August 19, 2004
Prepared by the Communications Division of the Caribbean Regional Negotiating
Machinery (RNM), this electronic newsletter focuses on the RNM, trade
negotiation issues within its mandate and related activities.
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Special Issue:
WTO Panel Ruling on EC Sugar Subsidies, and the WTO Framework Agreements
- NEWS BRIEFS
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[La versión en espanol del Boletín MRN esta disponible en
el sitio Wed de la MRN (www.crnm.org)]
After a hiatus, RNM UPDATE is now back on stream. RNM UPDATE resumes its
twice monthly publication cycle.
WTO Panel Ruling on EC Sugar Subsidies
In 2003, Australia,
Brazil, and Thailand requested the establishment of a World Trade Organization
(WTO) panel to examine the legality of subsidies applied to European Communities
(EC) sugar. The principal claim of the complainants is that the EC has
provided export subsidies in excess of its WTO commitments during the
Uruguay Round to reduce export subsides on sugar. In addition to a large
number of countries which included the United States, Canada, India and
New Zealand, several African, Caribbean and Pacific (ACP) countries joined
in the dispute as third parties, emphasizing the importance of EC sugar
preferences for ACP states.
WTO Panel Preliminary Ruling
The ‘Panel on EC Export Subsidies on Sugar’ issued a preliminary ruling earlier this month. WTO interim reports are issued for verification and comment by the parties to the dispute. In accordance with WTO rules, interim panel reports are confidential to the main parties involved in the dispute.
The WTO panel decision on sugar follows an earlier high-profile case subject to WTO dispute settlement, also involving Brazil, where Brazil claimed victory - in June of this year - in a challenge to US cotton subsidies.
The outcome of the sugar case has considerable implications for the six sugar exporting Caribbean Community (CARICOM) countries, namely Barbados, Belize, Guyana, Jamaica, St. Kitts & Nevis and Trinidad & Tobago. The other sugar exporting countries of the ACP Group are also affected by the case. These countries are signatories to the Sugar Protocol with the EC, which links the price of ACP sugar to that of EC sugar.
Panel Ruling Coincides with EC Reform efforts regarding Sugar Regime: Implications for CARICOM
The preliminary ruling comes at a time when the EC is contemplating plans to significantly reform and restructure its internal sugar regime. On July 14, 2004, the European Commission tabled proposals to overhaul the EC sugar regime. The start date for this reform is envisaged to be 2005, ending 2008.
The EC reform proposals for its sugar regime also have implications for CARICOM’s sugar industry. Reportedly, the proposed reforms intend to provide for significant reductions in the level of intervention and support (price, and production quotas) on the EC sugar market, while compensating EC sugar growers with direct payments. The expectation is that this would bring the regime in line with WTO rules.
The Sugar Association of the Caribbean has strongly condemned the reform proposals. The Association cites the “unfairness” and “illogicality” of the proposed regime changes; charging the proposed changes are unacceptable and “ignore the sanctity of the benefits of the Sugar Protocol as set out in the Cotonou Agreement”.
The EC reform proposals were firmly criticized and rejected outright by regional leaders at the Twenty Fifth Meeting of the Conference of Heads of Government of CARICOM, convened in early July, in Grenada. There is concern that the price reductions envisaged would, if implemented, result in losses of tens of millions of dollars to the industry in the Caribbean, with serious negative effects on employment and living standards of workers directly employed or otherwise dependent on the industry.
In a communiqué issued at the conclusion of the Twenty Fifth Meeting of the Conference, the Heads characterized the proposals as a betrayal of the commitments and guarantees given by the EC at the time of the negotiation of the Protocol in 1975. According to the communiqué, the proposed reduction, to be implemented in three stages commencing in 2005, would result in an annual catastrophic loss of US$90 million by CARICOM sugar-supplying countries from 2008. Heads of Government noted that the projected loss outstrips by more than 150% the aid that the EU has committed to regional programmes for the current five-year cycle. They called on the European Commission to withdraw the proposals and to ensure that the interests of the ACP sugar supplying countries are taken fully into account in the reform of the sugar regime.
CARICOM and the Way Forward
CARICOM does not intend to allow the WTO interim decision to halt regional consultations with the EC regarding the effects of their internal restructuring on the rights guaranteed to the ACP under the Sugar Protocol.
The panel report and proposals for reform of the EC sugar regime come at a time when most of the sugar-producing countries have developed plans to restructure in anticipation of a more competitive environment. These developments heighten the need for near-term support from the EC to facilitate industry restructuring and diversification, as deemed necessary.
CARICOM is cognizant
of the need to ensure the fair application of the rules of multilateral
trade. But, the region is mindful that the burden of adjustment not be
disproportionately distributed. Importantly, and with specific reference
to sugar, the region insists that the specific commitment secured under
the Cotonou Partnership Agreement to preserve the benefits of the Sugar
Protocol is maintained.
At their July meeting, CARICOM Heads reiterated their intention to continue
consultations with relevant stakeholders in the Caribbean and to make
strong representation to the European Commission on behalf of Caribbean
sugar producers.
Procedural Considerations
Under the rules of the WTO Dispute Settlement Understanding, at the interim stage of the panel process, a preliminary report is issued to the parties, who are then allowed to review and request changes to the findings of the panel. The panel then considers the request, and revises the conclusions if they deem it necessary, following which the report is finally circulated to all WTO Members.
The practice is that
the final report of the WTO panel rarely differs from the preliminary
report. The issuance of a final panel report, however, is not the end
of the process as any of the parties, including the EC, could decide to
appeal any of the panel's findings, once the panel report is circulated
in September. At that time it will indicate those aspects of its sugar
policies the EC may have to reform and in what time frame.
WTO Framework Agreements
The package of framework
agreements, clinched August 1, is viewed as the needed impetus to revive
global trade talks, faced with gridlock and discord since the collapsed
Fifth WTO Ministerial Conference held last September. The framework package
marks an important step for the troubled Doha Round. However, it represents
the start of a process of negotiations in the modalities phase of the
Round. These are negotiations that will delve into details, not encapsulated
in the ‘framework’.
Framework Pact Clinched
The preliminary WTO ruling on sugar came just three days after the WTO’s membership approved framework agreements, August 1 (see WTO document - WT/L/579, Aug 2, 2004 – available on www.crnm.org).
The text of the General Council’s decision on the Doha Agenda Work Programme (the “July package"), agreed on August 1, containing frameworks and other agreements was adopted after revisions to the first draft of the Decision of the General Council (July 16) and the second draft of the Decision of the General Council (July 30).
Objectives of the July GC
The aim of the WTO
General Council meeting, that took place between July 27 to 31, was to
achieve the framework agreement that eluded negotiators at the Fifth WTO
Ministerial and subsequently at the December 2003 General Council meeting.
The objective was limited to concluding framework agreements, rather than
to strive for agreement on full modalities in areas such as Agriculture
and Non Agricultural Market Access (NAMA); as well as to achieve some
consensus on the Cotton issue, 'Singapore Issues' (Trade Facilitation,
Investment, Competition Policy and Transparency in Government Procurement),
and Development issues.
Difficulty in Striking Framework Agreement
The framework package was not easily reached. Subsequent to the release
by General Council Chair, Ambassador Shotaro Oshima, and WTO Director-General,
Supachai Panitchpakdi, July 16, of the draft framework agreement that
set out the terms for the Doha Round, critical issues still remained unresolved.
In releasing the July 16 framework Text, Oshima and Supachai pleaded with
Members for ‘restraint’. As it turned out, the Text was heavily
criticized, and equally aggressively, at that, by both developed and developing
countries. Hopes for restraint were dashed when a number of countries
demanded significant re-drafting of the Text. Tensions heightened when
the French President very vocally blasted the draft as ‘unbalanced’.
In the days following its issuance, July 16, Members fell short in substantially
narrowing differences in positions on a number of issues outlined in the
draft Text. Substantive convergence came only during the week of July
26. Not surprisingly, the area of particular contention in the Supachai/Oshima
Text was Agriculture.
The July 30 framework Text incorporated a new Agriculture framework. Its
intention was to take into account an informal agreement reached by the
Five Interested Parties (US, European Union, Brazil, India and Australia)
July 29, with respect to language on market access, domestic support and
export competition. However, some countries criticized the newly released
framework, which was expected to reflect a common understanding on the
parameters for future Agriculture negotiations. Informed sources revealed
that the Groser Text, especially as it related to the Blue Box, had come
under fire from members of the G20. Apparently, there were questions over
the extent to which it adequately reflected an understanding reached among
the five key players. Agreement between these five core members –
the Five Interested Parties – was viewed as crucial for advancing
the July package, as the countries represent a wide and disparate range
of trade interests.
But, the tough issues were not found in Agriculture alone. The NAMA component
of the framework was also contentious. The NAMA deliberations were mired
in intense and at times acrimonious interchange, for example, as regards
the extent of developing country tariff cuts. Ultimately, though, the
“July package” was adopted.
Achievements and Shortcomings of the Framework
The framework package incorporates key issues such as Agriculture, industrial
tariffs and streamlining trade and customs procedures. As a basis for
further talks, what it succeeds in doing is providing guidelines and parameters.
However, the framework
is short on details. For example, the framework does not make reference
to a timetable for eliminating farm export subsidies, nor does it indicate
by how much the detailed agreements still to be reached will cut barriers
to world agricultural markets or reduce trade-distorting payments. In
addition, the framework repeats the commitment of WTO Members, at Doha,
to ‘substantial’ improvements in market access, but does not
define ‘substantial’. It also does not define a high or low
tariff. It is these details that will be the subject of negotiations in
the modalities phase. Clearly, there are a large number of outstanding
issues and modalities to be worked out.
The Way Forward
Questions remain, however, over when negotiations in the modalities phase
will resume since further work, even on the frameworks, would likely have
to await the outcome of US Presidential elections and changes in the European
Commission’s top-level bureaucracy. Lingering friction across the
Atlantic, as regards certain trade issues, also has a bearing on advancing
global trade talks. All this affects the timeline for the conclusion of
the Doha Round. Already, it appears that Doha Round talks will not be
ending by the scheduled January 2005 deadline. Coming out of July’s
talks, reference is made to a Sixth WTO ministerial in Hong Kong, set
for December 2005.
NEWS BRIEFS
New EU Trade Commissioner
Peter Mandelson has been appointed as the new European Union Trade Commissioner.
Mandelson is one of several newly appointed commissioners announced by
the new Commission President, Jose Manual Durao Barroso, who unveiled
his Commission August 12. Louis Michel is the new Commissioner for Development,
and Mariann Fischer Boel assumes the post of Commissioner for Agriculture.
Bernal to address Regional Law Conference
The Director-General of the Caribbean Regional Negotiating Machinery (RNM),
Ambassador Dr. Richard Bernal, will deliver the keynote address on the
occasion of an August 27 panel on International Trade at the Sixth Annual
Caribbean Commercial Law Workshop. Dr. Bernal’s presentation is entitled,
“The CARICOM Single Market and Economy and External Trade Negotiations”.
The Workshop is set for Montego Bay, Jamaica, August 25 to 28
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Nand C. Bardouille
Communications Officer
Caribbean Regional Negotiating Machinery (RNM)
3rd Floor The Mutual Building
Hastings Main Road
Hastings, Christ Church, Barbados
Tel: (246) 430-1678
Fax: (246) 228-9528
nand.bardouille@crnm.org
http://www.crnm.org