DOHA ROUND: POLITICAL MOMENTUM GROWING AS MINISTERS PREPARE FOR PARIS MEET

During last week, major groups within the WTO positioned themselves in anticipation of ministerial level talks on the Doha round of trade negotiations, held at the sidelines of an Organisation for Economic Cooperation and Development (OECD) summit in Paris from 13-14 May. EC Trade Commissioner Pascal Lamy and Agriculture Commissioner Franz Fischler circulated a letter to their trading partners on 10 May, offering to end all export subsidies and proposing more lenient treatment of the weakest and most vulnerable developing countries in the current round of talks. Meanwhile, the G-20 group of developing countries came out strongly against a formula for cutting agriculture tariffs preferred by the EC and US.

The Lamy letter

In a letter dated 9 May, Lamy and Fischler set out EC positions on key areas that Members need to move on in order to create a negotiating framework by July this year (the full letter is available at http://www.ictsd.org/ministerial/cancun/docs/Lamy_Fischler_9May04.pdf).

On agriculture, the letter acknowledges the need for subsidising countries to take the lead. Lamy and Fischler deal with all three agricultural pillars. On market access, they support the so-called blended formula (which combines elements of the so-called Uruguay Round formula that sets an average reduction with a minimum reduction per tariff line -- to be applied to certain "import sensitive" products -- and the Swiss formula, which would bring down all tariffs horizontally to a maximum ceiling, effectively addressing tariff peaks). On domestic support, the letter notes that the EC is open to commitments "guaranteeing the overall reduction of trade-distorting domestic support", while maintaining non-trade distorting, or "green box" support free of restrictions. On export subsidies, the letter states that the EC would be ready to eliminate such support, as long as other Members moved in parallel to get rid of other forms of export competition, including export credits, food aid and state trading enterprises.

Moving on to industrial market access, Lamy and Fischler suggest that negotiations focus on a "simple, general and ambitious" market access formula, including exceptions for sensitive developing country products. On services, the two note that negotiations are lagging and call for more action, stressing that "it would be inconceivable to conclude the DDA [Doha Development Agenda] without a significant level of new and substantial commitments on services".

On the Singapore issues (investment, competition, transparency in government procurement and trade facilitation), the letter notes growing support for negotiations on trade facilitation, and that this issue alone, or perhaps together with transparency in government procurement, would remain within the current trade talks.

In addition, the letter addresses issues of development concern. Lamy and Fischler make a proposal that least-developed countries (LDCs) as well as other weak and vulnerable countries -- singling out the G-90 group of mainly African, Caribbean and Pacific countries and LDCs -- should not be required to further open their markets, while being able to enjoy greater access to the markets of developed and advanced developing countries. The letter does ask the countries to bind their tariffs at existing levels so as to increase predictability.

In conclusion, the letter highlights the timetable for the talks ahead, stressing the need for an outline text no later than the end of May, paving the way for an agreement on framework modalities by the end of July.

Trading partners react

In their reactions to the letter, a number of the EC's trading partners welcomed the offer to end export subsidies. US Trade Representative Robert Zoellick said "I hope this will provide a shot in the arm to the overall negotiations" (for the full statement see http://www.ustr.gov/releases/2004/05/2004-05-10-statement-doha.pdf). Australia's Trade Minister Mark Vaile echoed the same sentiments. Mexico's Eduardo Perez Motta said "I think it helps. I do not want to sing victory but they are giving positive signals". A Brazilian spokesperson agreed that "The fact these positions are being made public is welcome. It constitutes a move we view positively and with satisfaction". Japanese Minister of Agriculture, Forestry and Fisheries Yoshiyuki Kamei also welcomed the EC move, noting that Japan's position was that all forms of export support should be eliminated in a set of stages, and that the matter warranted further discussion. Ottawa reacted by noting that the Canadian Wheat Board, a state trading enterprise, was not up for negotiation, and had been ruled to be WTO consistent in a dispute settlement case.

The portion of the letter suggesting that the must vulnerable countries be granted special treatment was greeted with suspicion among more advanced developing countries, however. The Chilean Ambassador to the WTO, Alejandro Jara, said "We are concerned over the attempt to create new categories of countries, consolidate preferential tariff regimes and establish an equivalence between poverty and inability to make commitments to trade liberalisation". Argentine Ambassador Alfredo Chiaradia went as far as saying that "the EU is proposing an act of generosity toward a group of developing countries with our money". Other trade officials indicated that they felt the EC move was one to win political support among the G-90 against the more competitive developing countries.

France to put sticks in the wheels?

The letter drafted by Lamy and Fischler was discussed by EU trade officials on 7 May. Reportedly, France, Ireland, Belgium, and Hungary argued at the meeting that the Commission lacked the mandate to negotiate a date for eliminating export subsidies. Germany, the UK, Denmark, Sweden, Finland and the Netherlands all supported the initiative. France's agriculture minister Herve Gaymard, at a separate occasion, stressed that the Commission had overstepped its mandate, and called the initiative dangerous. He said it "signals a degree of flexibility even though none of our other trading partners show any signs of flexibility". Farm groups in France also voiced strong opposition. Jean-Michel Lemetayer, of FNSEA, the largest farm union in France, said "We refuse to allow agriculture to be the bargaining chip in international negotiations... They have no right to sell off agriculture". Trade sources indicated, however, that it would be very difficult for the EC to withdraw its offer at this point.

G-20 opposes blended formula

Meanwhile, the G-20 group of developing countries reiterated their opposition to the blended formula for agricultural tariff reductions (see BRIDGES Weekly, 28 April 2004). On 7 May, the group officially rejected this approach -- which had mainly been promoted by the EC and US -- circulating a two-page critique in advance of meetings scheduled to be held between trade ministers from 13-14 May. The G-20 argued that the blended formula was "biased in favour of the tariff structures of its proponents, enabling them to maintain the protectionist status quo," adding that "It is a meticulously structured approach to accommodate the interests of the proponents and detrimental to the interests of the majority of the Membership". The G-20 has not, however, put forward an alterative formula. This fact came under fire from both the EC and the US, with the G-20 countering that the US and EC already signalled that they would not support a tiered approach favoured by the G-20 and the Cairns group.

Ag discussions to continue at the political level

Against the backdrop of the G-20 paper and the EC offer, key ministers are meeting at the political level to seek common ground on outstanding issues, with a focus on agriculture. Trade ministers from the US, EC, Australia, Brazil and India met from 12-13 May, in advance of a larger meeting among 28 trade ministers from 13-14 May at the sidelines of an OECD summit in Paris.

The next meeting of the WTO General Council will be held from 17-18 May.

ICTSD reporting; "EU may end farm export aid, seeks trade talks boost," REUTERS, 10 May 2004; "WTO heavyweights step up search for farm deal," REUTERS, 4 May 2004; "USTR Zoellick Welcomes EU Offer To End Farm Subsidies," DOW JONES, 11 May 2004; "Australia Welcomes EU Offer To Scrap Ag Export Subsidies," DOW JONES, 11 May 2004; "Latin Americans wary of latest EU trade proposal," EFE, 10 May 2004; "Japan Farm Chief Welcomes EU Proposal for Abolishing Subsidies," JIJI PRESS, 11 May 2004; "Canada says Wheat Board off limits in WTO talks," REUTERS, 10 May 2004; "EU Members Express Anger at Plan To Negotiate End of Export Subsidies," WTO REPORTER, 11 May 2004; "France renews attack on EU farm trade offer," REUTERS, 11 May 2004; "Group of 20 Slams U.S.-EU Insistence On 'Blended' Formula in WTO Farm Talks," WTO REPORTER, 10 May 2004.