TWN Info Service on WTO and Trade Issues (Oct07/15)

13 October 2007

North-South divisions at WTO General Council darken Doha prospects

Prospects for the Doha negotiations at WTO darkened after a General Council meeting on 9 October at which developing and developed countries clashed over several key points.

A major disagreement was over the suitability and fate of the draft text on non-agricultural market access (NAMA) authored by the chair of the NAMA negotiations, Ambassador Don Stephenson of Canada.

Major groupings of developing countries -- the ACP Group, African Group, NAMA 11 and small, vulnerable economies (SVEs) --presented a joint formal proposal setting out their views on what should be the elements of the NAMA modalities --which in substance challenged the content of the Stephenson paper.

Developed countries, led by the United States and the European Union, however insisted that the NAMA negotiations must be based on the figures contained in the Stephenson draft, especially the ranges for the coefficients in the formula which is used to cut industrial tariffs.

The joint statement had a big impact as it was a clear and bold challenge by a majority of developing countries to the Chair's NAMA text and in fact a rebuke of it.

Below is a report of the General Council meeting.  It was published in the South North Development Monitor on 10 October 2007.   It is reproduced here with the permission of the SUNS.  Any reproduction or re-circulation requires the prior permission of the SUNS (sunstwn@bluewin.ch).

With best wishes
Martin Khor
TWN

North-South divisions at WTO General Council darken Doha prospects
Published in SUNS #6341 dated 10 October 2007 

Geneva, 9 Oct (Martin Khor) -- Prospects for concluding the modalities of the Doha negotiations at the World Trade Organisation have darkened after a General Council meeting today at which developing and developed countries clashed over several key points.

A major disagreement was over the suitability and fate of the draft text on non-agricultural market access (NAMA) authored by the chair of the NAMA negotiations, Ambassador Don Stephenson of Canada.

Major groupings of developing countries -- the ACP Group, African Group, NAMA 11 and small, vulnerable economies (SVEs) --today presented a joint formal proposal setting out their views on what should be the elements of the NAMA modalities --which in substance challenged the content of the Stephenson paper in many areas.

Among the main points of the statement (presented by South Africa on behalf of the groupings) and the joint proposal:

-- Agriculture determines the ambition of the Round and NAMA modalities have to be built around what is achievable in agriculture.

-- On the tariff formula, developed countries should offer greater tariff reductions than developing countries. Among developing countries, the small vulnerable economies will undertake lesser reductions. Proposals that seek to impose reduction commitments on developing countries that are higher than for developed countries cannot be accepted.

-- On flexibilities, the statement mentions that some have suggested there be no limits to the tariffs covered as in the case of agriculture, and that there is need for additional flexibilities to preserve the common external tariff in customs unions. The modalities must capture this diversity in development needs.

-- Specific modalities for flexibilities for SVEs, LDCs and Paragraph 6 countries are provided in the proposal.

-- To address preference erosion, the paper proposes an implementation period of at least 10 years for tariff reduction affecting the relevant tariff lines.

Developed countries, led by the United States and the European Union, however insisted that the NAMA negotiations must be based on the figures contained in the Stephenson draft, especially the ranges for the coefficients in the formula which is used to cut industrial tariffs.

The developed countries in effect want the developing countries which are affected by the formula to drastically reduce their tariffs, and at rates which are steeper than the reduction to be undertaken by developed countries themselves -- a position that is unacceptable to the developing countries.

The joint statement and accompanying formal proposal had a big impact on the General Council meeting, as it was a clear and bold challenge by a majority of developing countries to the Chair's NAMA text (and in fact a rebuke of it). This is the text that the developed countries have been hoping to use as the basis for the negotiations ahead.

A second major area of dispute is the relationship between the main market-access components of the Doha negotiations -- agriculture, NAMA and services.

The developing countries insist that agriculture is and must remain the central issue, and a conclusion of the talks on agriculture must precede the negotiations on NAMA and services.

As the developing countries' NAMA paper puts it: "Centrality of agriculture in the Doha Ministerial Declaration cannot be wished away. Agriculture is the unfinished agenda of the Uruguay Round and significant progress in this area is critical."

The developing countries' position is that only when the "level of ambition" of commitments by the developed countries are known and agreed to in agriculture can the developing countries decide on their level of commitment in NAMA and services.

At the General Council today, the EU challenged this priority-setting and sequencing. It did not agree that the outcome in agriculture determines the level of ambition of the whole Round and implied that the developing countries' commitments in NAMA and services must be made known at the same time, or before the commitments in agriculture can be made.

On these two issues, the North-South divide became evident today as most developing countries supported one another on one hand while the developed countries came together on the other hand.

On the side of developing countries are the major groupings of small and big countries -- the ACP, Africa and SVE groups and the NAMA 11 -- presenting a joint formal NAMA proposal. And they were strongly supported from the floor by others who did not formally sign on -- most notably by the LDC Group and China.

And on the side of developed countries, the US and EU are now demanding that the ranges of the figures (for cutting tariffs and subsidies) in both the agriculture and NAMA draft texts of the two Chairs must be accepted as the basis for negotiations. Previously this was the position of the US.

Outside the meeting hall at the WTO, several diplomats expressed pessimism that there can be convergence of positions in the next several weeks, which is required if the modalities are to be concluded by November or even by December, which seems to be the new unofficial deadline.

"The members are further apart than they were before, while the time for finishing has become shorter and shorter," said the Ambassador of an Asian country.

Ambassador Faizel Ismail of South Africa, who had made the NAMA statement on behalf of developing country groupings in the General Council, told the SUNS outside the meeting hall: "The US and EU insists to know what contribution others are making in NAMA and services before they make commitments in agriculture. This is reversing the Doha mandate both in process and content."

Faizel said that the EU is in effect saying that developing countries must pay first and more before it makes commitments that it should make according to the Doha mandate.

He added that the developing countries that put forward a joint paper are calling for "a fair process, respect for the mandate and commitments by developed countries to address basic inequalities in the agricultural trade for the first time.

"That's why agriculture is at the top of the Doha agenda and the level of ambition of the Round will have to be determined by how the developed countries commit in agriculture.

"We are willing to make a fair and proportionate contribution, we are not asking for a Round for free, but our contribution has to be proportionate to what the developed countries can make."

Several other diplomats also gave their views, speaking outside the meeting room.

China's Ambassador, Sun Zhenyu, said that the big players had to show adequate commitment on domestic support in agriculture as well as flexibilities needed by developing countries. He said that China supported the paper by the developing country groupings on NAMA that wanted development issues to be addressed and that recently acceded members should also enjoy flexibilities. He hoped the Chair of the NAMA negotiations would give full consideration to the paper.

Argentina 's Ambassador, Alberto Dumont, said that a large number of developing countries had sent a message on the need for the centrality of development which is reflected in the mandate.

A large number of members are facing difficulty in understanding how the development concept is being brought in, he added. We have to bring this concept into the text and not cling on to a specific text. But the developed countries are saying we have to accept both the agriculture and NAMA texts.

Venezuela's Ambassador Oscar Carvallo challenged the premise made by WTO Director General Pascal Lamy (in his speech to the General Council) that members must now focus on text-based negotiations. In Carvallo's view, there is only a draft text in agriculture where members agreed to work on, but Venezuela did not consider the NAMA chair's text as an acceptable basis for negotiations.

Further, there is no need to prepare another text for services, because there is already a services text in Annex C of the Hong Kong Ministerial declaration, on which Venezuela also had registered its reservations.

While Lamy had said he was ready to undertake meetings of a cross-cutting nature to help towards agreement across the board, this is also not needed now as there was only one text (agriculture) at this moment and thus no basis for a cross-cutting exercise.

Brazil's Ambassador Clodoaldo Hugueney pointed out that it was of fundamental importance for Brazil to maintain regional cooperation in Mercosur, and this was its top priority. "We don't want to reach a point where we have to decide between Mercosur and the Doha negotiations," he said. But if forced to make a choice Brazil would have to choose Mercosur.

He was referring to the proposal that Brazil and Argentina have made that members of a customs union (such as Mercosur) that have to apply the formula cut in NAMA should have more lenient treatment if the customs union includes members that are LDCs or SVEs. Uruguay and Paraguay, who are eligible to be SVEs, are members of Mercosur, as are Brazil and Argentina.

The issue of special treatment for members of such customs unions has emerged as a controversial issue in NAMA and also at the General Council today.

The United States at the General Council rejected considering special treatment for members of such customs unions, thus pitting itself against Brazil which has made clear that maintaining the unity and basis for Mercosur is more important for it than concluding the Doha Round if that meant sacrificing Mercosur.

The United States' Ambassador, Peter Allgeier, speaking to journalists outside the meeting hall, criticized the approach to NAMA taken by the developing country groupings, which he said implied that the NAMA chair's text is not the basis for negotiations.

He said there is a real question if countries will negotiate on the basis of both texts (agriculture and NAMA). If we are to negotiate on the agriculture text, we will do it, but we have to be fair to both sides, he said.

It is a very strange approach to negotiations to say we move forward but in fact we go backwards, he remarked.

Asked on the stand by Brazil that if forced to choose between Mercosur and the Doha Round it would choose Mercosur, Allgeier said Brazil would have to make their own decision. The US is willing to consider the case (for flexibilities) of individual countries but it could not make an exception for SACU or Mercosur as this is contradictory to WTO principles.

India's Ambassador, Ujal Singh Bhatia, said that he had stressed to the General Council the importance of developed countries making progress in services in making commitments in modes and sectors of interest to developing countries. India had also signaled strong support for the NAMA statement by South Africa.

The coordinator of the small, vulnerable economies group, Ambassador Trevor Clarke of Barbados, said that the Doha commitments on development have been lost along the way, especially in NAMA, and must be restored. He endorsed South Africa's statement on behalf of the groupings on NAMA.

He recalled that last year he had supported India's call for a development audit of the proposals on the table in all negotiating areas. That call was not heeded and now we are seeing a text that has increased the level of concern among developing countries.

(More reports on the General Council meeting will be published in the next issue of SUNS.)