Dumping sequencing or agri-reform process in WTO Doha Round?

11 May, 2015

TWN Info Service on WTO and Trade Issues (May15/05)
11 May 2015
Third World Network

Published in SUNS #8017 dated 7 May 2015
Geneva, 6 May (Chakravarthi Raghavan*) - The WTO Director-General, Mr. Roberto Azevedo, appears to have attempted Tuesday (5 May) to tweak the Doha trade talks by dumping the "sequencing" framework, thus enabling the US to avoid answering tough questions on domestic support in agriculture for concluding the negotiations and ensuring a successful Nairobi Ministerial Conference.
Since the launch of the Uruguay Round negotiations in 1986 at Punta del Este, and its conclusion in 1994 at Marrakesh including by placing the agriculture sector and trade in agricultural products within the ambit of the multilateral trading system and its disciplines, reducing trade barriers at the border and cutting domestic support have been seen as two sides of the same coin, in the same way as in GATT disciplines in the industrial sector and specific domestic supports and subsidy for industry.
At Marrakesh, in return for this commitment to reverse course on agriculture, and undertake reforms, albeit over a longer time frame, developing countries agreed to more obligations and commitments in the areas of trade in industrial goods, services (GATS) and global protection for intellectual property (TRIPS).
It was in pursuance of the Marrakesh commitments to continue with the reform process in agriculture after the initial set of reforms and disciplines (covering reduction of domestic support, increasing market access by cutting tariffs, and gradual elimination of export subsidies) that the Doha Round was launched with agriculture as the major focus, but also adding non-agricultural market access and further services liberalisation.
These last two were done so as to provide the major developed countries, in particular the US, EU and Japan with domestic political cover to undertake further reforms in cutting domestic support and border tariffs by showing as trade-offs gains in trade in non-agricultural market access (NAMA) and services against agriculture concessions.
Hence from the beginning agriculture was seen as the yardstick for any concessions by developing countries in NAMA or Services, and the entire exercise carried out as a single undertaking.
As a corollary, since the launch of the Doha negotiations in 2001, in so far as the agriculture sector is concerned, reduction of protection on the three pillars of domestic support, market access and export subsidies were viewed as one, rather than (as has happenned now) maintaining or increasing protection and domestic support by developed countries through box-shifting.
These two main elements lie behind the "sequencing" followed since 2001, in the talks.
However, while at Doha, the US was fully behind further reforms in agriculture trade, and in particular reducing barriers to trade in Europe and Japan, by aiming at both border controls and domestic support, soon after it began reversing course, now reaching a stage when it is no longer willing to reduce its own domestic support, or even talk about it, given the nature of its farm law and the power of its farm lobby.
The suggestion of the WTO D-G, at the General Council Tuesday, for moving away from the sequencing framework, and focussing on market access issues in agriculture, NAMA and Services, thus dumping any talk of cutting domestic support on agriculture, has raised doubts whether all this is a manoeuvre to enable the US to avoid answering tough questions on this, several trade envoys told SUNS after the General Council.
Hitherto, in the "sequencing" based negotiations, agriculture issues, and more so issues of trade-distorting domestic support got primacy over other areas of the DDA talks, in drawing up a post-Bali work programme.
At the General Council meeting, Azevedo said (according to his remarks as TNC chair, posted on the WTO website) "we have to be aware of the damaging consequences that any kind of de-facto sequencing may have". He acknowledged that "there are "gateway" issues that we need to tackle very quickly."
At the formal TNC meeting on 27 April, while he promoted a re-calibrating strategy for the post-Bali work programme, the large majority of developing countries negatived such an approach, and insisted that agriculture is the locomotive of the Round, and that the revised modalities texts evolved over years of patient talks should provide the basis for further progress.
In his remarks Tuesday at the General Council, without suggesting what new approach would replace the "sequencing" strategy, the Director-General said the work programme must fulfill three criteria.
First, "it must be substantive and meaningful," implying that it ought to cover all areas in a balanced manner. Second, "it must provide clear guidance on how to conclude the [Doha] negotiations" at the tenth ministerial conference in Nairobi, Kenya, and third, "it must be a springboard to a successful MC10," he maintained. (The logo for the Nairobi meeting was unveiled Tuesday).
To pave the way for accomplishing "an overall balance" in the "substantive" work programme, Azevedo is to begin a discussion "on the horizontal trade-offs, including the wider Room W consultations [where all members can take part in the proceedings]."
"And the importance of this horizontal process underlines how vital it is that we make substantive movement in all areas to facilitate these trade-offs," Azevedo emphasised.
As part of the trade-offs, the market access in agriculture, industrial goods, services, and rules will be explored ahead of domestic support. Since there is no clarity yet on what a major industrialised country (the US) is ready to do at this juncture in the domestic support pillar of agriculture, only market access and rules will be taken up, said a trade envoy who took part in the General Council meeting.
Azevedo said "development and LDC issues must continue to remain central to our work" while emphasising the operationalisation of the LDC services waiver in which some 25 members indicated the preferential treatment they will provide in LDC services sectors and modes of supply.
So far, only one member has followed through and submitted a notification, the Director-General added.
But on other LDC issues such as duty-free and quota-free market access, simplification of preferential rules of origin, and cotton, there is still no clarity whether they will be fully addressed in the work programme, said a LDC trade envoy from Africa.
Until now, a large number of developing countries, particularly Brazil on behalf of the G-20 developing country farm coalition, have maintained consistently that agriculture is the engine of the DDA negotiations.
Consequently, the developing and least-developed countries, particularly the Cotton-four countries in West Africa (Benin, Burkina Faso, Mali, and Chad), have demanded that the trade-distorting domestic support and export subsidies and export credits need to be negotiated along with other issues in the Doha agriculture package as part of the sequencing strategy.
As part of this strategy, members would approach market access for industrial goods, services, rules, environmental goods, and developmental issues concerning special and differential treatment in the DDA, after the difficult issues in the agriculture package, especially the growing trade-distorting domestic subsidies for rich farmers in industrialised countries, are sufficiently addressed.
Although the "sequencing" framework was not stated in the mandate, it was generally accepted as the framework to conclude the DDA negotiations.
Mr Azevedo, when he was Brazil's trade envoy, aggressively promoted the sequencing strategy, saying that agriculture is the locomotive for the Doha negotiations, noted a South American trade envoy who was familiar with the negotiations.
But, in his current role as the chairman of the Doha TNC , Mr Azevedo informed members at the General Council meeting on 5 May that "many delegations noted that, we have to be aware of the damaging consequences that any kind of de-facto sequencing may have."
He said "the key potential trade-offs between the different areas are not clearly on the table as yet."
"This is why I announced at the TNC that I would increasingly look at ways to facilitate a discussion on the horizontal trade-offs, including though the wider Room W process," Mr Azevedo said.
The Director-General, however, did not explain what "these damaging consequences are," which member or members have called for abandoning the sequencing framework, and why those damaging consequences were not noticed when the Trade Facilitation Agreement was negotiated in 2013.
"For all we know, when he was making a pitch for the Trade Facilitation Agreement in 2013 and knowing fully well that it is a market access agreement, he did not get into any discussion on horizontal trade-offs," said another envoy.
During the TF negotiations in 2013, the Director-General held meetings only on the TF issue without linking it to other issues in the Bali package such as agriculture, issues on public stockholding programmes for food security and developmental demands, particularly those raised by the least-developed countries.
"Effectively, he held separate meetings on these issues without bringing any horizontal trade-offs," the envoy said.
Over the last two months, the Director-General has held consultations with a former United States chief agriculture negotiator, Joseph Glauber, to figure out what Washington can offer in the face of its farm bill adopted last year.
It was found that because of the new farm bill which was enacted last year and which would be in place for the next five years, the US will exceed the cap of US$14.5 billion as negotiated at the time of the 2008 revised draft modalities.
Azevedo held a meeting with trade envoys from six countries - the US, the European Union, China, India, Brazil, and Australia - at the Australian mission a fortnight ago to discuss the difficult issues in domestic support.
During the discussion, there were reportedly sharp exchanges on the de minimis provision for China, and Article 6.2 of the WTO's Agreement on Agriculture (AoA).
The US maintained that it would take a commensurate commitment in domestic support only after China agrees to reduce its de minimis and further tightening of Article 6.2 of the AoA, a stand that is not consistent with the previous Doha mandates such as the Doha Ministerial Declaration of 2001, the July 2004 framework agreement, the 2005 Hong Kong Ministerial Declaration, and the 2008 revised draft modalities, said sources in trade missions familiar with the meeting.
One trade envoy said that the Director-General has seen the writing on the wall that he cannot address the difficult issues in domestic support at this juncture.
According to a developing country negotiator, the US wants the Director-General to remain silent on the issue of domestic support commitments until the trade promotion authority bill is passed in the Congress.
The negotiator said any discussion on domestic support reduction commitments at this juncture could vitiate the climate in Washington where the administration is facing hurdles to get support from its Democratic party members for passing the TPA.
"Hence, the change for moving away from sequencing strategy based on agriculture first and the rest later of the Doha agenda," the negotiator said.
(* The above comment was contributed by Chakravarthi Raghavan, Editor-Emeritus of the SUNS, with inputs from D. Ravi Kanth.)