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Failure of WTO Geneva Mini-Ministerial

The June meeting of the WTO to break the deadlock in the Doha round failed mainly because of US intransigence. The developing countries refused to give in to the unreasonable demands of the US (and EU) in what was supposed to be a "development round" of trade negotiations. Will their solidarity be maintained in the face of new pressures?

Failure of WTO Geneva Mini-Ministerial

New Deadline and Challenges

The June meeting of the WTO to break the deadlock in the Doha round failed mainly because of US intransigence. The developing countries refused to give in to the unreasonable demands of the US (and EU) in what was supposed to be a “development round” of trade negotiations. Will their solidarity be maintained in the face of new pressures?


he World Trade Organisation’s Doha negotiations reached a new crisis point when a controversial ministerial-level meeting in late June ended in failure when some major countries could not agree on how to cut subsidies and tariffs in agriculture, clashed on how to proceed on non-agricultural market access (NAMA), and fought over the “flexibilities” (or supposedly more lenient treatment) to be provided to developing countries.

The series of meetings (most of them held “informally” and in exclusive small groups) started on June 30 and ended on July 1 – a day earlier than scheduled – after it became clear that no progress could be made on the agriculture issue. Also on hold was the issue of liberalisation of industrial products.

More than 60 ministers from membercountries turned up, exceeding the number expected. Two meetings of the WTO’s trade negotiations committee (TNC) were held for them to air their views. However, many of them were kept in the dark as to what was happening, as the real meetings were held in the so-called “Green Room” style, to which only 30 delegations were invited. Up to now, there is no public record or knowledge as to exactly who these 30 were or how they were selected.

There were also many meetings of the group of 6 or G-6 (the US, EU, Brazil, India, Japan and Australia), who are seen by the establishment as the leading members of the Doha negotiations. The inability of

Economic and Political Weekly July 22, 2006 even this small group to agree on key issues led to a stalemate in the Green Room of 30 delegations, which in turn meant there was nothing of substance to report to the wider membership (which if everything had gone to plan would have been asked to endorse the decisions of the Green Room). This opaque manner of operations was supposed to have provided the “efficiency” that would allow major decisions to be taken quickly. Many countries that are not part of the Green Room have been protesting against their inability to participate, and had geared up to make their voices heard if the Green Room decisions had been brought into the TNC. But that was not to be, because even the first hurdle (agreement by the G-6) could not be cleared, causing the Green Room to conclude by the morning of the second day that the talks should close early, rather than stretch out the agony for empty talk on a third day.

“There has been no progress, so we are in a crisis, we have to admit it,” said WTO director-general Pascal Lamy at the end. But the crisis did yield a dividend for the director-general. Lamy suggested to the TNC that it make three decisions: that he conduct “intensive and wide-ranging consultations with the aim of facilitating the urgent establishment of agriculture and NAMA modalities”. The agreement by the TNC was its only follow-up action.

Lamy’s New Task

How much authority and leeway Lamy will actually have within this mandate, and how he intends to use it, was one of the major questions being discussed before and after the meeting ended. Lamy at a press briefing denied he had “managed” or engineered a crisis to give himself a new role, said there were already a lot of texts available, and what was needed were “numbers”. He saw his job as “cracking heads, consult, confess, starting with the G-6, so we can get the missing numbers”. EU trade commissioner Peter Mandelson said that Lamy’s new task was to be facilitator and catalyst but not author. But since numbers are what counts, it is hard to figure out the difference between facilitator and author.

In any case, Lamy has a few weeks to get some “new movement” going. For the new deadline to finalise “modalities” (formulae and numbers for cutting tariffs and subsidies and for flexibilities such as sensitive and special products in agriculture, and more lenient treatment of limited products in NAMA) is the end of July. If this modalities deadline is not met, it would be difficult to finish the whole Doha programme by the end of the year, and it would then be almost impossible to have the US congress approve the Doha deal before president Bush’s “fast-track authority” for trade deals expires. Days after the collapse of the Geneva miniministerial, few believe the end-July deadline can be met.

An alternative solution to the timetable crisis, suggested by some influential US congressmen on the eve of the Geneva meeting, is for the US congress to give president Bush a new fast-track authority. This would allow the negotiations to go on without the sword of fast-track expiry hanging over the WTO. However, the US trade representative Susan Schwab has said she would not rely on the possibility of a fast-track renewal on which to hang the hopes of completing the Doha round.

The immediate cause of the meeting’s collapse was the inability of the US to improve on its offer to reduce its domestic farm subsidies. It had already agreed to bring the ceiling (the level that is allowed) of overall trade-distorting subsidies (OTDS) to US $ 23 billion. But as its actual OTDS was about $ 19.7 billion in 2005, other countries considered the US offer to be inadequate and unacceptable, as it allowed the US to expand (rather than decrease) its actual subsidies.

The group of 20 or G-20 developing countries has asked that the allowed subsidies be brought down to $ 12 billion, with others suggesting $ 15-17 billion. After the meeting, the EU trade and agriculture commissioners both demanded that the US offer be at least $ 15 billion. On the first day, the Brazilian minister Celso Amorim told the media that even if the US agreed to go down to $ 20 billion, this was unacceptable as it would not lead to anyactual decrease in US domestic support.

The US was expected to make a renewed offer, even if to go down by a few billions. But due to pressures from its farm lobby and from the US congress, it was unable to make even a small gesture, and stuck to its position. Instead it went on the offensive, blaming other countries for not going far enough in opening their markets on both agricultural and industrial goods, saying that this was a prerequisite for it to retain (let alone increase) its existing offer on domestic support.

This blame shifting did not work because the EU on the first day itself had agreed to lower its farm tariffs by an average of 51 per cent, an improvement from the 39 per cent it had earlier suggested. Some countries thought that was not good enough (the G-20 wanted 54 per cent, the US wanted 66 per cent), but almost everyone (except the US) thought it was a good start. The ball then went to the US court for it to match the EU move by telling by how much it would improve its subsidies offer. A whole day was spent waiting for the US to move. When it did not, the ministers present agreed to call off the talks early.

Meanwhile, an overwhelming number of developing countries expressed their frustration not only at the inadequate US offer but at how the developed countries are now putting pressure on them to steeply cut their tariffs.

Pressure on Industrial Tariffs

The pressure is greatest in industrial goods, in the negotiations on NAMA. The developed countries have proposed coefficients of 10 and 15 for a Swiss formula by which they themselves reduce their industrial tariffs by about 20-30 per cent, whereas the developing countries must cut their tariffs by 60-80 per cent. As pointed out by the NAMA-11 (a grouping of developing countries), this is against the principle of less than full reciprocity, agreed to early. It would be the reverse, a major special treatment for developed countries.

The developing countries also came under great pressure to relax or give up their defensive safeguards in agriculture. The US launched a major assault on what it called the “three S’” – sensitive products, special products (SPs) and special safeguard mechanism (SSM). Quite remarkably, the US trade representative and the US agriculture secretary told the media they “suddenly realised” that these three S’ would block whatever market access the US would have obtained through the tariff cutting formula.

The US has thus made it clear that it cannot accept the proposals of over 40 developing countries, grouped under the group of 33 (G-33), that their food security and livelihood security needs be covered by the G-33 proposals on special products (that 20 per cent of tariff lines can be selfdesignated as such and be subjected to no or very low tariff cuts) and special safeguard mechanism (that additional duty be allowed on agricultural imports if there is a certain increase in volume or decrease in price, with these “triggers” to be determined by certain proposed measures).

Economic and Political Weekly July 22, 2006

Ministers of many developing countries were alarmed and even outraged at this turn of events, that what was touted as a “development round” is turning out to be everything but one. They showed their concerns at a meeting of developing country groupings, which produced a joint statement and later a press conference as the WTO meetings were winding down. The groupings comprised the G-20, G-33, ACP group, the LDCs, the African group, the Small Vulnerable Economies, the NAMA-11, the Cotton-4 and CARICOM.

The points commonly stressed by many of the ministers were that:

  • The developing countries had tried their best to contribute to the meetings’ success, and the inability to make progress was due to the lack of movement by developed countries (or some of them);
  • There was an unfortunate attempt by developed countries to shift the burden of the round onto developing countries by asking the latter to take on onerous obligations especially in NAMA;
  • In exchange the developed countries were unwilling to take on similar commitments (in both agriculture and NAMA) that they were asking of the developing countries;
  • The “new trade flows” (a term now bandied around by developed countries and the WTO director-general Pascal Lamy as the new criterion by which to judge a proposal or offer) arising from the round should be from developing to developed countries and not the opposite; and
  • The development essence of the Doha round must be reclaimed if there is to be an outcome.
  • Brazilian foreign minister Celso Amorim (representing the G-20) said that at this time when the round was at a knifeedge, the developing countries are united. Their statement reflect demands that are not impossible. The burden of leadership is with the richer countries, which have more to give.

    Development Round?

    Stressing that this is supposed to be a development round, India’s commerce minister Kamal Nath said that paragraph 24 of the Hong Kong declaration mandated that market access should be enabled for developing countries to developed countries’ markets. “This is a round for trade flows and trade wins so that developing countries benefit. But if the developed countries come to Geneva in the hope that developing countries will make market access available to them, and at the same time they retain their agricultural domestic support, then there is no negotiating space.

    “We will urge the director-general to engage bilaterally and with ambassadors and groups. If he sees a sense of convergence, we’ll be back. But there can be convergence only if there is a commitment to the goals – there is the Hong Kong declaration, there are flexibilities there. Not by chance, but to serve the ends of the mandate. We can’t have completion (of the round) without the content.”

    Kenyan trade minister M Kituyi (coordinator of the African group) referred to the developed countries, saying there was a de-link between the solidarity in statements made by political leaders, and the flexibilities shown in the negotiations, and this gap must be closed. The negotiations must recognise that the flexibilities that are to be given must be for those who are supposed to be beneficiaries of the round, the developing countries. Deputy trade minister Rob Davies of South Africa (which coordinates the NAMA 11 developing countries) said that the developing countries are united here around the common demand to reclaim the essence of the Doha mandate, that the needs and interests of developing countries are at the heart of the Doha work programme.

    “This priority has been subordinated now by vested interests and commercial interest groups in the developed countries, as manifested in the unwillingness of big subsidisers among developed countries to make a bold move. They are held hostage by vested interests.” He said we are also seeing that any concession that is being offered (by developed countries) is matched by a commercial concession to an interest group in the countries, and this is leading these countries to place unrealistic and inordinate demands on developing countries, especially in NAMA.

    “The coefficients being suggested for developing countries would require a level of social dislocation and adjustment in our countries without any compensating factor, and which those countries are not willing to undertake themselves. The spread in the coefficients (between developed and developing countries) that the developed countries have suggested is so narrow, that the level of adjustment that they themselves have to undertake in NAMA is derisory by comparison” he said, making a comparison to what the developed countries want developing countries to undertake.

    Zambia’s trade minister Depak Patel (coordinator of the LDC group) said that it is extremely immoral for the developed countries, which profess to want to help the poorest countries, that the LDCs had to struggle for 10 years in order to obtain language in Hong Kong (for concessions to the LDCs) on a “best endeavour” basis, and then for these rich countries to neglect the LDCs’ concerns after that. “We have learnt that what they can’t get from us (in market access) in the WTO, they try to get from us through structural programmes of the Bretton Woods institutions. We have had enough of that.”

    Asked by the media to comment on a remark by the US trade representative that SP and SSM have been at the core of blockages against market access, and that developing countries are also blocking access in NAMA Kamal Nath said he did not know what was meant by the USTR. He said that the principles on SPs are in the framework agreement and the Hong Kong declaration, and only the issue of indicators are to be negotiated. It is too late to negotiate other principles, which are not open to negotiate.

    Amorim of Brazil said the burden is on the developed countries to show leadership. The developing countries have a bigger stake than the developed countries in the multilateral trading system. “Concluding the round is very important for Brazil but we can’t conclude at any price”, he said, adding that the developing countries had paid a high price in the Uruguay round, including accepting intellectual property and services into the system.

    “This round is basically about agriculture, the unfinished business of the Uruguay round. If this round fails, it would be because the developed countries are not addressing the problem.” He quoted an editorial in an American newspaper, which had commented (after Brazil had won the cotton subsidies case against the US) that “We knew agricultural subsidies are immoral, now we know it’s also illegal”.

    The performance of the ministers at the press conference was quite impressive as many of them (who are now veterans of WTO meetings) showed a good grasp of the issues. But whether the unity of developing country groupings, on display at the end of the Geneva meeting, can be maintained if and as the negotiations resume, remains to be seen. Towards the end of the Hong Kong ministerial, an inaugural meeting of what was then dubbed the G-110 (comprising the G-20, G-33,

    Economic and Political Weekly July 22, 2006 ACP, Africa and LDC groups) had been held, with the proclaimed aim of uniting the developing countries and resolving differences among themselves, so that they could have a more effective platform in the negotiations.

    However, there are several differences among categories of the developing countries, particularly among those with exporting interests (and would like barriers to go down as much as possible) and those whose main concerns are defensive (and are thus asking for exceptions and flexibilities for developing countries like themselves). The test of the political solidarity shown is whether it can survive these differences at the negotiating table.



    Economic and Political Weekly July 22, 2006

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