TWN Info Service on WTO and Trade Issues (Aug 07/01)

3 August 2007

WTO's TNC meeting ends without conclusion on modality papers

The meeting of the Trade Negotiations Committee of the WTO, which oversees the Doha negotiations, concluded late on 26 July afternoon without a substantive conclusion on the two modalities papers on agriculture and non-agricultural market access (NAMA).

The meeting did not decide on the status of the two papers. Some diplomats had been expecting that the Chair of the TNC, Pascal Lamy might put it to the meeting that they be accepted as the basis or a basis for negotiations starting in September. However, the status of the papers was left vague as the meeting ended without formally deciding on them.

Many developing countries, and their groupings, had differentiated between the two papers at the meeting. They severely criticized the NAMA paper or what they considered its bias against them. They however appeared to accept the agriculture paper as being able to play the role of facilitating further negotiations, even though they found flaws in it.

The highlight of the TNC meeting was the presentation of a broad united front of many developing countries, shown in two joint statements, one by eight groups in a statement on the state of negotiations generally, and another on the NAMA negotiations by the G90 and NAMA 11. (See SUNS #6302 dated 27 July for a report on these.)

Many of the developed country members also found fault with parts of the two papers, but they supported both as being able to be used to further the negotiations in September.

Below is a report of the TNC meeting.  An earlier report of the same meeting had been sent earlier.

This report was published in the SUNS on 30 July.

With best wishes
Martin Khor
TWN

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WTO's TNC meeting ends without conclusion on modality papers

By Martin Khor (TWN), 27 July 2007

The meeting of the Trade Negotiations Committee of the WTO, which oversees the Doha negotiations, concluded late on Thursday afternoon (26 July) without a substantive conclusion on the two modalities papers on agriculture and non-agricultural market access (NAMA).

The meeting did not decide on the status of the two papers. Some diplomats had been expecting that the Chair of the TNC, Pascal Lamy (who is also WTO's Director General), might put it to the meeting that they be accepted as the basis or a basis for negotiations starting in September. However, the status of the papers was left vague as the meeting ended without formally deciding on them.

Many developing countries, and their groupings, had differentiated between the two papers at the meeting. They severely criticized the NAMA paper of Canadian Ambassador Don Stephenson for what they considered its bias against them. They however appeared to accept the agriculture paper of Ambassador Crawford Falconer of New Zealand as being able to play the role of facilitating further negotiations, even though they found flaws in it.

The highlight of the TNC meeting was the presentation of a broad united front of many developing countries, shown in two joint statements, one by eight groups in a statement on the state of negotiations generally, and another on the NAMA negotiations by the G90 and NAMA 11. (See SUNS #6302 dated 27 July for a report on these.)

Many of the developed country members also found fault with parts of the two papers, but they supported both as being able to be used to further the negotiations in September.

The G20, G33, NAMA 11, Africa Group, LDC Group and ACP Group presented formal statements to the TNC, mainly reiterating the main points they had made in the agriculture and NAMA meetings on Tuesday and Wednesday respectively.

The G20 welcomed the agriculture draft as a good starting point for further work in September. Stressing the need for full modalities, covering all areas, it said some issues are not yet addressed and the text must be improved by correcting the imbalances and by filling in the gaps in areas that are not covered or not fully developed.

The G20 recalled the centrality of Agriculture in this Development Round. The ambition in agriculture must determine the negotiations in other areas - and not the other way around. This is fundamental to redress historical imbalances and to avoid future imbalances.

On Domestic Support, it reiterated the need for "very low teens" of Overall Trade Distorting Support (OTDS) and effective disciplines at the product-specific level for the AMS and the Blue Box.

On Market Access, the central linkage is between formula and flexibilities for developed and developing countries. Whereas the picture on the structure of the formula is clearer, the impact both on developed and developing countries remains to be assessed, while there is lack of clarity on flexibilities.

On Export Competition, the elimination of export subsidies by 2013 is correctly preserved, but ambition on volume commitments remains to be addressed. The texts on Food Aid and Export Credits provide a good starting point for further work.

"As a development Round, its results should be development-oriented and should correct the imbalances present in the multilateral trading system," concluded the G20.

The G33 said the agriculture draft is still greatly imbalanced especially on issues of major concern to developing countries. In market access, the tariff reduction formula leans in favour of developed countries, lowering their ambition level while raising the ambition level of developing countries.

On Special Products (SP), the G33 was disappointed with the lack of modalities on this key issue. On special safeguard mechanism (SSM), the draft modalities are not in line with the G33's concerns.

The NAMA 11 said that today a clear majority of WTO members have spoken with one voice and with absolute clarity. They have stated they are makers of their own history and demanded the right to participate in decision-making determining their economic development and peoples' lives. They did so with great responsibility and dignity.

The events of the past weeks and past 10 days reflect what is at stake, said NAMA 11. This Round is more than the mere exchange of mercantilist concessions, it is also about vital development aspirations of developing countries whose interests have been ignored in GATT for over 50 years.

NAMA 11 criticised the NAMA text for failing to adhere to the Doha Round mandates. It said even the Chair admitted the shortcomings of his interpretations of the mandates. The text has taken one step too far; by jumping ahead of the agriculture negotiations, it did not allow real engagement. By misconstruing the mandates on less than full reciprocity (LTFR) and prejudging the negotiations, it would have given rise to disproportionate outcomes, turning LTFR on its head and make developing countries pay first and pay more.

By jumping ahead of agriculture, the NAMA text negated the injunction of para 24 of the Hong Kong mandate to ensure comparable ambition in NAMA and agriculture, added NAMA 11. Para 24 was painstakingly negotiated and the price of a Swiss formula was a costly one for developing countries to pay. Developing countries must have the opportunity to assess agriculture's ambition level before working on the basis of the NAMA draft's narrow ranges.

NAMA 11 said that denying such an opportunity skews the negotiations in favour of developed countries and withdraws a vital negotiating leverage to secure a high ambition level in agriculture. The NAMA Chairs' argument that those who seek high agriculture ambition should not lower the NAMA ambition is thus fallacious, said the NAMA 11.

The LDC Group warned that the outcome of the Round should not be compromised by setting artificial and unrealistic timelines. It was disappointed that many WTO members had not engaged with the group on granting special priority in market access to LDC service suppliers.

Argentina said that there is a deep imbalance between the agriculture and NAMA drafts, which works against any progress in the negotiations conforming to the mandates. According to the mandates, the North must be at the center of agriculture reforms to end the "apartheid" situation the agriculture sector is facing in the trade system. However, one of the texts (NAMA) does the opposite by reversing the order of priorities and widening the gap between the disciplines applied to agriculture and to NAMA.

It has been clear that agriculture should first be tackled but in the past few weeks there has been a turn around with agriculture now appearing as the adjustable variable vis-a-vis the ambition level sought to be imposed on developing countries in NAMA.

"This action that is totally illogical is against the balance of contributions within NAMA and between NAMA and agriculture," said Argentina. "This is unacceptable to many developing countries and represents a dangerous change in the meaning of the Doha Round."

On the NAMA text, Argentina said: "It ignores the negotiating mandate, places a heavy burden on a great number of developing countries, disregards recent proposals at restoring balance in the negotiations and introduces the false principle of real market access.

"This leads us to the conclusion that it is not possible for Argentina to accept the draft text of modalities in NAMA as a basis to continue negotiations."

India, referring to the joint statements of 8 developing country groups and of G90/NAMA 11, said: "These statements make it abundantly clear that the development mandate of the Round cannot be wished away and must constitute the centerpiece of the outcome."

India reiterated that there is a deep imbalance between the two drafts and this issue will need to be fully addressed in September. Additionally the serious flaws in logic and content of the NAMA text have to be addressed.

Many WTO members have tried to calculate gains and losses in agriculture and NAMA for their countries. But there are several members like India who can only envisage losses in both areas. They need to balance their accounts through possible gains in other areas, which for India include services, rules, CBD-TRIPS, etc. India then elaborated on the need for and content of progress required in these other issues.

China supported the statement of the 8 developing country groupings. On agriculture, it said some areas need improving, The level of ambition for the reduction of trade-distorting domestic support, the improvement of market access to the developed countries and the S&D treatment for the developing countries, particularly the treatment of Special Products, and the treatment for RAMs, the Cotton 4, the SVEs and LDCs remain its major concerns.

On the NAMA paper, there are still many gaps to be bridged. These include that the spread between two coefficients should be wider (which means an even lower coefficient for the developed members and a higher coefficient for the developing members as compared to the Chair's proposal).

The ACP Group was concerned about the imbalances in the both drafts, which need to be corrected. There is in particular need to correct the flaws in the NAMA text. It was also against setting any artificial deadlines.

The European Union said the two texts take the process forward although the EU had serious concerns. The numbers in the NAMA text were not ambitious enough for developing countries. The modalities for services must also be included with the same ambition level as agriculture and NAMA.

The US shared the view that there must be a balance across agriculture, NAMA, services and rules (details of the US view are in SUNS #6302 dated 27 July).

A number of developing countries, including Mexico, Chile and Costa Rica, did not share the negative view of other developing countries on the NAMA draft. Mexico supported both drafts as points of departure, while Costa Rica said that the NAMA text was not ambitious enough.