Special OTN Update - (Developments in The Doha Round) 2010-06-30

SPECIAL
OFFICE OF TRADE NEGOTIATIONS
… for trade matters

OTN Update
June 30, 2010
Doha Development Agenda
We therefore reiterate our support for bringing the WTO Doha 2010. However, even a cursory glance at the Toronto
Development Round to a balanced and ambitious conclusion as declaration, would give pause to the casual observer. It
soon as possible, consistent with its mandate and based on the is not so much what was explicitly articulated but the
progress already made. We direct our representatives, using all
implications of what was omitted from the Declaration.
negotiating avenues, to pursue this objective, and to report on
progress at our next meeting in Seoul, where we will discuss the The Toronto Declaration jettisons the G-20 commitment
status of the negotiations and the way forward – The G-20 to complete the Round by 2010 and reflects the much
Toronto Summit Declaration June 26-27 2010. more nebulously articulated pledge to complete the
When the G-20 met in Toronto Canada on June 26-27 2010, Round ‘as soon as possible’. While it may be argued
their mandate was to discuss the safeguarding and that this Declaration exhibits a much more sober
strengthening of recovery from the global economic and acknowledgement of the state of play of the WTO
financial crisis, and the implementation of commitments negotiations, at the same time, it does not augur well
from previous G-20 summits. In accordance with the politically for the future of the negotiation process.
iterations from previous G-20 summits, the completion of the
The WTO Director General, Mr. Pascal Lamy, has
Doha Round by the end of 2010 was a component of the G-
continued to try to influence the political process by
20 implementation agenda. It was not anticipated that the G-
reiterating the importance of an open Global economy to
20’s substantive exchanges at the Toronto Summit would
economic recovery and financial stability. He has also
address the Doha Round negotiations – this item is
tried to persuade members that the completion of the
reserved for discussion at the next meeting of the G-20
Round by 2010 is possible, if only there was political
scheduled to take place in Seoul, South Korea in November
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery
(CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments
germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate
and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy
developments of currency and importance to the Caribbean.
http://www.crnm.org
2
will. Such were the themes of his address to the G-20 at has already been conceded in the current draft texts
the Toronto Summit. However, the tepid undertones of the would upset the balance of the negotiated package on
Toronto Declaration, considered as a reflection of the the table and culminate in the restart of negotiations
measure of global political will, do not complement the from scratch.
ambitions or optimism of the WTO DG.
At the Toronto Summit, President Barack Obama
At the same time, the lack of fervour emanating from the G- insisted that he wants to build on the work that has
20 this time around is consistent with recently experienced already been done. However, at the same time he has
disappointments. Such disappointments include the also insisted that the current offers as reflected in the
Stocktaking Exercise (SE) held in March 2010 as mandated draft texts are inadequate. To date, beyond drawing
by the 7th WTO Ministerial Session. The purpose of the inferences from his references to the need to be creative
stocktaking was to determine whether or not a conclusion of and to focus on other negotiating issues other than
the Doha Round in 2010 would be doable, through an Agriculture and Non-agriculture Market access (NAMA)
assessment of the current technical and political gaps that such as Services, it has been difficult to gauge the
currently inhibit the conclusion of the Round. The exercise specifics of the inadequacies of the current negotiating
drew on factual reports issued by the respective Chairmen offers on the table as observed by the President
of the Special Sessions or Negotiating Groups. These Obama. The advanced developing countries have
factual reports were in turn aided by the convening of all maintained that the current texts do not reflect the full
major thematic negotiation sessions (i.e. Agriculture, NAMA, quantum of their offensive interests either. However,
Services, Trade Facilitation and Rules) in the period they have emphasized that focusing on making progress
immediately preceding the SE. in other areas such as Services can not be supported
without first resolving the outstanding issues in
Based on the findings of the SE, the WTO DG indicated that
Agriculture and NAMA.
in order to move forward it would be important to maintain
the development dimension at the centre of the While much attention has been directed to the U.S. as a
negotiations. Furthermore, he underscored the need to primary proponent of deepening market access to the
conduct negotiations on the basis of the current texts. As large developing countries, it should be noted that
noted in the Toronto Declaration, these principles for achieving such access would also serve the offensive
moving forward were also acknowledged by the G-20. The interests of other WTO members including Japan and
reinforcement of such principles is timely. even China. In light of the current political tensions
however, it stands to reason that in order to prevent a
The United States of America (U.S.), under the Obama
deepening and widening of the chasm that stands in the
Administration has come under fire recently especially from
way of the conclusion of the Round, the starting point for
amongst advanced developing countries for harbouring
the conclusion of the Round should be the current text.
greater ambition with respect to tariff liberalization.
Members of the WTO G-20 group of developing countries, Furthermore, resolving the current impasse in the
including Brazil, China and India have insisted that the negotiations would involve striking a balance between
quest for opening developing country markets beyond what the creation and maintenance of flexibilities for
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3
developing countries to improve their meaningful

Highlights of the State of Play :
participation in the global trading system on one hand and
on the other, the further removal the barriers to trade. It Agriculture and NAMA
has been suggested that the advanced developing Negotiations
countries should concede greater tariff reductions in
industrial goods in exchange for improved access to
developed country Agriculture markets. However, should Agriculture
this type of reconfiguration of offers occur at this stage,
the effect is likely to be prejudicial to the interests of other
Special Safeguard Mechanism (SSM)
less advanced developing countries, such as the small
vulnerable economies (SVEs) of the Caribbean. Improved In Agriculture, an issue of primary contention is the
access for advanced developing countries to primary Special Safeguard Mechanism (SSM). The SSM is a
developed country agriculture markets such as the U.S. rapid response instrument which is proposed to allow
and the European Union (EU) for example, are likely to countries to apply a safeguard in the form of additional
negatively effect the margin of preference for traditional duties to agricultural imports in circumstances where the
Caribbean agricultural exports. volume of agricultural imports increase rapidly beyond a
specific volume benchmark or in circumstances where
In the end, as with most negotiations what is required is a
the price of agricultural imports fall below a specific
tradeoff of core offensive and defensive interests. The full
level. In both cases, the volume and price effects would
measure of this exercise will not become apparent until
have a deleterious impact on local agricultural
Agriculture and NAMA outstanding issues are first
production/producers and food security.
resolved.
The issue to date has been linked to challenges
resolving the architecture of the SSM. The export
interest groups of major agricultural exporting developed
and developing countries contend that there is a need to
place stringent conditionalities on the use of the SSM in
order to prevent its arbitrary use and to prevent
impositions of barriers to their exports. Proponents of
the SSM, namely the WTO G33 group, argue that the
condiitonalities proposed render the SSM inaccessible
or useless to developing countries.
Some of these conditionalities relate to cross check

provisions and seasonality requirements. The cross
Host of the G‐20 Toronto Summit, Canada’s PM
Stephen Harper check provisions, for example, oblige the SSM invoking
country to ensure that:
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4
(i) For the volume-based SSM, Members should livelihood security and therefore make them more
not have recourse to exceeding pre-Doha vulnerable to the adverse effects of import surges and
bound rates in cases where import surges are price declines. Against this background, the G33
not accompanied by price declines;
reiterated its support for the seeking enhanced
(ii) For the volume-based SSM, imports are at a flexibilities in the SSM for SVEs.
negligible level in relation to domestic
The G33’s critique of the treatment of the SSM in the
production and consumption;
current draft text was not received well by those states
(iii) For the price based SSM, when import (such as the U.S., New Zealand and Uruguay) with
volumes are declining; competing export interests. Though consultations on the
SSM have continued since the collapse of the July 2008
(iv) For the price based SSM, if the volume of
imports is manifestly declining or a negligible Mini-Ministerial, the matter still requires considerable
political and technical development
However, the G33 has argued that the relationship
between these variables is not always synchronized.
Referring to a recent study, they have argued, for
Cotton
example, that in most cases, import surges were not
accompanied by price declines. Such cross check In addition to the SSM, the issue of the treatment of
requirements would make the SSM inaccessible. cotton has become a renewed issue of contention. The
July 2004 WTO Framework Agreement and the Hong
Seasonality conditionalities require that limitations are
Kong Ministerial Declaration of 2005 mandated WTO
placed on the duration of the imposition of the SSM on
members to address cotton trade "ambitiously,
seasonal agricultural products – for a period of up to six
expeditiously and specifically within the agriculture
months only. On the other hand the G33 has argued
negotiations in relation to all trade-distorting policies in
that ‘seasonality in production’ should not be juxtaposed
all three pillars of market access, domestic support and
or conflated with ‘seasonality in trade’ trends of export
export competition". The mandate suggests that
trade markets.
developed countries should eliminate all forms of export
The G33’s defence of the SSM’s purpose and subsidies; provide duty-free and quota-free access for
architecture is documented in a January 2010 formal cotton exports from least developed countries (LDCs);
submission to all WTO members on the SSM and agree to substantial cuts in their trade-distorting
(TN/AG/GEN/30). That document also contains a domestic subsidies. However, with the Doha impasse,
section dedicated to SVE-specific concerns on the SSM. the commitment to attempt to fulfil this mandate has
The submission recognised, for example, that SVEs failed to materialize in the Doha negotiations.
face a number of constraints that justified the bestowal
With regard to cotton, the issue for developing countries
of additional SSM flexibilities. As noted in the G33
is not improved market access. The core issue is the
submission, SVEs are subjected to higher transaction
inflexibility shown by developed countries, mainly the
costs, limitations in crop diversification that inhibit these
US, with regard to the reduction of trade distorting
countries from addressing the challenges of food and
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5
subsidization of domestic cotton farming. The cotton Doha Round. On the other hand, the U.S. has indicated
exports of developing countries, especially of the LDCs that other outstanding issues in the agricultural
are not positioned to compete on the global market negotiations need to be addressed before the cotton
against the heavily subsidized cotton exports of issue.
developed countries.
It is possible to conclude that the U.S. may seek to
While progress on this issue has floundered, Brazil break the resolve of developing countries on this and
successfully challenged the U.S. subsidization of its other negotiation issues, as part of a strategy to
domestic cotton industry and its export credit guarantee leverage its offensive interests in the Doha negotiations.
program. The U.S. failed to comply with the WTO ruling Recognizing this likelihood, and understanding the
resulting in the granting of the right to Brazil to retaliate importance of cotton to the overall integrity of the
through the imposition of trade sanctions in the amount consolidated developing country negotiating position in
of US$829 million. Before Brazil implemented sanctions, the Round, India, for example, has publicly stated its
the US and Brazil brokered a temporary framework deal support for the C4’s position, encouraging them not to
which obliges the U.S. to provide technical assistance to waver in their resolve.
Brazil in the amount of US$147.3 million per year. In
Compared with other issues, the treatment of cotton has
addition, the U.S. has promised to make changes to its
not been identified as a matter of immediate priority.
export credit guarantee program and to limit its trade
However, the settlement of the cotton issue could be the
distorting cotton specific subsides.
litmus test of that larger philosophical question of
The deal has placated Brazil. However, the U.S. failure legitimacy surrounding the Round. Can the Doha Round
to comply with the WTO ruling has not helped those fulfil its development mandate? .
developing countries such as the C-4 which are most
seriously affected by the U.S. cotton subsidies. Without
the incentive of Brazil’s threat of trade sanctions against
the U.S., it is uncertain how successful the C-4’s
lobbying effort will be to effect any change in the US
negotiating position with respect to cotton U.S.
subsidies.
It should be added that African states have also been

receiving cotton development assistance. Though the
development assistance being provided should not be
considered a sustainable solution the problem, it is likely
to be viewed, understandably, as an attractive interim
solution for the African LDCs. This notwithstanding, thus
far, the African countries have been standing firm in
WTO’s Director‐General, Pascal Lamy
their insistence on an early agreement on cotton in the
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6
DSB. Some Members (such as Thailand and India)

Non-Agricultural Market want the HM to apply also to agricultural goods while
Access (NAMA) others believe that such scope would breach the
purview of NAMA negotiations. A number of CARICOM
countries recognize the value of the HM but are alarmed
The Horizontal Mechanism that as importers of relatively few tariff lines, the
administrative requirements to institute this new system
Work in NAMA has been related to three core elements
could be burdensome. Furthermore, some countries fear
namely (i) non-tariff barriers (NTBs), (ii) sectorals or the
that the establishment of the HM with its non-recourse to
elimination of all tariffs in particular sectors, and (iii)
DSU might lead to greater scrutiny of the compatibility of
scheduling. However, NAMA negotiations have been
their domestic laws and regulations with WTO
dominated by consideration of non-tariff barriers, with
obligations. It is in that context that additional
special attention to the development of a Horizontal
consultations are required to determine how the HM
Mechanism (HM).
would be operationalised and what would be its possible
The HM or the Procedures for the Facilitation of impact on countries, in particular SVEs.
Solutions to NTBs is an informal dispute resolution
mechanism that explores trade solutions without
affecting the rights and obligations under the WTO
Agreements. The initiative enjoys near universal support
among WTO Members. It should be noted that although
the African Group is a strong proponent of the HM, the
ACP has yet to take a definitive stance on it. The
establishment of the HM would result in a sub-judicial
body to address non-tariff measures, thereby bypassing
the DSB process. If adopted, the HM would allow for the
establishment of a consultative forum in which countries
disputing the interpretation of another Member’s NTB
would accept mediation by an independent actor. The
proponents argue that such a forum would support
Members’ efforts at resolving potential disputes thereby
ensuring that they do not jeopardise real trade flows. Members attending a NAMA negotiation session in Geneva.
Furthermore, the mechanism would be open to all WTO
Members with all Parties enjoying the same rights.
The Chairman of the NAMA Negotiating Group has

indicated that, a number of Members have expressed
concern with respect to the coverage of the HM and the
body’s relationship with other WTO Committees and the
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7
Features of the Horizontal Mechanism (HM)
• The procedures are intended to explore trade solutions to the NTB without getting into the
rights and obligations under the WTO Agreement.
• The first stage is of information exchange between the requesting and responding Member
which seeks to ensure transparency. This is non confidential and is circulated to the WTO
Committee.
• The Chairman or Vice Chairman get associated at this stage since they call a meeting for
addressing any outstanding issues and explore possible steps forward.
• Third parties can join in based on consent of the two parties and on terms and conditions
decided upon by them.
• The second stage is purely mandatory at the consent of both parties. It involves the
appointment of a facilitator which is by mutual consent or else selected by the Chairman of
the Council of Trade in Goods (CTG) after consulting the parties.
• This stage has flexible procedures in terms of the venue, means of communication,
exploration of possible solutions etc. The emphasis is on reaching a mutually agreed solution.
The entire proceedings and content of the discussions in this stage are confidential.
• If a mutually agreed solution is reached, the facilitator will submit a draft report on the NTB,
procedures followed and the solution arrived at. This has to be vetted by the parties and then
submitted to the Committee.
• While the solution may be trade related, it should not impinge on the rights and obligations of
Members under the WTO Agreements.
• The procedures would be useful especially for developing countries in the context of the
economical and expeditious nature of the decision making. It would also strengthen the WTO
Committees especially in the context of their decision making.
Source: http://commerce.nic.in/trade/international_trade_tig_nama_Brief.asp
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8
Preference Erosion The ACP applied objective filters to generate 57

products exported to the EC and a further 29 to the U.S.
to benefit from preference erosion treatment, that is, to
Preference erosion constitutes another NAMA issue and be subjected to longer tariff reduction implementation
is of great import to the Caribbean. Preference erosion periods. The ACP proposal includes swordfish,
is defined as the decrease in the margin between a deepwater rose shrimps, molluscs, women’s cotton
preferential tariff rate and the MFN tariff rate originating trousers, men’s shirts, T-shirts, women’s knitted jerseys,
from multilateral tariff liberalization. With the likely brassieres, cotton bed linen and aluminium doors and
reduction of MFN tariffs in the developed countries windows. An implementation period of 9 equal rate
under the ongoing negotiations on NAMA, developing reductions with 2 year grace periods has been proposed
countries including LDCs which enjoy unilateral for these products.
preferential access to developed country markets
The major stumbling block remains the settlement on
through regional trade agreements or Generalized
the treatment to be awarded to the DAMS –
System of Preferences (GSP) schemes will lose
Bangladesh, Pakistan, Sri Lanka, Nepal and Cambodia
markets on some products of export interests. In light of
– with respect to their exports to the U.S. The proposed
the problem, it is proposed that the tariff lines which
concessions to these countries would have the effect of
would be negatively affected by preference erosion
stripping away the economic value of the preference
would be selected and treated with longer
erosion treatment on 17 of the 29 tariff lines granted to
implementation periods for tariff reduction in order to
the ACP. The major Caribbean concern rests with Haiti
delay the effect of preference erosion. However, some
and the possible impact of this proposed treatment of
developing countries have argued that the tariff lines or
these countries on that Haiti’s preferences on apparel
products treated with longer tariff reduction
exports to the U.S. under HOPE. The preferential
implementation periods are items in which they have an
treatment received by Bangladesh in the U.S. market,
export interest and that they would benefit from shorter
for example, is very negligible. As a result, erosion of
implementation periods or from the elimination of tariff
preference in the U.S. market due to tariff reduction
reduction implementation periods. These countries
under NAMA negotiations is expected to be insignificant
referred to as disproportionately affected Members
for Bangladesh. On the other hand, the reduction of U.S.
(DAMs) have therefore been pressing special and
export duties under the NAMA negotiations will reduce
differential treatment which would allow them only to
the duties on products of export interest to Bangladesh.
benefit from faster implementation of tariff reductions on
This is particularly the case with respect to apparel
the preference erosion products.
exports. The reduction of U.S. duties on Bangladesh’s
The DAMS have indicted dissatisfaction with the current apparel exports will likely improve its competitive
NAMA negotiation package and have expressed position in the U.S. market and compromise the U.S.
concern about the limited number or value of tariff lines market share of Caribbean’s and Sub-Saharan apparel
awarded to them. On the other hand, other countries are exported under the Caribbean Basin Initiative and
opposed to re-opening talks on this hitherto “stabilised” African Growth and Opportunity Act preferential
issue. schemes.
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9
Affecting the erosion of preferences is the evolution of

sectorals discussions. Sectoral initiatives are proposals The Way Forward
from some WTO members for the elimination or
harmonization at low levels of customs tariffs in specific In terms of process, the WTO DG has signalled that a
sectors. The tariff reduction in these specific sectors is combination of different approaches is necessary to
to be higher than the reduction provided for under the push the negotiations along. The elements involved in
Swiss formula reduction of tariffs. The WTO members this ‘cocktail’ approach include the continuation of the
participating in the sectoral must comprise the majority Chairman-led processes within the Negotiating Groups.
of the total trade of all WTO members in that sector. In order to preserve transparency and inclusiveness of
Participation in Sectorals is not mandatory. Those the negotiation process, the convening of additional
countries which do not participate are not obliged to meetings with a variety of regional and thematic groups
eliminate or harmonize their tariffs. However, these while also increasing the frequency of Trade
non-participating countries can take advantage of the Negotiations Committee (TNC) meetings will also be
harmonized low duty or the zero duty regimes of the involved. The WTO DG has also endorsed the use of
participants of sectorals. meetings in smaller configurations to address specific
and horizontal issues to ensure that Members are able
The effect of sectorals is that they can impact the tariff to find commonality and synergies across all the
reduction of products which are preference erosion negotiating subjects. For the Caribbean, the focus will
products. Some of the items proposed to benefit from undoubtedly be to support these processes and to
sectoral treatment are fish and fish products, clothing continue to be on ensuing that there is little derogation
and footwear which are preference erosion products of from the current draft texts in as far as these reflect the
interest to the Caribbean and the wider ACP. Though Caribbean’s offensive and defensive interests.
the ACP has already tabled a recommendation that the
products selected for preference erosion should be Notwithstanding the plan of action that is being used to
removed from sectoral initiatives, consensus on this maintain momentum in the negotiations at the technical
and other matters may start of breakdown the longer level, at the political level pessimism amongst WTO
the Doha negotiations remain incomplete. members continues to be high. It is difficult at this time
to deduce whether the negotiations will progress
sufficiently to complete the Doha Round by the end of
2010.
****************
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SPECIAL

OFFICE OF TRADE NEGOTIATIONS

… for trade matters

Doha Development Agenda

developing countries to improve their meaningful

Some of these conditionalities relate to cross check

It should be added that African states have also been

DSB. Some Members (such as Thailand and India)

The Chairman of the NAMA Negotiating Group has

Features of the Horizontal Mechanism (HM)

Preference Erosion The ACP applied objective filters to generate 57

Affecting the erosion of preferences is the evolution of

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