CLASH OVER NAMA FURTHER DIMS HOPES FOR DOHA DEAL

Prospects for a deal in the troubled Doha Round of trade talks grew dimmer still this week, after an acrimonious debate on industrial tariff cuts between a large group of developing countries and the US left some trade diplomats wondering if an agreement was even possible.

Developing countries accounting for over half of the WTO's Membership, including Argentina, Brazil, India, and South Africa, formally argued that they should not be required to cut their bound manufacturing tariff rates more deeply than industrialised nations, in a paper submitted to a 9 October meeting of the WTO General Council. Calling agriculture the "unfinished agenda of the Uruguay Round," the group stressed that the depth of farm reforms should be the benchmark for future industrial tariff reduction.

The US, which is seeking greater access to developing country goods markets in return for farm subsidy cuts, slammed the proposal. US Ambassador Peter Allgeier said it was a "formula for failure" to negotiate as if manufactured goods and services "are simply residuals to be calculated after the dust has settled on agriculture."

"This could be the beginning of the end of the round," Sean Spicer, a spokesperson for the US trade representative's office, told the Associated Press. "This is a gigantic step backward. Are they trying to find a successful outcome or are they trying to light a fuse to blow up this round?"

Same disagreement, more acrimony

The disagreement was hardly new: the NAMA-11 has long argued that the Doha mandate for "less than full reciprocity in reduction commitments" by developing countries means that they should cut their bound industrial tariff rates by less than the percentage for industrialised countries. And the EU and the US have countered that such tariff cuts would not be deep enough to 'bite' into developing countries' applied duties - which are much lower than their bound ceiling rates - to create new trade flows. They say that the "less than full reciprocity" mandate would be fulfilled by letting developing countries emerge from the Doha Round with a higher tariff ceiling.

What was unusual was the bitter tone of the debate, particularly given that it came after weeks of incremental - but nonetheless positive - progress in the agriculture negotiations. Governments have generally tended to save the finger-pointing until after failed attempts to reach breakthrough compromises.

In fact, just before the rancorous exchange, WTO Director-General Pascal Lamy had praised delegations for demonstrating "engagement and readiness to look for compromises" in the agriculture negotiations.

The US and the EU criticised the African, Caribbean, and Pacific (ACP) group, the African Group, the group of Small and Vulnerable Economies (SVEs), and the NAMA-11 - the joint sponsors of the new paper - for failing to accept the parameters for a non-agricultural market access (NAMA) deal set out by the chair of the negotiating committee in July. They said that countries should follow their lead and accept that paper as well as a companion draft text on agriculture as a basis for negotiations.

The NAMA-11 group, which includes Argentina, Brazil, Egypt, India, and South Africa, has expressed dissatisfaction with Canadian Ambassador Don Stephenson's NAMA text from the outset, arguing that the tariff cuts it provides for are too demanding of developing countries, too easy on industrialised nations, and out of all proportion to the farm subsidy reform provided for in the draft agriculture text (see BRIDGES Weekly, 1 August 2007).

Stephenson's text suggested that Members might reach an agreement that would cap developed country tariffs at 8-9 percent and developing country tariffs between 19-23 percent, with duties reduced correspondingly across the board.

The new paper did not explicitly reject the NAMA chair's text. However, its core demand -- lower average bound tariff cuts for poor countries -- does not sit easily with the text's provisions. The stiffest reductions slated for the EU and the US would cut dutiable bound tariff rates by an average of roughly 40 percent; Brazil and India's substantially higher bound tariffs would respectively be slashed by over 50 and 60 percent at the very least (average applied rates would be reduced by 7 to 11 percent; see BRIDGES Weekly, 26 September 2007).

In order to approach comparable percentage cuts to bound rates, the EU and the US would have to cap their manufacturing tariffs at 5 percent or less. This would have relatively modest effects on the low duties of 2 to 4 percent that they currently levy on most manufactures - the difference would probably be dwarfed by currency fluctuation. However, it would entail very sharp - and thus unpopular - cuts to the 'tariff peaks' on the handful of industrial goods on which these countries still maintain a high level of protection. Several of the protected industries are politically influential, and manufacture the same products, such as textiles and t-shirts, that developing countries export efficiently.

'Flexibilities' for developing countries to shield some tariff lines from the full force of tariff reduction are another central issue in the talks. Stephenson's text would allow them to subject 10 percent of tariff lines to only half of the reduction demanded by the formula (albeit limited to a tenth of total manufacturing imports), or to exclude 5 percent of tariff from cuts altogether (but limited to only 5 percent of imports).

The new paper argued that different developing countries would need varying degrees of such flexibility to address "social, economic, and labour concerns" or "to preserve the common external tariff in customs unions." Many of the sponsors of the document are not among the 30-odd relatively larger developing economies required to apply the tariff reduction formula.

More than one trade negotiator expressed surprise about the "maximalist" demands put forward by the NAMA-11, the ACP group, the African Group, and the SVEs at this juncture in the talks. One, speaking on condition of anonymity, said "If they are really going to stick to that paper - and whether they are is an open question - there is probably no room for an agreement on NAMA."

The official surmised that the sponsors were trying to send Stephenson a signal as he prepares a revised version of his draft deal to present to Members alongside a new agriculture text, possibly in November.

Nevertheless, the delegate expressed deep concern about a sort of circular paralysis in the negotiations: NAMA paralysed by the absence of progress on agriculture, and the US refusing to make clearer subsidy concessions, citing the lack of movement on NAMA.

US Ambassador Allgeier criticised the demands made by the four developing country groups. "It is time for delegations to affirm that they will negotiate on the basis of the chairs' texts in both agriculture and NAMA, including the market access ranges and flexibilities contained in those drafts," he said. EU spokesperson Peter Power also called on countries to "undertake the necessary negotiations," on the existing draft texts.

Brazil: US, EU not really committed to texts

Roberto Azevedo, a top Brazilian negotiator, argued that Brussels and Washington were not nearly as committed to the terms of the agriculture text as they seemed to be suggesting.

"The US, the EU, the other developed countries are picking and choosing the provisions of the agriculture text they can live with. On the other hand, they are asking the developing countries to take the [NAMA] text as a 'take it or leave it' business which is frankly unfair, unreasonable, and irrational," he told journalists in Geneva the day after the General Council meeting, reports Reuters. "What they are essentially trying to do is put the blame on the shoulders of others if the round doesn't go forward."

The US suggested last month that it could accept the $13 to 16.4 billion cap on trade-distorting subsidies set out in the agriculture negotiations chair's text. However, it remains unclear where in this range it could go. Furthermore, 'overall trade-distorting support' has many product-specific and other components, and Washington has not explained how it might distribute spending cuts.

Azevedo, a senior official at the Brazilian foreign ministry, said that "with the level of uncertainty, with the level of ambiguity that we have in agriculture today" about how rich countries would cut tariffs and subsidies on individual products such as cotton, corn, and soy, "it is impossible for us to tell if we can live with what is in the [NAMA] text."

"We are ready to negotiate on all fronts, in all areas, all the time, right up to the end," he insisted.

Sources report that NAMA Chair Stephenson will meet with small groups of delegations in the upcoming weeks in an attempt to figure out how to proceed in light of the deep divisions.

Meanwhile, India, Brazil, and South Africa - all members of the NAMA-11 - are set to meet for a summit in Johannesburg and Pretoria next week.

ICSTD reporting; "U.S. slams Brazil, India, South Africa for refusing to open up goods markets," ASSOCIATED PRESS, 9 October 2007; "Brazil decries ;unfair' US stance in trade talks," REUTERS, 10 October 2007; "US says Doha round trade talks at risk," REUTERS, 10 October 2007.