Peter Mandelson
No. 84/05
October 11, 2005
WTO
Doha Round: Statement by EU Trade Commissioner
Peter Mandelson has set out the EU’s conditional
negotiating proposals in the
Doha Development Round in a
statement circulated to Ministers at the Informal
Ministerial in Zurich on October 10, 2005.
Trade Commissioner Mandelson argues:
“If we do not advance
this negotiation in concrete terms this week - and amongst
ourselves today - we will have to acknowledge that we may
simply run out of time for Hong Kong...the emphasis must
be on the offers, rather than the conditionality we attach
to them. They have to be real offers providing forward
movement.”
The proposals made in Zurich are entirely contingent on
satisfactory reciprocal gestures from other parties. This
version of the text has been annotated to explain
technical detail.
The EU’s key proposals:
- On domestic support in
agriculture: ambitious
cuts in trade-distorting forms of agricultural support – a
70% cut in the EU’s Aggregated Measurement of Support (AMS).
An additional 65% reduction – at least - in agreed maximum
levels of trade-distorting "de minimus" support and
possible reductions in maximum agreed levels of partially
distorting "Blue Box" payments. This would, in effect,
bind in Geneva internal reform already undertaken as part
of the current
CAP
[EU Common Agricultural Policy] reform. Other subsidizers would make
lower but proportional cuts.
- On market access in agriculture: four tariff
bands, with higher cuts for higher tariffs. Some limited
flexibility around a linear cut in some bands. Highest
band: tariffs over 90%; these would be cut by at least
50%.
- A maximum agricultural tariff for developed
countries as proposed by the G20, at a level “that will
create a severe constraint for all developed countries.”
- Minimum recourse to sensitive agricultural products
and an explicit willingness to provide higher tariff rate
quotas for sensitive products whose tariff cuts fall below
the average cut for their band.
- On export competition in agriculture: a
reiterated offer to end all export subsidies, with an end
date and "frontloaded" timetable agreed at Hong Kong.
- On NAMA [Non-Agricultural Market Access]: a 10% maximum tariff for
developed countries, achieved through harmonized cuts by
Swiss Formula. No obligatory cuts for Least Developed
Countries and “less than full reciprocity” for some
developing countries. The EU recalled that if there is not
a satisfactory outcome on NAMA, “there will be no outcome
on agriculture or other parts of our negotiation.”
- On Services: the use of multilateral formulae,
different for developed and developing countries, that
will set a minimum number of service sectors to be
covered. The production of "benchmark" sectoral models to
illustrate possible ambitious outcomes.
- On Development: the extension by all
developed countries to Least Developed Countries of
trading terms equivalent to those offered by the EU’s
Everything But Arms (EBA) system; this to be agreed at
Hong Kong.
- A “Round for Free” for Least Developed Countries: no obligatory tariff cuts. Some flexibility for other
developing countries – but the expectation of ambition
from advanced developing countries.
[Commissioner Mandelson continued:]
“I intend today to set out the EU’s current negotiating
proposals and positions in all the key areas of the Round
– agriculture, NAMA and services. The time has come for
all of us to put cards on the table; to stop the bidding
and to start to play the hand. If we do not advance this
negotiation in concrete terms this week - and amongst
ourselves today - we will have to acknowledge that we may
simply run out of time for Hong Kong. That is not where I
want to be. Within the limits of our mandate, the EU will
make moves to prevent it if others do likewise.
"Hong Kong matters. It is not the end of the process: but
it is a vital staging post. My ambition is to make
sufficient progress there to allow us to finish the round
in 2006. That essentially means agreeing modalities in all
areas of negotiation.
Agriculture
"I recognize that agriculture is the engine for an
ambitious and balanced result at Hong Kong. That is why I
have been prepared to focus more closely on agriculture
than on other issues in recent weeks. That certainly does
not mean that the other issues are less important, or that
the EU will agree to unbalanced final outcomes.
"In agriculture first, and then immediately in the other
areas of negotiation, I suggest that we now all make a
series of conditional offers, including figures.
"The emphasis must be on the offers, rather than the
conditionality we attach to them. They have to be real
offers providing forward movement.
"Our own proposals on the three pillars will remain on the
table as long as they are joined by others’ proposals and
do not sit there alone. I will give an overview, and
[EU
Agriculture & Rural Development Commissioner]
Mariann
[Fischer Boel] will flesh out on agriculture.
Domestic support
"Because we are ambitious we propose to make substantial
cuts in total and AMS support in this Round. The current
CAP reform that is now coming into effect allows this. We
are not dependent on further CAP reform to discharge our
DDA obligations.
"To be precise, we are ready to reduce our AMS by some 70%
assuming that the other major subsidizers commit
themselves to proportionate, but not equal, reductions and
introduce disciplines that lead to clear reforms as
envisaged in paragraph 14 of the framework. We are
prepared to go into the top band of reductions and to do
more than others. We accept the principle of progressive
harmonization of the levels of support of the main
players. But, I stress, there must be proportionality. If
we are to end up with a high degree of ambition we need
others, not just the United States but also Japan, Canada,
Korea, Switzerland and Norway for example, to come with us
along the way.
"What does this mean?
"The agriculture negotiations are divided into three
‘pillars’: domestic support, export competition and market
access. The EU is proposing to reduce its aggregate
measure of trade distorting support by 70% contingent on
proportionate reductions from other major subsidizers like
the US and Japan. Because the existing CAP reform has
already moved 90% of EU payments into the non-trade
distorting ‘Green Box’ the EU is able to offer to bind
reductions on this scale through the WTO. The EU is
proposing to divide agricultural subsidizers into three
bands. In the top band is the EU, with other subsidizers
below. The top band, in which the EU would be situated,
would lock in the highest aggregate cuts (70%), with a
reduced cut for the second band and a further reduced cut
for the third band.
"We also propose a very substantial reduction in the de
minimis category of subsidy, of at least 65% and
potentially much more if others do the same.
What does this mean?
"All WTO members are permitted to provide minimal supports
totaling no more than 5% of agricultural production for
developed countries. The EU is proposing to reduce this
allowance by at least 65%.
"On the Blue Box, the ceiling agreed in July 2004, which
remains at this stage, is 5%. This requires a significant
reduction of EU blue box use. Our negotiating flexibility
on that ceiling is limited, but I can confirm that there
is some room. We can offer a commitment to negotiate on
product specific caps.
"What does this mean?
"In the WTO agricultural rules an additional ‘Blue Box’
exists for classifying subsidies. A Blue Box subsidy is a
payment that would usually qualify as Amber Box which is
paid in a way that discourages overproduction or is
explicitly limited in time or scale. Under the July
Agreement Framework these payments will be capped as 5% of
a state’s total agricultural production. The EU is
signaling that it is willing to reduce existing payments
to this level and may be able to show further flexibility.
It has however also called for clearer definitions of what
constitutes a Blue Box support.
Market access
"On market access the Framework contains a checklist of
what has to be done by developed countries. A protracted
process has taken place on the AVE conversion, and it is
clear that a lot of complex technical and negotiating work
on the modalities remains to be done. We must now do it.
"Before the summer, Mariann [Fischer Boel] announced that
the EU would move from a Uruguay Round approach as the
basis for the overall tariff reduction formula. This
unlocked the negotiation on the structure of the formula.
The EU has accepted the G20’s linear approach to tariff
cuts, provided that this includes some defined and limited
degree of flexibility.
"What does this mean?
"The Uruguay Round reduced agricultural tariffs through a
linear cut – all tariffs were reduced by a single
percentage regardless of their initial level. This results
in reduced tariffs, but it preserves the ‘tariff
landscape’ by reducing high and low tariffs by the same
amount. The G20 proposal suggested a non-linear band
system for overall cuts with a linear cut in each band –
for developed countries five bands, with a reducing linear
cut (ie 60%, 50%, 40%) in descending bands. The EU has
proposed to accept this approach so long as a limited
degree of flexibility can be agreed around the linear cut
in each band. This ‘pivot’ would be minimal and subject to
important restrictions – see below.
"In respect of the actual size of the tariff cuts in the
formula, if we had four bands, including a top band
starting at tariff levels of 90%, we could envisage either
a cut of 60% in the top band, with a limited variation on
either side, or a straight linear cut of 50%. Until there
is agreement among us on this formula, it is difficult for
us to go beyond this kind of exploration and make any
firmer offer. But that is where we want to go.
"What does this mean?
"Based on a G20 ‘non-linear bands with linear cuts’
structure, the EU is proposing four bands for developed
countries in which the top band would contain all tariffs
higher than 90%. The EU is proposing that this band be
subject to either a 60% cut with limited flexibility in
either direction or a straight 50% cut.
"We are also ready to accept a tariff cap that will create
a severe constraint for all developed countries
"What does this mean?
"The G20 proposal suggests a cap of 100% for all
agricultural tariffs for developed countries (and a cap of
150% for developing countries). The EU is willing to
accept a tariff cap 'that will create a severe constraint
for all developed countries.'
"We are ready to explore ways to set clear limits on
flexibility around the central cut. For example we could
limit the permitted upward variation, so as to prevent a
below formula cut in one or several lines being offset by
'piling' the shortfall all into a disproportionate cut in
another single line. Or we could limit recourse to
flexibility around the linear cut to a limited number of
tariff lines. Or we could forego the right to flexibility
completely in certain bands. We stand ready to discuss
these and other options in order to meet the concern of
partners to understand the limits and implications of
flexibility.
"What does this mean?
"WTO members are permitted by the July Framework to
nominate an ‘appropriate’ number – to be negotiated – of
sensitive products that will be subject to reduced of
special cuts. The EU is recalling that countries are
permitted to nominate their own sensitive products but
that the total number is open for negotiation. The EU is
signaling that the greater the flexibility given in linear
tariff cuts in each band, the fewer total number of
sensitive products it would seek. However the EU is
signaling that it is willing to apply very clear limits to
its use of flexibility – limiting upward variations from
tariff cuts, forgoing flexibility in some bands, or
limiting flexibility to certain tariff lines.
"The Commission has developed a set of scenarios to
illustrate the implications for the identification of
sensitive products of different degrees of flexibility
around a central cut.
"The Framework makes clear that sensitive products will be
selected by WTO members themselves. But we accept that the
number of them is for negotiation.
"We also - very importantly - need to tackle the question
of how we intend actually to treat sensitive products -
through tariff reductions and Tariff Rate Quotas (TRQ)
which secure market access in these products. In this, we
fully understand that sufficient comfort has to be given
to exporters that there will be substantially improved
market access in the tariff lines where the real trade is
taking place.
"Our starting proposal is to link the tariff cut for
sensitive products to the agreed average reduction in the
tariff-level band in which the sensitive product lies. We
accept that the more the cut for a sensitive product falls
short of the average agreed cut, the larger the expansion
of the TRQ must be. This EU approach ensures real,
substantial market access.
"What does this mean?
"Sensitive products are subject to Tariff Rate Quotas – so
that a defined quota of the import in question enters at a
certain rate and all imports above that level at a new
higher tariff rate. The EU is signaling that it recognizes
that there will need to be a trade off between the level
of cut applied to sensitive products and the level of
tariff rate quota applied to that product – if the cut for
a sensitive product is less than the average for that
product’s band, the tariff rate quota for that product
should rise. The EU is stating clearly that it will
balance recourse to sensitive product categories against
new, real market access.
"What we are prepared to do to improve access to our
markets for others is of course linked to the satisfaction
of our own exporting interests, including in agriculture.
This is why we consider that substantial results are
necessary in the area of Geographical Indications (GIs),
in order to provide some of our exporters with a more
certain legal environment to market their products
globally.
"We wish to engage in intensive negotiations now on the
Register, and to have a firm agreement in Hong Kong to
start negotiations immediately on the extension of the
register. We are prepared to show flexibility in some of
our initial demands in this area, but we will only do this
when the negotiating process justifies it.
Export competition
"Here, the situation is somewhat simpler. The EU has made
firm commitments in 2004 to the elimination of export
subsidies, and to finding an agreed date for this. We
stand by that commitment.
"However, the elimination of our export subsidies must be
matched by the removal of other trade-distorting practices
in export competition, which are less easily quantifiable.
Movement on both State Trading enterprises and Food Aid is
urgently needed. We look to Canada, Australia, New Zealand
and the US to negotiate the necessary action. I would like
to be able to resolve this issue - and set a date - at
Hong Kong. But let us also remember that the end date is
not the whole story. We are ready to negotiate and agree a
phased and ambitious timetable for the elimination of
export supports.
"What does this mean?
"The EU is reiterates its commitment to end all export
subsidies and to negotiate both a final phase out date and
a phase out schedule for export subsidies. The EU is
reinforcing that by ‘frontloading’ the final timetable,
some eliminations could happen soon after the signing of a
final agreement. The EU is demanding that its own move be
matched by the removal of other forms of export subsidy by
the US, Canada, Australia and New Zealand.
"We need, in a short space of time, to set the agreed
parameters and to go deeper into the numbers. The EU is
ready to have these discussions at once. I hope others
will come to the table. And I hope Pascal will guide us
towards rapid progress.
"The time has come to make equally clear offers in other
parts of the negotiation. When the crunch comes, the EU’s
negotiating flexibility in agriculture will be heavily
influenced by how ambitious all WTO members are on NAMA
and services. And there will certainly be no deal on
agriculture unless and until there is a balanced outcome
across the board. We all need wins in this negotiation –
and that, after all, is what multilateral trade
negotiations are all about.
NAMA
"In NAMA, we seek – and indeed we all need – to achieve an
understanding on full modalities for market opening in Hon
Kong.
"This requires a package to be in place by the end of this
month covering the formula to govern tariff reductions,
the flexibilities associated with this formula, and the
treatment of unbound tariffs.
"The modalities must result in both real market access and
predictability for economic operators in all parts of the
world. This means that the modalities for tariff reduction
must cut into the applied rates of most WTO members, and
that we should increase substantially the level of binding
of our tariffs where they are not bound.
"To this end, the EU proposes to accept a maximum level for
our own industrial tariffs of 10%, after the application
of a Swiss formula, provided that this also applies to all
developed countries. It remains our position that Least
Developed Countries, and the countries covered in
Paragraph 6 of the July 2004 framework text, will not be
subject to the application of the formula.
"What does this mean?
"The EU would seek to cap industrial tariffs at 10% using a
Swiss Formula (it is called a Swiss Formula because it was
proposed by Switzerland during the Tokyo Round). The Swiss
formula is:
Z = AX/(A+X)
"X is the initial tariff rate; A is the maximum final
tariff rate and the coefficient which is agreed to
represent the level of cuts; Z is the final tariff rate
that results. So a coefficient of 30 (representing a final
maximum tariff of 30%) applied to an initial tariff of
100% produces a final tariff of about 23%. The same cut
applied to an initial tariff of 15% produces a final
tariff of 10%. The party with the higher initial tariff
has made cuts of about 77%, the party with the lower
tariff has made cuts of about 33% The final cut determined
by a Swiss Formula can be applied over a number of years.
"We also propose to implement the principle of less than
full reciprocity to the other developing countries. But
most of them should be obliged by the formula to cut into
their applied duties as well, so as to create new market
access opportunities, including for weaker developing
countries. This South-South opening is a vitally important
aspect of the development agenda for the Round. We
consider that setting a maximum tariff level of 15% for
this group of developing countries who can afford to offer
greater market access should deliver this objective.
"As we have agreed, the application of the formula would
start from bound tariffs. On the treatment of unbound
tariffs, we favor an approach which would give an
“advantage” to the lowest applied unbound duties rather
than to the highest. This would be more equitable, in the
sense that it would take into account the unilateral
efforts made by certain Members, as well as the
divergences in tariff structures.
"On the question of what degree of flexibility should be
permitted in the application of the formula, the EU cannot
accept a coefficient that would cut only a few applied
duties, and for these cuts then to be excluded through
recourse to 'flexibilities.' The result of this would be
paper cuts only for nearly all developing countries,
including those that have now become very competitive.
This is not an outcome I could or would wish to sell as a
success. If this is the maximum level of ambition partners
can muster on NAMA, let me be crystal clear – there will
be no outcome on agriculture or other parts of our
negotiation.
Services
"In the area of services, the aim of the EU is to agree at
Hong Kong to modalities that will impose a clear level of
ambition for these negotiations, and for the new market
access to be delivered as a result of the Round. Our
meeting today should specifically instruct the negotiators
of the countries present here to start immediately to
develop language for the Hong Kong declaration which will
have that effect, and to carry this forward to the
discussions in Geneva later this week.
"The modalities must set a level of ambition that is high
enough to match the levels of ambition we set in
Agriculture and NAMA. I cannot accept that services should
be a Cinderella. If we cannot show ambition we will not be
able to have a balanced overall DDA package that will be
acceptable to the EU. That said, we recognize that the
Hong Kong package will have to contain flexibilities to
enable some Developing Countries to be able to
participate.
"The modalities to be agreed at Hong Kong should include at
least four elements.
A multilateral formula for commitments by WTO members
"This formula should be based on a mandatory numerical
target for the number of services sectors in which each
WTO Member would be required to make offers. Without such
a target, the multilateral formula would bring no
added-value and would fall short of the ambition we are
seeking and the approach we are following in Agriculture
and NAMA.
"What does this mean?
"The current services negotiations are based on a
request-offer system in which each member tables a request
from other members and a parallel offer of what it is
willing to provide. Because of a disappointing level of
ambition under this system it is now proposed to establish
certain minimum numbers of sectors to be covered – and to
produce ‘model schedules’ in certain sectors that will
provide ambitious benchmarks for members to aim for.
"In order to make the multilateral numerical target
acceptable to all, we propose:
(1) To set bands for the number of sectors to be addressed
by developed and developing countries. These bands would
differ, thereby offering flexibility reflecting the level
of development of WTO members.
(2) To accept both new commitments in sectors not yet
committed, as well as improved commitments in sectors
where partial commitments have already been made.
(3) To provide guidance on, rather than set a mandatory
link with, the 4 different modes of supply.
Agreeing to the principle of sectoral model schedules –
the plurilateral approach
"We propose to produce benchmarks to guide the level of
commitments in sectors of interest to Members. These
benchmarks could take the form of 'model schedules' (ready
to use). They would be more ambitious than the
multilateral formula, and would include flexibilities for
Developing Countries. We propose that work should proceed
on those sectors where a critical mass of Members indicate
an interest, rather than predetermining a list of sectors.
Setting dates for new revised offers and final offers
"In Hong Kong, clear and firm dates should be fixed during
the first four months of 2006 for the presentation of
revised services offers reflecting both multilateral
targets set for coverage , and, where relevant, the
sectoral model schedules.
Agreeing on targets for negotiations on “rules”
"We may also want to discuss realistic targets for
negotiations on 'rules' in the services area (Government
procurement, emergency safeguards, subsidies). In the view
of the EU progress to date is not sufficient to enable
significant decisions at Hong Kong going beyond a simple
decision to pursue negotiations on the basis of existing
proposals for these three areas. Negotiations are also
needed on domestic regulations (license and qualification
procedures and requirements + technical standards), where
the Ministerial Declaration could set out elements to be
addressed.
Rules
Antidumping
"Antidumping is an important aspect of market access.
"The objective of the DDA negotiations in this area must be
to ensure that reductions in tariffs are not frustrated by
inappropriate recourse to antidumping, and to ensure that
antidumping duties do not remain in force longer than is
justified. Similarly, we cannot accept that costs for
exporters to co-operate are prohibitive, or that national
authorities hide behind confidentiality requirements to
escape transparency in the way they use trade defense
instruments. We all share an interest in tackling these
issues. There is no clear distinction between the users
and the targets of antidumping measures.
"Our specific goals for Hong Kong should be to agree on the
most important problems to be addressed and on broad
guidelines for how we intend to treat them.
"The EU has circulated its list of priorities and possible
solutions, covering the prevention of improper use of
antidumping measures; the avoidance of excessive duties;
transparency; cost saving and the prevention of
circumvention. It is essential that we move forward now on
all these fronts.
Trade Facilitation
"In trade facilitation, the objective for Hong Kong should
be to provide a political endorsement of the main future
commitments in a multilateral agreement, to allow us to
turn this into a legal text in 2006.
"We are determined to build on progress in this area –
which is of critical importance for development – by
working between now and Hong Kong both on the
identification of the rules to be improved through a
future agreement and on addressing technical assistance
and special and differential treatment as part of this
agreement.
Development
"This Round is the Doha Development Round. The EU is very
conscious of the obligations this places upon us. We
cannot come out of Hong Kong without clear proposals on
development outcomes that go beyond the better access to
markets that developing countries will get as a result of
the DDA’s core agenda. Although that market access, both
to the developed economies and to the stronger developing
economies, is essential for development, we must also make
progress on a number of other issues which are of
particular importance to the Least Developed Countries (LDCs)
and small economies, but to varying degrees matter also to
other developing countries.
"First, duty free/quota free market access. We propose that
all developed country WTO Members should agree in Hong
Kong on a clear-cut, concrete commitment to grant duty
free quota free access to LDC products. This would be
delivered as part of the final DDA undertaking. There are
a number of reasons why we should make this commitment. It
provides an essential part of the response to the erosion
of these countries’ present preferential access to some of
our markets. It has virtually no economic cost to
developed countries. There is no defensible reason for mot
now moving on this.
"Where major developing countries are also in a position to
do so, they should make a similar commitment. The level of
access may be more limited, and the timeframe for
implementation longer, But such a gesture of solidarity
between developing countries would have great impact. We
hope that a number of developing countries will make a
firm political commitment at the Hong Kong Ministerial to
take steps in this direction. They would then have until
the end of the DDA to find the right formula to translate
their political commitment into real market access for
LDCs.
"What does this mean?
"The EU’s Everything but Arms system extends tariff and
quota free access to all imports (except weapons) from
Least Developed Countries. At Cancun all other developed
countries undertook to extend similar access – the EU is
calling for delivery.
"Second, LDCs should not be asked to open their markets in
the current negotiations. We adhere to the principle of
the Round for Free. But within the wider group of
developing countries, there are many countries who may
also have particular problems with opening their markets
too rapidly. In this we must be fair. Developing countries
should be allowed to reflect their specific sensitivities
in the speed and degree to which they open their markets.
In arguing this, I recognize that we would be drawing
distinctions between developing countries. But the problem
is that, if we don’t make some differentiation, we risk
being faced either with an overall outcome that is not
ambitious enough, or with an outcome that the poorer
developing countries cannot in fairness live with.
"What does this mean?
"The EU is reiterating its support for a 'Round for Free'
for Least Developed Countries – asymmetrical tariffs cuts
from developed countries without a reciprocal requirement
for LDCs. The EU is also proposing to extend some
flexibility to non-LDC developing countries but argues
that there are important differences in capabilities among
developing countries.
"Third, Special and Differential Treatment and
implementation of Uruguay Round commitments. The time has
come for all of us definitively to agree to the 28 Cancun
proposals. There are 5 LDC proposals, including one on
duty-free/quota-free access, where intensive work in
Geneva before the summer narrowed differences
considerably. We should renew our efforts to ensure that
they are agreed at, and preferably before, Hong Kong. We
should also all be prepared to discuss other outstanding
proposals.
"Fourth, addressing preference erosion: there are a number
of vulnerable countries with real concerns in this area.
There is no single key for addressing preference erosion,
and we cannot solve this issue in the WTO alone. But there
are responses. Some are trade policy measures, such as
opening up South/South trade, creating duty/quota free
access, and longer transitional periods for particularly
affected products. Others are supply side measures, such
as substantial support for capacity building,
restructuring, diversification and regional integration.
We need to use all these instruments and structures,
including mobilizing other multilateral agencies, to
provide adequate expert advice and financial support.
"Finally, Trade Related Assistance. The developed
countries, together with the multilateral agencies (the
World Bank, IMF, etc.) must put together a strong
aid-for-trade package for Hong Kong, along the lines of
what was agreed at the Gleneagles G8 summit. The EU
proposes that, at Hong Kong, Ministers should announce
that they support the joint recommendation of the IMF/World
Bank Trade Progress Report to enhance the Integrated
Framework and give the green light to start building up
this program to be in place no later than 1 January 2007.
This is a concrete commitment we should all sign up to.
I have circulated these proposals in writing to the
ministers present today."
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