Cancun draft text flawed, imbalanced, say developing countries

Martin Khor

Geneva, 26 August - Several developing countries have criticized the revised Draft Cancun Ministerial Text as one that is imbalanced and does not take account of their development needs and of their proposals in many areas.

This emerged from an informal heads-of-delegation meeting at the WTO on Monday afternoon to discuss the draft, which was issued on Sunday night.

It was evident that developing countries with agricultural export interest such as Brazil and South Africa were unhappy with the lack of commitment for developed countries in agriculture in the draft Text. Other developing countries felt the text had sidelined development interests, and would open up developing countries' markets especially in industrial goods and damage local firms.

Several countries requested changes to the text, or at least the placing of their alternative language in the text or in annexes to accompany the text.

However, the General Council chairman, Uruguay Ambassador Carlos Perez del Castillo, indicated he was not in favour of revising the text and that it would be sent as it is to Cancun. He indicated that divergences of views would be clarified, perhaps in a cover letter.

It is still not clear, however, how the transmission of the text would be done. The General Council will meet in formal mode on Tuesday and possibly Wednesday, and the procedural questions such as what text will be the basis for negotiations in Cancun are expected to be brought up there.

In his opening statement at Monday's HOD meeting, Perez del Castillo said the text is put forward "on my own responsibility" and does not purport to be agreed in any part, and thus "the whole text is in square bracket." He added that rather than including all possible options, which would have resulted in an "unmanageable draft", he produced "clear text" in many areas.

His approach, he believed, kept to the criteria of respecting Doha mandate ambitions, respecting the development dimension and seeking overall balance.

He said that in some areas he produced texts with a high level of convergence, in other more controversial areas he tried to find a possible compromise in frameworks for developing modalities, and on Singapore issues where views remain polarized he set out two basic options.

Commenting on some issues in the text, he said there could be positive results very soon on TRIPS and public health. On agriculture, significant differences remained, and his Annex A is a best effort to provide a workable framework. There was general acceptance to proceed with a framework approach, leaving figures for negotiation post-Cancun.

On NAMA, he said the text from consultations as late as Saturday had serious problems and reservations on many elements, especially paras 3 and 6. He made some revisions, especially in para 6, but he understood there are still significant concerns and divergences that have to be tackled in Cancun.

On S and D treatment, he said the Annex C proposals were clearly only an initial harvest, and there is still a lot of work to be done on S and D treatment, and indeed on agreement-specific proposals.

On Singapore issues, he explained his approach of including two alternatives in each area. Many delegations view the establishment of modalities as an issue for Ministers to decide. He felt the best framework to give them to make those decisions was to outline "the proposals and positions at either end of the debate." He was aware some delegations will not find their position reflected in the two options and that any possible intermediate option for one or more issues, although the Chairs informed him some delegations would be comfortable with such a third option. These intermediate options remain available for Ministers in Cancun.

He added that in each area, the first option is a decision to launch negotiations and sets forth modalities for such negotiations. The second option refers the matter back to the working group for further clarification. The brackets reflect there are still considerable differences between members, "although the scope of divergence is greater in some areas than others." In all four areas, there is still considerable work for Ministers.

In the discussions, Brazil was perhaps strongest among developing countries which criticized the draft. Ambassador Luiz Felipe de Seixas Correa said the basic parameter to judge the text was whether it would lead to fulfilling the objectives of the Doha Declaration. Some areas of negotiations carry a disproportionate weight. If the document falters on key issues, the overall assessment must necessarily be negative, the Brazilian envoy added.

The Doha Round was about agriculture and development. "If we don't get enough movement in the right direction in Cancun, we put the Doha Round at risk. If we move in the wrong direction, the Doha round will fail. >From this perspective, the draft was "fundamentally flawed".

It did not provide a balanced approach, and fell short of the Doha agriculture mandate. Given that this is meant to be a development round, it oddly gives precedence to developed countries' views, particularly the largest ones. The draft has to be fundamentally changed, otherwise "it will fail and we will all fail."

On agriculture, said Seixas Correa, the draft fell short on all three pillars. It relies heavily on the US-EU proposal which reflects the line of least resistance of the two largest subsidizers. The draft fails the test of compatibility with the Doha mandate on agriculture by not requesting enough from the developed countries which are the largest sources of agriculture distortions. He requested that the proposal of the G-19, by Brazil and 18 others (Pakistan and Cuba have signed on to the earlier G-17 proposal) be kept on the table.

In addition to its failures on the three pillars of agricultural reform, said the Brazilian envoy, the revised draft has unaccountably listed as an item of negotiation, the temporary peace clause in the AoA, which is not part of the negotiations and expires on 31 Dec 2003.

The bias in favour of developed countries, charged the Brazilian, is reflected even in the details of the Agriculture annex: in para 1.7 of the Annex A, it characterizes the de minimis support of developing countries as 'trade- distorting,' while the de minimis support of the developed countries is not similarly qualified. The revised text also fails the test of compatibility with the Doha mandate in agriculture, "by not requesting enough from the developed countries who are the largest sources of distortions in world agricultural trade."

Brazil added that the draft also falls short of the Doha mandate on NAMA by asking too much from developing countries. Although the Doha mandate is explicit on less than full reciprocity and there is no mandate for harmonization of tariffs, yet the proposed framework retains elements such as participation by all countries in sectoral initiatives which cannot be reconciled with the Doha Declaration and are unacceptable to Brazil. On implementation, there is no justification for singling the protection of geographical indications as it does not have precedence over other issues.

"There is still time to get things on track for Cancun... the key word is inclusiveness. The yardstick is compatibility with the level of ambition of Doha. Let us put those two things together."

South Africa's head of delegation, Faizal Ismail, also criticized the draft for being imbalanced both in form and content. The Doha declaration was carefully balanced, recognizing the critical importance of development issues and agriculture and therefore calling for agreement on implementation and S and D treatment and agriculture modalities before NAMA and Singapore issues.

He said that the text had broken this balance and reversed the order agreed to. The framework agreement on NAMA is more advanced, On Singapore issues, the draft calls for stark choices, with one option calling for launching negotiations without substantive modalities. These sharply contrasting options do not correctly reflect the different views on the substance of each issue.

On the other hand, the agriculture text is only a framework, with no clarity that negotiations would proceed in the direction set by the Doha mandate. There is this no balance in the text on the level of importance of these issues.

On agriculture the text lowers the Doha ambition level, placing the EC-US text (which is the lowest common denominator of the largest most protectionist developed countries who want to accommodate each others' interests) at the centre. He proposed the draft be corrected to reflect different views, especially on agriculture, or else place the proposal of the G-19 in an annex as it is more in line with the Doha mandate.

India's Amb. K.M. Chandrasekhar highlighted the gap in the annex on agriculture from the Doha mandate, particularly in the area of domestic support. The lack of capping of the Green Box and new means of subsidizing the Blue box were areas of concern.

India also expressed surprise at the attack by some members on the S&D Treatment portion of market access. While the domestic support provided by the developed countries is intended to preserve the incomes of farmers in the rich countries, concerns were being expressed at the S&D Treatment proposals meant to preserve the incomes of farmers who could afford only one square meal a day.

"This is an issue on which there could be no compromise," the Indian envoy added. Referring to the criticism of some members about the two-tier structure on market access, Chandrasekhar said: "..such a two-tier system is already in existence, thanks to the members who distort trade through trade-distorting domestic support... consequently, elements from the G-19 text need to be drafted into the agriculture text," he said.

On the Singapore issues, several countries welcomed the presence of two options in brackets. However, a number of countries, including India, China and Malaysia, criticized the presence in the Draft of the four Annexes accompanying the option to launch negotiations. China said it could live with the two options, but it objected to the Annex documents as these had not even been discussed and they were not suitable to be put before Ministers as they had not been agreed to. They requested that these Annexes be removed from the draft.

India referred to the 'modalities' included under each of the Singapore issues in separate annexes, and said there was no agreement on any form of modalities, as the clarification process had not been completed.

On implementation, India expressed concerns over the low priority accorded to this issue, and which well below the priority accorded by Ministers at Doha. "There is a need to strengthen the language, and not singling out any particular issue."

On TRIPS, India indicated that there was probably an omission in the draft text relating to para 19 of the Doha Declaration. This issue had also been taken up on a priority basis as a result of the February decision of the GC. The Chairman, India said, should reflect this appropriately.

On NAMA, India was concerned about paras 3 and 6 of the annex. In para 3, the mention of non-linear was unnecessary, since in its current form it was too open-ended and could include any non-linear approach. The words 'non-linear' should be dropped or related to the Chairman's formula. India was also concerned, like many other members, on the language relating to sectoral approach, and any sectoral negotiations could only be on a voluntary basis. This should be reflected in the text.

The US said it was appropriate to leave the Singapore issues to Ministers to decide. It was willing to launch negotiations on all four issues if modalities are appropriate. It thought trade facilitation and transparency in government procurement were ready for negotiations but it was not optimistic on investment and it was unhappy that the second option put forward for a "soft agreement" on competition (by the chairman F. Jenny) was not included.

The Kenya delegate said it was better not to focus on the Annexes and suggested that the draft do not include them. Commenting on a remark by the Director-General that the multilateral trading system should be strengthened, Kenya said this should not be done to the detriment of the weak and poor developing countries. The agriculture proposal fell short by not focusing on S&DT. The proposal by a group of 19 countries, supplemented by a proposal by Kenya on S&DT in agriculture, should form the basis of revising the draft.

Kenya criticized the NAMA text, saying there were problems not only with para 3 and 6 in the Annex but also para 5, as they did not give adequate flexibility for developing countries to address their development needs. Kenya opposed compulsory participation in a sectoral initiative as it did not have industries that can compete and would thus be under tremendous pressures from such an approach, and its industries may close.

On services, the text did not give recognition to Article 4 and 19.2 of the GATS, which stressed the need to increase developing countries' services participation, and their right to liberalize according to their own levels. Instead the text went the opposite direction by asking all participants to take part.

On S & DT, Kenya stressed the need for the text to make clear that the post-Cancun negotiations should be held in the special session of the Committee on Trade and Development, where it could be given more coordinated focus. A specific dateline to conclude the talks should also be given.

Nigeria posed two procedural questions. When would the chairman's draft be transformed into a draft of the members? How would the comments that are being made be factored into a revised paper?

The General Council chairman said this had not yet been decided.

Meanwhile, at an EU press briefing, EC representative Peter Carl said the situation was such now that there is a text that has to be sent up to Ministers in Cancun to decide and no further time would be spent on discussions. If a final text is not out before the end of this week, it would be difficult for reflections before Cancun.

He said the EC was unhappy with the text and in some case, very unhappy. The text is flawed but can be repaired. He criticized the agriculture text for putting all the burden of reform and market opening on a small number of countries, starting with the EU, while not on others.

He added the NAMA text has to be improved as it was not ambitious enough. It also did not have any precise targets unlike the agriculture text and no definition in tariff cuts in the formula. He added the EC had proposed the Swiss formula approach but others had proposed a linear approach which he said was not up to our level of ambition. On Sectoral liberalization, it believed there should be a commitment that will involve substantial numbers of those engaged in world trade.

On agriculture, he said the text in many respects took on board what the EC had negotiated with US but in other aspects had backtracked and there are attempts to push us further and this would backfire politically back home. On market access the draft would give options so that there will not be market opening in any developing country. This was imbalanced, as the EU is asked to reduce substantially but there is no reasonable burden sharing.

On Singapore issues, Carl said the fact that there is no unanimity on investment does not surprise us. He claimed a number of countries were playing tactical games. Some of them do want to see outcome in agriculture but do not have time for the Singapore issues. He also claimed that the text's first option to negotiate is in conformity with the Doha mandate but second option is not. He insisted there was firm and clear expression of political commitment in Doha to launch negotiations on all four issues and " we will stick to that."

In response to a question about whether on Singapore issues there could be a plurilateral or an opt-in-opt-out approach, he said No.

In response to a statement by a journalist that the developing countries have paid several times over yet did not get anything in Uruguay Round, Carl challenged the journalist on his statement and said that "it is a myth that developing countries have paid several times".

At another press briefing, Indian Ambassador K.M. Chadrasekhar, in response to Carl's comment that it was a myth developing countries had paid a price in the Uruguay Round, said "the developing countries had indeed already paid a heavy price, and what more are we required to pay?"

He explained that the developing countries had paid a price at Punta del Este in agreeing to negotiate in a number of areas on the premise of liberalization of trade in agriculture and textiles and clothing and other sectors. At Marrakesh, they had taken front-loaded obligations in TRIPS, TRIMS, and in Services, but had not received any benefits in textiles and clothing trade or in agriculture.

He said that in agriculture the developed countries wanted subsidies to be paid for big farmers that were already well off, but some of the farmers in his country had only one meal a day. Even in such a imbalanced situation, it appeared from some proposals that there could be even more imbalance, so that poor farmers could now be asked to eat only once in two days.

- SUNS5405