Update on Multilateral Trade Negotiations in the WTO – "The July Package"

Briefing Prepared by the International Trade and Development Division (ITEDD), the dti
Pretoria, 09 November 2004

SUMMARY
The Decision adopted by WTO Members on 31 July 2004 - the so-called July Package - signalled a significant advance in the negotiating process. (See Annexure) First, the Package represents agreement on what had been unsuccessfully sought in Cancun. Second, in providing a framework for negotiations, the Package ensures negotiations continue on a more focussed agenda. Third, while the original deadline (December 2004) will not be met, the negotiations continue without compromising the Doha ambition and objectives.

The adoption of the Package illustrated growing cohesion in the G20 in terms of enhanced political unity and the technical capacity necessary to shape the outcome in agriculture. The Africa Group demonstrated its growing effectiveness in advancing its interests and compromising when necessary to secure overall gains. The Africa Group and the G20 have intensified cooperation. The Cairns Group continued to participate in agricultural negotiations, particularly through Australia’s participation in the small group on agriculture. While acknowledging the negotiating process was better managed and more transparent than in Cancun, there was concern over the central role played by the Five Interested Parties (FIPs) Group comprising Australia, USA, EU, Brazil and India in setting out the agriculture text. Such players as China or Argentina are unlikely to accept this as a permanent feature of negotiations. India and Brazil, in our view, effectively advanced the G20 position in the FIPs.

The July Package addresses the five issues considered to be the immediate obstacles: i) development; ii) agriculture; iii) cotton; iv) non-agricultural market access (NAMA); and v) trade facilitation. An annex on Trade in Services was also adopted reiterating Members commitment to the negotiations and setting a date (May 2005) for the submission of revised offers. Difficult and complex negotiations lie ahead. The July Package only marks agreement on a framework and many difficult decisions are deferred to the next phase.

South Africa has played an important role in the negotiations. To retain this role, South Africa will need to complement the political leadership it now provides with greatly strengthened technical input, comparable to that provided by Brazil and India. This requires, at the national level, building our technical negotiating capacity, including through the establishment of the Permanent Trade Forum (PTF). South Africa will also need to strengthen its representation to the WTO. All key WTO Members allocate dedicated representation to the WTO through a full time Permanent Representative. Given both the importance of these negotiations for developing countries and, in particular, for Africa’s development prospects, as well as anticipation of an intensification of the negotiating dynamic, including at technical level, an important consideration is to establish a dedicated South African PR to the WTO.

KEY ELEMENTS OF THE JULY PACKAGE
Development
South Africa was requested by the General Council to assist in drafting a text on the so called "weak and vulnerable developing country" issue. The objective was to ensure that the specific concerns of small developing countries are addressed in negotiations while ensuring no new sub-category of developing countries be established, as this could prejudice the interests of developing countries with more competitive economies. South Africa successfully negotiated this text, providing a basis for successful agriculture and NAMA negotiations.

Agriculture
The July Package contains the framework to establish modalities in agriculture and contains significant detail on each of the three pillars of agriculture: domestic support, export competition and market access.
Domestic Support: The main issues in this pillar involved ensuring a genuine cut in overall levels of trade distorting support; reducing the ability of Members shifting support among commodities; reducing the ability of Members to avoid reductions by simply changing "forms" of support; and the US demand for a "new" blue box for support it provides under its new Farm Act. The establishment of a cap (5% of total value of production) on the blue box (previously unlimited), as well as a cap and an initial 20% "upfront down-payment" on the overall level of trade distorting support are significant outcomes of the framework. The rules for the new blue box demanded by the US will be negotiated in the next phase. The cap is the departure point for further negotiations.

Export Competition: The framework contains an "in principle" agreement that export subsidies will be eliminated by an "end date to be agreed". While negotiations will define the end date, it is an historic achievement. The next phase of negotiations will deal with other forms of subsides having an equivalent effect (export credits, exporting state trading enterprises and food aid).

Market Access: A serious imbalance in the earlier draft of the framework agreement was corrected. In earlier versions, "sensitive products" for developed countries were defined so widely as to foreclose the possibility that developing country exports could achieve substantial improvements in market access. This was addressed in the final draft by postponing negotiations to define sensitive products to the post-July phase. In addition, there is recognition that the issue of preference erosion must be addressed.

Cotton: The West African proponents seeking to redress the devastating effects of industrial country domestic support to their cotton producers came under pressure from the US to accept that cotton is addressed in the framework of the agriculture negotiations.

Non-Agricultural Market Access (NAMA)
In preparation for the July meeting, two issues constrained progress on NAMA. First, many Members were reluctant to negotiate on NAMA in the absence of progress in agriculture. Second, Members disagreed on what should constitute the basis of negotiations. Industrial countries had supported the Cancun NAMA text as an agreed starting point. Many developing countries opposed this text because: i) it pre-empts negotiations on tariff formula (specifying a non-linear formula); ii) commits Members to sectoral negotiations (zero-for-zero in certain industrial sub-sectors); and iii) provides little flexibility for developing countries. The final compromise inserted a new introductory paragraph that opens the text for further negotiations.

Trade Facilitation
The outcome of the negotiations on Trade Facilitation signals two advances in the negotiations. First, in agreeing to launch negotiations on Trade Facilitation, proponents for the other Singapore issues (investment, competition, transparency in government procurement) agreed to drop these from the negotiations. Second, the consensus to launch negotiations on trade facilitation required agreement on the principle of linking commitments to implementation capabilities.

The Geneva Economic Office

South Africa has, thus far, played an important role in advancing the negotiations. To retain this role, South Africa will need to complement the political leadership it now provides with greatly strengthened technical input, comparable to that provided by Brazil and India. This requires, at the national level, building our technical negotiating capacity, including through the establishment of the Permanent Trade Forum (PTF). South Africa will need to strengthen its representation to the WTO in a manner commensurate with the role it seeks to play in the negotiations. The interactions and consultations that drive the negotiations take place at the level of Permanent Representative (PR) who is expected participate in intensive (technical and political) and permanent consultations. All key WTO Members, developed and developing, allocate dedicated representation to the WTO through a full time PR in order to pursue the negotiating process in a consistent manner at political and technical levels. An important consideration for South Africa is the establishment of the Post of Permanent Representative (PR) to the WTO to lead the negotiating process in a dedicated manner as is necessary in the WTO.