African Ministers have 'interactive session' with Lamy, Amorim and US

Original Publication Date: 
24 November, 2005

The WTO's Hong Kong Ministerial Conference will be a negotiating meeting and not just a stock-taking exercise, the WTO Director- General Pascal Lamy said at the African Union Trade Ministers' conference here on Wednesday night.

Lamy as well as Hong Kong Trade Minister J. Tsang and a US trade official all strongly indicated that they wanted the Hong Kong Ministerial to come up with a "development package", separate from the outcome on the market access issues of agriculture, NAMA and services.

Delegates and analysts at the meeting took this to mean that the organizers of the Hong Kong Ministerial were now planning to project to the public and the media during the Hong Kong meeting that it was a success, for giving so many benefits to developing countries through the designed "development package."

They were also concerned that this would be merely a public relations exercise, with no or hardly any substance of real benefit to the developing countries in the "development package", and that this would be used to cover up the actual failure of the Ministerial to achieve results - neither on development issues, nor on agriculture, NAMA and services.

Several African delegates were also quite visibly upset by a comment by Lamy that if the Doha Round did not conclude, the developed countries could increase their domestic subsidies in agriculture. One Minister responded by asking if this was a threat.

Lamy also characterized the African Ministerial declarations from this AU conference and a previous one in Cairo as containing many points, such as items in a Christmas tree, and advised the Ministers to prioritise two or three demands which he could help them to advance.

Some delegates were not happy with the Christmas tree comment, and thought the Declarations' views on a wide range of issues should all be considered.

Also speaking at the "interactive session", which was chaired by Tanzanian Trade Minister Juma Ngasongwa, were Brazilian Foreign Minister Celso Amorim, Egypt's Deputy Trade Minister, a US Trade Representative (USTR) official, and WTO General Council chairperson, Kenyan Ambassador Amina Mohammad. The EU Trade Commissioner Peter Mandelson had been expected but did not come.

On Thursday morning, the Ministerial conference focused on WTO issues. After the opening ceremony, the Ministers discussed broadly the strategy for their negotiations before and at Hong Kong. Following this, they went through the draft text of their Declaration, known as the "Arusha Development Benchmarks." The discussions were still going on by press time Thursday afternoon.

At the Wednesday interactive session, Lamy said that Hong Kong should be a negotiating session as there was "no virtue" to having a Ministerial just to take stock and note further negotiations next year.

He claimed that the development dimension is "central to every topic in the negotiations", like the central dish and not just something added to various dishes. Most of the development dimension should be in agriculture, services and NAMA, from where the bulk of the development-friendliness of WTO rules must come from, he said.

He said developing countries would lose if the Round disappears. With the present rules, the US can increase its trade-distorting domestic support (TDS) by $5 billion, the EU by $25 billion and Japan by $5 billion. "This is what is at stake and why we have to bid on what's on the table although it is not sufficient."

Lamy said that beyond the other issues, Hong Kong should focus on a set of development-related issues, which would include a package for LDCs, cotton, TRIPS and health, and the aid for trade initiative.

On aid for trade, he said this would include assistance to developing countries to cope with adjustment costs from implementing decisions of the Round; enhancement of their ability to increase opportunities through infrastructure.

On the process, Lamy said there would be a really "bottom up text" with no surprises, "so that no one thinks the text is biased or manipulated."

Hong Kong Minister, Tsang, who will chair the 6th Ministerial, said there were three tasks at Hong Kong, to keep the momentum and pressure of negotiations; draw a clear roadmap for post Hong Kong negotiations; and have a meaningful development package, separate from development benefits in other areas. He stressed that he was devoting time to the "development package" which he said is not a substitute for market opening gains in agriculture and NAMA, but neither could these be made a hostage to development issues.

He outlined the "development package" as containing duty and quota-free access for LDC products; dealing with preference erosion; harvesting some SDT (special and differential treatment) proposals; longer transition periods on TRIMS and TRIPS for LDCs; aid for trade programme, for implementing trade facilitation; and permanent solution to TRIPS and health.

Brazilian Minister, Amorim, said agriculture and development are twin issues as agriculture is central to developing countries for both exporters and the poor farmers, and agriculture is where trade distortion is greatest. For cotton and other products, developing countries would be competitive if they did not have to face huge subsidies of rich countries.

He said after months when the talks stalled, the US made a move on domestic subsidy that had been long requested by Brazil and the EU. He said the EU made a very poor offer on market access and was now expected to do more. This is why attention is directed at the EU now, but in future the attention may shift to the US to do more. On cotton, he said, there is nothing to be paid to the US for dismantling their support to its cotton producers, as that is what the WTO panel had directed it to do.

On preference erosion, Amorim said he recognized it is a sore and difficult point which had to be dealt with head on. There is however the need for the phasing out of preferences. After 30 years of preferences, the conditions of dynamic growth had not been created. One way to deal with problems of phasing out would include having more flexibility in rules of origin.

What is now needed, he said, was to keep the momentum in agriculture including in the 2 or 3 months after Hong Kong. Developing countries need to keep their unity despite their diversity.

William Jackson of the USTR office said, "we are in a difficult spot now but we are still hopeful for serious progress from Hong Kong." The most critical piece of the package is agricultural market access. The US remains committed to a "development package" and it would be bad "if we leave Hong Kong without development." However, like Lamy, he stressed that the greatest benefit for development comes from the market access outcomes.

Ambassador Amina agreed that Hong Kong would be a negotiating session, which is expected to produce some results that could not happen in Geneva. Africa is the only continent that became poorer and had a dwindling share of world trade and it expects the Round to deliver for it, as "this was the only reason many of us are engaging." She said that she had been working on issues under her mandate, including small economies, LDCs, technical assistance, trade and finance and trade and technology transfer.

During the discussion period, an African Minister asked Lamy what was his reason for warning that agricultural subsidies would be increased if there was no conclusion to the Round. He wondered if Africa's partners are able to understand that it was not challenging them but only putting forward a development agenda as already agreed to by all. "I'm not sure if we should accept all the proposals on the table just to avoid an increase in subsidies."

Several Ministers and officials took up the issue of process. One Minister said there is need to focus on the process, to have a manageable agenda in Hong Kong, and for Africa to be included in all consultations at Hong Kong.

Another Minister said process was a very important issue and the Hong Kong meeting has to do better than Cancun on this score. In Hong Kong, the Ministers will not sign up to something they do not agree with. "It is better not to join in to something on which we disagree."

He said it is not in Africa's interest for Hong Kong to fail, as there would be problems if the countries had to negotiate bilateral deals, adding that Lamy can recall "how ruthless the EU negotiates with African countries on Economic Partnership Agreements."

On development issues, the LDCs' proposal for a 15-year extension of the transition period for them should be resolved before Hong Kong, as too the TRIPS and health issue. It was regrettable that after so many years, even the five LDC specific proposals on SDT were not resolved.

On the "recalibration" of ambition for Hong Kong, he said this was done by the developed countries because they could not get a breakthrough on market access issues. He was concerned that there may need to be more recalibration in mid-2006, and there was a lot of uncertainty as those who need to deliver are not doing so.

Another delegate said although everyone agreed there should be a development outcome, what "we expect in Hong Kong is not the definition of development coming from the panel. It is not proper if the hierarchy of issues termed as 'development' is defined by others for us," he said. There needs to be a sense of balance, with Africa being the counterpart on development issues and concerns, to those other proposals on the table.

Hong Kong is a political event and Ministers must face critics, the media and public opinion. If Hong Kong has not delivered on development as they see it, they will have a problem in coming home.

Asking what would make it a balanced outcome for development, he said the menu Lamy gave fell far short, as it represented only a "big bang" approach to market access. Can this Round be reduced to market access and then be said to have delivered on development? The Africans, as shown in the AU declaration, have a more sophisticated approach to development and should be listened to, he said.

There are too many assumptions in the view that if there is liberalization there will be benefits to developing countries. Unrealistic assumptions include that there will be technology transfer, and employment can shift from one sector to another. Since these are unrealistic, it is important for developing countries to have policy space.

He was glad that Amorim recognized that "we must face the preference erosion problem head on." The proposals are on the table, and are meant not to contradict liberalization but to reconcile with it. It is not wise to discount the development importance of preferences, as those countries that made use of preferences properly have succeeded.

On Lamy's promise that there would be a "bottom up" participatory process, the delegate said unfortunately this was not the case in recent days. The NAMA and agriculture reports were not from a bottom up process but produced by Chairs "under their own responsibility." He hoped that when Lamy does his part in drafting, he would treat the status of these reports as not necessarily reflecting the views of the membership.

He added that it is important in the final product to have a balance between reporting of facts and the prescriptive part. He did not see that balance in the NAMA and agriculture reports. For example, there are problems with the NAMA report with regard to its references to sectorals, preferences, the restriction of key NAMA issues to only three elements and the attempt to link the three elements to one another. There are much more important issues as well that need attention.

He also hoped African countries would be allowed to be fully involved in the last leg to making the text, even in the restrictive meetings.

Another delegate said that on the cotton issue, the problem had worsened after Cancun with farmers becoming more indebted. The African producing countries expect Hong Kong to come up with a package solution, whatever the status of the general agriculture negotiations, otherwise he did not see how the countries can agree to a deal, and how the Ministers can go home to face their people.

In his response, Lamy said there is something that cannot be recalibrated, which is the deadline of end-2006 for ending the Round. The Hong Kong meeting should decide how the recalibration should take place to make up for the time lost.

On his statement about rising subsidies if the Round did not conclude, Lamy said it was not a warning but just a reminder, that "we would remain with the agricultural subsidies inherited from the Uruguay Round. It's a reality that the ceilings in the US, EU and Japan would go up and that is not good news."

He repeated that Hong Kong could not be limited to Ministers taking note of documents, as that did not make sense and was not polite to the Ministers and the media would qualify this as a failure. He encouraged the African Ministers to be very focused during their meeting the next day. He had seen the Cairo and Arusha declarations, which had many things in them. He recommended that they focus on a few essential points that they need to see negotiated in Hong Kong instead of having a Christmas Tree approach, and if they did so he would try to push these issues.

Amorim, replying, agreed that the preference erosion problem had to be faced head on, although it was not simple to find solutions. He agreed that it cannot be seen as only collateral damage. The problem is that preferences are linked to the protection system in the developed countries themselves. The issues were difficult to disentangle, and if they could be disentangled it would be easier to resolve the problem.

He added that Brazil was prepared to look at the issue. This was progress as Latin American countries had never talked about dealing with this problem before. The issue should not divide the developing countries, which should unite on this somehow. "We should work more together and not separately, as the divide and rule procedure is not good for developing countries."