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WTO Hong Kong ministerial conference (13-18 December) 5 December 2005 Levente Császi, DG ExPo Policy Department

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Presentation on theme: "WTO Hong Kong ministerial conference (13-18 December) 5 December 2005 Levente Császi, DG ExPo Policy Department"— Presentation transcript:

1 WTO Hong Kong ministerial conference (13-18 December) 5 December 2005 Levente Császi, DG ExPo Policy Department

2 Topics for discussion What is trade and why is trade important? What is trade and why is trade important? What is the WTO? What is the WTO? Timeline Timeline What is new in this round? What is new in this round? The stakes of the DDA and Hong Kong The stakes of the DDA and Hong Kong The structure of the negotiations The structure of the negotiations The main actors The main actors The EU agenda The EU agenda Agriculture Agriculture NAMA NAMA Services Services Is it a Development round? Is it a Development round? The EP and Hong Kong The EP and Hong Kong

3 What is trade and why is it important 8000 billion $ in goods and services 8000 billion $ in goods and services Trade policy: incentive to produce certain goods Trade policy: incentive to produce certain goods Theory: Theory: –link between freer trade and economic growth –Comparative advantage –Positive sum game BUT: BUT: –Trade is NOT enough –not magic panacea!

4 Myriad of instruments, policies and tools Tariffs (tariffication, binding tariffs, tariff peaks, tariff escalation, tariff reducing formula), quotas, tariff rate quotas (TRQs), standards, non-tariff barriers, subsidies, investment rules, intellectual property rights (IPRs), geographical indications (GIs), environment, labour standards, services regulation, movement of people, export credits, enforcement of the rules, technical assistance, trade facilitation, aid for trade, customs valuation, rules of origin, implementation issues, dispute settlement, anti-dumping, sanitary and phytosanitary measures, investment… Tariffs (tariffication, binding tariffs, tariff peaks, tariff escalation, tariff reducing formula), quotas, tariff rate quotas (TRQs), standards, non-tariff barriers, subsidies, investment rules, intellectual property rights (IPRs), geographical indications (GIs), environment, labour standards, services regulation, movement of people, export credits, enforcement of the rules, technical assistance, trade facilitation, aid for trade, customs valuation, rules of origin, implementation issues, dispute settlement, anti-dumping, sanitary and phytosanitary measures, investment…

5 Trade policy and overall economic impact Trade liberalisation: uni-, bi-, pluri-, multilateral Trade Policy Domesti c policies Geograph y Direct effects on trade flows and growth Indirect effects through Economic growth Trade policy is foreign policy!

6 What is the WTO? Creation in Uruguay round (1995) Creation in Uruguay round (1995) 148+ Members 148+ Members Member-driven intergovernmental organisation? Member-driven intergovernmental organisation? Champion of free trade? Champion of free trade? Negotiating mechanism to create economic opportunities? Negotiating mechanism to create economic opportunities? "Unidentified object of global governance"? – no common understanding "Unidentified object of global governance"? – no common understanding Development organisation? Development organisation? Obscure organisation with 23 agreements where fisheries are discussed under the Rules chapter Obscure organisation with 23 agreements where fisheries are discussed under the Rules chapter

7 Basic principles Non-discrimination (MFN principle) Non-discrimination (MFN principle) Transparency of rules (e.g.tarrification, notification system) Transparency of rules (e.g.tarrification, notification system) Progressive liberalisation through multilateral trade rounds Progressive liberalisation through multilateral trade rounds Consensus Consensus Enforcement of rules (Dispute Settlement) Enforcement of rules (Dispute Settlement)

8 YearPlace/nameSubjects coveredCountries 1947GenevaTariffs AnnecyTariffs TorquayTariffs GenevaTariffs Geneva Dillon Round Tariffs Geneva Kennedy Round Tariffs and anti-dumping measures Geneva Tokyo Round Tariffs, non-tariff measures,framework agreements Geneva Uruguay Round Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc 123 WTO rounds

9 Globalisation and the WTO Asymmetrical economic order Asymmetrical economic order WTO: part of the problem - part of the solution? WTO: part of the problem - part of the solution? The world without the WTO… The world without the WTO… –rules based system vs rule of the jungle –asymmetrical trade regime would exist without the WTO (bilateral and biregional agreements) –DSU – protects the weak? –consensus?

10 Timeline of negotiations Launch of Doha Development Agenda Launch of Doha Development Agenda EU-US renewal too late, Cancun failure EU-US renewal too late, Cancun failure July framework agreement July framework agreement 2005 – August: approximations 2005 – August: approximations 2005 – November – draft ministerial text 2005 – November – draft ministerial text December - Hong Kong Ministerial – recalibration & new road map December - Hong Kong Ministerial – recalibration & new road map Countries table offers based on Hong Kong guidance Countries table offers based on Hong Kong guidance December – negotiations conclude December – negotiations conclude Submit implementing legislation to US Congress Submit implementing legislation to US Congress July – US Trade Promotion Authority expires July – US Trade Promotion Authority expires New domestic reforms? (Farm Bill Renewal, CAP?) New domestic reforms? (Farm Bill Renewal, CAP?) Most reforms start to kick in Most reforms start to kick in

11 What is new in this round? Growing membership (China, DCs) Growing membership (China, DCs) Growing agenda affecting policy space Growing agenda affecting policy space Increasingly inflexible negotiating positions Increasingly inflexible negotiating positions Grand bargain: agri vs NAMA and services Grand bargain: agri vs NAMA and services Developing countries split (G20, G33, G90) Developing countries split (G20, G33, G90)

12 What is at stake in the DDA and at Hong Kong? Economic terms – expectations on gains from DDA scaled down (World Bank projections) Economic terms – expectations on gains from DDA scaled down (World Bank projections) Credibility of multilateralism - key concern for Europe (alternative: bilaterals…) Credibility of multilateralism - key concern for Europe (alternative: bilaterals…) Reducing global trade asymmetry – what about the D D A? Reducing global trade asymmetry – what about the D D A? Policy space? Policy space? Paradigm shift in agriculture? Paradigm shift in agriculture?

13 The structure of the negotiations July framework – basic guidelines July framework – basic guidelines Single undertaking Single undertaking General Council, TNC, Committees General Council, TNC, Committees defensive and offensive interests defensive and offensive interests issue-based coalitions issue-based coalitions shifting power constellations, G-20 emerging shifting power constellations, G-20 emerging Core group, green room deals? Core group, green room deals? consensus – developing countries have negative power consensus – developing countries have negative power

14 Main actors Five interested parties (FIPs - EU, US, Australia, India, Brazil) Five interested parties (FIPs - EU, US, Australia, India, Brazil) Quad (EU, US, Japan, Canada) Quad (EU, US, Japan, Canada) New Quad (EU, US, India, Brazil) New Quad (EU, US, India, Brazil) Cairns group Cairns group G10 G10 G20 (Brazil, India, China – marriage of convenience) G20 (Brazil, India, China – marriage of convenience) G33 – one issue: special products and SSM G33 – one issue: special products and SSM G77/90 – Africa + LDCs - defensive G77/90 – Africa + LDCs - defensive Who else is driving negotiations? (NGOs, multinationals…) Who else is driving negotiations? (NGOs, multinationals…) Parliamentarians??? Parliamentarians???

15 Cairns Group Argentina* Australia Bolivia* Brazil* Canada Chile Colombia* Costa Rica* Guatemala* Indonesia* Malaysia New Zealand Paraguay* Philippines* South Africa* Thailand* Uruguay *These countries have overlapping memberships with the G- 20 G-20 (G-21) Argentina Bolivia Brazil Chile China Colombia* Costa Rica* Cuba Ecuador* Egypt El Salvador* Guatemala* India Indonesia Mexico Nigeria Pakistan Paraguay Peru* Philippines South Africa Thailand Tanzania Venezuela Zimbabwe *These members have left the G-20 since its formation, due to the CAFTA negotiations with the US. EU Members Austria Cyprus Czech Republic Belgium Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxemburg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden United Kingdom G-33 Antigua and Barbuda Barbados Belize Botswana Cuba Dominican Republic Grenada Guyana Haiti Honduras Indonesia Jamaica Kenya Mauritius Mongolia Nicaragua Nigeria Pakistan Panama Peru the Philippines Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Suriname Tanzania Trinidad and Tobago Turkey Uganda Venezuela Zambia Zimbabwe (China*) (India*) *These countries (formal G-20 members) are actively participating in G-33 meetings and support the Group in the negotiations. Recently Acceded Members Albania China Croatia Georgia Jordan Moldova Nepal Oman G-10 (Bulgaria) Chinese Taipei Iceland Israel Japan Korea Lichtenstein Mauritius Norway Switzerland G-90 (AU/ACP/LDC) This is a combination of the 54 African Union countries, 77 African, Caribbean and Pacific (ACP) countries and 49 least-developed countries (LDCs), which are Members of the WTO

16 GroupCountries Agriculture Industrial Goods Services SubsidiesAccess United States European Union Free traders (Cairns) Australia, New Zealand, Chile Ag resistant countries G10: Japan, Korea, Taiwan, Switz, Norw G-20 main players Brazil, Argentina, Thailand China India Developing: SP, preference erosion G-90 and G-33 Developing: net food importers LDCs and others Doha Interest Groups = Offensive position= Defensive position

17 The EU Agenda I Starting off with a broad post-modern agenda Starting off with a broad post-modern agenda (Seattle to Doha, Singapore issues) Defensive interests: Defensive interests: Agriculture: CAP Goods: footwear, textiles and clothing Services: transport, audiovisual, education, healthcare Offensive: services & goods Offensive: services & goods (professional services, e-commerce, etc)

18 The EU Agenda II Trade facilitation (other 3 Singapore issues dropped) Trade facilitation (other 3 Singapore issues dropped) Trade and the environment + core labour standards controversial Trade and the environment + core labour standards controversial Development: global EBA, openness to S&D, phasing out export subsidies Development: global EBA, openness to S&D, phasing out export subsidies Challenge: preference erosion (ACP) Challenge: preference erosion (ACP) Agriculture is the sticking point – locking in 2003 CAP reform Agriculture is the sticking point – locking in 2003 CAP reform Policy linkages: CAP, budget, development Policy linkages: CAP, budget, development Three-level game Three-level game

19 Agriculture I July framework: July framework: market access: substantial tariff reductions market access: substantial tariff reductions exports subsidies: reductions of, with a view to phasing out, all forms of these (in the 1 August 2004 framework members agreed to eliminate export subsidies by a date to be negotiated) exports subsidies: reductions of, with a view to phasing out, all forms of these (in the 1 August 2004 framework members agreed to eliminate export subsidies by a date to be negotiated) domestic support: substantial reductions for supports that distort trade (in the 1 August 2004 framework, developed countries pledged to slash trade-distorting domestic subsidies by 20% from the first day any Doha Agenda agreement is implemented. domestic support: substantial reductions for supports that distort trade (in the 1 August 2004 framework, developed countries pledged to slash trade-distorting domestic subsidies by 20% from the first day any Doha Agenda agreement is implemented.

20 Protection is Still High and Mostly at the Border Source: OECD

21 Tariff Peaks Are Very High Source: WTO IDB (MFN Applied Duties)

22 Tariffs Escalate in Final Products Source: WTO IDB (MFN Applied Duties)

23 Agriculture: Three Pillars 2. Direct Export Subsidies EU (over $2 billion a year) 1.Market Access Average WTO Allowed Ag Tariff 3. Domestic Support – amber box: WTO allowed (gold) and Projected (yellow) 2005 Aggregate Measurement of Support (AMS) Levels. Billion $ at current x rates Other United States Switzerland Norway

24 Agriculture: Proposals for market access Market Access: Average WTO Allowed Ag Tariff (1% sensitive products) (8% sensitive products) (Based on WTO AVEs)

25 Domestic subsidies EU offer: 70 percent reduction in trade- distorting subsidies (conditional, US wants 83 percent) EU offer: 70 percent reduction in trade- distorting subsidies (conditional, US wants 83 percent)

26 Non-agricultural market access (NAMA) Z= AX/(A+X) Z= AX/(A+X) The magic harmonising Swiss formula – different from Uruguay! X= old tariff A= coefficient Z=new tariff Debate is about the coefficient + smaller coefficient for developing countries (2/3 of developed country commitments)

27 Services I GATS flexible offer-request process GATS flexible offer-request process The 4 modes of supply : The 4 modes of supply : 1. cross-border (trade that takes place from the territory of one country into another, e.g. e-commerce or telecoms) 2. consumption abroad (consumption of services in another country e.g. tourism) 3. commercial presence (establishment of a firm from one country in the territory of another – particularly important for financial services and professional services) 4. movement of natural persons (the ability for nationals to work overseas for a temporary period to provide services, which is not a synonym for cross-border labour movement in general

28 Services II Significant gains possible from services liberalisation Significant gains possible from services liberalisation No progress so far No progress so far EU proposed benchmarks: EU proposed benchmarks: –Voluntary commitments according to certain criteria –Smaller commitment from DCs –Not forced liberalisation or privatisation Resentment from DCs and NGOs Resentment from DCs and NGOs

29 The EU position before HK Agri tariff cuts between 35% to 60% Agri tariff cuts between 35% to 60% Sensitive products (6-8% off tariff lines), cap of 100% for developed and 150% for developing countries Sensitive products (6-8% off tariff lines), cap of 100% for developed and 150% for developing countries Reduction of trade-distorting subsidies (up to 70 percent) Reduction of trade-distorting subsidies (up to 70 percent) Export subsidies: phasing out + full parallelism: US to get rid of export credits, commercial food aid, etc Export subsidies: phasing out + full parallelism: US to get rid of export credits, commercial food aid, etc Ambitious tariff reduction in NAMA Ambitious tariff reduction in NAMA Services: benchmarks – less flexible? Services: benchmarks – less flexible? Development package Development package –Global EBA –Special and differential treatment (flexibilities) –TRIPs – better access to drugs –Cotton –Aid for trade

30 Key Elements of U.S. Proposal Stage 1 (5-year implementation): Stage 1 (5-year implementation): –Substantial reductions in trade-distorting domestic support (Amber Box: 60 percent cut for U.S., 83% cut for EU and Japan) –Substantial reductions in tariffs, with deeper cuts for higher tariffs Developed countries: tariff cap and cuts ranging from 55% to 90% Developed countries: tariff cap and cuts ranging from 55% to 90% Developing countries: slightly lesser cuts, focus on emerging markets Developing countries: slightly lesser cuts, focus on emerging markets –Limits the number of sensitive products eligible for smaller tariff cut to only 1% of total tariff lines, and ensures meaningful access through large quotas. –Total Elimination of export subsidies by 2010 Stage 2 (5 years after Stage 1 implemented): Stage 2 (5 years after Stage 1 implemented): –Phase out remaining tariffs and trade-distorting support measures over 5 years

31 Development??? Market access and rebalancing rules on domestic and export support; Market access and rebalancing rules on domestic and export support; The recognition, "operalisation" and implementation of special and differential treatment (S&D) and flexibilities for developing countries (e.g. separate treatment of cotton, a development box in agriculture); The recognition, "operalisation" and implementation of special and differential treatment (S&D) and flexibilities for developing countries (e.g. separate treatment of cotton, a development box in agriculture); Mainstreaming the development dimension into a wider range of policies that are not "classical trade instruments" but are covered by one of the 23 WTO agreements or could be added to the WTO agenda (TRIPs, TRIMs, Singapore issues, standards, social and environmental requirements). Mainstreaming the development dimension into a wider range of policies that are not "classical trade instruments" but are covered by one of the 23 WTO agreements or could be added to the WTO agenda (TRIPs, TRIMs, Singapore issues, standards, social and environmental requirements). EU: Round for free + global Everything But Arms? EU: Round for free + global Everything But Arms?

32 Development II – demands from DCs lesser and lower obligations for developing countries (asymmetric tariff cuts, exemptions for special and sensitive products and unbound tariffs); lesser and lower obligations for developing countries (asymmetric tariff cuts, exemptions for special and sensitive products and unbound tariffs); longer implementation periods; longer implementation periods; subsidies allowed on non-trade concerns (vulnerability, food security and environmental issues); subsidies allowed on non-trade concerns (vulnerability, food security and environmental issues); a definition of "small and vulnerable economies"; a definition of "small and vulnerable economies"; special treatment for single commodity producers; special treatment for single commodity producers; trade facilitation and technical help; trade facilitation and technical help; support measures for implementation; support measures for implementation; a ban on certain trade defence measures applied by developed countries with regards to specific countries and/or product categories; a ban on certain trade defence measures applied by developed countries with regards to specific countries and/or product categories; special safeguard possibilities for developing countries under certain conditions special safeguard possibilities for developing countries under certain conditions

33 The EP and Hong Kong 4 th Parliamentary Conference on the WTO – IPU + EP 4 th Parliamentary Conference on the WTO – IPU + EP 30 MEPs 30 MEPs Meetings with senior representatives Meetings with senior representatives Two main topics: Two main topics: –Concluding the round –International coherence


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