26 July 2007

Global Trade Talks Still Far from Securing Strong Market-Opening

WTO texts ask too little of large developing countries, U.S. official says

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U.S. Mission to the United Nations in Geneva
Press Office
July 26, 2007

Statement by U.S. Ambassador Peter Allgeier
At the trade negotiations committee

July 26, 2007

• Like others, I would like to thank Ambassadors Falconer and Stephenson for their extraordinarily hard work in producing draft texts.  During the past two days we all have been providing our initial reactions -- some of which, including our own, have been decidedly pointed and sometimes critical.

• But none of those reactions should be taken as diminishing the significance of the contributions by both chairs, and their dedication to helping us achieve the needed modalities.

• As a general matter, we would first underscore our commitment to work with both of the draft texts in September.  While we have serious concern with some of the content in each of the draft texts, we nonetheless believe that they have advanced our collective work, and the United States is prepared to continue serious and concerted efforts in September to build on these texts.

• We also would note our strong agreement with Chairman Falconer that there should be no assumption that the ultimate solution to the issues will lie in simply landing on the mid-point of the various ranges that have been put forward.  Indeed, given the lack of clarity in some areas of the texts, they are as much snapshots of the current situation as they are suggestions pointing to particular solutions.  However, as we achieve greater clarity in these areas, it should help us to narrow our differences.

• In this context, both draft texts serve to underscore what the United States believes is a continuing fundamental -- and still unmet -- challenge of the Doha negotiations and key to achieving a successful outcome: namely, securing a strong market-opening outcome that will result in meaningful new economic opportunities and trade flows worldwide – in agriculture, industrial goods, and services.

Agriculture

• As we outlined earlier in the week, our fundamental concern with the Agriculture draft text – and with the state of play within the negotiations -- is the uneven treatment across the three "pillars" in agriculture.  While the domestic support and export competition pillars sections of the text are highly developed, many key topics in the market access pillar remain conceptual at best –- with regard to both developed and developing country market access.

• Combined with this uneven treatment is a continued imbalance in ambition across the pillars. Ambition in agricultural market access must match ambition in domestic support.

• This assessment means that our first priority in September must be to fill in the gaps, on Special Products, Special Safeguard Mechanism, Sensitive Product treatment, tariff caps, and other critical elements.

• On domestic support, the text calls for large reductions in US Overall Trade Distorting Support.   For those who have called for “effective cuts,” it is important to note that US OTDS levels would have exceeded the upper bound of the range in the Chair’s paper in 5 of the past 8 years.  And we would underscore that, while we have indicated that we are prepared to offer more on OTDS, our ability to make further cuts depends upon securing significant real increases in market access.

• We remain committed to work with Members to ensure treatment for cotton that is consistent with the Hong Kong Ministerial Declaration. However, in our view, the draft text on cotton fails to take into account reductions to cotton-specific support relative to other commodities through the general formula.  We have stated consistently that one cannot determine the application of the Hong Kong text until one knows the outcome from the basic disciplines.  We continue to believe that the only path forward is through that sequence.

• Finally, it is only logical that Members who are in compliance with their domestic support obligations should not be subject to dispute settlement actions over such measures.

NAMA

• The key to a successful NAMA result is the coefficients in the Swiss formula. Unfortunately, the range proposed in the draft text for the approximately 30 developing countries applying the coefficient is too high, and the gap between the developed and the developing coefficients is too wide to achieve our twin goals of creating new market access opportunities for all while adhering to the principle of less-than-full-reciprocity in reduction commitments.

• In terms of both absolute ambition in NAMA and ambition relative to what is under negotiation in agricultural domestic support, the proposed range for the 30 or so developing countries falls short.

• At the end of the day, it is the new tariffs that everyone’s businesses will be paying that will help determine whether we have a worthwhile outcome.  We all need a result that provides meaningful new market access for our workers and manufacturers.  Without such a result, we will not have concluded a truly pro-development Round

• Therefore, our aim must be to improve the balance of contributions as we ensure a high level of ambition overall.

• The gap between the developed and developing country coefficients is too wide, particularly when one factors in the array of flexibilities available to developing countries.  And the proposed range for the developed countries’ coefficient of 8-9 is not realistic, given that many rapidly growing advanced developing countries are offering little beyond binding currently applied tariff rates.

• For example, currently, the average applied tariff for the 30 developing countries applying the formula is just over twice the average rate applied by developed countries.  Under any scenario in this text, this ratio would widen so that the average end rate for developing countries applying the formula would be more than three times the average end rate for developed countries.  The pattern is similar for bound rates.

• Furthermore, under any scenario in the draft text, no developed country would have a double-digit tariff anywhere, whereas even under the Chair’s most aggressive formulation for developing countries, high tariffs would remain.  For example, while the highest U.S. tariff would fall below 8%, several developing countries could maintain tariffs above 60%.

• In terms of relative contributions, the developed countries would account for more than 75% of all the duties forgone as a result of the proposed tariff reduction ranges.  The five largest developing countries would absorb less than 20%, and all the other formula countries would absorb barely 5%. Of course, the majority of developing countries don’t have to apply the formula at all.

• We agree with the Chair’s assessment that sectoral arrangements are a key element in the framework to reach the mandate.  Sectorals are a concrete way to improve the ambition and balance in this round.  They are an effective tool in helping developing countries attract investment that will plug their economies into the global supply networks that are the international business model of today.

Services

• Services is one of the three critical pillars of the Doha market access negotiations, and an essential element in meeting the development promise of Doha.  It simply is not possible to develop a competitive, growing economy without providing access to world-class services in key areas such as financial services, telecommunications, express delivery, and distribution.

• As we focus on achieving agreement on modalities for Agriculture and NAMA, we also must define what is necessary to achieve a level of ambition for services that is at least on par with the level of ambition for Agriculture and NAMA.  In our view, that means both binding what already is open as well as making new commitments in services market access.

• We therefore believe it would be important for the Services Chairman to hold consultations in September, including possibly open-ended meetings, with a view to producing a services document at the time that modalities for Ag and NAMA are agreed.  Such a document will be necessary to set a timetable for revised offers and final negotiations, as well as to articulate an appropriate level of ambition for services at this stage of the negotiations.

• In the meantime, we all need to be working at home to prepare the groundwork with our domestic regulators and stakeholders for our revised offers.

Conclusion

• The only way to achieve a Doha success -- and the only way to meet the development goals of Doha -- is through a result that actually expands international trade.  Our aim must remain to achieve a balance that reflects the broadest array of offensive interests across the market access pillars of agriculture, NAMA, and Services.  The only way to do this is to attain the highest level of ambition in each.

• For the U.S., there is no higher international trade priority than a successful conclusion of an ambitious Doha Round.  For our part, we will come to the table prepared to carry forward our work, fully equipped with the will and flexibility necessary.  We ask that our trading partners do likewise.

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