DOHA NEGOTIATING GROUP CHAIRS ACKNOWLEDGE NO FRAMEWORK DEAL POSSIBLE BEFORE AUGUST

The chairs of the Doha Round negotiations on agriculture and industrial goods last week announced the schedule for discussing the draft versions of conceivable deals that they will soon present to WTO Members, effectively abandoning hopes for a deadlock-breaking accord by the end of July.

In a joint note to delegations on 5 July, agriculture Chair Ambassador Crawford Falconer (New Zealand) and non-agricultural market access Chair Ambassador Don Stephenson (Canada) said that they would circulate the draft negotiating texts they are preparing in "mid-July."

After some time for trade diplomats to consult with each other and seek instructions from capital, the two chairs would convene their respective negotiating groups during the week starting 23 July to hear Members' "initial reaction." Crucially, they said that Members would then break for the WTO's traditional August holiday to "reflect fully" on the draft texts, before intensive negotiations begin on 3 September. The texts would then be revised based on countries' reactions.

Scheduling talks on the forthcoming texts in September amounted to the first open acknowledgement that a framework 'modalities' deal on agriculture and NAMA, with formulae and figures for tariff and subsidy cuts as well as exemptions, was not going to be struck by July's end.

Precisely such a breakthrough has been widely thought necessary to conclude the Doha Round by early next year, because of the time required to determine specific liberalisation commitments, and reach agreement on services, rules, and other aspects of the negotiations. Without a deal by then, the talks are likely to go into hibernation for at least two years, with election campaigns in the US and India making politically controversial concessions unlikely.

Prospects for finding a way out of the impasse in the negotiations took a dramatic turn for the worse on 21 June, when a meeting in Potsdam, Germany of ministers from the US, the EU, Brazil, and India broke down in acrimony, instead of leading to any sort of rapprochement (see BRIDGES Weekly, 27 June 2007).

Convergence among the so-called G-4 would have helped point the way to the contours of a broader multilateral agreement. Instead, the meeting ended in mutual finger-pointing. The EU and the US stopped targeting each other on agriculture, but jointly blamed Brazil and India for offering industrial tariff cuts that would have done nothing to galvanise new trade flows. The developing countries countered that Brussels's offer on agricultural market access and Washington's proposal to cap farm subsidy spending simply did not justify deeper tariff reduction.

The focus has now returned to WTO headquarters in Geneva, and the chairs' attempts to broker a compromise. Despite a general prognosis among delegates that chances for an agreement are slim, several delegations have tabled new proposals, at least in the agriculture talks, in an attempt to influence the content of Falconer's draft text (see BRIDGES Weekly, 4 July 2007).
NAMA talks halted in advance of text

In their note, Falconer and Stephenson said that, since the breakdown of the Potsdam meeting, they have conducted extensive bilateral and plurilateral consultations with Members on how to proceed, and would continue to do so.

NAMA talks halted in advance of text

In particular, they said that the consultations had revealed "an almost unanimous view that further meetings of the NAMA negotiating group will not be productive until there is a text on which to focus the discussions." In light of this, Stephenson cancelled a set of NAMA meetings that had been scheduled for this week.

Some trade analysts in the US believe that a negotiating text, with numbers for coefficients, would make the commercial potential of an accord clearer, and might even help galvanise thus-far sluggish industry support for the Doha Round. Delegates expect the chairs' negotiating texts to contain a constrained range of figures that would determine the depth of tariff and subsidy cuts (as opposed to the wide spectrum covered by Members' proposals).

The NAMA negotiations remain deeply polarised. The US, the EU, and other developed countries continue to demand "real market access," by which they mean a substantial cut in applied tariffs rather than simply the bound ceiling rates. They have called for a 'Swiss' tariff reduction formula with a 'coefficient' of 10 for developed countries and 15 for developing ones. Under the 'Swiss' formula, a Member's coefficient effectively becomes its new tariff ceiling: when fed through the formula, all duties are slashed to below the level of the coefficient, with lower ones reduced more gently.

Brazil and India have said that the coefficient for developing countries should be no lower than 30. Washington and Brussels complain that this would produce only modest cuts to duties currently levied, which are well below their bound ceiling tariff levels.

However, the reason for these gaps is two decades of autonomous domestic liberalisation by India and Brazil, during which they chose to reduce customs duties dramatically. Forcing them to cut tariffs to levels far below these lowered rates would, at least in the mercantilist terms of a WTO negotiation, 'penalise' them for these reforms.

In contrast, several developing countries complain, the EU's offer to cut trade-distorting farm subsidies does not go beyond what is foreseen by its own ongoing reforms to the common agricultural policy, and the cap offered by the US substantially exceeds last year's expenditures (though Washington officials say that it is still lower than spending for seven of the past nine years). Both, of course, remain free to provide 'green box' support to farmers, which is deemed not to distort trade or production.

A group of eight developing countries, including Chile, Colombia, Costa Rica, Mexico, Peru, and Thailand have proposed a "middle ground" in the industrial goods talks, in which the developed country coefficient would be "less than 10," and that for developing countries would be "between the upper teens and the low twenties." This proposal has, however, been criticised by labour unions even in some of the sponsor countries.

Governments express support again

Whether any overlap exists between Members' so-called 'red lines' on agriculture or NAMA - the absolute minimum beyond which each would walk away from the negotiating table - remains unclear. Indeed, virtually any accord would require several governments to back down from oft-repeated public statements, and essentially concede that they had merely been jockeying for position.

Despite low hopes for a deal in the foreseeable future, the past week saw several governments from around the world, including trade ministers from the 21 Asia-Pacific Economic Cooperation member nations, reaffirm their commitment to the multilateral talks, as well as the view that the round could be concluded this year.

Similar incantations of support have thus far been more numerous than missed deadlines in the Doha Round negotiations, and even less effective.

The APEC ministers, who met in Cairns, Australia from 5-6 July, issued a statement saying "there has never been a more urgent need to make progress" on the Doha Round. "We need to make cuts in agricultural and industrial tariffs which result in real and substantial improvements in market access, and real and substantial reductions in trade-distorting agricultural subsidies," they said, stressing their willingness to be flexible. They called on the negotiating group chairs "to table texts that will build consensus on an ambitious and balanced outcome."

APEC countries account for about half of world trade and 60 percent of global GDP. Members include the US, China, Japan, Canada, and Australia - but not the EU, India, or Brazil.

Indian Commerce Minister Kamal Nath last week insisted that it was "still possible" to conclude the negotiations by the end of the year. He was echoed in this view by Brazilian Foreign Minister Celso Amorim, who, like Nath, was in Geneva to meet with the G-90 bloc that encompasses several of the smallest developing and least-developed economies in the WTO.

US Trade Representative Susan Schwab sounded a more sceptical note with the press after the APEC conference. Speaking about the draft agreements being drafted by the negotiating group chairs, she stressed the need for a "high ambition centre of gravity." "I believe that if those texts are low ambition texts we're in deep trouble in terms of the Doha Round," she said. "I would strongly suspect at that point you would see countries go off and say: 'Okay, well, if Doha is going to be a low ambition round it will never be finalised or it will go into hibernation for an extended period of time. Let's go off and negotiate more bilateral and regional deals'." In the same interview, she insisted that Washington's offer to cut trade-distorting farm support, though deemed insufficient by many developing country Members, was in fact "high ambition."

Sources say that if, at some point in early autumn, an agreement looks within reach, WTO Director-General Pascal Lamy would probably invite some two dozen ambassadors or senior capital-based officials for 'green room' discussions aimed at rounding out the terms of a bargain, setting the stage for ministerial-level approval.

ICTSD reporting; "India says WTO can still clinch Doha deal this year," REUTERS, 6 July 2007; "Developing countries hold ground in WTO talks: Brazil FM," AGENCE FRANCE PRESSE, 6 July 2007.