Bridges Weekly Trade News Digest • Volume 12 • Number 41 • 3rd December 2008

Lamy Leaning Towards Calling Mid-December Mini-Ministerial

Discuss this articleShare your views with other visitors, and read what they have to say

Just under five months ago, a high-profile push for a WTO accord broke down when the US, India, and China proved unable to resolve differences on farm trade.

Although ministers came closer in July to striking framework deals on agriculture and manufacturing trade than many thought possible before the summit, the failure prompted several observers to once again proclaim the death of the long-struggling Doha Round of multilateral trade talks.

Now, with global economic cooperation back in vogue thanks to the worst financial crisis in decades, WTO Director-General Pascal Lamy is leaning towards bringing ministers back for another try.

In a fax to WTO Members dated 1 December, Lamy suggested that it would be possible to invite ministers to Geneva “in a window of time somewhere around 13-14-15 December.”

A prerequisite for this, he wrote, would be new draft agreement texts for agriculture and non-agricultural market access (NAMA). He indicated that he had asked the chairs of the two negotiating groups to issue updated texts “by the end of this week” to capture what progress they have discerned in their consultations with Members since September.

Lamy said that the draft texts would “provide a vehicle to allow ministers to close the final gaps before the end of the year, as they have been instructed to do,” in an allusion to the recent calls by heads of state, most notably the Group of 20 leading industrialised and developing countries, for the conclusion of framework Doha ‘modalities’ accords by the year’s end.

The WTO chief, who had held a ‘green room’ meeting with some 30 delegations the day before, argued that the prospect of another failed ‘mini-ministerial’ was worth the risk. He believes that a successful agreement would give a shot of confidence to a world economy reeling from the financial crisis. “As we all know, we still have a number of outstanding issues,” he said. “But the reality is the relevance of what we are doing to the financial crisis. If we fail, we have a problem, but although there remains the risk of failure, the risks involved in not trying are higher.”

Although the talks in July foundered on irreconcilable differences between the US, China, and India on a ‘special safeguard mechanism’ (SSM) for protecting developing country farmers from import surges, several other issues remain unresolved, and could potentially torpedo an upcoming mini-ministerial.

These include areas in the agriculture negotiations (see related article, this issue), but also in the NAMA talks, where the issue of how to deal with sector-specific liberalisation initiatives is proving particularly difficult.

NAMA: Sectorals most difficult issue

Swiss Ambassador Luzius Wasecha, who chairs the industrial goods negotiations, convened a meeting open to all WTO Members on 2 December to report on the consultations he had held on different issues with smaller groups of delegations.

Saying that there was a “possibility” that ministers will come to Geneva later this month, he said that “many things have to happen” before Members can move forward on the issue of sectoral liberalisation, which would see participating countries cut tariffs on covered goods more deeply than the standard formula would require.

Countries like the US, Canada, and Japan, backed by domestic industry, want to be sure that major developing country markets like China, Brazil, and India would take part in initiatives that would dramatically cut tariffs on goods like auto parts, chemicals, and forest products.

China and many other developing countries counter that the negotiating mandate explicitly specifies that participation in such initiatives is non-mandatory.

Proponents of sectoral initiatives are eager to secure China’s participation for two reasons. First, countries accounting for a high proportion of total world trade would need to sign on for the extra tariff cuts to kick in. Second, if a sectoral initiative got off the ground without China, Chinese exporters would benefit from low tariffs elsewhere without being equally exposed to international competition.

Wasecha pointed to the “crux of the issue”: while some governments want more “clarity and predictability” about other Members’ participation in such initiatives before they can agree on a general framework for tariff cuts and exceptions, these other countries are unwilling or unable to commit to an “unknown outcome,” or anything beyond a good-faith negotiation.

In a press briefing after the meeting, the Swiss ambassador declined to call the sectoral liberalisation conundrum a deal-breaker, but said it was very difficult, and sure to be put to ministers for its political significance. He also said that a Mexican proposal to compensate developing countries that do take part in sectoral initiatives with a gentler tariff reduction formula for other products was “no longer on the table.”

Another thorny issue is how to address differences over preference erosion. The most recent NAMA text contains provisions aimed at softening the blow of the erosion of trade preferences the EU and the US have long granted to some of the world’s poorest countries, allowing each of the two economic giants to take ten years instead of five to phase in Doha Round tariff cuts on some tariff lines, primarily textiles and clothing. This would at least slow the rate at which preference beneficiaries would have to confront potential displacement by more competitive exporters of the same products.

That text included a special footnote for Pakistan and Sri Lanka, both textile exporters that stood to be “disproportionately affected.” It would require the US and the EU to phase in tariff cuts at the regular pace on some of those products from the two developing countries, including cotton shirts, trousers, and sweaters.

Asian least-developed countries like Bangladesh, Cambodia, and Nepal, which do not receive tariff-free access to the US market, have sought to receive at least the same treatment as Pakistan and Sri Lanka.

They are not the only exporters with misgivings about the longer implementation period: China has unfavourably contrasted the US and the EU’s obtainment of protection for the textiles and clothing products with the demands it is facing for sectoral liberalisation.

Wasecha said that there is a need for a political definition of what “disproportionately affected” entails.

Also unresolved are the requests by some countries, such as Argentina, Venezuela, and South Africa, for special tariff treatment. Sources report that some developed countries, such as the US and the EU, remain unconvinced by Argentina’s and Venezuela’s claims that they need flexible treatment that goes beyond that accorded to other developing countries. South Africa, which in addition to having relatively low tariffs, shares a common external tariff with LDCs and small, vulnerable economies, will be the subject of additional consultations next week.

In his closing remarks to the 2 December meeting, the chair likened the need to address requests for exceptional treatment to the problems one faces when feeding a large group of people. Some people have allergies, he said. Others think they cannot eat what’s on the table. “The ideal is certainly not to let them starve,” he said, but to find a compromise.

Looking ahead, Wasecha said that he had planned consultations for Thursday and Friday, to discuss issues including preferences and sectoral initiatives.

As for the updated draft agreement, he promised negotiators that “you will have a text before next week.”

Delegates expect the chair of the agriculture negotiations to release a text on 4 or 5 December, with the NAMA text to follow a day or two later.

Wasecha said that delegations would have a chance to comment on the new text at a meeting of the entire negotiating group. At that meeting, he said that he would ask something that to do something that did not come easily to trade negotiators: demonstrate a “very small but precise gesture of generosity.”

“Otherwise I will tell your ministers that you have put them in the mess because you didn’t want to solve those issues,” he said. “And this is not good for your career.”

ICTSD reporting.