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Capital-based officials from seven major trading powers met last week in a last-ditch attempt to hammer out their differences on an agricultural safeguard mechanism for developing countries, a controversial trade tool that triggered the collapse of world trade talks in Geneva at the end of July.
Some delegates considered last week’s informal meeting the final opportunity for the so-called G-7, which includes Australia, Brazil, China, the EU, India, Japan and the US, to demonstrate its value as a negotiating group outside of the multilateral process. The G-7 aimed to reach a consensus on outstanding issues in the talks, which they then planned to present to the broader WTO Membership.
But such a level of agreement was not achieved. Indeed, the talks ended abruptly over the weekend when India reportedly refused to sign off on a compromise deal on the Special Safeguard Mechanism (SSM) that all of the other G-7 members had indicated they could accept.
A delegate called the conclusion of the talks a “zero result” and questioned the value of focusing so closely on the SSM. Another delegate contrasted the dismal outcome of the G-7 meetings with the optimistic atmosphere that prevailed in the lead-up to the informal consultations.
Some trade officials from the G-33, a group of food-importing developing countries, lamented the absence of Indonesia and other developing country group coordinators from the invitation-only talks.
The G-7’s failure to find consensus means that it is now highly unlikely that WTO Director-General Pascal Lamy will summon trade ministers back to Geneva this autumn, a move that he had indicated he was ready to take if the G-7 consultations proved fruitful. Sources indicated that a meeting of the seven ministers tentatively planned to be held in London on 2-3 October is not expected to be convened even though high level contacts were being made “to overcome the setback.”
Asked if the G-7 had reached the end of its life, a delegate replied, “I hope so.”
But even beyond the SSM, many issues that could make or break a potential deal have not been discussed in detail so far. These issues include cotton subsidies, tariff rate quota creation, and tariff simplification.
While Lamy has not responded publicly to the end of the G-7 talks over the weekend, the Director-General recently underscored his belief in the need for a new agreement on world trade. Speaking at the opening of the annual WTO public forum on 24 September, Lamy stressed the importance of keeping the world trade regime strong, especially in the midst of grim economic times.
“What is needed in times of crises is to enable consumers to purchase more for less. The temptation to shut our borders does exactly the opposite,” Lamy said. “There is no doubt therefore that the current hurricane that has hit financial markets must not dissuade the international community from pursuing greater economic integration and openness. But in order to be both sustainable and fair, this integration has to be based on rules. And the rule-book needs to be updated regularly.”
Proposals on the safeguard mechanism
A modified EU proposal from July 2008 framed the exchanges on the SSM at the G-7 talks, sources said. The proposal included additional provisions for a cross-checking mechanism, a year-long “holiday” provision, and a proposal to calculate time periods in calendar years, as opposed to twelve-month rolling intervals. Sources close to the talks said that the US insisted on the cross-checking component, which would ensure that, before a volume-based surge could trigger the mechanism, the additional imports would have to have an identifiable impact on prices. The so-called “holiday” provision would make the SSM applicable at varying periods, meaning that the remedies could not be applied continuously, without interruption.
The EU proposal used a ‘tiered’ approach, meaning that countries would be allowed to impose greater duties in the event of larger import surges. The numbers on the table at the mini-ministerial in July were 115 or 120 percent as a base for the lower tier, while the higher tier would have covered larger surges of at least 135 or 140 percent. An exception would have been made for developing countries facing a steep decline in prices, between 7.5 and 15 percent. In such cases those countries would be allowed to impose the applicable duties from the higher tier.
Exporters were keen to include a provision to ensure that “natural” trade growth would not trigger an imposition of protective tariffs under the SSM. Such a measure would allow imports to grow at a given pace, possibly determined by a moving average over a set time period. However, surges in imports beyond the “natural” growth rate would trigger the SSM remedies. But some developing country officials pointed out that the Special Agricultural Safeguard that was agreed in the Uruguay Round had no such provision, implying that including a measure to account for “natural” growth would make the mechanism less useful.
Moving towards a multilateral process
The failure to revive the Doha Round talks is expected to have broad process-oriented consequences for WTO Members.
One trade official argued that WTO Director-General Pascal Lamy “should take some action” and try to “set deadlines and find the technical compromises.” Explaining that if the countries that “pay the D-G’s salary do not want an agreement, it will not come.” The source nonetheless added that to have an agreement the Director-General will have to “focus on delivery and accountability.”
Ambassador Crawford Falconer of New Zealand, the chair of WTO farm talks, is convening a meeting of 25 ambassadors from a cross-section of countries to determine “where we are and how we should best structure our future work.” Some negotiating groups, such as the G-20, a group of developing-country agricultural exporters, are also expecting Falconer to attend their internal meetings.
Beginning next week, the chair of the farm talks is expected to start a series of ‘walk in the woods’ discussions that will focus on each Member’s particular concerns about both the process and the content of the negotiations.
But whether the WTO is ready for process-oriented discussions is an open question. Responding to calls from some quarters for the WTO to reassess the way it conducts its business, Lamy said in an address at WTO headquarters on 24 September that countries must find consensus on the matters that are already on the table before they begin to think about expanding the issues under consideration at the WTO, or about changing decision-making at the institution.
“It is not the time to launch parallel negotiations on how to negotiate…that may be an idea, but it’s an idea for later,” he said.
ICTSD reporting.
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