Bridges Weekly Trade News Digest • Volume 12 • Number 30 • 18th September 2008

G-7 Talks Continue; Lamy Could Summon Ministers ‘Within Weeks’

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High-level officials from the G-7 group of major trading nations met in Geneva last Wednesday in a renewed push to conclude a world trade deal. While acknowledging that difficult compromises would be necessary to achieve an agreement, those close to the negotiations appeared unusually up-beat about the potential for progress.

A “pragmatic mood” characterised the talks, a G-7 trade official present at the meeting told Bridges.

WTO Director General Pascal Lamy expressed similar optimism: “I am convinced that a deal is still possible,” he said in an address to an UNCTAD meeting on 16 September. “I still believe that with yet another push we could still reach our target.”

The G-7, comprising Australia, Brazil, China, the EU, India, Japan and the US, reportedly spent most of the meeting trying to find a way out of the impasse on the Special Safeguard Mechanism (SSM), a tool that would allow countries to protect domestic producers from sudden import surges or price declines. Deadlock over the SSM was at least the proximate trigger of the failure of world trade talks, which collapsed after nine days of intense negotiations at the end of July.

According to some members of the group, no specific proposals were tabled and discussions were largely informal, although the chair of WTO farm talks, Ambassador Crawford Falconer of New Zealand, attended the session. The group, which has been meeting at the office of the US mission to the WTO in Geneva, will work through the weekend in an attempt to reach a compromise that could jump start a conclusion to the stalled Doha Round negotiations.

The SSM deadlock that scuppered the talks in July largely revolved around a debate over when, and to what extent, developing countries should be allowed to temporarily impose protective tariffs that exceed current legal limits in the event of an import surge or price decline. India and China were firm in their demands that the SSM be simple and easy to implement, while the US fought hard to ensure predictable market access for its farm exporters.

A G-7 member commented that last week’s meeting was “productive” and a welcome forum to “test the waters” for new ideas. Though members of the group are aware that they have yet to address several key issues, such as tariff rate quota creation, tariff simplification, and potential reductions in US cotton subsidies — a key sticking point for four cotton-producing African nations — they are eager to resolve the issue of the SSM as a starting point.

The G-7 meeting reportedly focused almost entirely on the SSM. Led by the US, the countries present used the opportunity to discuss the factors surrounding the mechanism: its scope, cross-checking and surveillance, duration, the possible remedies, frequency of use and price or volume-based triggers.

Some members — Australia, Brazil, and Japan, in particular — introduced new ideas on the safeguard mechanism. The official from Australia recommended that those critical of the SSM, such as the US, consider a 10-year moving average of import growth as a trigger. Such a threshold, it is believed, would allow gradual increases in imports rather than sudden surges while allowing for a sustained growth in imports. The US has opposed any measures that would accommodate triggers at or below 120 percent of volume of imports, arguing that anything below that level would end up restricting normal trade.

Because the G-7 talks are not open to all WTO Members, several developing-country coalitions — the G-20, the Cairns Group, and the G-33 — have held separate meetings over the past week to be briefed on the content of the G-7 talks.

The G-33, a group of agriculture importing developing countries, is particularly concerned with negotiations on the SSM since the coordinator of the group, Indonesia, was not invited to the G-7 talks. At the G-33 briefing held on Friday, members focused on providing clearer insight into the ideas that have been put forth. Since there is no formal mechanism to inform the WTO membership about the deliberations of the G-7 meeting, members of the G-33 group have been critical of the lack of transparency in the process. According to some, a G-7 consensus that is reached outside of the WTO may not be the most constructive means of addressing the failure of the July mini-Ministerial.

India and China, the only countries to take part in both the G-7 and G-33 meetings, questioned the priority being given to the SSM in the negotiating process.

At the meeting today of the G-20 group of developing country agricultural exporters, delegates reiterated the shared sentiment that the “multilateral process cannot be replaced” by the G-7 meetings. Noting the demands from the US, another commented that the the compromises reached should be “equally discomforting” for all members.

Lamy is optimistic, but time is running short

The outcome of the ongoing G-7 talks will largely determine whether progress can be made toward a resolution of the seven-year-old Doha Round of trade negotiations before US elections on 4 November. Trade observers cite that date as a critical political deadline for the resolution of outstanding issues in the talks.

With time running short, WTO Director General Pascal Lamy has indicated that he is prepared to help push the process forward. “In the weeks to come, and depending on progress made by the negotiators, I am ready to call ministers to Geneva to try and close the issues which remain open,” he said in an address to an UNCTAD meeting on 16 September.

But while the negotiations are still alive, Lamy indicated last week that the timetable for the round — which officials had hoped to wrap up by the end of 2008 — has shifted. “While it has become clear that we cannot complete the Doha round by the end of this year, let us at least aim to complete the modalities in 2008, so as to conclude the round in 2009,” Lamy said in a speech to parliamentarians in Geneva last week.

EU Trade Commissioner Peter Mandelson expressed similar guarded optimism in an address to the European Parliament INTA Committee on 15 September, noting that “some cautiously encouraging signals of flexibility” had emerged from the G-7 meeting in Geneva. “I believe a further meeting of key negotiators at ministerial level will be desirable if we are going to succeed in pulling things round before domestic politics and elections in a number of countries takes over completely,” Mandelson said.

But he warned that substantial progress was in no way guaranteed. “It is still early days and we will need to see if senior officials are given the leeway they will certainly need to tease out a technical solution which satisfies all parties,” he said.

A stronger note of scepticism was sounded by India, whose junior minister of industry expressed doubt that a deal could be concluded before the US presidential election, now less than seven weeks away.

“Unfortunately the November timetable, I don’t see how any one party can set any timetable because everybody will have to make concessions,” Ashwani Kumar told Reuters on 16 September. “In an election year we all know that governments do not make concessions,” he said.

And while Kumar indicated that India was ready to engage in the talks, he said other countries would have to as well. “Any further concessions from India, if at all, will have to await further concessions from the rest of the world,” he said.

ICTSD reporting. “Doha breakthrough before November unlikely - Govt,” REUTERS, 17 September 2008; “The G-33 and the SSM,” WASHINGTON TRADE DAILY, 15 September 2008