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Agreement Reached on Incremental Advances in WTO Negotiations

By Bruce Odessey
Washington File Staff Writer

Washington - Trade ministers meeting in Hong Kong have accepted an agreement that incrementally advances long-stalled World Trade Organization (WTO) negotiations but leaves most politically difficult decisions for 2006.
Ministers approved December 18 a final declaration aimed at giving direction for concluding the negotiations, formally called the Doha Development Agenda, by the end of 2006.
"After a needed rest, we need to immediately focus our energy and commitment on advancing the work that has begun here in Hong Kong," U.S. Trade Representative Rob Portman said at a closing press conference just after midnight December 19.
"This conference made it clear that there is a consensus among countries rich and poor, North and South, large and small, that more open trade is the road to more prosperity," Portman said. "This is an important consensus because there are tough decisions to be made."
By all accounts the December 13-18 Hong Kong meeting did not achieve the kind of breakthrough the United States had considered possible months earlier but did produce some results, most of them conditioned on successful conclusion of the Doha negotiations with a comprehensive trade agreement.
AGRICULTURAL EXPORT SUBSIDIES AND COTTON
The final declaration requires elimination of agricultural export subsidies by 2013, a date acceptable to the European Union (EU), which accounts for about 90 percent of such spending. The United States and developing countries had pressed for a 2010 deadline.
"I was willing on behalf of the U.S. to move forward with the date of 2013 because I thought it was important for us to make progress," Portman said.
On an issue especially important to West Africa, the declaration requires elimination of export subsidies on cotton in 2006. The U.S. Congress has been expected to repeal U.S. cotton export subsidies already, possibly within days, in order to comply with an adverse WTO dispute-settlement panel ruling.
The declaration would provide for duty-free, quota-free access to cotton from the poorest least-developed countries, but only once implementation starts on any final agreement reached in the Doha negotiations.
It states as an objective that any negotiated cuts in domestic support spending for cotton farmers in countries that have such programs would have to go deeper and be implemented faster than any other domestic agricultural subsidy cuts.
The U.S. delegation worked intensively with negotiators from Burkina Faso, Benin, Mali, Chad and Senegal, countries that had threatened to block any Doha agreement without satisfactory resolution of the cotton issue.
"We all want to reduce subsidies and eventually eliminate subsides" in agricultural goods, Portman said. "That's our proposal, and the only question was whether we'd do it in the context of the agriculture negotiations or pull cotton out separately, and our view was the most effective way to get it done is to keep it with the rest of agriculture."
DUTY-FREE, QUOTA-FREE MARKET ACCESS
The declaration requires the provision of duty-free and quota-free market access for most products from the 32 least-developed countries "by 2008 or no later than the start of the implementation period" of any negotiated agreement.
It requires such access for at least 97 percent of products as defined by the tariff schedule. The United States had pressed for exceptions to duty-free, quota-free for specific products that already trade competitively on the global market.
Portman said at the press conference the United States has not decided on what products it might exclude from duty-free, quota-free treatment. He did suggest sugar was one possibility. Earlier in the week he suggested other possible exclusions, including certain competitive textile products from Bangladesh and Cambodia.
The Doha negotiations have languished almost since they were launched in 2001, with an impasse over politically difficult agriculture issues blocking most other progress.
They are scheduled to conclude by the end of 2006, a deadline of sorts for the United States, which has trade negotiating authority from Congress only until July 2007.
WTO members had agreed in a July 2004 framework for negotiating on agriculture on eliminating export subsidies but left the deadline to further negotiation.
In parallel with export subsidy elimination, the declaration also requires negotiated agreement by April 2006 on disciplines for agricultural export credits and credit guarantees; on monopoly state trading enterprises such as grain marketing boards in Canada, Australia and New Zealand; and on food aid.
FOOD AID
The declaration's language on food aid says any WTO-negotiated rules would not prevent food from going to hungry people in emergencies but would prevent displacement of commercial sales by donations of excess commodities. The EU had been pressing to restrict food aid to cash only, a position vigorously resisted by the United States.
At a late December 18 meeting with other delegations, Portman said the WTO should not limit delivery of food aid only to emergencies.
"We should be doing everything possible to promote the most flexible flow of food to where it is needed," Portman said. What is allowed as legitimate donations of food "must be expanded to cover both emergencies and the needs of the most vulnerable. Food aid can be the difference between life and death for starving people."
DOMESTIC SUPPORT PAYMENTS AND TARIFFS
Even with agreement on export subsidies elimination, much more difficult negotiations remain on the other major groups of agricultural issues concerning domestic support payments to farmers and tariffs.
In October the United States had submitted a proposal for drastically reducing agricultural tariffs and the most trade-distorting domestic support. This attempt to rally support for robust results at the Hong Kong meeting achieved little, as the EU subsequently made a counter-proposal that analyses showed would produce little or no real additional market access.
The declaration indicates little progress on the other major agricultural issues, tariffs and domestic support. On tariffs, it formally adopts existing working language setting four bands, from highest to lowest, but sets no level of ambition -- or target -- for cuts. The United States had pressed for deep cuts, deepest at the highest level.
The declaration has no specific language on limiting the number of sensitive products excluded from tariff cuts. The United States had pressed for a limit of 1 percent of products, as defined by the tariff schedule; the EU had sought 8 percent, about 160 products.
On trade-distorting domestic support, the declaration adopts some new language setting three bands for cuts but no specific level of ambition. The sharpest cuts would have to be made in the highest band, concerning the EU, the WTO member currently allowed to spend the most money on domestic support, about 3-1/2 times the allowed U.S. level.
The United States and Japan, in the second band, would have to make somewhat smaller cuts. Other countries, in the third band, would have to make even smaller cuts.
OTHER ISSUES
In language worked out on EU demand, the declaration requires that tariff cuts in industrial goods achieve "a comparably high level of ambition" as agricultural tariff cuts.
The declaration indicates little progress on industrial tariffs. It does set an April 30 deadline for establishing modalities -- how far and how fast to open markets -- and a July 31 deadline for countries to submit offers.
It adopts what is called a Swiss formula for the industrial tariff cuts, requiring the sharpest cuts for the highest tariffs. The United States had pressed more specifically for a Swiss formula that had two coefficients, a higher one requiring deeper cuts for the developed countries and a lower one for developing countries. The declaration specifies no number of coefficients.
The declaration sets deadlines for the services negotiations, requiring countries to make offers to open their markets for financial services, telecommunications, express delivery and other services by July 31, 2006. It requires countries to submit their final complete list of proposed commitments on services by October 31.
It also emphasizes the need to push that part of the Doha negotiations for prohibiting fisheries subsidies that contribute to overcapacity and overfishing.

Source: Washington File