OFFICE OF TRADE NEGOTIATIONS

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SPECIAL OTN Update

July13,2011

While a glimmer of hope for the conclusion of the Doha Round may have been apparent at the beginning of the year, at this current juncture, expectations have been considerably muted. During the early months of 2011, the world witnessed the rollout of a plan of action to push through the Doha impasse. Conceptualised by the WTO Director-General (DG) Pascal Lamy, an intensive work programme for the various Negotiating Groups began earnestly in the January 2011 and was expected to culminate in the preparation of new draft texts by the end of the years first quarter.

A GLIMMER OF HOPE DIMMED

were offered Chairmens reports coupled in some instances with minor modifications in the current draft texts. Rather than outlining a roadmap on the way forward, the reports offered no clarity on the solution to the stalemate in the Doha negotiations. What did emerge from the exercise was the troubling recognition that the primary roadblock of the negotiations resided in the NAMA Negotiating Group. As DG Lamy expressed in an April 21 letter a deal would be doable but for NAMA, where the differences today are effectively blocking progress and putting into serious doubt the conclusion of the Round this year. This is a grave situation for the Round and for all of the efforts and aspirations it embodies.

The intensified programme, sadly, did not realize the anticipated results. Most notably, the ambition of releasing revised texts in all Negotiating Groups by Easter 2011 remained elusive. Instead, WTO Members

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

2 At the core of the issues regarding NAMA negotiations are the disparate views on the interpretation of the Doha mandate as expressed in the Doha WTO Ministerial Declaration of 2001. On the one hand, developed countries have posited that the last decade of considerable economic growth experienced by advanced developing countries like China, India and Brazil dictates that they be subjected to treatment different to that which ought to be extended to other developing countries. Consequently, they argue that the level of ambition regarding the liberalization of the markets of advanced developing countries should be much higher than what is currently on offer on the negotiating table. On the other hand, advanced developing countries have maintained that development is the core pursuit of the Doha Development Agenda (DDA) rather than narrow mercantilist interests of developed economies. The entrenched elusiveness of a solution to the impasse has compelled a recalibration of the approach to the negotiations, including the consideration of alternatives to concluding a comprehensive agreement at this time the proverbial Plan B. The most longstanding suggestion of an alternative to a comprehensive Doha package has been the selection of particular issues for conclusion under a stand-alone agreement. This plan would involve the leaving aside of the more divisive issues such as those under Agriculture and NAMA negotiations. Another suggestion on the table has called for the prioritization of the needs of least-developed country (LDC) Members. Such prioritization would engender the establishment of an early harvest package for LDCs which, amongst other things, would facilitate duty-free, quota-free market access for LDC exports. A third proposed alternative recommended a temporary suspension of the Doha Round.

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

Of these, the proposal to focus on facilitating an early harvest for LDCs has gained traction. At the informal meeting of the Trade Negotiations Committee (TNC) on May 31, 2011 it was proposed by the WTO DG that the creation of a package deal on LDC specific issues should comprise part of a three-stage approach to an eventual final resolution of the Doha Round. DG Lamy has proposed that a package addressed specifically to the interests of LDCs would be fast tracked. This package, he suggested, should address duty-free quota free market access for LDC exports, improved rules of origin, the treatment of cotton, and a services waiver for LDCs that would allow Members to discriminate in favour of services exports from LDCs. In addition, an LDC-plus package is contemplated. This plus package would address additional issues that have neared resolution in the Round. It has been proposed by DG Lamy that a plus package include trade facilitation, a Special and Differential Treatment Monitoring Mechanism, and Fisheries subsidies. It is further contemplated that other more challenging issues relating to NAMA, Services and Agriculture in particular would be left to be resolved after the end of 2011. The effect of the overall approach would be to forgo the frustrating attempts to conclude the Round by the end of 2011, but at the same time, preserve the integrity, legitimacy and relevance of the multilateral system by concluding an abridged Doha package by December 2011 at the 8th WTO Ministerial Conference.

3 The notion of concluding the Round as a Single Undertaking has however not been abandoned. Rather, the proposed process invokes a principle enshrined in Paragraph 47 of the Doha Declaration which makes it possible to implement agreements reached ahead of the conclusion of the Round on a provisional or a definitive basis. The understanding is that such agreements will be taken into account in assessing the overall balance of the negotiations. Consequently, the components of the December package should not be regarded in isolation from the issues that will remain to be resolved after the 8th WTO Ministerial. To date, however, Members have been struggling to agree on what exactly should constitute the December package. It is perhaps the inextricable linkage between the December package, the outstanding issues and the potential balance of the final results of the negotiations that has made it difficult for the Membership to reach a Member final decision on the components of the December package. Some developing countries such as China, Bangladesh, India, and the African, Caribbean and Pacific States (ACP) have advanced a preference for focus on LDC specific package only. This has garnered no support from key developed countries such as the United States of America. Developed countries have insisted that an LDC-only package would not be saleable and that it would be necessary to also establish an LDC-plus package that would include areas of interest to Members other than the LDCs such as Trade Facilitation.
In response, developing countries have objected to the inclusion of developed countries interests as part of the final December package as a payment for
OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

concessions to LDCs. Therefore, it appears that the challenge of reconciling development with mercantilism that contributed to the Doha impasse now threatens to undermine the successful conclusion of a Doha Plan B. Additionally, there is no consensus amongst Members regarding the inclusion of fisheries subsidies as Members such as the European Union, Japan, Chinese Taipei and South Korea are of the view that negotiations have not sufficiently matured in this area and should not be part of a December package. The June 22, 2011 TNC meeting certainly has not served to ameliorate the situation. The meeting did not generate further guidance regarding the proposals that had already been suggested for the December package. Moreover, during that meeting, DG Lamy proposed the inclusion of yet another element to the LDC-plus package Environmental Goods and Services (EGS). The inclusion of EGS surprised most Members, as it is a component of the contentious NAMA negotiations. The liberalization of EGS has been promoted as a win-win proposition that would be advantageous for trade as well as the environment. Not only would trade flows in environmental goods increase but at the same time the increased opportunities to obtain and use environmental goods and services could reduce negative impacts of production activities on the environment especially within developing countries. However, with respect to goods and services, the majority of developing negative. Further, given trade in environmental trade balance of the countries is already that most developed

4 countries already apply low or zero tariffs on environmental goods, their burden of effective tariff reductions would be relatively less than for developing countries. The inclusion of environmental goods and services in the LDC-plus package would therefore decidedly favour developed countries relative to developing countries, at least in the short to medium term. It is therefore not surprising that developing countries such as Brazil and India expressed objections to the inclusion of the item in the LDC-plus package.

Implications for CARICOM

The advent of the WTO August recess does not provide a lot of time ahead of the 8th WTO Ministerial for Members to resolve their differences and to finalize the December package. It is hoped that, in the rest of months ahead, a final solution will be resolved. In this regard, the WTO General Council meeting which will take place July 27-28, 2011 may provide some indication of whether agreement on the December package might be secured.
The proposed three-stage process for ultimately resolving the Round does raise certain issues which will impact CARICOMs interests in the Doha negotiations. In the first instance, while the intention to secure a December package is plain enough, the roadmap for resolving other contentious Doha issues in the post December 2011 period remains unclear. This notwithstanding, during the post December 2011 negotiation process, the Caribbean will be interested in maintaining the developmental gains that have already been secured in the negotiations.

Relevant to this are the gains to the Region as reflected in the current draft NAMA and Agriculture texts regarding tariff reduction modalities, including the flexibilities for the Region as small vulnerable economies (SVEs), as well as the facilitation of Haiti and Suriname to rebind their tariffs in a manner consistent with their CARICOM Common External Tariff (CET) obligations without recourse to GATT Article XXVIII. Under Article XXVIII, other WTO Members that would be adversely affected by Surinames proposed tariff change would be entitled to renegotiation of tariff concessions with Suriname, and compensation. For the Caribbean therefore, it is crucial that the negotiations which are expected to continue after the 8th WTO Ministerial will be predicated on the draft texts. Furthermore, the Region would be interested in multilateralizing the ACP/EU/MFN Agreement on Preference Erosion/Tropical products that accompanied the conclusion of the longstanding trade dispute on bananas. With respect to the LDC-plus package, the reservations of some WTO Members regarding the inclusion of Trade Facilitation and Fisheries subsidies have been noted. However, should these issues be included in the plus package, the CARICOM Region will seek to (i) ensure that the capacity building component of trade facilitation is included in the December package, and (ii) ensure that the CARICOM Members as SVEs are exempted from any disciplines on fisheries subsidies given that the Regions share of global fishing catch is too miniscule to inflict environmental damage caused by over fishing. It is appreciated that the proposed facilitation of duty-free, quota-free treatment of LDC exports as well as the services waiver under the LDC package

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org

would undoubtedly be beneficial to Haiti, the Regions only LDC as designated by the UN. However, the improved access of LDC services and goods exports to major markets could undermine the margin of preference of other CARICOM Members within those markets. It will be important for CARICOM Member States to adjust quickly to the imminent effects of preference erosion by recalibrating their industrial and external trade strategies in order to maintain and improve their competiveness in these markets. In this regard, CARICOM Member States will need to consider,

inter alia, intensifying economic diversification and deepening the development and management of their innovation systems in order to engender expanded creation, export and marketing of highly differentiated, value added products and services.

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TradeNegotiationsCommitteeinSession

Photograph:WTO

OTN UPDATE is the flagship electronic trade newsletter of the Office of Trade Negotiations (OTN), formerly the Caribbean Regional Negotiating Machinery (CRNM). Published in English, it is a rich source of probing research on and detailed analyses of international trade policy issues and developments germane to the Caribbean. Prepared by the Information Unit of the OTN, the newsletter focuses on the OTN, trade negotiation issues within its mandate and related activities. Its intention is to provide impetus for feedback by and awareness amongst a variety of stakeholders, as regards trade policy developments of currency and importance to the Caribbean. http://www.crnm.org