How to conclude the Doha Round? How Can LDCs and other SVEs also gain from the Doha Development Agenda? Faizel Ismail and Brendan Vickers GPS1/7 How to conclude the Doha Round? How Can LDCs and other SVEs also gain from the Doha Development Agenda? Faizel Ismail and Brendan Vickers Background to the current impasse in the Doha Round It is now widely known that the WTO’s Doha Round negotiations have been at an impasse since the July 2008 Ministerial Meetings in Geneva. The convergences reached amongst the Group of 7 (G7) members (i.e. US, EU, Japan, Australia, China, India and Brazil) in the July 2008 “Lamy Package” and subsequent negotiations were captured by the Agriculture and NAMA Chairs in their December 2008 Texts (Rev 4).1 The “what’s on the table” is now reflected in these Texts. However, since December 2008 the US Trade Representative (USTR) and various constituencies in the US began to reject the deal on the table, since they regarded the latter’s ambition as being too low and not worth taking. The new Obama Administration in the US since January 2009 has continued to adopt the position taken by these lobbies on the Doha Texts, creating an impasse in the Doha Round.2 At the Seventh WTO Ministerial Conference (MC7) held in Geneva in December 2009, South African Trade and Industry Minister, Dr Rob Davies, clarified that: “South Africa was not part of the agreements reached by some members in the July 2008 Package. As we have stated before our view is that even these texts are imbalanced and reflect too much accommodation of the sensitivities of developed countries in agriculture, while demanding too much from developing countries in terms of reducing their applied industrial tariffs and policy space for industrial development.” Similar concerns about the imbalanced nature of the Texts were reflected in the statements by a large number of developing countries, including China, India, Brazil and Argentina. However, South Africa was willing to work on the bases of these Texts, provided that the country’s need for additional flexibilities in NAMA would be accommodated. The vast majority of WTO members were also willing to work on the bases of these Texts, since they captured several years of work amongst members. Notwithstanding these assertions, the USTR, Ron Kirk, repeated the same argument he had been making for several months in his speech to the December 2009 WTO Ministerial Conference (MC7). He quoted an IMF study, which claimed that: “58 percent of global economic growth between now and 2014 will be provided by China, India, Brazil, Argentina, South Africa and the ASEAN countries”. He went on to state that: “the creation of new trade flows and meaningful market opening, particularly in key emerging markets, is required to fulfill the development promise of Doha”.3 Ministers at the MC7 called for a stock‐taking exercise to be held at the end of March 2010 to evaluate the progress made and chart a way forward towards the conclusion of the Doha Round. However, by the time of the March 2010 stock‐taking, the Doha Round was still at an impasse, with the US position remaining unchanged. During the course of 2009 the US had preferred to prioritize bilateral engagements with its main target countries, namely China, India and Brazil. However, the latter 1 See WTO doc, “Fourth Revision of Draft Modalities For Non-Agricultural Market Access”, Negotiating Group on Market Access. TN/MA/ W/103/Rev.4 6th December 2008 and WTO doc, “Revised Draft Modalities For Agriculture”, Committee on Agriculture Special Session. TN/AG/W/4/Rev.4 6th December 2008. 2 Ismail, F. 2009. “An assessment of the WTO Doha Round July-December 2008 collapse”, World Trade Review (2009), 8:4, 579-605 3 WTO doc, Statement by HE Mr Ronald Kirk, USTR. Ministerial Conference, Seventh Session, Geneva, 30 November-2 December WT/ Min (09)/ST/3 1st December 2009 1 meetings had not yielded any significant progress. The new US Ambassador to the WTO, Michael Punke, who finally arrived in Geneva at the end of April 2010, initiated meetings of the Group of 5 (G5) – i.e. US, EU, India, China and Brazil – in an attempt to engage these countries on the need to increase their market access concessions to the US. However, some members of this group believed that the group was too small to make any breakthroughs and after several meetings of the G5, the US initiated the “Ambassadors Small Group” process in July 2010. The Ambassadors Small Group Process The Small Group Process was an attempt by the US to hold substantive discussions on all the issues of the Doha Development Agenda outside of the formal negotiating groups of the WTO. This would allow the US to listen carefully to other delegations and develop its own negotiating positions, whilst waiting for the mid‐term elections scheduled for November 2010 to pass. The Small Group Process had mixed results. On the one hand, it did not contribute at all to any new movements or engagement on the core market access issues (in Agriculture, NAMA or Services) whilst on the other hand it did help to create an opportunity for Ambassadors to engage and provide new ideas to advance some negotiations in Fish Subsidies, Trade Facilitation and the so‐called Development Issues (Monitoring Mechanism). Whilst the US was clearly unwilling and unable to provide any indication of positive movements in agriculture in the Small Group Process, together with almost all the other developed countries (except Australia and New Zealand), they continued to demand a higher level of contribution from the developing countries in Agriculture, NAMA, Services, and Environmental Goods and Services. Japan and Canada supported the US by putting forward a new “basket” approach to gain support for sectorals in NAMA. Australia (supported by the US) proposed a new “clustering” approach to increase market access in Services. In each case the proposals are aimed at obtaining more market access from the major emerging developing countries. After the US mid‐term elections held in November 2010 and at the Seoul G20 Leaders’ Summit (November 11th and 12th), the major developing countries were adamant that the Small Group process needed to be transitioned into the formal negotiating groups of the WTO, as the informal small group process was not yielding any real progress and was not sufficiently transparent. The G20 Seoul Summit Declaration recognized “that 2011 is a critical window of opportunity...”. Partly in response to the message of the G20 Leaders and the views of members, WTO Director‐General Pascal Lamy, at the last Trade Negotiations Committee (TNC) and General Council (GC) meetings of 2010, held in November and December of 2010, called for new Texts to be drafted by all the Chairs of the WTO by Easter 2011, with a view to concluding the Round by July 2011. An intensive process of negotiations led by the Chairs in the WTO negotiating groups have thus been scheduled beginning early in January 2011, with the first informal Ministerial engagement of several Trade Ministers set to take place in Davos on the 29th January 2011. Assessment of the State of Play of the DDA The US, in attempting to substantially raise the current level of market access from what is currently reflected in the 2008 July Package and December 2008 Chairs Texts to appease their domestic constituencies, is seeking a “new Round of negotiations”. These demands ignore the compromises and concessions already made by other members to the US lobbies, that is reflected in the current Chairs Texts (the US demanded and received a large number of flexibilities in the agriculture negotiations), in the past 9 years of negotiations. By targeting the emerging developing country markets that US is simply ignoring the development mandate of the Round. 2 The EU and the G10 members have been emphatic that they are unable to provide any more market access in Agriculture. Thus if the level of ambition of the Doha Round is to be raised, they will not be the ones making any contribution. Thus the pressure for increased ambition falls squarely on the developing countries. The US does not know precisely what its constituencies are seeking in their market access demands. They have not started a serious dialogue with their constituencies at home on the Doha Round. While the USTR has a mandate to negotiate, their constituencies have not provided them with any precision with regard to their demands. The US is thus demanding that China, India and Brazil indicate what further concessions they are willing to make without being able to reciprocate. The USTR is clearly still not engaged in an “end‐game” negotiation yet. How to conclude the Doha Round? A new “culture” that breaks with the mercantilist tradition of previous GATT negotiations is a necessary condition for a breakthrough in the current impasse. As a first step, this requires that all members should recognise, respect and indeed mainstream the WTO’s development dimension. The Preamble to the 1994 Marrakesh Agreement establishing the WTO set out the objective of “sustainable development” and expressly referred to the need for “positive efforts to ensure that developing countries secure a share in the growth of international trade commensurate with the needs of their economic development”. A second step is to ensure greater inclusiveness of developing countries in decision‐making, so that trade opportunities are made available to all members on a more equitable basis and that trade rules do not subvert their development prospects. We offer the following five principles or set of values as a new guiding culture to change existing mindsets and attitudes by the negotiators from all the major players in the Doha Round: 1. Adhere to the principle of Fairness The current playing field in trade is uneven and biased against developing countries, which constitute more than two‐thirds of the organisation’s membership. It is unfair and reflects a persistent “asymmetry of economic opportunity” against developing countries, which was established during previous GATT rounds and continues into the current Doha Round, given the onerous demands on developing countries.4 Agricultural protection in the US, EU and other developed countries continues to undermine the agriculture development and food security concerns of a large number of developing countries, many of which are in sub‐Saharan Africa, the poorest region in the world.5 The plight of the cotton producers from West Africa is but a reminder of a wider distortion caused by trade‐distorting subsidies in the US (and in several other OECD countries). It is for this reason that the removal of these distortions in agriculture trade is the core issue in the Doha Round and is a litmus test for a development outcome. In the US today, there is a widely held perspective that the declining competitiveness of US industry is due to the unfair playing field against the US and that the major emerging markets, led by China, India and Brazil, are competing unfairly with the US due to lack of compliance with WTO agreements, or lower labour and environmental standards. In addition, there is a perception that as these countries are growing much faster than the US and increasing their relative share of global trade, they should make a bigger contribution to opening global markets than the US. This 4 Wilkinson, R. 2006. The WTO. Crisis and the governance of global trade. London: Routledge. Tangermann, S.,“US Trade Goals: A Broader Perspective on US Trade Goals”, www.sompost.com, 5th March 2010. 5 3 demand is not based on any empirical data or existing reality. The major emerging economies still remain poor and their level of development is vastly different from that of the major OECD economies. The US as the world’s largest economy, has been and remains the largest beneficiary of liberalization under the GATT.6 It is still the world’s richest economy, with a per capita income 15 times that of China and 47 times that of India.7 2. Respect the Doha Mandates The Doha Round placed Agriculture at the centre of the Round. The level of ambition in NAMA and other areas of the Doha Round were to be proportionate to the level of ambition developed countries were prepared to undertake in Agriculture. However as the Round proceeded developed countries began to demand onerous and disproportionate concessions from developing countries in NAMA, disregarding the Doha mandate that called for “the products of interests to developing countries to be prioritized” and that required developing country contributions to be based on the concept of “Less Than Full Reciprocity” and “special and differential treatment”. In addition, the formula adopted for NAMA is a much more onerous (the Swiss formula) than the more lenient linear formula adopted for tariff cuts in Agriculture. In addition, the relatively wide range of flexibilities insisted on by the developed countries to protect their sensitive agriculture products has been contrasted with the relatively narrow set of flexibilities they were willing to provide developing countries in NAMA for their sensitive sectors. Developing countries were to thus assert that the Doha development mandate had been turned on its head with the developed countries being granted more special and differential treatment than developing countries.8 3. Honour multilateral convergences and agreements reached The USTR urged by their lobbies played a leading role throughout the Doha Round negotiations. They were part of the G7 July 2008 Ministerial Meetings. However, the new USTR since June 2009 urged by these same lobbies claimed that it was not in a position to work on the basis of the Chairs Texts of December 2008. Multilateral trade negotiations take a long time. The last round (Uruguay Round) that was to be completed in four years, took more than seven years to conclude. If negotiators kept withdrawing their offers, refusing to work on the basis of agreements reached and kept changing the goal posts along the way on what they required to finalize a deal, they would lose credibility and the negotiations would be prolonged. 4. Recognize the value of a stable and secure Multilateral Trading System A stable and secure multilateral trading system is an insurance against protectionist tendencies that could threaten the trading interests of all members. The US and the EU are the largest beneficiaries of the rules‐based multilateral trading system. Demanding mercantilist gains at the expense of their trading partners, especially developing countries, will delay the conclusion of the 6 Bergsten, C. F. ”Obama needs to be bold on trade”, Financial Times, 24th June 2009. World Bank. 2010. World Development Report. Washington, DC: World Bank. 8 See WTO doc, “Reclaiming Development in the WTO Doha Development Round” submission made to the 55th session of the Committee on Trade and Development on behalf of Argentina, Brazil, India, Indonesia, Namibia, Pakistan, the Philippines, South Africa and Venezuela. 28th of November 2005. 7 4 Doha Round and undermine the stability of the rules‐based system. The US, as the world’s largest economy, has a responsibility to provide the leadership required to build the WTO into a global public good for all its members. 5. Contribute to the strengthening of global governance A stable and strengthened rules‐based system is a vital component of multilateralism and the system of global governance. A failure to conclude the Doha Round on the basis of its development mandate, and that is fair and balanced, will have serious systemic implications for global governance more generally. Developing countries are unlikely to trust the major developed countries as serious negotiating partners in other more profound areas of the global system such as climate change, if they are seen to be adopting a purely mercantilist approach in the WTO. Their appeals to developing countries to take a more holistic long term view of their interests in areas such as climate change will sound increasingly hollow. How can LDCs and SVEs also benefit from the Doha Round? Specific actions that WTO members, and in particular developed countries, can take to benefit all LDCs and other small, weak and vulnerable economies: Market Access 1. First, the Doha negotiations should fast‐track the elimination of tariff peaks and tariff escalation in manufactured products of particular export interest to these countries. Similarly, fast‐tracking the elimination of export subsidies and trade‐distorting domestic support on agricultural products of export interest to these countries – such as sugar, cotton, groundnuts, diary products, fish, and tobacco – would provide a stimulus to their industrial and agricultural development. The implementation period should start immediately or on the conclusion of the Round. 2. Second, developed countries should cease efforts to exempt from liberalization “sensitive” agricultural products that are of export interest to these countries. 3. Third, all G8 countries should provide 100 percent effective duty free and quota free market access (DFQFMA) to all African countries and other small, weak and vulnerable economies. This should be provided immediately and without waiting for the conclusion of the Round. The current decision agreed in Hong Kong only provides 97 percent DFQFMA to LDCs and will only be implemented at the conclusion of the Doha Round. Developing countries in a position to do so should also provide such access and support in accordance with their capacity. 4. Fourth, it will be vital to facilitate imports of LDCs and other small, weak and vulnerable economies’ services into developed country markets. This should include providing better access for the temporary movement of workers and for outsourcing in various areas including health, education and call centres from these economies. The potential benefits of mode 4 liberalization by developed countries could dwarf the benefits gained by developing countries from openings in the traditional goods sectors. The current Services Waiver being discussed in the WTO for LDCs should be extended to other SVEs and implemented immediately. Non‐Tariff Barriers (NTBs) 5. Fifth, in the area of product standards, both technical product regulations and sanitary and phytosanitary measures WTO members need to establish a “fast‐track” mechanism by which 5 exporting firms can bring up instances where standards are being enforced with excessive stringency and seek a rapid resolution; and provide expanded assistance to LDCs and small, weak and vulnerable economies to ensure that its products meet internationally agreed standards. The proposed Horizontal Mechanism being negotiated in the NAMA negotiating group would be a first step towards providing such a fast‐track problem solving mechanism for countries facing such NTBs. 6. Sixth, more liberal rules of origin that allow firms to import textiles and other inputs from the most efficient suppliers in the world are critical in order to ensure that the garments produced in the LDCs and SVEs are competitive in developed country markets. Thus, the existing preferential rules of origin in developed countries should be adjusted and aligned to facilitate exports from these economies. This demand has been made by LDCs in the WTO and has yet to be effectively addressed. Flexibility in Rules 7. Seventh, a mechanism should be established in the WTO that provides SVEs with “flexibility” not to implement a specific discipline, if such non‐implementation is properly justified for development interests. This should be understood as operationalizing the principle of special and differential treatment, and targeted capacity building should be utilized to assist the country to meet the implementation of the remaining obligations. The Monitoring Mechanism currently being negotiated in the WTO CTDSS could be used for such a purpose. Capacity Building 8. Eighth, to provide relief for LDCs and SVEs to be impacted by any erosion of preferences as a result of the Doha Round, effective financial and technical cooperation should be provided by the developed countries. Any “compensation” for the lost preference should be designed to encourage sustainable diversification and to cushion any negative socio‐economic effects of the reform process. 9. Ninth, in the short term preferences provided to LDCs and SVEs need to be deepened where technically feasible, to retain the margin over most‐favoured nation (MFN) rates. In the medium term alternative, complementary mechanisms are needed, specifically “aid for trade” to build these countries’ supply capacity and competitiveness. 10. Tenth, more secure legally binding commitments need to be made by developed countries to assist LDCs and SVEs to implement trade agreements. The WTO Trade Facilitation negotiation provides a good opportunity for the WTO members to agree to such legally binding “Aid‐for‐Trade” for LDCs and small and vulnerable countries. 6