Bridges Weekly Trade News Digest • Volume 12 • Number 39 • 19th November 2008

Global Financial Crisis Focuses Minds on Doha

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The chair of the farm trade talks at the WTO has warned Members that they must quickly show signs of new flexibility if an accord on the ‘modalities’ for agriculture subsidy and tariff cuts is to be struck before the end of the year.

A meeting last weekend of 20 major economic powers in Washington gave a fresh impetus to the troubled Doha Round of global trade talks by agreeing to strive for a blueprint deal by the end of 2008 (see related article, this issue). But the extent to which that rhetoric will translate into actual movement in the negotiations remains to be seen.

Negotiators are expecting WTO Director-General Pascal Lamy to call a December ministerial meeting aimed at reaching agreement on the formulas for tariff and subsidy cuts for agriculture and industrial goods, and exceptions to them. Although no date has been set, many suggested that a meeting could be held around the 10th, with some suggesting dates a few days later than that.

Any such deal would have to be formally adopted by the WTO’s General Council, which is scheduled to begin a two-day meeting on 18 December – shortly before trade negotiators stop work for the winter holidays. Sources suggested that a new draft text would have to be issued some time around 28 November by the chair of the agriculture talks, Ambassador Crawford Falconer (New Zealand), in order to allow policy-makers enough time to analyse it before ministers arrive in Geneva.

Onus on 20 countries

Falconer has challenged negotiators to show flexibility in their positions in order to allow him to produce a new draft. “I certainly don’t feel…I have the basis to do a revised version of the July text,” he warned an informal meeting of the full membership on 17 November.

Falconer told Members that he expected the 20 countries that had met in Washington to show signs of new flexibility very quickly. “I am looking forward to hearing this afternoon, at least from those 20 Members, the concrete changes in their positions that they had foreshadowed to their heads of government,” he announced wryly, before acknowledging that it may take negotiators “a day or two” to share information on any new room for manoeuvre they may now have.

Changes in position would have to be clear to him by “no later than the end of next week” if the year-end target date was to be met, Falconer cautioned.

He indicated that he was ready to begin intensive consultations immediately, and continue these in the week of 24 November. Members were also expected to meet within coalition groupings. Falconer will also hold an informal meeting of the full Membership on Friday afternoon.

The likelihood of an imminent ministerial meeting appears to have galvanised much-needed momentum in the Doha talks, which as recently as last week seemed to be juddering to a near halt. “It now seems inevitable that we’ll have a meeting,” said one delegate, admitting that, before the weekend, the likelihood had seemed nearer 60 percent.

Delegates suggested that the severity of the economic situation - the biggest financial crisis for eight decades, and the real risk of widespread recession in 2009 – had focused minds on the need for a Doha trade deal. One pointed out that, when governments are obliged to take such major steps as nationalising their banks, they may find it easier to make some concessions that at other times might seem too painful.

Five key issues

Delegates reported that they suspected Falconer was particularly awaiting signs of movement on around five key outstanding issues. He had already identified four of these in an August report to the Membership, written after the July mini-Ministerial collapsed: the special safeguard mechanism, tariff rate quota creation, tariff simplification and cotton. A fifth issue has also surfaced more recently: the number of permitted ‘sensitive products’ which developed and developing countries will be able to shield from tariff cuts in exchange for expanded import quotas.

Special safeguard mechanism still deadlocked

The special safeguard mechanism, which developing countries will be able to use to raise tariffs temporarily in the event of import surges and price depressions, remains highly controversial. Developing countries in the G-33 have insisted that an effective and usable mechanism to safeguard their poor farmers is a precondition for a Doha Round deal, while exporters in both developed and developing countries have argued that any such safeguard must not interfere with ‘normal trade’. The issue was widely seen as a major cause of the mini-ministerial breakdown in July (see BRIDGES Weekly, 7 August 2008, http://ictsd.net/i/news/bridgesweekly/18034/).

Since September, Members have discussed various options that could lead to convergence on the issue, such as modifications to the maximum number of months that countries would be allowed to apply the safeguard, or the option of prohibiting successive impositions of the safeguard until a given period of time had elapsed. However, no clear consensus has emerged on these options, said sources familiar with the talks.

Sensitive products: Japan and Canada seek more flexibility

Two developed countries, Japan and Canada, were reportedly seeking greater flexibility in the negotiations on the number of sensitive products that they would be allowed. Members currently are allowed to designate four percent of tariff lines as sensitive, provided tariff quotas were expanded accordingly; those with over 30 percent of tariff lines in the top band would be allowed another two percent, provided again that Members compensate for this through quota expansion. Sources indicated that Japan was trying to obtain the right to designate an additional two percent of tariff lines as sensitive. Canada was also reportedly seeking to expand the flexibility available to them on sensitive products, in a move that was also resisted by exporting countries.

TRQ creation

Several trade sources agreed that, despite exporters’ initial demands, there appeared now to be an emerging consensus that some limited form of tariff rate quota (TRQ) creation would be allowed. It remained unclear, however, what form this would take. Falconer had previously outlined four categories of products for which new quotas could conceivably be created (see BRIDGES Weekly, 23 October 2008, http://ictsd.net/i/news/bridgesweekly/31623/). One delegate suggested that Falconer’s new text could propose a figure for the number of tariff lines for which TRQ creation could be allowed.

Tariff simplification

Tariff simplification - the conversion of ‘specific tariffs’, which are set at a precise level, to ad valorem tariffs, which are expressed as a percentage of the product’s value – has long been controversial amongst Members. Trade sources reported that some exporting countries were exploring new options that tried to move away from the issue of the percentage of tariff lines that needed to be converted to ad valorem equivalents (see BRIDGES Weekly, 23 October 2008, http://ictsd.net/i/news/bridgesweekly/31623/).

Cotton

While the draft modalities text on cotton currently reproduces the proposal of the C4 group of African cotton producers that seek ambitious reductions in developed country subsidies, rich countries have so far failed to make alternative proposals. The issue is widely seen as another make-or-break issue for the round.

Looking forward

Falconer indicated that he would be willing to meet with delegates to discuss tariff simplification, as well as other outstanding issues on domestic support or export competition. He encouraged Members to ensure representation at a senior level, warning that he may cancel meetings if there was an insufficient quorum of capital-based officials. Trade sources also indicated that another ‘green room’ meeting, with around 20 to 25 senior officials, could be held this Sunday, to be followed by more intensive meetings all next week.

Explaining the sudden push for a deal, some delegates pointed to the depth of the economic crisis; others suggested that some saw a political window of opportunity in the time between the US elections earlier this month and 20 January 2009, when President-elect Barack Obama takes office. However, others also pointed to the crucial role played by Falconer, who is returning to New Zealand at the end of the year. “People will regret his departure” said one developing country delegate, noting that it would be hard to find a replacement who could display both the listening skills and technical knowledge of the current agriculture chair.

ICTSD reporting.

One response to “Global Financial Crisis Focuses Minds on Doha”

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