TWN Info Service on WTO and Trade Issues (Oct13/06)
14 October 2013
Third World Network  

Expert panel voices its views on Bali package
Published in SUNS #7671 dated 9 October 2013
 
Geneva, 8 Oct (Kanaga Raja) -- None of the issues of importance to developing countries have seen any traction in the consultations and negotiations at the World Trade Organisation (WTO) on any of the three pillars of a potential Bali outcome, according to panellists at a WTO Public Forum in Geneva last week.
 
The potential outcomes or ‘deliverables' for the Bali Ministerial Conference taking place this December have been identified as a Trade Facilitation accord (being pushed by the US), Tariff Rate Quota (TRQ) administration, food security and export competition issues in agriculture, and development/LDC issues.
 
The panel session, held on the last day of the 1-3 October Public Forum and titled "WTO at a Crossroads: Bali Outcomes for Development," was organised by the Our World is Not for Sale (OWINFS) CSO network and the Third World Network.
 
The panellists included Ambassador Faizel Ismail of South Africa, Ambassador Jayant Dasgupta of India and Mr Vice Yu of the Global Governance for Development Programme at the Geneva-based South Centre.
 
The session was moderated by Ms Deborah James of the Washington-based Centre for Economic and Policy Research (CEPR) and coordinator of the OWINFS network.
 
Ambassador Faizel Ismail of South Africa provided at the outset an overview of the Bali package, what are the underlying issues for the Bali ministerial conference - the future of the Doha Round and the future of the multilateral trading system itself - and the ‘new narrative' on trade.
 
On the issue of agriculture and Bali ‘deliverables', he said that after many discussions, members arrived at three possible deliverables: on TRQ administration, agricultural export subsidies, and on food security.
 
The TRQ in agriculture, he underlined, is not about market access per se but on increased transparency on agricultural import quotas that was reached in the Uruguay Round Agreement on Agriculture. On this, he said, the G-20 had put forward a proposal to make (the administration of) these quotas more transparent because they are not very transparent in many developed countries, and as a consequence, they limit the extent to which countries are able to export into those markets.
 
"This was seen as the easy one because in the last few months, everyone said ‘well this can be done'", he said. There were a few voices of concern and dissent but the majority of countries felt they could do it.
 
In the last few weeks though, according to Ambassador Faizel, the United States suddenly said ‘well we are willing to do this provided the developing countries, particularly the big emerging countries like China and others, also implement this provision and ensure that they not only make it transparent but pay attention to the extent to which they fill these quotas - the so-called underfill mechanism.'
 
And the US wanted to ensure that the so-called special and differential treatment (S&D) provision of this proposal put forward by the G-20 changes its nature.
 
According to the South African trade envoy, China has taken the view that it does not want to be excluded from the S&D, and the G-20 agreed that it should maintain its position, that there should be S&D on TRQ administration.
 
This TRQ issue was a rather simple proposal, Ambassador Faizel said, adding that Director-General Roberto Azevedo had sent a letter a few days earlier to trade ministers, in which he had said that he is very troubled by the differences that members have on this issue because this was supposed to be an easy one in the negotiations.
 
On the much more important question of (agricultural) export subsidies, Ambassador Faizel told the participants in the panel session that the G-20 had put forward some very "modest" proposals. He recalled that in 2005 all members had agreed at the Hong Kong Ministerial Conference that they shall eliminate export subsidies by 2013, which is this year, "but of course, there has been no traction on this" and the G-20 decided instead to ask for subsidies to be at least reduced by half.
 
"And on this proposal, there has been no traction at all because all the major providers of export subsidies in the developed world say that this will be very difficult politically for them to accomplish. So, that's not going anywhere," stressed Ambassador Faizel.
 
On the issue of food security, he said that here too there is a big debate. "Fortunately, we have focused the debate on one issue, which is the possible ‘peace clause' to allow those countries who fall foul of the current Agreement on Agriculture (AoA) that does not cater sufficiently for developing countries who have public food stocks and procure (for stocking) food grains from small farmers. However, since the AoA is obsolete, these developing countries could now be in violation of the current Agreement on Agriculture."
 
There is recognition that there is a problem with the (current) Agreement and that something needs to be done, "but many countries are reluctant to provide any permanent solution and so the peace clause is a temporary solution - an interim solution - that is being discussed at the moment, but we still have a long way to go on this."
 
"So, on the agriculture pillar, we don't seem at this stage to be able to fulfill all three of the deliverables; and whether we will be able to deliver at least one of the three is not very clear at this stage," Ambassador Faizel asserted.
 
On the issue of trade facilitation (TF), he said that while this is a controversial negotiation, all members are working on this, and there has been intense processes of textual negotiation, adding that there is a Rev. 17 of the text which is heavily-bracketed - about 400 brackets still - but there is a potential agreement on the table, which members are negotiating.
 
According to the trade envoy, the basic issue here is that there are two sections in the agreement. In section I (on commitments), members are trying to agree to some new disciplines to add value to existing World Customs Organisation (WCO) guidelines on how countries should manage their customs systems.
 
Of course, he said, the disciplines that are being proposed, mainly by developed countries, are to encourage developing countries to modernise their customs systems to facilitate trade, and there are many proposals on the table that are being negotiated. Some are quite complex and they envisage very sophisticated mechanisms for import and export of goods through customs. Some of these will require additional support and technical assistance for those countries who are at a lesser level of development.
 
He also pointed to a Section II which provides for S&D and some flexibilities for developing countries, allowing them to implement over a longer period, and it does hold the promise, in Category C of Section II, of technical assistance and capacity to those countries that need it.
 
"However, there are a number of problems at the moment," said Ambassador Faizel. In Section I, there are a number of proposals that are "still wide open".
 
Some of them have to do with differences among some of the major developed countries - differences about the different systems they have - for example, an authorised operator scheme of the European Union, where it has proposed to provide special favours and special transit measures for those traders who are frequent traders. The US and many other more advanced countries like Singapore have a different system.
 
"So, we have been discussing even up to last week how to find a way of accommodating among the advanced countries the differences in their systems. So, we've not yet agreed on that and that has little to do with many of the poorer developing countries."
 
Similarly, he added, there are major differences among the developed countries on issues like advanced rulings. The US has a very ambitious proposal on the table and the EU can't meet the high expectations of the US on that, and many other countries as well.
 
There is also another proposal like this by the US on expedited shipments to provide special services for companies like FedEx, UPS and others, and some major developed countries have difficulties with this proposal, "not to speak of many of the poorer developing countries who will have to raise substantially their current level of customs modernisation to meet this very high standard," he said.
 
On Section II (of the draft TF text dealing with S&D), Ambassador Faizel said that the main dispute that is on the table, which is not resolved and on which there are a number of brackets, is the difference between the expectation of many of the developing countries (on) the promise made in the mandate.
 
In this context, he referred to the mandate on TF in Annex D of the outcomes of the Hong Kong Ministerial meeting. In that document, there was a provision agreed by the ministers that those countries that require assistance will only be required to implement any of the agreements in Section I if the necessary capacity and technical assistance is provided to them.
 
"Currently, the United States and many of the other developed countries are unwilling to sign on to such a provision because they say that the current policies on aid and technical assistance doesn't allow them to commit to some recurring financial commitment and they feel also that this will provide a loophole for countries who don't want to or are unwilling to implement some of the provisions to put these implementation obligations into section C," Ambassador Faizel underlined.
 
On the issue of so-called development, he said, there have been two major questions that have been discussed, one is to implement the so-called (28) S&D proposals that have been on the table since 2001. On this, developing countries took a view, particularly from the African Group, that many of the proposals that were agreed to by developed countries in the past were of a low economic value, and they were reluctant to sign on to this.
 
But even these 28 proposals were being reopened by many developed countries and "at this stage, these are unlikely to be in the Bali package."
 
He noted that there is another S&D proposal that could be of value to developing countries - the monitoring mechanism. This is a mechanism that would allow developing countries to review existing S&D provisions with a view to strengthening them, making them more effective and if necessary, revising them.
 
But negotiations are going on at the technical level on this, he said, adding that "it's very slow and we don't have much time. So, we're not sure whether there will be a substantial outcome on this."
 
On the LDC issues, he drew attention to the four issues that are on the table. On DFQF (Duty Free Quota Free market access for LDC products), he said, "we've heard from the biggest country, the United States, that this is not doable. We heard that many months ago and there have been many statements on it. So, there hasn't been any traction on it."
 
On the issue of cotton, he said that these are the poorest countries in Africa whose economies rely on cotton, and that the cotton market has been highly distorted, undermining their production. "There has been no movement," he said.
 
He noted that there has been a little bit of movement and some discussion on rules of origin, "but again this is not substantial."
 
With respect to the services waiver (for LDCs), he said that "at this stage, we don't see any substantial outcome that would provide any real additional market access to LDCs in services."
 
"So, on the LDC issues, there is not likely to be much traction and deliverables in Bali," Ambassador Faizel stressed, adding that "overall, it looks like many of the issues are still wide open..."
 
On the real issues at Bali, he was of the view that there are two real issues. One is the question of what happens to the Doha Round. There was a discussion on this at the last ministerial conference (MC8 in 2011).
 
On this, he said, there were two views. One view was that ‘well, too much time has passed. The Round is obsolete and it's not doable anymore.'
 
The dominant view amongst many of the thinkers and writers in the OECD is that the Round is dead, he added, noting that if one reads the outcomes of 2008, it will be seen that the majority of the developing countries had an opposite view, highlighting in particular the development dimension of the Round which included many of the concerns of the developing countries from the weaknesses and imbalances of the Uruguay Round.
 
"Those concerns still remain valid," he said, further highlighting the concern that the last agreement on agriculture in the Uruguay Round remains highly imbalanced, and the distortions still remain, and that many implementation problems of the previous round still remain on the table.
 
He noted that these are mandated in the current Doha Round and that many of these issues are of concern. Many promises were also made in the Doha Round, for example, to provide DFQF to LDCs.
 
"And many of these things will be lost if the round is simply allowed to sink into the sand," said Ambassador Faizel, adding that it remains a big debate and there is a huge difference between members in the house about the future of the round.
 
The second issue is about the future of multilateralism itself, he said, noting that USTR Michael Froman indicated that at MC8 members agreed that ‘we shall move on and discuss fresh and new approaches' and he had said that was agreed.
 
However, Ambassador Faizel countered, actually that had not been agreed, but was only one view. And there were other views by more than 100 countries that insisted ‘we should retain and strengthen multilateralism as we know it.'
 
But the new fresh view (of some) says that the single undertaking as we know it is passe, and that it doesn't work anymore because there are too many countries and we can't agree, and there are too many issues on the table, and we should try to agree to one thing at a time. And the first thing we should try to agree on is trade facilitation.
 
He also mentioned in this context the issue of environmental goods and services, which is of interest to developed countries.
 
The second thing that the fresh new approach says is that there are too many members - 159 - and they can't agree, and what we really need to do is to bring together a group of like-minded countries first in a so-called plurilateral and then agree between them because we are more likely to agree to a high standard - a gold standard - and after we agree, then we can multilateralise this, and we can get the others to do it.
 
He noted that in services, there is a plurilateral process going on at the moment (the so-called Trade in Services Agreement).
 
Commenting on the ‘new narrative' on trade, Ambassador Faizel said that what this is linked to is a new idea that has been germinating over the last three or four years - the idea that the world has changed and is now dominated by what is called ‘global value chains', and this means that multinationals like Apple, Walmart and others operate across borders and nothing is produced in one country anymore, it's produced across many countries.
 
And for any country to develop, they need to link up to these value chains, and if they want to link up and benefit from it, they have to remove all barriers between countries that are involved in this chain so that they can facilitate greater efficiency of trade and investment, and then they will improve their welfare, he said, adding, that is how the theory goes.
 
Further citing the new narrative, he said that one of the key instruments to achieve this is trade facilitation, because trade facilitation will help improve the flow and increase the efficiency of trade. Also, the new narrative says that tariffs are less important - it's all about trade facilitation - and services are more important than goods, so let's not worry about agriculture and all that. Let's look at services and improve services and remove all the barriers to services trade.
 
According to Ambassador Faizel, the new narrative also says that plurilaterals are the way to go, because multilateralism as we know it today - 159 countries - doesn't work anymore. The narrative also points to a number of new issues that are more important like investment (and services) - because in this ‘global value chains world', investment needs to flow across and services need to flow across - and State-owned Enterprises (STEs) should all be abolished.
 
He noted that in the Trans-Pacific Partnership (TPP) Agreement, this is where many of these ideas are germinating on the new gold standard on each of these issues - intellectual property, services and STEs - and after there is agreement on this - and the new mega bilateral between the EU and the US - these ideas will be brought to the WTO and then those of us who haven't been part of those will have to gradually accept the new gold standard that is developed.
 
"That is the new trade narrative that is on the table," said Ambassador Faizel, adding that there are other views on this - in the MC8 outcomes, the majority of developing countries had a different view.
 
Their view was that ‘we need to stick to the principles of fairness, equity, of balanced rules, of inclusiveness and of a development-oriented multilateral trading system', he concluded.
 
Speaking on the issue of trade facilitation, Vice Yu of the South Centre said that if one looks at the way the developing countries have been approaching these discussions - ever since the discussion about the mandate in 2004 and the launch of the TF negotiations in 2005 - they have been pushing for two things in terms of the TF negotiations.
 
According to Yu, one is that there must be internal balance within the negotiations itself that would result in a TF agreement - internal balance in terms of the balance between the rules that would come out that supplement what the WCO has put together and the articles in the GATT, and S&D and the provision of technical assistance that would match what the developing countries should do in terms of implementing and complying with the new rules that would be set up.
 
Over and above that, he added, there was also the issue of external balance which developing countries sought. In this regard, he noted that TF came into the DDA (Doha Development Agenda) only in 2004, and that the other parts of the DDA also had to be moving along at the same time as one moves along on the TF negotiations. So, that meant that you had to have progress in agriculture, in services, on the LDC issues, on S&D, on implementation-related issues and other parts that were relevant to development.
 
"And that kind of approach then underlay the approach that developing countries have been taking for quite some time on TF," said Yu, adding that this approach was based on the idea that "yes, facilitation of trade is important for developing countries not least because it should help developing countries improve their industrial capacity and ... the ability of their industries in terms of producing goods for export."
 
But as the negotiations move along, what is seen in terms of the shaping of the Section I text (on commitments), has seen TF moving into a more narrow focus on the simplification, harmonisation and standardisation of trade procedures, in effect trying to create new rules that would require developing countries, for example, to raise up their customs procedures to standards that (developed) countries are already implementing.
 
"And so, the burden of implementation and the burden of compliance, if you look at it that way, will actually be falling more on developing countries than it would fall on developed countries, to a great extent."
 
If one looks at the way that the new rules are being crafted, a lot of these will actually involve facilitating the flow of imports into developing countries rather than the flow of exports out of developing countries to major markets, said Yu, adding that this could then have a downside effect on the ability of developing countries to pursue their own industrialisation objectives, in terms of the industries that they would want to set up.
 
He pointed out that the other major issue that is related to the development agenda in the DDA in relation to trade facilitation is the fact that if one looks again at the way that the provisions that are being negotiated are shaping up and what their implications could be when one really looks at how they would be implemented at the national level, a lot of the provisions hold significant administrative and institutional burdens for developing countries, and LDCs in particular, whose customs and customs-related institutional mechanisms might not be as advanced compared to developed countries.
 
One of the key issues in the TF negotiations is the issue of compliance with the mandate in Annex D, he said, noting, amongst others, that Annex D also said that developed countries committed themselves to provide developing countries with the support that would be needed in order for them to actually build implementation capacity.
 
This was the promise, but so far, unfortunately, the promises have not been kept, Yu stressed.
 
Deborah James of OWINFS network summarised: "It seems like while so far we've heard a lot of the developing country agenda is being sort of pushed off, not discussed, not having a lot of traction, this trade facilitation is an area that seems to be moving forward and having traction and getting pushed a lot, even though it wasn't part of the original DDA agenda."
 
Ambassador Jayant Dasgupta of India, speaking on the post-Bali scenario and the future of multilateralism, said that "the problem that confronts us is not so much about Bali, it is about post-Bali. It is about what do we do with the Doha Round," adding that it all started with agriculture, that there would be reforms "and that we would carry on with them and that we would review them periodically."
 
"Now, that is something which did not get implemented and it has taken us all these 12 years to come to some sort of an agreement on agriculture which lies gathering dust on the shelves because the developed country perspective is that only if the single undertaking ever comes through, that could be part of the package, but till that time, it will have to wait, gathering more and more dust," he said.
 
And this is the most important development outcome that could have been delivered, he stressed, adding that the developing countries, especially the poorer amongst them, have a very large proportion of their population dependent on agriculture.
 
"As long as the export subsidies continue to distort international trade, as long as food aid continues to flow and distort domestic trade and agricultural production in the poorer countries, as long as domestic food aid in the developed countries, which disburse billions of dollars, continue to find their way," he lamented, highlighting in this context, that the colour (of the box) has now shifted from Amber to Blue to Green.
 
The problem with that is partly rooted in the Uruguay Round Agreement in which various loopholes were provided in the Green Box so that a large number of subsidisation programmes could be parked there and could be protected from any challenge in the WTO.
 
He noted that if one looks back, what was almost concluded without any square brackets, was the pillar of export competition - it was export subsidies, export credit guarantees, and food aid. There was no dispute remaining on this and everything had been sorted out, of course, not to the full satisfaction of either side.
 
"But that is not being sought to be harvested in this Bali package," Ambassador Dasgupta underlined.
 
On what is being sought to be harvested from a development perspective, he pointed to the LDC issues, adding that the LDCs are primary product producers and they have a problem in terms of capacities, investments, resources, product diversification, and industrialisation. Whatever little they produce, they would like that - if they have a surplus - to be exported so that they can develop and grow, and use that for investing and have some kind of industry.
 
The problem is that that has to come through market access provided in other countries, he said, adding that DFQF (duty-free quota-free market access for LDC products) lies at the heart of it.
 
He said that it is very heartening that many developed countries have given it already. The EU gave it in 2000 through the Everything But Arms initiative, and developing countries like India did it five years ago.
 
"But there is a problem when the largest market [the US] finds it difficult to give that to the LDCs, something which the LDCs have been clamouring for since 1996," he said, adding that this is a development issue which is falling, or has fallen, off the table for the near future, definitely for Bali.
 
He noted that there is a very concerted effort to project trade facilitation as primarily an LDC issue and a poorer developing country issue, "but we have a different opinion about that especially the form in which it is now been taking shape."
 
On the second thing that the LDCs have asked for, he noted that there are four LDCs and 32 other African countries that have a deep interest in cotton subsidies - domestic and export subsidies which distort the international market and provide a hindrance to their exporting this cash crop which they need to fund their other expenses, as a source of income.
 
"That is blocked completely. No way (to a solution)," he asserted.
 
Ambassador Dasgupta pointed to services as the third avenue of getting market access, saying that in this area, the poorer countries, especially the LDCs, have a problem about highly skilled manpower.
 
Those larger developing countries which have a reserve of, or some strength in them for highly skilled manpower, are finding it extremely difficult to get access in Mode 4 (movement of natural persons) in countries where there is a shortage and where there is a demand.
 
Referring to Mode 4, he said that it is not the highly skilled professionals that perhaps India, the Philippines, China and many other developing countries have been asking for more than a decade. Pointing out that it is the semi-skilled and lower-skilled people, he said: "Will there be a kind of access provided? I don't think it is going to take place in the near future."
 
Fourthly, Ambassador Dasgupta said that if DFQF is given, then the rules of origin governing that should be framed in such a manner that they are simple to use, and operational. The LDCs have floated a paper with a great deal of difficulty, and facing a lot of resistance.
 
"What is the reaction to that? It has to be non-binding and non-prescriptive. That is where the negotiations are" on this fourth item of the LDC proposal.
 
As to what is over and above this as part of the so-called development package, Ambassador Dasgupta pointed to two issues, one being the monitoring mechanism for S&D provisions, noting that there is a "very palpable tension" on this because there is one side which says ‘you can only review the effectiveness of implementation of the S&D provisions.'
 
So, the S&D provisions will stand where they are and the implementation will be there and the effectiveness of the implementation is all that you will be able to do in the monitoring mechanism, he explained. Was it the way it was conceived of and then articulated by the poorer countries, the developing countries? "No," he answered.
 
Referring to the General Council Decision of 2002 and the events leading up to it, he said that it was about strengthening the S&D provisions, and that if they had implementation and monitoring, it was only a part of it.
 
"We really don't know whether we would have anything meaningful coming out of this discussion leading up to Bali."
 
Secondly, he pointed to the 28 Agreement-specific proposals, noting that the South Centre has been documenting things and they have shown how the proposals that were made before Cancun got distorted in the WTO by a small group of countries and when they went into Cancun (in 2003) for adoption, they "had been mutilated beyond recognition."
 
And there was no consensus in the WTO to even put them forward, and it was kicked upstairs for Ministers at Cancun to take a decision on this. "Obviously, that decision never got taken."
 
It came back and the African Union, which was the proponent of most of these proposals, gave a long paper in June 2006, which said that most of these proposals, in the form that they came out of Cancun, have no economic value, he said, adding that the African Group has said very clearly that in order to further this process of moving towards Bali and beyond, ‘if we have to accept these 28, please give all the 28, no questions asked. Don't reopen them.'
 
They have also said clearly ‘that you can't cherry pick even amongst those 28 and say that alright this is what we are prepared to give and not the others'.
 
That is where the last bit of the development package is now positioned, said Ambassador Dasgupta.
 
On the issue of agriculture, he said that (the issue of) export subsidies is extremely important and is at the heart of this whole development issue, "but we have heard very discouraging and disappointing responses to that right from the beginning... We don't know what shape it will take, whether a mere political declaration of goodwill etc or good intentions or it will be something more concrete."
 
On the G-33 proposal on food security, Ambassador Dasgupta said that this is something that cannot wait till the conclusion of the Doha Round, stressing that this has to be resolved.
 
He noted that in the face of "really great intransigence" on the part of a few of the developed countries, the G-33 has put forward a compromise solution by way of a ‘peace clause' that till a permanent solution is found it could live with a peace clause.
 
"We don't know where we will go. We are keeping our fingers crossed and of course harbouring a lot of hope that it will get resolved in a satisfactory way," he said.
 
On the issue of trade facilitation, he said that the whole endeavour is to show that it is a great deal for the developing countries and that it is the best deliverable agenda for the development of the poorer countries.
 
"It is not so," countered Ambassador Dasgupta, adding that the whole thing is about harmonising. "Who are the proponents? If it was so good, the proposals would have come in a flurry - in a rush - from the developing countries. They have not," he said, adding that most of the proposals have come from the developed countries.
 
In concluding the session, Deborah James summarised that for the developing countries, it is about fixing the current system that is so unfair, by making the S&D provisions operational and effective, allowing developing countries to do some of the same kind of food subsidies that developed countries are allowed to do in the WTO, to promote food security, and disciplining developed countries' export subsidies.
 
Yet we have the developed countries and primarily the corporate lobbies behind them pushing these other agreements, such as trade facilitation, which is not even part of the original mandate, and moving ahead with that, with the Trade in Services Agreement (TISA), and the Information Technology Agreement (ITA), she added.
 
These are really all about getting more market access for transnational corporations based in developed countries, she said.