WILL MEMBERS REVEAL THEIR CARDS IN TIME?

As talks continue at the 13-18 December Hong Kong Ministerial Conference, little appears to have changed in the way of Members' negotiating positions. Negotiators and trade observers suggest that though it is almost traditional for delegations to hold their cards close to their chest until the last two or three days of the meeting, there is a risk that when they finally reveal their positions, there will not be enough time left to reach a deal. Nevertheless, informal bilateral and plurilateral meetings have been taking place at a furious pace, particularly on services and duty- and quota-free market access for exports from least-developed countries (LDCs). These could possibly lay the groundwork for more substantive negotiations in the days to come.

A four-hour 'Green Room' meeting late Wednesday night saw every country in attendance except the EU and Switzerland endorse a 2010 end-date for agricultural export subsidies. On non-agricultural market access (NAMA), Members simply repeated long-standing positions.

Ministerial Chair John Tsang held his first heads-of-delegation (HOD) meeting earlier that evening. These will be held at five every afternoon to brief the Membership at large on progress in the issue-specific consultations involving 30-40 ministers. The facilitators of the NAMA and development negotiations told the meeting that Members had done little more than restate well-established views. Norwegian Foreign Minister Jonas Gahr Store reiterated that he remained at Members' disposal with regard to consultations on WTO rules. Services consultations have begun under the charge of his fellow 'facilitator-at-large', Korean Trade Minister Kim Hyun-Chong. The facilitators had previously assured anxious delegations that they would meet with all of the different Member groupings during the Tuesday night 'Green Room,' which focused primarily on process issues.

Wednesday's proceedings saw the US announce that it would double its annual aid for trade spending to USD 2.7 billion - explicitly conditional on "market access expansion and the elimination of trade-distorting subsidies."

Stakes Raised on Cotton and Bananas

At a late plenary session, WTO Members heard minister after minister express sympathy over the plight of West African cotton farmers affected by low world prices, but no US commitment to an 'early harvest' on cotton. Instead of promising a rapid subsidy phase-out, US Trade Representative Robert Portman said that 11 recent studies had shown that even a total removal of the subsidies would result in only a 2-12 percent increase in the world cotton price, with a 2-3 percent range being more likely. Thus, he argued, aid and lowered tariffs worldwide - rather than subsidy reduction - would be required to help cotton-producing African countries trade their way out of poverty. Faced with the reaffirmation of the US view that its cotton subsidies did not drive world prices below the cost of production in even low-wage countries as Benin, Burkina Faso, Chad and Mali, the African countries decided in an emergency session to raise the debate from the technical to the political level. After the WTO's adverse ruling on US cotton subsidies, they said, the link between subsidies and global market prices was undeniable, and African cotton-producers could not envisage leaving Hong Kong without a solution to their long-standing demand for a solution to the crisis in their cotton trade.

Feelings ran equally high on bananas, the second issue on the plenary session agenda. In particularly strong statements, Honduras, Colombia and Ecuador lambasted the EUR 176/tonne tariff adopted by EU member states on 25 November. The EU set the new tariff - a far cry from the EUR 75/tonne level sought by Latin American banana producers - unilaterally after negotiations failed between the two sides and WTO arbitration condemned its latest proposal of EUR 187/tonne.

The EU's banana import regime almost sank the WTO's Ministerial Conference in Doha in 2001. At issue then - as now - was a waiver needed by the EU in order to continue extending duty-free access to banana exports from the African, Caribbean and Pacific (ACP) countries after its banana import regime was ruled illegal. The waiver was granted in extremis on the last day of the conference, on condition that the EU replace its quota- and licence-based import regime by a negotiated tariff-only regime on 1 January 2006 at the latest. Honduras, Colombia and Ecuador urged the EU to reconsider the EUR 176/tonne banana tariff before that date. They stressed their willingness to enter into negotiations, but were emphatic that a solution must be found in Hong Kong. Many trade observers believe that the Hong Kong banana fight will prove just as bitter as the one four years ago in Doha.

Duty-free Quota-free Market Access for LDCs

Development facilitator Clement Rohee, Guyana's trade minister, reported to the Wednesday heads-of-delegation (HOD) meeting that divisions persisted on duty- and quota-free access for LDC exports, the first of the five LDC proposals in Annex F of the draft ministerial declaration text. The EU, already bound to permanent duty- and quota-free access under its everything-but-arms (EBA) initiative, strongly argued that other developed countries should do the same. The US and Japan, however, would prefer to be able to exclude some products - such as textiles or rice - at least for some time. They would also like to preserve the possibility of revoking preferential access to LDC imports that exceed a certain share in their markets.

Differences also emerged on when duty- and quota- free access for LDCs would be put into effect. US WTO Ambassador Peter Allgeier said it would need to be implemented along with the overall Doha Round package. India and Brazil, in contrast, stressed that they were ready to do so before the conclusion of the round.

Sources report that the US has been putting bilateral pressure on LDC negotiators and capitals to accept the potential exclusion of some products and countries from duty- and quota-free access. One LDC source noted that carving out just one percent of tariff lines would be enough to keep Bangladeshi textiles outside a duty- and quota-free scheme in the US. A senior LDC government official suggested that any market access package for LDCs that did not include all countries and all products would be unacceptable.

Also on textiles, the EU on Wednesday repeated its call for a NAMA sectoral initiative to liberalise textiles and clothing trade, suggesting that all countries lower their tariffs in this sector to as close to zero as possible. It is not clear whether the EU intends to lift the safeguard import restrictions it currently has in place on Chinese textile imports as part of this initiative. Sectoral liberalisation in textiles is not likely to appeal to the US, given its reluctance to fully open its textiles markets to LDC exports.

First Agriculture Meeting

The agriculture negotiating group held its first meeting of the entire Membership on Wednesday. Facilitator Mukhisa Kituyi, Kenya's minister of trade and industry, exhorted Members to give some ground on their demands, and encouraged them to meet amongst each other to try to find acceptable compromise positions. Delegations had different ideas on what they should try to achieve in Hong Kong: some wanted to focus on determining an end date for export subsidies (and 'parallel' forms of export support), while others would prefer to discuss subsidy and tariff reduction, or flexibilities and other measures for developing countries.

Several developing country delegates lauded the co-ordination between the G-20 and other developing country groupings (ACP, LDCs, Caricom, African Union, small and vulnerable economies, G-33, G-90) - noting that their informal 'outreach' meeting was a first in the WTO context. Brazilian Foreign Minister Celso Amorim said that developing countries did have some common interests, and that co-ordination could help "sort things out to the benefit of the whole."

Mr Amorim said that the Hong Kong Ministerial needed a visible and tangible deliverable, and that this should be an end date for export subsidies. This increased focus on export competition may explain the relatively high profile of food aid, on which the US and the EU continued to snipe at each other on Wednesday. Meanwhile, the African Group - many of whose members are aid recipients - indicated that in-kind aid was acceptable in emergencies. In situations where food is available in the region, they suggested that a multilateral mechanism such as the World Food Programme, could be used to ensure that aid in cash form is used to get the best possible deal.

Services Bilaterals Reveal Potential Fault Lines

Sources report fears that tension may arise between Members that want the language in the services annex of the draft declaration to be made more ambitious, and those that would like to weaken it or have the currently-bracketed reference to it in the body of the draft declaration removed altogether. India reportedly would like to see Members agree to preserve the annex. Brazil, which pushed strongly for the bracketing of the draft declaration's reference to the services annex in Geneva, has indicated that it could live with this. However, countries including the ACP Group, the African Group, and Malaysia are said to have developed alternative language for the annex's provisions on qualitative modal objectives and plurilateral negotiations, although they have not decided whether to formally submit it. This may be because reopening the text could open the door to modifications that they would find even more undesirable than what is currently on the table. Some sources suggest that the EU, on the other hand, has indicated in bilaterals that it wants to raise the level of ambition of the annex, and may even find a watered-down version of it unacceptable. The US, for its part, also supports beefing up the annex by including a model schedule for services commitments. Services facilitator Kim is expected to report to the HOD meeting on Thursday.

India Calls for TRIPS-CBD Negotiations

To the surprise of many, Indian Commerce Minister Kamal Nath on Wednesday called for negotiations on the relationship between the TRIPS Agreement and the Convention on Biological Diversity to be launched in Hong Kong. Referring to growing popular discontent in developing countries about biopiracy and the misappropriation of traditional knowledge for commercial gain, Mr Nath said India intended to raise the matter in Green Room discussions. India has long supported requiring patent-seekers to disclose the source and country of origin of any genetic resources and traditional knowledge used in the development of an invention. Sources report that India has developed draft language for the ministerial declaration based on its October proposal calling for negotiations on mandatory disclosure requirements, as well as prior informed consent and benefit-sharing.

Informal Meetings on Environment

Informal bilateral meetings are currently taking place on the Doha Round environment mandate - Paragraph 31 of the Doha Declaration. The draft Hong Kong declaration text provides two alternatives for how to proceed with the talks on liberalising trade in environmental goods: one option instructs Members to continue their work towards developing a "common understanding" on how to proceed; the other would see Members "complete by [...] 2006 the work under Paragraph 31(iii) by identifying environmental goods" for expedited liberalisation. The mostly developed and newly industrialised countries that are pushing for the creation of a multilaterally-agreed list of environmental goods for liberalisation (the so-called 'list' approach) support the latter option. Most developing countries, however, argue that the list approach would only benefit developed country exporters, and thus prefer the more open language of the former option. The EU is also said to be pushing for stronger language on post-Ministerial negotiations on the relationship between multilateral environmental agreements and WTO rules.

Strong Call for Fish Subsidy Rules

Several high-level trade officials - including the US Trade Representative, the EU Agriculture Commissioner, trade ministers from New Zealand and Senegal, the agriculture secretary of the Philippines, the Brazilian fisheries secretary and a representative of Chile's foreign affairs minister - joined forces with the UN Environment Programme (UNEP) and environmental group WWF to call for urgent action on disciplining fisheries subsidies in the WTO at a press conference Wednesday. Pointing to the dire state of global fisheries, they urged Members to take advantage of the opportunity provided by the Doha mandate to promote trade liberalisation that also safeguards environmental and social objectives. New Zealand, the US and Chile - all members of the so-called 'Friends of Fish' group which is the driving force behind the negotiations - emphasised the environmental dimension of the talks. Brazil, Senegal and the Philippines stressed the need for effective special and differential treatment to account for the particular needs of developing countries. While fisheries subsidies are not expected to feature highly - if at all - in Hong Kong, the press event was aimed at keeping the issue on the table for intensified discussions after the Ministerial Conference.