TWN Info Service on Trade and WTO Issues (July08/50)
29 July 2008
Third World Network

Trade: Lamy draft faces opposition from many at TNC
Published in SUNS #6527 dated 29 July 2008

Geneva, 28 July (Kanaga Raja) -- At a meeting of all WTO members on Saturday (26 July) morning, many developing countries indicated opposition to critical parts of the one-page draft that WTO Director-General Pascal Lamy had given to the Green Room of about 30 Ministers the previous night.

The informal meeting of the Trade Negotiations Committee on 26 July was the first chance that the whole WTO membership got to respond to the Lamy draft.

Several delegations accepted the Lamy package as acceptable, or an acceptable starting point for further negotiation, but some others had more serious reservations, ranging from problems with individual parts of the package to complaints that the agriculture and non-agricultural proposals are unbalanced. Especially critical were Argentina, South Africa, Venezuela, Indonesia, India and Bolivia, according to some trade diplomats.

One of the issues of most concern was the new special safeguard mechanism for developing countries, particularly when this raises tariffs above pre-Doha Round (or Uruguay Round) legally bound maximums. Another area of contention was the NAMA part of the draft.

At a media briefing following the informal TNC meeting, WTO Spokesman Keith Rockwell said that Lamy told the TNC that the group of 7 members and the larger Green Room meeting had shown leadership and made compromises, and that the package of elements he circulated represents their contribution.

Lamy said that the various elements of this package are linked in one way or another as part of a whole and should be seen as such. This is not a final product, he said, but one around which to build convergence. There are elements in this package with which many at this stage are uncomfortable, to a larger or lesser degree, including some who have expressed specific reservations. The package will remain on the table as a contribution, but there remain many elements not in this package which need to be tackled urgently in order to find the overall political balance.

There is, said the Director-General, no such thing as partial modalities. The next step in the consultative process is to address other issues, including cotton, preference erosion, tropical products, bound in-quota tariffs, tariff simplification, tariff quota administration, and developing country sensitive products. In NAMA, the focus of work needs to be on issues such as preference erosion, the issue involving Venezuela, and the question of recently acceded members.

Minister Jonas Store of Norway, who has been conducting consultations on the three TRIPS-related issues (GI register, GI extension and TRIPS/CBD), said that positions on some key issues are diametrically opposed and he believed that it is important not to allow these difficulties to put in jeopardy the success of this meeting. He has therefore been exploring a way forward which would not prejudice members' positions on the most contentious points such as the relationship to the single undertaking of the Doha negotiations and the legal form of any outcome. Store said that he hoped that he would nevertheless give sufficient satisfaction to all members and enable work to move ahead positively. He said that the consultations have so far been constructive but have not yet reached a point where he is in a position to put forward specific proposals.

On specific reservations expressed over the proposed package of elements, Rockwell said that the principle reservation pertains to the special safeguard mechanism (SSM). He explained that the principle problem that members have focussed on is the threshold of 140% (the proposed text says that for use of SSM above bound rate, the trigger is 140% of base imports).

Rockwell said many countries expressed concerns about the threshold of 140% on either side - those who believe that the trigger is set too high and those who believe enabling countries to breach the Uruguay Round bound tariff would mean less trade liberalization. There was very strong views expressed on either side.

At the meeting, India said that the numbers circulated by the Director-General provide a basis for discussion in many areas in agriculture and NAMA. However, "we have serious concerns regarding the numbers in some of the areas." India said that on special products, it can accept the one-tier approach. But coverage at 12% is inadequate. It is at the lower end of the 10-18% range that the Chair had provided. "We will need at least 15%." The average cut of 11% is too high as it includes the zero-cut lines and would result in an average cut of 19% on the non-zero lines. This needs to be reduced to 9%.

"We have even more serious concerns on the numbers in the SSM," said India, adding that the above bound rate trigger of 140% is simply not acceptable. "We cannot go home with a provision which would ask us to wait for an import surge 40% before we can take remedial action. By that time, the import surge would have wreaked havoc on the livelihoods of the most vulnerable farmers.

"Let me repeat, this is simply not acceptable," said India. The G33 had agreed with the structure proposed by the Chair in para 124. It was clear that this structure would apply to above bound rate triggers also. A reversal of this understanding tilts the balance against developing countries very significantly, said India. This issue has all the makings of a deal-breaker. "We need serious reconsideration of this proposal." Similarly, said India, the ceiling on the remedy at 15% or 15 ad valorem points is way too low and would need to be revised upwards. That is also true of the limitation of 2.5% tariff lines. The proposal for a cross-check mechanism is contrary to the mandate for separate price and volume triggers and, therefore, would need to be removed.

On NAMA, India said that on the anti-concentration issue, it had signalled its willingness to negotiate reasonable numbers. This is a major concession given the concerns that important sections of Indian industry have on this proposal. "Our understanding is that the two numbers (20% of tariff lines, 9% value) are either/or numbers and not cumulative. "This has to be confirmed." The language on the sectorals is too prescriptive and goes beyond the understanding that we reached a few days back before the text was released, said India, adding that the voluntary nature of participation has to remain the main element. "We would need to negotiate the language based on this understanding."

"While yesterday's proposals certainly mark progress in the negotiations, we have many more issues to address before we conclude the modalities," said India, adding that issues such as cotton, preferences, bananas, duty free quota free, tariff simplification remain to be negotiated and incorporated in the modalities. Results of the negotiations on some of these issues like tariff simplification can significantly tilt the balance against developing countries. "We can only assess the balance including under para 24 of HKMD (Hong Kong Ministerial Declaration) once we know the outcome on these issues."

On the services signalling conference, India said that it has tabled very ambitious proposals on services and it would expect its major trading partners to also reciprocate rather than only keep taking and not giving.

Argentina said that new ideas are valuable if they contribute to change and correct the trend that has been overhanging the negotiations. "Regretfully, this is not so with the informal paper presented this morning. Without significant changes to it, I am afraid it would be impossible to reach a positive outcome for the modalities." The ideas floated this morning are poor in agriculture and substantially unbalanced in NAMA, Argentina added.

On agriculture, Argentina said that the OTDS of the US would remain at $14.5 billion, $7.5 billion, or 100% above its lowest historical level and the probable current applied level. This means that they are keeping 100% water; a 70% cut for a tariff of 85% is equivalent to a Swiss Formula coefficient of 36. For a higher tariff of 150%, the 70% cut represents a Swiss coefficient of 64; there is no tariff capping, just a poor "compensation" for its absence; 4% tariff lines of sensitive products capture most of our exports to developed members; 4% domestic consumption of TRQ expansion is not even the middle point of Falconer's range. Anyway, the reduction of ambition is mainly caused by the partial designation methodology.

Argentina said that it recognised the elimination of the Special Safeguard in developed members, but this was agreed in the Uruguay Round: Paragraph 9 of Article 5 says that it is a transitory measure. "We already paid for that in the Uruguay Round."

The rest of the agriculture text also causes concern to us, said Argentina, adding that some difficult issues for developed members have been brushed aside from the discussion, including some that are in brackets in the Chairman's text. Argentina cited as examples the flexibilization of the green box for developed members; cotton; the transparency loopholes in the base of expansion for sensitive products; the partial designation floor; no creation of new TRQs; tariff simplification in ad valorem terms.

On NAMA, Argentina said that "what we have from the ideas floated is more of the same. We had rejected the Chairman's text already and the numbers in the new paper do not change an iota from this text." What is being thus proposed is against the principles of Less Than Full Reciprocity and Special and Differential Treatment for developing countries. A Swiss Formula coefficient of 8 for the US and the EU represents a cut slightly over 42%, while a coefficient of 20 for Argentina, including flexibilities means a cut of 60% on the same basis. "As you see, it is a two thirds cut lower for developed countries than for developing countries. It is less than full reciprocity inversely applied for the benefit of the main trading partners."

Argentina noted that it has repeatedly said this is not acceptable. The proposal is against Less Than Full Reciprocity and paragraph 24 of the Hong Kong Ministerial Declaration. The numbers in NAMA should substantially change and the conditions attached eliminated so as to have a go towards an agreement. Developing countries are the locomotive of the world economy. If this is a development round, their interests should not be neglected; on the contrary, should be clearly taken on board for the sake of the international trading system and the benefit of the world society, said Argentina.

Venezuela said that in recent days, it had insisted that we did not want any surprises. It was thus surprised by the draft, which is a clear step back in terms of the process, because it arose from only one small group (the G7) in order to impose NAMA and Agriculture texts and give the impression to the public that there is an agreement.

Venezuela will continue to reject a process developed in those restricted groups, because they are not representative nor binding for the whole of the Membership. Moreover, the majority of the sensitivities in the paper are provided to developed countries. "We refuse the circulated text in its totality," said Venezuela.

It said the 12% of tariff lines proposed for special products in agriculture is not even the middle point of the range put on the table, nor is it the 20% that many countries and alliances asked for. This contrasts with what Lamy did on the OTDS of the US, where the middle point of the range in the paper was selected. Additionally, the suggestion of only one tier for the treatment of Special Products, goes against the mandate of flexibility for SPS.

In respect of SSM, Venezuela reiterated that there should not exist limits on the remedies, and the right to overlap the bindings, they should be clearly defined and available for all the developing countries. The SSM presented in the text, is totally restrictive and loses the sense of the application of a safeguard, first, because it is almost impossible to apply it, second, because it has limitations in the application of remedies on top of the bindings, said Venezuela.

Speaking to journalists after the meeting, Deputy Trade Minister of South Africa Mr. Rob Davies said that the numbers on NAMA (in the proposed Lamy package) "were not developed with our concurrence. We weren't part of the consultations." He added, "we had no mandate to agree on anything on anti-concentration clauses or on compulsory sectorals."

He remarked: "If they are asking us to stretch beyond our red-lines, then first of all, we are going to have to do it in consultation with all of our other groups, and secondly, we'll need in general to be assured that this is going to be a development outcome, it's got to meet some tests." He pointed to the principle of less than full reciprocity, and paragraph 24 (of the Hong Kong Ministerial Declaration). "At the moment, it doesn't look like that."

"As there is no 'water' (difference between bound and applied rates)," he said, and in South Africa's most sensitive product tariff lines, there is very little between bound and applied rates. "So, once you start applying the Swiss formula, we start cutting deeply, deeply into our applied tariffs," he said, adding that hundreds of thousands of jobs in the clothing industry and important strategic sectors like automobiles in the South African economy are threatened. "We can't let this all go for the sake of being nice to in a multilateral forum. We can't."

He noted the understanding that South Africa will get between 1-6 additional points. "We said to them, actually what we asked for was 6 and more. And the 6 was based on a coefficient of 35. If the coefficient is going to be 22, then we need many more than 6 extra points."

Following the conclusion of the Green Room meeting Friday evening, US Trade Representative Susan Schwab said: "We have a tentative agreement on a path forward. There are a number of significant issues to be resolved. I think the biggest concern we have is that a handful of large emerging markets threaten this round for the rest of us."

Brazilian Foreign Minister Celso Amorim said that "I am encouraged. I think we made progress. No one's totally happy."

Meanwhile, speaking at a media briefing Saturday, EU Trade Commissioner Peter Mandelson said that he has the backing of EU member states to work on this emerging deal. The package has the potential to offer something close to the balance needed, between agriculture and industrial goods, within industrial goods negotiations, and between developed and developing countries. +