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Africa: Trade Talks Analysis, 2

AfricaFocus Bulletin
Dec 16, 2005 (051216)
(Reposted from sources cited below)

Editor's Note

Having failed to come up with a joint proposal on agriculture that begins to satisfy the demands of developing countries, Europe and the United States have proposed a "development package" that they hope will preserve some image of success in the World Trade Organization ministerial conference in Hong Kong. But critics say whatever the face-saving agreements reached by the weekend, the results will clearly show no progress at all for poor countries in what was supposed to have been a "development round."

This AfricaFocus Bulletin contains two short articles from Third World Network, one the summary of a workshop with Tetteh Hormeku, coordinator of the Africa Trade Network, focusing on the latest "development package," and the other an account of the December 13 statement on agriculture by the G20 group of developing countries, which includes, among others, Brazil, Egypt, India, Nigeria, South Africa, and Tanzania.

Another Bulletin sent out today has a summary analysis of the issues being discussed at the WTO Ministerial conference, also from Third World Network (TWN).

TWN has much additional information and analysis on its website at

For a full list of earlier AfricaFocus Bulletins on trade issues, see

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

The "Development Package" That Isn't.

By Tetteh Hormeku, Coordinator, Africa Trade Network

TWN Info Service on WTO and Trade Issues

16 Dec 2005

Third World Network

The "development package" touted by the European Union and the United States is dangerous and will prevent real development for Africa. This was the conclusion by Tetteh Hormeku of the Africa Trade Network in a presentation made at a TWN panel discussion on "Services, NAMA and Agriculture: What is at Stake?" Below is a summary of his presentation.

WTO Director General Pascal Lamy and European Trade Commissioner Peter Mandelson are pushing for early agreement on the development package to demonstrate their "good faith". The failure of the Doha Round so far to deal head on with development has led to this flurry of activity. What is this package and what is it not?

There are two central features of the development package in the Ministerial text. First, the supposed "special and differential treatment" (SDT), as it applies to LDCs. Secondly the aid for trade promise.

Before the Seattle Ministerial Conference, developing countries began to complain that after conclusion of Uruguay Round, the process of implementing the agreements resulted in difficulties to their economies which can only be addressed if WTO rules are corrected and rebalanced.

SDT was supposed to be part of the integral rules of GATT as well as the new Uruguay Round rules which allowed developing countries to adopt less onerous obligations than developed countries because they have different levels of development and different capacities.

The history of SDT predates the Uruguay Round. Countries at different stages of growth and development should not assume the same level of responsibilities in international agreements as these are unequal partners. But by end of the Uruguay Round the spirit of SDT was reduced to a narrower concept: developing countries had to essentially accept the same obligations as developed countries, and may be exempted from implementing some measures, as well as allowed different time scales. But almost all obligations would be adopted by them.

SDT provisions in the final agreements are mostly "best endeavour" clauses and developing countries cannot hold developed countries to them or enforce them. Thus in Doha, developing countries asked for effective SDT implementation, to move away from simply longer timeframes for implementing obligations, to fully integrating SDT into the architecture of the WTO.

Over 200 proposals were made relating first to strengthening SDT and second to resolving implementation issues. Since the Round has been launched, all discussions on SDT and implementation issues have made no progress except on 22 issues which are widely described as of having little or no commercial value.

In an attempt to attain a more balanced package in time for the July approximation this year, 5 proposals specific to LDCs were selected for inclusion into the package. Out of these, the two most valuable -- duty free and quota free access for LDC products, and exemption from TRIMS obligations -- are subject to interminable controversy.

On the issue of duty free and quota free market access, the demand by LDCs for these to be made legally binding and enforceable in the WTO continue to be resisted by both the EU and US. These developed countries prefer the continuation of the current situation where duty free and quota free status exists as unilateral offers which they can change any time they wish.

The most farcical saga is being played out. For example, the US and EU argue that there will be MFN problems if this status is bound in the WTO. In the Geneva negotiations the EU offered cold comfort by saying that although they won't be bound they are sincere and will honour their offer. An LDC can resort to the European Court of Justice to enforce any non-compliance. At one point the US and EU even argued over what "binding" means.

As the moment the US is insisting on two things: first, not extending duty free and quota free access to all products, which makes the concession useless since this allows for market access for products that LDCs don't produce. For instance, giving duty free access for computers to an LDC is meaningless. Secondly, they want to reserve the right to exclude countries, an insistence which led to some of the most heated moments in the negotiations in HK so far. A strong letter of protest has been submitted by Zambian Minister of Trade and Industry, Mr. Deepak Patel, who is the Chair of the LDCs Group.

On the issue of the TRIMS (trade related investment measures)Agreement, which prohibits the use of some performance requirements such as the use of local content policies, LDCs want to be able to obtain exemptions for existing and future TRIMS. LDCs did not notify enough in the Uruguay Round because most of them had not been aware and did not have the capacity to safeguard their rights.

The increasingly marginalized issue of cotton also makes a mockery of any development package. The US has offered to eliminate duties but only when there is full agreement on full modalities for agriculture. In the interim, money will come from the Millennium Challenge Account (MCA) to address supply side constraints. Again this promise rings hollow as most of the funds (if they materialize) will be likely used to pay for services from the US to "assist" African producers.

The other central piece of the development package is "aid for trade" which is meant for developing countries (and not just LDCs) to help improve production and other supply capacities. As it stands now in the text, there is only a promise to hold a meeting to discuss this at the WTO before the mid-2006.

The terms of this "aid for trade" are also not clear as to whether it will come from new money or old money, whether it will be concessional grants or loans. African countries say that there must be clear criteria: the funds must be predictable, adequate and unconditional with the countries themselves deciding what those resources shall be used for. There are estimates that 80% of the MCA funds has gone back to the US.

From discussions so far in Hong Kong, the aid is for trade liberalisation. For instance it has been proposed that as part of aid for trade, a fund be set up to compensate developing countries for revenue losses arising from tariff reduction. Apart from the absurdity of taking money from developing countries and returning a part of it as a grant later, this ignores the problem of removing the right of those countries to use tariff as a policy to support and nurture local industry.

There are also serious concerns that the aid for trade package will be used as a trade-off ploy. At this stage of the negotiations, the entire development package looks more like a ploy to soften the developing countries so that they will accept the extraction of concessions from them. They are offered the promise of some funds which may not be from new and additional resources (but may simply be shifted from another aid box), so that they will agree to new onerous obligations (such as huge tariff cuts in industrial products, significant tariff cuts in agriculture, and a basic change in the rules of negotiations in services) that would jeopardize their development prospects. That is an unfair and imbalanced bargain, and it is cynical to ask developing countries to accept it.

Peter Mandelson has even told developing countries that he is working hard for them, and in return they must give him services. He has openly stated that he is not happy with the highly contentious Annex C on services and wants it "strengthened." The developed countries should drop this charade. They should not impose new and onerous liberalization obligations on developing countries that will cripple their economies. They should agree to strengthened SDT measures and to resolving the implementation issues. They should offer genuine assistance to developing countries to help them build their capacity to produce, first for the local market, and for exports. Unfortunately, this is not what the "development package" is about.

G20 Ministers reaffirm "agriculture central to Doha Round,"

India and Brazil state positions

TWN Info Service on WTO and Trade Issues

December 13, 2005

Hong Kong 13 December (Martin Khor and Hira Jhamtani) -- The Group of 20 developing countries held a Ministerial meeting Tuesday morning and issued a G20 Ministerial Declaration reaffirming its position that agriculture is the central issue of the Doha Round .

"As agriculture is the engine of the negotiations, the G20 expects that Ministers in Hong Kong will provide a sound basis for making progress in the negotiations, putting the process firmly on track," said the Declaration. "They should agree to a clear and specific work programme in agriculture for 2006 so as to conclude the Round by the end of the year. For this purpose, modalities will need to be agreed no later than early April and draft schedules based on these submitted no later than 3 months thereafter."

In reasserting the central place of agriculture in the Doha negotiations, the G20 Ministers were countering the increasingly strident position taken by the EU Trade Commissioner Peter Mandelson who is canvassing that negotiations should focus equally on other issues such as NAMA and services. He has been saying that it was a mistake for the negotiations to have focused mainly on agriculture in the past few years. Placed on the defensive and being widely blamed for the EU not giving a good enough offer in agriculture, Mandelson has tried to shift the blame to India and Brazil for not offering enough in NAMA and services.

The G20 held a press conference, attended by the Trade Ministers of Brazil, Egypt, Argentina, India and South Africa. "A development round requires the removal of distortions in international agricultural trade rules," said the Declaration. "The largest structural distortion in international trade occurs in agriculture through the combination of high tariffs, domestic support and export subsidies that protect inefficient farmers in developed countries. Removing these anti-development measures is a core objective of the Doha Round as it will help in reclaiming the development dimension of the DDA. It is for this reason that agriculture is the central issue of the Doha Round."

The Ministers added that the G20 had presented balanced and middle ground positions in all areas of the negotiations, and these proposals remain on the table as an appropriate basis for completing the Round. "The G20 is prepared to negotiate agriculture here in Hong Kong. We hope that others are prepared to do so likewise."

At the G20 press conference, Indian Commerce Minister Kamal Nath said that special products (SP) and special safeguard mechanism (SSM) are integral parts of the agricultural package. They lie in the livelihood needs and rights of developing countries and cannot be negotiated in exchange of anything, and the only defensive mechanism that developing countries have is tariff. He added that export subsidy was the most trade distortive measure, "yet we have difficulty in defining the end date. Let the US and EU say that export subsidies will be eliminated in a certain number of years. We have not come to Hong Kong to perpetuate the inequalities. We need to correct this."

At a separate meeting with NGOs, Kamal Nath said it is not the completion of the Round but its content which is important. The content to be deliberated in the Doha round must not perpetuate inequalities in world trade. " We cannot be hassled into an agreement" he said. While the Ministerial will discuss problems of LDCs and small states, the issue of "aid for trade" should not put developing countries more in debt so that they have to increase trade.

To correct world trade imbalance, he said, export subsidies must be eliminated. On domestic support, it must be clear how "much less will developed countries spend on subsidy instead of shifting around the boxes". On NAMA, Kamal Nath said the issue is not just market access but a reform of the dumping laws. " I do not care what formula is used, whether Swiss or German, I want to see how much the tariffs will be cut. If the EU cuts its tariff by only 24% while India has to cut by 77%, then where is the development content?"

He stressed that there is enough already of statements about good intentions. "But let us now see specifics". Developed countries cannot keep pocketing whatever they can get, but reducing to statements whatever they have to give. In NAMA, for instance, the negotiation content must take into account the need to protect small, infant and large- employment industries in developing countries. He added that the days are over when countries are held to ransom in negotiations. And this is thanks to the input and statements of civil society group. Indeed in the beginning of his briefing he said there is a great difference between the Uruguay round and the Doha round, in that this time civil society is more aware of the issues and raising their voices as well as providing inputs to negotiators.

Brazil's WTO Ambassador, Clodoaldo Hugueney, told a separate meeting with NGOs that the G20 position is the same. "We haven't seen movement in agriculture, so it is not justified for the G20 to move." The US proposal on domestic support (in October) was important as a first move, but insufficient to allow for real reform in the US. He said the G20 stands for two things. Firstly, there must be real and effective overall cuts in total trade-distorting domestic support, and not just a cut in "water" (i.e. the difference between the bound and applied levels).

Secondly, there must be disciplines, especially rules on the blue box domestic subsidies, especially since the US wants a change in the way the blue box is used. He stressed that if there is no agreement on new disciplines, there would be no new box created. There is need for product specific caps and specific price disciplines, to control counter-cyclical payments. The G20 also wanted a review of the Green Box subsidies, (i) to clarify that their use in developed countries is really minimally trade distorting, and (ii) to make it more user friendly for developing countries.

On market access, Hugueney said the EU proposal is widely considered as insufficient. The cuts for developed countries are very small. In addition, the EU wants 8% of tariff lines designated as sensitive products, or 300 of its 2200 tariff lines. This is too excessive and unacceptable, as even if only 2% of tariff lines is accepted it would already involve a very part of the EU's agricultural production.

On export competition, Hugueney said that the G20 wants a standstill on export subsidies to prevent an increase in the meanwhile (which has tremendous dumping effects), and an early end-date (2010). This should apply to all forms of export support, including food aid and export credits.

He also stressed the importance of S&D for the G20. Developing countries that don't have AMS domestic support should be exempted from an overall cut and de minimis cut. There should be longer implementation periods for all three pillars for developing countries; proportionality in commitments; and the role of SP and SSM is very important.

At the meeting, French economist Jacques Berthelot argued that domestic subsidies that are given to inputs for exports (such as feed for animals) should also be considered export subsidies. A large part of the EU subsidy to cereals goes to animal feed. The EU's exports for example of chicken and pork, contain high export subsidy in the form of domestic subsidy of inputs into these exports.

Hugueney said the G20 was aware of this linkage and had raised the issue of disciplines on this. However there was "total resistance" from the developed countries when this issue was raised.

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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