July 06, 2004: Geneva Update -- July 6, 2004

Geneva Update

6 July, 2004

July Framework: Will the Doha Mandate be honoured?

By Alexandra Strickner, TIP/IATP Geneva

What to expect for the end of July?

The reports from the Trade Negotiating Committee and sources in Geneva indicate that it is very likely WTO member states will agree a framework for negotiations at the end of July. The general sense is that some kind of agreement is necessary to send a message that the Doha Agenda is not dead. The question remains—how specific can the framework be and what detail will there be in the various Annexes, especially the Annex on Agriculture.

Observers expect the framework will set new deadlines for agreeing modalities for agriculture, services, NAMA and the other issues on the Doha Agenda. The suggested deadline for agreement on agriculture modalities is June 2005. There is still no clear date agreed for the next Ministerial Meeting (to be held in Hong Kong ). WTO members are unwilling to set a date until there is further clarity regarding the July Framework.

Given the differences among members on a number of issues, most notably in agriculture, we can expect only a very general framework document at the end of July. Developing countries want a framework that underlines coherence and that is consistent in its level of specificity within and across the subjects under negotiation.

Untransparent and exclusive process

Many developing countries claim the negotiating process for the framework is untransparent and exclusive, particularly the agricultural negotiations. Most of the high level negotiations on agriculture are taking place among the Non Group of 5 (NG5), which is made up of the U.S., EC, Australia, Brazil and India. From the 6th - 11th July, further meetings of the NG5 will take place to discuss contentious issues. The meetings will culminate in a Ministers Meeting in Paris on the 11th. After this, several chief negotiators, including Commissioner Lamy of the EC, will go to the G90 Ministers meeting in Mauritius.

The issue of transparency is critical. The Chair acknowledged in his statement that he has held consultations with only a few countries and that Special and Differential Treatment (SDT) has not been high among his priorities. There is very little time left before the July deadline. The first draft of the framework is expected to come out within the next two weeks, most likely on the 9th of July. Since the General Council meeting that is expected to adopt the framework meets 27-29 July, this leaves little time to discuss and modify a draft that the Chair acknowledges does not yet give due attention to issues of core concern to most developing countries. Developing countries are already under pressure to accept a framework, and that pressure will only intensify in the coming weeks. There is a real risk developing countries will be confronted with a draft framework on which they have not been properly consulted and that leaves out issues of crucial importance to be dealt with in the post-framework phase. Given the history of broken promises from developed countries to developing countries in the area of SDT, developing countries are worried.

Special and Differential Treatment

The Chair of the agricultural negotiations, Ambassador Tim Groser, seems to support leaving any clear decisions on the terms for Special and Differential Treatment (SDT) to the post-framework phase. He mentions the need to establish a "work programme" on a variety of issues including Special Products and the Special Safeguard Mechanism (SP/SSM), preferences, market access for least developed countries (LDC), and exemptions from tariff reductions for LDCs. There is no clarity as to what such a "work programme" would look like, yet even the contested Derbez text included proposals on some of these issues that reflected developing countries’ positions. It is questionable that Groser’s completely open-ended approach fulfills the Doha mandate, which calls for SDT to be an integral part of all elements of the negotiations. Postponing the discussion on SDT is risky since without agreement on these issues there is no guarantee they will be adequately addressed once the framework is adopted.

Some more details on Agriculture talks

Domestic Support - Blue Box

The blue box will probably become a deal-breaker. The U.S. is negotiating to relax the criteria of the blue box to allow the inclusion of direct payments to producers based on fixed areas and yields but tied to international prices, known as counter-cyclical payments. The G20 seems prepared to consider this proposal, although they insist they do not want to change the production-limiting criterion. Any accommodation of the counter-cyclical payments would require further negotiations on the criteria to ensure production limitations were maintained.

Cutting through the technical jargon, the US proposal is seeking to negotiate a deal on domestic support that will allow them to reduce their amber box ("trade-distorting") support by shifting that spending to a newly broadened blue box instead of actually cutting spending. The proposed new blue box will face spending limits (which it does not under the existing agreement) but there is a strong risk that any real reduction in spending will be considerably postponed by the re-categorization. The blue box spending limits are certain to be much less constraining than those agreed for the amber box.

AMS (Amber Box) and the de minimis

The widely accepted proposed reduction for amber box spending—the so-called Aggregate Measure of Support or AMS—is 50 percent. The G20 is proposing to classify AMS and de minimis spending in a so-called tiered approach. (The de minimis exempts from reduction any programme that does not cost more than a certain percentage of a country’s overall agricultural value-added). The G20 ’s idea would effectively require the largest reductions in domestic support from countries with the highest spending levels. The EC is strongly opposed to the proposal—not surprisingly, since they are among the largest spenders. Their counter proposal is to require the largest reductions from those whose AMS is the largest as a percentage of their total value of production. This would leave G10 members such as Switzerland and Norway facing the largest reductions, although in absolute terms their AMS is not high and the impact of their domestic support on world markets is for the most part minimal because they are not large exporters, and, in most cases, not very big import markets either.

Market Access

Chair Tim Groser suggests that one of the objectives of the negotiations on market access is to harmonize tariffs—that is, to bring everyone’ tariffs nearer to a common level. However, this objective is not shared by all WTO members. On the contrary, many developing countries oppose it. As long as this is the perceived objective of the negotiations, it will be difficult to agree on a formula for market access that responds to developing countries' needs regarding food and livelihood security and rural development as per the Doha declaration. NGOs need to stress the principle of proportionality, which would ensure developing countries’ overall tariff reductions are only be a fraction of those committed to by developed countries.

Another development in the market access debate is a non-paper from the U.S., which accepts the tiered approach to tariff reduction proposed by the G20 early in June. However, the U.S. proposes that every band of tariffs be subjected to a Swiss Formula to calculate reductions. The formula effectively cuts higher tariffs by more than lower tariffs. The U.S. proposal also insists that for any product whose tariffs that are not cut by a given minimum a tariff rate quota should be created instead (which allows a certain volume of import onto the market at less than the prevailing tariff rate). The G20 have refused this proposal. The EC, which also rejects the Swiss Formula approach to tariff reductions, is asking for exceptions for certain so-called "sensitive products." If this were agreed, it will have a similar effect as the original blended formula proposed by the US and EU and firmly rejected by the G20, G33 and Cairns Group. The EC proposal will allow the EC to protect its sensitive products while forcing the markets of other countries in particular developing countries, to open up.

( Link to U.S. Non Paper: http://www.tradeobservatory.org/library.cfm?refid=36199 )

The discussion on the need for Special Products (SP) for developing countries has been confused with the recent discussions on sensitive products for developed countries. It appears that the EC is attempting to link sensitive products with SPs. If sensitive products are allowed, negotiators will insist on a string of conditions, including compensation through minimum tariff reductions and new commitments on tariff rate quotas (TRQs). There is an urgent need to de-link SP from sensitive products so that the concept of SP for food security and rural development is not weakened.

Singapore issues – Trade facilitation

The Chair of the General Council continues to say that a large number of delegations consider the launch of negotiations on trade facilitation to be an essential part of the July framework. This clearly contradicts the most recent statement of the G90 (Georgetown Consensus), where they explicitly said that before starting any negotiations on this matter, a number of issues need further clarification.

What can be done?

It is crucial for as many NGOs as possible to be in Geneva from mid-July onwards, to support developing countries in their insistence on a framework that gives due consideration to their issues. In addition, it is also vital that NGOs in national capitals reinforce the work going on in Geneva, by talking to trade officials in the responsible Ministries. The most important moment will be when the draft text is released around the 9th July. This is when all WTO members will have to make their assessment and decide whether to support the framework.

The next agriculture negotiating sessions will take place:

14-15 July

The next General Council will take place:

27-29 July