TWN Info Service on WTO and Trade Issues (Nov07/20)

15 November 2007

Chances of a WTO December deal dim further

The chances of an agreement by the end of this year on the agriculture and NAMA have dimmed even more, with the revised texts now expected to be issued only at the beginning of December.

Moreover, the revised draft modalities for agriculture may not be a text containing the full agriculture modalities (as earlier anticipated) but may still leave open the options for some key and controversial issues, such as special products (SPs) and special safeguard mechanism (SSM) for developing countries.

This was the impression of some developing-country diplomats after having a consultation at the end of last week with the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand.

The report below was published in the SUNS on 13 Nov 2007 and is reproduced here with permission from SUNS.  Any reproduction requires permission from SUNS (sunstwn@bluewin.ch).

With  best regards
Martin Khor
TWN

Chances of  WTO December deal dim further
Published in SUNS #6364 dated 13 November 2007

Geneva, 11 Nov (Martin Khor) -- The chances of an agreement by the end of this year on the modalities for agriculture and NAMA in the WTO's Doha negotiations appear to have dimmed even more, with the revised texts now expected to be issued only at the beginning of December.

Moreover, the revised draft modalities for agriculture may not be a text containing the full agriculture modalities (as earlier anticipated) but may still leave open the options for some key and controversial issues, such as special products (SPs) and special safeguard mechanism (SSM) for developing countries.

This was the impression of some developing-country diplomats after having a consultation at the end of last week with the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand.

According to a diplomat, Falconer had indicated that his revised draft would not be the final one and would probably not have his final version of text on the difficult SP and SSM issues, as there was no agreement among members on these two issues.

It is thus possible that further small group negotiations will take place after Falconer issues his revised draft, now expected in early December. Feedback from members to this revised draft, and possibly more consultations, are to be expected.

In this scenario, it would not be possible to see a final deal on modalities in December. Another paper may be prepared in the new year, possibly January or February.

Another factor weighing against a December deal is the impasse in the negotiations on non-agriculture market access (NAMA). Not only have old divisions remained, but in some areas the divisions seem to have widened instead of narrowing.

This was evident in the series of NAMA meetings held last week. On most issues discussed, the Chair of the NAMA group, Ambassador Don Stephenson of Canada, admitted that there had been no movement and he was not sure how to proceed.

The clashes were sharpest last Thursday when the Swiss formula and flexibilities for those affected by it was discussed. Several developing-country groupings and individual countries asked for extra flexibilities either for themselves (SACU, Mercosur, Venezuela) or for developing countries as a group. (See SUNS #6363 dated 12 November 2007).

These requests were countered by developed countries as well as about ten developing countries (that named themselves a "non group of developing countries") that focused around a statement by Costa Rica. They demanded that the flexibilities proposed in the Chair's July draft be retained instead of being expanded as demanded by the other developing countries.

A day earlier, China had expressed strong opposition to any attempts to discriminate against it in the flexibilities to be provided to recently acceded members (RAMs). There was a sharp exchange between China (which said it would veto or block a NAMA paper that was unfair to it) and the EU (which said that RAMs was an outdated category in the WTO, implying that China and other RAMs should not be asking for extra flexibilities). (See SUNS #6362 dated 9 November 2007).

The NAMA meetings concluded on Friday afternoon with the Chair confirming that his revised text would have to be delayed for as long as the text on agriculture is not ready.

Stephenson told the meeting that he would hold more consultations in all formats (such as with individual countries and with small groups) from this week onwards, according to a trade official who was at the meeting. From time to time, said the Chair, he will also hold meetings for all members to inform them of developments, according to a trade official.

Stephenson was to have issued his revised draft in mid-November but early last week, he announced that his paper would be postponed by two weeks or more in line with the decision by Falconer to delay his draft.

Stephenson also stressed that the process he is conducting is very much tied to the process in agriculture. He added that he would try to close the gaps on issues that remain wide open but he said that he was not sure if he could close any of the issues before the start of the "horizontal process".

[The "horizontal process" is a term used to refer to talks that include several issues simultaneously, where the overall situation and the balance between issues can be assessed and negotiated, and is often used to refer to informal Green Room meetings of selected Ambassadors or informal Trade Negotiations Committee meetings and sometimes to mini-Ministerial meetings.]

Nevertheless, he said that he will continue to give opportunities to members to close the gaps in these issues. He said a lot of work remains to be done on NTBs and other areas. He said that when the present series of agriculture meetings ends, he would convene another "NAMA week."

Acknowledging that his road map for a further process seemed vague, he explained that his NAMA process has to follow agriculture, which itself was a "moving target."

A highlight of the NAMA meetings last week was a lengthy statement by the NAMA-11, presented by its coordinator South Africa, on Thursday when the issue of flexibilities for developing countries was discussed.

South Africa's Ambassador Faizel Ismail urged the Chair to avoid the mistakes of the past and ensure that the sequence of the negotiations respects the overwhelming view of members that agriculture is the engine of the Doha Round and must lead the level of ambition of the Doha Round as a whole.

In this regard, said South Africa, the developed members have a major responsibility. However, the NAMA-11 will play its part.

The NAMA-11 urged Stephenson to co-ordinate his efforts very closely with the chair of the agriculture negotiations. It asked for the NAMA text to follow three principles.

Firstly, the revised NAMA text should strive to ensure that it is comparable in its completeness with that of the Agriculture text.

Secondly, the revised NAMA text should ensure that the ranges and the parameters that are critical to the level of ambition in NAMA should be comparable to that in Agriculture.

Thirdly, the revised NAMA text should ensure that there is sufficient internal balance within the NAMA text between the efforts that are to be made by developed countries and the efforts of developing countries.

The NAMA-11 said that in this regard the issue of the coefficient is an important aspect for further discussion and negotiation between the members. The NAMA-11 has very clear positions on this issue, expressed in several proposals and it was willing to discuss this further.

On flexibilities for those developing countries having to make formula cuts, the NAMA-11 has also made proposals since November 2005, and in the past few weeks its members have elaborated on these proposals of the NAMA-11, in an effort to explain their particular situation and development needs.

The NAMA-11 was of the view that these development needs should be accommodated by the flexibilities to be provided for in the NAMA modalities text.

The NAMA-11 said that its members have very different objective realities and situations that they have set out in the various proposals referred to above, including:

-- Low applied rates and low unbound tariffs, as a result of very significant unilateral liberalization;

-- Concentration of trade in a few tariff lines;

-- Similar bound and applied rates in their most sensitive sectors, resulting in little water and deeper tariff cuts in these sectors;

-- Customs Unions that will need to share the flexibilities provided in paragraph 8 among members at different levels of development, including SVEs and an LDC;

-- Low Uruguay Round bindings as a result of being classified as a developed country in the Uruguay Round;

-- Low share of world trade and volatile commodity markets.

The NAMA-11 said that these objective realities create the need for these members to carefully manage their adjustment processes in their most sensitive sectors.

It is for these reasons, said the NAMA-11, that it was proposing that the flexibilities provided in paragraph 8 (i. e. of the July 2004 framework for NAMA) be extended to accommodate the development needs of the NAMA-11 countries.

In this regard, the NAMA-11 urged Stephenson to also consider the manner in which the Chair of Agriculture has extended flexibilities to a large number of developed countries in Agriculture, to accommodate their particular needs.

"All we ask is for the flexibilities that are requested by the NAMA-11 to be considered and provided for in a manner that is appropriate to address the different needs of our members," said Faizel on behalf of the NAMA- 11.

In this regard, the NAMA-11 proposed the following:

1. The trade volume limitation in paragraph 8 (of the July 2004 framework for NAMA) should be relaxed. This is an anomaly in NAMA. There is no such restriction for developed countries to protect their sensitive products in agriculture.

2. The percentages of tariff lines provided for in paragraph 8a and paragraph 8b should be expanded in line with the needs of developing countries.

3. A combination of paragraph 8a and paragraph 8b should be provided for to assist those countries that require this to address their development needs.

Added Faizel: "We are aware that the current process of the negotiations is unclear and that this is a cause of some frustration. We urge you to keep the discussion of flexibilities open until you need to begin drafting your revised text.

"We also urge all members to exercise restraint and responsibility in the manner in which they react to our proposals in the press, just as we have with respect to their proposals. We are involved in a serious negotiation. The views of all should be respected and engaged with in these negotiations."

[Faizel was apparently referring to media reports of comments by US Trade Representative Susan Schwab and other senior US officials as well as EU Trade Commissioner Peter Mandelson, who have been attacking NAMA- 11 members such as Brazil, Argentina, India and South Africa for allegedly undermining the conclusion of the Round because of their criticism of Stephenson's July draft.]

At the same meeting, India (represented by Ambassador Ujal Singh Bhatia) supported South Africa's statement on the need for additional flexibilities. It said that the demand for additional NAMA flexibilities for developing countries has a parallel in the agriculture negotiations where a number of such flexibilities are proposed for developed countries.

"Special and differential treatment for developed countries can surely not be allowed to exceed those for developing countries in this Development Round," said Bhatia. "The demand for additional flexibilities in NAMA should thus be viewed as an effort to balance the ambition between agriculture and NAMA texts to enable a reasonable horizontal discussion between the two areas."

Unlike the EU, India did not support customized solutions for flexibilities. In NAMA, there has been enough peeling of the onion, said India. Only a minority of members remain who will apply the formula.

Further fragmentation of solutions and outcomes will fracture the mandate itself, warned India.