Bridges Weekly Trade News Digest • Volume 11 • Number 22 • 20th June 2007

G-4 Meeting Underway In Potsdam; Other Members Await Convergence, Chairs’ Texts


Trade ministers from the EU, Brazil, India, and the US have kicked off a new attempt to resolve their differences in the deadlocked Doha Round negotiations in order to bolster chances of salvaging a multilateral agreement by the end of the year.

Talks among the so-called G-4 got underway in Potsdam near Berlin on 19 June. They are scheduled to continue through 23 June; an additional day has been budgeted for in case officials want to keep bargaining.

The four trading powers, which represent a wide spectrum of interests in the talks, are hoping to be able to bridge enough gaps on agriculture and industrial goods trade to help the broader WTO Membership strike a framework ‘modalities’ deal with specific formulae and figures for tariff and subsidy cuts before the Geneva-based institution’s August holiday. Such an accord is thought necessary to conclude the round by the end of the year.

Expectations lowered for Potsdam

Expectations for the meeting in Potsdam have been lowered. As recently as last week, US Trade Representative Susan Schwab was talking about moving the talks forward "dramatically." However, officials reject suggestions that this is the last chance for a rapprochement. EU Trade Commissioner Peter Mandelson told EU foreign ministers on 18 June that the ongoing gathering might achieve only "incremental progress," with the possibility of another G-4 summit in July, reports Agence France Presse.

Nevertheless, even though a breakthrough seems unlikely, a total breakdown - like the acrimonious collapse of a similar summit last July - could be fatal to the multilateral talks, or at least put them into a prolonged coma (see BRIDGES Weekly, 26 July 2007, http://www.ictsd.org/weekly/06-07-26/story1.htm). Mandelson said that the meeting of "G-4 negotiators cannot finish the Doha Round, but it will determine if Doha can be finished."

The negotiations have not wanted for deadlines or "now or never" moments since their launch in late 2001. Most have been forgotten, let alone successfully met. But this time could well be more serious: the US presidential elections in 2008 will make lawmakers in Washington even more reluctant to grant politically-sensitive concessions in order to reach a trade accord. India is set to follow with elections in 2009. If a Doha Round agreement cannot be reached by early next year, the talks could well be put into deep freeze for years - if not forever.

G-4 representatives have met repeatedly in recent months for quiet, technical talks aimed at finding ways out of the impasse in the negotiations. Most recently, senior officials met last week in Paris to prepare for Potsdam. Little of substance has been confirmed about the G-4’s discussions, with contradictory rumours of convergence and deadlock. Indeed, the secrecy has led some observers to wonder whether the governments are on their way to an unavoidably controversial compromise, or simply trying to manage the political fallout from a collapse that they know to be inevitable.

The nature of the impasse in the talks has remained broadly unchanged since early 2006: while many Members want the US to agree to deeper cuts to its farm subsidies, Washington insists that it will not do so unless the EU agrees to greater agricultural market access and developing countries such as India and China accept tight limits on their ability to shield ’special’ farm products from tariff reduction for food and livelihood security concerns. Meanwhile, the EU and the US want Brazil, India, and other developing countries to cut their industrial tariffs by much more than they have offered thus far.

There is little apparent overlap in the positions that each government espouses in public. Nevertheless, this may not be the case in closed-door informal discussions, where negotiators generally feel more comfortable talking about potential concessions.

Spotlight on NAMA, ag subsidies

The Potsdam meeting will address both farm and manufactureds trade, as well as services.

Although differences on agriculture have bedeviled the talks almost from the start, the divisions on non-agricultural market access (NAMA) were recently brought into sharp relief (see BRIDGES Weekly, 13 June 2007, http://www.ictsd.org/weekly/07-06-13/story1.htm). Brazil and India reiterated their opposition to US and EU demands in the negotiations, arguing that they would force developing countries to cut their bound tariffs by greater percentages than industrialised countries.

USTR Schwab complained last week that the gentler tariff cuts India and Brazil seek would leave the duties that they actually levy on manufactured goods largely untouched. Such demands by developing countries, she told Reuters, could "be the deathknell of the [Doha] development round." "I’m hoping that the serious players in this negotiation understand if you want a development outcome, you really have to cut into applied rates," she said.

Other G-4 members will spend substantial time in Potsdam trying to convince Schwab to bring Washington’s bound spending limit for trade-distorting domestic farm subsidies into closer alignment with the payments it actually doles out, if Indian Commerce Minister Kamal Nath has his way. "I do hope the US comes with a bag full of things [on farm support] tomorrow," he said in Montreal before leaving for Germany. Nath said that he hoped for movement on the issue "because you cannot be talking of fair trade and continue with domestic subsidies."

Differences on domestic support remain deep, despite the recent hints of convergence on some issues in the agriculture talks. The US’ offer to cap its trade-distorting farm subsidies at USD 22.5 billion is still well above the USD 19 billion it paid out to farmers in 2001, let alone the USD 11 billion that some of its trading partners estimate it spent last year.

Brazil and India’s G-20 bloc want the US’ spending entitlement capped at about USD 12 billion; the EU is seeking a USD 15 billion limit. Initial press reports from Potsdam suggest that Washington has suggested that it might be able to consider a USD 17 billion ceiling. Before going to Germany, Schwab had reiterated that the US would consider greater subsidy reduction if offered expanded market access.

The bulk of US government payments to farmers - worth over USD 50 billion in 2001 when last notified to the WTO - will not face any reductions in the Doha Round, since they have been deemed not to distort trade and production. Many developing countries allege that some of these ‘green box’ subsidies in fact affect both.

Ag, NAMA chairs’ texts to come soon

Whether or not the G-4 countries manage to agree on anything, discussions at WTO headquarters in Geneva are set to heat up later this month, when the chairs of the agriculture and NAMA talks are to present Members with draft agreement texts for further negotiation. These texts are expected to contain formulae and figures (whether precise or a limited range) for where they think a compromise might be found on subsidy and tariff cuts, as well as on the often-contentious exceptions to these. Both chairs had indicated that they would welcome input from the G-4 when preparing their papers.

WTO Director-General Pascal Lamy has described the process led by agriculture Chair Ambassador Crawford Falconer (New Zealand) and NAMA Chair Ambassador Don Stephenson (Canada) as an "insurance policy" against another failure by the G-4 to resolve their differences. In recent months, other governments’ patience for the G-4 has waxed and waned; many delegates have expressed relief that a parallel multilateral track exists for pushing the talks along.

Even if the trading powers in Potsdam converge to a significant extent, they will have to figure out how to feed this into the multilateral talks in a way that does not seem as though they are trying to foist a deal on to the wider WTO Membership.

As it is, several civil society groups from around the world have criticised the G-4 as illegitimate, unrepresentative and undemocratic. They fear that small developing countries will feel forced to accept any compromise the four come up with. The G-4 has been likened by some to the less diverse quartet of countries - the US, the EU, Japan, and Canada - that played a dominant role during the Uruguay Round negotiations.

Oxfam warns that excessive haste could produce a deal that is harmful to development concerns - the precise opposite of the round’s original purpose. Marita Hutjes, acting head of Oxfam’s Make Trade Fair campaign, called for an end to trade-distorting subsidies. The last thing poor countries need, she said, "is a deal done at any cost, that exposes them to further dumping, and undermines future development prospects."

Describing the process in recent months as neither "transparent, accountable [nor] inclusive," she said that "the danger now is that as momentum builds towards a deal, the poorest countries will be pressured into accepting a text which does not serve their development needs."

Delegates say that if a modalities deal appears to be within Members’ reach in July, Lamy could summon ministers to Geneva towards the end of the month to hammer out an accord.

ICTSD reporting; "US should be open to farm subsidy cuts: Kamal Nath," INDIAN EXPRESS, 19 June 2007; "Trade powers launch new WTO push, US hopeful," REUTERS, 19 June 2007; "US trade chief eyes dramatic progress in WTO talks," WASHINGTON POST, 18 June 2007; "US, Brazil wrangle over farm subsidies as top WTO powers start talks," ASSOCIATES PRESS, 19 June 2007; "’Decisive’ talks in Potsdam," AGENCE FRANCE PRESSE, 19 June 2007.