Sombre mood at WTO as April deadline looks more unattainable

The mood at the World Trade Organisation headquarters turned even more sombre Wednesday 19 April as many delegates have become convinced that it would be impossible to agree to modalities for agriculture and non-agricultural market access by the 30 April deadline set by the Hong Kong Ministerial.

Several delegations are also now doubting whether the plan, announced by the WTO Director-General Pascal Lamy last month, to hold a 'Mini-Ministerial' meeting of about 30 Ministers in the period 29 April to 5 May, would or should go ahead.

Two pointers that there would not be an end-April Ministerial meeting have emerged, according to a senior developing-country diplomat.

The first is the unexpected shift of the US Trade Representative Rob Portman to a new job at the White House, announced on 18 April by US President George W. Bush. To many delegates at the WTO, this shift, taking place at a crucial moment in the Doha talks, indicates that the White House has put domestic priorities ahead of the multilateral trade negotiations.

'There are so many uncertainties now,' said the diplomat. 'For example, if the end of April talks are to go ahead, who will represent the US - Portman or his successor, who has not been confirmed yet by the US Congress?'

The second factor, said the diplomat, is that the crucial talks on NAMA and agriculture this week have not been going well enough to indicate any breakthrough or even any significant progress.

If some Ministers are to come to Geneva, there would not be much for them to work on, and there would be the risk that the failure to reach modalities or even partial modalities would be played out in front of the world media, according to this line of thinking.

Lamy is expected to convene a Green Room meeting of some Ambassadors on Friday to review the situation. That meeting will probably decide on whether the plan for an end-April mini-Ministerial will proceed, be modified, or cancelled.

One scenario, according to observers, is for a Ministerial meeting to proceed, but limited to only the G6 countries (US, EU, Brazil, India, Australia, and Japan). Even then, the value-added of such a meeting would have to be considered, especially with the sudden changeover from Portman to Susan Schwab as USTR.

Another scenario being considered, according to some trade diplomats, is for the envisaged mini-Ministerial of 30 Ministers to be held in mid-May, around the time of the scheduled General Council meeting.

Or if there has not been enough progress yet by that time, a mini-Ministerial could be held later, perhaps in June.

Some African diplomats have also reported that Lamy, during his visit to Nairobi for the African Union's Trade Ministers' conference last week, told some of the Ministers in bilateral meetings with them that he was thinking of having a full Ministerial meeting (to which all Ministers would be invited) at the end of July.

The swirl of confusion over what would happen in the next few weeks as the end-April modalities deadline approaches was evident as the WTO began its second day of this week's talks on agriculture and NAMA on Wednesday.

The question of process was uppermost on some diplomats' minds. 'If the April deadline is missed, who will define the new deadline, and what issues will be included in this new deadline, and what issues will be left out?' asked a senior African diplomat. 'Such decisions must be taken by the membership as a whole, and not by just a few countries, or by the Director General.'

He added that even if a mini-Ministerial were still to be held at the end of April, there would be serious questions about the legitimacy of the process. 'How can a meeting of some Ministers proclaim on modalities, which are crucial issues affecting all Members?'

So far, there has been little significant movement in this week's negotiations on NAMA and agriculture. On Tuesday and Wednesday, deep divisions re-surfaced at the open-ended meetings on NAMA.

At the start of the NAMA session on Tuesday, the Chairperson of the NAMA Negotiating Group, Ambassador Don Stephenson of Canada, presented a report on his consultations of the previous weeks. This showed the continued existence of differences among Members on key issues of the tariff-reduction formula and treatment of unbound tariffs.

On Wednesday, the differences in NAMA were again evident when the Group discussed three more issues - flexibilities for 'paragraph 6' countries and for small and vulnerable economies (SVEs), and preference erosion.

The 'paragraph 6 countries' (so-called because they are referred to in paragraph 6 of the NAMA annex of the WTO's August 2004 Framework agreement) are members that have bound 35% or less of their NAMA tariff lines.

The 2004 Framework exempts countries with a binding coverage of non-agricultural tariff lines of less than [35] percent from making tariff reductions through the formula. They are expected to bind [100] percent of non-agricultural tariff lines at an average level not exceeding the overall average of bound tariffs for all developing countries.

The figures in brackets are subject to negotiations and the simple mean average referred to is widely taken to be 28.5 percent.

In previous consultations, 11 of the paragraph 6 countries (including Kenya, Mauritius, Macau (China), Nigeria, Suriname, Ghana, Zimbabwe and Sri Lanka) had proposed that they be allowed to bind up to 95% of their tariffs at an average level that does not exceed 50%.

This had been objected to by several members, which had stated that this would change the August 2004 framework, in which the average tariff level of 28.5% had been implied.

At Wednesday's NAMA meeting, the members agreed to lift the brackets around 35%, thus confirming the August Framework's definition of para 6 countries.

However, there was a heated discussion on the treatment of these countries. Kenya on behalf of the 'para 6 countries' put forward a new proposal that the countries be allowed to bind up to 70% of their tariff lines at an average rate of 28.5%.

Several members objected to this (including US, Peru, Costa Rica, Chinese Taipei, and Ecuador), saying that the 100% figure in the bracket should remain, that the flexibilities for these countries are generous enough, and that what was in the Framework was 'delicately balanced.'

Kenya replied that among the various groups, the Para 6 countries had at least put forward concrete proposals with numbers. It reminded the meeting of the history of the NAMA annex in the August framework, that there had been many disagreements on its provisions, as recognised in a letter sent by the then Chairperson of the NAMA Group to the General Council chairperson, when submitting the draft of the Annex.

On flexibilities for small economies, El Salvador said that the small economies' group was working on a new proposal (including on definition of small and vulnerable economies and the treatment for them) which they would submit soon.

On preference erosion, countries adversely affected (including Kenya and Mauritius) spoke on the need for a trade-related solution, including their proposal for a correction coefficient and longer transition period for products which preference receiving countries are benefiting from.

However, this was opposed by Ecuador and Costa Rica, which would not accept proposed solutions that affected the rights of other members. They pointed to studies at a recent WTO seminar on preference erosion that this problem involved only a few countries and a few products.

This was challenged by Kenya which questioned the conclusions of the studies which it said were based on incorrect assumptions.

At the agriculture meeting, the chairperson of the negotiations Crawford Falconer presented 'reference papers' on five subjects, three of which (food aid, state trading enterprises and export credits) were discussed on Tuesday and Wednesday.

In a note to Members on what to expect of the agriculture week, Falconer stated that 'we are not in anything that I can recognise as a closing zone for finalising modalities.'

He detailed some progress that had been made since Hong Kong, but said that a resolution of outstanding issues could only come from negotiated compromises among Members - and 'not via papers from heaven.'

He also underlined that this is a 'genuinely multilateral endeavour' to be achieved only with the consensus and participatory involvement of the entire Membership. It is also, he stressed, an enterprise aimed at securing 'modalities'. He further emphasised: 'Not 'half' modalities or 'partial modalities' or modalities 'a la carte'. It is the full fixed menu.'

This statement seems to be in sharp contrast to the approach promoted so far by Lamy, that there should be a sequence in which 'key modalities' be settled first (in the case of agriculture, he defined this as figures for cutting domestic support and tariffs, and sensitive products), while other modalities could be dealt with later (including special products, special safeguard mechanism and preference erosion).

Last week, African Ministers issued a Declaration rejecting the 'partial modalities' approach and some of them told him, at the Nairobi meeting, that they could not accept the 'sequencing' of issues that left out topics of concern to them in Lamy's proposed first phase.