11/3/2005
The Doha Round – State of Play March 2005

2005 will be a defining year for the Doha Round of international trade talks and the multilateral trading system. The mini-Ministerial Meeting in Mombasa on 3-4 March gave important impetus to the negotiations by rebalancing them across the board and identifying precise steps to accelerate the negotiations. That ministerial was one of a series of waymarking meetings aimed at providing political guidance to the negotiations as we move to the 6th WTO Ministerial in Hong Kong in December 2005. With a successful Doha Round dependent on broad agreement in all sectors, including the Round’s vital development goals, the next ten months will be crucial .

From Cancun to Kenya

The Doha Round, launched in Doha, Qatar in 2001 is the first round of international trade talks explicitly to put broader social and political goals - economic growth, poverty reduction and sustainable development – at the forefront of the trade liberalisation agenda. Following two years of negotiations in which WTO members set out their national positions on the key issues, the Round almost collapsed in Cancun in 2003 due to disagreement over the ambition to aim for in agricultural and non-agricultural markets, differences over the scope of new rules, and less than ideal management of the negotiating process at the Ministerial itself.

With the objective of re-launching the Round after the failure of Cancun and addressing the concerns of Developing Countries the ‘July Framework Agreement’ of 2004 focused mainly on agreeing frameworks for negotiations on agriculture and industrial goods, set a deadline for services offers, and launched negotiations on trade facilitation The framework agreement also reconfirmed that development issues need to make serious progress throughout the Round. The EU is committed to making the DDA a success for developing countries.

As an economy whose comparative advantage lies in industrial goods and services, the EU seeks to widen market access for exports in these sectors, and the July framework agreement re-stated that any agricultural commitments would have to be met by other WTO members and that progress reached in the agricultural sector would have to be matched by advances in other sectors.

Since July 2004 progress has been sporadic and disappointing. Although there is a wide commitment to completing the round, there has been a marked lack of political will to push for an ambitious result. In particular, there remains an important need for an agreement on access to services and non-agricultural markets that matches the ambition shown in the agricultural sector.

Meeting on the fringes of the World Economic Forum in Davos in January 2005, Trade Ministers of several WTO Members agreed to inject new momentum into the Doha round, and to aim for the date of 2006 for a final agreement. The Ministerial meeting in Kenya on 2-4 March 2005 strongly reinforced the political will for progress and confirmed the willingness to move forward with parallel negotiations in all sectors. It was also an opportunity for the EU to table a concrete package of proposals on the Round’s development goals, to introduce ideas on cutting industrial tariffs in a way that accommodates developing countries, and to mark out some steps forward in agriculture.

Development

Chaired by an African state, the Kenya meeting put a strong emphasis on development. The EU used the Kenyan meeting to reiterate its firm commitment to the development goals of the round and presented a package of proposals to that effect.

- The EU called for an immediate start to negotiations on special and differential treatment in Geneva. It pushed for agreement on giving some additional flexibility in the WTO rules where needed by Least Developed Countries (LDCs) and other poor countries in justifiable need. The EU has called for the package of special and differential treatment measures prepared for Cancun to be adopted with as few changes as possible.

- The EU called for Developed Countries to increase the level of trade related assistance that they currently provide for developing countries, particularly in building trading capacity and infrastructure. In Kenya, the EU called for the G8 Summit and the UN Review of the Millennium Goals to firmly endorse, and act as a catalyst in, this process.

- The EU called for all developed countries to develop their own versions of the Everything But Arms tariff and quota free trading scheme currently applied by the EU to all LDCs.

- The EU called for immediate and concrete moves to make the various rules of origin systems more flexible. The EU committed to simplifying its own rules of origin system to assist development goals as a matter of priority. The EU called for this process also to be reinvigorated at the WTO level.

Services and Non-Agricultural Market Access (NAMA)

Along with development, the question of market access for services and non-agricultural goods was at the centre of the Kenyan talks.

On services, WTO members are committed to submit an offer for access to their service markets by May. So far offers have been too few, and those that have been tabled, particularly from Developed and advanced Developing Countries, have been far from adequate. The Kenya talks confirmed that services are an integral part of the negotiation and the vast majority of participants acknowledged that significant services offers would contribute to the development objectives of the round.

Our aim should be not only moving beyond the Uruguay Round commitments, but also to make a qualitative leap in terms of improvements contained in the new commitments, so that these secure genuine new and meaningful market access opportunities for our industry.

For LDC’s and other vulnerable economies the EU has proposed that access be extended in a tailored choice of two out of five sectors (telecommunications, construction, financial services, transport and environmental services). These sectors are targeted for their potential for attracting inward investment, improving infrastructure and boosting development.

On manufactured goods (or NAMA – Non-Agricultural Market Access) work needs to focus on the development of a formula for reducing tariff barriers across the board for non-agricultural products and on allowing sufficient flexibility for different developing countries. Cuts in tariffs need to be ‘real’, meaning they need to reduce applied tariff rates, ie; the real rates, and not the ‘bound’ maximum tariff rates notified in Geneva by all WTO members.

In Kenya the EU argued that whatever the final form of the NAMA formula it needs to have sufficient flexibility to provide for the specific and different needs of developing countries. WTO member states should be required to contribute according to their capacity, retaining the ability to temporarily limit access to particularly vulnerable sectors. The formula used could, in other words, be customised to some extent to fit individual countries’ situations.

The talks in Kenya produced an agreement that technical talks both on a NAMA formula and an appropriate flexibility mechanism will now take place in Geneva with the objective of producing a result before the May mini-Ministerial in Paris.

Agriculture

The Kenya meeting brought real progress in the agriculture talks, which had been temporarily held up by disagreement on a highly technical issue related to the market access pillar (Ad Valorem Equivalents) which needed a solution before moving on to the possible formulae for reductions in import tariffs.

There was general agreement on the need for a full agreement on “modalities” in Hong Kong, and that, for that to be achieved, a first approximation must be on the table by July.

Ministers set a timetable to address the AVE issue by indicating that by the end of the April agricultural session, Members should table their individual AVEs, allowing for work to begin on the tariff reduction formula.

In agriculture, Market Access looks set to be the trickiest issue. The EU is committed to considerable market opening, but will also look for comfort for certain “sensitive” products. The EU already imports as much agricultural produce from the developing world as the US, Canada, Japan, Australia and New Zealand put together.

In the Framework Agreement from summer 2004, the EU agreed to phase out its export refunds on condition that its trading partners also got rid of their export subsidy programmes (such as export credits, abuse of food aid and State Trading Enterprises). Progress is being made on this issue, but all parties must continue to show determination to establish new rules for eliminating export subsidies.

The CAP reforms of 2003 and 2004 strengthen the EU’s position on the question of domestic farm support, by moving the vast majority of direct payments to farmers into the so-called “Green Box” of non-trade distorting subsidies. The EU stressed in Kenya that there could not be any renegotiation of the criteria for either the Green or Blue Box.

The EU also underlined the need to address the questions of Geographical Indications and non-trade concerns in agriculture. It called for a constructive debate on these subjects at the next agricultural session in Geneva.

The Next Steps

For the EU the immediate priority is that agreement at the Ministerial level is now translated to progress among negotiators in Geneva. In order to maintain momentum a series of mini-Ministerial meetings is planned between now and the summer. Ahead of the important deadline for offers on Services there is a mini-ministerial in Paris in May. Following that there is a second mini-Ministerial in China in July. The objective is to have a first approximation of a HK package available before the summer.

Annex: Joint Statement by EU Commissioner for Trade Peter Mandelson and EU Commissioner for Agriculture Mariann Fischer Boel on the work of the WTO Mini-Ministerial Mombasa 4 March 2005

The talks we have had in the Mara and Mombasa have given further political impetus to the Doha Round and have improved the balance between its components.

There is a growing consensus among participants on the principles that should underpin the DDA negotiations in industrial tariffs: the need for real tariff cuts combined with a recognition of development needs. The EC has agreed to pursue in Geneva a customized country approach to the formula for tariff reduction.

It was also encouraging that the vast majority of participants acknowledged the importance of ambitious offers on Services as part of the development ambition of the round.

On Agriculture it was agreed that considerable progress, notably on Market Access, has to be made. In this respect, we committed the EU to contribute constructively to reaching an agreement on the AVEs issue by the end of April. Furthermore, we put a suggestion on the table to kick off the discussion on the issue of simplification of tariffs.

Our overall objective still is that a first approximation of the agriculture modalities must be tabled by the end of July and that full modalities are reached in Hong Kong.

Finally, this meeting has allowed a productive working session between Ministers on Development. The EU used this opportunity to offer specific ideas on special and differential treatment, the funding of trade related assistance, the extension of quota and tariff free access for all LDCs and simplifying rules of origin to deliver further developmental gains.

Our talks in Kenya now have to be carried home, to National Governments, and to give our negotiators in Geneva a fresh mandate for their work.

We express our gratitude to Minister Kituyi for hosting this meeting so ably, and for his leadership in the Doha Round.