TWN Info Service on WTO and Trade Issues (Apr11/02)
4 April 2011
Third World Network

Doha talks reach an impasse, TNC meeting told
Published in SUNS #7120 dated 31 March 2011

Geneva, 30 Mar (Kanaga Raja) -- A number of countries have voiced disappointment and deep concern over the impasse reached among the key players in the Doha Round of trade negotiations, with some saying amongst others that the ten years of talks are now at a crucial juncture.

These views were highlighted at an informal meeting of the Trade Negotiations Committee (TNC) on 29 March.

The TNC meeting has come in the wake of meetings held last week among the so-called "G-11" comprising Brazil, India, China, the United States, the European Union, Japan, Australia, Mauritius, South Africa, Argentina and Canada.

A trade diplomat told SUNS that in bilateral meetings among members of the G-11, the gaps remained extremely wide, and discussions within the G-11 did not come out with any "magical solutions" to bridge the gaps.

The informal TNC meeting was preceded by a "Green Room" meeting on 28 March. A participant in the Green Room told SUNS that Director-General Pascal Lamy had identified NAMA (non-agricultural market access) sectorals as the "gateway" issue, and said that he will be consulting on this issue to assess whether the gaps are bridgeable.

Some in the Green Room, said the trade diplomat, however felt that at this stage the gaps cannot be bridged. The trade diplomat said that delegations in the Green Room were also divided on whether the negotiating group Chairs' texts should emerge by Easter, as planned.

According to a report in the "WTO Reporter" of 25 March, a G-11 meeting of 24 March had shown up the differences between the US and China over the issue of the NAMA sectorals, with the US demanding that China and other major emerging economies participate in the sectoral initiative.

At the informal TNC meeting, these differences seemingly re-surfaced, with the US detailing the product basket approach in the NAMA sectoral initiative, viewed from both the US and Chinese perspective. The US said that China's approach would significantly increase the imbalance beyond the July 2008 package.

China, on the other hand, stressed that its participation in the sectoral arrangement means fundamentally altering the level of China's tariff reduction. China said that it is not the demandeur of sectoral liberalization nor does it intend to participate in any sectoral initiative. (See below).

In his report to the TNC, Director-General Lamy, who is also the TNC Chair, said that the bilateral and plurilateral discussions (among the G-11) on the market access leg have reached an impasse, and the outstanding substantive gaps which existed three weeks ago persist today. He proposed holding consultations with a number of Members (so-called one-on-one "confessionals") with a view to understanding the size of the gaps on NAMA, particularly the sectorals, whose absence of progress he identified as "a major obstacle".

According to trade officials, the TNC meeting also saw many delegations voicing support for Chairs' texts to come out as planned by Easter (which this year takes place from 22-25 April) including Bangladesh (LDC Group), Mauritius (ACP Group), Australia (Cairns Group), Barbados (Small Vulnerable Economies), Indonesia, Kenya (African Group), Argentina, Mexico, Japan, Lesotho, Turkey, Chile, Hong Kong-China, Pakistan, the EU and El Salvador.

Trade officials said that some others warned against this, as they did not feel that it would be helpful and might instead cause more problems. They called for a bottom-up process. Yet others were of the view that discussion of texts should be left aside for the moment until the Director-General had completed his consultations on NAMA sectorals. The plan is still in the direction of having texts by Easter, but if the results of Lamy's consultations are not promising, then there may be a reassessment of whether revised texts should come out at this time, trade officials remarked.

Speaking to SUNS after the informal TNC meeting, Ambassador Fernando de Mateo of Mexico said: "The problem is that we're in a critical junction, when the critical window of opportunity that was mentioned by G20 is closing. So, either we can find quickly a solution for the different gaps - and there are not just the NAMA gaps but gaps everywhere - or we are not going to be able to conclude the round in 2011."

"The round is not going to die. That's for sure, but the round could become a zombie," he further said, adding that the round could be "haunting us for many years to come in the corridors of the WTO."

In his statement at the TNC, Lamy stressed that both the Chairs and himself are committed to working in a bottom-up way, where texts reflect the convergence achieved and also lack of convergence where necessary. "Let me also be clear: texts are not an end in themselves. It is not about ‘texts for the sake of texts'. Texts cannot replace negotiations. Texts are means to capture negotiations. And at the end of the day the negotiations are in your hands. And therefore texts are in your hands."

He further said that the capturing of progress by Chairs serves two fundamental objectives. First, it provides an across-the-board picture of the remaining gaps which will need to be addressed in the end game. Second, such an across-the-board evaluation would provide us with the tool to move into a more horizontal phase in the negotiations - a phase where key obstacles are crystalized and remaining trade-offs identified.

"So, with less than a month to go, are we on track to meet this target?" he asked. "In all honesty, I must tell you we are not."

Overall, said the TNC Chair, there have been elements of progress. "But, in truth, far from enough. While the Negotiating Groups are proceeding across the board, including on a number of technical issues, the bilateral and plurilateral discussions on the market access leg have reached an impasse. The outstanding substantive gaps which existed three weeks ago persist today."

"The absence of progress in NAMA sectorals constitutes today a major obstacle to progress on the remaining market access issues. However, let me be clear, this is not the only market access related problem area. There are other issues whether in agriculture or to a larger extent in services - which have not been resolved either."

"Over the coming two weeks, starting April 4, I will undertake consultations with a number of Members with a view to understanding the size of the gaps on the NAMA market access. Once I have done this I intend to report to the entire membership. Together - and on the basis of an across the board view of progress in all areas in the negotiation, including the regulatory part as well as market access - we will then decide on the next steps," said Lamy.

"Now is the time for all of you, and in particular those among you who bear the largest responsibility in the system, to reflect on the consequences of failure. To reflect on the costs of the non-Round to the world economy as well as to the development prospects of Members, in particular the smaller and least-developed which are more dependent on an improved set of global trade rules. And above all, it is time to think about the consequences of the non-Round to the multilateral trading system which we have so patiently built over the last 70 years," Lamy warned.

According to trade officials, some thirty-three delegations spoke following the report by the TNC Chair.

According to trade officials, Bangladesh, on behalf of the Least Developed Countries (LDCs), said that there remain areas of divergence but also areas of convergence. New texts would be useful and there are still quite a few days before Easter (scheduled release of texts). It said that the LDCs are seeking clarity in agriculture, especially on the issue of cotton, which is important to the LDC group. It expressed hope that the WTO can bring something to the LDC Conference to take place in Istanbul, Turkey this May.

Mauritius, on behalf of the ACP Group, said that members are at a crucial juncture. The crisis will affect the developing countries more. There are huge gaps that remain among the major players and the ACP Group said that it is frustrated at the slow pace of the negotiations. It welcomed the Director-General's initiative to consult on the 'gateway' issues. It is still committed to help produce texts by Easter.

Australia, on behalf of the Cairns Group of agricultural exporters, said that the conclusion of the round in 2011 has been the key focus for the group this year. The benefits of an ambitious and balanced outcome to the negotiations for agriculture and for development are clear for all to see. "We are therefore deeply concerned that despite the great deal of effort and energy through intensified work in the last few months, there has been very little progress in the negotiations. This has become even more apparent from the plurilateral and bilateral meetings of recent weeks."

The seriousness of this situation demands a multilateral response. "We are now in a very difficult situation which has thrown up questions around our ability to conclude the Round this year... We understand the size of the gaps on substantive issues are large." The Cairns Group said it cannot accept a situation where the opportunity to undertake serious reform of global agriculture markets through the Round might be called into question.

Burkina Faso said that it is concerned about the issue of cotton. There have been various meetings on cotton, not only in Geneva but also in Brussels. But the last Quad (the US, the European Union, Brazil and the Cotton-4 - Benin, Burkina Faso, Chad and Mali) meeting left them with a bitter taste. It urgently appealed for members to show political will and put forward real negotiating elements on cotton.

Barbados, on behalf of the Small, Vulnerable Economies (SVEs), shared the views of the delegations regarding the big gaps in the negotiations. It urged that the development mandate be preserved.

Indonesia, on behalf of the G33, agreed that members are at a crucial moment.

Kenya, on behalf of the African Group, said that while it recognizes that the nature of these negotiations sometimes requires consultations through different formats such as bilaterals and plurilaterals, the Group wishes to take this opportunity to remind those members who engage in such formats of the responsibility which goes with such engagement.

It further said that it has supported negotiations through those formats in the past and will continue to do so if only their outcome will inject momentum into the overall negotiations without attempting to replace the multilateral process. In this regard, the African Group said it continues to emphasize that any decisions on how to take the DDA (Doha Development Agenda) forward and ultimately into its conclusion phase must be multilaterally based and not through any other format.

"The group although not a party to any of the parallel formats, is aware that there are areas of divergences and also convergences. Indeed, we expect the Chairs texts next month to reflect them and where possible suggest possible ways of bridging the divergences."

Argentina said that the real problem in the negotiations is how to raise the level of ambition across the board. It stressed that the Chairs' texts should continue, but on a bottom-up approach.

The United States (represented by Ambassador Michael Punke) said that "clearly the negotiations are not advancing at this point as we have all hoped -- and the gaps among Members remain wide."

Laying out for Members the perspective of the US on key areas where it sees gaps today, the US envoy said that first, he would acknowledge that there has been considerable interest in the bilateral discussions between the United States and China.

"It is important for me to emphasize, however, that our analysis of the gaps in the negotiation, while informed to an important degree through our discussions with China, is not exclusively informed by those discussions. My colleagues here are aware that we have important market access interests with respect to other major members as well, and those gaps must also be addressed for Doha negotiations to succeed."

The US noted that its gap analysis is not confined to a single market access pillar, nor to a single sector, such as chemicals. Regrettably, in its view, the gaps are as significant with respect to agriculture and services as they are in NAMA.

It provided some specifics to illustrate its view of the gaps that it is confronting. It said that one of the most graphic examples is NAMA sectors and the product basket approach. It and other proponents of NAMA sectors have proposed an architecture with three broad elements: (1) a very substantial ‘zero for zero' (tariff) basket; (2) other baskets with greater-than-formula cuts using a range of tools to address sensitivities; and (3) a basket that accommodates the use of normal NAMA flexibilities.

"This approach, in our view, offers the potential for balance between our need for more ambition - and the needs of others to address sensitivities."

The US said that China has taken a different approach to product baskets, and it is important to understand those differences. China also proposes a zero basket - but only developed countries would contribute to that basket. It also proposes a second basket where countries would make greater-than-formula cuts - but with developed countries contributing more than developing countries. Developing countries would self-designate the goods covered in this and other baskets. China proposes a third basket where developing countries would take formula cuts only while developed country cuts would go to zero. Finally, China proposes a fourth basket for developing country flexibilities, the US noted.

"We have carefully analysed this structure. Ironically, it would significantly increase the imbalance beyond the July 08 package. This, for us, is a major gap."

In services, the US said it discussed with key partners its priority market access interests in various areas and were told that none of these requests could be met. This too represents a major gap. In agriculture, Ambassador Punke said: "Unfortunately, what we learned confirmed our worst fears - that we would see no new market access on our major agricultural export interests. This also represents a major gap. So while there has been much recent attention on NAMA, the gaps in services and agriculture are no less daunting."

On whether these gaps - which the US said are large - can be bridged, the US envoy said: "I don't have the answer to that question. But the United States is not giving up the effort. We are fully committed to working hard in coming weeks to find productive ways forward and we continue to be open to a full discussion with any and all Members to explore this question. One point, however, is fundamental. We are setting the terms of global trade for decades to come, so it remains essential that this negotiation produce market access outcomes in industrial goods, services, and agriculture that are in keeping with the realities of a 21st century economy."

Turning to the text side of the negotiations, the US said that progress has been very uneven. "And it's important to emphasize that the production of texts, in itself, will not necessarily help us answer critical questions such as the level of ambition in services... Texts are an important tool, but if we don't quickly solve some of the problems we are encountering in our work, we will have to reassess whether tabling new texts in late April risks more harm than good."

The US further said that this is not a time for Members to look to Chairs to solve problems that they themselves cannot solve. Such an approach, quite simply, will not work. Compromises that do not have buy-in from Members obscure gaps rather than making them clearer and can give a false sense of progress. In a similar vein, putting a new date on an old text, perhaps with a few minor changes, will not contribute to progress and risks sparking acrimonious debates.

"However, as I said before, texts are a tool. But if that tool is not working there are others, such as Chairs reports, that can capture for Members the state of play and assist the process of further reflection in capitals. Such reports could cover all areas of outstanding differences and could be equally suitable for both rules and market access issues," said Ambassador Punke.

China (represented by Ambassador Yi Xiaozhun) said that it shares the anxiety and disappointment expressed by the previous speakers. With the various deadlines imminent every day, the lack of progress in substance is worrisome. "The question mark is getting bigger as to whether we are able to grasp the narrow window of opportunity to conclude the round in 2011, as instructed by our Leaders and agreed to by all members at the General Council of last December."

China stressed that it is not the demandeur of sectoral liberalization, nor does it intend to participate in any sectoral initiative. The three sectors of chemical, industrial machinery and electronic and electrical products that the developed members demand take 43% of China's total NAMA tariff lines, and more than 55% of its total NAMA imports. In addition, the above sectors are very sensitive to China, and participation of the sectoral arrangement means fundamentally altering the level of China's tariff reduction in Doha, which obviously goes beyond the capabilities of a developing country.

However, in order to save the round, China said that it is still trying its hardest to take part in the negotiations of various forms in a constructive manner, as long as those negotiations will not challenge the Doha mandate for developing countries' "participation on a non-mandatory basis" and "special and differential treatment" and that sectors will be chosen "in particular on products of export interest to developing countries".

"We acknowledge that despite our utmost efforts, the gaps between us and some developed members on market access are still big. Nevertheless, we believe such an attempt to bridge the differences should not be wasted. For this purpose, we are of the view that broader membership needs to be involved in the process and make concrete contribution."

It clarified that on top of its extensive and comprehensive accession commitments, China's contribution in the Doha Round is already well above the average level of all members, and "we have pushed ourselves to the limit." In order to make these negotiations meaningful, major demandeurs have to come back to earth and get realistic about their ambition. "If on the last day there is any member who is still standing by Doha, that will be China."

Singapore shared the concerns of the Director-General regarding the status of the Doha negotiations. "We are in a grave situation." What remains on the table has value.

Lesotho supported having texts by Easter. It said that the small groups should desist from making decisions on behalf of the entire membership. The process must be bottom-up, inclusive, transparent, multilateral, and faithful to the Doha mandate.

South Africa said that it agreed with the Director-General that the Round is in a grave situation. "We agree gaps between the members remain wide. Indeed, we have been saying this consistently during the past two years. However, we do not agree that the main gaps or obstacles to progress lie in providing the demandeurs even more market access in NAMA through sectorals."

"How we characterize the current impasse will have important implications for how we go about trying to resolve the crisis and whether we succeed in doing so." It noted that the previous GATT rounds and especially the Uruguay Round tilted the playing filed in agriculture and labour intensive manufactures against developing countries for more than 50 years. And the rules were biased against developing countries.

It said that in South Africa, over a million jobs were lost, and that high levels of poverty and inequality remain its major challenges. Thus, the demands by some of the major developed countries for more market access beyond what was already provided for in the July and December 2008 texts must be seen in this context. These demands threatened to create more job losses and undermine its industrial development.

"Let us remind each other that the NAMA sectorals are a voluntary modality or supplementary modality according to the Doha mandate." However, in sharp contrast to their high demands for more market access in NAMA and services from developing countries, the developed countries were not willing to provide additional market access in agriculture in exchange. Their current commitments allowed them sufficient space or "water" to increase their trade distorting subsidies. Agriculture tariffs in developed countries will also remain high after the proposed tariff cuts with some peaks remaining above several hundred percent, said South Africa.

South Africa said that the remaining gaps in the round cannot be simply reduced to NAMA sectorals. "The main Gap in our view remains that between the promise of development in the Doha mandate and the mercantilist demands of the developed countries for more market access in NAMA and Services." It also cautioned against any efforts to draft new texts which attempt to create convergences that have not emerged in a bottom-up process.

India said that it shares the sense of disappointment with the rest of the membership that they have not been able to make more progress in bringing about convergence. "We acknowledge that the gaps among some members in terms of the level of ambition in certain areas of market access, continues to remain wide and are mindful of the fact that these need to be narrowed substantially if we are to conclude the Round."

As regards the documents that are sought to be brought out by Easter across all areas of negotiations, India welcomes them, with just a few caveats.

"First, your assessment of the situation in two weeks, would form a very valuable input in enabling the members to arrive at a decision about the content of the documents that are going to be issued. Second, as we have been given to understand, in WTO parlance texts mean draft final agreements. At the end of our collective assessment in two weeks time, we need to be clear in our minds as to whether the negotiations till that date have been productive or decisive enough to enable the Chairs to come out with texts in the WTO sense before Easter. We need to approach this matter with an open mind and not rule out the possibility of coming out with documents, which would facilitate further discussion and convergence and not amplify divergences and widen existing gaps."

"We would also need to take a view whether the membership wants the same kind of text or document in all areas of negotiations or the type of document will vary depending on the degree of convergence reached in different areas and even on different topics within the same area of negotiations," said India. "Third, if the collective decision of the membership is in favour of texts after two weeks, we would need to think carefully about their contents. As regards convergence reached until now or which takes place in the Negotiating Groups in the next two weeks or as a result of your process, we perceive no problems in reflecting them," it added.

India stressed that the problem lies in the way the divergences get portrayed. As the discussions in the negotiating groups have brought out, there are quite a few areas in which the members have yet to reach a consensus. The question is how does the divergence get captured by the Chairs? "In this context, our delegation would strongly recommend that the Chairs err on the side of caution and reflect accurately the movement in the positions of different members, if any, rather than hazarding a guess about where the possible landing zone may lie or providing only their options about possible solutions to the problems."

"We would indeed be very disappointed to see any document or text, in which a Chair has exercised his own imagination or creativity and which shows a disconnect with the ground realities of the negotiations. As we are in the end game and striving hard to bring about convergence and closure to the Round, none of us is prepared to be confronted with surprises - specially of the not so pleasant variety," it concluded.

The European Union agreed with those who said that the situation in the negotiations is very serious. There are gaps in bilateral and plurilateral negotiations, and bridging them would not be easy. There is need to think carefully about the next steps. The EU said it supports increased transparency in the bilateral negotiations. The G11 could not conclude on whether these gaps are bridgeable. "We need to explore the margins in the negotiations", and that clearly NAMA sectorals are the gateway to progress in the negotiations. Services is also a great priority to the EU. Negotiating groups must continue with their work and it is important to have texts by Easter, as foreseen. It supported the Director-General's initiative and is committed to exploring the remaining margins of the negotiations.

Brazil, on behalf of the G20, said that it is deeply concerned about recent developments in the negotiations and understands that the Doha Round is at a truly critical juncture. "Gaps in substance are wide and nothing short of strong political will can overcome this difficult moment and lead us to the achievement of our common goal of concluding the Doha Round negotiations by 2011."

"Agriculture remains the key determinant of the level of ambition in all other areas of the negotiation and the benchmark for the end-game in terms of the landing zones. The 2008 texts are the basis for agreement and the expression of years of negotiations and trade-offs. Gaps in substantive positions must be bridged with realism."

On behalf of itself, Brazil (represented by Ambassador Roberto Azevedo) said that on recent developments, "I will start by underlining a disappointing but quite inescapable reality: we are before a very serious situation. Reports of the most recent bilaterals clearly indicate that the gaps among key negotiating partners are indeed very large, and some of the parties involved in those bilaterals believe them to be unbridgeable. We may or may not agree with them, but those parties are the ones who actually have to bridge those bilateral gaps; they are the ones familiar with the details of the negotiations; and, at a minimum, they know what their own true redlines are."

"The first assessment of this situation happened recently in the G-11. We must emphasise, however, that these gaps are not a result of the G-11 process or, actually, of any process. We have to accept the fact that processes may assist but are themselves incapable of closing large substantive gaps."

In its sessions last week, said Brazil, the G-11 received reports that recent bilaterals provided more clarity to the negotiating gaps between key delegations. The G-11 was also informed that some of those engaged in the bilaterals were sceptical about the possibility of closing those gaps. After intense discussions, no concrete ideas or suggestions were offered in that group that its members felt had any chance of promoting convergence.

In the G-11 discussions, added Brazil, key developed countries also unambiguously stated that they could not bring any additional contributions to the table in agricultural market access. For them, the market access negotiations in agriculture were either concluded or needed to have the level of ambition reduced to meet their particular sensitivities.

As far as Brazil is concerned, it is ready to work with adjustments to the July 2008 package, as long as (a) the level of ambition does not change dramatically in areas that are sensitive to it, and (b) there is full and proportional reciprocity in areas of Brazil's interest, agricultural market access in particular.

On the process forward and the Director-General's consultations in early April, Brazil noted that key developed countries already made clear that, for them, agricultural negotiations are over, certainly as far as market access is concerned. Any outstanding issues are to accommodate further sensitivities of theirs, not to increase ambition.

Brazil said that under these circumstances and despite any assurances to the contrary, addressing NAMA first and by itself would: First - essentially indicate that, for some there would be giving, but no taking, and for others there would be taking, and no giving; Second - such non-horizontal approach would discourage engagement. After all, those doing the giving would not believe in a process that requires them to show flexibility - which would be immediately pocketed - without any hope for reciprocity in other pillars.

On the issue of texts by Easter, Brazil's view is that, given all that has been said before, this is not a time to abandon the bottom-up approach. "Some may be tempted to request Chairs or even you, Mr. Director-General, to use those texts to test landing zones and try to facilitate convergence. This may well be a big faux pas with irreversible consequences. At this juncture, gaps are so wide that any attempt to 'split differences' will very likely be vehemently rejected by Members on both side of the divide. This could be an additional blow to negotiations at a moment when we can ill afford it."

"We need not rush to a decision today on how to proceed regarding texts. It seems to us that a better-informed decision on this matter could be reached after your consultations are completed in April," said Brazil. +