GENEVA, 19 February 2007: Whilst the WTO Doha negotiations have
formally resumed, most negotiators in Geneva are in the dark about what
is really going on. There are no formal agriculture meetings of the
membership. The agriculture committee chair, New Zealand ambassador
Crawford Falconer is regularly holding informal ’fireside chats’ to
which only about 23 - 25 delegations are invited. (1) These meetings
are only for ambassadors. A meeting of the African Group in Geneva on
Friday 16 February saw African delegates expressing anger over the fact
that they have been excluded from these talks. Of the entire continent,
only Benin, as the spokesperson for the West African cotton issue, is
on the ’fireside chat’ invitation list - a bitter irony given DG Pascal
Lamy’s proclamations that the round is most important for Africa.
The fireside chats last about two hours and are held about once or
twice a week. Various scenarios - numbers on domestic supports and
market access - are explored at these meetings.
In the recent weeks, however, the real talks, it seems, are between the
US and EU, although the G4 [US, EU, India and Brazil] in meeting this
week in London and a Brazil- India meeting scheduled for 5 March.
The format of negotiating amongst the G6 (US, EU, India, Brazil,
Australia and Japan), the ’real negotiating forum’ before the talks
collapsed in July last year, has been disbanded. USTR Susan Schwab
commented in a press conference that the G6 forum was not useful.
Instead, she has been advocating a ’reverse engineering’ approach.
US-EU REVERSE ENGINEERING - BLAIR HOUSE ACCORD BY ANOTHER NAME?
According to one developing country delegate, Schwab’s ’reverse
engineering’ is the process whereby the US and EU set the market access
tariff cutting formula aside in their negotiations, and instead focus
on the products of market access interest to each other, or products
which are sensitive for their domestic constituencies. Agreement is
worked out between them product by product. After that, the tariff
cutting formula to be applied multilaterally, as well as the treatment
for sensitive products, will be worked out to fit in with the bilateral
agreement.
When they have decided upon their desired package, the talks are then
expanded to include first India and Brazil, and then a small group of
other members (probably those in the fireside chats). The majority of
WTO members are finally presented with a take-it-or-leave it package.
This process is not new. The Uruguay Round was infamously concluded
only after the US and EU met in Blair House (the official state guest
house for the US President in Washington), and came up with the ’Blair
House Accord’ which they then proposed to the rest of the Membership
for endorsement as a multilateral deal.
Informally commenting on the current state of affairs and their
exclusion from the process, one African delegate, whose country has not
been invited to the fireside chats lamented:
« We are not having a multilateral process, but the bialteral and
plurilateral agreements are being ’processed’ and passed through the
multilateral route just to justify that the membership is on board. In
actual fact, we are not having a member -driven negotiation. »
He continued:
« Resumption? This is a false resumption. The process is to legitimise
the deal that the US and EU may come up with. Perhaps they felt that
they were close to the conclusion of a deal or they were making
progresss, and they want the rest of the membership to endorse what
they come up with, so they called for a ’resumption’. But the reality
is that the rest of the membership is just sitting there waiting... The
chair’s informal sessions [open to all members held once in two or so
weeks] is simply about information. You are told for example that the
fireside chats did not make progress. It is a waste of time. These
[open-ended meetings] are not negotiating meetings. »
WASHINGTON POLITICS - FARM BILL AND TPA
Whether Congress will give the Bush administration an extension on the
trade promotion authority (TPA or « fast-track ») when it expires on 1
July 2007 will determine the life or death of the round. However, as
one US official shared informally, the extension does not have to be in
place by 1 July when the current TPA expires. It could well be that
there is a lapse of several months before Congress agrees to a new TPA
for the purposes of concluding Doha and several free trade agreements
(FTAs), for example with Peru, Panama, Colombia, South Korea. Obviously
though, US trade representative Schwab’s negotiating authority
vis-a-vis her trade partners would be diminished if TPA lapses. A hard
campaign is ongoing in Washington. Labour and environmental clauses for
the FTAs are being discussed in order to draw the Democrats on board.
Also, Democrats representing farm interests are being courted and asked
what they want to get out of Doha and the Farm Bill. Whether the
Administration’s campaign will be successful remains to be seen.
On 1 February, the Administration unveiled 65 proposals for the US Farm
Bill to Congress. Whilst these remain only at the proposal stage, the
trends are not particularly encouraging. More box shifting is being
planned - moving subsidies from WTO illegal categories to direct
payments which, in the WTO, falls under the unlimited « gree n box ».
In fact the US already houses about 70% of its subsidies under the
green box, which the WTO cotton case has revealed is anything but
non-trade distorting. These moves towards direct payments will simply
make hide export subsidies and trade distortions. The increase in
direct payments could be up to 5.5 billion. This means that US can
declare that it is WTO compatible, but in reality it will still be
distorting trade.
Unfortunately, this deceptive game of box-shifting could unlock the
current deadlock in the Doha Round. Due to high commodity prices
because of biofuels and high global demand, so-called ’trade distorting
supports’ of the US amounted to 11.5 billion in 2006, down from about
19 billion the previous year. In its last official agriculture offer in
the WTO, in October 2005, US proposed binding their trade distorting
supports at 22 billion. The G20 rejected this, and has asked the US to
bring supports down to 12.5 billion.
The US could conceivably accept the G20 position at this point. If so,
the only stumbling block in the domestic supports pillar would be
disciplines on the blue and green boxes. Hopefully, the G20 will wake
up to and push for strong disciplines in thegreen box - they have
articulated some of these disciplines but seem not to have pushed them
hard in the negotiations.
In market access, a source close to the Brazilian negotiating team said
that whilst the EU’s Peter Mandelson has made it known that he is
willing to accept the G20 market access position of 54% tariff cuts,
gaps between EU and Brazil still remain. The EU apparently wants to cut
tariffs based on averages (even as they are asking deveoping countries
to cut NAMA tariffs line by line), whilst the G20 is asking for
line-by-line cuts. There are also remaining differences in the coverage
and treatment of sensitive products.
NON-AGRICULTURE MARKET ACCESS (NAMA)
In NAMA, Canadian Ambassador Donald Stephenson has also been holding
some informal consultations (similar to the fireside chats in
agriculture). At these meetings, Stephenson has been exploring the
different ideas of ’level of ambition’. Whilst it does not make much
sense that one sector is traded off with another in the negotiations,
WTO negotiators are generally aiming for ambition in agriculture to be
more or less matched by ambition in NAMA and Services. That is, if
tariffs in agriculture are cut by 54%, those in NAMA may not be too far
from that percentage also.
Since the resumption, the US and EU have, as in services, attempted to
intensify the NAMA negotiations. This approach was rejected by
developing countries. India reportedly said that this round is about
agriculture since that is the sector that is most distorted and it
would be impossible to finalise figures for NAMA before the figures in
agriculture emerge.
There has been disagreement around the concept of ’level of ambition’,
with the chair attempting to equate level of ambition as ’tariffs minus
flexibilities plus sectorals’. The NAMA 11 [including Argentina,
Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa,
Tunisia and Venezuela] were opposed to that - their reasoning being
that flexibities should be a completely separate issue from the tariff
formula (this is the same position NAMA 11 held on to last year) and
should not be accounted for in the ’level of ambition’. They also said
that sectorals were completely voluntary and should not also be a
factor.
The EU is still pushing hard for coefficients of 10 for developed
countries and 15 for developing countries in the Swiss formula, that is
maximum tariffs of 10 and 15 respectively. US was reported to have been
silent on the issue of coefficients. They are apparently facing
difficulties at home in the manufacturing sector and may not be even
keen on an across the board coeffient of 10 for themselves. The two
sectors which are sensitive for them are automobiles and textiles. (2)
Instead, the US remains very aggressive in pushing for sectoral
negotiations. A sectoral approach to liberalisation is in their
interest since they want low to zero tariffs in most sectors, but high
tariffs in textiles. They have tried in NAMA to push for a ’positive
sectoral’ in textiles, that is higher tariffs than the formula would
yield, but this effort did not seem to go far in the negotiations last
year.
Talks are also taking place on non-tariff barriers (NTBs) and the
non-legally binding mechanism for settling NTBs.
SERVICES
There were attempts at the end January Davos meeting by US and EU to
get developing countries to agree to a date for the revision of their
services offers. Again, developing countries have chosen to wait for
clearer indication in agriculture before committing themselves further.
No date has been set. Explaining why developing countries have not
bitten the bait, a Caribbean delegate says, « They (the US and EU) are
attempting to have low ambition in agriculture and high ambition in
services and NAMA. Given the current situation (where nothing has
emerged in agriculture), there is no way I can account to my capital
why I need to provide a revised offer. »
Nevertheless, informal services clusters are taking place in the last
two weeks of every month. The February cluster will deal with rules
rather than market access - including domestic regulation and the
emergency safeguard mechanism.
The domestic regulation talks have been continuing under the
chairmanship of the Singapore’s Peter Govindasamy. He has dealt with
the following issues at his meetings - transparency, technical
standards, necessity test and development. With each meeting, he has
been working with groups on parts of the domestic regulation text.
Positions however, remain far apart. The US has said clearly that it
will not be forced to agree to a necessity test. If one is included in
the text, there will be no domestic regulation negotiations. EU used to
be silent on the issue, but is also now saying no to the necessity
test. Switzerland, Australia, India, and Hong Kong China are amongst
the delegations pushing for the necessity test. The end result, some
speculate, could be a ’best endeavour’ necessity test.
However, the US has been aggressively pushing ’prior comment’ under
transparency. That is, countries need to notify the WTO membership
before changing their domestic regulation, and be open to receiving
feedback from other delegations about their proposed changes in
regulation. Developing countries are opposed to this - it would give
other countries an avenue to interfere in domestic policies. Also,
developing countries have argued that they do not have the
institutional capacity to enforce such an agreement. The current text
is based on the US position and could be watered down into best
endeavour language.
The development concerns of the ACP countries have not been endorsed by
developed countries such as the US, which fears that what the ACP is
asking for could amount to too many loopholes in the agreement. In
addition, the major players are apparently not agreeing to carve outs
for LDCs! All in all, there remain many differences.
FORECLOSING DEVELOPING COUNTRIES’ DEVELOPMENT PROSPECTS
History does not seem to have changed, and we seem to be reliving the
end days of the Urugauy Round negotiations.
Poverty in Africa has doubled in the past 25 years under structural
adjustment policies. UNCTAD has already revealed that even in the
recent years, when some LDCs have experienced positive economic growth,
and increased exports, poverty has not declined. In Comoros, Malawi,
Mali, Tanzania and Zambia, GDP growth has not translated to higher
consumption per capita i.e. no decrease in poverty.(3) Harvard’s Dani
Rodrik concludes that poor African countries can grow, but they cannot
seem to sustain their growth. (4) This is probably connected to the
findings of UNCTAD economist S.M. Shafaeddin, who cites the examples of
Jamaica, Ghana, Colombia, Uruguay and Paraguay - all countries which
have had high or moderate levels of growth rates in exports in the
recent years, but have had negative manufactured value (MVA) added.
That is, even as countries are growing in exports, there has been a
process of deindustrialisation. Ghana’s MVA was at -3.5% during the
1990s, indicating severe deindustrialisation.(5)
These issues have not been discussed in the multilateral trade
institution. Instead, Doha negotiations and its fixed formulas
liberalising all sectors and products line-by-line, and permanently, is
being negotiated, with outcomes experts have already predicted will
amount to losses for the poor.(6)
NOTES
1. The group Falconer has pulled together includes Argentina,
Australia, Bangladesh, Benin, Brazil, Canada, Chad, Chile, China, Costa
Rica, Croatia, EC, India, Korea, Indonesia, Japan, Malaysia, Norway,
Paraguay, Switzerland, Thailand, US and Uruguay.
2. Since Bush came into power in 2001, 1 in 5 manufacturing jobs have
disappeared, totaling over 96 million jobs. Auto makers and textile
companies have been hardest hit. (Klapper B ’WTO’s 150 Members to Meet
Amid Uncertainty about US’ AP, 7 February 2007).
3. UNCTAD 2006 LDC Report.
4. Rodrik D 2006 ’Goodbye Washington Consensus, Hello Washington
Confusion’, January.
5. Shafaeddin S.M. 2005 ’Trade Liberalisation and Economic Reform in
Developing Countries: Structural Change or De-Industrialisation?’
UNCTAD Discussion Papers No. 179 April.
6. See Wise T and Gallagher K 2006 ’Doha Round and Developing
Countries: Will the Doha Deal Do More Harm Than Good?’ also, Polaski S
2006 ’Winners and Losers: Impact of the Doha Round’.