OUTCOME OF WTO MINI-MINISTERIAL MEETING IN GENEVA 8-9 NOVEMBER 2005

PREPARED BY CD: TRADE NEGOTIATIONS ITED, THE DTI

11 NOVEMBER 2005, PRETORIA

The Mini-Ministerial Meeting and Background

  1. The WTO Mini-Ministerial held in Geneva 8-9 November was considered important to provide further impetus to negotiations in advance of the 6th Ministerial Conference in Hong Kong, 13-18 December 2005. This followed the meeting in Zurich, 10 October 2005, where the US submitted its agricultural proposal. This was a significant move because agriculture has always been understood as the key to unlocking progress across the Doha Round Agenda. The US offer was well received as it had generated momentum in the process but deeper analysis indicated that, as an opening gambit, it was insufficient. Nevertheless, the stage was set for further engagement.
  2. On 12 October 2005, the G20 submitted its detailed proposal indicating a range of targets for the US and the EU on agriculture. The proposal was balanced – a genuine middle ground – that aims to eliminate export subsidies, and achieve substantial, real reduction in trade distorting domestic support provided by industrial countries to their farmers. The G20 proposed a reasonable target in market access (i.e. reducing agricultural tariffs) in products of export interest to developing country exports and offered new access to its markets on the basis of special and differential treatment (less than full reciprocity).
  3. Market access in agriculture (i.e. agreement on global tariff reductions for agriculture) offers the most significant benefits for developing countries that amount to over 90% of the overall benefits from a combination of subsidies elimination, reductions in domestic support and lower tariffs.
  4. The EU was caught off guard by these developments and came under considerable pressure to make its proposal as soon as possible. At the Zurich meeting, the European Commission (EC) made an improved offer on domestic support reduction (not inconsistent with the current reform of the Common Agricultural Policy - CAP), and further indicated the EU would submit a comprehensive response by 27 October 2005. Between the Zurich meeting and 27 October 2005, the EC came under severe pressure from some EU Members (particularly France) not to move beyond the mandate given by the CAP reform.
  5. On 28 October, the EC submitted its proposal. This has caused the impasse in the negotiations. First, whereas the US has offered to reduce tariffs by an average of 75% and the G20 proposed 54%, the EU by contrast offered only 45% along with a series of caveats that could see the tariff offer reduced to only 24% - less than in the Uruguay Round. By most accounts, the EU made no meaningful offer in the most important aspect of the agricultural negotiations.
  6. Second, the EU made a series of demands that would imply enormous adjustment pressures and burdens on developing countries, particularly the so-called advanced developing countries (India, Brazil, China, South Africa among others), on industrial tariffs and services. The EU proposal in fact go beyond the negotiating mandate agreed in Doha and subsequent agreements. The EU also called – implicitly – for further differential among developing countries (so-called advanced and vulnerable developing countries) and re-introduced the issue of Geographic Indications. Both issues polarizes the WTO membership. Finally, contrary to spirit of any negotiation at this stage, the EU indicated that this was its final offer for Hong Kong.
  7. The meeting of Ministers offered an opportunity to address these issues, and explore possibilities for any movement from the main players. The EU held its position and demanded that developing countries make the next move in industrial products and services. Even when some developing countries indicated the possibility of improved offers, the EU refused to move on agriculture. In retrospect, the EU proposal and subsequent engagement appears designed to cause impasse because of an extremely limited negotiating mandate in agriculture.
  8. Following the meeting in Geneva, it appears the EU has managed to shift – or at least share - the blame for the impasse. The impression is being created that the difficulties are the result of a combination of intransigence of several Members. It is this distortion of perspective on the process that needs to be corrected.
  9. Way Forward

  10. The prospects for the 6th Ministerial Conference in Hong Kong do not appear promising. WTO Members are keen to avoid a re-run of the Cancun debacle. At this stage there are two possibilities. First, the EU makes an improved agricultural offer and reduces its ambition in industrial tariffs and services in advance of the Hong Kong Conference. This appears unlikely.
  11. Second, expectations for Hong Kong are reduced and effectively managed. In this respect, the key objective would be to capture (consolidate) the work that has been undertaken. This would take the form of a report to the Conference and suggests there would be no real negotiations. In addition, WTO members could agree to deliver some tangible benefits for the poorest most vulnerable countries: i) some decisions in favour of least developed countries (South Africa chairs this group); ii) an Aid for Trade package. In addition, a final solution (procedural) could be announced on TRIPS and Public Health.
  12. It is at this time important to reclaim the debate and principles that underpin this round of negotiations in the WTO – the so-called Doha Development Agenda – that claims to place development at the center of the round. These include the principles of proportionality, asymmetry, and special and differential treatment in favour of developing countries. The largest structural distortion in international trade occurs in agriculture through a combination of measures by industrial countries that include high tariffs, massive amounts of domestic support and export subsidies to protect their inefficient farmers. Removing these anti-development measures is a core objective of the round as it will lead to the expansion of developing country exports and meaningful integration into the global economy.
  13. Developing countries cannot pay for this needed reform in agriculture by overly ambitious requests in industrial tariff and services that does not take into account the realities of their levels of economic and institutional development. Developing countries will, of course, make a contribution to the round and their concessions will be commensurate to their levels of development in a full expression of the principle of special differential treatment. Larger economies, responsible for most distortions need to make the larger adjustments.
  14. At this stage, the EU must be held accountable for creating the impasse in agriculture that is the key to overall progress in the round. The EU needs to move first, and the US needs to improve its agriculture offer. Developing countries will follow with proportional commitments in industrial tariffs and services.