Bridges Weekly Trade News Digest • Volume  • Number  • 23rd January 2008

NAMA Impasse Persists, As WTO Members Await New Draft Texts

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WTO Members insist that they have not given up on concluding the Doha Round of global trade talks in 2008. Director-General Pascal Lamy, too, sounds optimistic. "It’s an Olympic year for China and maybe an Olympic year for Doha too," he told a Chinese newspaper last week.

In theory, finishing up the Doha Round this year would look something like this: the chairs of the WTO negotiating committees on agriculture and industrial goods trade would issue updated draft deals to Members in early February. These texts would serve as the basis for a ‘horizontal’ negotiating process involving tradeoffs across the two sectors, which would culminate in an agreement - say by April or so - on formulae and figures for tariff and subsidy cuts, possibly linked to some promises on services trade. The US presidential administration would use this ‘modalities’ deal to win negotiating authority from a Congress that would be reluctant to torpedo a multilateral trade pact.

Meanwhile, WTO Members would turn their attention to wrapping up talks on services, fisheries subsidies, trade facilitation, anti-dumping, special and differential treatment for poor countries, and other issues. They would then proceed to scheduling product- and sector-specific liberalisation commitments, a process likely to take months and entail more than a little last-minute haggling. Following legal verification of each others’ future obligations, WTO Member governments would adopt the Doha Round agreements with much fanfare, before the year is out.

However, Members failed to achieve very similar goals over the past two years, even when the beleaguered Bush administration would not have needed to secure a new trade promotion authority mandate from a hostile Congress. Indeed, the Doha talks, launched over six years ago, were originally supposed to finish by the end of 2004.

Nevertheless, recent months have been marked by intensive negotiations and modest signs of progress. In an interview published in the 22 January edition of China Daily, Lamy said that this year, an accord was "doable as we now have both political and technical conditions to make it possible."Following a meeting in Brussels earlier this week, EU Trade Commissioner Peter Mandelson and US Trade Representative Susan Schwab also spoke of wrapping up the talks in 2008. Mandelson said that a modalities deal would be necessary by the "very early spring" for this to happen.

NAMA divide largely unchanged

Major obstacles will need to be overcome even for Members to reach the crucial modalities deal on agriculture and industrial goods trade.

Not least among the stumbling blocks is the wide gap between Members’ positions in the negotiations on non-agricultural market access (NAMA). "Nothing happened" to narrow these differences during last week’s talks on the figures that will determine Members’ future tariff levels, negotiating committee Chair Ambassador Don Stephenson (Canada) told delegates on 21 January. This was also true for the parameters for the controversial ‘flexibilities’ that will guide the extent to which developing countries will be able to shield some products from tariff reduction.

In fact, little has changed since July 2007, when Stephenson issued a draft agreement text setting out terms for where he guessed an agreement might lie, in light of Members’ notable failure to converge on their own. That text provided for a formula and associated numerical ‘coefficients’ that would cap developed country tariffs at 8-9 percent and those of developing countries between 19-23 percent, with duties reduced correspondingly across the board.

The NAMA-11 group of developing countries, which includes South Africa, Argentina, Brazil, and India, has criticised the July 2007 text for being too demanding of poor nations, too easy on industrialised nations, and out of all proportion to the farm subsidy reform provided for in a linked draft deal from the agriculture committee chair (see BRIDGES Weekly, 1 August 2007). On the other hand, the US and the EU have said that the text’s tariff cuts for developing countries are barely sufficient. Both sides repeated these views during talks last week, the NAMA-11 saying that the proposed cuts would mean "massive consolidation of tariffs for developing countries."

The two camps have also clashed over the coverage of ‘flexibilities’ for developing countries. Stephenson’s July 2007 text would allow the 30-odd developing countries required to apply the standard reduction formula to subject 10 percent of tariff lines to reductions half as steep as those ordinarily required (so long as this does not cover more than a tenth of manufacturing import value). Alternately, they would be allowed to exclude 5 percent of tariff lines from reduction altogether (albeit limited to only 5 percent of total import value). The NAMA-11 has sought to expand the reach of these flexibilities, while the EU and the US have proposed constraining them further.

A ‘middle ground’ group of developing countries including Chile, Colombia, Peru, Singapore, and Thailand have called for accepting the parameters in the July text, both for the formula and the flexibilities. However, many of these countries already have low overall tariff levels or see a significant share of imports enter their markets duty-free due to bilateral agreements, and would thus be left relatively less affected by the Doha Round.

Stephenson: much left to ‘horizontal process’

Incremental progress on the far more numerous issues in the farm trade talks has enabled agriculture committee Chair Ambassador Crawford Falconer (New Zealand) to tell negotiators that he will be able to significantly update the draft text that he presented to them last July. Sources now expect this text soon after the General Council meeting scheduled for 5-6 February.

In the industrial goods talks, however, the deadlock has hampered Stephenson’s ability to revise the figures in his own text. He finally said this week that the key issues in the NAMA talks - especially the formula and the flexibilities - would only be resolvable in conjunction with the agriculture negotiations. He was referring to the so-called ‘horizontal’ process during which senior officials (and ultimately ministers) are expected to negotiate cross-sector tradeoffs based on the revised agriculture and NAMA texts.

Some countries may be willing to soften their positions on NAMA if they receive concessions that they want on agriculture, or vice versa.

Stephenson indicated that he would look at the new agriculture text and consider any adjustments before releasing his own draft deal, sources said. He said that he would issue his text either alongside the agriculture one, or shortly thereafter. Delegates said that they were not sure specifically how the new text would differ from the old, although the chair had promised some changes.

Trade ministers from several influential WTO Member countries are set to meet this week in Davos, on the sidelines of the World Economic Forum summit there. Both Lamy and Mandelson are looking to the upcoming talks to produce clearer signs on how the WTO negotiations might move forward.

Indian Commerce Minister Kamal Nath also expressed hope that the Davos gathering would "create a greater momentum towards the conclusion" of the Doha Round, reports Reuters. However, he said that he was "realistic" that the US elections and "a new phase of protectionism" in the EU could pose problems.

ICTSD reporting; "India hopes for progress on WTO trade deal this week," REUTERS, 22 January 2008; "Lamy eyes success in trade talks," CHINA DAILY, 22 January 2008 ; "EU, US still hoping for 2008 Doha deal," REUTERS, 21 January 2008.