Talks Continue Around Clock In Search Of Consensus

WTO Director-General Pascal Lamy and Hong Kong Ministerial Conference Chair John Tsang released a revision of the draft ministerial declaration to Members at approximately 2 p.m. on 17 December. Notable additions to the 7 December draft presented to ministers at the start of the conference included a bracketed provision that would have countries eliminate all agricultural export subsidies by 2010, and those for cotton in 2006. The draft left open details about exceptions and implementation periods for granting unrestricted market access to exports from least-developed countries (LDCs).

The most important decision expected from ministers - setting a date for reaching a comprehensive agreement with numbers and structures for tariff and subsidy cuts - also remained to be determined, although the text hinted that this would come in March 2006. Ministers were to fill as many of these blanks as possible before handing in their last amendments at 6:30 a.m. on Sunday.

Substantial changes were made to the sections on agriculture, cotton, non-agricultural market access (NAMA), and special and differential treatment (SDT). The original text's controversial annex on services was also modified in an attempt to make it acceptable to more Members despite the risk of making it less acceptable to the EU.

At the time of writing, ministers from twenty-six-odd delegations were involved in last-ditch 'Green Room' negotiations. A second, and hopefully final, revision of the Hong Kong declaration was expected mid-morning on Sunday. The main features and significance of the 17 December version are briefly reviewed below.

.Agriculture

The 17 December text contains two bracketed alternative deadlines for "the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect": either 2010 or five years from the start of the implementation of Doha Round commitments. In Green Room meetings throughout the week, the EU and Switzerland had resisted 2010 as an end-date. A 2013 deadline, however, is likely to be more palatable to the EU as that is when Brussels' recently-approved six-year budget will come to an end. It would also coincide with a Doha Round implementation period starting in 2008.

Responding to EU complaints that the export subsidy phase-out would not affect equivalent measures applied by other countries, the draft asks Members to develop disciplines on food aid, export credit programmes, and the practices of exporting state trading enterprises by "end-March 2006 as part of the modalities." On food aid in particular - the EU has argued that a great deal of US in-kind food aid is tantamount to an export subsidy to its farmers - the new text provides for "effective disciplines on in-kind food aid, monetisation and re-exports so that there can be no loop-hole for continuing export subsidisation." It also calls for the creation of a 'safe box' for bona fide food aid to ensure that the new rules do not serve to impede it in emergencies.

WTO officials believed that the bracketed potential deadline dates would be the subject of much debate during the night. In a statement on the revised draft text, EU Trade Commissioner Peter Mandelson said "we expect to be put under pressure tonight on export subsidies. We will defend our interests." Several sources suggested, however, that the EU had hinted during the night that it might be willing to eliminate agricultural export subsidies by 2013. This would be contingent, of course, upon agreement on the entire text, in keeping with the WTO principle that "nothing is agreed until everything is agreed."

The revised text confirms the 'working hypothesis' of the 7 December original that developed country domestic subsidies would be classified in three bands. Unlike the earlier version of the text, it places "the Member with the highest level of permitted support" - the EU - in the top band, facing the highest linear tariff reduction. The US and Japan would be in the second tier. All other Members would fall into in the bottom band. Notably, it specifies that the overall cut in trade-distorting domestic support must be "greater than the sum of the reductions" in Amber Box, Blue Box, and de minimis (exempted) support. This means that a Member wishing to make the minimum possible reductions to Amber Box and de minimis spending would have to slash Blue Box spending more heavily in order to bring the total reduction up to the target for overall trade-distorting support. This may make it more difficult for countries to simply re-classify subsidies in order to dodge reduction commitments.

With regard to market access, the draft formalises the 'working hypothesis' on structuring Members tariffs for reduction, while "recognising that we now need to converge on the relevant thresholds" for developed and developing countries. It also refers to different market access flexibilities: for 'sensitive' products, tariff rate quotas (TRQs) will have to increase in accordance with the leniency of the tariff cut relative to what would normally be demanded by the formula. Developing countries would be able to "self-designate an appropriate number of tariff lines as Special Products (SPs) guided by indicators based on the criteria of food security, livelihood security and rural development." They would also "have recourse to a Special Safeguard Mechanism (SSM)" to protect themselves from a surge in imports or a collapse in import prices. The specifics of SP status and the SSM are to be determined, and "shall be an integral part of the [agriculture] modalities."

Cotton

Paragraph 10 of the 7 December draft contained two options: ministers could either instruct negotiators in Geneva to continue discussions on how to translate into practise the 2004 July Framework mandate to "address cotton ambitiously, expeditiously and specifically within the agriculture negotiations," or they could adopt a schedule for eliminating export subsidies and trade-distorting domestic support on an 'early harvest' basis.

The 17 December draft text falls midway between the two. Its equivalent paragraph states explicitly that developed countries will eliminate export subsidies in 2006. In practice, 'developed countries' refers to the US, as it is the only developed WTO Member to provide such subsidies for cotton. The US Congress is widely expected to pass within weeks a bill that would terminate its WTO non-compliant USD 110-350 million 'Step 2' export subsidy programme on 1 August 2006. It is less clear whether the term 'export subsidies' would extend to its export credit guarantees, estimated at USD 700-800 million annually.

The new text is much less specific on domestic subsidies. Paragraph 11 calls for faster, or 'front-loaded', and deeper reductions in trade-distorting domestic subsidies for cotton than those that will be achieved through the general agricultural subsidy reduction formula. This implies, however, that the overall reductions and the implementation schedules for domestic farm subsidies must be agreed before the depth and speed of cotton subsidy cuts can be negotiated. There will thus be no 'early harvest', i.e. reductions in domestic cotton subsidies will not start in advance of the conclusion of the Doha Round.

In a Saturday evening press conference, trade ministers from the four West African cotton producing countries that had placed the issue on the ministerial agenda said that the new draft text did not "go to the heart of the problem": the US' lavish domestic subsidies, which make up 80-90 percent of total US support for cotton (estimated around USD 3.8 billion in 2004). They outlined their compromise position on the elimination of trade-distorting domestic support to cotton: 60 percent by 2008, with the additional 20 percent each in 2009 and 2010. The group's earlier proposal called for all such support to be eliminated by the end of 2008. The ministers indicated that they had agreed with US officials to discuss the issue after Hong Kong, possibly signalling that they did not intend to block consensus at the summit.

The revised text also requires developed countries to give duty- and quota-free market access to least-developed countries' cotton exports as of the conclusion of the Doha Round negotiations. However, African countries are unlikely to benefit from this, since they do not export cotton to the US - and in other markets, particularly in Asia, they have to compete against subsidised US exports.

NAMA: Number of Coefficients Unspecified

The draft text provides for a 'Swiss formula' for tariff reduction, with an unspecified number of coefficients. Indian Commerce Minister Kamal Nath welcomed this for remaining open to his country's preferred multiple-coefficient approach. His Canadian counterpart Jim Peterson, however, said that in the final version of the text he would prefer to see a 'simple Swiss formula' with two coefficients, one for developing and one for developed countries. Brazil's Celso Amorim said in the Saturday heads-of-delegation meeting that the principle of 'less than full reciprocity' in reduction commitments should be made explicit.

Notably, the draft text contains an unbracketed paragraph that explicitly links the level of ambition for agriculture and NAMA, specifying that this ambition "is to be achieved in a balanced and proportionate manner consistent with the principle of SDT."

Duty- and Quota-free Access for LDC Exports

At press time, ministers were still negotiating on the final provisions on duty- and quota-free market access for exports from LDCs. Agreement had already been reached on the principle that developed countries and developing countries declaring themselves in a position to do so should provide, 'on a lasting basis', such access to all products from LDCs. However, Members facing difficulties in according full access to all products will be able to exclude a certain percentage of tariff lines from the scheme. That percentage still remained to be negotiated in the early hours of Sunday (figures proposed varied between 4 and 0.1 percent), as did the date of entry into force of the obligation to provide duty- and quota-free treatment.

As for the tariff lines left outside the regime, Members would need to take "steps to progressively achieve compliance" with the obligation to extend duty- and quota-free market access to all LDC products. In spite of the imperative 'shall', this provision is weak as it contains no deadline or interim targets. Some LDC Members have argued that the exclusion of even one percent of tariff lines could in some cases allow the preference-provider to cut benefits for an entire sector, such as textiles. Nevertheless, the achievement of a WTO obligation to provide duty- and quota free access to LDC exports seemed unlikely when the Doha Round was launched in 2001.

Services

Some delegations were reportedly disappointed with changes present in the 17 December draft declaration's services annex that reaffirmed the non-prescriptive nature of its recommendations, as well as the fact that the reference to it in the body of the text (Paragraph 25) remained bracketed. Instead of obliging Members to enter into plurilateral market access negotiations, the new text stipulates that they "shall consider such requests" in line with different rules and guidelines for conducting services negotiations.

The EU was also reportedly disappointed by the removal of the 7 December version's implicit reference to a 2002 EU proposal (S/WPGR/W/39) that laid out a framework for liberalising government procurement in services.

Emma Harrison, a campaign director for Consumers International, expressed concern that countries with insufficient regulatory systems would be pressured into liberalising "essential services" sectors such as water and electricity. She noted that the text made no mention of universal public access.

Environment

The first brackets removed from the original draft ministerial declaration related to liberalising trade in environmental goods and services. After failing to settle on either of two options offered in the 7 December draft, the agreed text simply instructs Members "to complete their work expeditiously under Paragraph 31(iii)" of the Doha Declaration.

Intellectual Property Rights

India tried to keep up the pressure on the relationship between the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) and the Convention on Biological Diversity (CBD) during the informal HOD meeting on Saturday. Mr Nath maintained that there was a strong call for 'serious negotiations' on mandatory disclosure requirements related to genetic resources and associated traditional knowledge in patent applications. Brazil, which has been another key driving force behind the push for negotiations, supported India's efforts by highlighting the need "to agree on a mandate to initiate negotiations on the relationship between TRIPS and CBD."

Also during the HOD meeting, the EU expressed frustration with the lack of movement on 'GI extension' - i.e. the question of whether to extend to other products the additional protection already accorded to geographical indications related to wines and spirits.

Before heading into their night-long consultations, many delegations expressed appreciation for the text's "bottom-up" approach, in spite of the arduous work that it entailed.

ENDS

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