WTO Ministerial Talks in Disarray As EU Lashes Out at G-20 Members

GENEVA--Preparations for the World Trade Organization's important ministerial conference in Hong Kong were thrown into disarray following two days of fruitless ministerial talks in Geneva Nov. 8-9, where member governments essentially gave up on achieving their stated goals for the December gathering.

The discussions were marred by an increasingly bitter feud between the European Union and members of the Group of 20 developing country alliance, in particular Brazil, on linkages between the Doha Round talks on agriculture and the separate talks on non-agricultural market access (NAMA) and services.

The two dozen ministers taking part in the talks left Geneva without any indication whether further high-level discussions would take place before the Hong Kong meeting, which was due to finalize a deal on key "modalities" for reducing tariffs on agricultural and industrial goods and cutting farm subsidies.

One official, however, speaking on condition of anonymity, said a small group of ministers may meet with WTO Director-General Pascal Lamy in the coming weeks in order to review a draft ministerial Hong Kong declaration the WTO chief plans to circulate before the end of November.

Ministers generally agreed with Lamy that the goals for Hong Kong would have to be "recalibrated" in light of the failure to make progress on bridging differences in agriculture, NAMA and services, leaving it up to the WTO chief to elaborate in the run-up to Hong Kong how this would be achieved.

Lamy has already indicated to trade diplomats that the goal will now be to improve on the WTO's August 2004 framework package for advancing the Doha talks and "locking in" areas of convergence in agriculture and NAMA that have emerged since then, especially over the past two months, when members began discussing figures to plug into formulas for reducing tariffs and subsidies.

The hope among some officials is that a Hong Kong agreement will include the structure of the formulas to be used and a possible range of figures to be plugged into the formulas, based on the proposals made to date.

No Modalities Deal, Portman Says

U.S. Trade Representative Rob Portman said that while the Geneva talks did result in some narrowing of differences on agriculture, NAMA and services, he admitted that ministers failed to achieve their objective of coming up with a modalities deal.

What can be achieved in Hong Kong, he added, "will depend on what happens in the next few weeks."

Portman noted that the original objective for Hong Kong was to agree on modalities that would spell out details such as the thresholds for reducing tariffs on farm imports in the four product "bands," which would ensure that higher tariffs are subject to bigger cuts. Other broad agreements were sought on areas including: the treatment of agricultural products deemed "sensitive" by WTO members; the use of a harmonizing "Swiss" formula for cutting tariffs on industrial goods; and a range of possible figures for reducing industrial tariffs.

"Those hopes seem less likely to be achieved now," Portman admitted. "But we have not given up, we will not give up."

Mandelson Downbeat, Johanns Optimistic

EU Trade Commissioner Peter Mandelson was more downbeat in his assessment, declaring that the Geneva meetings were useful "not in narrowing the differences, but in defining them."

'The gap is significant," he continued. "This has been sobering for all ministers present here."

Mandelson reiterated his earlier concerns expressed in the ministerial meetings about lowering ambitions for the ministerial conference.

"I have argued strongly this week for the keeping of our original aims [but] I was not in the majority," he told reporters Nov. 9. "My fear is that in lowering expectations for Hong Kong, we will cause the overall ambition for the Round to fall," he declared.

U.S. Agriculture Secretary Mike Johanns, who was also in Geneva for the ministerial talks, insisted that reviewing expectations for Hong Kong "is not a sign of crisis."

"It is a realistic assessment that will help ensure that we engage in problem solving rather than finger-pointing in December," Johanns declared. "I'm optimistic that we can make significant progress in Hong Kong even if it is not as much as ministers would have liked."

Johanns also stressed that the United States was not reducing its expectations for an ambitious outcome to the Doha talks and the goal of completing the negotiations by the end of 2006. "But it's going to require all of us to dig in deeper to find common ground on the issues where we are still apart," he declared.

In a joint statement, the G-20 declared that agriculture "lies at the center of the Doha Round" and that linking the farm trade talks with other negotiations was both contrary to the Doha mandate and could lead to "unbalanced results" for developing countries.

Nevertheless, additional movement in agriculture from other trading partners "would find a response in terms of proportionate contributions in other areas of the negotiations," added the G-20. Members of the group are Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, the Philippines, South Africa, Thailand, Uruguay, Venezuela, and Zimbabwe.

The Geneva talks were preceded by a Nov. 7 meeting in London between top trade officials from the United States, the EU, Japan, Brazil, and India, where the EU succeeded in turning the focus away from agriculture and spotlighting the NAMA and services talks.

But once again, differences over agriculture came to the forefront, with the feud between the EU and the G-20 over linkages with NAMA and services emerging as the biggest stumbling block to the talks.

Brazil Slams EU

Brazil's foreign minister, Celso Amorim, slammed the EU Nov. 9 for refusing to improve its offer on reducing farm tariffs, which the G-20 has deemed inadequate, and attaching unacceptable demands for concessions in the separate talks on NAMA and services as the price for further movement in agriculture.

Some "are putting the narrow interest of those that probably number not more than a few thousand people above the interests of the large majority of the world's population," Amorim said of the EU proposal

"Realistically, what is being asked in terms of services, and what is being asked in terms of NAMA, is not to be obtained, it's just to create difficulties so we can't move on agriculture," he declared.

The EU said its offer to cut tariffs by an average of 46 percent was conditional on developing countries such as Brazil and India accepting a 15 percent cap on their industrial tariffs and agreeing to offer new or improved market access commitments in at least 93 services subsectors.

Alfredo Chiaradia, Argentina's secretary of trade and international economic relations, said the EU's proposed linkages crossed four "red lines" for the G-20: proposing that developing countries be treated differently, depending on their level of development; violating special and differential treatment provisions for developing countries by, among other things, insisting that developing countries accept a 15 percent cap on industrial tariffs while proposing a 100 percent tariff cap on agricultural imports for rich countries; injecting issues into the negotiations such as the expanded protection of geographical indications, which have already been rejected by many countries; and setting numerical targets for market liberalization in services, also widely rejected by many WTO members.

"When you have all these elements tied to something which was going in the right direction, it invalidated the whole thing," Chiaradia declared. "Unfortunately, it was clear in the indications from the EU that it was their bottom line."

The Argentine official directly blamed the EU's insistence on these linkages for the subsequent decision to lower expectations for Hong Kong. However, "we expect that high ambition for the round is alive and will be pursued after Hong Kong," he declared.

Brazil, EU Spar Over NAMA Initiative

Brazil is also furious with what it views as the EU's dismissive response to an initiative it put forward in London on NAMA. Amorim told Mandelson that Brazil would consider cutting its tariffs on industrial goods by 50 percent if the EU accepted the G-20 proposal to cut its farm tariffs by 54 percent.

Mandelson, however, told the meeting that Brussels would not budge from its Oct. 28 offer to cut its farm tariffs by an average of 46 percent; farm exporting countries have challenged this figure, arguing that the EU proposal would actually result in cuts of 39 percent or less, particularly if provisions for treatment of sensitive products are taken into account.

"We have made credible offers, described by Pascal Lamy as serious," the EU chief insisted. "I believe we have negotiated in good faith."

"These moves quite simply have not been reciprocated by our partners in the areas of industrial tariffs and services," he added. "That's the bargain lying at the heart of this negotiation. But demanding more and more in agriculture, without proper balance in commitments from others in agriculture and outside of agriculture, does not add up to deal making."

U.S. 'Made Good Response,' Amorim Says

Amorim compared the EU's position with what he said was the more cooperative attitude from Washington on both agriculture and NAMA

"When we speculated on figures" for NAMA in London, the United States "made a good response," Amorim declared. "They were interested. The European Union, it fell into deaf ears."

The Brazilian minister also noted that while the G-20 remains critical of the United States' proposal on reducing farm subsidies, Washington has said it is willing to go farther if other WTO members, in particular the EU, make more generous offers on reducing tariffs. In contrast, the EU has "been adamant" in saying that its Oct. 28 proposal is its final offer.

"The EU made a move, but it was insufficient, much below the expectations of everybody, and it had so many strings attached," Amorim declared. He warned that additional discussions beyond Hong Kong on finalizing modalities will produce nothing if Brussels continues to dig in on agriculture.

If the EU offer "is not improved upon ... then we won't be able to move," he declared.

Mandelson Says Brazil, India Not Serious

Mandelson for his part accused Brazil and India of failing to engage in any serious negotiations on NAMA and services, where the EU is looking for new market access opportunities to offset its concessions in agriculture.

"This week has revealed that other countries, reluctant to make credible offers of their own in industrial goods and in services, are hiding behind the European Union on the question of agriculture," Mandelson declared. "I think another proposal by us on agriculture would not alter that, indeed it might even encourage it and perpetuate it."

Mandelson said that in contrast to some leading developing countries, "we have made a comprehensive offer on agriculture ... We have not seen an offer on industrial goods, we have not seen an offer or a suggestion by other countries, including Brazil, on how we are going to jump-start the negotiation on services, which at the moment are marooned on a sandbank of completely inadequate offers."

The EU chief accused developing countries of engaging in brinksmanship and warned that the negotiating tactics by the G-20 on agriculture could backfire by eroding support for the Commission's negotiating position within the EU.

G-20 'Playing Politics.'

"The G-20 are seriously weakening and isolating those very forces within the European Union and among member states who want an ambitious outcome of the Doha Round," Mandelson declared. "What they're doing is playing politics with this round in a way which is weakening the position of my strongest supporters amongst member states. That's how serious this situation is."

Mandelson has come under fire from a number of EU member states, in particular France, for proposing what they consider to be excessively generous tariff cuts on agricultural imports.