WTO Members expressed a desire not to abandon the Doha Round negotiations, nor to lose the progress they had made towards an agreement on cutting tariffs and farm subsidies during nine days of intense negotiations.

“We were very close to finalising modalities in agriculture and [non-agricultural market access],” Director-General Pascal Lamy told the Trade Negotiations Committee Wednesday morning, in a reference to the framework deals governing tariff and subsidy cuts that governments had hoped to strike. He said that “a huge amount of problems which had remained intractable for years have found solutions,” even though the talks ultimately ran aground on the extent to which developing countries would be able to protect farmers from import surges under a ’special safeguard mechanism’ (SSM).

Lamy called for Members “to seriously reflect about if and when we can jump the obstacle of what was not possible this week.”

He acknowledged that “perhaps the dust needs to settle a bit” before countries can decide on how to proceed with the Doha agenda, but urged Members to preserve “the progress we have made in agriculture and NAMA” and other areas of the talks. “This represents thousands of hours of negotiation and serious political investment by all the Members of the WTO,” he said. “This should not be wasted.”

Several Members expressed disappointment that the recent ‘mini-ministerial’ meeting had ended in a breakdown, making it the third such collapse in the past three summers.

On behalf of the group of African WTO Members, Uhuru Kenyatta, Kenya’s deputy prime minister, told journalists prior to the TNC that “most of the key issues of interest to the African continent were not even discussed,” at the summit, especially cotton, which is slated to receive deeper-than-normal subsidy cuts. “Africa critically needs to realise development and get itself out of poverty through the establishment of fair trade rather than aid,” he said. “Africa’s opportunity to achieve fair trade has therefore been gravely undermined by the lack of progress in these negotiations.”

In separate press conferences on 30 July, US Trade Representative Susan Schwab and Indian Commerce Minister Kamal Nath traded insinuations that the other had been taking unacceptable stances on the SSM. But both stressed the importance of the WTO, and called for a clear path forward for the negotiations.

Chinese Deputy Trade Minister Li Enheng told the TNC session that “the major developed Members need to play in particular genuine leadership in the negotiations rather than in any unhelpful activities with a view to shifting responsibilities onto others, including through the media.” The US has implied that China, along with India, was responsible for the breakdown.

In general, however, Members expressed a desire, echoed by Lamy, not to “throw in the towel” on the global trade talks.

Nevertheless, the path towards putting the negotiations back on track is unclear. Lamy announced that the chairs of the committees on agricultural and industrial goods trade will soon issue “state-of-play” reports capturing progress that had been made before the talks fell apart.

But even this will not be straightforward. Argentina noted that it was not willing to work on the basis of the texts curently on the table, especially on non-agricultural market access (NAMA). A number of delegations have expressed dissatisfaction with some of the compromise parameters that Lamy put to Members on 25 July, as well as with the fact that certain countries, particularly the US, sought to present it as a “sacrosanct” or “take-it-or-leave-it” package.

As for the future, USTR Schwab suggested at a press conference Wednesday that she was open to taking a more piecemeal approach to the talks. There are “some discrete parts of the package that have been negotiated or have almost been negotiated, or where there is a consensus, that I think you could move them forward,” she said, tentatively identifying duty-free and quota-free access for least-developed countries, export competition, trade facilitation, and environmental goods and services.

Choosing to move ahead in the talks on a disaggregated basis would require a consensus decision among all WTO Members. That could prove difficult, given the varying degrees of importance that different governments assign to particular issues. Indian minister Nath implied that there would be resistance to dismantling the Doha Round package, given the institution’s traditional ’single undertaking’ approach, under which ‘nothing is agreed until everything is agreed’. “The WTO is not a buffet that you pick up what you want and go,” he said.

Also unclear is the status of a deal on banana trade struck between the EU and a group of 11 Latin American nations. The EU, which had promised in that agreement to slash its banana tariffs by 62 euros per tonne over seven years, insists that that accord was part of the Doha Round talks, and thus, in the absence of a Doha agreement, is now moot. The Latin American banana exporters, however, see the matter differently. Colombia told WTO Members on Wednesday that it considered the banana deal, which followed over a decade of trade disputes between Brussels and the Latin Americans, to be a stand-alone agreement.

ICTSD reporting.

Officials expressed surprise and disbelief that, in the end, the negotiations foundered on an issue that had never been the stuff of news headlines before this week: the extent to which developing countries would be able to raise tariffs to protect farmers from import surges under a ’special safeguard mechanism’ (SSM). Differences over cuts to farm subsidies and industrial tariffs, which had long seemed virtually intractable, appeared to be bridged to a significant extent during the ‘mini-ministerial’ gathering in Geneva. Even the always tricky issue of preference erosion was reportedly close to being finalised.

One of the main sticking points about the SSM has been whether, and by how much, countries should be allowed to impose safeguard duties in excess of current (i.e., pre-Doha) tariff ceilings. The group of seven leading trade powers that was at the centre of the talks met much of the day Tuesday, as they had the day before, to see if they could find common ground. Import-sensitive China, and especially India, were pitted against the US’ demands for predictable market access for farm products. Some time around 5pm, they gave up.

“I think it’s no use beating around the bush,” WTO Director-General Pascal Lamy told journalists after announcing the failure to WTO Members. “This meeting has collapsed. Members have simply not been able to bridge their differences.”

Initial reactions to the collapse of the summit, which started on 21 July, do not seem to have been marked by as much acrimony and finger-pointing as that which surrounded the breakdown of pushes for framework Doha Round deals in each of the past two years.

More than anything, ministers expressed disappointment, sounding rueful that the talks had fallen apart despite coming very close to agreement. EU Trade Commissioner Peter Mandelson called it a “collective failure,” a sentiment echoed by Lamy.

“Never, never, before have we been so close just to see everything fall apart,” EU Agriculture Commissioner Mariann Fischer Boel said at a press conference.

Any outside observer “would not believe that after the progress made here, we could not conclude,” said Celso Amorim, Brazil’s foreign minister.

So close did some Members feel to an agreement that some delegations expressed willingness to continue consultations late Tuesday night, Lamy said.

There were nevertheless insinuations of intransigence on the part of others.

A “disappointed” Kamal Nath, India’s commerce minister, said “it is unfortunate that in a development round we couldn’t run the last mile because of an issue concerning livelihood security.”

“Even today, 5 of the 7 countries in the leadership group were prepared to accept the Friday proposal by Director-General Lamy,” said US Trade Representative Susan Schwab on Tuesday, in a reference to India’s and China’s rejection of some provisions in a compromise package that the WTO chief put to Members on 25 July. In a statement, she said that market access-creating “ambition is not evident” in other countries’ offers.

The full G-7 includes Australia, Brazil, China, the EU, Japan, India, and the US.

How it broke down

While the special safeguard mechanism was widely seen as the proximate cause of the collapse, the deadlock on the SSM meant that other contentious issues, notably cotton-specific subsidy cuts and protections for location-based food names like Parma ham, never even got their turn in the spotlight.

On the SSM, Lamy said, differences on how big import surges need to be in order to justify the highest safeguard remedies ultimately proved irreconcilable, despite “more than 60 hours” spent trying to bridge the gaps. “Those who feared that the safeguard would lead to a disruption of normal trade wanted this safeguard as high as possible. Those who feared that the safeguard would be not operational if it was too burdensome wanted a lower trigger,” he said.

Lamy’s own proposed compromise would have allowed SSM remedies to surpass pre-Doha tariff bindings by up to 15 percent (or percentage points) when import volumes rose by 40 percent over a three-year average. The freedom to exceed current bound levels would have been limited to 2.5 percent of tariff lines, with remedies unavailable if prices were not actually declining.

The G-33, which includes India and China, said that this ‘trigger’ was too high to ensure that farmers would not be hurt by surges of subsidised agricultural imports from developed countries. They wanted the highest SSM remedies to be triggered by import volume increases of 10 percent and more, with safeguard duties capped at 30 percent (or 30 percentage points) above bound levels.

On Monday night, the US rejected a proposal from Lamy that included no numerical triggers and remedy caps, but would have instead constrained the use of the SSM by linking it to “demonstrable harm” to users’ food and livelihood security and rural development needs, and by making remedies subject to expert review. India accepted it, according to one G-33 official.

G-7 ministers and officials on Tuesday looked for more acceptable numbers to plug into the model proposed by Lamy. Sources say that one option would have involved a ‘trigger’ import volume increase of 15 to 20 percent, with remedies equal to either 30 percent of current bound tariffs or 8 percentage points. A subsequent trigger of a 35 to 40 percent increase in import volumes would have been linked to remedies of either 50 percent of bound tariff levels or 12 percentage points. The difference between the percentage of bound tariffs and the number of percentage points would be particularly relevant for countries looking to export to China, which has low tariff levels because of its accession conditions (adding 8 percentage points to a tariff capped at 8 percent amounts to a 100 percent increase; adding 30 percentage points, to yield 38 percent, represents a far higher increase).

The US reportedly did not budge from its position that a 40 percent increase in import volume was the lowest possible trigger it could accept for SSM remedies that would go beyond current tariff ceilings.

Mandelson said that it was “heartbreaking” that a small difference on numbers related to the SSM trigger had tripped up the talks. “An irresistible force met an unmovable object in the negotiating room, and the rest is history,” said Mandelson of the clash between India and the US.

A future for Doha?

With the failure of the summit, the next step for the Doha Round, already in its seventh year, is not yet clear. Any real movement in world trade talks may be a long time coming. US elections in November will constrain trade policymaking for the rest of this year, and many fear that in 2009, amid political changes in the US and Europe, and elections in India, global trade will be put on the political backburner.

“We will need to let the dust settle a bit,” Lamy said at a press conference following the collapse. “It’s probably difficult to look too far into the future at this point. WTO Members will need to have a sober look at if and how they bring the pieces back together.”

Ministers also expressed a general desire to somehow capture the progress that was made this week. “US commitments remain on the table,” Schwab said. But Brazilian minister Amorim was doubtful about whether non-binding commitments offered in the course of the negotiations would be honoured in the future: “It’s not in our power,” he said. “Life goes on, and not always in the best way.”

Trade ministers said they were not opposed to continuing negotiations at a later date. “We should not preclude the possibility of returning to the table,” Mandelson said, although he added that he did not think that there was “any chance” of modalities being agreed either this year “or in the foreseeable future.”

Schwab shared that sentiment, saying that the US remained “committed to and supportive of the WTO.” Likewise, Indian minister Nath said that his confidence in both the global trade body and the multilateral system as a whole, remained “intact.”

Despite the ministerial expressions of confidence, Paul Blustein, a trade specialist at the Brookings Institution who is writing a book about the WTO, said that “looking back in history, we might see this as a big blow to the multilateral trading system.” Tuesday’s collapse, he suggested, risked hurting “the credibility of the WTO, which is already losing its place as the central rule-maker and dispute settler” in global trade, due to the growing number of bilateral trade agreements around the world.

Blustein suggested that actions taken by the next US presidential administration would do much to determine whether the breakdown could have a silver lining for the WTO. A new president — if interested in multilateral trade, which is not a given — could decide to launch a serious push to revamp the Doha negotiations in ways that would in the long term be good for the multilateral trading system, addressing issues of the future such as climate change and high food prices.

The WTO, for its part, will carry on with its day-to-day work enforcing the existing set of global trade rules. The negotiations, too, are likely to drag on, if not at the highest political levels for some time.

Indonesian Trade Minister Mari Pangestu summed up the situation: “Multilateral talks never fail, they just continue.”

ICTSD reporting.

“The situation is very tense,” the WTO’s chief spokesman, Keith Rockwell, said while trade ministers from the ‘G-7′ group of leading trade powers were tense talks on a mechanism to protect developing country farmers. “The outcome is by no means certain.”

“The good news is that we are still talking,” Indian Commerce Minister Kamal Nath told reporters after the meeting. “If the talks were stalemated, I’d be back in my hotel room.” The G-7 includes Australia, Brazil, China, the EU, India, Japan and the US.

Trade ministers have been meeting in Geneva since 21 July to try to hammer framework agreements in the Doha Round of trade negotiations. With reports that the high level talks are increasingly strained, rumours of an imminent collapse once again began to circulate in the WTO building on Monday. But some longtime trade observers note that political rhetoric often grows especially heated just before breakthroughs.

In a further complication to a potential accord, however, nine EU countries, led by France and Italy, formed a coalition on Monday to push for better terms in a Doha Round deal, Reuters reported. EU Trade Commissioner Peter Mandelson has maintained that he has the support of EU member states in the negotiations, but the creation of the new alliance could nonetheless undermine his credibility at the talks.

Fight continues on SSM

An arcane-sounding mechanism intended to allow developing countries to protect farmers in the event of import surges or price declines has emerged as one of the most fought-over issues of the ongoing mini-ministerial. The ’special safeguard mechanism’ would allow developing countries to raise tariffs beyond bound levels, in principle to stall inflows of cheap imports that could displace farmers.

The issue neatly splits the interests of import-sensitive developing countries and competitive farm exporters, including those in the developing world: the former want to have recourse to protection, the latter want predictable access to overseas markets.

One of the main sticking points has been whether, and by how much, countries should be allowed under the SSM to impose safeguard duties in excess of current (i.e., pre-Doha) tariff ceilings. The G-33 bloc of developing countries, which includes China, India, and Indonesia, insists that this may sometimes be necessary for safeguard duties to have the desired effect, i.e., protecting farmers.

At the other end of the spectrum, some exporters, such as Uruguay and Paraguay, believe that allowing safeguard duties to breach current tariff bindings would upset the “balance of rights and obligations” that governments agreed to during the previous Uruguay Round of negotiations. They warn that as currently crafted in the draft agriculture text, the SSM could be triggered even by normal trade growth, inviting potential safeguard duties that would reduce agriculture exports that are important to their economic growth and development.

Lamy’s proposal — allowing SSM remedies to exceed current tariff bindings by up to 15 percent (or percentage points), but only if import volumes rise by 40 percent, and limited to 2.5 percent of tariff lines — was deemed insufficient by the G-33. Along with the African Group, the ACP Group, and the group of Small and Vulnerable Economies, the G-33 tabled an alternative proposal that would allow them to exceed current tariff bindings for 7 percent of tariff lines, with SSM remedies capped at 30 percent (or 30 percentage points) above current bound levels, triggered by volume increases starting at 10 percent.

In talks that ran past midnight, the G-7 ministers, the US and India in particular, considered various possibilities that could serve as the basis for a compromise. One such option would have set a lower 30 percent import surge threshold for allowing SSM duties to exceed tariff bindings, but with remedies limited to 10 percent (or percentage points) over bound levels.

Lamy reportedly also asked them to look into a numberless mechanism that would still restrain the use of SSM remedies, possibly via provisions against misuse. There is a precedent for such provisions in existing WTO rules: the Safeguards Agreement allows countries to temporarily restrict imports in order to avoid injury to domestic industries. In order to prevent abuse, the possibility of injury must be verifiable.

US Trade Representative Susan Schwab reportedly continued to advocate leaving untouched what she has called the “delicate balance” of Lamy’s compromise package.

Nath, who has repeatedly said that he would not negotiate subsistence and livelihoods, said Monday that “developing countries must protect themselves against subsidised imports coming in” from the developed world. Asked how this would affect developing country farm exporters, he said that nations supporting a beefed-up SSM were far more numerous, numbering close to 100.

India, which has high bound tariffs but relatively low applied rates for several products, would appear to need the SSM less than fellow G-33 member China, which has low bound rates that are very close to its applied duties. China has said that it cannot make more concessions on the SSM issue.

Raul Montemayor, the president of the Federation of Free Farmers Cooperatives in the Philippines, suggested to Bridges that the SSM’s potential to totally block imports might be somewhat overblown. According to his mathematical analysis, the effectiveness of SSM duties at bringing import prices in line with domestic prices was limited — imports tended to be cheaper anyway. He also said that the thresholds for the SSM were more important than the remedies in terms of the effect, albeit with variations for different products and countries. Thresholds that are too high, however, could mean that “remedies might not be enough to help the farmers.”

China returns US barbs

The US stepped up its war of words against China and India Monday, accusing them of throwing the entire Doha Round “into the greatest jeopardy of its nearly seven-year life.”

In language unusually strong for a WTO meeting, David Shark, a US trade official, blamed India for rejecting the compromise package of parameters on key unresolved issues that Pascal Lamy put to Members last Friday, and China for “walk[ing] away from it.”

In his statement to the Trade Negotiations Committee, Shark took aim at the two developing countries for “insisting on the ability to raise agricultural tariffs in violation of their current WTO commitments,” and “firmly refusing” to take part in sector-specific liberalisation initiatives for industrial machinery, electronics, and chemicals.

“Even more damaging to the round, these two countries have actively enlisted the support of poorer developing countries for these positions,” Shark said, arguing that those countries were supporting policies that would hurt themselves the most.

The US delegate specifically criticised China for saying it would shield cotton, sugar, rice, and other commodities from tariff cuts, adding that “the United States has consistently maintained that the price for us to cut our agricultural subsidies and protection is for other major trading partners to open their markets for such commodities.”

Chinese WTO Ambassador Sun Zhenyu immediately hit back, arguing that China had made a more than adequate contribution to the round. He pointed out that China’s average farm tariff was lower than the EU or Canada’s, and that its average manufacturing tariff was a mere 9 percent, due to the strict liberalisation commitments that the country accepted as the price of its accession to the WTO in 2001. Sun said China would account for half of the cuts to applied manufacturing tariffs made by developing countries in the round.

The Chinese envoy suggested that US policy, too, left much to be desired: the expansion of low-tariff import quotas for the US’ ’sensitive’ farm products paled in comparison to the size of China’s tariff rate quotas he said, often by more than a factor of ten. “Where is the access to the developed countries?” he asked.

Sun said that the US would, in the name of easing preference erosion, take ten years instead of five to phase in cuts to its high tariffs on textiles and clothing, thus shielding its own sensitivities while asking China to cut tariffs to near zero in areas like chemicals and electronics, where it might want to maintain relatively higher tariffs.

Zhang Xiangchen, a senior Chinese official, told Bridges that China, as a developing country, was “fully entitled” to shelter cotton, rice, and sugar from standard tariff reduction for subsistence and livelihood security reasons. As for sectoral liberalisation initiatives in the negotiations on non-agricultural market access (NAMA), he said that the mandate was clear: participation was voluntary. Attempts by developed countries to link developing country participation in some such initiatives with more lenient tariff treatment in other sectors amounted to making it “mandatory or quasi-mandatory.” Furthermore, industrialised countries only seemed to be pushing for liberalisation in sectors in which they enjoy “substantial export advantages,” he suggested.

The US’ recent argument that the extent to which they cut cotton subsidies will depend on how much China cuts its cotton tariffs was “absurd,” Zhang charged. Billions of dollars in trade-distorting US cotton subsidies had caused serious injury to cotton farmers in Africa, not to mention the 150 million in China. In contrast, the rates of Chinese protection for cotton that Washington was complaining about amounted to an in-quota rate of as low as 1 percent, and an over-quota duty of 40 percent. “We believe that the US is not in a position to discuss with developing Members on cotton tariff until they eliminate their cotton subsidies as requested by African Cotton Four,” he said.

Zhang took a shot at US tariffs on peanuts, sugar and tobacco, which he said were equivalent to 131 percent, 185 percent, and 350 percent respectively. In contrast, China’s are as low as 15 percent, 15 percent and 25 percent. “Further to that, we have zero subsidies on those products,” he said. “Could we ask the US to cut their tariffs on those products to zero?”

At the TNC meeting, Indonesian Trade Minister Mari Pangestu said she was “very disappointed to hear the blame game tone taken by one country,” in a clear reference to the US. “This is not constructive and certainly counterproductive,” she said. Pangestu disputed the US’ assertion that Lamy’s compromise package had been accepted by a majority of countries, arguing that “a majority of countries — the G-33, the African Group, the SVEs and the ACP — still have problems with parts of the package since they feel that their sensitivities have not been adequately addressed.”

Still no deal for ACPs on bananas

Ministers from the African, Caribbean, and Pacific (ACP) group of countries spoke out strongly against a deal brokered yesterday between the EU and a group of 11 Latin American banana exporters, as well as the US. That agreement, which follows more than a decade of WTO disputes against the EU’s banana import regimes, would lower Brussels’ MFN import tariffs on the fruit over the next eight years to 114 euros per tonne. It also requires ongoing disputes to be dropped.

The ACP countries, former European colonies that have long enjoyed tariff-free access to the EU banana market, are upset about the deal, fearing that the preference erosion resulting from the 62 euro per tonne reduction in the EU’s tariffs would leave their own banana producers unable to compete with more efficient Latin American exporters.

“A stab in the back” was how an ACP country reportedly described Brussels’ deal with the Latin Americans to the TNC. The minister from Guyana also inveighed against the agreement.

Though technically a bilateral matter between the EU and the Latin American countries, the ACP group has threatened to block a Doha Round agreement if dissatisfied with what it is offered on bananas. ACP ministers hinted yesterday that aid guarantees from the Europeans might sweeten a banana deal for them, but senior-level consultations on the issue reportedly produced little progress on Monday.

The final push

Tuesday’s schedule is still up in the air. The day is set to begin with an informal session of the Trade Negotiations Committee (TNC). Senior officials from the G-7 are also set to meet to consider possible ways out of the SSM deadlock, with ministers to resume consultations around midday. Last-minute small-group consultations on cotton and other outstanding issues will take place in the afternoon, followed, at least in theory, by a meeting of the 30-odd governments that comprise the ‘green room’ group. Updated draft texts on agriculture and NAMA are also expected during the day.

ICTSD reporting.

Ministers from about 30 countries discussed the issues — which were not among those addressed by WTO Director-General Pascal Lamy in a package of potential compromise parameters he put to Members on 25 July — at a ‘green room’ meeting Sunday evening. Several participants described the meeting as constructive, hailing progress on tropical products and banana trade.

But part of the reason for the relative harmony might have been that ministers simply held off discussing some issues that divide them sharply, such as protections for developing country farmers under a ’special safeguard mechanism’ (SSM).

“In the last 24 hours we have resolved or very nearly resolved issues that have been on the table for a very long time,” said Keith Rockwell , the WTO’s lead spokesperson. He said that the three key issues left to be resolved are the SSM, special treatment for cotton, and sector-specific liberalisation initiatives for manufactured goods.

Updated draft deals on agricultural and industrial goods are expected from the chairs of the two negotiating committees at some point on Monday. Rockwell said that these would contain “no surprises,” suggesting that they would only reflect widely accepted convergence. An informal session of the Trade Negotiations Committee (TNC), the WTO body that oversees the Doha Round negotiations, has been scheduled for 9am Monday. This will be followed by a noon meeting of ministers from seven leading trade powers, the so-called G-7, with whom Lamy has been consulting intensively since Wednesday. A larger ‘green room’ meeting may be called later in the afternoon.

Lamy has stressed that he wants to ensure that delegations have sufficient time to consult before calling on them to deliver official opinions on the proposals on the table. Thus, assuming that the talks do not break down, a formal gathering of the TNC — necessary for any modalities package to be presented to the full Membership — would probably not be held before Wednesday.

EU, Latins agree on bananas — ACP next?

In a significant development, eleven Latin American banana exporters and the US on Saturday reached an agreement with the EU on the latter’s import regime for bananas. As per the compromise, based on a proposal by Lamy, the EU would cut its MFN tariffs on bananas to 114 euros per tonne by the beginning of 2016, with a 28 euro per tonne ‘down payment’ reduction in the first year. The pact would exempt the EU from having to cut banana tariffs under a Doha deal.

Brussels has long maintained a complicated banana import regime involving quotas and tariffs, allowing it to provide preferential access to bananas from former colonies in the African, Caribbean, and Pacific (ACP) group. Despite various reforms, its import rules - including the current tariff, equivalent to 176 euros/tonne - have been repeatedly ruled to violate WTO rules, in cases dating back to the early 1990s. Under the agreement signed Saturday, the Latin Americans and the US effectively committed to not resuming their dispute against EU banana import policies until the new tariff is fully phased in.

In theory, the agreement between the EU and the Latin American exporters is a bilateral issue, springing from their long legal fight. In practice, there is a third party whose acquiescence must also be secured: the ACP group, which wants to minimise the erosion of its access to the EU market.

ACP officials have expressed discomfort with the EU-Latin American deal.

Clifford Paul Marica, Suriname’s minister for trade and industry, told Bridges that the terms of the agreement “would put our banana industry in serious difficulty.” He said that the ACP had put a new counter-proposal to Brussels, under which the EU’s MFN banana tariffs would actually end up lower than 114 euros per tonne, albeit with duty reductions spread over a greater number of years, including a grace period. He stopped short of threatening not to accept a modalities agreement if unhappy with the outcome on bananas, but suggested that “if there are no eyes and ears for our proposal, it would be difficult for us.”

Marica and other ACP delegates suggested that EU adjustment assistance to promote economic diversification and compensate for lost income might help make the banana deal more palatable.

Last-minute horse-trading over banana trade has marked WTO decision-making from the start, from the Marrakesh agreement establishing the global trade body to the launch of the Doha Round in 2001. True to form, bananas were called a potential deal-breaker for the current mini-ministerial as recently as last week.

WTO spokesperson Rockwell told journalists Saturday that the banana negotiations were “close to an overall agreement.”

“Emerging consensus” on tropical products

An issue closely linked to banana trade — the Doha mandate for the “fullest liberalisation” of trade in tropical products and those that might be grown in the place of narcotic crops — has also pitted the interests of Latin American exporters against the ACP group, which fears preference erosion. But following years of inconclusive negotiations on the two groups’ conflicting demands, New Zealand Ambassador Crawford Falconer, who chairs the agriculture talks, told the Sunday evening green room meeting that there was an “emerging consensus” on the treatment of tropical products.

Under this, tropical products with tariffs less than 20 percent would be reduced to zero. Those with tariffs over 20 percent would be cut by 80 percent over five years. The hotly debated question of what constitutes a tropical product would be rendered moot by providing Members with an ‘indicative list’ of potential tropical products, with the stipulation that developed countries apply tropical product tariff treatment to a certain percentage of commodities on the list.

All countries will treat bananas as a tropical product, apart from the EU (which otherwise would have been obliged to cut banana tariffs to about 35 euros per tonne). Sugar, another crucially important product to both groups, is likely to be designated as ’sensitive’ and slated for gentler-than-normal tariff cuts in many major markets, thus softening the blow of preference erosion.

In an attempt to win the ACP group’s support for banana tariff cuts and the agreement with the EU, the Latin Americans have agreed to allow most of the products where the two groups’ interests overlap to receive the longer implementation period assigned to products subject to preference erosion. Compromises on two remaining products — rum and arrowroot — are still under negotiation.

Potential tradeoff on GI extension, TRIPS-CBD?

As resolutely as the EU has pursued the extension of geographical indication (GI) protections already available to spirits and wines like Champagne to regional food names such as Parma ham and Roquefort cheese, the US has opposed it. During the ongoing mini-ministerial meeting, Lamy entrusted the long-stalemated debate on ‘GI extension’ to Norwegian Foreign Minister Jonas Gahr Støre for mediation, along with two other intellectual property issues: a proposed amendment of WTO intellectual property rules to require patent applicants to disclose biodiversity or traditional knowledge used in inventions, and the functioning of a ‘register’ of GIs for wines and spirits that Members have already agreed to negotiate.

With countries’ positions on the issues remaining diametrically opposed, one delegate said that Støre has been exploring a possible compromise under which Members would agree as part of a modalities deal to intensify discussions on the three issues, with the aim of identifying common objectives. These talks would be set to coincide with the scheduling of product-specific liberalisation commitments on agriculture and NAMA in October. Discussions on GI extension and a disclosure amendment would not take place in the Special Session of the TRIPS Council, the committee established for the negotiations on the GI registry, but could be chaired by the same person, thus establishing a link with the Doha ’single undertaking’.

Such a ‘process agreement’ may not be enough to satisfy some EU member states, which have insisted that their farmers need the price premiums that would result from GI extension to make up for subsidy and tariff cuts under the Doha Round.

Sources close to the discussions have suggested that a potential tradeoff might be in the offing, under which Brussels would agree to the US demand for a ‘peace clause’ insulating its farm subsidies from many types of legal challenge at the WTO, and Washington would drop its opposition to GI extension. Meanwhile, developing countries like Brazil, India, Cuba, and Peru, among many others, would tolerate a US peace clause in return for getting the disclosure amendment they claim is necessary to prevent ‘biopiracy’.

Cotton talks still at an impasse

Negotiations on the mandate for “expeditious and ambitious” cotton-specific subsidy and tariff cuts have also been stuck in a stalemate. Like a meeting among senior officials the day before, a Sunday gathering of US and several African ministers yielded no movement. Sources report that US Trade Representative Susan Schwab maintained that Washington could not put forward a specific offer on cotton subsidy reduction until it knows what it stands to gain in broader agreements on agriculture and NAMA, particularly with regard to market access.

Abdoulaye Sanoko, a Malian trade official familiar with the discussions, said that Schwab suggested that the depth of cotton subsidy cuts would be linked to market access for cotton that the US gains elsewhere, particularly in China. This was an argument that US officials had not made in prior talks on the issue. “It seems suspect to us,” he said.

Along with Benin, Burkina, and Chad — making up the so-called C-4 — Mali has long called for cuts to developed country cotton subsidies, which they say undermine otherwise competitive small-scale producers in Africa. Sanoko said that for the C-4, the main problem is “subsidies that hurt prices,” far more than access to other markets.

A C-4 country delegate told Bridges Sunday evening that, without an agreement on cotton, his country would be unable to accept a Doha deal.

Substantial differences on SSM

Lamy’s compromise parameters for the ’special safeguard mechanism’ (SSM), a device intended to help developing countries protect farmers from import surges and price collapses by temporarily raising tariffs on affected products beyond bound ceiling rates, would allow remedies to exceed current bound tariff levels by 15 percent (or 15 percentage points), but only when import volumes surge by 40 percent or more. SSM duties would be allowed to breach current tariff ceilings for 2.5 percent of tariff lines in a given year.

Import-sensitive developing countries have complained that the threshold is too high, the remedies too low, and the number of tariff lines too limited. India, which sees the SSM as an essential tool to protect vulnerable farmers, warned that the issue was a potential “deal-breaker.” A delegate from a different G-33 country said that Lamy’s parameters should be subject to negotiation, not “take it or leave it.”

The G-33 met with Falconer on Sunday to explore alternatives. Later that day, developing countries and LDCs accounting for about half of the WTO’s membership — the G-33, the African Group, the ACP Group, and the group of Small and Vulnerable Economies — tabled an alternative set of SSM parameters, saying it reflected “the limits of the flexibility” they could show on those issues. For 7 percent of tariff lines, they would allow larger developing countries to raise tariffs as high as 30 percent (or 30 percentage points) above current bound levels under the SSM, triggered by volume increases starting at 10 percent. For the remaining 93 percent of tariff lines, remedies would be added to post-Doha bound rather than applied rates, and would not breach pre-Doha tariff ceilings. SVEs and LDCs would receive higher remedies, for more tariff lines.

Meanwhile, farm exporters in the developed and developing world fear that the SSM already on the table could close off market opportunities. Developing country agriculture exporters stress that selling farm products abroad is central to their growth and development. Uruguay’s WTO ambassador, Guillermo Valles Galmes, said that a 10 percent trigger would mean that some 82 percent of China’s food imports, and 64 percent of India’s, could be slapped with safeguard duties. Uruguay is “gravely concerned about the way the SSM is crafted,” he said.

Ministers did not focus on the issue in Sunday’s green room session. But it will have to be addressed this week.

ICTSD reporting.

The day also saw several countries ’signal’ the extent to which they might open services sectors to foreign competition as part of a multilateral trade deal.

Meanwhile, delegations continued to consult on a number of issues not addressed by Lamy’s compromise but that must be resolved before ‘modalities’ deals can be reached.

Mixed reactions to Lamy’s ‘way forward’

At Saturday morning’s Trade Negotiations Committee (TNC) meeting, more than 30 delegations offered their reactions to the figures suggested by Lamy. WTO spokesperson Keith Rockwell said that the majority of those who spoke indicated that they considered the package an acceptable working document for further negotiations, even if not satisfied with all of its provisions.

EU Trade Commissioner Peter Mandelson told reporters that the compromise package has “the potential to offer something close to the balance that we believe must be at the heart of this round.” Mandelson, whose negotiating positions have been loudly criticised by France and some other European countries, stressed that he had “the backing of EU member states” to pursue an agreement on the basis of Lamy’s proposal.

Some delegations were more critical.

Nestor Stancanelli, a senior Argentinian negotiator, said that the package on the table would have to see “significant changes” before a modalities agreement could be possible.

Argentina has complained that the draft texts on which the agriculture and NAMA negotiations have been based for the past year — texts from which most of Lamy’s compromise figures were drawn — required developing countries to cut manufacturing tariffs by margins disproportionate to the rich-country farm reforms on offer. The most recent draft NAMA text contained an exception that would effectively allow Argentina (along with Uruguay and Paraguay) to shelter a significantly higher share of its manufacturing imports from full tariff cuts than would be allowed to other developing countries.

A ‘Swiss formula coefficient’ of 8, Stancanelli noted, would reduce US and EU tariffs by over 42 percent. But for Argentina, a coefficient of 20 — one of three proposed for developing countries — would entail a 60-percent average reduction to its allowable industrial tariff ceilings. This is “less than full reciprocity inversely applied,” he said.

Agriculture did not compare favourably, he implied. The proposed $14.5 billion cap on US trade-distorting farm subsidies would let Washington double payments from current levels, he noted. The 70 percent cut that developed countries would be required to make to their highest tariffs was far more lenient than the NAMA coefficients for developing countries: such a reduction on an 85 percent farm tariff would have the effect of a Swiss formula coefficient of 36, he claimed; for a 150 percent farm tariff, the figure would be 64. He said that the 4 percent of farm products that developed countries would be allowed to designate as ’sensitive’ would cover most of Argentina’s exports to the industrialised world, and that the value of expanded import quotas for these commodities would be compromised by allowing importers to pinpoint protection on some very specific products (’partial designation’).

India expressed “serious concerns” about some of the numbers outlined by Lamy, though it said that other figures “provide a basis for discussion.” Its sharpest objections were to the parameters for some remedies under the ’special safeguard mechanism’ (SSM), a device intended to help developing countries protect vulnerable farmers from import surges and price collapses by temporarily raising tariffs on affected products beyond bound ceiling rates.

Lamy’s figures would allow remedies under the SSM to exceed current bound tariff levels — a key demand of India and other members of the G-33 bloc of developing countries — but only when import volumes surge by 40 percent or more. Remedies would be capped at 15 percent above the bound tariff (or 15 percentage points). Furthermore, in a given year, SSM duties would be allowed to breach current tariff ceilings for only 2.5 percent of tariff lines.

The 40 percent trigger “is simply not acceptable,” India said, arguing that by the time import surges reached that size they “would have wreaked havoc on the livelihoods of the most vulnerable farmers.” The Indian statement criticised the ceiling on remedies, and the 2.5 percent limitation, as “way too low.” “This issue has all the makings of a deal-breaker,” it warned. The draft agriculture text released in mid July provides for lower remedies for smaller import surges.

On NAMA, India refrained from commenting on the formula ‘coefficients’, although it, like Argentina, Brazil, and other members of the NAMA-11 group, had been critical of the draft texts’ parameters in the past. Lamy’s proposal to reward developing countries that participate in sector-specific liberalisation initiatives with more lenient tariff treatment in other sectors was “too prescriptive,” it said, emphasising that such initiatives are supposed to be voluntary. India said that it was willing to negotiate on “reasonable numbers” for an ‘anti-concentration’ clause on the use of tariff flexibilities, describing this as a “major concession” in light of concerns from Indian industry. It also sought confirmation that developing countries would have a choice between applying full tariff cuts to either 20 percent of tariff lines or 9 percent of import value within each HS chapter.

Although Japan’s statement to Saturday’s TNC was fairly guarded, Agriculture Minister Masatoshi Wakabayashi told Japanese journalists in Geneva on Friday night that he was “strongly dissatisfied with the Lamy proposal,” mainly over the number of sensitive products, reported The Economic Times, an Indian newspaper.

South African Trade Minister Mandisi Mpahlwa, told Bridges that “at the moment, the package doesn’t reflect South Africa’s needs,” particularly with regard to manufacturing trade.

‘Signals’ provided on services trade liberalisation

Officials from several countries expressed satisfaction with a five-hour ’signalling conference’ on services trade liberalisation held Saturday, at which participating countries — mostly developed and relatively large developing countries — provided indications of the sort of binding market-opening commitments they would be willing to undertake under a Doha Round agreement.

“The signals that were sent were magnificent,” said Mexican Ambassador Fernando de Mateo, who also chairs the services negotiations at the WTO. He said that signals were sent in all of the sectors in which countries had made requests for market access, as well as in areas of interest to developing countries and developed ones. De Mateo said that the “very successful” meeting made him more optimistic that “things might move” elsewhere in the negotiations.

The exercise had been an objective primarily of developed countries like the EU and the US, but also India, who were seeking Lamy has called “a certain level of comfort” about future levels of liberalisation in the services sector, as they work on agriculture and NAMA.

While details on the ’signals’ offered were not made public, officials emerging from the conference were positive. US Trade Representative Susan Schwab said that the meeting had been “a good step forward, a positive step forward” in the negotiations. EU Trade Commissioner Peter Mandelson said that the “very good meeting” had seen some interesting signals from India and China.

Indian Commerce Minister Kamal Nath told reporters that there had been “good movement by the US and by the EU” on temporary cross-border labour movement (Mode 4 in WTO parlance), as well as on the cross-border supply of services (Mode 1), both of which are important to India’s information technology sector. He stressed the importance of the domestic regulation aspect of the services negotiations. An Indian trade official said that the EU had suggested that it may consider lifting ‘economic needs tests’, a regulatory requirement that can make it nearly impossible to use Mode 4 access.

The services talks are expected to pick up in fall, as de Mateo has tentatively set a 15 October date for Members to table revised offers.

Other issues see little progress

Senior officials have been working to narrow differences on a wide variety of issues in the negotiations that were not addressed by Lamy’s compromise parameters. In the agriculture talks, those issues include cotton, preference erosion, tropical products, bound in-quota tariff rates, and tariff simplification; on NAMA, divisions remain on preference erosion, provisions for recently acceded Members, and Venezuela’s requests for lenient tariff treatment.

Lamy reminded Members in the TNC Saturday morning that these issues must be addressed before they can agree on agriculture and NAMA ‘modalities’.

However, officials said later that day that little had been achieved in meetings on several of those issues.

A Saturday evening meeting on cotton subsidies and trade involving the US, the EU, Brazil, and the so-called C-4 group of West African cotton producers (Benin, Burkina Faso, Chad and Mali) yielded “nothing new,” according to one source. Agriculture negotiations chair and New Zealand Ambassador Crawford Falconer, who chaired the session, observed that with senior officials apparently unable to make progress, the mandate for extra-deep cuts to trade-distorting cotton subsidies will have to be sent to ministers. The US reportedly said that it would put forward a significant offer, but only after the contours of a broader agriculture deal — including market access — become apparent. The EU, which provides lower amounts of cotton subsidies than the US, said that constitutional constraints related to the accession protocols of Spain and Greece prevented it from cutting ‘blue box’ cotton payments to below 272 million euros.

Later that evening, Pascal Lamy chaired a meeting of representatives from several Latin American countries and the African, Caribbean, and Pacific (ACP) group in an attempt to find a compromise between their conflicting demands: the former want faster, deeper multilateral tariff cuts for tropical farm products, the latter want the opposite for some of the same commodities — most famously bananas and sugar — in order to soften the blow of the erosion of long-held trade preferences. Although participants tried for three hours to devise a solution for rum, one of the limited number of products where the groups’ interests overlap, “we could not come to an agreement,” said one official. Possible options examined included gentler tariff cuts implemented over a shorter time period, or deeper tariff cuts implemented over a longer number of years.

Consultations on preference erosion in the NAMA negotiations were also “going in circles,” one source said. Despite openness to looking at trade in particular products, there was little agreement on how to respond to the concerns of Asian least-developed countries (LDCs) like Bangladesh, Cambodia, and Nepal, which do not receive trade preferences in the US. Despite their status as LDCs, those countries thus stand to be hurt by provisions allowing Washington to implement tariff cuts on some textiles and clothing products over an extended ten-year period. Unless the Asian LDCs secure the inclusion of potential provisions that would have Washington cut tariffs more quickly on the same imports from non-LDCs Pakistan and Sri Lanka, they stand to be doubly affected.

Discussions on extending ‘geographical indication’ (GI) protections to location-based food names and amending WTO patent rules for inventions that involve biodiversity or traditional also seem stuck in a holding pattern. Norwegian minister Jonas Gahr Støre told the TNC that the positions of the two sides on the critical issues remained diametrically opposed. He will continue consultations on Sunday.

The process ahead

The schedule for Sunday has been largely left up in the air, although Lamy has announced that he will not convene the usual morning meeting of the TNC. Sources said that he may call a meeting of ministers from the G-7 countries, with whom he has been meeting intensively since Wednesday. If so, a ‘green room’ meeting would likely be convened so that a more representative group of 30-odd countries might be briefed on their consultations, with a broader meeting the following morning. An informed source said that, if progress continues, updated draft modalities texts could be expected “early next week,” leading to a conclusion on Tuesday or Wednesday.

ICTSD reporting.

By the end of the day on 25 July, an accord at least seemed possible, which was barely the case in the morning, although negotiators cautioned that it remained very far from a done deal. At the centre of the turnaround was a package of potential compromises on several unresolved issues in the negotiations put together by WTO Director-General Pascal Lamy in his consultations with ministers from seven leading trade powers, the so-called G-7.

Of all of the members of the G-7 — Australia, Brazil, China, the EU, Japan, India, and the US — India alone expressed strong reservations about Lamy’s proposal, particularly with regard to provisions for developing countries to protect poor farmers. India did not, however, object to sharing the WTO chief’s ‘landing zone’ for an agreement with a broader group of some 30-odd governments in a ‘green room’ session Friday evening, where it garnered significant support as a basis for discussions over the upcoming days, despite some objections.

While no country was happy with every detail of Lamy’s proposal, there was “very, very, very broad acceptance that this paper was the way forward,” WTO chief spokesperson Keith Rockwell told reporters after the Friday evening green room.

“We have achieved a path forward to what we hope will be a successful modalities package,” said US Trade Representative Susan Schwab. Celso Amorim, Brazil’s foreign minister and leader of the G-20 bloc of developing countries, said that the odds of striking framework Doha Round agreements on agriculture and non-agricultural market access (NAMA) had “increased from 50-50 to 65-35.” Norwegian Foreign Minister Jonas Gahr Støre went further, saying that the talks were “close to a breakthrough.”

This was a marked contrast from the morning, when Lamy told a session of the Trade Negotiations Committee that the “blunt reality” was that the talks were “edging between success and failure,” and asked Members to “give hard thought to [their] red lines, not in a week, not in a month, but in the next hours.”

Despite the change in tone, substantial differences still need to be overcome for a deal to be possible. Ministers continued to position themselves to avoid blame if the talks break down.

Indian Commerce Minister Kamal Nath insisted that Lamy’s basis for the negotiations was unsatisfactory when it came to protections for poor farmers in developing countries, which he has described as non-negotiable livelihood issues that have little to do with commerce. “In areas which affect livelihood and security, which affect poverty, there is no agreement, there is no consensus. In areas that enhance prosperity there is some consensus,” he said, as reported by Agence France Presse.

Jorge Taiana, Argentina’s minister responsible for trade, said that his government rejected Lamy’s document “in its current state,” according to a statement on the external affairs ministry’s website. “We are negotiating and indicating that we want a better result,” added Taiana, who has been resisting calls to make deeper cuts to industrial tariffs.

Schwab, although she stopped short of mentioning any countries by name, repeatedly warned that “a handful of large emerging markets” risked “unravelling the entire round.”

The proposed compromise from Lamy:

In the afternoon meeting with the G-7, Lamy put forward a set of parameters for key unresolved issues on both agricultural and industrial trade, detailing a ‘landing zone’ around which a potential Doha deal could take shape. The figures discussed would require the US to cut its spending allowance on trade-distorting farm subsidies by 70 percent. This would require Washington to lower its cap on ‘overall trade distorting support’ (OTDS) to roughly $14.4 billion (its current allowance is about $48 billion). The EU, for its part, would be expected to lower the ceiling on its own trade-distorting farm payments by 80 percent, to approximately 22 billion euros.

Both would be allowed to maintain tens of billions of dollars worth of ‘green box’ farm subsidies, which are deemed not to distort trade or production. A review of the rules that determine what kinds of payments qualify for the green box is part of the ongoing negotiations.

Brazil, India, and other developing countries were unimpressed earlier this week when the US announced it was willing to cap its OTDS at $15 billion, pointing out that Washington’s current payments amounted to only $7 billion.

With regard to market access, Lamy suggested considering a 70-percent reduction for the highest farm tariffs levied by developed countries (those above 75 percent, which fall into the top band of the tiered tariff reduction formula).

The compromise parameters would allow developed countries to designate 4 percent of their agricultural tariff lines as ’sensitive’, or eligible for lower tariff cuts. (Countries with very high tariff levels, like Switzerland and Norway, are entitled to an extra 2 percent.) For these products, rich countries would have to expand import quotas for sensitive products enough to provide exporters with new access opportunities equivalent to 4 percent of domestic consumption levels.

Moreover, there would be no maximum level for tariffs on sensitive farm products under Lamy’s proposal. For non-sensitive products, developed countries would have to cap agricultural tariffs at 100 percent, although they would be allowed to exceed that ceiling for 1 percent of tariff lines in return for compensation such as making a greater-than-normal expansion to tariff rate quotas for all sensitive products. Japan and Switzerland have resisted tariff caps.

As for developing country market access flexibilities, the ‘landing zone’ outlined by Lamy would let them designate 12 percent of all agricultural tariff lines as ’special’, based on concerns for rural development, as well as food and livelihood security. Within that ’special’ range, products that account for 5 percent of tariff lines could be fully exempt from tariff cuts.

Collectively, all special products (SPs), including the reduction-exempt ones, would be subject to an average tariff cut of 11 percent. That is, if countries chose to make full use of the 5-percent exemption, the remaining ’special products’ would be subject to an average reduction of roughly 18.9 percent. Recently-acceded Members of the WTO, such as China, would be allowed to designate 13 percent of tariff lines as special, with a 10 percent average tariff cut.

Whether developing countries should be allowed to impose safeguard duties in excess of current tariff ceilings under the ’special safeguard mechanism’ (SSM), a device intended to help developing nations protect vulnerable farmers from import surges and price collapses, has been controversial. Proponents in the G-33 group of developing countries, which includes India, China, and Indonesia, said that breaching current tariff ceilings may sometimes be necessary to protect farmers. Competitive exporters say that allowing safeguard duties to go beyond the ceilings negotiated during the Uruguay Round would represent backsliding on liberalisation. Lamy set out a potential compromise, under which remedies would be allowed to go beyond current bound levels, but only by 15 percentage points (or an amount equivalent to 15 percent of the current bound tariff), and only in the event that import volumes surge by 40 percent or more. Furthermore, safeguard remedies would be able to breach the current tariff ceiling for 2.5 percent of tariff lines in a given year.

On non-agricultural market access, Lamy suggested compromise numbers for ‘coefficients’ linked to the formula that will determine countries’ future tariff levels, and the figures governing the extent of ‘flexibilities’ for developing nations to shield some products from full duty cuts. All of the figures came from within the ranges provided in the most recent draft deal put together by the chair of the NAMA negotiations.

The industrialised country coefficients would be 8. (When fed through the so-called ‘Swiss’ reduction formula, all of a country’s tariffs are slashed to below the value of its ‘coefficient’, with lower tariffs cut less sharply across the board.)

For developing countries, there is a three-option ’sliding scale’: the higher the coefficient they choose, the less freedom they have to shelter products from tariff reduction.

Developing countries opting for a coefficient of 20 would be allowed to subject 14 percent of tariff lines to cuts that are half as high as those required by the formula, covering 16 percent of manufacturing imports by value. Alternatively, they would be allowed to exempt 6.5 percent of tariff lines from cuts altogether, accounting for 7.5 percent of import value.

A coefficient of 22 would involve ‘half-formula cuts’ for 10 percent of tariff lines and import value, or full exemptions for 5 percent of both.

Finally, developing countries choosing not to use the flexibilities would receive a coefficient of 25.

The G-7 also discussed potential solutions on two other issues that had proved divisive: sector-specific liberalisation initiatives, and an ‘anti-concentration’ clause that would restrain developing countries from focusing their tariff-reduction ‘flexibilities’ on a limited number of industrial sectors, such as automobiles.

The proposed figures would require developing countries to apply full tariff cuts to either 20 percent of tariff lines or 9 percent of import value within each HS chapter.

With regard to sectoral initiatives, the G-7 considered a potential clause that would allow countries to, at the time of a modalities agreement, “commit to participate in negotiating the terms of at least two sectoral initiatives likely to achieve critical mass.” Developing countries that ultimately elect to participate in one or more sector-specific liberalisation initiatives (as opposed to simply negotiating how an initiative might work), would be rewarded with a higher coefficient.

Beyond the compromise deal, other issues remain

While the day’s focus overwhelmingly centred on the compromise package on agricultural and industrial goods trade, Norwegian foreign minister Jonas Gahr Støre told reporters Friday evening that he had consulted that day with both sides of a long-running dispute on three contentious intellectual property (IP) rights issues: the disclosure of the source of genetic information in patent applications, the extension of geographical indications (GIs) to all location-specific goods, and the establishment of a multilateral register for GIs for wines and spirits. Earlier in the week, Lamy asked the Norwegian minister to take his place as the head of consultations on the matter, which the Director-General has warned could cause “a big clash” in the negotiations. But as talks on agricultural and industrial goods have begun making progress, the IP issues are now starting to “come on the radar screen” at the summit, Støre said. But even if momentum in other parts of the negotiations spills over into the IP debate, the Norwegian minister cautioned that the current stated positions of the two sides leave “no room for compromise.”

In another side issue to the compromise deal, a ’signalling conference’ in which Members will indicate how far they are willing to go in liberalising trade in their services sectors, is now set to take place Saturday afternoon. Rockwell, the WTO spokesman, indicated that that meeting might “provide an extra layer of comfort” to some countries, perhaps giving them assurances that would enable them to make greater concessions in the agriculture and industrial goods talks. Indian minister Nath, who has been widely criticised for intransigence during the summit, this week mentioned services trade as an area in which India was prepared to show flexibility.

But even beyond the questions on intellectual property rights and services trade, a number of critical issues remain unresolved. Officials have been working to resolve differences on preference erosion, as well as the treatment of cotton and tropical products, and are set to continue talks on Saturday, aimed at hammering out potential solutions to present to their ministers.

Meanwhile, G-7 and green room talks on the agriculture and NAMA issues set out in Lamy’s compromise package are set to resume Sunday.

ICTSD reporting.

A crucial day lies ahead for the ongoing attempt to strike framework deals on liberalising agricultural and industrial trade. Discussions have been largely stalemated since they started Monday, and negotiators are under increasing pressure to find common ground — and soon — or potentially face the breakdown of the troubled Doha Round.

“Tomorrow is the day in which we will know if it’s possible or not,” Brazilian Foreign Minister Celso Amorim told reporters Thursday night. “We’re doing our best. It’s not easy, but we’re trying.”

“I know there are difficulties all around,” he said. “Time is running out.”

Mari Pangestu, Indonesia’s trade minister, insisted that the “the mood was still positive.”

The ministers were speaking just after the conclusion of a ‘green room’ session Thursday evening that involved some 30-odd governments. That meeting was scheduled after several countries complained earlier in the day that the negotiating process, which on Wednesday had revolved almost entirely around a group of seven major trading powers, was becoming too secretive and exclusive.

Even some countries that had backed WTO Director-General Pascal Lamy’s call on Tuesday for Members to pursue compromise in smaller groups expressed unease with his near-exclusive focus on the so-called ‘G-7′ countries: Australia, Brazil, China, the EU, India, Japan, and the US.

Speaking at a Thursday morning session of the Trade Negotiations Committee (TNC), Doris Leuthard, Switzerland’s economics minister, said that Lamy had “changed at short hand the process and decided to work in one very small group only.” “You have put many of us ministers in the waiting room,” she told him. “This is very difficult for me to accept.”

A representative of the Kenyan delegation went even further, saying that it was not acceptable for “consensus to be forced down the throats” of those who have no seat at the negotiating table.

Responding to the criticism, Lamy told the disgruntled delegations that he was sympathetic to their positions. “I totally understand, and share, the concerns of those of you who feel that this process is frustrating and sometimes too obscure,” he said. The Director-General went on to emphasise that only the entire Membership can ultimately take a decision on modalities packages on agricultural or industrial goods trade. “No decision can be taken by a small group, and no decision will be taken by a small group,” he said.

Despite such reassurances, several Members reportedly expressed concern that if they were not involved in the negotiation of a deal they would have no “ownership” in the outcome of the talks, which in principle are meant to be run in a transparent and inclusive manner.

“I totally agree that we have to work out this problem of ownership,” Lamy reportedly replied. “Ownership is a problem, but there is a bigger problem if there is nothing to own.”

Little progress in closed-door G-7 talks

Apart from generalities about “progress,” however limited, few details have emerged from the closed-door G-7 meetings, which took place late into the night Wednesday and then again on Thursday afternoon.

Lamy did tell the TNC Thursday morning that his consultations with the group had focused on some key issues in the agriculture and industrial goods talks. On farm trade, they discussed limits on trade-distorting subsidies; cotton; the tariff reduction formula for developed countries; and market access flexibilities for ’sensitive’ products, ’special’ products, and the ’special safeguard mechanism’. Farm subsidy spending entitlements have featured prominently in the week’s discussions, with Brazil, India, and other developing countries saying that a US offer to cap ‘overall trade-distorting support’ (OTDS) at $15 billion was insufficient, especially in light of the concessions Washington wanted in return.

As for non-agricultural market access (NAMA), Lamy said that the seven considered the ‘coefficients’ that will determine countries’ future duty levels, flexible tariff treatment for developing countries and ‘anti-concentration’ rules on their use, and sector-specific liberalisation initiatives. Lamy did not go into specifics, however.

Sources close to the G-7 talks suggest that Lamy put forward a range of potential parameters for a deal on agriculture, including a 70-percent reduction for the highest farm tariffs levied by developed countries (those above 75 percent, which fall into the top band of the tiered tariff reduction formula). The most recent draft agriculture text had two bracketed options for percentage reductions in the top band: 66 percent and 73 percent.

Lamy further proposed allowing developed countries to designate 4 percent of their agricultural tariff lines as ’sensitive’, or eligible for lower tariff cuts. (The text’s other option was 6 percent; countries with very high tariff levels, like Switzerland and Norway, are entitled to an extra 2 percent.) He reportedly suggested that countries expand import quotas for sensitive products enough to provide exporters with new access opportunities equivalent to 4 or 5 percent of domestic consumption.

Sources indicate that the EU, which does not want to expand quotas beyond 4 percent of domestic consumption, suggested a compromise that would link tariff rate quota expansion to the number of products designated sensitive. Thus, under the European proposal, if a country were to designate 4 percent of products as sensitive, it would have to provide new access opportunities worth 4 percent of domestic consumption. With a 5 percent sensitive product entitlement, the country would be required to expand TRQs by an amount equivalent to 5 percent of domestic consumption. And if it designated 6 percent of products as sensitive, the TRQ expansion would have to be equal to 6 percent.

With regard to tariff capping — a demand of farm exporters that is anathema to countries like Japan and Switzerland — one official indicated that Lamy had said that there should be an absolute cap on non-sensitive products. (The draft text contains an option for a limited exception to such a cap.) Sensitive products could remain exempt from tariff ceilings, but only in return for some unspecified payment.

The G-7’s talks at least covered new ground on ’special products’, which developing countries alone are allowed to shield from tariff cuts for food and livelihood security and rural development concerns. The participants discussed the notion of allowing developing countries to designate 15 percent of agricultural tariff lines as ’special products’, with less than a third of these, fewer than 5 percent of all tariff lines, fully exempt from tariff reduction. Though short of the 8-percent exemption in the most recent proposal from the G-33 bloc of developing countries, the US and other exporters have insisted that no lines be exempt from cuts.

One of the main sticking points in discussions on the ’special safeguard mechanism’ (SSM), a device intended to help developing nations protect vulnerable farmers from import surges and price collapses, is whether countries should be allowed to impose safeguard duties in excess of current tariff ceilings (i.e., pre-Doha duty cuts). Sources say that Lamy broached the notion of placing a cap on safeguard duties that would instead be some level above pre-Doha bound rates. He has suggested that senior officials meet to examine various options.

Competitive farm exporters, most vocally the US, fear that an SSM without substantial restraints could close off and even reduce market opportunities. The G-33 bloc of developing countries, on the other hand, has stressed the need for an effective SSM. Indian Commerce Minister Kamal Nath has repeatedly called it a matter of livelihoods and poverty, not a negotiable issue of commerce.

Speaking to reporters after the green room meeting on Thursday evening, Indonesian minister Pangestu took pains to emphasise that special products and the SSM were far from the only sticking points in the agriculture negotiations. “SP/SSM are not the only issues where there is not convergence,” she said, citing sensitive products and OTDS caps as other examples.

ACP, Latin Americans, still consulting

Negotiating mandates to liberalise trade in tropical products while addressing the effects of preference erosion have pitted Latin American proponents of expedited liberalisation against countries in the African, Caribbean and Pacific (ACP) group that have long benefited from preferential access to major markets, especially on products such as bananas and sugar. The two groups have continued to meet in an attempt to find a compromise where their goals conflict, but the issue remains unresolved.

In mid-July, some of the Latin American countries proposed dropping their demands for expedited liberalisation on 30 of the 42 overlapping tariff lines, in return for achieving their objectives on the remaining 12, which included arrowroot, plaintain, palm oil, and melons.

Recent talks have followed a two-track approach, one official said. One for bananas, and the other for almost “everything else.” Although talks on the latter were going well, exploring options such as letting preference-granting industrialised countries cut tariffs on certain key commodities like orange juice by the lower percentages in the developing country tariff reduction formula, and implementing duty reductions over a longer period of time.

Banana trade, however, remains divisive, and risked affecting the talks on other products, the source said.

In talks with the EU brokered by Lamy, some of the Latin American countries turned down as insufficient a proposal for the EU to cut its banana tariff to 116 euros/tonne by 2015, with a 26 euro/tonne cut in the first year.

Meanwhile, the ACP has proposed a ‘down payment’ initial tariff reduction of 26 euros/tonne followed by a grace period, with tariffs not reaching 116 euros/tonne until 2019.

Shifting process and timeline

While delegations speaking at Thursday morning’s TNC meeting denounced Lamy’s decision to focus the talks among the G-7 countries, the process appears to have gained at least some support during the evening’s green room session. One source said that Canadian Trade Minister Michael Fortier told the G-7 ministers that he did not mind waiting, so long as there was potentially something to wait for, and asked them to report to the larger green room group, one by one, where they thought the negotiations stood. The ministers reportedly responded by suggesting that there was at least some hope that a way forward could be found in the talks.

Pangestu, the Indonesian minister who had complained in the morning about being relegated to a ‘dark waiting room’, also expressed a degree of confidence with Lamy’s new process, telling reporters that she hoped another green room session would be convened the next day so that non-members of the G-7 could be further briefed on progress in the closed-door talks.

With the agriculture and NAMA talks struggling, the services signalling conference, which had already been pushed back from Thursday to Friday, has now been re-scheduled for Saturday afternoon. With that meeting pushed to the weekend, there is now no chance that the final session of the TNC, originally slated for Saturday at 10am, will take place on time. Thus, assuming the talks do not fall apart in the coming days, Monday or Tuesday of next week is likely the earliest that ministers could be brought together to formally adopt modalities packages on trade in agriculture and industrial goods.

On the contentious issue of whether the Doha round ’single undertaking’ should include anti-biopiracy measures and expanded protections for location-based food names, Norway’s foreign minister, Jonas Gahr Støre, whom Lamy has appointed to head informal consultations on the issue, said he would continue to “consult in good faith with the whole array of interests.” Støre acknowledged, however, that the focus of the talks would still be on reaching deals on trade in the agricultural and industrial sectors. Once further progress is reached in those arenas, “that’s when this issue becomes real,” he said.

ICTSD reporting.

“We made progress, but not enough,” said Indian Commerce Minister Kamal Nath after the meeting, which ended past 3am. “Not enough for an agreement, but not no progress, for it to fail.”

EU Trade Commissioner Peter Mandelson told reporters that there had been progress “in the sense that after a great deal of very hard work, some issues are nearer solution.” He declined to comment on the issues in question.

Brazilian Foreign Minister Celso Amorim sounded a more sombre note, saying that things were still fluid, and that “there is no balance yet.”

Australia, Brazil, China, the EU, India, Japan, and the US were discussing non-agricultural market access (NAMA), agricultural market access, and trade-distorting farm subsidies, a source said. WTO Director-General Pascal Lamy, who is chairing the consultation, reportedly told Members that they needed to discuss numbers for future subsidy and tariff levels within the ranges proposed in the draft deals serving as the basis for discussions, and find figures they can agree on.

After governments showed few signs of narrowing their differences on subsidy and tariff cuts during the first two days of a high-stakes ‘mini-ministerial’ gathering aimed at securing framework Doha Round accords on agriculture and NAMA, Lamy cancelled a so-called ‘green room’ session with thirty-odd countries planned for today, and called on Members to explore compromises in smaller groups. His intention, he told the Trade Negotiations Committee on Wednesday morning, was to prod Members into “a more intensive mode of consultations” Lamy himself met with the seven-member group, already dubbed the ‘G-7′.

Apart from the notable addition of China, the G-7 is made up of the six countries that took the lead in attempting to broker a Doha ‘modalities’ deal in 2006; that attempt collapsed in acrimony in Geneva two years ago today, primarily over differences on farm subsidies. The EU, Brazil, India, and the US were part of a similar breakdown in Potsdam the following June.

But “Geneva has a different atmosphere this time,” Kamal Nath said in the wee hours of 24 July, on his way back to the G-7 meeting after a break.

The fault lines in the negotiations were underlined this week by reactions to the US’ new offer to cap trade-distorting farm subsidy spending at $15 billion, unveiled Tuesday. Brazil and India said that the offer was insufficient, since it would allow Washington to nearly double payments from current levels, and certainly did not merit the sort of tariff cuts that the US was seeking from developing countries in return.

The draft agriculture text calls for the US to cap ‘overall trade-distorting support’ between $13 billion and $16.4 billion. One source suggested that if the US were to lower its limit on OTDS much further, it would put pressure on the EU to offer more on agricultural market access — a prospect that many EU member states are unlikely to welcome.

Nath: Schwab’s offer sign of “movement”

Earlier in the day, Nath expressed appreciation for Schwab’s offer. “I really was quite optimistic when I heard about this $15 billion,” he said.

Although the start of movement was a “good sign,” the Indian minister said he “look[ed] forward to much greater movement,” pointing to the “headroom” between the US’ current spending — about $7 billion — and the proposed cap.

Nath was in good spirits, addressing reporters upon his return to Geneva after his ruling coalition convincingly won a parliamentary confidence vote that had required his presence in New Delhi for two days.

He said that the current global economic crisis — “an economic crisis which has the three Fs as challenges: food, fuel, and finance” — made a development-friendly conclusion to the Doha Round an “imperative.”

Nath defined what he meant by a Doha Round with “developmental content”: the final package should both promote “healthy economies” in world’s poorer nations, and reform “structural flaws in global trade” resulting from rich countries’ agricultural subsidy programmes.

In an implicit rebuke to the industrialised world’s demands for more tariff cuts by developing nations, Nath said that developing countries needed to have “healthy economies” to be able to purchase imports. “Then only do they provide markets for developed countries,” he emphasised. US exports to India in 2007 were 74 percent higher than the year before, he said. EU exports grew by 32 percent. This happened for two reasons: because “India is open,” and “India’s a healthy economy.”

“If you’re open, and you’re not a healthy economy, there aren’t going to be any trade flows,” he stressed.

Farm subsidy cuts were necessary to “stimulate investment in agriculture in developing countries,” Nath insisted, arguing that subsidy-fuelled price distortions had discouraged investment in agriculture in the developing world.” He called for strict disciplines on all classes of agriculture subsidies, as well as a “strong result” on tariff simplification and tariff capping (although he later suggested he could accept an exception from the latter for Japan).

Nath highlighted services trade as an area in which India was willing to make concessions in return for what it was seeking.

“India will go to the signalling conference with a good offer,” he said, referring to the meeting, tentatively scheduled for Friday, where countries are due to “signal” future market-opening in services trade. “We have to ensure that… the signalling conference just doesn’t remain a cocktail party, but gives signals that are non-reversible.” Notably, Nath said that like the EU and the US, India’s flexibilities would “depend on a good services package.”

With regard to the agriculture and NAMA negotiations, Nath was more circumspect, saying that his flexibilities would depend on what was put on the table by everybody else.

Industry groups take contradictory stances

In Lamy’s estimation, the NAMA talks as of Wednesday had not even shown the “modest” progress seen in consultations on agriculture. The views of industry groups from countries in the opposing camps attest to the polarisation: European manufacturers’ ‘must-haves’ are Indian manufacturers’ ‘must-not-haves.’

Developed country business groups including Business Europe, the US National Association of Manufacturers, and the Australian Industry Group in June said that to win their support, a Doha deal must, in addition to “significant” market access gains, involve “robust participation” by developed and emerging economies in sector-specific liberalisation initiatives. In addition, they said it must include a so-called ‘anti-concentration clause’ that would prevent developing countries from focusing their tariff-reduction ‘flexibilities’ on a limited number of industrial sectors, such as automobiles.

“The basic and primary goal of a global trade round,” they said, is to achieve significant commercial gains for all WTO members in all markets through meaningful reduction of tariffs.”

The NAMA chair’s most recent draft would require developing countries to apply full tariff cuts to either a to-be-negotiated proportion of tariff lines, or a to-be-negotiated share of import value, within each HS chapter. The higher the percentages, the more developing countries would be prevented from shielding similar classes of products from tariff cuts.

This list of ‘must haves’ from the coalition of rich-country business groups is precisely what Indian industry associations have been lobbying against.

The Federation of Indian Chambers of Commerce and Industry this week issued a list of their own Doha Round ‘must-haves’: nothing but a minimal anti-concentration clause, and strictly non-mandatory sectoral initiatives (with no incentives for participation in the form of higher future tariff levels). FICCI believes that a Doha agreement should not require developing countries to cut their tariffs by margins far greater than industrialised nations, given the mandate for “less than full reciprocity” in reduction commitments for developing countries.

The Confederation of Indian Industry said that the sectoral initiatives favoured developed countries and would hurt small and medium enterprises in India, affecting sectors such as chemicals, textiles and clothing, industrial machinery, and auto parts.

Globalisation, in the form of foreign investment flows, has added a twist to the debate on NAMA flexibilities. Although the EU invokes the needs of European manufacturers to try to pressure New Delhi into accepting stronger restrictions on its ability to shield industrial goods from tariff cuts, European auto companies with investments in India such as Audi, BMW, Fiat, and Volkswagen have urged Kamal Nath to do the opposite.

Sources say that the European companies fear that their investments in India would be jeopardised by premature exposure to competition from China as well as from the industrialised world.

Officials examining specific issues

The G-7’s deliberations overshadowed other informal meetings during the day. These included a consultation by agriculture Chair Ambassador Crawford Falconer (New Zealand), on ’special products’ and the ’special safeguard mechanism’, two types of flexibilities for developing countries. Sources said that the US put forward some ideas for triggers and remedies under the proposed SSM, which is intended to allow developing countries to raise tariffs beyond bound levels to combat import surges. In particular, it suggested that if safeguard duties are to be allowed to breach pre-Doha tariff ceilings — one of the chief sticking points on the issue — they should be significantly harder to trigger. The G-33 bloc of developing countries, which has pushed for making safeguards relatively easy to trigger, reportedly rejected the notion.

Falconer has been meeting regularly with officials for so-called ‘walk in the woods’ consultations with senior officials, with the aim of clarifying what is — and what is not — achievable in the talks.

An African delegate told Bridges that the agriculture chair will convene a ‘quadrilateral’ meeting — between Brazil, the EU, the US, and the so-called C-4 group of African cotton-producing nations — on Thursday morning to discuss cotton-specific subsidy cuts, which are part of the negotiating mandate. Delegates expect Members to come to the session ready to discuss figures. However, the US has indicated that it is still awaiting outcomes in other areas of the talks — specifically, agricultural market access — before it makes commitments on reducing its cotton payments.

Lamy announced Wednesday that he had asked Norwegian Foreign Affairs Minister Jonas Gahr Støre to take his place as coordinator of informal consultations on whether to extend geographical indication protections to foods such as Darjeeling tea or Roquefort cheese, and whether patent applicants should be obliged to disclose any biological resources or traditional knowledge used in their inventions. Having mediated peace talks in Sri Lanka and facilitated dialogue between the Israelis and the Palestinians, Støre is as qualified as anyone to help Members try to bridge their gaps on the two intellectual property issues.

Services

The services negotiating committee met Wednesday to finalise work on a text aimed at providing guidance on how to proceed in the services talks, ahead of the ’signalling conference’ that has been tentatively scheduled for Friday. Bolivia, Cuba, and Venezuela maintained their opposition to the most recent services text, joined this time by Nicaragua. Those countries maintain that there is no need for what the chair of the committee calls a ‘roadmap’ for the talks, arguing that the services provisions of the Hong Kong Ministerial Declaration provide sufficient guidance for the negotiations.

Sources said that the chair, Mexican Ambassador Fernando de Mateo, agreed to mention the four countries’ reservations in his next report to the Trade Negotiations Committee. He also said that his ‘roadmap’ would include a footnote acknowledging their concerns, although it was not clear whether the dissenters were satisfied with that concession.

Bolivia called for the text to include a human rights clause about essential services such as electricity and water. However, de Mateo suggested that the issue could be discussed later, noting that not-for-profit public services are rarely covered by WTO services rules.

Since countries negotiate market-opening in their services sectors through a process of requests and offers, a services text would simply set out guidelines for the market access talks, instead of governing future liberalisation. The current draft services text sets a tentative 15 October date for submitting revised offers, and exhorts governments to formally bind, “to the maximum extent possible,” existing levels of market access.

Way forward

The G-7 talks appear set to continue. It is not clear whether Lamy will convene a larger ‘green room’ meeting of 30 or so delegations on Thursday evening.

New draft texts on agriculture and NAMA, originally expected Friday, may not come until the weekend.

“I would not advise you to hold your breath for those texts on Friday,” WTO spokesperson Keith Rockwell told reporters Wednesday.

This would suggest that even if the talks head towards agreement, the final session of the TNC - the meeting at which Members could formally adopt modalities packages - may not occur until 28 or 29 July, instead of 26 July as originally planned.

Cape Verde

In the background of the day’s negotiations, Cape Verde became the WTO’s 153rd Member on Wednesday. The North Atlantic archipelago, which recorded a GDP of in $1.3 billion 2006, is the 33rd of the world’s 50 least developed countries to join the global trade body. In his opening remarks to the TNC Wednesday morning, Lamy offered Cape Verde his congratulations: “They have worked very hard to achieve this, knowing it will give a welcome boost to the economy, and their efforts serve as an example to us all.”

ICTSD reporting.

A Wednesday evening ‘green room’ session has been cancelled in favour of multiple meetings of smaller groups. Lamy had been expected to convene meetings of the invitation-only forum, which involves ministers from 30-odd countries, every day.

Sources say that during a seven-hour green room meeting on 22 July, Lamy told participants that at their current pace, convergence on liberalising trade in agricultural and industrial goods would take at least a fortnight. The alternatives were either for the chairs of the two negotiating committees to try to split the differences among Members, or for countries to meet in smaller groups to try to resolve their differences on the toughest issues more quickly.

US subsidy offer leaves developing countries unimpressed

Earlier in the day on 22 July, the US had announced that it would lower its annual limit on trade-distorting farm payments to $15 billion in order to push the negotiations forward. “This is a major move, taken in good faith with an expectation that others will reciprocate and step forward with improved offers in market access,” US Trade Representative Susan Schwab said at the press conference she called to unveil the offer.

But Brazil, India, and other developing countries said that the offer would still allow Washington to virtually double farm payments over current levels, and hardly merited the industrial tariff cuts it was seeking from them in return.

A ceiling of $15 billion for allowable ‘overall trade-distorting support’ (OTDS) would be well below the $22.5 billion limit Washington has formally tabled in the trade talks, as well as the $17 billion figure it has informally offered. It would also be within the $13-16.4 billion range for US OTDS caps present in the draft agriculture text that is serving as the basis for the current negotiations.

However, it is considerably above the roughly $7-8 billion in trade-distorting support that the US government paid to farmers and agroindustry in 2007, according to data distributed by the US trade representative’s office.

The distance between the proposed ‘bound’ ceiling and actual spending — what trade diplomats call “water” — has failed to impress officials from developing countries. Brazilian Foreign Minister Celso Amorim’s initial response was that the US offer showed “a low level of ambition.” He said that an acceptable level of water would be one that would let him “breathe.”

“Thank you, that’s a good offer… could have been better,” said Indonesian Trade Minister Mari Pangestu, after Schwab presented the proposal to ministers from about thirty countries during the ‘green room’ that evening. On his way out of that meeting, Amorim suggested that a US offer closer to an OTDS cap of $13 billion, as in the chair’s text, would be a significant move in the right direction.

During the press conference, Schwab defended the significance of the $15 billion ceiling, saying that it would necessitate “adjustments” to US farm programmes. US OTDS expenditures would have exceeded that level in seven of the last ten years, she said, and the average outlay over the last ten years was $16.8 billion. Explaining that farm payments were currently low because prices were high, Schwab said that when prices drop, spending would face real constraints.

Under the WTO’s complex rules for classifying farm subsidies, OTDS is made up of three components: ‘amber box’ payments (the most distorting kind), ‘blue box’ payments (less distorting), and ‘de minimis’ (could be just like the amber box, but allowed up to a certain percentage of the value of agricultural production).

The US’ new offer has left its proposed future cap on amber box payments untouched at $7.6 billion, a figure that commands enough acceptance among Members to be present in the current draft text without brackets. Therefore, the additional $2 billion cut in allowable subsidies entailed by the $15 billion offer would come from Washington’s blue box and ‘de minimis’ spending entitlements.

However, the $2 billion reduction to these latter two components of OTDS may not “do very much” to place real new constraints on US spending, suggested David Blandford, a professor of agricultural and environmental economics at Pennsylvania State University. Because of the way US farm programmes are designed, most of the price-sensitive payments are in the amber box, he explained. On the other hand, Blandford said, the US might run into trouble meeting its amber box limit if it notifies payments under a new, potentially expensive revenue stabilisation plan called ACRE as belonging in that box.

Officials look for deeper offer

An official familiar with the negotiations said that the US offer at least demonstrated “a disposition to negotiate.” The source noted that the figures for the past ten years were pushed upwards by unusually high spending from 1999 to 2001 (between $23.5 to $26.3 billion), and that food prices were likely to remain high (and subsidy payments consequently low) for the next three to four years.

Some developing country delegates suggested that the US offer was a strategic gambit, and that it could accept a lower cap on OTDS.

Schwab did not rule out further moves on OTDS. “This is an iterative process,” she said, “we have a ways to go, but I expect others to come forward with areas where they can do more.”

Both she and US Undersecretary for Agriculture Mark Keenum stressed that the price for winning political support even for the new subsidy offer would be access to overseas markets. Although the US Congress recently overrode a presidential veto to pass a subsidy-laden farm bill, the two insisted that lawmakers would accept subsidy reform if presented with enough new market access.

Schwab said that Washington was willing to cut cotton subsidies by an extra margin, as WTO Members have promised West African cotton producers, but Keenum said that this margin “will be dependent on [the] market access, quite frankly, that we will see for American cotton” in China and other Asian markets.

Call for new ‘peace clause’?

In addition to trade concessions, Schwab also appeared to call for protection from legal challenge similar to that afforded by the WTO’s now-expired ‘peace clause’.

“We also need assurances that if our [farm subsidy] programmes are going to meet these disciplines, that they are not then going to be subject to legal challenges that will reduce them further,” she said. Although Schwab insisted that the US was not “expecting the peace clause as it existed to be reinstated,” she said that it would be “impossible for us to go back to the farm community” with a Doha Round deal promising to cap OTDS, “if then a legal challenge could result in it being made even lower.”

Under the peace clause, which expired at the end of 2003, countries agreed not to launch WTO cases accusing each others’ farm subsidies of distorting world prices and hurting their trade interests, so long as payments remained within legal limits.

The US, which faces such accusations for some of its farm subsidy programmes, has been pushing for a new variant on the peace clause since 2005, albeit with little support from other countries.

Jeremy Hobbs, the head of Oxfam International, said in a statement that “requesting this sort of immunity upfront is tantamount to admitting intention to break the rules in the future.”

“No mandate for GI extension,” Schwab says

Also during the press conference, Schwab rejected the notion of extending special intellectual property protections to location-based food names as part of the Doha round negotiations.

“There is no mandate in Doha for GI extension,” she said in response to a journalist’s question. “We do not think that is a good idea and we are not currently engaged on that subject, nor do we intend to be,” she said.

The notion of extending a higher level of geographical indication (GI) protection — already available for wines and spirits — to other products with geographic links has long been the subject of controversy at the WTO. Opponents of ‘GI extension’ such as Argentina, Australia, Canada, Chile, and Taiwan — in addition to the US — argue that it would hurt producers to prohibit them from using long-used product names such as ‘Parma ham’. Supporters like Switzerland and the EU believe that expanded GI protection could win their farmers price premiums that would soften the blow of subsidy and tariff cuts.

Luzius Wasescha, Switzerland’s ambassador to the WTO, called Schwab’s remarks “an initial reaction.”

“I cannot believe that the world leader of democracy would ignore the attitude of over 108 countries,” he said.

He was referring to a recent joint initiative by over one hundred developed and developing countries, led by Switzerland, the EU, Brazil, and India, that called on ministers to accept GI extension as part of a modalities agreement (along with a commitment to amend WTO intellectual property rules to oblige patent applicants to disclose any biological resources or traditional knowledge used in their inventions).

Lamy has been conducting intensive consultations on GI extension this week.

“Let’s give these consultations a chance,” Wasescha said.

An EU spokesperson declined to comment on Schwab’s remarks about GI extension, pointing to the ongoing consultations.

Timeline for talks slipping?

Differences on the depth of industrial tariff cuts, as well as flexibilites for developing countries to shelter some products from liberalisation, remained a subject of discussion during talks today. Mandisi Mpahlwa, South Africa’s trade minister, took a very different view from USTR Schwab, suggesting that the US offer was not significant enough to put the onus on developing countries to come forward with further concessions.

Speaking to heads of delegation at Tuesday’s morning of the Trade Negotiations Committee (TNC), Mpahlwa said that the figures currently on the table in the non-agricultural market access talks would already result in substantial cuts to South Africa’s applied tariff rates, exposing the majority of the country’s dutiable tariff lines to greater import competition. In light of the country’s unemployment rate of 23 to 26 percent, he said that “anything short of a significant expansion of the flexibilities and an appropriate increase in the level of coefficient will be politically, economically, and socially very difficult to justify.”

The ongoing talks in Geneva dodged a potential complication on Tuesday when India’s ruling coalition survived a confidence motion in the nation’s parliament. Commerce Minister Kamal Nath had flown to New Delhi for the vote, but will return to the WTO on Wednesday.

The timeline for the ‘mini-ministerial’ discussions in Geneva appears to be extending. The cancelled Wednesday evening green room meeting will now be made up on Thursday, and a conference on services trade originally scheduled for Thursday has been postponed until the following day despite the return of the Indian minister, whose country has been prominent in the services trade negotiations. Officials say that the aim is still to have a revised set of draft negotiating texts on Friday.

Nevertheless, barring a breakdown, negotiations aimed at achieving framework ‘modalities’ agreements on agriculture and industrial trade in the struggling Doha Round trade talks may now continue through the weekend. “I don’t know how many more days this is going to be,” said WTO spokesperson Keith Rockwell after Tuesday evening’s green room.

Lamy is set to address the daily TNC session on Wednesday morning, where he will presumably provide further details about the altered process for the negotiations.

ICTSD reporting.

Members are attempting to strike framework ‘modalities’ agreements on agriculture and non-agricultural market access (NAMA). These would include formulae and figures that will determine countries’ future subsidy and tariff levels.

WTO Director-General Pascal Lamy opened deliberations on 21 July by telling Members that an accord was achievable, although it would not be easy. “I remain convinced that with patience and determination we will be able to get to our collective objective,” he said.

“I can think of no stronger spur for our action than the threats which are facing the world economy across several fronts, including rises in food prices and energy prices and financial market turbulences,” Lamy told the Trade Negotiations Committee, saying that a balanced Doha Round agreement could contribute to growth and development by bolstering the rules-based trading system.

Trade powers agree: others should move first

Trade ministers from several countries echoed Lamy’s sentiments that concluding an accord would send a positive signal to markets at a time of financial uncertainty. Some pointed to specific priorities, such as duty-and quota free access for exports from least-developed countries, or cotton-specific subsidy reform. In general, ministers stressed their commitment to agreeing on modalities for agriculture and NAMA.

Commitment to reaching a deal, of course, is quite different from agreeing on how to get there.

Key players in the negotiations do seem to agree on one thing: that it is their trading partners who must move first and offer new concessions in order to make a deal possible.

While addressing Members in the TNC, US Trade Representative Susan Schwab noted that the US is committed to seeing the round through to a successful conclusion. But immediately afterwards, Schwab told journalists that offers of further tariff cuts by major emerging economies — Brazil, China, India — would be “most significant” to the finalisation of modalities.

In a comment directed at the developing countries that have been pushing the US to accept stricter constraints on its allowable trade-distorting farm subsidies, Schwab acknowledged that Washington had “a contribution to make,” but said that “the US move on subsidies has been a convenient target for a lot of countries that would rather not get to the other parts of the negotiation, namely the market access parts… whether in terms of agricultural market access or manufactured goods or indeed services.”

EU Trade Commission Peter Mandelson struck similar notes. “A limited number of developing countries must accept tariff cuts imposed by a NAMA coefficient,” he told the TNC, referring to Brazil, China, India, and the rest of the 30-odd relatively larger developing countries required to use the standard tariff reduction formula. “They must be real. These cuts must provide some new market access in practice. That is the political bottom line. Nothing else will work for us. Nothing else will close the deal.”

Mandelson said that the EU had “political ‘must-haves’” on agriculture, NAMA, services and intellectual property protections for geographically linked food names. He reiterated his call for a NAMA agreement to include an “anti-concentration clause” that would prevent developing countries from focusing on a handful of sectors their entitlement to shelter some industrial products from full tariff cuts. “Why should European industries like cars and textiles see their tariffs slashed to less than 6 percent at home while the tariff protection of the same sectors remains untouched or barely affected in the fastest growing economies in the world?”

Meanwhile, Brazil’s foreign minister, Celso Amorim, took the precise opposite view about what was needed to move forward. “Positive and concrete indications, on the part of the developed countries, early on, about the key elements of the agricultural negotiations are indispensable to set the tone for a positive dynamic on all areas of [the] negotiations,” he said. He pointed to unresolved issues beyond the gaps on trade-distorting subsidies, such as the speed with which tariff cuts would be phased in; tariff capping; and a potential provision in the draft agriculture text (Paragraph 80) that would allow countries to create tariff quotas for products for which none currently exist, which he said would create “a zone of indetermination.”

With regard to the industrial goods talks, Amorim said that “the attempt to extract an additional price in terms of anti-concentration or disguised mandatory sectorals would overload the negotiation and make a conclusion impossible.” He was referring to the US’ attempts to link developing countries’ participation in sector-specific liberalisation initiatives to the depth of tariff cuts they would undergo.

Developing countries including Argentina, China and India have also expressed opposition to the notion of a stiff anti-concentration clause; Japan and Switzerland have indicated their support for such a measure.

No real movement in ‘new’ EU farm offer

Peter Mandelson made news headlines on Monday by suggesting that the EU could cut farm tariffs by an average of 60 percent — higher than the 54 percent that the 27-country bloc had previously mentioned. A Commission spokesperson later clarified, however, that the higher figure was simply the result of incorporating higher tariff cuts on tropical products into the overall calculations, and thus did not represent a “fundamental change” in what was on offer.

The EU has been telling its trading partners that it has already made major concessions on agriculture trade, and now it is their turn to offer concessions on agriculture and NAMA in return. Mandelson reiterated this message at the TNC session, saying that “on agriculture… the EU will be a major net loser in any deal.”

At home, however, the Commission has suggested that the effects of its agriculture trade offer would actually be fairly modest, in the face of criticism from EU member states. Earlier this month, a Commission trade spokesperson rejected French President Nicolas Sarkozy’s accusations that Mandelson’s Doha offer would devastate the farm sector, cutting production by one-fifth and costing 100,000 people their jobs. The official said that the draft WTO text on the table would reduce production by only 1.1 percent; job losses would be little higher than the sector’s normal rate of productivity-related attrition. Moreover, Doha Round tariff cuts would save EU farm exporters roughly 5 billion euros in duties in third markets.

G-33: draft texts “still unbalanced”

But while the EU thinks that the balance of the agriculture negotiations is not in its favour, neither do the 45 members of the G-33 coalition of developing countries, which include China, India, and Indonesia. Speaking on behalf of this group, Indonesian Trade Minister Mari Pangestu told journalists on Monday that the current draft was “still unbalanced” with regard to the G-33’s two priorities: flexible tariff treatment, including full exemptions, for some ’special products’ (SPs), based on food and livelihood security and rural development concerns, and the special safeguard mechanism (SSM), a measure that would allow developing countries to temporarily raise import tariffs above bound levels in response to sudden import surges or price drops.

Some competitive farm exporters have been critical of the G-33’s demands, fearing diminished market opportunities.

“We all understand the value of market access,” Pangestu acknowledged, “but we all have sensitivities, whether for political reasons or for more tangible ones. Liberalisation must happen in a way that does not lead to very adverse circumstances – hence the flexibilities are necessary.”

Also responding to the criticism, GK Pillai, India’s commerce secretary, said that the SSM the G-33 was seeking would not involve remedies stronger than those that have been used to protect rich-country farmers since the WTO’s inception, under the global trade body’s existing special agricultural safeguard (which, for a variety of technical reasons, cannot be used by many developing countries. He added that even after a Doha agreement, the very highest tariffs on agricultural products — reaching the equivalent of up to 1700 percent — would be levied by developed countries, not developing ones.

Pangestu and Pillai added to the calls for developed countries to take advantage of high food prices and cut agricultural subsidies, which they blamed for distortions in world markets. Pillai called agricultural subsidy reform the “unfinished business of the Uruguay Round,” noting that 14 years after that trade round was concluded, rich countries were still paying out hundreds of billions of dollars of subsidies — even though developing nations had adopted intellectual property protections and other rules as the price for bringing agriculture into the multilateral trading system.

Yet the Indian negotiator sounded the day’s most conciliatory note when pressed for more details on the kinds of subsidy cuts he was hoping for. “The G-20 has said we would like ‘effective’ cuts,” he said, using a term that the developing country coalition uses to refer to reductions in actual spending, “but let’s see where we can get.”

“Many things which we would like, we have to compromise [on] in terms of what is politically feasible, as well as keeping the overall balance in view,” he added.

Broad convergence on ‘Paragraph 6′ countries

Members did manage to achieve broad convergence on at least one pending issue in the NAMA negotiations: special tariff treatment for the dozen, generally relatively poorer, developing countries that have binding caps on fewer than 35 percent of their tariff lines. Under the compromise, which the chair of the talks communicated to the TNC, countries with binding caps on fewer than 15 percent of their tariff lines will bind 75 percent of them at an average level no higher than 30 percent. Those with bound ceilings on more than 15 percent of products will bind 80 percent of tariff lines at the same level. The numbers are on the lenient end of the bracketed ranges of figures in the most recent draft. The so-called ‘Paragraph 6′ countries include Cameroon, Cote d’Ivoire, Cuba, Ghana, Kenya, Sri Lanka, and Mauritius.

Lamy outlines the week ahead

Lamy told Members that the ultimate aim of the week’s meetings is to “prepare the formal establishment of modalities in agriculture and NAMA,” while providing assurance that other sufficient progress is being made on other issues of interest to them.

During the mini-ministerial, the TNC, which includes the full WTO Membership, will meet daily to review progress. Lamy will convene daily invitation-only ‘green room’ meetings of some 30-odd ministers in an attempt to pursue compromise. The chairs of the agriculture and NAMA negotiations may also hold consultations on some issues.

A ’signalling conference’ on services trade has been scheduled for the afternoon of 24 July, at which Members will indicate the sorts of liberalisation commitments they are willing to offer. The final TNC meeting is planned for the morning of 26 July, though Lamy said it “could well take place later depending on progress this week.”

“The time has come to move from ‘discussions’ to ‘negotiations’,” Lamy told ministers. “We have talked the talk, now we have to walk the walk to finish the Round.” Likening the pursuit of an agreement to climbing a mountain, the WTO chief said “the only way to reach the top is understanding each others’ interests and limitations.”

No real progress was made during the week’s first green room session on Monday afternoon. Sources report that during the meeting, ministers simply made statements reiterating their own positions.

New negotiating texts are expected to be released on Friday.

ICTSD reporting.