Little Progress in London on DDA
12 March, 2006
Washington Trade Daily
EU trade commissioner Peter Mandelson said only "incremental" progress was made in resolving the difficult issues in market access and trade-distorting domestic support.
Little progress also was made in market-opening for industrial goods.
Brazilian foreign minister Celso Amorim was even more pessimistic telling reporters that "we have been working in an incremental way, and I don't believe we can get a deal in incremental steps."
The six plan to meet again early next month to give a final push to the stalled negotiations but no date was set.
Nevertheless, the six ministers are sticking to the end-of-April deadline to conclude negotiating modalities.
US Trade Representative Rob Portman told WTD that it is still important to reach full modalities by April 30 despite the limited progress.
Over two days of talks Friday and Saturday, the ministers also briefly discussed other issues in the trade negotiations. On services, they agreed to have a review meeting in May.
Senior Group-of-Six trade officials plan to meet in Geneva March 27 and 28 to prepare for the ministerial.
...And Mr. Lamy
World Trade Organization Director General Pascal Lamy participated in the marathon event offering guidance during the negotiating session on nonagricultural market access. Mr. Lamy was anxious to get direction from the six trade ministers on the figures for agriculture and NAMA tariff-cutting formulas along with coefficients for the formula to cut industrial tariffs. He also sought some direction on the relationship of the market-access negotiations with "paragraph eight" flexibilities for developing countries.
At the end of a 12-hour meeting on Saturday, Brazil's Amorim expressed his disappointment about lack of sufficient engagement in hammering out figures for the market access pillar. "What is lacking is the deep conviction that if we don't have an ambitious result, we won't have any result at all."
USTR Portman said it is still within the grasp of members to reach a deal but it requires some "tough trade-offs" and "compromises." He noted that ministers for the first time could look at the results of the various simulation exercises and "were able to see the broad outline of an agreement." He noted to reporters that all members have "difficult" choices to make, but the big picture should not be lost.
The USTR reminded his counterparts that the United States currently has embarked on bilateral free trade negotiations, but Washington would not lose interest in the multilateral effort.
Indian trade minister Kamal Nath echoed concerns that the developmental goals of the DDA are being short-changed due to contradictory positions. He said the talks "need more comprehension." Australian trade minister Mike Vaile also expressed disappointment about the manner in which the talks have progressed in both agriculture and NAMA but said ministers have drawn the connections between current differences and areas suitable for compromise.
Japan's agriculture minister Shoichi Nakagawa said Tokyo is ready to strike an agreement. Tokyo is willing to show flexibility but not on issues like tariff caps.
The ministerial failed to break any new ground in the farm negotiations due primarily to Brussels' refusal to offer anything new that would advance the talks, WTD was told. Ministers had been ready to resolve at least two important core elements in farm talks * agreement on thresholds in the four-band formula for cutting farm market access barriers as well as some broad indication from the European Union about improvements in its October 2005 market access offer.
Brussels flatly refused to budge even on the thresholds issues based on the compromise Group-of-20 formula, WTD was told. It calls for thresholds for four tariff bands zero percent to 20 percent, 20 percent to 50 percent, 50 percent to 75 percent and above 75 percent. The EU proposal includes thresholds of zero percent to 30 percent, 30 percent to 60 percent, 60 percent to 90 percent and 90 percent and above.
Hopes were thwarted because of member-state pressure on Trade Commissioner Mandelson. France circulated a letter written just prior to the December Hong Kong ministerial meeting from 13 EU members saying the Commission has already gone beyond its negotiating mandate and warned not to offer anything additional.
US Silent
Apparently the United States did not pressure Brussels to come up with a new proposal, trade ministers told WTD. "We don't know why the US remained silent but it gave us the impression that the two might have gotten into an understanding," according to one minister. The battle on agricultural farm market access was left largely to Brazil and Australia which pressed hard for an improved access offer from Brussels.
The EU also refused to budge from its proposal on reserving 8 percent of its agricultural tariffs lines as sensitive products. The EU also refused to concede to demands for taking domestic consumption overall rather than imports as the basis to set tariff-rate quotas.
The US came under intense opposition for sticking to a 1999 to 2001 base period for determining domestic support reductions. It also felt the heat on its stance on product-specific subsidies, WTD was told. Brussels pressed Washington to accept a 65-percent overall cut in the aggregate measurement of supports "amber box" in exchange for bettering its 65-percent offer to 75 percent. The United States has insisted that the EU agree to an overall cut of 80 percent in its "amber box" programs.
The EU, India and Brazil said Washington must accept the 1995 to 2000 implementation period when subsidies were higher. The United States also refused to agree on product-specific caps as demanded by the EU, Brazil and India.
On disciplines for a new "blue box" of transitional income payments, Brussels said it is prepared to cap spending at 2.5 percent of total production from the currently agreed 5 percent. The United States rejected additional criteria for the "blue box" as demanded by the EU.
In the NAMA discussions, the United States, the EU, Japan and Australia insisted that Brazil and India agree to a coefficient of "15" in the "Swiss" formula, effecting tariff cuts from applied levels. Backed by the United States, the EU and Australia, Japan raised the applied-tariff issue. Australia's Vaile pursued the argument for "commercially effective" market access in the tariff-cutting exercise.
Simulations from the NAMA formulas have clearly shown that unless developing countries agree to cuts based on a coefficient of "15" in a Swiss formula, there would be no commercially significant market access. But, India argued, a 15 coefficient would require its tariffs to come down by 10 percent in real terms well above for industrial nations.
North/South Split?
Discussions among the six demonstrated a sharp divide between industrialized countries on one side and the developing countries on the other, trade ministers told WTD. India and Brazil flatly refused to any specific demand on coefficients, but said they are ready to show flexibility on the basis of the outcome in agriculture and the principle of "less-than-full reciprocity."
Brazilian foreign minister Amorim pointed out that while Brussels and Tokyo are not prepared to show flexibility in agriculture, they continue to insist on an unequal coefficient of "15". Mr. Amorin offered numbers during the meeting that Brasilia is willing to consider provided there is an appropriate response in the farm market access negotiations.
India's Nath told WTD that he opposed a "take-it-or-leave-it" approach in NAMA. He also insisted that there be no watering down of "paragraph eight" flexibilities.
USTR Portman suggested that "less-than-full-reciprocity" remains a vague concept in the talks; WTO chief Lamy is understood to have said that it means different things to different members, ministers told WTD. Some developing country ministers also complained that while the industrial countries would cut tariffs from their bound rates, they insist that similar cuts be on applied tariffs in developing countries. The industrialized countries want 2005 to be the base period for tariff cuts by developing countries, sources said.