Transparency by others, secrecy for WTO

The revelations about Roberto Azevedo’s consultations with seven member state delegations have reportedly upset the WTO chief, writes D. Ravi Kanth.

GENEVA: WTO Director-General Roberto Azevedo is apparently upset that his meetings with trade envoys from seven developed and developing countries to discuss the benchmarks in the market access pillars of agriculture and industrial goods for concluding the Doha Round negotiations by the end of this year are being reported in some publications, including the South-North Development Monitor (SUNS), according to people familiar with the development.

An exasperated Director-General was unhappy as to why closed-door deliberations among seven countries – the United States, the European Union, China, India, Brazil, Australia and Japan – could not be kept confidential, said a trade official from South America.

For the Director-General, who constantly chants the mantra of a “bottom-up and transparent” process, the comment in SUNS (reproduced as the preceding article in this issue) is seen as a breach of confidentiality because it raised some fundamental questions on how a market access package is being constructed without discussing trade-distorting domestic and export subsidies in order to suit the interests of the two trans-Atlantic trade giants, the official said.

The article in SUNS also challenged the basis for adopting the approach of an “average cut in tariffs or a cut on the average existing tariff level” for reducing tariffs on agricultural and industrial products in total disregard of the tiered formula in the 2008 revised draft modalities for agriculture and the so-called Swiss formula for industrial products.

The article raised questions on who the proponents of these average-cut-based formulae were and whether the Director-General is echoing them at the behest of the two dominant developed-country members, the US and the EU.

[Perhaps Azevedo and others (members or officials) wanting secrecy for their talks and making a fetish of it, would do well to read what the Financial Times’ Alan Beattie – an ardent supporter of the WTO and the opening up of markets to transnational corporate investors (including FT owners Pearson) – has to say about US President Barack Obama’s insistence on secrecy for the Trans-Pacific Partnership trade talks (“Five arguments against the self-defeating secrecy of the Trans-Pacific Partnership”, blogs.ft.com, 19 May). What is true of the TPP is even more true of the WTO. It will not be the Doha Round alone that will be a casualty, but the WTO itself, and the US will lose more than others. – SUNS]

The Director-General’s meetings were attended by the General Council Chair, Ambassador Fernando De Mateo of Mexico, and the heads of the agriculture and non-agricultural market access (NAMA) negotiating bodies, Ambassador John Adank of New Zealand and Ambassador Remigi Winzap of Switzerland respectively.

“Potential approaches”

Almost a week after the Director- General’s last meeting with the seven countries, NAMA chair Winzap issued a note in which he has suggested five “potential approaches” that were brought to his attention.

“Besides the request and offer approach submitted by Argentina and discussed in March, the following potential approaches have been brought to my attention,” Winzap said in the note, without revealing the proponents of these approaches.

So far, only two members – Argentina and Paraguay – have proposed different approaches. Argentina had proposed a request-and-offer approach while Paraguay had circulated a proposal on average and minimum cut for agriculture products. Both these approaches were rejected by a large majority of developing and least-developed countries which have consistently demanded that the Doha Round negotiations must be concluded on the basis of the 2008 revised draft modalities in agriculture and industrial goods.

Despite the rejection of the Paraguayan proposal, Norway had submitted to the chair of the agriculture negotiations an almost identical proposal, which is yet to come up for discussion.

Against this backdrop, it doesn’t require rocket science to discern the proponents of the NAMA chair’s latest note.

The five “potential approaches” mentioned by Winzap are:

(i) Increasing the coefficients of Rev. 3 (the 2008 revised draft modalities for industrial products) for developing and developed Members.

(The coefficient in the Rev. 3 draft was 8 for the developed countries and between 20 and 25 for the developing countries with a set of flexibilities such as a certain percentage of unbound tariffs or a percentage of tariffs without cuts for sensitive products);

(ii) Taking the average of line-by-line reductions according to Rev. 3, using the coefficients 8 for developed and 25 for developing countries (but without flexibilities), as the starting point for applying a cut of the overall tariff average;

(iii) Same as under (ii), but starting from a reduced reference level (e.g., average of cuts multiplied by a number smaller than 1);

(iv) Taking the average of line-by-line reductions according to Rev. 3, using the coefficients 8 for developed and 25 for developing countries (without flexibilities), as the starting point for applying an average cut of tariff lines; and

(v) Following an approach for the so-called formula applying members similar to what Rev. 3 envisaged for other members, such as small and vulnerable economies (i.e., grouping members according to levels of their existing bound tariff averages).

The chair did not explain how he arrived at these five approaches, whether through a top-down or bottom-up process. In the informal open-ended meetings he held with members at large, these approaches hardly figured as they are indicated now in the note.

Clearly, it is easy to surmise that the chair’s note is based on what one major industrialized country wants to do, a developing-country trade official said.

During the 2008 negotiations, the US was unhappy with a coefficient of 8 because it would cut into its peak tariffs on textiles and apparel products and leather products, which are around 40%. The US wants to get a high coefficient so that it can protect some of these peak tariffs, but more importantly, it wants to ensure that there are no flexibilities for developing countries, the developing-country official said.

Many developing countries had accepted the 2008 revised modalities on the basis that they were a compromise in which the developing countries would undertake higher cuts than the industrialized countries in their bound tariffs but also avail themselves of the entitlement for a small percentage of sensitive products. Even then, South Africa and Argentina had some fundamental concerns on the 2008 NAMA modalities.

Therefore, it is not clear what the underlying rationale of the chair’s proposal is, the official said.

Fundamental questions

In his note, the chair said that “the NAMA negotiations need to take account of today’s international environment, in particular the fact that market access negotiations in WTO are ‘competing’ with such negotiations in RTAs [regional trade agreements], which impacts the ambition level in WTO.”

“I also mentioned as a further determinant the very different tariff profiles of Members – the difficulty being that whatever approach is chosen, the implications may be quite different for different Members ... Both observations also apply in agriculture,” the NAMA chair argued.

This raises two fundamental questions.

Firstly, is the chair adhering to the existing Doha Round mandates or trying to conceive an approach that is suitable for industrialized countries?

The 2001 Doha Ministerial Declaration, the 2004 July Framework agreement, the 2005 Hong Kong Ministerial Declaration and the unsettled 2008 revised draft modalities are all premised on the development dimension of the Doha Round.

For example, the 2004 July Framework agreement and the 2005 Hong Kong Ministerial Declaration had called for “less than full reciprocity” (LTFR), in which the developed countries undertake higher reduction commitments than the developing countries.

The LTFR-based approach was followed in the modalities proposed by the former chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, through a bottom-up process. However, it was an open secret that the approach was torpedoed by the then chair of the NAMA negotiations, Ambassador Don Stephenson of Canada, who had resorted to a top-down approach.

The developing countries grudgingly accepted the broad parameters of those 2008 revised draft NAMA modalities as a compromise. Now the current chair’s note raises a further question of whether even that compromise would be respected, said an official familiar with the negotiations.

Secondly, at a time when the Director-General and major industrialized countries are pushing for a “recalibration” framework which aims to lower the level of ambition in order to conclude the Doha Round by the end of this year, why is the chair suggesting that the level of ambition in NAMA must correspond to what is being done by some members in RTAs, the developing-country official asked.

Winzap emphasized that “Members are looking at market access in NAMA and in agriculture in a more parallel way than in the past.” He went on to raise several questions such as: “What could that mean? Comparability by taking as starting points Rev. 3 in NAMA and Rev. 4 in agriculture? Comparability by moving to formulas based, both in NAMA and agriculture, on an average cut of tariff lines or on cutting the overall tariff average? Should the chosen approach be the same in NAMA as in agriculture or could it be different?”

The chair is conspicuously silent on what happens to the internal balance of the agriculture negotiations between the three pillars of domestic support, market access and export competition, and whether it is proper to treat only the market access pillar without considering the other two pillars.

Also, the Doha Round negotiations were premised, and this has been repeatedly reiterated, on the understanding that agriculture will decide the level of ambition. But now there is no clarity on what happens to trade-distorting domestic subsidies in agriculture because the US cannot bring its Aggregate Measurement of Support below $14.5 billion due to its latest farm law which came into force last year.

Also, it is not clear what happens to the balance within NAMA between tariff reduction commitments on the one side, and the removal of non-tariff barriers (NTBs) on the other.

The chair said that he doesn’t see much traction in NTBs and “I understand that it is difficult to advance on NAMA NTBs as long as we do not see progress on the tariff side.”

Here again a major industrialized country remains opposed to any discussion on NTBs at this juncture, said a trade official who is familiar with the negotiations.

“At this stage, it would certainly be helpful if there were not any upfront rejection of ideas,” the Swiss chair emphasized.

It is intriguing why the chair chose to make such a statement even before the discussion began on the issue, the official added.

Also, Winzap maintained that “the work on the NAMA tariff side needs to be pursued in relation to what is going on in Agriculture. Therefore, I will also further coordinate my work with the Chair of the Agriculture negotiation and the Head of the TNC [Trade Negotiations Committee].”

In a nutshell, the chair’s note falls in line with what the Director-General wants to do at this juncture. The DG, who was the former Brazilian trade envoy to the WTO and who had maintained that the 2008 modalities in agriculture are the final landing zones, is now determined to put the Doha Round to bed by the end of this year so as to ensure that the developed countries walk away without undertaking significant commitments in agriculture.

Perhaps, having obtained for free from the developing countries the gift to the US and EU of the Trade Facilitation Agreement (trade facilitation was a part of the Doha single undertaking), he now wants to achieve the same and wind up the Doha Round, more so when the African nations appear to be in difficulties, torn between the need to secure a fair deal for themselves and supporting, from a sense of African solidarity, Kenya’s need to show success at Nairobi for the Ministerial Conference. (SUNS8025)                                         

Third World Economics, Issue No. 594, 1-15 Jun 2015, pp4-6