Bridges Daily Update #3 - Technology Trade Deal Reached at Nairobi WTO Ministerial

16 December 2015

A group of 53 WTO members negotiating a tariff-cutting agreement on information and communication technology goods reached a final deal in Nairobi, Kenya, on Wednesday evening, bringing to a close more than three tumultuous years of talks.

“It took a lot of hard work and a lot of time. But, most importantly, it took compromise and flexibility,” Director-General Roberto Azevêdo told reporters, adding that he hoped it would inspire progress in other negotiations at the WTO ministerial.

The pact – an update to the WTO’s 1996 Information Technology Agreement (ITA) – would see tariffs removed on 201 products, such as new-generation semi-conductors, magnetic resonance imaging (MRI machines), video game consoles, computed tomography (CT) scanners, and various advanced medical products.

Some estimates place the gains from this expanded deal – known as ITA-II – at US$1.3 trillion in annual trade. The list of products, which together cover 10 percent of global trade, had already been confirmed in July, leaving the participants in this initiative still needing to agree on the “staging” for phasing out tariffs.

Participants had aimed to conclude the staging talks and submit tariff schedules by early December to achieve sign-off by ministers in Nairobi. However, talks dragged on, with a deal at the ministerial ultimately hinging on whether China would submit a revised tariff schedule, and whether those changes – characterised as necessary to resolve technical errors – would be agreeable to the group.

Under the deal’s terms, tariffs on 65 percent of products would be eliminated on 1 July 2016, making up 88 percent of imports. Within three years, this would increase to 89 percent of tariff lines - 95 percent of imports – with full elimination within seven years.

Though the concessions of the ITA-II are required only of its participants, the benefits would be extended to all WTO members. The ITA-II participants are a subset of the original ITA’s membership and have said that they hope other countries sign on.

Liberia welcomed in

Another key development was the formal invitation of Liberia into the WTO, with the ceremony attended by the nation’s president, Ellen Johnson Sirleaf and Kenyan President Uhuru Kenyatta. The Liberian leader called the news “another turning point” in her nation’s history.

Once Liberia ratifies the protocol of accession it will become the 35th least developed country (LDC) within the WTO. Currently, 19 governments are negotiating to join the global trade body, with six of these being LDCs: Bhutan, Comoros, Equatorial Guinea, Ethiopia, Sao Tomé & Principe, and Sudan. Afghanistan, another LDC, is slated to have its accession ceremony on Thursday.

Liberia had submitted its formal accession request in June 2007. Given its recent challenges including the Ebola crisis, experts say that WTO accession will bring the country into a rules-based system that will encourage economic reforms, in turn generating inclusive growth.

Draft deal on rules of origin

Earlier in the day, a draft ministerial decision on preferential rules of origin for LDCs also emerged after various consultations aimed at solving the remaining outstanding issues. The draft text will now be forwarded to ministers by Ambassador Steffen Smidt of Denmark - who chairs the talks - for adoption.

Building on the guidelines contained in the Bali ministerial decision, the text – a copy of which has been seen by Bridges – sets out criteria for preferential rules of origin for LDCs.  The text outlines requirements for preference-granting countries in areas such as the determination of substantial transformation, cumulation, simplification of documentary requirements and implementation, flexibilities, and transparency.

One of the issues that had proven divisive in the negotiations involved finding common ground on the various methodologies that exist for establishing substantial transformation, designed to evaluate the extent of meaningful local production.

Members “shall adopt” a calculation method involving the value of materials not from LDCs, the draft decision says. After extensive discussions on the level of the threshold of value addition, the text says that members “shall consider” allowing 75 percent of foreign inputs to make up the final value of a product to qualify for preferential treatment. Language on the related section of the draft decision seems to have accommodated some developing countries’ concerns who had pushed for the term “consider” over “aim.”

Some flexibilities for developing countries seems to be contained in the document to allow them to undertake commitments in relation with the stated provisions on a best endeavour basis. If adopted, members would be expected to notify measures in compliance with the decision by 31 December 2016.

S&DT talks struggling

Despite the advances on rules of origin, consultations on special and differential treatment (S&DT) are also struggling to move forward. According to a source, the G-90 developing country coalition is reportedly willing to submit a proposal for ministerial consideration, including a number of decisions which have proved contentious throughout the entire process.

One African official told Bridges that part of the G-90 strategy was to push for an outcome on a set of proposals of key interest for the group, touching upon flexibilities supporting industrialisation.

“The thorny question of differentiation and the definition of the future work programme continue to underpin the divisions,” said one delegate. At press time, positions were still entrenched, and several delegates from developed and developing countries commented that disagreements were too many to allow for a ministerial outcome.

Services waiver

Regarding the LDC services waiver, today’s discussions also proved difficult, with many outstanding issues as members work to agree language on the preferential conditions provided under the waiver approved earlier. One developed country delegate, however, expressed hope that differences would be ironed out once issues move to the level of ministers.

“The issues being discussed can be resolved, however timing makes it difficult,” said an African official. Some of the issues discussed involve reducing administrative procedures and fees for visas, work and residence permits, and licenses for LDC services suppliers and independent professionals, the issue of mutual recognition, and the LDC request for additional definition of the term “preferential treatment” in the sense of the waiver.

Ministerial statements draw scrutiny

The second day of the conference also saw a series of plenary statements by various ministers, which were analysed closely by trade watchers for possible political signals.

Speaking that morning, Indian trade minister Nirmala Sitharaman said that she had “taken careful note” of calls by some countries to start work on “new issues,” while warning against overloading the WTO agenda while Doha issues remained unresolved.

One negotiator from an agricultural exporting country told Bridges that he saw signs of flexibility in Indonesian Trade Minister Thomas Lembong’s statement, which reportedly made no mention of safeguards to protect developing countries from sudden surges of farm goods, despite Jakarta being the coordinator of the G-33 negotiating group, which has championed this issue.

Australian Trade Minister Andrew Robb said that the issue facing negotiators is “not whether Doha is alive or not.” Instead, he said, members needed to agree on how to make the WTO’s negotiating function more effective. Mexico’s trade minister Ildefonso Guajardo Villareal echoed these sentiments, saying that the issue of whether Doha was dead or alive was “a sterile discussion.”

Meanwhile, the Deputy Director-General of the UN Food and Agriculture Organization sought to rebut arguments that US Trade Representative Michael Froman had made in an opinion piece in the Financial Times on Monday. The Doha Round could be concluded quickly if WTO members kept the promises they’d made to tackle trade distortions, wrote DDG Jomo Kwame Sundaram in a letter to the same newspaper.

The negotiations at the conference on both substantive issues and the ministerial declaration have now been broadly divided into two “tracks,” announced last night at an informal meeting of heads of delegation by Azevêdo and conference chair Amina Mohamed, Kenya’s Cabinet Secretary for Foreign Affairs and Trade.

One track will be on substantive issues, with the ministers of Lesotho, Jamaica, and Rwanda coordinating the dossiers for agriculture and cotton, rules, and LDC issues, respectively. No minister had been confirmed as a facilitator for special and differential treatment (S&DT) at press time. The other track will be on the ministerial declaration, led by Amina Mohamed with the support of two “Friends of the Chair,” the ministers of Mexico and Norway.

While spokesperson Keith Rockwell told reporters that the first part of the ministerial declaration – on the WTO’s achievements and the global macroeconomic climate – is relatively mature and the second part is a placeholder for substantive outcomes, the third part “remains very divisive,” given the “highly politically charged issues” of the Doha Round’s next steps and possible inclusion of new issues.

New texts on rules, questions on cotton

At press time, consultations on possible outcomes linked to the trade body’s “rules negotiations” remained ongoing. Sources confirm that Australia and the 28-nation EU on Tuesday presented a draft joint proposal – based on earlier separate drafts in these talks – for a ministerial declaration geared towards boosting WTO members’ notifications of fisheries subsidy programmes. 

The African, Caribbean, and Pacific (ACP) Group of countries have also reportedly distributed a revised draft decision that would see members aim to complete negotiations within two years for disciplines on subsidies provided to vessels engaged in illegal, unreported, or unregulated (IUU) fishing, as well as on subsidies to any fishing activity negatively affecting fish stocks that are in an “overfished condition.”

In addition, Russia has circulated a revised draft decision for a rules outcome that would have members decide to further proceed with discussions on ways to review members’ anti-dumping and countervailing policies and practices, floating the idea of establishing a factual review system for these.

An informal heads of delegation meeting on Wednesday evening did not reach concrete consensus on any of these proposals, sources said, with some members maintaining that these trade transparency-related efforts do not constitute a development outcome. Other sources suggested, however, that results in rules might be more forthcoming should other tough areas in the talks move.

On cotton, top negotiators from West African countries said that some progress had been made on a draft negotiating text that ministers were still considering, a decade after ministers first called for an “expeditious” solution to address distortions in the sector.

ICTSD reporting.

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