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WTO Director-General Pascal Lamy announced on 22 February that trade ministers will not be gathering in Geneva at the end of March for a stock-taking meeting. Rather, the meeting, called for by the G-20 in September, will involve senior officials.
The announcement comes amidst frustration among delegates at the slow pace of the talks. The negotiating committees on the critical areas of industrial goods, services and agriculture have all held meetings since the beginning of February, but to little avail.
The negotiating committee on industrial goods talks, which met during the first week of February, narrowed some gaps in members’ views on non-tariff barriers to trade, but negotiators completely sidestepped the main area of contention in the talks: whether participation in sector-wide tariff-cutting deals should be voluntary or mandatory. Meanwhile, the negotiations on services liberalisation apparently saw “no movement” at all, according to a source close to the talks.
Even the talks on trade facilitation - usually the golden boy of the Doha Round talks - moved at a glacial pace during a first official meeting of 2010.
Meanwhile, the agriculture talks have also been largely treading water. Delegates have only discussed issues of controversy in informal consultations with the chair of the talks, Ambassador David Walker of New Zealand, at the New Zealand Mission; the touchy subjects have not been broached in any formal meetings.
Official talks have largely centred on the technicalities of the Special Safeguard Mechanism, a tool that would allow developing countries to raise tariffs to protect domestic producers from import surges and price depressions.
Many delegates say that the US, which still lacks an official ambassador to the WTO, is the primary drag on the pace of the negotiations. More than a year after US President Barack Obama took office, several critical trade posts remain unfilled thanks to partisan political point-scoring on Capitol Hill. One source argued, however, that delegates might be putting too much focus on the US stance, pointing out that the EU also lacks ambassadorial representation at the WTO at the moment.
G33 challenge exporter’s claims on the special safeguard mechanism
The G33 group of import-sensitive developing countries have have responded to exporters’ criticisms of the proposed ’special safeguard mechanism’ - a new tool that would allow developing countries to impose additional safeguard duties on imports in the event of a surge in import volumes, or a sharp drop in prices - in a series of papers released in January and February.
Disagreements over the SSM were largely blamed for the collapse of high-level trade talks in July 2008; since then, exporters have outlined many of their concerns with the mechanism. Among them, the protection of ‘normal trade,’ or trade outside of import surges, has been key. Exporters want to ensure that the SSM can only be used in the case of import surges and not in response to growth in ‘normal trade’.
Although the notion of normal growth in trade is not clearly defined, the G33 responded to exporter concerns in a paper published in late January by showing that, between 1987 and 2007, growth in trade for the ten most traded agricultural commodities has remained in the single digits, with the exception of soy.[1]
The SSM has a proposed trigger of a ten-percent surge in import volume compared to a three-year moving average. The G33 document suggests that, under such a scenario, normal trade is likely to flow unimpeded.
In two subsequent papers, released in February, the G33 examine whether the SSM should take into account seasonal variations in production and trade, and also whether a volume surge and price depression should occur simultaneously as a condition for imposing safeguard duties - both of which are key demands from exporters.
In their paper on ’seasonality’, the G-33 warn that a distinction must be made between ’seasonality in trade’ and ’seasonality in production’. While growing seasons may mean that production of certain products is skewed towards particular months of the year, these trends do not necessarily translate into increased international trade during those periods - for example, in the case of raw materials that are subsequently processed into non-perishable secondary products, and then traded throughout the year.
The G33 also challenge the argument promoted by exporters that a “cross-check” or link should be made between the presence of a volume surge and a price depression, on the basis that if import volumes are increasing but prices are not falling, there is continued demand from domestic consumers.
The G33 counters that “a considerable time lag” can occur between an import surge and its impact on domestic prices and industry - with such time lags being particularly acute in developing countries, due to “complex and thick layers of distribution chains and inadequate infrastructure.” The group warned that the proposed ‘cross-check’ would “unresponsive to practical needs.”
In addition, because many developing countries will in reality be unable to monitor real time price and volume data for all tariff lines all the time, the cross-check requirement would in effect make the SSM unworkable, the group observed. The poorest and smallest countries would also be the most affected by any such requirement.
Brazil Set to Announce List of US Goods for Sanctions, Takes First Step to Cross-Retaliate
Brazil has announced that on 1 March it will release a substantive list of retaliatory duties to be imposed on US goods. The retaliation results from a dispute between the United States and Brazil over the subsidies that the US provides its cotton farmers.
A WTO panel ruled in August that Brazil should be allowed to impose retaliatory duties on US$830 million worth of trade with the United States. That ruling came on the heels of a 2008 Appellate Body decision that concluded that US cotton subsidies contravene WTO rules. But the subsidies remain in place, thanks in large part to the US agriculture lobby, which wields significant influence on Capitol Hill.
Of the US$830 million worth of trade that Brazil can sanction, US$560 million will be detailed in the list of goods to be released in March. The other US$270 million will be applied in the form of ‘cross-retaliation measures’, which would target services as well as intellectual property rights (IPRs).
Cross-retaliation, which is allowed under WTO rules, can be a powerful retaliatory tool. By restricting or suspending IPRs, a relatively small country can inflict economic damage upon a larger country without making its consumers suffer from higher prices.
On 11 February Brazil’s president, Luiz Inácio Lula da Silva, approved legislation that allows the suspension and limitation of the IP rights of citizens or companies domiciled in countries that violate WTO rules. However, additional administrative action is still needed before Brazil can be in a position to effectively implement the cross-retaliation.
If Brazil follows through with the duties on IP rights and services, many believe that the measures would target the economically and politically strong US pharmaceutical industry. By suspending or breaching the IP rights of pharmaceutical companies, Brazil would be able to seize royalty payments or even produce cheaper generic versions of the targeted drugs.
Industrial Goods Talks Tackle Non-Tariff Barriers
With no movement on the principal sticking point in the Doha Round industrial goods talks, negotiators continue to inch forward on establishing new rules for addressing non-tariff barriers.
In recent months, officials have been focusing their energy on non-tariff barriers, or NTBs. In February, they continued to discuss proposals for the automotive, electronics, and textile sectors. They also looked at ‘remanufactured goods’ - used products that are refurbished and provided with a warranty - and a proposed ‘horizontal mechanism’ for quickly adjudicating trade problems arising from NTBs.
The automotive sector is marked by a wide array of differing standards that compel auto makers to re-tool cars and trucks to meet the specifications of each target market. The EU has proposed moving towards harmonising technological regulations and standards in the sector, although other major auto producers remain hesitant. The US called it “unrealistic” and said it would deprive countries of the ability to follow their own standards. Japan argued that countries with different geographies, climates, and population densities need different standards.
Talks on NTBs in the electronics sector have been marked by similar disagreement. Several developing countries, including India and Brazil, are wary of trade in ‘remanufactured goods’. Many of them do not differentiate between ‘remanufactured’ and ‘used’, fearing that such products - warranty notwithstanding - might last less long than new ones, and could become a pretext for dumping waste from rich nations.
A substantial majority of WTO members, from the EU and Canada to the African and LDC groups, favours the creation of a ‘horizontal mechanism’ for promptly addressing trade irritants arising from non-tariff barriers. The US is unconvinced, however; it would prefer that countries take particular problems to relevant WTO committees. Another wrinkle comes from the fact that Japan, Korea, and Taiwan don’t want such a mechanism to address trade barriers linked to sanitary and phytosanitary (SPS) measures - even though fish products are covered by the NAMA negotiations.
This information has been summarised from ICTSD’s Bridges Weekly Trade News Digest.
[1] “Refocusing Discussion on the Special Safeguard Mechanism: Outstanding Issues and Concerns on its Design and Structure Submission by the G33″, TN/AG/GEN/30, 28 January 2010: http://ictsd.org/downloads/2010/02/g-33-ssm-paper-28jan2010.pdf
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