamy proposed that customs duties imposed by developed countries (in particular the EU) which are equal to or higher than 75% be reduced by 70%. Developed countries will be allowed to designate 4% of their tariff lines as sensitive products (6% for net agricultural importing countries like Japan, Norway and Switzerland). For these products, the increase in tariff quotas is set at 4% of domestic consumption. Developing countries will be able to designate 12% of their tariff lines as special products, with tariff lines exempt of all reduction restricted to less than 5% of tariff lines. The special safeguard mechanism (SSM) which allows developing countries to protect their producers in the event of sudden massive increases in imports, could be operated if the surge in imports exceeds 40%. The temporary rise in tariffs thus caused would be limited to 15% on the basis of the tariffs consolidated at the WTO before the Doha Round. Finally, the special safeguard clause (SSG) for developed countries is to be limited to 1% of tariff lines and phased out over a seven-year period.
NAMA - The tariff reduction coefficient to be applied to developing countries under the “Swiss formula” is to be 20, 22 or 25. The lower the coefficient, the greater the flexibility. A country which chooses a coefficient of 20 could, for example, protect 14% of its tariff lines applying a cut 50% less than the one provided for in the formula, provided that these tariff lines do not exceed 16% of the total volume of imports. A coefficient of 25 would not afford any flexibility. There is to be an “anti-concentration clause” to prevent emerging countries from protecting whole sections of their industry, such as motor car production, from tariff reductions, by requiring them to reduce their duties on at least 20% of tariff lines in each sector. On sectoral agreements, which seek to fully remove tariffs in certain sectors, the compromise says that a developing country taking part will be authorised to increase its tariff reduction coefficient by an amount to be specified.
A basis for continuing talks
Despite the considerable reticence of South Africa and Argentina, and to a lesser extent India and Indonesia, the 35 ministers in their Green room meeting on Friday evening accepted the Lamy compromise as a basis for continuing discussions. The compromise on the table “has the potential to offer something close to the balance that we believe must be at the heart of the round: between agriculture and industrial goods; within industrial goods negotiations; and between developed and developing countries. It does ask more of the developed world than the developing. We accept that, because we accept the principle of a development round. This package has the potential to be good for the global economy and good for development. The package is not perfect for anyone, it has not attracted the support of everyone. We still have considerable concerns. But nobody left the table yesterday,” commented Mandelson on Saturday, after he had received the backing of EU Trade Ministers to continue discussions. “Some member states have accepted the compromise, certain have expressed their reservations, their opposition even, because they feel it is unbalanced. The Council has encouraged the Commission to continue its efforts to improve the text, in line with the Council mandate, on the basis of the compromise,” said Council President Anne Marie Idrac following the General Affairs Council on Saturday morning. The United Kingdom and Sweden have accepted the text, but France, Hungary and Lithuania have expressed strong objections, while Spain, Greece and Ireland say they have serious concerns about it.
Encouraging promises of opening on services
On Saturday 26 July, the ministers from some 30 developed and emerging countries who took part in the “signalling” conference on services said they were encouraged by the promises to open up sectors such as telecoms, finance, transport, construction and public works, and tourism. The conference, chaired by Pascal Lamy and WTO mediator on this issue Fernando De Mateo of Mexico, consisted of an exchange of offers and requests among the countries involved. “I'm encouraged by some of the signals we've been receiving,” said European negotiator Peter Mandelson, referring to progress made in their offers by China and India. “This conversation was a good step forward,” said Susan Schwab of the United States. “The signs are positive. There has been reasonable progress made,” added Indian negotiator Kamal Nath, welcoming the US offer. Celso Amorim of Brazil welcomed the “warm atmosphere where there were no recriminations”. For the EU, Mandelson offered to grant at least 80,000 visas/work permits per year to foreign service providers, an offer agreed previously with member states. For the Americans, Schwab proposed to increase the number of service sectors open to foreign workers, without giving any figures. This is an extremely sensitive issue since Washington has considerably toughened its legislation since the events of 11 September 2001. In exchange, Schwab called for an increase in the limits set by some countries to restrict the share that foreign investors could hold in national companies. India, which is seeking to export its computer experts, wanted developed countries to offer temporary work for foreign workers. Nath said that India was prepared to open up 51% of the capital of some financial services to foreign investment, to raise the percentage from 49 to 74% in the express mail sector and to open the telecoms sector. Brazil, Canada, Malaysia, Mexico, Pakistan and Thailand said they would open up various sectors of their services market to foreign investors. South Korea, Indonesia, Morocco, the Philippines and Turkey talked about the distribution sector, Brazil the re-insurance and telecoms sectors, Argentina, Chile and Japan the energy sector. Australia offered to formally commit itself to all the liberalisation that it has already voluntarily undertaken in services, without toughening controls in future. (E.H./transl.rt/rh)