BRINKMANSHIP MARKS FIRST DAY'S PROCEEDINGS

Representatives of WTO Member governments held firm to their negotiating positions at a series of press conferences and other meetings, as the Hong Kong Ministerial Conference kicked off on 13 December.

In an attempt to avoid blame for the current impasse in the negotiations, they did not hesitate to - more or less directly - criticise each other's arguments. For instance, when challenged to match the EU's quota- and duty-free market access scheme for least-developed country (LDC) exports, the US cited a recent World Bank study indicating that once requirements such as standards and rules of origin were taken into account, the US was actually more open to LDC exports than the EU. The two sides also traded public barbs on food aid.

Meanwhile, the 'facilitators' of the talks on non-agricultural market access (NAMA) and development held informal meetings to discuss how they would structure their work for the duration of the summit.

Positions Reaffirmed

At the end of the first day of the Ministerial, the negotiations seemed likely to focus on agriculture, non-agricultural market access (NAMA) and a 'package' of measures in favour of LDCs. In the assessment of WTO Director-General Pascal Lamy, these are the areas where progress is most needed, not least because the topics are tactically linked. Mr Lamy estimated that by the end of the Hong Kong meeting, the negotiations could achieve between 55 and 66 percent of the Doha Round's final outcome.

The G-20 group of developing countries seized the opportunity to stress its role as a united and 'indispensable' interlocutor in the negotiations. India highlighted the role of Special Products (SPs) and the Special Safeguard Mechanism (SSM) as some of the most immediate priorities for developing countries in the negotiations.

The G-20's strong stance on eliminating agricultural subsidies contrasted with EU Trade Commissioner Peter Mandelson's statement that while there was a need for an ambitious Doha Round outcome, focusing on agriculture alone would be counter-productive. US Trade Representative Robert Portman, for his part, emphasised that Hong Kong was not about the rich against the poor.

In terms of the negotiating process, the loud complaints during Cancun with respect to inclusiveness and transparency have all but disappeared. From a practical standpoint, most Members seem to have effectively accepted that the Ministerial Chair's consultative group meetings (the so-called 'Green room') are the only realistic way to move forward in a 149 Member-strong organisation, so long as all delegations are kept informed of the process and the discussions.
Bilateral meetings are in full swing and the first Green Room meeting was held late on Tuesday. Plenary sessions, where trade ministers will deliver prepared statements, start on Wednesday morning. Among the 32 scheduled speakers are the US, the EU, G-20 members China, Brazil and India; Japan and Switzerland from the G-10; Cairns Group members Canada and New Zealand; and Zambia, representing the LDC Group. Later that day, the plenary session is scheduled to examine the cotton sectoral initiative put forward by four West African countries, and the EU's refusal of third party rights in the longstanding banana dispute.

High Profile for Aid for Trade

Members' jockeying for political position with regard to the overall negotiations has extended to the discussions on a development package for least-developed countries (LDCs). Japan has announced a dramatic increase in aid for trade spending. Commissioner Mandelson unveiled a plan on Tuesday to ramp up similar grants to poor countries. The contours of any aid for trade deal that might be reached in Hong Kong are not clear. At the moment, countries seem to be announcing funding commitments, but saying little about how the money would be spent. It does, however, seem likely that the bulk of such assistance would be delivered bilaterally. Furthermore, the promises of increased aid may prove to be capricious: at the same press conference, US Trade Representative Rob Portman warned that an agreement on aid "could be lost" if a Doha Round deal eventually failed to come together.

Mr Mandelson, who referred to a development package for LDCs as 'indispensable,' indicated that the EU had committed to step up annual spending on aid for trade to EUR 2 billion by 2010. One billion of this will come from member states, which agreed Monday to the increase (from EUR 400 million per year); the remainder will come from the European Commission. "Europe did not come to Hong Kong empty-handed on aid for trade," he said.

The EU action comes only days after Japan announced that it would spend USD 10 billion over three years on 'aid for trade' for LDCs, to help build infrastructure such as roads and ports, as well as to revamp their customs systems. It also has indicated that it would provide duty- and quota-free access to most LDC exports, though it is unclear whether this would extend to the country's mightily protected farm sectors such as rice. The Japanese government is expected to spell out its proposed development package in greater detail during its keynote speech to the Ministerial Conference on Wednesday.

For his part, Mr Portman pointed to the USD 1.34 billion per year that the US was spending on trade-related assistance, much of it to physical infrastructure and trade facilitation. Sources suggest that the US might reveal additional spending on Wednesday.

At the press conference with Mandelson and Portman, Rwandan Finance Minister Paul Manasseh Nshuti stressed that aid for trade should come in the form of grants, and should not prejudice recipient countries' positions in the negotiations.

Although the ministers agreed that aid for trade was a necessary complement to - rather than a substitute for - trade liberalisation, some development campaign groups have accused the would-be donors of using their announcements to deflect attention from their failure to agree on pro-poor trade reform. According to John Hilary of War on Want, "rich countries are trying to buy off opposition to their trade policies by means of a cynical bribe."

Negotiating Structure Decided for NAMA, Dev't

NAMA facilitator Humayun Akhtar Khan, Pakistan's commerce minister, told the negotiating group Tuesday evening that he would be meeting with Members bilaterally and in small groups, since such consultations would help him understand their concerns more effectively than meetings of the entire Membership. Sources report that for transparency purposes, Mr Khan will hold plenary meetings, and will also report to the planned daily heads-of-delegation (HOD) meetings.

Guyanese Foreign Minister Clement Rohee, who is facilitating the talks on development, indicated that he would be meeting with individual delegations for so-called 'confessionals.' Although charged with facilitating all development topics not classified as implementation issues -running the gamut from 'aid for trade' to the Doha-mandated negotiations on special and differential treatment (SDT) - he suggested that his main focus would be on the five LDC proposals for amendments to the SDT provisions of WTO agreements present in Annex F of the draft ministerial declaration text. Like his NAMA counterpart, Mr Rohee is to report to the daily HOD meetings.

New Developing Country Group Forming on NAMA?

In a notable development in the NAMA talks, a 'core group' of nine developing countries, led by India and South Africa, sent a letter to Ministerial Chair John Tsang arguing that the current basis for the negotiations did not adequately reflect developmental concerns. The group said that its members were being asked to make 'disproportionate' cuts to their industrial tariffs, underscoring that "developing countries cannot be expected to pay for the much-needed reforms in the agriculture sectors of developed countries." In a reference primarily to farm trade, they called for the level of ambition in NAMA "to be calibrated with the ambition achieved in other market access negotiations."

The group emphasised that the flexibilities accorded to developing countries in Paragraph 8 of the NAMA mandate in Annex B of the 2004 July Framework, such as exempting a small number of tariff lines from reductions, should be independent of the structure of the tariff reduction formula. The US and the EU, among others, have taken the position that developing countries should give up at least some of these flexibilities in return for a more lenient formula. The nine countries, which also included Argentina, Brazil, Egypt, Indonesia, Namibia, the Philippines and Venezuela, called for rich countries to remove high tariffs, tariff peaks and tariff escalation on products of export interest to developing countries.

EU, US Trade Barbs On Food Aid

WTO Director-General Pascal Lamy said on Tuesday that agreement in Hong Kong on new disciplines on food aid could provide the key for setting a date for the elimination of 'all forms of export subsidies,' in accordance with the July 2004 Framework Agreement. The establishment of that deadline is an essential element of 'full modalities' on agriculture.

Many WTO Members believe that food aid given in kind distorts markets, particularly if the donated food is produced with the help of subsidies. Donated food surpluses can displace regional producers - incapable of competing against subsidised food - from markets. Assistance in cash, at least in theory, would actually boost demand for local production.

On Tuesday, Mr Mandelson argued that a great deal of US in-kind food aid was tantamount to an export subsidy to its farmers. He said that the EU would be far more open to the US' proposal to eliminate export subsidies by 2010 if the latter agreed to move away from 'fake food aid' towards less market-distorting alternatives such as cash payments to countries that require food aid but are not in emergency situations. US Trade Representative Rob Portman described the EU as 'obsessed' by food aid, and suggested that the approach it favoured ran the risk of making people go hungry.

UNU-IAS Forum on the WTO and Sustainable Development

The United Nations Institute for Advanced Studies (UNU-IAS) hosted a dialogue to take stock of how sustainable development is being addressed within the context of the Doha Round. The WTO and Sustainable Development, a book by former senior WTO official Gary Sampson, was launched at the event. Several high-level speakers proposed a review of the WTO and sustainable development, initiating a periodic conference on trade and environment and creating a WTO group on the functioning of the WTO system to make recommendations on how to increase policy coherence at the global level.

Farmers Protest in Hong Kong

More than 4000 protesters - mostly from Korea, India and Indonesia -- marched on the Hong Kong Convention Centre on Tuesday evening chanting "the WTO is killing farmers." Some 50 demonstrators jumped into the Victoria Harbour in attempt to force the security perimeter around the WTO's Ministerial Conference venue. Police used pepper spray to subdue some of the protestors.

Today at 9am at the Hong Kong Exhibition Centre, Pascal Lamy, Hilary Benn, Klaus Toepfer, Ulla Tornaes and Martin Khor will be speaking on "strengthening the global trade architecture for development," as part of the Hong Kong Trade and Development Symposium.