The Hindu Business Line : Hong Kong Ministerial

The Sixth Ministerial Meeting of the World Trade Organisation at Hong Kong must set the stage for the final phase of the Doha Round. At stake is the credibility of the multilateral trading body, particularly in the wake of bilateral agreements and free trade pacts.

AS THE deadline for the Sixth Ministerial Meeting of the World Trade Organisation (WTO) to be held in Hong Kong nears the signs are not promising enough for the completion of the ambitious multilateral trade negotiations started at Doha in November 2001. After four years of sporadic negotiations, interspersed with the Cancun (Mexico) Ministerial in August 2003 that all but floundered for want of consensus on contention issues, the WTO cobbled a sort of July Framework in 2004 as the basis for proceeding with trade talks on identified areas. Exactly after a year, the Geneva-based world trade body convened its General Council meeting in the last week of July 2005 to come out with a sort of July Approximation of modalities, which also did not yield the desirable results. .

No wonder, the European Union Trade Commissioner, Mr Peter Mandelson, in a statement in Geneva on July 28, called for "a paradigm shift in this negotiation, one which allows us to move fast from stand-off to trade-off, within each negotiating block and between them". His desperation to find a solution or a starting point before the trade ministers proceed to Hong Kong is understandable, because, as he put it, "instead of negotiating piecemeal, attempting to negotiate one incremental step at a time, we need to lift a series of the difficult logs at the same time, putting a number of interlinked moves on the table together, with equality of pain for all who are in a position to pay".

As this month is virtually a vacation for the WTO, not much can be expected by way of initiatives. The Chairman of the Trade Negotiations Committee (TNC), the outgoing WTO Director-General , Dr Supachai Panitchpakadi, in his report to the General Council, declared that Hong Kong must set the stage for the final phase of negotiations. For this to supervene, ministers will have to take a spate of decisions, establishing modalities for Agriculture and Non-Agricultural Market Access (NAMA) and providing the political guidance to move into the final phase. Dr Supachai Panitchpakadi's 15-page report, designed to speed up the glacial pace of progress in crucial areas, deserves to be focussed, as stakes are too high for all the 148 members of the WTO to remain complacent. The collapse of the talks will have grave ramifications for the Doha Development Round and the global trading system. Also at stake is the credibility of the rule-based multilateral trading body itself, particularly in the wake of a plethora of bilateral agreements and free trade pacts. Referring to the individual negotiating areas, the WTO chief recalled that, in agriculture, Hong Kong's objective is to establish modalities for market access, domestic support and export competition — the so-called three pillars. According to Dr Supachai Panitchkpakadi, setting the structure of the tiered formula is important not only in its own rights, but also because it is the pre-condition for any meaningful attempt to sort out other issues in the market access pillar which include politically-sensitive and technically-complex matters such as the new Special Safeguard Mechanism (SSM) in favour of developing countries , tariff escalation and simplification, tariff quota administration, preference erosion and tropical products. Significant progress is also needed in domestic support and export competition. In the former, the corollary is convergence on the structure of the reduction commitments, particularly with regard to the tiered formula for reduction of the final bound total Aggregate Measure of Support (AMS).

The EU Director-General for Trade, Mr Mogens Peter Carl, in a statement to the WTO Trade Negotiation Committee, while endorsing the proposals from the G-20 (an alliance of countries with predominantly agricultural interest such as Brazil, China, India and South Africa) on all three pillars, was not happy with the virtual lack of progress since July 2004 on trade-distorting domestic support. Stating that both cuts and disciplines were to be enforced in domestic support, the EU official said that some early, probably difficult, political decisions in this regard had to be taken in key developed countries.

The EU blamed other developed countries, including the US and Japan, for their persistent support to their farmers, while it introduced major reforms to its costly common agricultural policy (CAP) in 2003 by cutting down subsidies on the farm front, much to the dismay of frontline farm-interest countries such as France, Germany and Italy. The Commerce and Industry Minister, Mr Kamal Nath, stated that "the success of the current Doha Round of the World Trade Organisation talks will be judged not by tariffs and formulae but by how many jobs it can create in developing countries; how much the income of farmers in developing countries has risen and how many poor people have been extricated from poverty."

On NAMA or industrial tariffs, the WTO Chief's report said that the Hong Kong objective is to establish modalities for the reduction or as appropriate the elimination of tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation. This should be done in a way that takes into account the special needs and interests of the participants of the developing and least developed countries.

The difficulty in the tariff-cut formula arises from the reluctance of some members to discuss numbers without first having a defined structure, while others have problems discussing the structure without having the numbers first. NAMA's dilemma is to evolve a pragmatic, equitable solution to deal with the sensitivities of some members on unbound tariffs at low applied rates, while bringing on board others with problems on unbound tariffs at high applied rates. But as the tariff-cutting formula remains ticklish, an agreement on the structure of the formula might emerge by October 2005, while other key elements of the NAMA package might get filled at Hong Kong, as the July Approximation of modalities on this count has not emerged. On services, so far, 68 initial and 24 revised offers have been submitted to the WTO by members, with the pace of submitting offers picking up in recent months. But despite the improvement in the number of offers, the overall quality remains `unsatisfactory' as few provide new business opportunities to service suppliers. Given the nature of the request/offer process, the overall expectation should be that the final outcome of the market access negotiations on services would include commitments by a critical mass of members in each of the sectors and modes of supply identified. As the request-offer method of negotiating has not generated meaningful results, EU endorses the Chairman report about exploring complementary approaches to the negotiations to ensure that there is substantive outcome in services in the DDA.

On rules, the WTO Director-General's report underlined the need for "more clarity and convergence on what is needed to ensure that all areas of the rules negotiation make sufficient progress by Hong Kong so as to form part of the overall balance that we have all demanded". Here, both the EU and India indicated that they would cooperate in making a submission to the WTO to bring about greater clarity and disciplines in the areas of anti-dumping, with the EU conceding that preventing abuses of anti-dumping procedure is essential for preserving real market access for all the members. There is some progress on the trade facilitation even as this issue remains "largely below the political radar screen".

With a change of guard in the WTO from September 1, when the former EU Trade Commissioner, Mr Pascal Lamy, will succeed Dr Supachai Panitchpakdi, the trade talks may gather momentum in the run-up to the Hong Kong Ministerial. With the aircraft subsidy issue contributing to trade tensions between the EU and the US and Tokyo taking the unprecedented step of imposing punitive tariffs on 15 US goods, including steel, to protest against Washington's anti-dumping law, the dice is loaded against the success of the multilateral trade talks. But if the trade majors do not resolve their row amicably and quickly, the new WTO Director-General will find the going tough.

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