WTO DG reports on latest round of talks on Bali issues

The WTO Director-General has indicated that much more needs to be done on the negotiating front to deliver the trade reforms targeted for adoption at the WTO’s Ministerial Conference in Bali this December.

by Kanaga Raja

GENEVA: While some progress is being made, “at the current pace we simply are not going to meet our target of having all landing zones clearly identified by the end of October”, WTO Director-General Roberto Azevedo told an informal meeting of the Trade Negotiations Committee (TNC) on 30 September.

With barely 20 working days remaining (to end-October), things were going to have to change, and “the amount of ground to be covered is still very large”, he added.

Azevedo was reporting, in his capacity as Chair of the TNC, on the second round of consultations in the Room E/D format held in the past week on the three issues on which agreement is slated to be reached at this December’s WTO Ministerial Conference in Bali: trade facilitation, some elements of agriculture, and development/LDC (least developed country) issues. The “Room E” and “Room D” meetings have involved some 30-50 delegations at “ambassador plus one” level, i.e., each delegation is represented by its ambassador and one senior official from the capital or, in his/her absence, a capital-based expert.

The Director-General had reported on the first round of intensive consultations held earlier in September at an informal TNC meeting on 23 September.

On the additional advances members had made since then, the Director-General told the 30 September TNC meeting that in a nutshell, “I continue to be encouraged by the level of the engagement and the efforts being made to move our work forward. But we are not moving fast enough and things will need to change – and change quickly – if we are to achieve our objective of success in Bali.”

Summing up the second round of discussions in the Room E/D format, Ambassador Faizel Ismail of South Africa told the South-North Development Monitor (SUNS): “I think it’s very inconclusive at this stage.” The Director-General has worked very hard on each of the three pillars, but on each of them “the gaps remain very wide”.

Going through the three pillars of a possible Bali package, Faizel said that on trade facilitation, even on Section I (on commitments), which is where the main disciplines are, many of the issues still remain to be resolved. “And we have not yet found language that is acceptable to the poorer countries in Section II of the text [on provisions on special and differential (S&D) treatment relating to developing and least developed countries].”

On the development issues, the South African trade envoy said that “there still is no real movement on the issues of importance to the LDCs”, such as duty-free quota-free (DFQF) market access for LDC products and cotton.

On the agriculture pillar, he said that “on issues that we thought we had made some progress like TRQ [tariff rate quota] administration, we now realize that there is going to be a big political problem because of the new issues raised by the United States on special and differential treatment for countries like China.”

On the proposed due-restraint or “peace clause” mechanism relating to the food security concerns of developing countries, Faizel said that some progress was made on starting to formulate a mechanism on the peace clause.

He added, however, that “when we started getting into the details, we realized that there is still quite a long way to go before we can really complete the technical exercise and get to the political issues which have to do with the time period for this peace clause”, whether it will be temporary and whether it will lead to and be part of a permanent solution eventually.

“So, even on that issue, we still have some way to go,” he said.

According to one trade source, there was no balance from the beginning in the proposed Bali package.

On trade facilitation, the source noted that even the members of the so-called Colorado Group, which comprises some developed and developing countries and includes the US and the European Union, have not agreed amongst themselves on key issues such as the single window, authorized economic operators, advanced rulings and transit.

“Not moving fast enough”

In his statement at the informal TNC meeting on 30 September, the Director-General reported that the focus of the work in the second phase of the Room D and E consultations “has been to make advances where we can, on the most critical issues. In the past week, we had four sessions (that is four half-days or two full days) on trade facilitation, a session on the monitoring mechanism and a session on the G33 food security proposal.”

In addition, consultations were also held by chairs of the relevant negotiating groups in different settings to help efforts in the Room D/E format.

As to what additional advances have been made, the Director-General said that in a nutshell, “I continue to be encouraged by the level of the engagement and the efforts being made to move our work forward. But we are not moving fast enough and things will need to change – and change quickly – if we are to achieve our objective of success in Bali.”

On the development pillar, the TNC Chair said that members continued their deliberations on the monitoring mechanism, taking up three issues:

(i) the frequency of meetings of the mechanism, that is, how often it should necessarily meet each year and how, if required, members could convene additional meetings;

(ii) the non-negotiating character of the mechanism, the deliberations of which would not impact the legal nature of members’ rights and obligations, notwithstanding its ability to make recommendations for initiating negotiations, and

(iii) the focus of the review in the mechanism, that is, how broad its review should be, focusing not only on the effectiveness of the implementation of the provisions, but also on the reasons for any shortcomings, including the provision itself.

Azevedo said: “Discussions have been positive and we have managed to close a number of conceptual gaps. The Chair and I shared some language on all three elements, which Members were willing to consider as a basis of future work. This is necessarily a difficult conversation, but we are pointed in the right direction.”

Regarding the revised submission from the LDCs on preferential rules of origin, he reported that the facilitator, Ambassador Smidt, began his consultations in the week of 23 September.

“I understand that there is broad convergence among Members to work out a meaningful outcome on rules of origin associated with LDC preference schemes. I am optimistic about the current engagement and the progress that we can make. However, I would like to, once again, take this opportunity to urge Members to continue to engage in a constructive manner so that this work is accomplished in time for Bali.”

He added that he is also fully aware of the other deliverables being sought by the LDCs and “we will pursue these remaining issues under the LDC package”.

On the two areas of cotton and the operationalization of the services waiver, he said that members are awaiting specific proposals from the LDCs, while on DFQF market access, he urged LDCs as well as other interested members to reflect upon what is doable before Bali.

Consultations on agriculture

Work on agriculture has continued on various fronts, the TNC Chair said, noting that consultations have continued in the Room D format on the G33 proposal concerning public stockholding for food security and domestic food aid, and that the chair (of the agriculture negotiations) has also held consultations on the G20 proposals on export competition and on TRQ administration in different settings.

On the discussions on the G33 proposal, Azevedo said that the consultations in the week of 23 September concentrated on two elements of the interim (due restraint) solution: Element 4 (transparency and reporting) and Element 5 (safeguards to minimize the distorting effects).

The earlier discussions on Element 4 had indicated the need for additional information specific to the public stockholding food security programmes on the part of those that intend to benefit from the peace clause. These would complement the regular domestic support notifications. There had also been support for developing a template that members wishing to benefit from the provision could be asked to complete, he reported.

Therefore, to advance the discussions on transparency further, draft template elements were circulated to members, and these included: (a) the description of the programme for which flexibility is being sought; (b) measures in place aimed at minimizing any production or trade-distortive effects; (c) statistical information; and (d) ongoing reporting requirement.

Members had the opportunity to clarify and debate all these elements of the template one by one, he said.

On Element 5 on safeguards, the TNC Chair reported that there has been less work on this element than on transparency. Therefore, the debates were more conceptual in nature and were looking at deepening the discussions about what would be doable or not.

“Many Members underlined again the trade-distorting potential of these programmes, as well as their potential impact on the food security of other Members. Calls were made to be practical when handling the issue, not to over-engineer the response and to look at the relationship with existing WTO provisions.”

[At the regular (non-negotiating) meeting of the WTO Agriculture Committee in the week of 23 September, some agriculture exporters, in particular Canada, the US and Pakistan, were reported by trade officials as “expressing concerns” and seeking clarifications from India over its public stockholding for food security and distribution from such stocks to the poor, in particular on rice and wheat. Questions were also asked on the recently announced stockholding of rice in Thailand, soybeans and other products in Indonesia, and cotton in China.

[Meanwhile, food aid deliveries remain at their lowest levels since 1990 despite a slight increase in 2012 to 4.1 million tonnes, the committee heard. The figures from the World Food Programme were cited in a WTO secretariat document presented to the committee as part of its annual monitoring of the situation for net food-importing developing and least developed countries.

[Food security, trade officials said, remains a concern as the world recovers from the 2007-08 food crisis, and new international initiatives continue to be created, including the “Zero Hunger Challenge” adopted by the UN High-Level Task Force on the Global Food Security Crisis in January 2013.

[In other contributions, the UN Food and Agriculture Organization reported slight declines in countries’ expected food import bills in 2013, both globally and among least developed and low-income food deficit countries. However, the declines were more modest for cereals and oilseeds than for vegetable oils and animal fats, while dairy products and meat were increasing, FAO said.

[On stockholding and domestic support, trade officials said, India was questioned at the committee about its new Food Security Bill as it applies to rice and wheat, but declined to comment at this stage on the target purchase quantities and the effect on markets because the bill has not yet been implemented. Canada, Pakistan and the US were among the countries seeking information.

[Thailand was asked about its rice subsidies under a “paddy pledging” scheme – unmilled rice (paddy) is used as collateral for loans, which farmers can forfeit if prices do not meet the target. Thailand was pressed to notify the domestic support given under the scheme but said information-gathering is being coordinated by its government agencies and more time will be needed to notify it. Countries expressing concern for both “systemic” reasons (whether Thailand would exceed its limit and when it would share information) and market reasons (whether released stocks would depress prices) were Canada, the US, Australia, Pakistan and the EU, said trade officials.

[China was asked about its cotton support, and responded that the information was available on its website, and the cotton bought would not be exported but used domestically.

[Several of the nations asking for notifications appear to be themselves lagging. Information made available at the committee showed that on the matter of notifications, the backlog of notifications not received has increased slightly since the last meeting in June. Almost half (44%) of notifications on domestic support, the most complicated area of work, are overdue, while 40% of notifications on export subsidies are overdue. – SUNS]

On export competition, the chair of the agriculture negotiations held a consultation on 26 September, Azevedo said. He added that these discussions constituted a useful step in the process towards the identification of a realistic and credible outcome on export competition in the Bali package.

On one hand, he stressed, the debates confirmed that “clear divergent views” remain at this stage between members on the two following topics: first, whether a step forward on export competition disciplines, of the kind proposed in the G20 proposal, could be part of a realistic outcome for Bali; second, how the whole pillar of export competition should or could be addressed in Bali, including areas such as export credits, export credit guarantees or insurance programmes, state trading enterprises and food aid.

“On the other hand, Members started engaging more in depth with a view to identify the possible content of some elements on which growing convergence could emerge.”

On the TRQ administration proposal, the Director-General reported that many members continue to see this proposal as one that could realistically be part of a balanced outcome at Bali. Consultations have confirmed that the transparency elements of the TRQ administration proposal are generally acceptable to members. “Still, the S&D treatment proposed in the underfill mechanism remains unresolved and with divergent views.”

Trade facilitation

On trade facilitation, the TNC Chair said that work continues to intensify, covering several negotiating tracks. “We had a series of meetings last week, both as part of the Room D process and in the framework of activities by the Friends of the Chair. I have also been consulting delegations bilaterally.”

In the Room D format, all pillars of the draft consolidated text were covered, and the discussions touched upon various elements of Articles 3 (advance rulings), 4 (appeal or review procedures), 7 (release and clearance of goods), 10 (formalities connected with importation and exportation and transit) and 12 (customs cooperation) as well as on Section II (S&D provisions for developing and least developed countries).

Within the first section, the TNC Chair said that special time was given to the issue of customs cooperation as an area requiring more work.

“Taken together, this work allowed us to make good progress on the Draft Text. In some areas, we were even able to find common ground on how a respective provision would read. At the same time, it became very clear that there is a considerable amount of work still ahead. It is also uneven in that there are parts which are more advanced than others, especially on the crucial elements of S&D and customs cooperation, which are clearly less developed than many other parts of the Draft Agreement.”

The way forward

On the forward process, Azevedo said: “I continue to be encouraged that we are making some progress – but at the current pace we simply are not going to meet our target of having all landing zones clearly identified by the end of October. Things are going to have to change. Barely 20 working days remain, yet the amount of ground to be covered is still very large. However, I am convinced that it is not impossible.”

On what needs to be done, the Director-General said that firstly, political engagement of capitals is becoming increasingly critical.

“This is why today I am sending a letter to each of your Ministers to emphasize the need for their personal and active engagement in the process from now on. Ministers and Senior Officials need to give you the additional room you need to genuinely look for convergence in each of the three areas. I am also asking your Ministers to consider the bigger picture – the fate of our negotiating arm and with it, the DDA [Doha Development Agenda]. But more importantly, as I have repeatedly stressed, at stake is the credibility of the multilateral trading system itself. I am also underlining that the Geneva process is very much alive, but that the time available to show results is increasingly limited,” the Director-General told the members.

He added: “Let me be clear. We need to stand by our end of October target – too often I have seen such deadlines come and go – but time does not allow this now. This is necessary for proper finalization of our work in November. But it means that from now on, we have to count every day as a working day.”

In this context, he said that he is asking the three chairs, LDC facilitator and Friends of the Chair on Trade Facilitation to operate on a continuous basis over these two weeks. Intensive consultations in a variety of formats, aimed at deepening and extending convergence and rapidly closing gaps, should be undertaken.

“I equally request Ambassadors and your necessary officials to be continuously available. In short, negotiators should be on call on a permanent basis.”

“We will then be in the final countdown mode from the week of 14 October to the end of the month. We will commence this phase with a meeting of the TNC on 14 October which I will confirm in due time. As I said, we will have to realistically assess our prospects for success in Bali and set the course for the final stretch. How precisely we do this will depend on the progress that can be made between now and 14 October,” he stressed.

According to trade officials, Nepal (on behalf of the LDCs), Venezuela, Morocco (for the African Group), Jamaica (for the African, Caribbean and Pacific Group), the Solomon Islands, Ecuador and Benin (for the Cotton-4 group) spoke following the statement by the TNC Chair.

Nepal, on behalf of the LDCs, said that “we need to be mindful of the balance that we have always stressed on. The Bali outcome cannot serve the interests of some Members and leave others, especially the most vulnerable, behind. It should be the result of balanced progress on all pillars.”

Stressing that LDC issues should be given priority, it said that Bali will have no meaning if it does not deliver for the LDCs, highlighting in this context an early harvest package for Bali on low-hanging issues.

Nepal underlined that LDC issues have always been defined as low-hanging and as the best candidate for any early harvest package. “If we are not ready to accept LDC issues as doable, one may wonder what other issues could be doable? Let us be mindful of the message the rest of the world will receive if Bali forgets LDCs.”

“Balance does not seem to appear yet in our focus and definition of doability,” said Nepal, explaining that members have focused so much on trade facilitation. “We have said time and again that this is not an agenda LDCs advanced in these negotiations.”

Noting that the LDCs have constructively engaged and have not challenged its doability, it said that this flexibility on the LDCs’ part has not been reciprocated when LDCs come up with a proposal with maximum calibration of ambition.

“Imagine how much reform of legislation, domestic practices and investment will be required to implement the disciplines we are developing under trade facilitation to facilitate trade in which LDCs have negligible share. They will create immediate obligations for us...,” it said, adding that the LDCs had not said no to the process.

However, when the LDCs came up with their proposal, some members are hesitant, it further said, referring as an example to rules of origin, where it said that the LDCs made a big compromise and provided a very brief text to members. (SUNS7666)

Third World Economics, Issue No. 554, 1-15 Oct 2013, pp 2-5