One of the signs for perfect negotiations is that none of the negotiating parties feels satisfied. Going by this definition, the recent ministerial meeting of World Trade Organization (WTO) may be termed quite successful. None of the major stakeholders, ranging from big trading nations to the civil society representatives, were ’completely’ satisfied with the deal that was reached by 149 member governments of WTO on December 18, 2005.

Though the expectations from the Hong Kong ministerial meeting were strategically toned down, the success in avoiding a repeat of what happened at Cancun or Seattle can be called another victory. The Hong Kong meeting has put the sluggish Doha Round of trade talks “back on track,” in the words of WTO Director-General Pascal Lamy.

The Hong Kong conference was never meant to propose any modalities (specific numbers and formula structures) for reduction in subsidies and tariffs as a means to liberalise international trade. In fact, before the meeting the whole process that was originally designed to discuss the modalities was renamed as ’recalibration’ phase in which ministers had to re-assess their positions on agricultural as well as non-agricultural market access to determine how far they would like to go to materialise the Doha Development Agenda. Thus the ministers’ agreement to disagree and their decision to resolve their differences on agriculture, industrial goods and services (probably in Geneva) allows them to fill in the considerable blanks still left from the Hong Kong. After successfully avoiding failure now, they can still hope to conclude the Doha round by the end of next year.

That the level of success depends on the level of expectations is only stating the obvious. This time our expectations were very low. So it came as no surprise when John Tsang (Hong Kong’s secretary for commerce, industries and technology), who was chairing the meeting in his capacity as the host minister, said that the outcome of Hong Kong meeting exceeded his expectations.

But the question remains: Whose victory was it?" And in Pakistan’s domestic context, what does it entail for our country? These questions, though, seem very simple and direct but their answers are extremely complicated.

A close analysis of the ministerial declaration issued at the end of the six-day Hong Kong meeting reveals that the gathering’s most talked about achievement is the putting down of 2013 as the end date for elimination agricultural export subsidies, contingent “upon the completion of modalities”. The US has also agreed to eliminate its export subsidies on cotton next year. Progress is also visible on the Least Developed Countries (LDCs) long standing request for duty free quota free market access. The developing countries’ reservations about the treatment of services were also addressed to some extent by weakening the mandatory and prescriptive nature of certain provisions relating to the future course of negotiations.

The critics of the declaration question the rationale for allowing subsidy-providing nations to have eight more years to keep supporting their agriculture exports on the expense of poor farmers from the developing nations. They also question the untamed domestic support on cotton provided by the US, the elimination date of which is not indicated in the final declaration.

The final draft declaration contains 59 paragraphs on key areas of agriculture, Non-Agriculture Market Access (NAMA), services, cotton, Trade-related Aspects of Intellectual Property Rights (TRIPs), WTO rules, environment, Least Developed Countries (LDCs), aid for trade, integrated framework, and accession.

On agriculture, there are minor improvements on what was written in the pre-Hong Kong December 7 draft text of the declaration. For instance, the “working hypothesis” on three bands for classifying trade-distorting domestic subsidies for the purposes of reduction has been replaced by text specifying that “there will be three bands,” with similar language for structuring tariffs into four bands for making tariff cuts. The EU will face the highest reduction on both counts and will be placed in the first band, the US and Japan would be placed in the second band, while all the other members will be in the lowest bands of tariff and domestic subsidy reduction. Countries such as Switzerland, which have high relative amounts of trade-distorting subsidies even though they fall into the lowest band, are enjoined to make an additional reduction.

On export subsidies, the members have agreed to develop detailed modalities on parallel elimination of all export subsidies and discipline all export measures. The text commits members “to ensure the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect to be completed by 2013.” This date has is more acceptable to the EU than a widely-supported 2010 deadline which European negotiators resisted in the exclusive ’Green Room’ meetings all week. This is because the 2003 reform of Europe’s Common Agricultural Programme (CAP) will eliminate most export subsidies by 2013 anyway. However, in order to placate the advocates of earlier date, the declaration says “a substantial part” of the reductions is to be “realised by the end of the first half of the implementation period.” For the purposes of comparison, the implementation period for the Uruguay Round commitments was five years for the developed countries.

The declaration also requires WTO members to develop disciplines on food aid, export credit programmes and the reform of state trading enterprises by “30 April 2006 as part of the modalities.” On food aid, in particular, the EU has argued that a great deal of US in-kind food aid is tantamount to an export subsidy to its farmers. The declaration, therefore, provides for an “effective disciplines on in-kind food aid, monetisation and re-exports so that there can be no loop-hole for continuing export subsidisation.” It also calls for the creation of a ’safe box’ for bona fide food aid to ensure that new rules do not serve to impede it in emergencies.

An important movement in the declaration is the recognition of the fact that Special Products (SP) and Special Safeguard Mechanism (SSM) will be an integral part of the modalities and the outcome of negotiations in agriculture. This is a huge victory for G-33, which achieved it by making an alliance with G-20 nations. The developing countries have been given the flexibility to self-designate an appropriate number of goods as Special Products guided by the indicators on the criteria of food security, livelihood security and rural development. Similarly, their right to a recourse to SSM — based on import quantity and price triggers — have also been recognised. Recognition on the basis of price triggers is particularly significant because many developing countries cannot effectively monitor import quantities; prices are far simpler to follow.

On the cotton issue, it is agreed that “all” export subsidies for cotton would be eliminated by the developed countries in 2006, a major achievement for the four African LDCs — Benin, Burkina Faso, Chad and Mali — who are dependant on cotton exports. This means not only the elimination of the US Step 2 export subsidy programme but also the ’subsidy element’ of the export credit guarantees the US extends to cotton traders — both ruled inconsistent with WTO rules by a WTO tribunal in April 2005.

There is, however, no mention of a binding commitment on the reduction of domestic subsidies for cotton production. African cotton-producing countries were intensely disappointed at this outcome, as the high level of producer and marketing support allows US producers to sell cotton in international markets at prices below the real cost of production. Domestic subsidies make up 80-90 per cent of total US support for cotton (estimated around 3.8 billion dollars in 2004).

It is also agreed that some time in future (from the commencement of the implementation of the deal that comes about at the successful conclusion of the Doha round of global trade talks), the developed countries will provide duty and quota free access to their markets for cotton exports from the LDCs. African countries are, however, unlikely to benefit from this provision because they do not export cotton to the developed countries markets in general and the US market in particular. They sell their cotton in other markets, particularly in Asia, where they have to compete with subsidised US exports.

A small development on NAMA negotiations is the inclusion of a paragraph on the need for a balance between agriculture and NAMA ambitions in a proportionate manner, consistent with the principle of special and differential treatment. Similarly, the earlier “working hypothesis to use a Swiss Formula” has been replaced in the revised text with “We adopt a Swiss formula”.

Though the structure and details of the formula are yet not finalised, the declaration sets the direction that the co-efficient levels in the Swiss Formula will take. According to the declaration, the formula will be used, among other things, to “reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in particular on products of export interests to developing countries and... take fully into account the special needs and interest of developing countries, including through less than full reciprocity in reduction commitments”. This leaves the door open to both Pakistan sponsored two-co-efficient ’simple Swiss formula’ and the multiple-co-efficient-based approach linked to each country’s average tariff favoured by Argentina, Brazil, and India.

The declaration notes the concerns raised by small, vulnerable economies, on how to handle the issue of preference erosion and instructs the Negotiating Group to establish ways to provide flexibilities for these members without creating a sub-category of WTO members.

On services, the developing countries (barring Cuba and Venezuela, who raised objection and showed concerns in final plenary) can take a breath of relief as the final ministerial declaration weakens the mandatory and prescriptive language in the original version of Annex C of the declaration. The annex’s much-contested paragraph on the plurilateral request-offer process was revised to explicitly specify that the members’ obligatory consideration of collective requests will take place in the context of an article on General Agreement on Trade in Services (GATS) which stipulates that liberalisation in services trade should pay respect to the countries’ developmental levels. This change was thought to be necessary to address the concerns of G-90 and some members of Association of Southeast Asian Nations (ASEAN).

The annex to the paragraph of the declaration that deals with LDCs provides details on the brand-new developed country obligation to provide duty free and quota free access for LDC exports as of 2008. While it is later than LDCs would have hoped, a precise date is important because it guarantees an application of the benefits even if the Doha round stretches beyond 2008. There is, however, an important caveat on product coverage: developed countries that face difficulties in providing full unrestricted access in 2008 will only be required to do so for 97 percent of tariff lines. This three per cent reservation will account for some 330 tariff lines. The undiversified export basket of the LDCs may deprive them of getting any real benefit through this clause.

According to the declaration, the ministers have come up with a self-imposed challenging deadline of April 30, 2006 for finalising the full modalities and have agreed on a second milestone of July 31, 2006, by which date they will have to submit the detailed draft of their commitments based on the final modalities. But, as they say in WTO negotiations, deadlines are meant to be missed. Both the above mentioned deadlines do not seem to be very practicable, though it is expected that attempts to meet them will keep the ball rolling for the global trade talks.

Also, all the above mentioned developments appear to be far away from even starting to benefit the global trade share of the developing and least development countries because of the impracticability of the new deadlines.

Apparently there are many significant but very minor positives for the developing countries in this declaration. But the negotiators still have many long bridges to cross before everyone starts rejoicing.