OCTOBER 13, 2005 - MEETING OF THE WTO TRADE

UNCLAS SECTION 01 OF 05 GENEVA 002505 SIPDIS PASS USTR FOR ALLGEIER AND DWOSKIN EB/OT FOR CRAFT USDA FOR FAS/ITP/SHEIKH, MTND/YOUNG USDOC FOR ITA/JACOBS E.O. 12958: N/A TAGS: ETRD WTRO USTR SUBJECT: OCTOBER 13, 2005 - MEETING OF THE WTO TRADE NEGOTIATIONS COMMITTEE (TNC) Summary ¶1. The meeting of the WTO Trade Negotiations Committee (TNC) on October 13, 2005 featured a more upbeat atmosphere evident since the lift given to the process by the new U.S. agriculture proposal. Director-General Lamy and many other speakers observed a new impetus in the negotiations, while many Members allowed themselves to guardedly express hope that the upcoming Sixth Ministerial Conference in Hong Kong, China, can be a success. At the same time, however, participants remained realistic about the shortness of time and the difficult challenges ahead. ¶2. Lamy set the tone in his opening remarks by noting this week's developments seemed to have reignited the negotiations. He saluted the important contribution from the United States on agriculture, and he referred as well to the positive role played by other proposals including those of the EU, the G-20, and the G-10, but Lamy also underlined that positions on agricultural market access remain very far apart - too far apart for real negotiations to occur. The chair of the agriculture negotiations echoed this message. Quite a number of other delegations welcomed the positive momentum engendered by recent proposals, many singling out the U.S. agriculture proposal for special mention, with Australia and Mexico emphasizing that it is time for movement on market access. ¶3. Besides the United States, several speakers - for the EU, the G-20, and the G-10 - took advantage of the meeting to outline their proposals. Brazil, speaking for the G-20, underscored that the tariff reductions specified in the group's market access proposal represented a "maximal limit" for developing countries. G-10 members, including Agriculture Minister Iwanaga for Japan, emphasized they are willing to improve market access but the outcome must be equitable for food-importing countries. Japan and Norway rejected a tariff cap. Benin, speaking for the four cotton countries, voiced concern that none of the recent agriculture proposals included specific solutions on cotton, and warned that there could be trouble in Hong Kong if the issue was not explicitly addressed. ¶4. Other themes of the meeting included broad support for Lamy's proposed roadmap for Hong Kong and beyond, including taking a bottom-up approach in preparing texts for ministerial consideration and making the process as transparent and inclusive as possible. Lamy's Statement ¶5. Lamy began his statement by recalling the roadmap leading up to the Sixth Ministerial Conference that he enunciated at the previous TNC and foreshadowing the substantial amount of work that will be required next year to convert what is agreed in Hong Kong, particularly with respect to modalities, into specific commitments. Outlining what he described as an "incompressible" number of drafting and legal episodes, he concluded that the Ministerial Conference must be a success or the 2006 target will be missed. ¶6. He then assessed the current state of play, beginning with agriculture and judging that "the engines of the negotiating plane have been switched on again" in large part because of an important contribution from the United States. - The U.S. proposal puts domestic support on a par with export competition in terms of its negotiating shape even if there are elements where further approximations are necessary, according to Lamy. - On market access, however, Lamy said that positions remain too far apart for real negotiations to commence, despite proposals by several participants - the G-10, the EC, the United States, the G-33, and the G-20. - Development must be kept at center stage, he said, which means addressing special and differential treatment in an inclusive way and making every possible effort to advance the cotton dossier. ¶7. Lamy then turned to other issues, outlining areas where convergence is needed leading up to Hong Kong. - On NAMA, there is an emerging consensus over a Swiss formula with a limited number of coefficients, he said. By mid-November, there needs to be 1) a range of numbers for the formula, 2) comparable detail on flexibilities, and 3) a way to fix the base rate for unbound tariffs. This is the minimum before addressing issues such as preference erosion, sectoral, and non-tariff barriers. - On services, Lamy said that Members need to define a level of ambition that matches the ambition elsewhere in the negotiations, and devise a plan for achieving it. - On rules, Lamy urged Members to intensify the ongoing text-based negotiating process, so that by Hong Kong there has been a rigorous consideration of proposed amendments to the agreements. - The greatest development gains will stem from substantive areas, he reiterated, so it is by advancing these areas that a development package will appear. It is "still possible and necessary" to harvest agreement on a good number of agreement-specific proposals, he said, beginning with those of the LDCs. - Members also must ensure that implementation and TRIPS/public health are addressed in an appropriate way, he said, along with "building the necessary base" for an aid for trade package by the end of the round. ¶8. In their informal consultations, Lamy urged Members to aim for "fresh ideas" that can be brought back to the overall membership and catalyze negotiations, consistent with goals of transparency and inclusiveness. He said he would be reaching out to different Members and groups, and he reported that he would be continuing the consultative process on outstanding implementation issues, including those related to GIs, with the assistance of relevant chairs and two Deputy Directors- General, Rufus Yerxa (on GIs and TRIPS/CBD) and Valentine Rugwabiza (on TRIMS). ¶9. Lamy closed by recalling the importance of a bottom-up approach whereby the text for ministers grows out of convergence in the negotiations. That, however, puts "severe pressure" on negotiators to deliver results in a very short time. But it can be done, Lamy emphasized, and Members should stand by the target of a comprehensive draft text by mid- November - about thirty days from now "counting every day as a working day." Statements by Chairs ¶10. Lamy invited the chairs to make statements, noting that two chairs - the trade facilitation chair, Ambassador Noor, and the dispute settlement understanding (DSU) chair, Ambassador Spencer - were not present. Agriculture ¶11. Ambassador Falconer agreed with Lamy's assessment of the agriculture negotiations, referring to his written report (TN/AG/20) and adding that political momentum is needed in the next week or ten days to maintain the pace for Hong Kong. There have been considerable advances, but Members do not have the luxury to move at a leisurely pace - further political guidance is needed quickly. On the three pillars: - Falconer reported that Members have come a long way on export competition and further movement on parallelism is grounds for confidence, but agreement is linked to the other pillars and will not come automatically. - Because of recent developments, including the U.S. proposal, there is now a basis for believing that a deal on domestic supports is "possibly within reach," but it too is linked to other parts of the negotiations. - On market access, participants are making proposals and talking numbers but positions remain a "very long way apart and it is not yet possible to discern the basis of a deal with any confidence." NAMA ¶12. Ambassador Johannesson agreed with Lamy's roadmap for Hong Kong, saying it is "absolutely necessary" to reach modalities at MC6 because twelve months is the bare minimum required to finalize and verify schedules and commitments. Members are in the midst of an intensive meetings schedule, he reported, including formal negotiations on September 21-22 where Members discussed three key issues of formula, flexibilities, and unbound tariffs in an integrated manner on the basis of contributions by Pakistan and Mexico. ¶13. He further reported that informal consultations have been frank, useful, and they have revealed divergences "of utmost concern" on key elements. Extremely wide gaps remain on formula and flexibilities, he reported, with Members retaining very different expectations over expected outcomes, including over the nature of contributions by developed and developing countries. Gaps on unbound tariffs are less wide, he said, but they are there. The challenges lies on these issues, he said, and he urged Members to get started on solving those issues now. Services ¶14. The recently departed services chair (and current Deputy Director-General) Jara began by bringing Members up to speed on offers - 69 initial offers have been submitted so far, along with 29 revised offers. He commented that many Members still have not made a submission - despite the fact that initial offers were due two and a half years ago - and the hoped-for conclusion of the round is now only fifteen months away. ¶15. The key question for Hong Kong, he said, is how to better specify objectives for market access and rules. On market access, he said there is wide agreement that request/offer should be the primary instrument, but there is also interest in complementary approaches to better organize negotiations and reach a higher level of ambition. A related issue, then, is how to set new targets without encroaching on flexibilities for developing countries. But it is important to remember that more offers and more commitments do not necessarily equate to higher levels of liberalization. That is the goal, he said, even if it only locks in existing levels of liberalization. ¶16. The new chair, Ambassador de Mateo Y Venturini of Mexico, picked it up from there, emphasizing his resolve to get a good draft package ready for Hong Kong that can guide the negotiations next year. To facilitate work on an initial draft text, he is circulating a list of possible elements with three main components - 1) objectives for the negotiations, 2) ways to achieve the objectives, and 3) timelines. These are not rigid concepts, he said, just an attempt to structure the debate. Rules ¶17. Ambassador Valles Galmes said that work on antidumping is receiving the most attention, and it is has moved past the philosophical stage. Although substantive differences remain great, he reported that he is committed to a comprehensive draft text early next year and to that end he is working on the development of legal operative text through an intensified schedule of plurilateral consultations. He is looking to Members to select key issues for focus in this advanced stage of the negotiations. Due to the difficulty of the technical issues, he is working with Friends of the Chair. He stressed that the Friends process is not a veiled attempt to prioritize issues, but rather a way to move through the heavy schedule ahead. He reported that he is also looking for draft texts on subsidies, fish, and transparency in RTAs in Hong Kong. TRIPS Special Session ¶18. Since his last report, Ambassador Ahmad reported that Members succeeded in overcoming procedural differences and held useful, productive discussions over three proposals - the EC proposal, the joint proposal, and the proposal by Hong Kong China. To date, however, substantive differences remain - there is no sense of direction and no narrowing of differences among Members. Trade and Environment ¶19. Ambassador Ali recalled that discussions have focused on paragraph 31(iii) of the Doha Declaration, including environmental goods liberalization, following calls by many Members to intensify work prior to Hong Kong. There have been two main approaches, he explained, a list approach in which some delegations have identified lists of specific projects they would like considered in the negotiations, and an environmental project approach in which environmental goods and services would be liberalized within a framework of environmental projects undertaken at the national level. Discussions continue, he said, including an informative information exchange session that took place the day before the TNC, focusing on five broad topics including wastewater management, solid and hazardous waste management, air pollution control, renewable energy projects, and environmentally preferable products. Ali closed by emphasizing the importance to participants of other parts of the mandate. Trade and Development ¶20. Faizel Ismael said his consultations indicated that work for Hong Kong on S&D should focus on the five proposals from the least-developed countries. Work would also proceed on as many of the remaining African proposals as possible. He noted he has been unable to advance the negotiations on any proposals however because neither the LDCs nor the Africans have been prepared, although the LDCs have signaled that they expect to be ready by next week to continue work. He further reported that he will meet with the chairs of the other relevant bodies to review the status of the category two S&D proposals that were referred to those bodies for consideration. United States Statement ¶21. Ambassador Allgeier introduced the recent U.S. agriculture proposal, describing it as a response to repeated calls for the United States to clarify what it is willing to do on domestic supports. With this proposal, the United States "has crossed the political Rubicon of reform," he emphasized, and he hoped it would mark a turning point and be a sufficient basis for unlocking progress in the broader negotiations. He emphasized the proposal is conditional, however, and it must be met with equivalent ambition by other Members or it cannot be sold at home. The full text of Ambassador Allgeier's statement can be found on USTR's website. Statements by Other Members ¶22. Thirty Members made statements, many expressing hope for success in Hong Kong while at the same time conveying a realistic sense of the challenges ahead. Much of the discussion centered on agriculture. Other themes included concern about the shortness of time, support for Lamy's roadmap for Hong Kong and into 2006, agreement on a bottom-up approach in preparing texts for ministerial consideration in Hong Kong, and recognition that the negotiating process must be transparent and inclusive. Some other specific points made by other delegations may be of interest to Washington agencies: - Quite a number of speakers welcomed the positive momentum in the negotiations, many acknowledging the impetus created by the recent U.S. proposal. Mexico and Australia (on behalf of the Cairns Group) underscored that the time has come for movement on agricultural market access. - China recognized the important contribution of the U.S. proposal, but it also expressed concern about the depth of real reductions, blue box disciplines, and the lack of special and differential treatment components in all three pillars. - On behalf of the G-20, Ambassador Hugueney of Brazil reviewed the group's two recent proposals - on market access and domestic supports - saying that the G-20 was asked to provide its vision of ambition, and it came through in a sign of unity from Members with offensive and defensive interests. The 36-percent average tariff cut for developing countries is as far as they can go, he stressed. He foreshadowed that more proposals from the G-20 are in the works on issues such as sensitive products; tropical products; the treatment of recently acceded Members; how to deal with subsidized exports from developed countries into developing country markets; product-specific caps on domestic support, monitoring, and surveillance; state-trading enterprises; and export restrictions. - Ambassador Trojan recapped the EU's contributions on agriculture, emphasizing that the EU can deliver what it is proposing on domestic supports - "while we have heard some good news from the U.S. earlier this week, we are certainly not yet there." He said the EU has gone far on market access and commitments should be based on both tariff reductions and TRQ expansion. Sensitive products are an important part of the equation, he said. - Switzerland presented the G-10 concept of allowing Members to choose between two options on agricultural market access. At one point in his intervention, Ambassador Wasescha questioned whether the authors of some proposals could pay the price if their ambitions are fulfilled. - G-10 members Norway, Japan, and Chinese Taipei added that they are willing to contribute on agriculture, but the outcome must be equitable for them. Agriculture Minister Iwanaga of Japan ruled out a tariff cap and said the Japanese people will never accept an outcome that destroys its agriculture. Norway's representative hit similar themes. - Ambassador Bhatia of India supported the G-20 proposal, stating that agriculture represented a major development outcome of the round. He called for a balanced outcome on services to promote development, and he pushed back on Lamy's assertion that a consensus seems to be forming around a NAMA formula, putting the focus instead on the previous Argentina- Brazil-India (ABI) proposal. - Indonesia spoke on behalf of the G-33, emphasizing the importance of special products, food security, and rural livelihoods. The Philippines, Cuba, and El Salvador picked up similar themes. - Brazil, Norway, and Thailand stressed the importance of a text-based process on rules, particularly antidumping, with Norway calling for "firm clear guidance with a high degree of specificity to guarantee a meaningful result" in the round. Others - including Colombia and Peru - made passing references to the issue. - Benin noted that recent proposals lack solutions on cotton, and he warned that there could be trouble in Hong Kong if cotton is not taken into account, including the trade and development aspects. Mauritius mentioned the elimination of cotton subsidies, improving market access opportunities through bound duty-free and quota-free access, and creating an emergency fund for cotton producers. - Mauritius (speaking for the ACP) bemoaned the push for progress on agricultural market access, saying it is not in the interest of most WTO Members, and he welcomed recent proposals calling for policy space and flexibilities for LDCs and small economies. - Peru, Colombia, and Ecuador highlighted the importance of tropical products, with Peru describing the issue as an offensive dimension of special and differential treatment and Colombia opining that some market access proposals offer little hope on this issue. - Bolivia, Brazil, Colombia, Cuba, Ecuador, Peru, and India raised TRIPS/CBD, with Cuba calling for a ministerial declaration in Hong Kong. Peru and Colombia said they seek an obligation for patent applications to disclose the source and country of origin of any genetic resources or traditional knowledge, together with proof of prior informed consent and an assurance that benefits are equitably shared. - There seemed to be differences of opinion over complementary approaches to request/offer in the services negotiations. Australia and Norway expressed support; India seemed willing to look at alternatives to request/offer; Brazil and Thailand put the focus on existing guidelines; and Mauritius registered "clear objection." - Venezuela's representative made a singularly unhelpful presentation, saying there seems to be little commitment by developed countries for agriculture reform and warning the developed world to be wary of making "false promises" to developing countries. There are still debts to be paid on S&D, she said, and the credit of some Members should be cancelled. Lamy's Conclusion ¶23. Lamy concluded by saying there seemed to be convergence around his diagnosis that the negotiations are re-ignited. He said he took a couple of other clear messages away from the meeting, including the importance of transparency and the centrality of development. On this latter point, he said he agreed with the gist of India's message - the main development gains from the round would indeed come from substantive pillars such as agriculture. In closing, Lamy noted a strong sense of urgency in the room - here we are talking of days, he said, while at our next meeting we will be talking of hours. Shark