The DDA and Agricultural Market Access

The United States went as far as it could in last week's World Trade Organization ministerial meeting and it is now time for the European Union to "step up" and propose a more ambitious agricultural market access offer in the Doha Development Agenda, Agriculture Secretary Mike Johanns told reporters yesterday (WTD, 12/19/05).

"They hold the key to the Doha Round," Mr. Johanns just back from the six-day Hong Kong ministerial told reporters in Washington. Once Brussels moves forward, the negotiations can wrap up "very, very" quickly, he suggested.

The agriculture secretary reiterated that the Doha Development Agenda negotiations are all about market access even though the subject was not much discussed in Hong Kong. The United States and Brazil repeatedly attempted to bring it up but to little avail.

The US delegation went to Hong Kong not expecting breakthroughs and none occurred the agriculture secretary told reporters in a telephone press conference. "We are ... now down to a point where ... we can ... start talking about the really important issues market access issues and agricultural reform."

But agreement in Hong Kong on trade with least developed countries including a generous offer from the United States on "cotton" demonstrates that trade is key to their own economic development, Mr. Johanns stated. When subsidies are reduced and market access is increased, all countries benefit, including the United States.

The agriculture secretary cautioned the US Cotton Council which came out yesterday with a strong statement opposing the Hong Kong declaration not to prejudge the final outcome. The Cotton Council suggested that by agreeing early to a "cotton" initiative, the United States had violated the "single undertaking" precept of the negotiations.

Mr. Johanns said the United States made it clear in Hong Kong that "we will not agree to anything that would require our agricultural producers to carry a larger share of the load than those of other countries."

Mr. Johanns pointed out that the United States already is the most open market in the world for developing countries but said it was willing to go further by accepting language for duty-free and quota-free access for least developed countries. The US duty-free, quota-free pledge includes cotton.

The agriculture secretary was hopeful that Congress would conclude the business of ending the controversial "Step-2" cotton export subsidy program and further demonstrate US commitment to market access (see related report this issue).

European Commission President Jose Manuel Barroso cautioned yesterday that the European Union's promise to get rid of agricultural export subsidies by the end of the next budget in 2013 was conditional on other trading partners making equivalent gestures, Dow Jones news service reported from Brussels (see related story in this issue). "If our partners think we will go further, they must rethink," Barroso said, adding the implementation of the EU's 2013 commitment was conditional "on other countries taking parallel measures."

He didn't say whether he meant parallel measures on agricultural export subsidies or parallel measures on developing countries opening up their markets to imports of more European services or manufactured goods. Barroso said the EU's 2013 commitment had "saved" global trade negotiations. He also pointed to the agreement to review all EU spending in 2008 as opening up hope for earlier cuts in EU farm spending.

Hong Kong and Services

Hong Kong The Hong Kong ministerial declaration issued on Sunday gave a mandate to World Trade Organization members to pursue "plurilateral" approaches in an effort to speed the beleaguered Doha Development Agenda services negotiations (WTD, see related report this issue).

Despite last minute reservations from Venezuela and Cuba, trade ministers agreed on a blueprint to set time-lines for members to submit their final draft schedules of commitments by October 31, 2006.

The final ministerial declaration asked members to submit their initial outstanding offers "as soon as possible" and plurilateral requests by February 28. Ministers also agreed to submit a second round of revised offers by July 31, 2006.

At the six-day ministerial meeting, talks on how to reinvigorate the much-delayed services liberalization negotiations generated considerable heat with trade ministers of the African, Caribbean and Pacific nations along with Venezuela, Cuba and the Philippines opposed to binding commitments from the plurilateral discussions. They also opposed modal coverage of services commitments.

Pressure mounted throughout the meeting to overturn the draft text submitted by services negotiations chair Fernando De Mateo on the grounds that it would radically change the traditional General Agreement on Trade in Services architecture that relies on a request-and-offer approach to liberalization. But the United States working closely with India and Chile successfully convinced the countries except for Cuba and Venezuela to join the consensus on the draft annex without changes.

Indian trade minister Kamal Nath who led the so-called "core services group with the United States told WTD that he took considerable time to talk to ACP trade ministers to address their chief concerns on the plurilateral approaches.

Plurilateral Approach

But in "green room" meetings on services, only Jamaica objected to the plurilateral approach, fearing that it would impose legally binding commitments on all WTO members. India and Singapore big services exporters assured Jamaica that there would be sufficient safeguards built into the services text to minimize concerns.

Other Southeast Asian countries including Thailand and Indonesia remained silent on the services annex even though they had expressed reservations in the past.

Services talks are likely to face major hurdles because of likely conflicts in the various sectors as well as modes of supply. India's Nath said Sunday that New Delhi will call for substantial access in "Mode 4" the temporary transit of professionals across borders. India also will aim at locking in commitments at existing levels across sectors on a nondiscriminatory basis primarily to ensure that business process outsourcing is not subjected to restrictions in the United States and other markets.

"Mode-4" will present a major problem for the United States which is pushing for substantial market opening in financial services, telecommunications and express deliveries. Congress is not likely to go along with any changes in the US immigration law at this juncture, commented Deputy US Trade Representative Peter Allgeier.

Hong Kong and Developing Countries

Hong Kong The 150 World Trade Organization member trade ministers on Sunday gave some "psychological comfort" to developing countries by providing explicit assurances on flexibility as well as acceptance of the principle of less-than-full-reciprocity (see related report this issue).

But a final decision on how steeply developing countries would have to cut their tariffs as compared to industrial nations under a "Swiss" formula in the nonagricultural market access negotiations remains. Ministers put off until later a decision on the number of coefficients in the formula. The United States is demanding dual coefficients one for industrial countries and one for developing nations.

The Hong Kong declaration said a "Swiss formula with coefficients" will be adopted to "reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, in particular on products of export interest to developing countries."

The declaration said, however, that the final formula will take into consideration the interests of developing countries through less-than-full-reciprocity suggesting that developed countries will commit to greater degrees of market access than developing countries would have to provide. It also reaffirmed "paragraph eight" flexibilities for developing countries as "integral parts of the modalities."

US Trade Representative Rob Portman told journalists that the "Swiss" formula with two coefficients will be adopted for countries to cut their high industrial tariffs and bring about harmonization among all members. European Union trade commissioner Peter Mandelson told a press conference that he is confident members will eventually adopt a two-coefficient approach.

A/B/I

But trade ministers from Argentina, Brazil and India all insisted that their approach of coefficients based on the average of bound and applied tariffs is very much on the negotiating table. They suggested that negotiators will finalize the issue in the coming days.

The United States and other industrialized countries gained ground from a firm commitment in Hong Kong on "zero-for-zero" sectoral tariff elimination. A special negotiating group will review the various sectoral proposals. The document, however, made clear that "participation should be on a non-mandatory basis."

The declaration also called on the NAMA negotiating group to intensify work on how to assist countries dependent on trade preferences.

During NAMA "green room" discussions on Saturday and Sunday Argentina pushed aggressively for acceptance of a simple "Swiss" formula. India led on "paragraph eight" flexibility for developing countries. India said any lack of clarify on "paragraph eight" would likely further delay the negotiations.

Trade ministers of the ACP group pressed "green room" participants to consider different coefficients that address their specific concerns, including the anticipated loss of trade preferences.

Brazilian foreign minister Celso Amorim opposed any specificity in the NAMA formula without first knowing the level of ambition in market access for agriculture a demand that was supported by USTR Portman and WTO Director General Pascal Lamy, one trade minister told WTD.

Consequently, ministers agreed for the first time in the four-year-old negotiations to new language on the need for a balance between agriculture and NAMA. Negotiators must "ensure that there is a comparatively high level of ambition in market access for agriculture and NAMA," the declaration said. It should be "achieved in a balanced and proportionate manner consistent with the principle of special and differential treatment."

By insisting on balance between agriculture and NAMA, it becomes imperative that the agricultural market access modalities be completed in advance so negotiators know what level of ambition there should be for the NAMA talks, trade ministers said.

USTR Portman said Doha is still all about agriculture arguing the outcome in farm market access will set the agenda in NAMA and services.