African Ministers reject 'partial modalities' approach to WTO April deadline

Original Publication Date: 
19 April, 2006
African Trade Ministers have declared that the WTO modalities on agriculture and non-agricultural market access (NAMA) that are scheduled to be concluded at the end of April must be 'all-inclusive' and indicated that they would not accept 'partial modalities' that leave out issues of concern to African countries.

This rejection, contained in a Ministerial Declaration, implies that the African countries would not find acceptable the reported two-phase plan by the WTO Director-General Pascal Lamy to first finalise modalities in what he defines as key issues in agriculture and NAMA, leaving aside other issues to be settled later.

At the sidelines of the Conference of African Union Trade Ministers that concluded in Nairobi on 14 April, some African Ministers reportedly met with Lamy and told him bluntly that they would not accept an end-of-April deal that left out Africa's priority issues such as special treatment for developing countries in agriculture (especially special products and the special safeguard mechanism) and a solution to the problems caused by preference erosion.

The African concerns add to the problems that have cropped up in recent days that make it unlikely that the end-April deadline for modalities in agriculture and NAMA (established by the WTO's Hong Kong Ministerial) will be met.

It is also becoming more likely that a meeting planned by Lamy for the end of April of some 30 Ministers, intended to finalise the modalities, will be cancelled, postponed or scaled down. At the Nairobi meeting, Lamy himself hinted that the meeting might not be held if there is no progress in this week's Geneva negotiations on agriculture and NAMA.

Kenya's Trade Minister Mukhisa Kituyi, who has assumed the position of Chairman of the AU Trade Ministers, said in an opening speech that he did not believe that the WTO members would conclude modalities at the end of this month. This sentiment was generally shared by many of the delegates at the Ministerial.

'How realistic is the 30 April deadline?' asked another Minister. And the head of another delegation said: 'After the Hong Kong Ministerial, the EU and US have been blaming each other for not moving ahead, and there has been nothing more in terms of progress.'

They were both speaking out at a dialogue session held with Lamy and representatives of the EU, US, Brazil and Japan.

At the dialogue session, on 14 April, Lamy said that the key issues in agriculture and NAMA would be discussed in Geneva in the week starting 18 April. 'We'll be in a position at the end of that week to assess how far we can reach at the end of April and what sort of Ministerial involvement is needed, or whether it will be needed.'

The Conference adopted two Ministerial Declarations: on the WTO's Doha Work Programme, and on the Economic Partnership Agreements (that African countries are negotiating with the European Union). It also adopted a resolution on regional integration (rationalisation and harmonisation of Africa's regional economic communities).

In the Declaration on the Doha work programme, the Ministers emphasised that the April outcome for the modalities in Agriculture and NAMA 'must be all-inclusive and also address the concerns of African countries. In this regard, the establishment of partial modalities that exclude the concerns of Africa and its LDCs Members will not be conducive to a productive and acceptable outcome.'

Spelling out areas of concern to Africa, which should be included in the modalities, the Declaration mentioned the following issues in agriculture: the tariff reduction formula, special products, special safeguard mechanism (SSM), preference erosion, cotton and commodities.

It stressed that the SSM should apply to all products, and that trade-related solutions must be found to urgently address preference erosion problems. There should also be full modalities for the cotton issue by the end of April 2006.

On NAMA, the Ministers stated that they are concerned that the modalities 'may lead to the de-industrialisation of African countries if their concerns on adequate flexibilities, less than full reciprocity, appropriate Special and Differential Treatment and erosion of preferences are not adequately addressed in the negotiations. Accordingly, we expect the modalities to fully address these concerns and provide for a credible trade solution to the issue of preferences.'

At the dialogue session, Lamy reiterated his thesis that the 'key modalities' comprised a triangle of issues (agricultural subsidies, agricultural tariffs and industrial tariffs) and that they were the key to 'unlocking' remaining issues such as services, preference erosion and implementation issues.

He repeated that the US would have to accept real cuts in agricultural subsidies, the EU and Japan had to accept similar cuts in subsidies and real cuts in agricultural tariffs, and emerging developing counties like Brazil and India would have to provide some real cuts in industrial tariffs.

On preference erosion, which is a particularly sensitive issue for Africans, Lamy admitted that it would have a potentially negative impact and a solution must be found, 'but only if we agree on the right sequence.'

What this 'sequence' is, or whether there should be a sequence at all, has become a bone of contention.

Lamy's statement in Nairobi was in line with what he had told a Green Room meeting of Ambassadors in Geneva in recent weeks, that the planned end-April mini-Ministerial would be confined to resolving 'key modalities' which hehad defined as agricultural subsidies (threshold and numbers), agricultural tariffs and the number of sensitive products, and the NAMA tariff reduction formula (with coefficients) and flexibilities.

In this Lamy scenario, other issues such as special products and SSM in agriculture, modalities for 'Paragraph 6' countries (those with less than 35% tariff bindings) in NAMA, and preference erosion in both agriculture and NAMA, would be dealt with at a later stage.

The African Ministers in their Declaration have rejected this 'partial modality' approach to meeting the end-April deadline, and insisted that their priority issues be included in the Agenda. They do not agree with the definition of what are the so-called 'key issues', since to the Africans, their issues (such as special products, SSM, preference erosion) are key issues and should not be left out.

Their concern is that if a deal is struck on the so-called 'key issues' as defined by Lamy, they would no longer have the leverage to have their issues properly addressed in the modalities, and these would continue to be left aside and in the end neglected or subjected to poor treatment.

The Ambassador of an influential African country, speaking after the meeting, said that his Minister had spoken to Lamy on a bilateral basis and made it clear that he would not accept an agreement on modalities that excluded the issues of priority to Africa.

'We told Lamy that sequencing is all right, so long as it is the sequencing of issues in the same document,' he said. 'But we cannot accept a sequencing in terms of different timing, that so-called key issues are settled as a first stage, and our issues are discussed at a later stage, as there will no longer be conditions present to properly address our issues once the so-called key issues are settled.'

Besides Lamy, also present at the dialogue session at the African Ministerial meeting were Deputy US Trade Representative Karan Bhatia, the European Commission's Director of Trade Karl Falkenberg, a representative of Brazil's Foreign Minister and a representative of Japan.

Bhatia was pessimistic about meeting the 30 April deadline and about the Doha agenda as a whole. 'The US shares the concern expressed by many of you today about where we stand on Doha,' he said. 'We face a significant challenge in meeting the end-of-April deadline on modalities.

'Even more troubling, we do not see a depth of commitment to the goal of an ambitious outcome that we (both Africa and the US) must have to make a deal that is politically saleable and meets the development promise of Doha.'

Falkenberg said the EU remains committed and wants real cuts in agriculture. But he could not predict what would happen at the end of April. He sounded a high note of warning to the African Ministers, that if the ambitious market access proposals in agriculture are accepted, then Africa will bear a risk that 70% of its agricultural exports to the EU would be lost to more competitive producers, as a result of preference erosion.

This statement was seen by several observers to be a call by the EU to African countries to support the EU's defensive position of not having deeper cuts in its agricultural tariffs.

At the opening session of the Ministerial segment of the Conference, the African Union's Trade Commissioner Elizabeth Tankeu said that not much progress had been made in the WTO negotiations on major issues of interest and concern to Africa.

'In spite of the Doha commitment to place the needs of developing countries at the heart of the negotiations, the developed countries have not mustered the political will to offer the necessary negotiating flexibility to ensure a favourable outcome of the Round for developing countries,' she said.

'In agriculture and NAMA, there has been a lack of progress, with the developed countries being more concerned about protecting their interests and dominant position in global trade than in placing the needs and interests of developing countries at the heart of the negotiations.

'This development calls for concerted and collective efforts by African countries to ensure the negotiations remain faithful to the promise of Doha and achieve fully the development objectives of the Round. Africa has the right to insist that an outcome of the Doha Round negotiations that does not take adequate account of its major interest and concerns will not be acceptable.'

The Kenyan Vice President Moody Awari said Africa's greatest challenge was its continued marginalisation in world trade. From 1990 to 2003, Africa's share of world trade fell from 3.1% to 2.3%; its share of world services exports dropped from 2.5% to 2.1%.

The Doha negotiations must address the persistent imbalances by recognizing the need for policy space through special and differential treatment provisions in all elements of the negotiations.

'Further, we need to ensure the outcome of negotiations preserves the existing market access of our products and in addition secure better and additional market access,' he said, adding that removal of structural distortions in agriculture is necessary to creating a level playing field.