Uncertainty and confusion at WTO after failed Ministerial

There has been an unusually quiet atmosphere at the World Trade Organisation since the Ministerial-level meetings ended on 1 July without substantive result.

The flurry of intensive negotiations on agriculture and non-agriculture market access (NAMA) that prevailed before and at the "mini-Ministerial" was replaced last week by an absence of meetings. There is a sense of "uncertainty and confusion" (in the words of one diplomat) of whether negotiations among members will resume, and if so, when and how.

Part of the uncertainty is due to the different interpretations of the mandate given by the Trade Negotiations Committee to the Director-General Pascal Lamy on 1 July. The TNC asked Lamy to conduct intensive and wide-ranging consultations to facilitate agriculture and NAMA modalities, based on the draft texts of the Chairs of the agriculture and NAMA negotiations, and to report to the TNC as soon as possible.

One question being discussed by diplomats is whether this means that Lamy has been enabled to consult with what he considers key members (namely, the G6), get them to agree among themselves and then continue by bringing in other members, covering more and more groupings and individual members until consensus is reached.

In this approach, the previous Geneva process, in which delegations negotiate directly among themselves through the plenary and smaller (Room F and Room D) meetings, would be replaced or diminished. The consultations would in effect be between delegations and Lamy, with many meetings being the sort of "confessionals" in which comfort lines and bottom lines are revealed in confidence. Lamy would, in this "top-down" scenario, play the active role in coming up with the numbers for the modalities.

Many delegations have another view of what the mandate means. In this view, the mandate requires Lamy to consult, primarily with the G6 members, and then these members would have to bring their own new offers and positions (if any) directly to other members through the agriculture and NAMA negotiating groups in the Geneva process.

This second approach, which would be more in line with the "bottom-up process", is favoured by the many delegations that are not part of the G6. They are worried that in the "top-down" approach they would be faced with a "fait accompli" and called upon to cooperate and endorse what the "major players" had agreed to, in order to meet the deadline and save the Round.

At a media briefing on 1 July, after the end of the TNC meeting, EU Trade Commissioner Peter Mandelson said that Lamy has been asked to play a more active role in facilitating convergence on the key issues. He added that Lamy should act as the catalyst but not the author of an early agreement among the big players on the big issues.

At the TNC meeting on 1 July, the Kenyan Minister M. Kituyi pointedly said, in relation to Lamy's mandate, that the members expected that any results from Lamy's consultations with political leaders would lead to new instructions from the leaders being given to their delegations in Geneva, and be reflected in the agriculture and NAMA negotiations there.

The Venezuelan Vice Minister, also at the TNC meeting, said its understanding is that the mandate given to the Director-General is to hold consultations but on a broad basis and not focused on only a small group. The Vice Minister said the G6 is not representative of the spectrum of interests of the members, and consultations should not be limited to this group only.

Thus, it is necessary to maintain the bottom-up approach, added Venezuela. The consultations must aim to achieve full and not partial modalities, they should be based on the modality documents produced by the Chairs of NAMA and Agriculture, and the consultations should refer to numbers and disciplines and not produce new documents, particularly if they re-define the mandate (of the July 2004 framework and Hong Kong).

Several other TNC interventions also asked for inclusiveness, transparency and the bottom-up approach. They reflect anxiety among many developing countries that Lamy may get a deal struck among the G6 on what he and perhaps the G6 (or most of them) may see as the "core modalities", while other issues would not be covered.

These other issues, such as special products and special safeguard mechanism in agriculture, flexibilities in NAMA (including for para 6 countries and small and vulnerable economies), and how to deal with preference erosion, have been discussed at the agriculture and NAMA negotiating groups, with members talking directly to one another, though solutions have not been found.

The worry is that a narrowed modality agenda and the urgency of the time schedule to very rapidly reach agreement will combine to pressurise the developing countries to accept a deal they cannot fully comprehend technically (given the short time span) or that they do not substantively agree with.

"Now that Lamy is consulting with the G6, we have to be vigilant," commented the Ambassador of one developing country. "We need to have time and opportunity to study the implications of what they may agree to. What takes them two or three weeks to discuss should not be given to us with two or three days to consider and agree to."

Another developing country Ambassador told the SUNS that the issues are highly technical and those who are not involved in the Lamy consultations would not be able to process the results of the consultations unless they are given enough time, so that they can react and if necessary come up with alternative proposals.

"Lamy's approach seems to be that his top priority is to get the 'major players' to agree, and when that happens then our development concerns can fall into place," he said. "However, I am worried that the G6 or most of them may decide that they are satisfied with a 'minimalist' deal among themselves that allows them to 'cut water' between their bound and applied levels of tariffs and domestic support.

"But then they will ask other developing countries to accept a deal - for the sake of the trading system - in which we have to make heavy sacrifices. Even when we are unable to gain new benefit, we could be asked to relax our positions on SP and SSM and other development flexibilities, and to deeply cut our tariffs, including significantly below our applied rates."

The uncertainty in the present period was not reduced by two developments last Friday (7 July) - a faxed message from Lamy to delegations and a meeting that the Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand, held with selected delegations.

Lamy's letter dated 7 July said its purpose was to update delegations on his consultations to facilitate modalities. His aim was to "facilitate and catalyse agreement among Members, who continue to remain the main actors in the process" and he reiterated that his consultations would be "pursued in keeping with the principle of a bottom-up approach and full respect for transparency and inclusiveness".

The operational part of the fax states that "I have now started this consultative process with contacts at every level with a number of Members. I intend to pursue this process over the next couple of weeks, progressively widening this circle of my contacts with individual delegations and with groups. I intend to keep all delegations informed of developments in my consultations as they arise."

Several developing-country diplomats interpret the fax to mean that Lamy will consult with the G6 and try to get results in two weeks, up to the third week of July, and might also hold Green Room meetings with selected Ambassadors to keep them informed. The letter also indicated that he would also want to take charge of negotiations among the wider membership.

Given that the new implicit deadline for modalities is end-July, the developing-country delegations worry that if there is a result in a "couple of weeks" (i. e. the third or even fourth week of July), there would be very little time (a couple of days in the estimation of one diplomat) for them to analyse a potential G6 agreement, let alone to adequately react to it.

Meanwhile, some diplomats who went to Falconer's informal consultation with selected delegations were also rather puzzled by the meeting and its outcome.

One diplomat said that Falconer wanted feedback from delegations whether their understanding of the TNC decision and the current process was similar to his. According to his interpretation, there would not be any more agriculture meetings when the current Lamy consultations were taking place.

According to diplomats present at the meeting, some delegations requested Falconer to re-start the agriculture negotiations, as there were still many issues to be resolved, and that the discussions should continue, especially since time was running out.

These delegations did not think that the mandate given to Lamy meant that the Chairs of the agriculture and NAMA negotiations would stop their work. Instead, Lamy's consultations would only assist in the negotiations within the agriculture and NAMA groups.

However, Falconer's understanding was that the negotiations in the agriculture committee would still be relevant, but would only resume after Lamy gave a report on his current consultations.

After the meeting, Falconer sent a letter to the WTO members informing them that there will be no agriculture and cotton negotiations for the time being. This is in order to give "sufficient time and space" for the wide-ranging consultations now being undertaken by Lamy.

"Of course, I remain at the disposal of the chairman of the TNC to support and assist him in any way I can in his attempts to facilitate progress," said Falconer. "I remain available also to meet with any delegation that wishes to do so."

Referring to his own consultations with members, Falconer acknowledged some points that some delegations raised. The negotiations sessions of the Agriculture Committee and Cotton Sub-Committee remain on call, he said.

Both "continue to exist and, as the bodies charged with conducting negotiations, will have a considerable amount of work to do both in actually establishing modalities and in the work that will be required after that point and before the negotiations could be considered completed.

"That is clear and there is no question about it. It is also clear that it is the hope of all that, pursuant to the facilitating consultations, we will all be in a position to come back to these groups as soon as possible in order to get on with the job."

The developing-country diplomats have interpreted Falconer's conclusion as meaning that while he will not convene any meetings in the meanwhile, he was making clear his view that the work of establishing modalities would be undertaken by the agriculture committee (in special session), whose work would resume following the Lamy consultations.

In other words, it was Falconer's understanding that there would not be a new mechanism set up for the full membership to negotiate the modalities, and that Lamy's role was thus confined to facilitate a breakthrough among the major members so that the normal negotiations could then proceed.

Some of the diplomats who were at the Falconer meeting were of the impression that Falconer wanted to see if this understanding was shared by the delegations.

These diplomats said they made clear that the Geneva process of the past few months, in which the agriculture and NAMA groups were the centre of the negotiations that took place directly among the members, must continue to be the forum of negotiations.

The Lamy consultations, in their view, were supposed to catalyse and assist the bottom-up process, and not to replace it.