Breaking the stalemate

The failure of the Cancun MC was still fresh in the minds of all the Members even before the Hong Kong Ministerial kicked off. The WTO Secretariat was careful this time, and highlighted that the Hong Kong Ministerial would revolve around the Doha ‘Development’ Agenda. The Director General of the WTO, Pascal Lamy, was also careful to point out the ‘development’ dimension in his letter to journalists just before the Ministerial. He also pointed out in this letter that this Ministerial was a stepping stone to the culmination of the round, which would happen in 2006.

Issues at the Hong Kong Ministerial

The issues at the Hong Kong Ministerial were not new, and were those included in the Doha Development Agenda. These were: agriculture trade, trade in non-agriculture goods (or NAMA), services trade, TRIPS, cotton subsidies given by developed countries, trade facilitation rules, including subsidies, safeguards and anti-dumping, trade and environment and dispute settlement. In addition, there were issues related to developing countries and LDCs such as debt and finance, technology transfer, special needs of small economies, technical cooperation and special & differential treatment.

Even though there was a long list of issues, most of the time was spent on negotiating issues in the areas of agriculture, NAMA and services. Mostly, these were related to market access demanded by developed countries in developing countries.

In agriculture, the negotiations revolved around three pillars: market access, domestic support and export subsidies. Market access negotiations involved reducing tariff and non-tariff barriers. Domestic support discussions were centered on Members reducing the domestic support (in the form of input subsidies or direct payments) provided to farmers since it is trade distorting. Export subsidies are payouts to domestic farmers so that they compete better in the export markets. Interestingly, the developing countries were the ones that set the agenda in agriculture negotiations. The G20 group led by Brazil and India and the G33 group led by Indonesia, Philippines and India had tabled proposals with recommendations in all the three pillars. For example, G20 countries had suggested that developed countries take tariff cuts in the range of 45-75 per cent and developing countries by 25-40 per cent. On domestic support, G20 proposed that developed countries should divide the support into different bands. Each band would have different levels of reduction. The first band would include domestic support of above USD 60 billion, which should be reduced by 80 per cent; the middle band of USD 10-60 billion, with reduction of 75 per cent; and the lower band of support below USD 10 billion, with reduction of 70 per cent. Similarly, the G33

group gave a proposal on a safeguard mechanism which would allow countries to raise tariff barriers in the event of a surge in imports.

In NAMA, the developed and developing countries were divided on issues such as tariffs and binding of commitments. While the developed countries wanted the larger developing countries to take higher tariff cuts and bind 100 per cent of the actual tariffs in practice, developing countries wanted developed countries to do away with their tariff peaks and tariff escalation. Developing countries also wanted flexibility in taking commitments and exemption from cutting tariffs in a specified number of tariff lines. Developing countries led by Argentina, Brazil and India also suggested a formula (called the ABI formula) based on which tariff cuts could be taken. Developed countries, on the other hand, wanted to use the simple ‘Swiss’ formula, under which higher tariffs would be reduced more than lower ones, meaning that developing countries, which had higher average higher tariffs would have to take larger tariff cuts. In the end, the ABI approach of developing countries was not accepted and the text only spoke of the ‘Swiss’ formula.

In Services, all developing countries wanted a more relaxed regime for the entry of their service providers into developed countries (called Mode 4 in WTO legalese). Developed countries, on the other hand, wanted higher FDI ceilings in developing countries in sectors such as telecom and financial services (called Mode 3 in WTO language). Some developing countries led by India, Mexico and Philippines also demanded more liberal commitments from developed countries in the area of cross-border supply of services to foster their business process outsourcing (BPO). The developed countries, however, did manage to push and get the Membership to agree on a new negotiating approach in Services: the plurilateral approach. The objective of this approach was that like-minded countries could organise themselves into sectoral groups voluntarily and table a plurilateral demand on their target export markets. This was a departure from the bilateral request-offer modality which was the negotiating approach until now.

From the point of view of developing countries, the implementation issues in agriculture, services, sanitary & phytosanitary measures, TRIPS and Special & Differential Treatment were also on the table. Implementation issues were important for developing countries and LDCs because these related to commitments and promises made by developed countries, which remained unimplemented and developing countries and LDCs could not benefit from these. For example, in agriculture, while developed countries had taken tariff cuts, they had retained high tariffs on many commodities which were of export interest to developing countries. Another example from Services trade was the commitments taken by developed countries providing easy access to service providers from developing countries (Mode4). However, this easy access was not forthcoming because it got clubbed with other requirements such as more difficult visa measures, salary thresholds and economic needs tests.

There were some positive elements included in the Ministerial Declaration in respect of LDCs and developing countries. One was the DFQF (Duty-Free Quota Free) inclusion which provided for free access to exports from LDCs to developed country markets and developing countries willing to do so (this covered at least 97 per cent of the products, but the USA and Japan still got to decide the 3 per cent, which happened to be many products of interest to LDCs such as textiles and readymade garments, rice, fish and leather goods). There was also a mention of ‘Food Aid”, but the provision was improved so that non-emergency food aid was not dumped. Furthermore, there was also an initiative for “Aid for Trade” that would involve the WTO extending support to poor countries in helping build supply-side capacity to take advantage of trading opportunities.

Even though there was little progress in the main areas of agriculture (market access, domestic support and export subsidies), NAMA and services, and even areas such as TRIPS and Implementation issues saw no movement, there was a Ministerial Declaration, which was adopted by all Members. The reason for this was that no one wanted a repeat of Cancun. More importantly, the negotiations were put off till 2006 so that no one could be blamed and a collapse could be avoided.

Conclusion

The Hong Kong Ministerial did produce a consensual declaration, even though little was achieved. Most of the contentious issues in Agriculture, NAMA and Services and in other areas were put off till 2006. Developed countries did manage to extract the plurilateral approach in Services and get the ’Swiss’ formula in NAMA. Developing countries and LDCs got DFQF, Aid for Trade and Food Aid into the text, but the real benefits would flow in how these would be implemented.

The Hong Kong Ministerial yielded a modest consensus with limited accomplishments. Key disputes in Agriculture, NAMA, and Services were deferred to 2006. Developed nations secured a plurilateral approach in Services and the ‘Swiss’ formula in NAMA. Developing countries obtained DFQF, Aid for Trade, and Food Aid, emphasising the crucial impact of implementation for actual benefits.

The writer is Additional Chief Secretary, Department of Mass Education Extension and Library Services and Department of Cooperation, Government of West Bengal.