Global Policy Forum

Alexandra Strickner and Carin Smaller

Cancun to Hong Kong, by way of Geneva?

Geneva has been a busy place this year. In July, WTO members achieved their main goal: saving the Doha Development Round and the multilateral trading system. The run up to the July Package presented a picture of a bruised and damaged multilateral trading system with all hopes pinned to a successful outcome from the July General Council. The heavy hitters came in for the meeting, including EU Trade Commissioner Pascal Lamy and US Trade Representative, Robert Zoellick. In fact, the July Package was really more about achieving some kind of agreement-on anything-than a concrete step forward on the Doha commitments. Not a single one of the timelines for decisions laid out in Doha had been met, and desperation permeated the negotiating atmosphere.

That task accomplished, the framework will serve as the basis for future negotiations. The assessment and interpretation of this framework by WTO members however, presents a rather confusing picture as to the actual status of the document. Everyone has interpreted the document according to their own interests and there seems almost no common view on the elements contained in the framework. No one is unhappy with the framework, but then no one is particularly delighted either. The general comment is - it is not perfect, but it is the best we could do at the time. Everyone is conscious that the most important and sensitive issues are yet to be resolved. Already members are lowering expectations that further important progress will happen anytime soon.

Deciphering the lessons from July

In the aftermath of the July Package it is important for civil society groups to reflect on the results. In particular, civil society groups need to assess and observe possible changes for future negotiations. The WTO is definitely a learning institution; it works to avoid repeating its mistakes. It was certainly not a miracle that the July package - despite large differences on key issues such as agriculture and non-agricultural market access - was finally accepted. Some media reports even claimed that the absence of civil society groups - only a small number of NGOs followed the process in Geneva directly - helped take pressure off negotiators and facilitated the conclusion of the July Package. Indeed one real possible result of the process that lead to agreement on the framework may be a move by WTO members to use General Councils in Geneva as the primary decision-making forum, leaving Ministerial Meetings to a largely ceremonial function.

Civil society groups must closely monitor the evolving processes and adapt their campaigns and strategies to fit the changing political landscape. Developing countries must also become more firm and coherent on their position regarding the process. There is no doubt that developing countries have become better coordinated and have gained a much stronger and unified voice over the past few years. Nevertheless, their calls for increased transparency and inclusiveness need to evolve now into concrete proposals that would establish at least a minimum set of rules. It was clear in July that the existing ad hoc approach to process serves some developing countries but not the majority.

Dealing with the Doha Agenda from now until Hong Kong given the current political situation with the US elections ahead and the change of the EU Commission, delegations and country groupings are concentrating their efforts on so-called "technical work." It is still unclear what this means and how much technical work on modalities can take place without further political commitments, especially from the EC and US. From now until March 2005 there will be a stocktaking exercise to outline all the issues that require further discussion. This stocktaking exercise has already started. From March 2005, trade negotiators expect things to become political again, with some of the more sensitive issues, such as definitions of the blue box and sensitive products in the agriculture negotiations, likely to surface once more. Since a lot of technical work is taking place, it could be an opportune time for NGOs to contribute their policy or research work to this technical process and try to influence the shape of the negotiations that way.

Dynamics in Agriculture

The Chair of the Special Session on Agriculture, New Zealand Ambassador Tim Groser, started the agriculture negotiations with a bang, taking a very active role from the first and calling on members to start technical work immediately. Ambassador Groser put forward an agenda that avoided the most politically sensitive issues for developed countries (including the proposed expansion of the blue box to accommodate US farm support programs and the question of sensitive products). The agenda, which is likely to become the basis for technical work over the next few months, identified specific issues in all three pillars. The agenda includes the green box (under the domestic support pillar), the question of how to achieve "parallelism" between eliminating export subsidies and eliminating the subsidy element of export credits and food aid (under the export subsidy pillar), and the special safeguard mechanism (SSM) (under the market access pillar). Also under market access, Groser listed the question of converting all tariffs into ad valorem equivalents (AVEs) in order to achieve a uniform tariff calculation to simplify the implementation of a tariff reducing formula. Ad valorem tariffs are calculated as a percentage of the price of the product, as opposed to specific tariffs, which are calculated on a per unit basis - for example, at X dollars per tonne. The question of de minimis support was included in the original agenda but was quickly eliminated because key developing countries objected to an agenda that seemed to deal with all developing countries sensitivities first, leaving developed country sensitivities to the final stages.

The technical work for agriculture will involve different country groupings producing technical papers on issues of concern. The Group of 33 (G33) is likely to draft papers on special products (SP) and the special safeguard mechanism (SSM). On the SSM they will be looking for a mechanism that is simple and effective to use. Many existing safeguard mechanisms are complicated and require high standards of proof of injury to the domestic market before they can be applied. The Group of 20 (G20) will work on the market access pillar, in particular the formula for tariff reduction. The Cairns Group has been very active, circulating papers among its members on issues such as the green box, ad valorem equivalents, food aid, export credits and State Trading Enterprises (STEs).

Ambassador Groser said that unless he was given a stronger role within the negotiations, it would be very difficult for him to stop the process moving outside the WTO, as happened in July. He was referring to the role played by the Five Interested Parties (FIPs), of the US, EU, Brazil, India and Australia, who in many ways made agreement possible by first coming to agreement themselves on key elements of the framework proposal on agriculture. Ambassador Groser suggested he lead smaller group meetings with interested parties on particular issues and said he should be given a degree of freedom to determine the exclusivity of the process. This attempt at reviving the Chair-driven process is despite a response to the loud calls for greater transparency and participation in the negotiations by delegations irritated by FIP's role.

To date, the FIPs have not re-appeared with the commencement of negotiations. The FIPs originally appeared when negotiations were stalled and there was a vacuum in political decision-making. For now, WTO members are committed to discussing technical issues with all political decisions postponed until after the US elections and the new EU Commission has settled down. But whether this 'non-group' is dead or not, remains to be seen. None of its members say it is dead, but it is not meeting at the moment.

Deadly Dealings in Service Negotiations

Unlike the negotiations in agriculture and non-agricultural market access, where different WTO members are negotiating jointly according to common interests, market access negotiations in services are undertaken bilaterally. Among those members that have already tabled offers for services liberalization -more than 40 members have done so - bilateral negotiations continue throughout the negotiating sessions. Representatives from the services industries regularly come to Geneva to meet trade negotiators - partly in the WTO itself - to lobby governments and to pressure members to table offers and undertake commitments to liberalize their services sectors. During the special session at the end of September, representatives from the energy industry among others undertook such lobby exercises.

The July Package contains a deadline for revised services offer in May 2005. Some trade negotiators and even the Chair of the services negotiation group - Chilean Ambassador, Alejandro Jara - are already saying it will be difficult to meet the deadline. After the first offers were tabled last year, the concerned parties started their assessment. Developing countries have repeatedly pointed out, that in the area of most interest to them - Mode 4 (the temporary movement of persons) - offers tabled by developed countries fell far short of their expectations. For some of these countries, tabling revised offers - in other words improved offers- might be difficult. The US is also waking up to the fact that the deadline for revised offers might not be too good for them either. The US is facing huge political questions on the issue of job losses through outsourcing, while state level migration authorities are becoming more critical of Mode 4 proposals and their implications for federal migration laws.

Another issue keeping services negotiators busy is the consolidation of existing EC schedules. For the past several months, the EC has been harmonizing the schedules of commitments of newly acceding EC member states and also Austria, Finland and Sweden who joined the EC already in 1995. Article XXI of the GATS agreement allows members to withdraw commitments once made. However this involves a process of compensation to all those that indicate a loss due to a change of existing schedules. According to Geneva sources, some developed countries such as Switzerland and Japan are trying to use this process to limit the scope and use of this Article by demanding compensation from the EU without proof of losses. If their demand is accepted, it will set a precedent that any future withdrawal of commitments by a member will entitle any other member to ask for compensation without having to first show damages. This will render Article XXI meaningless. Given that Japan and Switzerland have been key demandeurs for the Singapore Issues, the rationale of the approach to article XXI makes more transparent what many civil society groups and to date some developing countries have been saying: that GATS is to a large extent the hidden investment and government procurement agenda.

Developing Countries Defeated in NAMA

No formal negotiations have taken place on non-agricultural market access (NAMA) but informal meetings were held earlier in the month. The Chair of the Negotiations Group on NAMA, Iceland's Ambassador Johanesson, was keen to get members to commence technical work on the formula for tariff reduction, the sectoral approach and flexibilities. Some developing country voices spoke out against moving so quickly on technical issues without re-opening the debates on the elements in NAMA of most concern to them, elements specified in paragraph one of Annex B of the July Package. The negotiations in July surrounding NAMA created serious tensions between developed and developing countries and even threatened to derail overall negotiations on the July package. Developing countries only agreed to accept Annex B on the condition that four key elements would be subject to "additional negotiations." The Chair, supported by many members, seems to be showing reluctance to re-open the negotiations, preferring instead to move straight to technical work. Given that very few developing country members spoke out against the proposed agenda of Ambassador Johannesson, it now seems more likely that paragraph one of Annex B will not be given adequate consideration.

At the moment there are no country groupings working actively on NAMA. During the July Package, it was the Africa Group that was most vocal and given that many other developing country groupings are focused on other issues, it could be important for the Africa Group to continue to speak with a unified voice on NAMA. Civil society groups have started to come together around NAMA issues but more active mobilization is required. More work is needed both in terms of research and campaign activities in order to heighten awareness around the issues.

Differentiating Special and Differential Treatment

The July Package avoided creating a new category of "weak and vulnerable" developing countries, as advocated by EC Commissioner Lamy. In fact, paragraph 1.d of the Framework explicitly says no new sub-category of members will be established. However, some G90 countries seem keen to create a differentiation that would separate them from the more advanced developing countries (the G90 includes the Africa Union, Africa, Caribbean and Pacific (ACP) countries, and least-developed countries (LDCs)). It is still unclear what the agenda of the G90 is on this issue, and indeed whether they will continue to coordinate as a group over particular issues at all. Since developed countries are very interested to limit the number of developing countries that benefit from SDT, however, the issue is not likely to go away. It is clear this could be a very divisive issue for developing countries and will need close monitoring by civil society.

Decisions on Trade Facilitation

One concrete outcome of the July Package is the establishment of the Committee on Trade Facilitation and the appointment of the Chair, Ambassador Noor from Malaysia. This is an interesting choice considering that Malaysia advocated very strongly against the Singapore Issues and was a leading country in the fight against the inclusion of the four issues. It is expected that the Committee will meet soon to establish an agenda of work.

Deciding on the next Director General

Next year, WTO members will be choosing a new Director-General. Rules and procedure have been set out to help formalize the process. Until December 2004, candidates will be nominated (candidates can only be nominated by their own government). From January to March, a formal process of consultation will take place with a decision to be made by May 2005. The list of people currently nominated includes the former Ambassador of Uruguay to the WTO, Eduardo Perez del Castillo; the current Ambassador of Brazil to the WTO, Luiz Felipe Seixa de Correia; the Trade and Foreign Minister of Mauritius, Jaykrishna Cuttaree.

Conclusion

The July Package may have saved the WTO and the multilateral trading system for now, but most of the work -political and technical - remains to be done. There are still no commitments from anyone, especially from developed countries guaranteeing the development dimension of the round. Developing countries are very cautiously satisfied with the results of July, but unless developed countries show that they are willing to give real concessions and start addressing the inequalities existing in WTO Agreements, the multilateral trading system will continue to teeter.

* Dates to Remember in 2004

The next Trade Negotiations Committee will take place on 9 December

The next negotiating sessions on Agriculture will take place: 15-19 November; 13-17 December

The next negotiating sessions on Service will take place: 22-29 November Also on services, three weeks in February have been dedicated to intense negotiations before the May 2005 deadline.

The next General Council will take place: 16 December

The next Ministerial meeting will take place from 13-18 December 2005 in Hong Kong

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