Rather than speculate about who won and lost at the WTO ministerial meeting in Hong Kong and how full the glass is, it is better to recognize that the glass has water in it and begin planning for the next stage of the negotiations. While huge uncertainties remain about how to bring the talks to a successful conclusion, the roadmap is a little clearer.
For people concerned about deadlines for completing the talks, the ministers agreed to complete negotiations in 2006. With President Bush’s authority to negotiate agreements and have a vote in the House and Senate with no amendments under Trade Promotion Authority expiring at the end of June, 2007, completing negotiations by the end of 2006 is critical. Negotiations on agricultural export subsidy programs, including food aid, export credit programs and state trading enterprises, are to be completed by April 30, 2006. The overall agricultural negotiations are to have the modalities (mechanisms for change) set by April 30 with comprehensive draft schedules by July 31. The non-agricultural market access (NAMA) negotiations are on the same time schedule of April 30 and July 31. The services talks are working from a timeline of July 31 for revised offers and October 31 for final draft schedules of commitments.
The ministerial meeting confirmed that the 149 member countries can move forward on a consensus basis on developing country issues. India and Brazil were as critical to the process as had been expected prior to the meeting. Both countries validated their status as full partners with the U.S. and EU in seeking out consensus and keeping the process moving, even though they have substantially different interests in the talks. Brazil is a major agricultural exporter and has much to gain from more open agricultural markets, while India is much more concerned about its subsistence farmers and less interested in opening markets to competitive exporters like Brazil.
The ministers agreed on a plan to provide least developed countries (LDCs) in the WTO, estimated to be 32 countries with per capita incomes of less than $750 per year ($2 per day), tariff free and quota free access to developed country markets for at least 97 percent of the total tariff lines for a country. The access would become effective in 2008 or no later than the start of the implementation period for the overall agreement.
The figure of 97 percent of tariff lines was a concession to U.S. concerns about allowing unlimited access for LDCs that are competitive in specific industries. The most quoted example was Bangladesh and Cambodia for certain textile products, but the issue is broader than just textiles or those two countries. Agricultural groups from developed countries have repeatedly pointed out in recent years that some developing countries like Brazil are fully competitive in many agricultural products. The purpose of special and differential treatment is to give developing countries a break for industries that are not competitive with developed countries, not to give additional preferences to industries that are already competitive. Defining countries that are or are not competitive in an industry is not easy, but has become a necessity as trade rules are tailored to fit the specific needs of developing countries with industries that have a wide range of competitiveness.
The ministers endorsed the tentative convergence that has occurred on some agricultural trade issues. They agreed on establishing three bands of countries based on total bound AMS (Aggregate Measurement of Support) for the amber box with the countries in the higher bands required to make larger reductions than those in the lowest band. The actual percentage reductions have not been decided. They also accepted putting tariffs in four bands for the purpose of reductions without agreeing on the cutoff points for each band or the level of reduction required for each band. The hard negotiating will come with deciding the cutoff points and percentage cuts in tariffs, but with a framework in place negotiators can begin testing to see how others respond to specific details. Some behind the scenes efforts may have occurred in Hong Kong that could move the process along in January.
Cotton continued to be a major issue with the ministers reaffirming their commitment to having an explicit decision within the agricultural negotiations. All forms of export subsidies by developed countries for cotton are to be eliminated by the end of 2006. Developed countries are to provide duty free and quota free market access for cotton from LDC countries at the start of the implementation period for the agreement. Reducing domestic subsidies for cotton on a faster timetable than the general formula for other commodities continued to be pushed. International development agencies were encouraged to continue to increase cotton specific development assistance, including South-South cooperation and technology transfer.
The ministers also recognized the importance of enhanced market access for developing countries in both agriculture and NAMA. Negotiators are instructed to have high ambition in both areas in a balanced and proportionate manner. This lends support to the U.S. position that major tariff reductions are needed in both agricultural and industrial goods.
While the modest achievements in Hong Kong can be viewed with some enthusiasm, there were no major breakthroughs. As USTR Rob Portman said in his closing press conference, “It`s true that we need to also see progress in other areas — industrial goods, services — but in order to see the round come together, we have to unlock the agriculture deadlock.” The ministers in Hong Kong did a good job of working around the edges of agricultural issues and making progress where it could be made, but success in 2006 will still require major new initiatives from the EU, U.S., Brazil, India, Japan, South Korea and a host of other countries.