Concern among developing countries on WTO DG consultations

Original Publication Date: 
22 May, 2015

TWN Info Service on WTO and Trade Issues (May15/09)
22 May 2015
Third World Network  

Published in SUNS #8023 dated 19 May 2015
Geneva, 18 May (Chakravarthi Raghavan*) -- There is increasing concern among developing countries over the "growing attempts" by the WTO Director-General and the major developed countries to wind up the Doha Round in time for the Nairobi Ministerial Conference by focussing only on market access issues in agriculture and industrial products, without addressing and resolving issues of domestic and export subsidies in agriculture, which adversely impact on farmers in poorer countries, trade envoys said.
Some of them said that there also appear to be subtle attempts to split China and India, which so far have been resisting these efforts to focus on market access issues, and ignoring the huge trade-distorting agriculture subsidies (domestic and exports) of developed countries.
In a scenario more reminiscent of the bad old days of the pre-WTO trading system, of very restricted "green room" meetings, where a few developing countries are sought to be isolated and pressured to force down an accord on the membership, the WTO DG Mr. Roberto Azevedo has been apparently having closed-door meetings with trade envoys from the United States, the European Union, China, India, Brazil, Australia, and Japan.
These meetings, according to those familiar with the discussions, are focussing only on market access issues in agriculture and non-agricultural products, being pushed by the United States.
Some trade envoys told SUNS that the meetings are discussing "new ideas" on market access, based on a combination of average cut as well as a cut on the average existing tariff level for reducing tariffs on agriculture and industrial products.
This has raised serious questions as to whether attempts are being made to bury all the existing Doha mandates to conclude the Doha trade negotiations by the end of this year, in time to proclaim success at the Nairobi Ministerial Conference in December.
"Clearly, there is an attempt to run away with market access results based on an average cut in agriculture products while postponing the outcome on domestic support till the last minute of the tenth ministerial conference," according to a developing country trade envoy familiar with the DG's green room meetings.
"One major developed country (the US) doesn't want to discuss domestic support at this juncture as it could raise questions on its trade policy initiatives," said another trade envoy.
Azevedo has reportedly held three rounds of green room meetings with the seven countries on 6-12 May to discuss only market access in agriculture and industrial products.
On 8 May, the DG held a larger green room meeting of over two dozen trade envoys on issues concerning services and the development dossier in the Doha Development Agenda (DDA).
During the discussions on market access in agriculture and industrial goods, the chairs of the negotiating bodies - Ambassador John Adank of New Zealand (Agriculture) and Ambassador Remigi Winzap of Switzerland (NAMA) - along with the WTO's General Council Chair Ambassador Fernando de Mateo of Mexico were present and took part in the marathon meetings.
Prior to the DG's green room meetings with the seven countries, a large majority of developing and least- developed countries had insisted at the Trade Negotiations Committee meeting on April 27 (see SUNS #8013 dated 30 April 2015) that the post-Bali work programme with precise modalities must be largely based on all the existing Doha mandates beginning with the 2001 Doha ministerial declaration.
The Doha mandates include the 2001 Doha Ministerial Declaration, the 2004 July framework agreement, the 2005 Hong Kong ministerial declaration, and the 2008 revised draft modalities in agriculture and industrial goods.
In sharp contrast, the developed countries, led by the United States, had raised numerous concerns on the previous mandates while insisting that the work programme must be based on a "re-calibrated" approach. The EU consistently propagated what it has been calling a "simplified" approach, but without spelling out the elements that would be taken in such an approach.
The developed countries have largely coordinated their positions to give short shrift to the previous mandates, particularly the 2008 revised draft modalities, trade envoys suggested, with some suggesting that there is an element of disarray among African envoys, in the absence of strong leadership here and back home.
Against this backdrop, the DG has reportedly focused on a "new approach" based on average formula without specifying any figures that would be used for such a formula. Azevedo asked the seven countries to spell out their views, said trade officials familiar with the meeting on 6 May.
The average formula framework has been proposed at the agriculture meetings last month by Paraguay and then Norway. But these proposals did not fly, as it failed to secure any support from the developing countries, particularly China and India. China had accused Paraguay of acting as a front for some developed countries who are promoting the average formula framework so as to deny the flexibilities, at the chair's agriculture meetings last month.
Clearly, the average formula framework is seen as a death knell for the tiered formula approach that the former chair for agriculture negotiations Ambassador Crawford Falconer of New Zealand had suggested in the revised draft 2008 modalities.
That tiered approach was aimed at reducing the sensitive agriculture tariffs in the developed countries. Even developing countries had to bring down their tariffs based on the tiered framework and in return, they were provided flexibilities through increased entitlement for sensitive products and special products.
Therefore, the director-general's emphasis on average formula is seen as a clear ruse for the developed countries to protect their sensitive tariffs, said a former trade envoy from an industrialised country. "An average low tariff cut will help industrialised countries to shelter their sensitive tariff products," the envoy argued.
The four industrialised countries - the US, the EU, Australia, and Japan - have favoured the average formula approach for different reasons. While Australia, which is the coordinator for the Cairns Group, had suggested an aggressive market access approach in the past, Canberra is now willing to change course in line with the interests of other developed countries, said an agriculture negotiator familiar with the discussions.
However, India and China told the director-general that while they are willing to consider new approaches, they prefer that the 2008 revised draft modalities remain as the basis. The two countries sought to know how the flexibilities will be treated in the event the average framework is to be adopted.
India also pointed out that it would prefer the tiered approach with flexibilities as compared to the average framework which might have an uneven impact on its tariffs, said negotiators familiar the discussions.
The two developing countries, particularly India, also raised concerns whether the average formula approach would address tariff peaks and tariff escalation and tariff capping. These are long-pending issues that the Tokyo Round of the old GATT failed to address, but were placed on the agenda of the Uruguay Round.
They again were not tackled in the Marrakesh Treaty, but developing countries accepted the "good faith" assurances of the developed countries that the agriculture reform process, while needing a long timeframe for implementation, was now irreversible, and these issues will be addressed as part of it.
These assurances were renewed, and are a fundamental part of the Doha Round negotiations and mandate, but all of that is again sought to be brushed away.
At the DG's meetings with the seven countries, there was considerable discussion on what happens to special products and the special safeguard mechanism for developing countries.
Apparently there was a suggestion that only China must be given a few special products-entitlement while other developing countries must not have these products because the level of ambition is already lowered with the average cut, trade officials told SUNS.
The suggestion for a few special products for China came from the director-general, said a trade official from an industrialised country.
This is being seen as an effort by Mr. Azevedo to break the unity of China and India on attacking domestic agricultural subsidies of the US and other industrial countries affecting the poor farmers in these and other developing nations.
On the industrial products, the seven countries discussed what is called "a cut from the average" given in the Swiss formula that was proposed in the 2008 revised draft modalities.
There was no clarity as to how the cut on average would compare with the Swiss formula and whether the associated flexibilities for developing countries in the NAMA tariff reduction commitments would be retained as they are in the 2008 revised draft modalities, trade officials said.
The US has maintained that with the proposed "re-calibration" to reduce the overall level of ambition in market access for agriculture and industrial goods, there should be no demands for any additional flexibilities.
However, the most puzzling aspect of the DG's meetings with the seven countries is that there was no discussion at all on the domestic support and export competition, developing country trade envoys told SUNS. The US has said there is nothing to discuss in domestic support while the DG has made no effort to discuss the issue despite demands from India and China.
The 2008 revised draft modalities had suggested a figure of US$14.5 billion for the US Aggregate Measurement of Support (AMS). But, with the current American farm bill enacted last year, the US AMS will go well beyond the US$14.5 billion.
Azevedo also did not discuss the commitments on export competition in which the EU and the US remain major culprits, said a trade official.
The WTO's Appellate Body had ruled, and this has been adopted by the Dispute Settlement Body (DSB), that the domestic subsidies and export-financing schemes for cotton producers in the United States had adversely affected global cotton trade. The ruling was handed down in a dispute launched by Brazil, adopted by the DSB, but yet to be implemented by the US, which has been "buying" off affected Brazilian farmers by lump sum payments to Brazil.
In another dispute against sugar subsidies, the Appellate Body had passed strictures against the European Union.
In a nutshell, Azevedo's specific focus only on market access without discussing all the outstanding issues in the domestic support and export competition pillars has raised more questions about the integrity of the process being adopted, several trade envoys told SUNS.
(* The above commentary has been contributed by Chakravarthi Raghavan, Editor-Emeritus, with inputs from D. Ravi Kanth.) +