EU gives cautious welcome to draft compromise in WTO trade talks

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World Trade Organisation mediators have tabled a compromise package on possible tariff and subsidy cuts in an attempt to salvage the troubled Doha Round – aimed at freeing up global trade.

The chairmen of key WTO negotiating committees on agricultural and industrial market access issues published – on 17 July 2007 – new proposals on how to calculate tariff and subsidy cuts, in a bid to save the troubled Doha Round.

The proposals are based on the latest positions of WTO member governments and, while the two chairs said that the differences separating member countries were not huge, they admitted that political commitment and courage would be required to overcome them. 

The main points of their compromise proposals include: 

  • On agricultural market access: 

    • The EU is being asked to cut its highest tariffs on farm imports by 73% – more than the 60% it has offered so far; 
    • Governments will be able to classify 4-6% of their agricultural products as “sensitive”, meaning that they will be entitled to maintain higher levels of protection for such goods. The US had been demanding that these be limited to 1%, but the EU had insisted that it needed around 8% of its farm products protected from tariff cuts. 
  • On agricultural subsidies: 

    • The US is being asked to reduce its overall trade-distorting subsidies (OTDS) by 66-73%. This would bring its permitted levels of spending down to between $13-16.4 billion per year rather than the current $48.2 billion. This is above the $10-11 billion demanded by Brazil and India but below the $17 billion floated by the US. 
    • The EU, which has already offered to slash its OTDS by 75% – along the lines of developing countries’ demands – could be asked to make a 75-85% cut. 
  • On industrial market access: 

    • The text on non-agricultural market access (NAMA) says that developing countries should put a ceiling of 19-23% on their tariffs. This is well below the 30% that the Brazilians and Indians have been demanding, but above the 15% that the EU and US had been pushing for in order to increase their access to these growing markets. 
    • Rich countries would have to cut tariffs on industrial imports to below 3%, with a maximum tariff level set at less than 10%. 

EU officials noted that the texts ''represent a useful step forward'' and ''provide a basis for further work in the Doha Round''. Nevertheless, they added: ''There are points on which we have major concerns and other significant issues in the negotiations that are not included in these texts." 

''This document is intended to take everyone out of their comfort zones'', said Crawford Falconer, the New Zealand WTO ambassador who chairs the farm negotiations. ''That has to happen if we are ever to get an agreement.'' 

WTO Director-General Pascal Lamy said: ''Members will not be fully satisfied with the texts. But what separates members today is smaller than what unites them. There is already an impressive package on the table. In the weeks to come it is essential that members focus efforts on overcoming those differences and reach agreement in the two sectors that hold the key to success in the Doha round.'' 

European business lobby BusinessEurope said that the proposals were a ''positive development'' but complained that proposals for tariff reductions on industrial goods, which would allow emerging countries like China and Brazil to maintain tariffs as high as 23%, were ''unacceptable''. 

''European companies need access to those emerging markets that are now displaying the world's highest levels of economic growth. Tariff levels above 15% will not deliver this result'', stated the group. 

EU farm lobby Copa-Cogeca said that the EU should reject the paper because "the EU is being pressed to go well beyond its limit on market access", while the US is mostly getting its own way. Secretary General Pekka Pesonen said the paper had "been specifically designed to fit the new US Farm Bill" and would allow it to continue with trade-distorting payments and high levels of product-specific support. 

At the same time, he added: "Issues of vital concern to the poorest countries, like food security, are ignored."

International NGO Oxfam however said that the proposals continued ''to offer too little and cost too much to developing countries to constitute the basis for a development deal''. The agency said that the proposed steeper cuts in EU and US domestic support were ''a step in the right direction'', but Céline Charveriat of Oxfam's Make Trade Fair campaign added: ''But this is very unlikely to bite into actual spending. On average, the US spent $15.4 billion between 1995 and 2005. Unless severe caps are put on specific products, these new figures would mean that dumping of cheap produce, which is so damaging to developing countries, will not be eliminated.'' 

On industrial goods, she said that too much was already being asked of developing countries: ''The NAMA text turns the negotiating mandate on its head, requiring a developing country such as Brazil to make more than twice the cut in tariffs than the US. This proposal forces a handful of developing countries, with large and growing populations, to carry the burden of a WTO deal. It would lead to significant job losses and would stifle efforts by developing countries to move into higher value-added sectors.'' 

The Doha Development Round, aimed at liberalising global trade and extending the benefits of globalisation to developing countries, was launched by Ministers of WTO member countries in November 2001 in the Qatari capital, Doha. 

Talks have been continuing on and off over the past six years, but reached a low point in July 2006, when WTO Director-General Pascal Lamy formally suspended negotiations after members failed to achieve any kind of convergence on reducing farm subsidies and cutting tariffs on industrial and agricultural products. 

Negotiators nevertheless agreed that what was at stake was too important to be discontinued and, in January 2007, they agreed to restart talks in view of reaching final agreement by the end of the year. However, most experts believe that this deadline will not be met unless a deal on ''modalities'' – the contentious formula and figures for calculating tariff and subsidy cuts – is reached by the end of July. 

If a global agreement is not clinched this year, the Doha Round is likely to be postponed until after US presidential elections in 2008, and possibily even after European elections in 2009. 

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