Presentation

The Doha negotiations reached crisis point when the WTO Ministerial
meetings of last weekwnd in Geneva fell apart.

The meeting ended last Saturday — one day earlier — after it became
clear that no progress could be made on the agriculture issue.

Lamy admitted “we are in a crisis”. He won a mandate from the
Trade Negotiations Committee to conduct "intensive and wide
ranging consultations with the aim of facilitating the urgent
establishment“of agriculture and NAMA modalities.”

How much authority and leeway Lamy will actually have within this mandate,
and how he intends to use it, was one of the major questions being discussed
before and after the meeting ended.

Lamy at a press briefing denied he had “managed” or engineered a crisis to
give himself a new role, said there were already a lot of texts available,
and what was needed were “numbers.”

EU Trade Commissioner Peter Mandelson said that Lamy’s new task was to be
facilitator and catalyst but not author. But since numbers are what counts,
it is hard to figure out the difference between facilitator and author.

Below is a report giving an overview of the meeting. It was published in
the SUNS on 4 July. Further reports will be on the positions of various
countries.

With best wishes
Martin Khor
TWN

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As talks fail, Lamy given new role (“facilitator not author”)

Geneva, 3 July 2006

The Doha negotiations reached crisis point when a Ministerial-level
meeting of the World Trade Organisation in Geneva fell apart after
major countries could not agree on how to cut subsidies and tariffs
in agriculture, and clashed over how to proceed on non agricultural
market access (NAMA).

The meeting ended last Saturday — one day earlier — after it became clear
that no progress could be made on the agriculture issue. Also on hold was
the issue of liberalization of industrial products.

“There has been no progress, so we are in a crisis, we have to admit it,”
said WTO Director General Pascal Lamy.

Lamy suggested to the Trade Negotiations Committee that it make three
decisions: that he conduct "intensive and wide ranging consultations with
the aim of facilitating the urgent establishment" of agriculture and NAMA
modalities; that the consultations should be based on the draft texts of the
chairs of the negotiating groups; and that he report to the TNC as soon as
possible. The agreement by the TNC was its only follow up action.

How much authority and leeway Lamy will actually have within this mandate,
and how he intends to use it, was one of the major questions being discussed
before and after the meeting ended.

One senior official who was present in the Green Room meetings said it
appeared, at least to some, that Lamy was interested in a mandate to draft a
new text, but that the Green Room decided he should only facilitate further
negotiations.

Lamy at a press briefing denied he had “managed” or engineered a crisis to
give himself a new role, said there were already a lot of texts available,
and what was needed were “numbers.” He saw his job as "cracking heads,
consult, confess, starting with the G6, so we can get the missing numbers in
the chairmen’s texts." (See separate article on Lamy’s press briefing).

EU Trade Commissioner Peter Mandelson said that Lamy’s new task was to be
facilitator and catalyst but not author. But since numbers are what counts,
it is hard to figure out the difference between facilitator and author.

About 60 Ministers of trade and agriculture had gathered on Friday in an
effort to agree on the “modalities” for agriculture and NAMA — formulae and
numbers for cutting agricultural tariffs and subsidies and industrial
tariffs, as well as for exceptions and flexibilities, or reduced rates of
liberalization, for certain goods and for some countries.

The meeting was planned for at least three days. But it became clear by the
first evening (Friday) that the positions were too far apart, and a decision
was made then to call off the talks the next day and to try to limit the
damage to the WTO’s image.

The talks have been plagued with problems since they were launched at Doha
in 2001. They were to have ended in 2004 but went through many failed
deadlines. The Hong Kong Ministerial conference last December gave it new
life and directions, but the new deadlines of April and now June have passed
without a basic agreement on how much to cut tariffs and subsidies, and what
“flexibilities” to give.

The urgency for completing the Round is due to the expiry next July of the
“fast track authority” of the United States President. Without this
authority it would be difficult to have a trade agreement passed by the US
Congress. The wide belief is that the WTO needed to agree on the
“modalities” by the end of June if the talks are to be wrapped up in
December, in time for the US to prepare for the passage of its bill before
the fast track authority expires. Now that end-June has passed without
result, end-July is the new “final” deadline.

However, an alternative solution to the timetable crisis, suggested by some
influential US Congressmen on the eve of the Geneva meeting, is for the US
Congress to give President Bush a new fast track authority. This would allow
the negotiations to go on without the sword of fast-track expiry hanging
over the WTO.

However, the US Trade Representative Susan Schwab has said she would not
rely on the possibility of a fast track renewal on which to hang the hopes
of
the Doha Round.

After the meeting ended, EU Trade Commissioner Peter Mandelson warned that
Lamy would only have two weeks to turn the talks around by securing a G6
agreement, as non-G6 delegations would need another fortnight to digest a G6
proposal.

The widely held thinking is that the last hope of a December agreement is
for convergence on modalities to be reached at the end of July (possibly
through another Ministerial level meeting). Few believe it can be done.

The immediate cause of the meeting’s collapse was the inability of the
United States to improve on its offer to reduce its domestic farm subsidies.

It had already agreed to bring the ceiling (the level that is allowed) of
overall trade-distorting subsidies to US$23 billion. But as its actual
subsidies were slightly below $20 billion last year, other countries
considered the US offer to be inadequate, as it allowed the US to expand
(rather than decrease) its actual subsidies.

The Group of 20 developing countries asked that the allowed subsidies be
brought down to $12 billion, with others suggesting $15-17 billion. On
Saturday, after the meeting, the EU Trade and Agriculture Commissioners both
demanded that the US offer be at least $15 billion.

The US was expected to make a renewed offer, even if to go down by a few
billions. But due to pressures from its farm lobby and from the US Congress,
it was unable to make even a small gesture, and stuck to its position.

Instead it blamed other countries for not going far enough in opening their
markets on both agricultural and industrial goods, saying that this was a
pre-requisite for it to retain (let alone increase) its existing offer on
subsidies.

This blame shifting did not work because the European Union had agreed to
lower its farm tariffs by 51%, an improvement from the 39% it had earlier
suggested. Some countries thought that was not good enough (the G20 wanted
54%, the US wanted 66%), but almost everyone (except the US) said it was a
good start.

The ball then went to the US court for it to match the EU move by telling by
how much it would improve its subsidies offer. A whole day was spent waiting
for the US to move. When it did not, the Ministers present agreed to call
off the talks early.

Meanwhile, an overwhelming number of developing countries expressed their
frustration not only at the inadequate US offer but at how the developed
countries are now putting pressure on them to steeply cut their tariffs.

The pressure is greatest in industrial goods. The developed countries have
proposed coefficients of 10 and 15 for a Swiss formula by which they
themselves reduce their industrial tariffs by about 20-30%, whereas the
developing countries must cut their tariffs by 60-80%.

At a press briefing to show the solidarity of developing countries, ten
Ministers representing various groupings of the South (including the G20,
the Group of 33, Africa, the Caribbean and the least developed countries)
urged the developed countries to do more, and asked for fairness in their
demands on what the South can do. (See separate article on the developing
countries’ media briefing and statement).

“After all this is a Development Round,” said Indian Minister Kamal Nath.
"The mandate is for developed countries to cut their farm subsidies and open
their markets to developing countries.

"But if the developed countries come to Geneva and hope to put the shoe in
the other foot, asking developing countries to provide market access to them
while they retain their subsidies, then there is no negotiating space
possible.“Speaking on industrial tariffs, the South African Minister Rob Davies said:”What is being demanded of us is that we cut our tariffs to such an extent
that our industries are dislocated. We have to reclaim the development
essence of this Round."