RNM UPDATE 0401

January 20 , 2004

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this electronic newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

Special Issue: WTO/FTAA Negotiations: Year in Review, and a Prospective Look at 2004

Edición Especial: Negociaciones de la OMC/ALCA: Revisión del Año, y Una Mirada Anticipada al 2004

-  NEWS BRIEFS / NOTICIAS

-  UPCOMING EVENTS / CALENDARIO

2003 was a challenging one, with crucial turning points in both multilateral and Western Hemisphere trade negotiating theatres.  In this regard, this ‘Special Issue' examines the past year and the year ahead, with a view to bringing into focus key developments and issue...

2003 fue un año desafiador, con momentos cruciales en los foros de negociaciones comerciales del hemisferio occidental y multilateral. En este respecto, esta ‘Edición Especial' examina el ultimo año y el año próximo, con el objeto de enfocar progresos claves y temas…

External Trade Negotiations marked by Uncertainty

( Negociaciones de Comercio Exterior Marcadas por Incertidumbre )

2003 was the World Trade Organization's (WTO) year.  Regrettably, it commanded the spotlight for all the wrong reasons. It was the multilateral theatre of negotiations that suffered the most severe and debilitating blow. It has yet to fully recover from the aftershocks of a failed key WTO Ministerial.

There were a preponderance of setbacks, in 2003.  Multilateral trade negotiations were portentous, in large measure, because of disparate ‘expectations', and competing ‘visions'/‘goals' for the Doha Round. Flexibility and dialogue, in 2004, are crucial in order to achieve a positive balance. The road ahead is an uncertain one. 

In recent months the Western Hemisphere free-trade pact – the Free Trade Area of the Americas (FTAA) - has met with impasse, which subsequently prompted a technical and political review of the process.  Progress in the aftermath of the Seventh Ministerial meeting, convened November 2002, had been affected by a number of technical difficulties arising from negotiations.  The main issue of contention, which has not been assuaged, is the treatment of agricultural subsidies – in particular domestic supports and export credits in the hemisphere.   Fundamental differences, in FTAA negotiations, also exist over the scope of application of negotiations in other areas, such as Services, Investment, and Subsidies and Antidumping.  With just over twelve months before the scheduled end of negotiations, January 2005, this has left the text of the draft FTAA pact subject to disagreement.  

Contemplating New Issues and Repairing Relations

( Contemplando Nuevos Temas y Reparando Relaciones )

Multilateral trade negotiations seized, in late 2003.  There were calls for sweeping changes to decision-making procedures in the WTO.  Architectural/governance-related issues have surfaced.  Hitherto, these are uncharted waters for the organization's membership.  The main protagonists are set on capitalizing on calls for reforms to the WTO's consensus building approach. 

Reconciliation amongst Members has been slow in coming after the collapse of a crucial WTO Ministerial, in September 2003.   In certain cases, relations are still not propitiated. 

At Issue: Midway WTO Meet Fails

( El Tema Central: La Reunión de la OMC a Mitad del Camino Falla )

Anemic for months, global trade talks came to a stand-still in September, at the Fifth WTO Ministerial Conference in Cancún, Mexico.  The Ministerial achieved no consensus on any items on its agenda.  It met with failure.  The formal outcome of the meeting was a short communiqué.  It instructed Members to continue working at the technical level, in Geneva, and convene a General Council meeting, by December 15.

Explanation of the collapse of the Cancún summit cannot be divorced from sluggish negotiations, in Geneva, in the lead-up to the Ministerial.  The collapse, however, was also precipitated by attempts by developed countries - at the Ministerial - to ‘steam-roll' their agenda.

The Ministerial's success, though, and the fate of the Round's agenda were under question well before that meeting got underway.  The Doha Round was launched in November 2001, at the conclusion of the Fourth WTO Ministerial Conference, in the Gulf nation of Qatar, with an ambitious three-year timetable.  The “Doha Development Agenda” – the elements of which have been under negotiation and study since 2001 - was initially shrouded in ‘great' expectation.  It was also tainted from the start.  A promise to address agricultural protectionism, by developed countries, was a primary convincing factor in the Round's launch.  However, this came at a price.  The agenda was subsequently cluttered with contentious issues, for which developed countries were the principal demandeurs .  Top on the list, the so-called “Singapore Issues” (i.e. Investment and Competition rules, Trade Facilitation and transparency in Government Procurement) .  Agriculture's addition to the agenda was a pyrrhic victory for developing countries.

The Doha Agenda promised to place the ‘needs' and ‘interests' of developing countries at the core of the Doha Work Programme.  For much of 2003, however, negotiations in Geneva were grid-locked, in areas of critical importance to developing countries.  Key intermediate negotiating deadlines that were missed, included, inter alia: Trade related aspects of intellectual property (TRIPS)/Public Health; Special and Differential Treatment (S&DT); Agriculture; Services; cuts to tariffs on industrial goods; and, reforming the WTO's dispute settlement system.  TRIPS/Public Health, the so-called “Singapore Issues”, and Agriculture were the source of much acrimony amongst WTO Members.

WTO Talks Undercut by ‘Agriculture'

( Negociaciones en la OMC Interrumpidas por ‘Agricultura' )

The content of the Doha Agenda contributed to the collapse at Cancún.  Amongst its more far reaching objectives was cutting away at agricultural subsidies.  It is an especially politically charged issue for the United States, the European Union (EU) and Japan, but remains a much sought after negotiating objective for countries that make up the G-20+ and the Cairns Group, for instance.  Hard fought over, it was eventually brought to the table after acrimonious negotiation at Doha, itself threatened with collapse.  Since then, closing wide gaps between these groups of countries, on the sensitive issue of farm trade, has proved difficult. 

Early in 2003, it became apparent that without movement in Agriculture advancing negotiations in other areas would not be feasible or possible.  This held true for much of the year.  The climax of dysfunctional global trade talks, through to late 2003, was when the key September WTO Ministerial closed inconclusively.

Reaching agreement on a basic framework for reforming farm trade was critical for progress at the Cancún summit.  It was never forthcoming.  Agriculture notwithstanding, disagreement at the meeting was compounded by a number of other factors, not least sharp differences over the place of the so-called “Singapore Issues” on the negotiating agenda. 

Weak Commitment to “Development” Ideals of Doha Agenda

( Compromiso Débil con los Ideales de “Desarrollo” de la Agenda de Doha )

The chasm between developed and developing countries further widened in 2003 because of a few, but important, developments.

The First Development: Wrangling amongst WTO members since the launch of the Doha Round regarding the WTO's intellectual property rules and the compulsory licensing of essential medicines for the treatment of such diseases as HIV/AIDS, malaria and tuberculosis, for instance, had threatened progress in global trade talks.  Failure to honor intermediate deadlines – while indicative – on this and other key issues, viewed as crucial to developing countries, appeared to enforce the view amongst several developing countries that developed counterparts were not sincere in their commitment to and actions regarding the “development” aspect of the Doha Agenda. 

An accord on measures to ease access to low-cost medicines for poor countries was, however, clinched, August 27.  In many ways, this will be remembered as a significant achievement in multilateral negotiations in 2003.  The victory, though, is bitter sweet. The hard fought over agreement on drug patents has been characterized as having serious flaws that undermine its workability.

Just as soon as the TRIPS and Public Health issue appeared to have been resolved, ahead of the Cancún Ministerial, the controversy over cotton subsidies took its place.  At Cancún, West African countries focused attention on the ‘harmful effects' of trade-distorting subsidies in cotton.  Benin, Burkina Faso, Chad and Mali made a very public appeal to the United States and the EU to cut subsidies to their cotton farmers.  These cotton-producing African countries maintain that the billions of dollars a year spent by those developed countries on cotton subsidies was a threat to the livelihoods of their cotton farmers.  The United States, however, called for cotton not to be treated as a separate issue at Cancún.  US negotiators maintained that it must be considered as an element in agricultural talks, at large.  The Cancún summit fell short on brokering a balanced compromise on cotton subsidies.  Momentum on the issue, since then, has been disappointing.

The Second Development: The emergence of the G-20+, catapulted into the spotlight at the Fifth WTO Ministerial, affected the dynamics of the Cancún summit.  G-20+, as a mechanism of co-ordination, galvanized an influential group of developing countries.  At the helm of G-20+, along with India and China, Brazil has taken to task developed country farm subsidy practices (Brazil, China, and India together account for over sixty percent of the world's farmers).  It has resoundingly altered multilateral trade relations, post-Cancún.  Brazil's role in the grouping has also added to its status as a counter-balancing force to the United States, in the FTAA context.  The G-20+ are united by their opposition to protectionist agricultural policies.  They have developed proposals for farm trade reform.  The Group has called for significant cuts in European and North American domestic support programs, as well as the elimination of export subsidies.  In addition to the elimination of ‘blue box' domestic subsidies, that are tied to production-limiting schemes, the G-20 favors measures to address ‘green box' and ‘amber box' subsidies. 

Another strong developing country coalition at the Fifth WTO Ministerial was a group of over ninety countries constituting the Africa, Caribbean and Pacific (ACP)/Least Developed Countries (LDCs).

Cancún's Aftermath: Uncertainty 

( Consecuencias de Cancún: Incertidumbre )

The failed WTO Ministerial effectively derailed the momentum of multilateral trade talks, already lacklustre at that point.  It called into question the ‘road map' forward and time line for continued negotiations.  The temptation, in light of the Ministerial's breakdown, was to assign blame.  By all accounts it was dished out generously, but unfairly.  The burden for the collapse of the key mid-round WTO Ministerial must be equally apportioned. 

Global trade talks – sluggish through 2003 - floundered after the ill-fated Ministerial came to an abrupt end.  This state of limbo persisted for weeks.  In an effort to pick up the pieces, the WTO Director-General, Supachai Panitchpakdi and his deputy, General Council Chair, Perez del Castillo, mounted marathon consultations.  They visited Member Capitals, meeting with senior officials and Trade Ministers.  Meanwhile, WTO functionaries, led by Perez del Castillo, worked on a series of consultations in Geneva.  Focus was on four key issues.  Non-agricultural market access was among them.  Notably, cotton subsidies assumed a place, as well. Predictably, Agriculture and the “Singapore Issues” took on top priority in consultations.  Early in the process, dejection was apparent.  

This despondence appeared to abate as a key December 15 General Council meeting, in Geneva, drew closer.  However, an important heads of delegation meeting, immediately before it, that served as a ‘test run' for the all important high-level meeting a few days later, muted hopes of what that meeting could actually accomplish.  The General Council meeting was originally envisioned, at Cancún, as re-awakening the Doha Round of negotiations.   In spite of the consultations requested by Ministers and undertaken in an intense manner by the Chairman of the General Council and the WTO Director-General, at the conclusion of the scheduled December meeting the Chair could merely note progress in clarifying the key issues and the challenges to be faced. Consultations were unable to close the gaps in negotiating positions and provide any meaningful convergence to take the process forward.

The meeting saw a reiteration by Members for the need to re-start negotiations.  Painfully apparent to everyone concerned, as had been the story through 2003, was the necessity of taking concrete steps forward, getting into the ‘nuts and bolts', to enable a re-start.  Members roundly agreed on the need to advance the agenda.  However, this sense of common vision was quickly blurred when it was time to hunker down and determine how to do so.  Key members were conspicuously short on specifics.  The most controversial of which, and by all accounts the main culprit in the breakdown of talks at Cancún and the impasse in moving the negotiating agenda forward ahead of that meeting, Agriculture.  On the precipice of talks in 2004, a spate of issues are holding up negotiations.  Addressing protectionist impulses, associated with Agriculture, however, remains at the core of the overall success of the process this year.

The FTAA Theatre

( El Foro del ALCA )

The highlight for 2003, in Western Hemisphere trade talks, was the gathering of Trade Ministers, from thirty-four countries, at the Eighth FTAA Ministerial Meeting, in Miami.  They endorsed a key Ministerial Declaration, November 20.  The one-day Ministerial summit followed a crucial meeting of Vice-Ministers. 

The Ministerial Meeting produced a ‘compromise' Ministerial Declaration for the Americas-wide trade pact.  The Ministerial Declaration marks a watershed in the FTAA process.  It signifies the introduction of the principle of ‘flexibility' in defining the character of the hemispheric trade accord.  This reflects an acceptance of the need for a ‘pragmatic re-dimensioning' of the FTAA.  The ‘decision' to re-dimension FTAA negotiations, at the Eighth Ministerial, represents an important milestone in the process.  Ultimately, the process has been kept alive; because of the compromise struck in the Declaration.  But, the manner in which it has done so has been the subject of criticism. 

The vision of the FTAA, which forms the core of the Eighth Ministerial Meeting Declaration, reaffirms commitment to a comprehensive and balanced Agreement, and introduces an element of flexibility into negotiations; which seeks to accommodate the needs, sensitiveness and ambitions of all FTAA countries. The vision, which represents a compromise between US and Brazilian ambitions, introduces a two-tiered structure into the negotiations.  On one level, countries will negotiate a common and balanced set of rights and obligations in all nine negotiating areas, which will be applicable to all of them.  Countries that so choose can agree to additional obligations and benefits, on a ‘plurilateral basis'.  Central to the vision, however, is the principle of ‘appropriate balance of rights and obligations where countries reap the benefits of their respective commitments'.

The Text has been described as a departure from the vision of the FTAA set in 1994, at a meeting that launched the FTAA process.  It has been labelled ‘FTAA-lite', faulted for falling short on ‘ambition'.   Some countries decry that a wide-ranging hemispheric trade accord has been undercut by these key November FTAA meetings.  They argue the Declaration is below expectations, charging the ‘scope' of the FTAA has been ‘scaled back'.  In point of fact, the Miami meetings represented a crossroads for the FTAA.  The alternative, to the present outcome, was a Cancún-style breakdown.  The multilateral trading system could not have survived such a setback.  The Declaration takes into account the perspectives and sensitivities of all countries negotiating the FTAA, but at the same time is comprehensive enough.  This is critical. 

Other developments of merit in the FTAA theatre, in 2003, include the initial dialogue between potential donors and countries seeking assistance for trade capacity building for the implementation of the FTAA Hemispheric Cooperation Programme (HCP), in Washington, DC, this past October.  The purpose of the Initial Meeting with donors was to engage FTAA countries that have identified trade-related capacity needs in dialogue with countries, regional and international institutions with the potential to assist in addressing the needs expressed. 

The idea of a Regional Integration Fund or similar mechanism to support adjustment for smaller economies in the Americas-wide trade pact gained a growing acceptance among FTAA countries, in 2003. In this regard, the Miami Declaration mandates the Consultative Group on Smaller Economies (CGSE) to present recommendations to the TNC on financing methods and facilities to address the adjustment needs resulting from  differences in the levels of development and size of economies in the hemisphere.

2004: A Look Ahead

( 2004: Una Mirada al Futuro )

2003 was a challenging year in the WTO and FTAA negotiating theatres.  This year is set to be just as, if not more, portent.  The WTO process is set to restart, and FTAA talks are scheduled to move into their final year. 

With the start of the New Year, WTO Members have approached negotiations with cautious optimism.  On January 11, United States Trade Representative (USTR), Ambassador Robert Zoellick, wrote a letter to WTO Member Trade Ministers.   In it, he proposed a WTO Ministerial meeting before the end of this year, in Hong Kong.  He also shared some “common sense reflections” on where the WTO process stands as regards the Doha Agenda, and ideas on how to advance it, collectively.  By his own admission, though, his “thoughts are not intended to launch breakthrough proposals”.  G-20 Ministers, with responsibility for trade, welcomed the recent letter.  The Group underscored its consistent commitment to “successful negotiations”.  For its part, the Cairns Group also welcomed Zoellick's letter; characterizing it as a “positive contribution”.  A Cairns Group statement highlighted “the Cairns Group shares the view…that an ambitious result on agriculture is essential for the round to succeed”.  In remarks, January 19, EU Trade Commissioner, Pascal Lamy, echoed the comments of Ambassador Zoellick – in his January 11 letter - that 2004 should not be a lost year for WTO negotiations.  The EU and US were not agreed, however, on where the onus lay to address farm subsidies.  EU Agriculture Commissioner, Franz Fischler, reacted swiftly countering what has been characterized as US criticism of EU agricultural subsidy practices.

The FTAA theatre has received new life from an accord brokered in November, last year. The Text of the Ministerial Declaration has been credited with keeping the FTAA ‘on track', and allowing it to move forward.  The Miami Ministerial Text has a certain pragmatism.  It has a balance and a flexibility that takes into account a multiplicity of concerns.  The challenge is to give specificity to and focused guidance regarding the broad ‘vision' that has been agreed upon, in Miami, as the process moves onto the next Trade Negotiations Committee (TNC) meeting, this coming February.  That TNC has been instructed to develop a common and balanced set of rights and obligations applicable to all countries and across all the FTAA disciplines, as well as procedural arrangements applicable to those countries desirous of undertaking additional commitments.   Consequently, grappling with the vision in the Ministerial Declaration is expected to begin in earnest at that point.  This is where the challenge lies.  It will be a critical hurdle to overcome, early this year. 

Consideration of developments in multilateral and hemispheric trade negotiations, however, cannot be divorced from 2004 being a Presidential election year in the United States.  

As with the beginning of 2003, the start of 2004 will be no different.  All eyes will be focused on the WTO.  The role of developing country blocs, such as G-20, is indispensable in re-engagement, in Doha Round talks. Ultimately, what can be achieved, especially in market access negotiations, in this theatre in 2004, will - in large measure - be dependent on a very strong political commitment by the WTO's membership to put negotiations back into gear.  It is in their collective interests to advance a reform agenda.  Just how, is the key.  

The objective of the December 15 WTO General Council meeting was to move closer to a successful outcome by trying to arrive at the position that should have been attained in Cancún. This objective was a limited one; in essence merely to conclude framework agreements in Agriculture and non-agricultural market access rather than to strive for agreement on full modalities in these areas, as well as to achieve some consensus on the Cotton issue, “Singapore Issues”, and the idea of an early harvest on S&DT proposals (which underpin the development dimension of the Doha Agenda).

There are many sticky areas where divergences remain profound and no agreement is emerging on the use of a text as the basis for further negotiations necessary for the completion of the Doha Agenda. At the heart of this impasse are the three pillars in the Agriculture negotiations. In consultations, Members have examined the Cancún Agriculture Annex in technical and substantive detail but arrived at no convergence. The difficulties in accepting the Derbez Text, which was never fully discussed at Cancún, are now even clearer.

The new target date for agreement in the WTO arena is now set for Spring 2004.  Re-engagement, in 2004, is expected to go the direction of moving beyond ‘principles' to grapple with detail s and ‘matters of substance'.  Top on the list will be putting together a framework for farm trade reforms.  2004 is expected to be dominated by this issue. 

An agreement through the recent EU-G20 meetings could serve as a catalyst for Agriculture talks. A mechanism is to be examined for producing joint texts from these two Groups. Similarly, dialogue and partnership between the G-20 and other developing groups such as the G-90 could provide a solution not only to the problems in Agriculture but in non-agricultural areas as well.

Breaking the deadlock in Agriculture would provide the basis of advancing the process and a resumption of negotiations in this area would enable more reciprocal bargaining and flexibility.  However, agreement on modalities for non-agricultural market access is also expected to feature prominently in any re-start.

Other forums will have a bearing on, and from a developing country perspective, feed into the WTO process, this year.  UNCTAD XI is set to play such a role. 

Unavoidably, through the year, there will be simultaneous consideration of procedural reforms to the consensus building approach to decision-making in the WTO.  In spite of its dissembling qualities, it is likely to be a reoccurring theme in trade talks. 

NEWS BRIEFS

( N OTICIAS)

Com Sec Trade Meeting

The ‘Commonwealth IGO Trade Experts Group Meeting on Small Economies' was convened in Geneva, January 5 to 7.  The major purpose of the meeting was to review and revise draft proposals favouring small vulnerable states within the context of the WTO Doha Round. Two proposals were already elaborated and presented to WTO members in May 2002 and June 2002, respectively. 

The Commonwealth Secretariat had commissioned a paper – entitled: Definition of Small Economies – that served as a guide for deliberations amongst participating trade experts.  The paper considered and dismissed the use of variables such as land area, population size, GDP as a measure for defining a small economy.  Instead, international trade constituted the most suitable proxy given its centrality to the work of the WTO and was therefore best suited to defining small economies.  The commissioned paper maintains, countries enjoying a share of 0.06 percent of world trade or less would be defined as small economies. This criterion would encompass all members of the three IGOs and its embrace by all participants represented the meeting's substantive point of agreement.

Representing the RNM – at the meeting - was Mr. Junior Lodge, RNM Brussels Representative.

Interim Summit Pledges Support for Americas-wide Trade Pact

Announced last year, l eaders from thirty-four countries in the Americas were called to focus and deliberate on three principal topics: combating poverty, promoting social development, and strengthening democratic governance, at a Special Summit in the city of Monterrey, Nuevo León, Mexico, January 12 to 13, 2004.  Caribbean l eaders were amongst the invited Heads of State. 

Prior to the two-day summit , indications were the Americas-wide trade accord, the Free Trade Area of the Americas (FTAA), currently under negotiation, would not feature on the summit agenda.  However, it emerged as a topic of debate.  At the summit, certain leaders voiced their opposition to hemispheric trade issues being incorporated into the Declaration; they challenged links US President George Bush made, at the meeting, between trade and poverty eradication. 

The final declaration welcomed progress achieved, to date, towards the establishment of a FTAA accord.  However, common understanding has been elusive over the deadline for hemispheric trade negotiations.  There are lingering uncertainties over it being definitive or merely a ‘goal'.  

OECS Private Sector FTAA Meet

Organization of Eastern Caribbean States (OECS) private sector representatives met, for a one-day workshop, entitled: ‘Post-FTAA Ministerial OECS Private Sector Gathering', in Grenada, January 16.  The agenda incorporated sessions reviewing recent developments in the FTAA and WTO; constraints to corporate growth and competitiveness; and, private sector strategies for engagement in external trade negotiations.

Regional Negotiators Meet

The region's top FTAA negotiators met for their first College of Negotiators meeting for 2004, in Kingston, Jamaica, January 17 to 18.  The meeting considered the outcome of the Eighth FTAA Ministerial Meeting, last November, as well as political developments in the hemisphere since that meeting.    Focus was also on the upcoming Seventeenth meeting of the FTAA TNC, with a view to developing policy guidance and negotiating instructions to the CARICOM delegation at that TNC.  A review of progress of exchange of offers in the negotiating groups undertaking market access negotiations also took place.  Finally, the College was invited to report on the status of proposals aimed at giving effect to special treatment in favour of smaller economies.

UPCOMING EVENTS

( CALENDARIO )

World Economic Forum

The World Economic Forum, Annual Meeting, will be convened in Davos, Switzerland, January 21 to 25.  Over two-dozen Ministers with responsibility for trade are expected to convene a consultation on the margins of that meeting to discuss the Doha Round of global trade talks.  Ministers will take stock of and look ahead to how the Round can be moved forward.  The side-event will mark the first time WTO Member Trade Ministers are meeting since the collapse of the Fifth WTO Ministerial.  It has been reported that USTR Zoellick and his European counterpart, Pascal Lamy, are not expected to attend the meeting.

OECS Heads Meeting

Organisation of Eastern Caribbean States (OECS) Heads of Government are expected meet, January 22 to 23, in St. Lucia.  External trade negotiation matters are slated for discussion, at the Thirty-Eighth Meeting of the OECS Authority.  The Authority is also expected to advance a number of key issues, namely: agreeing on measures to further advance the OECS economic union, including common OECS Citizenship, and a common OECS passport.  In addition, the Heads will examine the level of implementation of the OECS Development Strategy, which will guide the future economic development of the sub-region. 

The OECS is a grouping of the nine Member States, inter alia: Antigua/Barbuda, Anguilla, the British Virgin Islands, Dominica, Grenada, Montserrat, St. Kitts/Nevis, St. Lucia, and St. Vincent and the Grenadines.    

Key FTAA Vice-Ministerial

The Seventeenth Meeting of the FTAA TNC is scheduled for February 2 to 6, in Puebla, Mexico .

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For More Information Contact:

Nand C. Bardouille 

Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528
email: nand.bardouille@crnm.org

Previous issues of RNM UPDATE are archived on and can be downloaded from the RNM website: http://www.crnm.org

The ‘RNM DRAFT CALENDAR 2004', that provides an account of hemispheric and multilateral trade meetings, is available on the RNM website.