WTO MEMBERS ENDORSE DRAFT HONG KONG TEXT AFTER SPAT OVER SERVICES

Following hours of discussions on 2 December, the WTO General Council agreed to endorse a revised version of the draft declaration text for the 13-18 December Ministerial Conference in Hong Kong -- albeit with some additional modifications in response to a disagreement over its language on services. Along with the text, WTO Director-General Pascal Lamy and General Council Chair Ambassador Amina Mohamed of Kenya will send ministers a set of questions about the agriculture and non-agricultural market access (NAMA) negotiations, in an attempt to guide their debate towards issues that are in particular need of resolution.

Lamy and Mohamed had circulated the text, changed to incorporate Members' reactions to the 26 November first draft, to delegations the evening before (see BRIDGES Weekly, 30 November 2005). The revision includes new paragraphs that point to areas in the agriculture and industrial goods negotiations where Members' views overlap significantly. Nowhere in these additions, however, is there binding language -- instead, the text refers to "working hypotheses" on issues such as classifying farm tariffs into four bands for the purposes of reducing them.

The revised draft retains blank spaces for ministers to establish dates for agreeing on 'full modalities' on agriculture and NAMA -- the specific numerical values and formulae for cutting tariffs and subsidies that Members had once hoped to finalise in Hong Kong. Some progress towards these dates came during a 2-3 December meeting in Geneva of senior officials from the US, the EU, Australia, Brazil, India (the so-called Five Interested Parties, or FIPs) and Japan, when they set a 1 March 2006 deadline for reaching an agreement on eliminating agricultural export subsidies. Geneva sources continue to mention March and April as potential target dates for full modalities.

The legal status of the annexes to the draft declaration -- the reports submitted by the chairs of the Doha Round negotiating bodies on agriculture (Annex A), NAMA (B), services (C), rules (D), trade facilitation (E) and S&D (F) -- remained contentious. Although the introduction of the ministerial text explicitly stated that with the exception of the one on trade facilitation, none of the annexes "purport[ed] to be agreed texts," a number of Members objected to the phrasing of the reference to the services annex in the body of the revised draft, arguing that it implied a consensus that did not exist.

Lamy: agriculture, NAMA, S&D "most difficult issues"

In his speech to the General Council, Lamy identified agriculture, NAMA, and special and differential treatment (S&D) as the "most difficult issues" in the talks. He also attested to an increasing sense among Members that they should focus on the "wide divergences" that persist in these areas.

In spite of these differences, Members did manage to come up with new text to "capture" what convergence they had achieved in the agriculture and NAMA negotiations.

New paragraphs on agriculture refer to "working hypotheses" on three bands for classifying rich country Amber Box and trade-distorting domestic subsidies, with steeper linear cuts to be made to higher levels of support, and four bands for the tariff reduction formula. They also note "some convergence" on the actual extent of farm subsidy cuts.

The revised draft text reaffirms Members' earlier commitment to ensure the elimination of all forms of export subsidies and equivalent measures "by a credible end date." It also refers to "recent movements" on Special Products, which developing countries would be able to designate for reduced tariff cuts based on food security, livelihood security and rural development concerns; and a Special Safeguard Mechanism, which they would be able to use to protect themselves against import surges.

With regard to Members' 2004 July Package (WT/L/579) mandate to address the distortions in cotton trade, the text now provides for two bracketed alternatives -- continuing work largely as is, or agreeing on the specifics of an 'early harvest' agreement that would be implemented ahead of the deadline for other obligations that emerge from the Doha Round.

On NAMA, the new paragraphs refer to a "working hypothesis" on a 'Swiss' formula approach to tariff reduction, which would reduce higher tariffs far more sharply than lower ones. They do not, however, make any reference to the number or value of coefficients to be associated with the formula. These coefficients are a major determinant of Members' post-cut tariff rates. The draft text instructs the Negotiating Group on NAMA "to pursue discussions with a view to finalising [the formula's] structure and details, as well as the issues of unbound tariffs and flexibilities, as soon as possible."

The new language on both agriculture and NAMA notes the importance of S&D, though the African Group described the language as vague. It also refers to progress in both negotiating areas on how to go about converting 'specific' tariffs based on import quantities into price-based 'ad valorem' equivalents (AVEs) -- a mathematical exercise that is a prerequisite for applying the reduction formula to such tariffs.

Lamy said that it had "not been possible to find more straightforward text in all points of Annex F," which contains a number of alternative versions of potential amendments to specific WTO agreements in response to proposals from least-developed countries (LDCs) for enhanced S&D provisions.

The draft text's section on LDCs, which is separate from the one dedicated to S&D, provides for "developed-country Members, and developing-country Members declaring themselves in a position to do so" to provide duty-free and quota-free access to LDC exports by the end of the round. This is a key LDC request, overlapping with one of the proposals in Annex F. It is also an issue that several countries have suggested could be part of a potential 'early harvest' agreement on development issues in Hong Kong.

Disagreement over services annex dominates discussions

In contrast to agriculture and NAMA, where the chairs' reports largely described the range of disparate proposals that had been made in each negotiating group, the services chair put forward non-binding qualitative targets for liberalisation and provided for allowing groups of countries to make requests for market access, in contrast to the currently bilateral request-offer process. Furthermore, while the draft text simply provides for ministers to "take note" of the reports on agriculture and NAMA, the link to the services chair's report was considerably more specific: Paragraph 21 of the revised draft reads "We are determined to intensify the negotiations in accordance with the above principles (a reference to previous agreements on the services negotiations -- ed.) and the Objectives, Approaches, and Timelines set out in Annex C to this document with a view to expanding the sectoral and modal coverage of commitments and improving their quality."

This raised the ire of some delegations, primarily from developing countries, which argued that the paragraph did not reflect the fact that Annex C -- as alluded to in the introduction -- was simply a document that the chair had put forward under his own responsibility. Brazil's representatives said that a change to Paragraph 21 to make this status of the services annex clearer would make it possible for them to endorse it. Several other Members and groups called for similar modifications, including the African Group, Venezuela, Jamaica, and the group of African, Caribbean, and Pacific (ACP) countries.

In the end, Members agreed to place the section of Paragraph 21 that refers to Annex C in brackets, thus indicating that they do not agree on it. The compromise, present in the final version of the draft declaration that Lamy issued to Members on 7 December (WT/MIN(05)/W/3), allowed them to agree on sending the text to ministers in Hong Kong. This saved Lamy and Mohamed from having to send it to the summit on their own authority.

Questions to guide agriculture and NAMA talks

Lamy said that consultations had produced a series of questions based on the requirements of the Doha mandate and the 2004 July Package that "might be useful" as "a device to assist debate" in Hong Kong.

On agriculture, ministers will be asked to identify "elements" of the formulae for reducing tariffs and trade-distorting domestic subsidies, as well as the flexibilities and disciplines that should accompany these commitments. They are also to be asked for guidance on the elements necessary to address cotton and S&D. With regard to export competition, the questions solicit input on what sort of agreement on 'parallelism' -- the word given to the need to discipline all kinds of support to exports, such as through food aid programmes or state trading enterprises -- would be necessary in order for countries to settle on an end-date for the elimination of export subsidies.

The NAMA questions ask ministers whether they can agree on "all the elements needed to finalise the formula and other elements that support it" and resolve their differences about the flexibilities to be accorded to developing countries when making the tariff cuts required by the formula. They also ask whether consensus is possible on the 'mark up' approach to dealing with unbound tariff lines -- this would have Members add a certain number of percentage points to the tariff rate that they apply, and then subject the marked-up total to the reduction formula.

These issues are roughly identical to those that the chairs had deemed to be in need of ministerial guidance in their respective reports.

Lamy indicated that he and Mohamed would send the questions in a letter to the chair of the Ministerial Conference, Hong Kong Commerce, Industry and Technology Secretary John Tsang. This letter will also reiterate that the annexes, save the one on trade facilitation, are not agreed documents, but rather presented by the chairs on their own responsibility. It will also refer to the continuing differences in Members' positions on a variety of issues.

The Ministerial Conference kicks off on 13 December. In the interim, many trade negotiators have returned to their capitals to prepare for the summit.

ICTSD reporting; "WTO General Council agrees to put services text in square brackets," THIRD WORLD NETWORK INFORMATION SERVICE, 6 December 2005.