er-wtoconferencehk-12-05

Report on the

6th WTO Ministerial Conference in Hong Kong

13-18 December 2005

By David King, IFAP Secretary General

The objective of the six day Ministerial Conference of the 149 member countries of the World Trade Organization (WTO), held in Hong Kong, China, 13-18 December 2005, was to take some of the tough political decisions in order to get the Doha Trade Round back on track.

The last significant advance in this round was made 18 months ago in July 2004 when the WTO General Council (ambassadors meeting in Geneva) agreed on a “Framework Package” for negotiating the modalities for making commitments. Since that time, negotiators have been trying to put some content into that framework. A lot of technical support work has been done in that regard in Geneva, especially on agriculture, but the time had come to make some political decisions and provide some outcomes in order to inject more momentum into the Round.

The Round must be completed by 31 December 2006, and final schedules presented to national governments for approval in early 2007, since US trade promotion authority expires in July 2007 (last time it took 9 years for the US to renew its trade promotion authority).

JUST ENOUGH MOVEMENT TO PREVENT A FAILURE

“No breakthrough but no breakdown” to quote WTO Director General Pascal Lamy during the discussions, is an appropriate description of what happened in Hong Kong.

The concrete outcomes are as follows:

Timetable - full modalities in agriculture and non-agricultural market access to be agreed by 30 April 2006. Comprehensive draft commitment schedules based on these modalities are to be submitted by 31 July 2006. This is a very tight deadline.

It is generally assumed that the implementation period of the new WTO agreement would start in 2008.

Agriculture - in the area of export competition, it was agreed:

To end all forms of export subsidies by the end of 2013, with a substantial part to be realized by the first half of the implementation period (i.e. around 2010).
To call into question the behaviour of State Trading Enterprises (STEs) and not their existence, i.e. they would not be able to use their monopoly powers to circumvent disciplines on export subsidies, government financing and underwriting of losses.
To establish a “safe box” for food aid dedicated for emergencies, and to eliminate food aid that displaces commercial sales.

Cotton – developed countries agree to:

eliminate of all forms of export subsidies on cotton by the end of 2006
Provide duty-free, quota-free access for cotton exports from the least-developed countries (LDCs) from the beginning of the implementation period (2008).

There was a third demand from the West-African cotton producing countries, namely that trade-distorting domestic subsidies for cotton in developed countries (notably the USA) should be reduced by more than that for other products, with these cuts being made more rapidly. However, this is included in the Declaration in brackets as a proposal and not a decision at this stage.

Development package – developed-country Members shall, and developing-country Members declaring themselves in a position to do so should provide duty-free and quota-free market access on a lasting basis, for at least 97 per cent of products originating from the 32 least-developed country members (LDCs) of WTO from the start of the implementation period of the Agreement on Agriculture (2008). Steps shall be taken to progressively achieve duty-free and quota-free market access for 100 per cent of products originating from the least-developed countries in the future. This was an important achievement for developing countries who organised themselves into a group of 110 countries to push this through. It gives more credibility to the Doha Round as a “Development Round”.

Several countries also announced expanded “aid for trade” capacity-building programs for developing countries, e.g. $27 billion over 5 years from the USA.

NAMA (non-agricultural market access) – market access for industrial products will be increased by cutting tariffs using a Swiss Formula (under which all tariffs are brought down to, or harmonized around, the level of the coefficient chosen). At the insistence of developing countries, Ministers agreed to a link between tariff cuts in agriculture and tariff cuts in NAMA, stating that the level of ambition in market access should be comparable.

Services – this is the area of the negotiations where the least progress has been made so far. In order to accelerate the negotiating process, the Ministers invoked in their final statement certain principles and articles of the General Agreement on Trade in Services, as well as the Guidelines and Procedures for the Negotiations on Trade in Services of 28 March 2001, that would allow them to make bi-lateral (2 countries) and pluri-lateral (several countries) deals in services among willing countries. Earlier drafts of the Ministerial Declaration made it an obligatory for countries to respond positively to any collective requests for such negotiations. This prescriptive approach was changed in the final version of the Declaration under pressure from the developing countries.

WHAT REMAINS TO BE DONE IN AGRICULTURE?

Bringing together what was agreed in the July 2004 Framework and the Hong Kong Ministerial Conference, the situation to date of the agricultural negotiations is as follows.

Domestic support

There is agreement to:

Divide trade distorting domestic support (Amber Box) into three bands depending on the level of total amount of domestic support paid (bound AMS) in each country. The EU with the highest level of domestic support would go into Band 1, the next largest providers of domestic support Japan and the USA would go into Band 2, and all other developed countries, as well as the 17 developing countries that give domestic support would go into Band 3.

Apply higher linear cuts to the higher bands.

Developed countries in the lower band that have a relatively high level of domestic support (bound AMS) compared with the size of their agriculture will make an addition effort in AMS reduction.

Make an overall reduction in trade distorting domestic support, which could be greater than the sum of the reductions in AMS, Blue Box payments and de minimis. In the first year of the implementation period the overall cut would be a minimum down payment of 20 per cent.

Exempt developing countries with no AMS commitments from reductions in de minimis and the overall cut in trade-distorting domestic support.

Cap Blue Box support at 5 percent of the total value of agricultural production in a country from the start of the implementation period (2008).

Outstanding issues:

Review Green Box criteria to make sure that they are no more than minimally trade distorting, and also that they provide policy space for developing countries to address their developmental needs.

Work out appropriate disciplines for Blue Box measures to make sure that they are less trade-distorting than Amber Box measures.

Establish the thresholds for the three bands of domestic support for both AMS and overall support.

Establish the size of the cuts in the four areas of domestic support: overall, AMS cuts, Blue Box, and the de minimis.

Decide on the level of cap or ceiling for the AMS of each product.

Decide on how to apply Special and differential treatment for developing countries.

Export competition

There is agreement to:

Phase out all forms of export support in a parallel and equivalent manner by the end of 2013.

Achieve a substantial part of the phase out of all forms of export support by the end of the first half of the implementation period.

Phase out export credits, export credit guarantees or insurance programs with repayment periods of over 180 days. Discipline the use of these measures with payment periods of 180 days or less.

Ensure that Export credits, export credit guarantees or insurance programs are self-financing over a short period of time.

Phase out the trade-distorting practises of State Trading Enterprises (STEs) so that they cannot use their monopoly powers to circumvent the direct disciplines on export subsidies, government financing and the underwriting of losses.

Phase out food aid that displaces commercial sales through effective disciplines on in-kind food aid, monetization and re-exports.

Provide a "safe box" for bona fide food aid to deal with emergency situations.

Allow developing countries to benefit from the provisions of Article 9.4 of the Agreement on Agriculture for five years after the end-date for elimination of all forms of export subsidies. This means that they will have more time to phase out subsidies on internal transport and freight charges and certain other subsidies to reduce the costs of marketing their agricultural exports.

Outstanding issues:

Draw up rules to eliminate the subsidy components of export credits, export credit guarantees or insurance programs with terms of 180 days and less, disciplines on the operation of STEs and for the provision of food aid by 30 April 2006.

Decide on how to apply Special and differential treatment for developing countries.

Market access

There is agreement to:

Divide tariffs into four bands depending on their size.

Make the largest cuts to the highest tariffs using a linear formula.

Allow developing countries to self-designate an appropriate number of tariff lines as Special Products for food security, livelihood security and rural development purposes.

Establish a Special Safeguard Mechanism (SSM) for developing countries to protect themselves from surges in imports, based on import quantities and price triggers.

Take into account the erosion of preferences of developing countries

Ensure the fullest liberalisation of trade in tropical agricultural products and for products of particular importance to the diversification of production from the growing of illicit narcotic crops.

Outstanding issues:

Decide on the tariff thresholds in the four bands and the reductions in each band
How to handle the complex issue of sensitive products (including TRQs)
Arrangements for the operation of the SSM and designation of Special Products
How to handle erosion of preferences of developing countries, including developing methodology to identify “vulnerable “products. This is mainly an issue for ACP countries
Decide on how to apply Special and differential treatment for developing countries.

CONCLUSIONS

The agricultural negotiations are running ahead of the negotiations in other areas such as industrial goods (NAMA) and services. This is causing serious concern to certain countries which are looking for concessions in these areas to match the concessions that they have agreed in the agricultural negotiations. The toughest decisions in the agricultural negations have yet to be taken, and progress is needed over all areas of the negotiations in order to achieve a result.