US, EU report no substantive progress on Doha differences

U.S. and European Union trade officials this week acknowledged they have made no progress in narrowing their substantive differences on the Doha round of World Trade Organization negotiations in their most recent discussions leading up to this week's visit of EU Trade Commissioner Peter Mandelson.

U.S. Trade Representative Susan Schwab said she expected no "major breakthroughs" during this week's meeting with Mandelson, which was scheduled for Sept. 28. Speaking to reporters after a Sept. 27 congressional oversight group meeting, Schwab said she would discuss the Doha round and bilateral issues.

The bilateral issues Schwab referred to include sanitary and phytosanitary barriers that prevent U.S. beef and poultry exports from entering the EU, an EU official said. He said the U.S. had been pressing the EU to resolve these disputes as a way of improving the climate on market access issues in the Doha round, where the U.S. is demanding a greater EU concessions as a pre-requisite for the U.S. offering more subsidy cuts.

The beef dispute refers to the long-standing EU ban on beef raised with growth hormones. The U.S. won a WTO challenge against this ban years ago, and the two sides have engaged in a lengthy battle over the amount of non-hormone-treated beef that should gain market access to the EU as a compensation for the trade lost due to the ban.

The poultry dispute revolves around EU requirements that poultry not be cleaned with chlorinated water. The U.S. uses chlorinated water to disinfect poultry carcasses at the end of the slaughtering process, which the EU argues poses a health risk.

The EU official said Mandelson and Schwab would not be discussing the dispute over subsidies the two sides allege are granted to Airbus and Boeing.

While Schwab said the U.S., EU and other WTO members have succeeded in building confidence since the Doha talks were suspended in July, she pointed to no specific examples where members have bridged substantive differences. She said that at recent multilateral meetings of trade ministers in Australia and Brazil, members had probed "boring but critical" issues such as the handling of special agricultural products, the treatment of sensitive agriculture products, and how formula tariff cuts would be impacted by "loopholes."

The U.S. has repeatedly argued that market access gained through the formula tariff cuts would be gutted if countries can exempt a number of sensitive and special agriculture products from meaningful tariff cuts and quota expansions. They have argued the EU tariff-reduction offer, which would serve as a basis for cuts that developing countries would accept, would be meaningless given the EU's demands to exempt 8 percent of its tariff lines from significant tariff cuts.

Schwab said members were making progress on a technical level, and through confidence building. She said work on these technical issues needed to be resolved as a pre-requisite to "getting to more obvious policy issues."

Separately, a U.S. trade official said the U.S. and EU had been having a series of discussions but had not made progress on their substantive differences. This official added that the talks broke down in Geneva over substance, and would have to be revived based on substance, not procedural agreements. The official did say that other trading partners seemed to be taking more seriously the U.S. argument that it needs more market access on the table.

An EU official also said that senior-level discussions ahead of the Mandelson-Schwab visit had not succeeded in making progress.

Mandelson met with a host of members of Congress during his three-day visit to Washington, which concludes today. These meetings included a Sept. 27 session with members of the Senate Agriculture Committee, after which Chairman Saxby Chambliss (R-GA) said he did "not really" hear anything new from Mandelson.

EU officials in advance of Mandelson's visit have told U.S. officials, members of Congress and agriculture lobbyists that the EU offer has been misunderstood, and that the EU is not getting the credit it should for agreeing to open its markets. The response from the U.S. has been that the EU proposal has been analyzed, and that the U.S. has concluded it does not offer meaningful market access.

One agriculture lobbyist said EU suggestions that its offer has been misunderstood and really amounts to significant market access are leading to rising anti-European sentiment in the agriculture community and in Congress.

Chambliss said committee members told Mandelson they do not think the current EU agriculture offer is commensurate with the U.S. offer to reduce its ceiling on trade-distorting subsidies in the amber box by 60 percent. At the same time, Chambliss did signal the U.S. could move on domestic support if the EU moved on market access. "When they give us true market access, then I think you will see some movement on this," he said.

Sen. Kent Conrad (D-ND), who also attended the meeting, said he heard nothing new from Mandelson. He said Mandelson offered to reduce the EU ceiling on trade-distorting support, which is much higher than the current U.S. ceiling under current WTO rules, so that the EU would have a 2-to-1 advantage in spending instead of a 3-to-1 advantage.

Conrad said only countries such as Brazil and Argentina would benefit from the market access currently on the table, and that this would leave the U.S. in a similar situation to the one it found itself in after the Uruguay Round agreement. "The United States can no longer afford to buy these bad deals that confer advantage on to others," Conrad said. "If we buy this one more time we are suckers."

Mandelson declined to comment to reporters on Sept. 27, and said he would not speak with the press during his visit. Mandelson is also scheduled to meet Ways and Means Committee Chairman Bill Thomas (R-CA), Rep. Sander Levin (D-MI), House Agriculture Committee Chairman Bob Goodlatte (R-VA), Ranking Member Collin Peterson (D-MN), Senate Finance Committee Chairman Charles Grassley (R-IA), Finance Ranking Member Max Baucus (D-MT) and Senate Agriculture Committee Ranking Member Tom Harkin (D-IA).

Besides Schwab, Mandelson is also meeting with U.S. Agriculture Secretary Mike Johanns, Treasury Secretary Henry Paulson, National Security Advisor Stephen Hadley and Secretary of State Condoleezza Rice.

Mandelson is scheduled to meet with representatives of the U.S. Chamber of Commerce and the National Association of Manufacturers in separate meetings today, and also has a meeting scheduled with American Farm Bureau Federation President Bob Stallman.

NAM will emphasize that the EU needs to do more on agriculture but that both the U.S. and EU should work together to move the talks forward, possibly by agreeing to move on agriculture simultaneously. NAM officials are headed to Brussels next week for meetings with EU officials.

The Chamber officials will also tell Mandelson the EU agriculture offer does not go far enough, and they will stress that it is important to prevent agricultural differences from preventing the wider gains of a Doha round. The U.S. and EU need to work together to bring Doha to a close, a Chamber source said.