LAMY SETS END-JUNE DEADLINE FOR AG, NAMA MODALITIES

WTO Director-General Pascal Lamy on 30 May set an end-June deadline for a deal on 'modalities' for how much the Doha Round will cut farm subsidies as well as tariffs on both agricultural and industrial products. He told an informal heads-of-delegation meeting that this would be necessary for Members to wrap up the negotiations by the end of the year, as scheduled.

Insisting that the deadline was achievable if Members worked together "constructively, ambitiously and with a greater sense of urgency," Lamy said that "direct ministerial involvement" in Geneva would likely be needed towards the end of June in order to finalise an agreement. He told ambassadors that he had asked the chairs of the negotiating groups on agriculture and non-agricultural market access (NAMA) to produce draft agreement texts "on or around 19 June." This would allow Geneva-based negotiators to discuss them and set the stage for a ministerial-level gathering at WTO headquarters during the last week of the month.

Sources suggest that ministers from dozens of countries could join trade negotiators in hashing out the final details. This would resemble the intensive negotiations at the end of July 2004, when ministers from some 30-40 Members came to Geneva to help broker the 'July Framework' agreement that revived the Doha Round talks, which had been moribund since the collapse of the Cancun Ministerial Conference in September 2003. Some civil society groups had criticised the July 2004 negotiations for excluding smaller delegations; they are concerned that this could happen again at the end of June (see BRIDGES Weekly, 3 August 2006).

Lamy stressed the importance of agreeing on agriculture and NAMA modalities in June. Telling Members that they must "avoid, at all costs, backloading this work into July," he warned that doing so would risk a "traffic jam" with other negotiating areas.

Members still divided on ag and NAMA

Modalities on agriculture would require agreement on numbers and formulae for tariff and subsidy cuts, along with an understanding about the number and treatment of 'sensitive' and 'special' products that would be shielded from the full force of tariff reduction. NAMA modalities would entail figures that determine how much countries will have to cut industrial tariffs, how many products developing countries will be able to shield from the tariff reduction formula, and the treatment of tariff lines not currently subject to binding caps.

With Members still divided on agriculture and NAMA, achieving modalities will be an uphill task. Agriculture Chair Ambassador Crawford Falconer (New Zealand) admitted to delegates on 30 May that the 19 June target for an initial draft text was earlier than what he had been expecting. The same day, NAMA Chair Ambassador Don Stephenson (Canada) said that the contents of the text that he would prepare depend on Members: if their positions converge enough, he will put together a draft modalities text; if not, he will simply provide comments on different possible options. Both Falconer and Stephenson urged Members to narrow their differences on enough issues to allow for the creation of draft texts that would leave ministers with a manageable number of political decisions to take at the end of June.

Lamy has long said that a way out of the deadlock would require progress on a 'triangle' of issues: the US would have to agree to deeper cuts in domestic farm support, the EU to lower farm tariffs further, and developing countries such as Brazil and India to move on industrial tariffs.

The EU has recently suggested that if the US and developing countries moved on their respective areas, it could somewhat enhance its offer on agricultural market access (see BRIDGES Weekly, 24 May 2006). EU Trade Commissioner Peter Mandelson told a European Parliament committee on 29 May that "if the US can come closer to what the G-20 developing countries are seeking in the reduction of farm subsidies -- as we can on market access -- I am confident that a deal will be in sight." The US has dismissed the EU's hints at a deepened market access offer as too minor to merit any new concessions on domestic support.

June modalities simplify July, but is it possible?

Lamy was emphatic about the need to solve the problems in the agriculture and NAMA negotiations in June, along with finalising the nearly-complete deal on transparency with regard to regional trade agreements, so that Members can turn their attention to other issues in July.

For instance, the Hong Kong Declaration stipulates that countries are supposed to table a new round of offers to liberalise services trade by 31 July. However, many developing countries have been unwilling to commit to opening new sectors to foreign competition without a better idea of what was going to be agreed on agriculture and NAMA. Members are also supposed to agree on several other issues by the end of July, including trade facilitation, anti-dumping, how to restrain fisheries subsidies, and the treatment of small and vulnerable economies.

Some negotiators question whether an agreement is possible in a matter of weeks, given that almost no concrete progress, even on relatively minor issues, has emerged from a month of continuous negotiations that were launched after Members missed the last deadline for modalities at the end of April.

Nevertheless, others believe that Members' differences are not insurmountable. They argue that the subsidy and tariff cuts already on offer are significant, and that they risk being lost.

If Members cannot reach a deal by the end of July, it would become very difficult for them to finalise a Doha Round package by March 2007, the last date for the Bush Administration to submit a trade agreement for Congressional approval before the expiry of its 'fast-track' trade promotion authority.

One trade official noted that in the event that a ministerial-level gathering in the last week of June were unable to yield a deal on modalities, enough time would remain to bring ministers back for a last-ditch meeting at the end of July.

ICTSD reporting; "Lamy sets end-June target for key WTO trade deal," REUTERS, 30 May 2006; "Deadline set for tariff and subsidy deal," FINANCIAL TIMES, 31 May 2006.