'Blame game' follows failure of FIPs Ministers' meeting

The WTO preparations for the Hong Kong Ministerial conference suffered a serious setback Wednesday night when a key meeting on agriculture involving Ministers of five major countries - the US, EU, Brazil, India and Australia - ended abruptly after failing to make any progress. The session scheduled for Thursday was cancelled.

On Thursday, a "blame game" took place, with some of the so-called "five interested parties" (FIPs) having press conferences and statements in which they disclaimed responsibility for the failure, and sought to place the blame elsewhere.

"It may not have been a collapse, but it was close to a collapse," said one developing country diplomat, describing what happened at the Wednesday talks.

The meeting had been attended by the US Trade Representative Robert Portman, EU Trade Commissioner Peter Mandelson, Brazilian Foreign Minister Celso Amorim, Indian Commerce and Industry Minister Kamal Nath and Australian Trade Minister Mark Valle.

A significant development Thursday was the decidedly downbeat assessment by both Portman and Mandelson on where the Doha talks now stand, following the failure of the FIPs meeting.

Portman told a media briefing that he had no positive news, and with no progress and time being so short, "it is difficult to envision success for Hong Kong and the conclusion of the Round by 2006."

He put the blame squarely on the EU and the G10 for stalling the agriculture talks.

Mandelson warned that if there are no results within two weeks "in all areas", it would be time to scale down expectations for the Hong Kong Ministerial. He made clear that he was expecting agreements not only in agriculture but also NAMA and services, where he wanted "formulas and methods" in place by Hong Kong, or else "we will not have anything."

Mandelson was re-emphasising his recent theme that unless there was progress in NAMA and services satisfactory to the EU, it could not make concessions in agriculture.

This is widely seen as a posture to enable the EU to blame others (especially the developing countries) for the deadlock in the talks.

But neither Brazil nor India nor the US would have any of it. All three agreed, in separate press briefings (US, and Brazil) or a press release (India), that progress had to be made in agriculture first before there could be movement in the other two areas. The blame was passed back to the EU.

Said Amorim: "I prefer to speak not of a deadlock but a padlock. And the key of that padlock is in the EU's hands."

According to trade delegates, the Wednesday FIPs meeting floundered mainly because of the inability of the EU to make any new offers in the market access pillar of agriculture. The offer made by Mandelson the previous week on how far the EU could go to cut its tariffs had been rejected by the others as too weak.

At the start of the Wednesday meeting, Mandelson said he was in a difficult position to offer anything more as the French would withdraw their support.

On the other hand, Mandelson tried to go on the offensive by stating that there should be more progress in the talks on NAMA and services as his constituencies were disgruntled about the lack of movement in these areas.

Other Ministers criticized the EU for not being able to move on market access, saying that there was little point for continuing the meeting if this was the case.

The EU criticized the G20 for what it claimed was a shift away from its previous position that developing countries' tariff cuts would be two thirds the rate of the developed countries' cuts.

Brazil responded that this was a wrong interpretation of the G20 proposal, and asked whether the EU was unhappy because of what the G20 offered or what the G20 was asking of the EU, according to the trade diplomats. The EU responded that the level of ambition was too high.

When the EU suggested that discussion could be held on sensitive products first instead of the tariff reduction formula, Amorim responded that the general rule must first be discussed, then only the exception.

According to the diplomats, WTO Director-General Pascal Lamy was also present and he was also critical of the inability of the EU to improve its offer on market access.

Mandelson apparently asked for one more week to attempt to get results. The meeting, which was supposed to have gone on much longer, ended abruptly.

Earlier, at a Wednesday afternoon press briefing, before the FIPs meeting, Amorim had been asked to respond to reports that Mandelson had said that the EU could not move in agriculture unless other countries make more concessions in other areas such as NAMA and services.

Amorim said he could understand that everything is conditional on what happens in other areas. "But we would be wary of any attempt to make a smokescreen to prevent an advance on agriculture."

He said Brazil would not refuse to discuss other issues, but the real negotiations in these other areas can take place "when we have a real shape in agriculture."
He
added: "It would not be possible to move in these other areas even to test flexibility in these areas, if we don't have clear signals in agriculture."

An Indian Commerce Ministry press release on 20 October described the world trade talks as being "deadlocked" over agriculture, after the key ministerial meeting.

According to the press release, Kamal Nath insisted at the FIPs meeting that India could not offer any higher tariff cuts in agriculture than what was already contained in the paper tabled by the G-20.

The Minister also raised the issue of Special Products (SPs) and Special Safeguard Mechanism (SSM) for developing countries, saying that these would have to be sorted out satisfactorily before deciding on anything further.

Kamal Nath said he would not settle for a deal that could be unfavourable for farmers. "Only an arrangement that fully safeguards our interests would be acceptable", he said.

At the meeting, Kamal Nath also resisted a move by the EU to link the treatment of Sensitive Products (products regarded as sensitive to developed
countries) and
Special Products (which are products that developing countries rely on for food security and farmers' livelihoods).

Sensitive Products are sensitive commercially, Kamal Nath said, while Special Products are products on which people are dependent on food, livelihood security and rural development needs. He made it clear that "the two are conceptually different".

He also opposed a move by the US and EU to widen the scope of talks at the meeting and to establish linkages between agriculture and NAMA and services.

The strategy of the developed countries is to cooperate to get ambitious results in NAMA and thus take the pressure off the US to give an enhanced offer on domestic support/subsidy cuts and the EU to agree to deeper tariff reductions in agriculture. Kamal Nath also countered the move by the US to downplay the issue of "proportionality" (in which developing countries commit to proportionately lower tariff reductions).

The Indian Minister insisted that the developing countries would not commit at any cost to more than two-thirds the extent of developed countries' cuts. He also rejected the US formulation of "slightly lesser cuts" by developing countries as "totally inadequate to meet our concerns".

US Trade Representative, Robert Portman, at a press briefing Thursday, gave a downbeat assessment of the state of the talks. "I wish I can give you positive news but I cannot do so," he said.

"We are concerned that there is no progress and time is so short," he said.
"It is
difficult to envision success for Hong Kong and the conclusion of the Round by 2006."

Portman said the US had moved on domestic support and that the G20 had now put numbers to its proposals. But the EU and the G10 had not offered anything.
There was a lack of convergence despite the deadlines for Hong Kong.

Referring to the EU statements that services and NAMA are important to it, Portman said these issues are also important for the US, but there is need to make progress in agriculture first in order to see progress in other issues.

He reiterated that there is need for substantial improvement in market access (in
agriculture) not only from developed but also developing countries.
Reductions
should be on both bound and applied tariffs, even for developing countries.

Responding to questions, Portman said the EU members had reaffirmed the Trade Commissioner's mandate and the EC had the authority to negotiate. He also criticized the G10 for being even less ambitious than the EU.

At another press briefing Thursday, Peter Mandelson also warned that it was almost time to scale down expectations for the Hong Kong Ministerial. He also made it clear that he wanted "formulas and methods" in place in NAMA and services by Hong Kong, or else "we will not have anything."

Mandelson said that the EU was instrumental in starting the development round, where it continued carrying it and will see it to a successful conclusion together with its partners.

He stressed that the EU will not take lectures from anyone on the needs of developing countries. The EU's markets are open to developing countries such that more produce from these countries is coming into the EU than to the whole of the US, Japan and Australia combined.

The EU will work hard for a balanced agriculture agreement including on market access, but this is not an agriculture-only round and the EU is not its sole banker.
There needs to be progress made on all subjects at Hong Kong.

"We need clear evidence of progress by Hong Kong in industrial goods and services," Mandelson said, adding that if there are no formulas and methods in place for everything at Hong Kong, "we will not have it for anything."

With seven weeks to go to Hong Kong, he said that a breakthrough is needed in all areas in the next fortnight or "we have to start scaling down expectations for Hong Kong."

He elaborated that for Hong Kong to be a success, there needs to be a platform in place to agree modalities, formulas, methods and structures in agriculture, NAMA and services. "If that platform is not in place, in about two weeks'
time...we will
then have to adjust and scale down our expectations for Hong Kong."

He stressed that this was not what the EU wanted, saying that the EU remains strongly committed to a balanced and ambitious result for Hong Kong.

Mariann Fischer-Boel, EU agriculture commissioner, said that the EU had reformed the CAP in 2003/2004 and as a result the EU was well equipped to be ambitious on the domestic support issue.

She said that at the end of the day, there has to be progress on the whole package consisting of agriculture, NAMA and services to make Hong Kong a success.
The
single-undertaking makes it clear that nothing is agreed until everything is agreed.

She said expectations on market access should not be so high that no one can meet them.

When asked whether the EU would be putting forward a new proposal on market access, Mandelson would only say that the EU was committed to reaching a balanced agreement in agriculture. When pressed on this issue, Mandelson would only comment that the EU's negotiating partners would be the first to hear about the proposal on market access.

Asked why did it take the EU so long to come up with a new proposal on market access, he replied that we have been waiting for the US to come up with its proposal on domestic support since July 2004, which only came last week. It could only respond after that.

With respect to services, Mandelson said that in the EU's view there needs to be mandatory quantitative targets in a number of identifiable sectors in which WTO members commit themselves to make offers.

Different levels of effort would be required for developed and developing countries.

There also needs to be sectoral negotiations in which a critical mass of WTO members volunteer to take on a high level of ambition, or what is referred to as a plurilateral approach.

On NAMA, for success in Hong Kong, the structure of the formula for tariff reduction needs to be in place, flexibilities to operate within that formula and an agreed treatment of unbound tariffs.

Meanwhile, at another press briefing later Thursday, the Foreign Minister of Brazil, Celso Amorim, said in reference to the enlarged FIPs meeting taking place Thursday, that "we are at a crucial moment."

Speaking only on behalf of Brazil, Amorim said that while the round is a single-undertaking, its engine remains agriculture and the starter at this moment remains market access in agriculture.

He said that while the US proposal on domestic support is an important step, it was an insufficient one.

What is needed now in the round is an important move on market access that will help others to move, and also help the US to move on domestic support.

Other aspects also have to be discussed taking into account that this is a development round. The round is not a machinery to extract concessions from the developing countries, he said.

Referring to some remarks that had been made that there was now a deadlock, Amorim said that he preferred to speak of a 'padlock.' "And the key to the padlock is in the hands of the EU."

Note: This report received inputs from Kanaga Raja. It was published in SUNS Bulletin, 21 Oct 2005