Ministers Reach Compromise Declaration

Hong Kong After a lot of discussions and generally little sleep for the major players, World Trade Organization trade ministers yesterday crossed a major hurdle and adopted a Hong Kong ministerial declaration that calls for achieving full modalities in the Doha agriculture and market-opening negotiations in industrials by the end of next April (WTD, 12/16/05).

After six days of nearly around-the-clock talks, the European Union finally conceded demands by the United States and other farm exporting countries for the elimination of export subsidies by 2013. Brussels had insisted it would not agree to a date until there was full parallelism with other aspects of the export competition pillar.

This concession, however, is contingent upon establishing full modalities as well as eliminating all forms of subsidization in export credits and food aid and "trade-distorting practices" of state trading enterprises.

The 11-page Ministerial Declaration which underwent substantial changes and two major revisions during the week for the first time called for "balance between agriculture and nonagricultural market access to ensure a "comparably high level of ambition" in both aspects of the Doha Development Agenda. "This ambition is to be achieved in a balanced and proportionate manner consistent with the principle of Special and Differential Treatment."

World Trade Organization Director General Pascal Lamy described the agreement as achieving an additional 5 percent of the ambition from members he initially expected bringing total results to 60-percent.

'2006' Conclusion in Sight

Although he had come to Hong Kong with lowered expectations, US Trade Representative Rob Portman told reporters early Monday morning that he is now satisfied with the final outcome and puts an end-of-2006 date for concluding the round in sight. He cautioned that members have challenging tasks ahead.
Brazilian foreign minister Celso Amorim called the agreement "a gateway to open up the market access negotiations." He said developing countries have finally come to "center stage."

On the controversial "cotton initiative", the Hong Kong declaration forced major exporters including the United States to agree to eliminate export subsidies next year and provide duty and quota free access to all least developed countries from the beginning of the DDA implementation period.

The House and Senate are set to finally approve today a budget reconciliation bill (HR 4241) that ends the so-called "Step-Two" cotton subsidy program by next September.

The four West African cotton producers Benin, Burkina Faso, Mali and Chad managed to secure commitments from the United States for big reductions in trade-distorting domestic support along the lines of what will be agreed in other agricultural products.

The Hong Kong meeting also delivered a package of duty- and quota-free concessions to the poorest countries . The United States held out, however, for less than full coverage. All least-developed countries would be included in the initiative, but importers would be allowed to reserve 3 percent of their tariff lines. The initiative would be implemented by 2008.

At his concluding press conference, USTR Portman mentioned that some apparel lines would be reserved along with sugar.

Japan backed US insistence on less-than-full coverage.

European Union trade commissioner Peter Mandelson said he was disappointed that all ministers could not agree to full product coverage. He commented that if the Doha negotiations are not concluded by the end of next year, the political energies might evaporate.

Indian trade minister Kamal Nath told WTD that he is happy with the outcome because it sets the direction and paves the way for accelerating the talks. He is confident that negotiations will be completed by the end of next year.

Canadian International Trade Minister Jim Peterson said negotiations now must accelerate in weeks ahead if the round is to conclude by the end of 2006.
Both Brazil and India claimed success in securing a commitment in NAMA that calls for a "Swiss" formula with coefficients at levels "which will address tariff peaks and tariff escalation." The final declaration, however, shied away from adopting the two-coefficient model. But, USTR Portman, who pushed hard for a dual coefficient one for industrialized countries and one for developing countries said he is confident that members would agree to two coefficients.

On services which went through some rough negotiations because of opposition from the Philippines and the G-90 group of developing countries ministers managed to retain plurilateral approaches as well as modal targets. The United States worked along with India and Chile to ensure that final text on services was not diluted from what was agreed in the chairman's draft circulated earlier in the month.