Text Box: WTO DG Pascal Lamy delivered a special address at the ICRIER Conference on WTO and the Doha Round: The Way Forward

 

Indian Council for Research on International Economic Relations (ICRIER) organized an International Conference on WTO and the Doha Round: The Way Forward, on April 6 and 7, 2006 at the ITPO Conference Hall, New Delhi. The Honourable Commerce and Industry Minister of India, Mr. Kamal Nath inaugurated the Conference, and also delivered the Valedictory Address. Mr. Pascal Lamy, Director General of the WTO, delivered a special address at the inaugural session. The Conference was aimed at providing a platform to key trade representatives and other stakeholders to informally discuss and brainstorm towards identifying new methods of attaining the elusive convergence.

 

Inaugurating the conference, Mr. Kamal Nath said, “it is important to acknowledge the achievements that were made in the Doha round as there is no time left”. He added that “the way to move forward was by looking at things from a future perspective and simulating the economic architecture accordingly”. He stressed that the results must be achieved in accordance to the ambitions but it should not be limited to the development concerns only. Mr. Nath added that “Inspite of having lot of responsibilities, Mr. Lamy has shown a great persuasive power in the whole process of negotiations”. He lauded Director General for his personal involvement for ensuring that the Hong Kong Ministerial was not a failure. He was hopeful that Mr. Lamy would be able to give direction and meaning to a successful conclusion of the Doha Round.

 

Addressing the Conference Mr. Lamy said, “India is a key member of the WTO and has benefited from a more open global trading environment. It has always played an active role in almost all negotiating areas”. Mr. Lamy added, “In the agriculture sector India has both defensive and offensive interests”. He was confident “India would be able to cleverly balance both the interests by insisting on an ambitious tariff reduction formula as well as forcefully make the case of protectionism needed in certain sectors like textiles”. He also said, “It was in India’s interests to see a drastic reduction in industrial tariff peaks applied by the EU and the US as India also has an important role to play in negotiations on services, trade facilitation and anti-dumping”.

 

Mr. Lamy highlighted the fact that the DDA was aimed at focusing on development and correcting the imbalances in the trading system. He stressed that the end of the Doha Round was fast approaching and it will require hard work, determination and nerves to focus on the final goal for strengthening the multilateral trading system. He mentioned that currently only 60% of the package had been achieved.  He said the focus of negotiations today was on reaching an agreement by the end of April on three key areas relating to quantum of reduction in agricultural subsidies, agricultural tariffs and industrial tariffs.

 

Mr. Lamy warned that there will be many losers in the Round from developing countries especially, the smallest and weakest countries and the WTO itself. He hoped that given what is at stake, India would contribute its best to help achieve a win-win situation and a successful conclusion of the Round.

Key issues deliberated at the four substantive sessions: Agriculture, Non-agricultural market access, Services, and Rules

 

1.      Agriculture

 

Doha Round is a Development Round and its main agenda is to ensure a level playing field for all countries. This round was intended to reach a convergence over three major issues by 30 April, 2006: agricultural domestic subsidies, agricultural market access, and NAMA. The main issues under the three pillars of agriculture and the suggestions on them are as follows:

 

     Domestic Support

o    Tiered formula for cuts in overall Trade Distorting Support (to say 5% of value of production).

o    Additional effort in AMS reduction by developed country members in the bottom band.

o    Reduction in de minimis for developed countries.

o    Strengthening criteria on blue and green box to prevent box shifting.

o    Proposal for limiting direct payments to small farmers in the Green Box criteria.

o    Assessment of the developed countries’ proposal for cuts in domestic support for effectiveness and creation of real commercial opportunities. 

*        

*           Market access

o    Progressive reduction, through a tiered formula.

o    Formula to address tariff escalation.

o    Capping

o    Assessment of credibility of self selection of Special and Sensitive Products (need to keep these to a minimum)

o    Reliance on Special Safeguard Mechanism (SSM).

o    Determining basis for the quantity based and price based SSM

*        

*           Export Competition

o    Maintenance of suggested period of 5 years for elimination of direct export subsidies

o    Strict adherence to discipline on export credit for under 180 days

o    Fundamental changes in food aid with clarity on type of food aid to be permitted in non emergency situations.  

o    Limiting monopoly powers of exporting State Trading Enterprises (STEs) while acknowled-ging that these were an important development instrument for the present day developed countries and hence have a key role to play in developing countries as well.

 

Strategies and Options Ahead

 

*      Developing Countries’ offer of tariff cuts must be conditional on steep cuts in domestic support by the US and EU.

*      Domestic support disciplines must be simplified. The current structure based on the three boxes is complex and ambiguous.

*      US need to move forward on domestic support, EU on market access and India, Brazil and other big developing countries need to show greater flexibility on industrial goods.

 

Within the framework of WTO, India has enough instruments to cater to her interests. Much of the problems like farmer suicides are very much internal and to correct these we must set our own house in order.

 

Time has almost run out but whatever is agreed upon must be carefully implemented so that mistakes from the Uruguay Round are not repeated.

 

Offensive and defensive steps of various countries and groups must be in balance to pave the way forward. It would be a collective mistake to postpone the negotiations. Even though developing and developed countries differ in many ways and cannot be directly compared on several counts, if the negotiation is disciplined, it could ensure that all countries gain.

 

2.      Non-Agricultural Market Access

 

     Outstanding Issues

 

o    Co-efficient of the Swiss formula

o    Unbound tariffs

o    S & DT

o    Social harmonization

o    Preference erosion

o    Issue of newly acceding countries

o    LDC vulnerability, especially of small island states

 

The Way Forward: Issues and Concerns

 

o    Choice of coefficient is important. If tariff cuts are applied on the lines of the Swiss formula, the maximum tariff will fall below the coefficient agreed upon. Further, choice of coefficient should be such that peak tariffs on products of developing country export interest reduce to accord real access to developed country markets

 

o    There is a need to resist any move by trade partners (insisting on this change so as to ensure improvements in ‘real’ market access) to change the basic mandate of WTO by which commitments are to be taken from bound levels. Use of applied rate as base for tariff cuts would mean that developing countries would in future hesitate to introduce unilateral liberalization measures; WTO encourages Members to go beyond MFN commitments. India should therefore resist, and take the stance that cuts will be made from bound rates, though choice of coefficient may lead to cuts that go below the applied rates.

 

o    Credit for unilateral liberalization undertaken since the conclusion of the Uruguay Round is due to India. During the Uruguay Round, the concessions negotiated by India were within TRIPs, with voluntary commitments made in tariff reduction. Now, India cannot be denied credit for autonomous liberalisation undertaken by bringing up the fact that India did not have to negotiate any tariff liberalisation in the previous Round; on the contrary we need to ensure that we get reciprocal concessions on the unilateral liberalization already undertaken.

 

o    Paragraph 24 Issues: Given the clear mandate in the Hong Kong Declaration for harmonizing levels of ambition in Agriculture & NAMA, identifying this level of ambition appropriately is important.

 

o    India is well ahead on the path of unilateral liberalization which is good for the domestic industry. Introspection suggests that India can make still more aggressive offers in NAMA, but without a viable quid pro quo, it would make little sense to take such deep commitments.

 

o    ‘Less than full reciprocity’ in cuts is a basic pillar of WTO which cannot be ignored or negotiated. New proposals are being made to evaluate the perpetuation of protectionist tendencies in the developed world aimed at shielding, in Prof Debroy’s words, “newly declining (developed) countries” and the “refusing to develop countries”. India belongs to neither group, and should not compromise on the principle of less than full reciprocity.

 

o    Unbound products: flexibility allowed in the NAMA framework is needed to address domestic sensitivities. While there seems to be a convergence on use of a constant mark up on applied rates and use of a nonlinear formula, the degree to which this is allowed is yet to be finalised. A minimum 5% of product lines need to be kept out of reduction commitments; however, the panel felt that India could concede to give up the demand of applying less-than-formula-cuts for certain items.

 

o    The definition of ‘new goods’ is unclear even in the Indian context and the categorization of certain refurbished/remanufactured goods is still ambiguous. The government needs to make necessary changes in domestic Foreign Trade Policy to address of the issue.

 

o    Discussion on Sectorals being non-mandatory as per the Hong Kong mandate is on the back-burner, even though several position papers have been submitted on the subject. However, in certain sectors it may suit India to push for sectoral tariff elimination/ harmonization.

 

o    In the final outcome, it was agreed that countries (in particular developing ones like India) are better off with the WTO. Multilateral processes such as FTAs and RTAs create more distortion and trade diversion, and only complicate the process of doing business.

 

3.      Services

 

*       The negotiations in services started in January 2000 and became an integral part of the Doha Round. Although the services negotiations started much ahead of the negotiations in agriculture and NAMA, progress has been slow. Moreover, negotiations in services are more complex than NAMA and agriculture, wherein once the formula is decided upon the rest of the negotiations fall in place. However, in services intense negotiations on cross-cutting issues across different sectors are required to arrive at a consensus. Services negotiations in the Doha Round are significantly behind schedule.

*       India is a proactive player in the services negotiations and its stake in the multilateral negotiations is high since it is not a member of any major trading bloc.

*       Since the beginning of the current Round, India is pushing for greater market access in Modes 1 and 4.

*       In Hong Kong it was agreed that members would explore all negotiating methods available within the GATS parameters and accordingly members decided to undertake plurilateral negotiations in addition to the bilateral request-offer negotiations. As per the deadline set in Hong Kong (of 28 February 2006), members have submitted the plurilateral requests and first services cluster was held between 27 March and 7 April. Around 35 countries participated in plurilateral negotiations. Plurilateral requests have been made in 16 sectors, in Modes 1 or 2, 3 and 4 and in MFN (both general MFN exemption and for exemption of MFN in audio-visual and financial services). Developed countries have made most of the requests (Japan in 13 sectors and US and EU in 12 sectors each) and target countries are mostly developing countries. India, Brazil, Philippines, Malaysia, South Africa are receiving the largest number of requests. Some developing countries such as Mexico, India and Chile also made requests.

*       India received requests in 14 sectors and for removal of MFN exemption in audio-visual services. India made requests in Modes 1/2 and Mode 4 and computer related services.

*       During the March-April services cluster, Members sought detailed clarifications on what the requests entailed, described their current policy regime and indicated the extent to which the requests could be met.

*       India identified sectors in which it could meet the demands listed in plurilateral requests. In certain sectors India has met the request substantially. These include construction and related engineering, logistic services, maritime transport, etc. In some sectors it would be difficult for India to meet the requests. These include retail services, legal services, etc.  

*       The requests are dominated by developed countries and many developing countries are defensive about participating in the negotiations. The seminar called for greater participation from developing countries in the services negotiations. It also called for greater cooperation among developing countries and technical assistance from large developing countries to others.

*       It highlighted the need to address domestic regulations. Many barriers faced by professionals in developed country markets are related to domestic regulation such as qualification and licensing requirements.  On their part, even proactive developing countries such as India are not able to make commitments in certain sectors since the regulatory regime is still evolving.

*       It was pointed out that the coverage of Mode 4 needs to be widened to accommodate interests of other developing countries. There should be greater cooperation between sending and receiving economies so that ambiguity regarding the quality of workforce, security issues, etc. can be resolved.

*       Along with market access commitments, the focus should be on securing national treatment commitments.

 

4.      Rules

 

Doha Round has a limited mandate to clarify and improve existing articles in the agreements on anti-dumping, subsidies and safeguards, and rules on RTAs. The discussions were however focussed on AD, ASCM & fisheries subsidies.

 

Way forward suggested:

 

o    AD needs to balance interests: There is a need for a pro-exporter bias to redress the damage caused by the abuse of these provisions by India’s trade partners

 

o    Anti circumvention (the sweeping proposal by US): Ambiguity of wording raises the possibility of misuse and abuse. Hence there is a need to ensure predictability and put in place fair rules that clearly define the balance of rights and obligations, and call for circumspection and care.

 

o    New Shipper Review: It is important to retain the requirement of accelerated review, and if possible, refine the requirement of bona fide commercial sales. Flexibilities are needed to prevent abuse and improve transparency. India could then be open to further disciplines.

 

o    Sunset Reviews: There is a need to limit subjectivity and improve transparency of ‘likelihood tests’ and provide clear definitions of methods of calculation etc. Automatic termination of sunset review duty needs to be pushed for, ideally after 5 years, but definitely after say 7-10 years. One view was that if duty is allowed to continue, new duty from date of expiry should be imposed, and imposition of retrospective duties should not be allowed.

 

o    Dumping Margin: Currently, de minimis rates are at 2% which need to be raised to 5%. Further, whereas now the rate is applied on percentage of total imports, it should be calculated on percentage of total domestic consumption. To discourage small margin initiation misuse, cumulation of markets for the purpose of initiation should not be allowed.

 

o    Lesser Duty Rule: India applies the LDR and is a demandeur of mandatory application. However, we could be persuaded to accept a limited mandatory application of LDR to original investigation and thus provide some flexibility to countries.

 

o    ASCM: The export competitiveness issue is of pre-eminent importance. A clarification of what is a ‘reasonable and effective verification system’ needs to evoked in our favour.

 

o    ‘Prohibited Subsidies’: A clearer definition is needed on what is prohibited. This new development is a cause for concern as further erosion of policy space is being envisaged. Also, application of Prohibition Rules should not apply to developing countries, especially the Annex 7 countries as in the case of export subsidies.

 

o    Fisheries Subsidies: These are important for overall balance in rules negation. However, there is a need to ensure that we:

 

    protect interests of small fishermen;

    protect support for deep sea fishing;

    exclude disciplining of inland fishing.

 

While Summing-up the Conference, Session Chairman, Mr. Gopal K Pillai highlighted the urgency of remaining engaged in the multilateral negotiations. He stressed that though many issues remain unresolved, a negotiated deal is still possible. This would however require all Members to move away from their extreme positions and make adjustments albeit without compromising on the core issues of concern.

 

He stressed that of the two main areas of focus, viz. agriculture and NAMA, agricultural negotiations in DDA are only in their second round; consequently, one can’t expect miracles. However, WTO Members could use this opportunity to discipline domestic agricultural policies, especially vis-à-vis the different boxes of subsidies and direct payment issues; sensitive products and SSM; tariff caps and tariff peaks in items of export interest to developing countries. Domestic sensitivities in agriculture vis-à-vis livelihood issues need to be respected. In comparison, for countries like India, coming to a convergence in NAMA is a much easier proposition, and flexibilities could be attained relatively painlessly.

 

 

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