wto hong kong ministerial conference (13-18 december) 5 december 2005 levente császi, dg expo...
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WTO Hong Kong WTO Hong Kong ministerial conferenceministerial conference(13-18 December)(13-18 December)
5 December 20055 December 2005
Levente Császi, DG ExPo Policy Levente Császi, DG ExPo Policy [email protected]@europarl.eu.int
Topics for discussionTopics for discussion
What is trade and What is trade and why is trade why is trade important?important?
What is the WTO?What is the WTO? TimelineTimeline What is new in this What is new in this
round?round? The stakes of the DDA The stakes of the DDA
and Hong Kongand Hong Kong The structure of the The structure of the
negotiationsnegotiations
The main actorsThe main actors The EU agendaThe EU agenda AgricultureAgriculture NAMANAMA ServicesServices Is it a Is it a
“Development” “Development” round?round?
The EP and Hong The EP and Hong KongKong
What is trade and why is What is trade and why is it importantit important 8000 billion $ in goods 8000 billion $ in goods
and servicesand services Trade policy: incentive Trade policy: incentive
to produce certain to produce certain goodsgoods
Theory:Theory:– link between freer trade and link between freer trade and
economic growtheconomic growth– Comparative advantageComparative advantage– Positive sum gamePositive sum game
BUT:BUT:– Trade is NOT enoughTrade is NOT enough– not magic panacea!not magic panacea!
Myriad of instruments, Myriad of instruments, policies and tools policies and tools Tariffs (tariffication, binding tariffs, tariff peaks, Tariffs (tariffication, binding tariffs, tariff peaks,
tariff escalation, tariff reducing formula), quotas, tariff escalation, tariff reducing formula), quotas, tariff rate quotas (TRQs), standards, non-tariff tariff rate quotas (TRQs), standards, non-tariff barriers, subsidies, investment rules, intellectual barriers, subsidies, investment rules, intellectual property rights (IPRs), geographical indications property rights (IPRs), geographical indications (GIs), environment, labour standards, services (GIs), environment, labour standards, services regulation, movement of people, export credits, regulation, movement of people, export credits, enforcement of the rules, technical assistance, enforcement of the rules, technical assistance, trade facilitation, aid for trade, customs trade facilitation, aid for trade, customs valuation, rules of origin, implementation issues, valuation, rules of origin, implementation issues, dispute settlement, anti-dumping, sanitary and dispute settlement, anti-dumping, sanitary and phytosanitary measures, investment…phytosanitary measures, investment…
Trade policy and overall Trade policy and overall economic impacteconomic impactTrade liberalisation: uni-, bi-, pluri-, Trade liberalisation: uni-, bi-, pluri-, multilateralmultilateral
Trade Policy
Domestic
policies
Geography
Direct effects
on trade flows and
growth
Indirect effects through
Economic growth
Trade policy is foreign policy!
What is the WTO?What is the WTO?
Creation in Uruguay round (1995)Creation in Uruguay round (1995) 148+ Members148+ Members Member-driven intergovernmental Member-driven intergovernmental
organisation?organisation? Champion of free trade? Champion of free trade? Negotiating mechanism to create economic Negotiating mechanism to create economic
opportunities?opportunities? "Unidentified object of global governance"? – "Unidentified object of global governance"? –
no common understandingno common understanding Development organisation?Development organisation? Obscure organisation with 23 agreements Obscure organisation with 23 agreements
where fisheries are discussed under the where fisheries are discussed under the “Rules” chapter “Rules” chapter
Basic principles Basic principles
Non-discrimination (MFN principle) Non-discrimination (MFN principle) Transparency of rules Transparency of rules
(e.g.“tarrification”, notification (e.g.“tarrification”, notification system)system)
Progressive liberalisation through Progressive liberalisation through multilateral trade roundsmultilateral trade rounds
ConsensusConsensus Enforcement of rules (Dispute Enforcement of rules (Dispute
Settlement)Settlement)
Year Place/name Subjects covered Countries
1947 Geneva Tariffs 23
1949 Annecy Tariffs 13
1951 Torquay Tariffs 38
1956 Geneva Tariffs 26
1960-1961
GenevaDillon Round
Tariffs 26
1964-1967
GenevaKennedy
Round
Tariffs and anti-dumping measures
62
1973-1979
GenevaTokyo Round
Tariffs, non-tariff measures,“framework”
agreements
102
1986-1994
GenevaUruguay
Round
Tariffs, non-tariff measures, rules, services, intellectual property,dispute settlement, textiles,
agriculture,creation of WTO, etc
123
WTO roundsWTO rounds
Globalisation and the Globalisation and the WTOWTO ““Asymmetrical economic order”Asymmetrical economic order” WTO: part of the problem - part of the WTO: part of the problem - part of the
solution? solution? The world without the WTO…The world without the WTO…
– ““rules based system” vs “rule of the jungle”rules based system” vs “rule of the jungle”– asymmetrical trade regime would exist asymmetrical trade regime would exist
without the WTO (bilateral and biregional without the WTO (bilateral and biregional agreements)agreements)
– DSU – protects the weak?DSU – protects the weak?– consensus?consensus?
Timeline of Timeline of negotiationsnegotiations 2001 - Launch of Doha Development Agenda 2001 - Launch of Doha Development Agenda 2003 - EU-US renewal too late, Cancun failure2003 - EU-US renewal too late, Cancun failure 2004 - July framework agreement2004 - July framework agreement 2005 – August: “approximations”2005 – August: “approximations” 2005 – November – draft ministerial text2005 – November – draft ministerial text 2005 - December - Hong Kong Ministerial – 2005 - December - Hong Kong Ministerial –
“recalibration” & new road map“recalibration” & new road map 2006 - Countries table offers based on Hong Kong 2006 - Countries table offers based on Hong Kong
guidanceguidance 2006 - December – negotiations conclude2006 - December – negotiations conclude 2007 - Submit implementing legislation to US Congress2007 - Submit implementing legislation to US Congress 2007 - July – 2007 - July – US Trade Promotion Authority expiresUS Trade Promotion Authority expires 2007 - New domestic reforms? (Farm Bill Renewal, CAP?)2007 - New domestic reforms? (Farm Bill Renewal, CAP?) 2010 - Most reforms start to kick in2010 - Most reforms start to kick in
What is new in this What is new in this round?round? Growing membership (China, DCs)Growing membership (China, DCs) Growing agenda affecting policy Growing agenda affecting policy
spacespace Increasingly inflexible negotiating Increasingly inflexible negotiating
positionspositions Grand bargain: agri vs NAMA and Grand bargain: agri vs NAMA and
servicesservices Developing countries split (G20, G33, Developing countries split (G20, G33,
G90)G90)
What is at stake in the What is at stake in the DDA and at Hong DDA and at Hong Kong?Kong? Economic terms – expectations on gains Economic terms – expectations on gains
from DDA scaled down (World Bank from DDA scaled down (World Bank projections)projections)
Credibility of multilateralism - key Credibility of multilateralism - key concern for Europe (alternative: concern for Europe (alternative: bilaterals…)bilaterals…)
Reducing global trade asymmetry – Reducing global trade asymmetry – what about the Dwhat about the DDDA?A?
Policy space?Policy space? Paradigm shift in agriculture?Paradigm shift in agriculture?
The structure of the The structure of the negotiationsnegotiations July framework – basic guidelinesJuly framework – basic guidelines ““Single undertaking”Single undertaking” General Council, TNC, CommitteesGeneral Council, TNC, Committees defensive and offensive interestsdefensive and offensive interests issue-based coalitionsissue-based coalitions shifting power constellations, G-20 shifting power constellations, G-20
emergingemerging Core group, “green room deals”?Core group, “green room deals”? consensus – developing countries have consensus – developing countries have
“negative power”“negative power”
Main actorsMain actors Five interested parties (FIPs - EU, US, Five interested parties (FIPs - EU, US,
Australia, India, Brazil)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 groupCairns group G10G10 G20 (Brazil, India, China – marriage of G20 (Brazil, India, China – marriage of
convenience)convenience) G33 – one issue: special products and SSMG33 – one issue: special products and SSM G77/90 – Africa + LDCs - defensiveG77/90 – Africa + LDCs - defensive Who else is driving negotiations? (NGOs, Who else is driving negotiations? (NGOs,
multinationals…)multinationals…) Parliamentarians???Parliamentarians???
Cairns GroupArgentina*AustraliaBolivia*Brazil*CanadaChileColombia*Costa Rica*Guatemala*Indonesia*MalaysiaNew ZealandParaguay*Philippines*South Africa*Thailand*Uruguay
*These countries have overlapping memberships with the G-20
G-20 (G-21)ArgentinaBoliviaBrazilChileChinaColombia*Costa Rica*CubaEcuador*EgyptEl Salvador*Guatemala*IndiaIndonesiaMexicoNigeriaPakistanParaguayPeru*PhilippinesSouth AfricaThailandTanzaniaVenezuelaZimbabwe
*These members have left the G-20 since its formation, due to the CAFTA negotiations with the US.
EU MembersAustriaCyprusCzech RepublicBelgiumDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyLatviaLithuaniaLuxemburgMaltaNetherlandsPolandPortugalSlovakiaSloveniaSpainSwedenUnited Kingdom
G-33Antigua and BarbudaBarbadosBelizeBotswanaCubaDominican RepublicGrenadaGuyanaHaitiHondurasIndonesiaJamaicaKenyaMauritiusMongoliaNicaraguaNigeriaPakistanPanamaPeruthe PhilippinesSaint Kitts and NevisSaint LuciaSaint Vincent and the GrenadinesSurinameTanzaniaTrinidad and TobagoTurkeyUgandaVenezuelaZambiaZimbabwe(China*)(India*)
*These countries (formal G-20 members) are actively participating in G-33 meetings and support the Group in the negotiations.
Recently Acceded MembersAlbaniaChinaCroatiaGeorgiaJordanMoldovaNepalOman
G-10(Bulgaria)Chinese TaipeiIcelandIsraelJapanKoreaLichtensteinMauritiusNorwaySwitzerland
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
GroupGroup CountriesCountriesAgricultureAgriculture
Industrial Industrial GoodsGoods ServicesServices
SubsidiesSubsidies AccessAccess
United StatesEuropean 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 GroupsDoha Interest Groups
= Offensive position = Defensive position
The EU Agenda IThe EU Agenda I
Starting off with a broad “post-Starting off with a broad “post-modern” agenda modern” agenda
(Seattle to Doha, “Singapore issues”)(Seattle to Doha, “Singapore issues”) Defensive interests:Defensive interests:
Agriculture: CAPAgriculture: CAPGoods: footwear, textiles and clothingGoods: footwear, textiles and clothingServices: transport, audiovisual, education, Services: transport, audiovisual, education,
healthcarehealthcare Offensive: services & goodsOffensive: services & goods(professional services, e-commerce, etc)(professional services, e-commerce, etc)
The EU Agenda IIThe EU Agenda II
Trade facilitation (other 3 Singapore issues Trade facilitation (other 3 Singapore issues dropped)dropped)
Trade and the environment + core labour Trade and the environment + core labour standards controversialstandards controversial
Development: global EBA, openness to S&D, Development: global EBA, openness to S&D, phasing out export subsidies phasing out export subsidies
Challenge: “preference erosion” (ACP)Challenge: “preference erosion” (ACP) Agriculture is the sticking point – locking in Agriculture is the sticking point – locking in
2003 CAP reform2003 CAP reform Policy linkages: CAP, budget, developmentPolicy linkages: CAP, budget, development Three-level gameThree-level game
Agriculture IAgriculture I
July framework:July framework: market access: substantial tariff reductionsmarket access: substantial tariff reductions exports subsidies: reductions of, with a view exports subsidies: reductions of, with a view
to phasing out, all forms of these (in the to phasing out, all forms of these (in the 1 August 2004 “framework” members agreed 1 August 2004 “framework” members agreed to eliminate export subsidies by a date to be to eliminate export subsidies by a date to be negotiated)negotiated)
domestic support: substantial reductions for domestic support: substantial reductions for supports that distort trade (in the supports that distort trade (in the 1 August 2004 “framework”, developed 1 August 2004 “framework”, developed countries pledged to slash trade-distorting countries pledged to slash trade-distorting domestic subsidies by 20% from the first day domestic subsidies by 20% from the first day any Doha Agenda agreement is implemented.any Doha Agenda agreement is implemented.
Protection is Still High Protection is Still High and Mostly at the Borderand Mostly at the Border
0
20
40
60
80
100
120
140
160
US OECD OECDdeveloping
EU Japan QUADManufacturing
Tariffs
Prot
ecti
on R
ate
(%)
Subsidies
Border Protection
Source: OECD
Tariff Peaks Are Very HighTariff Peaks Are Very HighU
gan
da
To
go
Mal
awi
Bra
zil
Co
sta
Ric
a
Ind
on
esia
US
Can
ada
Mo
rocc
o
EU
Ko
rea 0
100
200
300
400
500
600
700
800
900
1000
Du
ty (
%)
MaximumTariff (% )
Source: WTO IDB (MFN Applied Duties)
Tariffs Escalate in Final Products Tariffs Escalate in Final Products
0
5
10
15
20
25
30
35
40
45
50
tari
ffs
(%)
QUAD Canada Japan US EU LargeMiddleIncome
OtherMiddleIncome
LowerIncome
Average MFN Applied Out-of-quota Duties (%)
RawIntermediateFinal
Source: WTO IDB (MFN Applied Duties)
Agriculture: Three PillarsAgriculture: Three Pillars
EU87,8%
U.S.1,8%
Rest of World3.0%
Switzerland6,4%
Norway3.0%
2. Direct Export SubsidiesEU(over $2 billiona 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
0102030405060708090
100
U.S. EU - 25 Japan
Other
United States
Switzerland
Norway
12%
31%
51%
66%
114%
62%
0%
20%
40%
60%
80%
100%
120%
Current
US EU Japan Korea India Global
Agriculture: Proposals for market Agriculture: Proposals for market accessaccess
Market Access: Average WTO Allowed Ag Tariff
12%3% 5% 6%
31%
6% 9% 13%
51%
7%12% 15%
66%
14%
29% 29%
114%
28%
70% 70%
0%
20%
40%
60%
80%
100%
120%
Current U.S. Proposal G-20 Proposal EU Proposal
US EU Japan Korea India
(1% sensitive products)
(1% sensitive products) (8% sensitive products)(Based on WTO AVEs)
Domestic subsidiesDomestic subsidies
EU offer: 70 percent reduction in trade-distorting EU offer: 70 percent reduction in trade-distorting subsidies (conditional, US wants 83 percent)subsidies (conditional, US wants 83 percent)
Non-agricultural market Non-agricultural market access (NAMA)access (NAMA)
Z= AX/(A+X) Z= AX/(A+X) The magic The magic harmonisingharmonising Swiss formula – different from Uruguay! Swiss formula – different from Uruguay!
X= old tariff X= old tariff A= coefficientA= coefficient Z=new tariff Z=new tariffDebate is about the coefficient + smaller coefficient for Debate is about the coefficient + smaller coefficient for
developing countries (2/3 of developed country commitments)developing countries (2/3 of developed country commitments)
Sw iss form ula. Coeffi cient=25
0
20
40
60
80
100
120
140
160
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Tariff
S tart 150%S tart 125%S tart 100%S tart 75%S tart 50%S tart 25%S tart 10%
Services IServices I GATS flexible “offer-request” processGATS flexible “offer-request” process The 4 modes of supplyThe 4 modes of supply::
1.1. cross-bordercross-border (trade that takes place from the (trade that takes place from the territory of one country into another, e.g. e-territory of one country into another, e.g. e-commerce or telecoms)commerce or telecoms)
2.2. consumption abroadconsumption abroad (consumption of services in (consumption of services in another country e.g. tourism)another country e.g. tourism)
3.3. commercial presencecommercial presence (establishment of a firm (establishment of a firm from one country in the territory of another – from one country in the territory of another – particularly important for financial services and particularly important for financial services and professional services)professional services)
4.4. movement of natural personsmovement of natural persons (the ability for (the ability for nationals to work overseas for a temporary period to nationals to work overseas for a temporary period to provide services, which is not a synonym for cross-provide services, which is not a synonym for cross-border labour movement in general border labour movement in general
Services IIServices II
Significant gains possible from Significant gains possible from services liberalisationservices liberalisation
No progress so farNo progress so far EU proposed benchmarks: EU proposed benchmarks:
– Voluntary commitments according to Voluntary commitments according to certain criteriacertain criteria
– Smaller commitment from DCsSmaller commitment from DCs– Not forced liberalisation or privatisationNot forced liberalisation or privatisation
Resentment from DCs and NGOsResentment from DCs and NGOs
The EU position before The EU position before HKHK Agri tariff cuts between 35% to 60%Agri tariff cuts between 35% to 60% Sensitive products (6-8% off tariff lines), cap Sensitive products (6-8% off tariff lines), cap
of 100% for developed and 150% for of 100% for developed and 150% for developing countriesdeveloping countries
Reduction of trade-distorting subsidies (up to Reduction of trade-distorting subsidies (up to 70 percent)70 percent)
Export subsidies: phasing out + full Export subsidies: phasing out + full parallelism: US to get rid of export credits, parallelism: US to get rid of export credits, commercial food aid, etccommercial food aid, etc
Ambitious tariff reduction in NAMAAmbitious tariff reduction in NAMA Services: “benchmarks“ – less flexible?Services: “benchmarks“ – less flexible? Development packageDevelopment package
– Global EBAGlobal EBA– Special and differential treatment (flexibilities)Special and differential treatment (flexibilities)– TRIPs – better access to drugsTRIPs – better access to drugs– CottonCotton– Aid for tradeAid for trade
Key Elements of U.S. Key Elements of U.S. ProposalProposal Stage 1Stage 1 (5-year implementation): (5-year implementation):
– Substantial reductions in trade-distorting domestic Substantial reductions in trade-distorting domestic support support (“Amber Box”: 60 percent cut for U.S., 83% cut for EU (“Amber Box”: 60 percent cut for U.S., 83% cut for EU and Japan)and Japan)
– Substantial reductions in tariffs, with deeper cuts for Substantial reductions in tariffs, with deeper cuts for higher tariffshigher tariffs
Developed countries: tariff cap and cuts ranging from 55% Developed countries: tariff cap and cuts ranging from 55% to 90%to 90%
Developing countries: slightly lesser cuts, focus on emerging Developing countries: slightly lesser cuts, focus on emerging marketsmarkets
– Limits the number of “sensitive products” eligible for Limits the number of “sensitive products” eligible for smaller tariff cut to only 1% of total tariff lines, and smaller tariff cut to only 1% of total tariff lines, and ensures meaningful access through large quotas.ensures meaningful access through large quotas.
– Total Elimination of export subsidies by 2010Total Elimination of export subsidies by 2010
Stage 2Stage 2 (5 years after Stage 1 implemented): (5 years after Stage 1 implemented):
– Phase out remaining tariffs and trade-distorting support Phase out remaining tariffs and trade-distorting support measures over 5 yearsmeasures over 5 years
Development???Development???
Market access and rebalancing rules on domestic Market access and rebalancing rules on domestic and export support;and export support;
The recognition, "operalisation" and The recognition, "operalisation" and implementation of implementation of special and differential special and differential treatment (S&D) and flexibilitiestreatment (S&D) and flexibilities for for developing countries (e.g. separate treatment of developing countries (e.g. separate treatment of cotton, a development box in agriculture);cotton, a development box in agriculture);
Mainstreaming the development dimension into a Mainstreaming the development dimension into a wider range of policies that are not "classical wider range of policies that are not "classical trade instruments" but are covered by one of the trade instruments" but are covered by one of the 23 WTO agreements or could be added to the 23 WTO agreements or could be added to the WTO agenda (TRIPs, TRIMs, Singapore issues, WTO agenda (TRIPs, TRIMs, Singapore issues, standards, social and environmental standards, social and environmental requirements).requirements).
EU: Round for free + global Everything But Arms?EU: Round for free + global Everything But Arms?
Development II – Development II – demands from DCsdemands from DCs lesser and lower obligations for developing countries lesser and lower obligations for developing countries
(asymmetric tariff cuts, exemptions for special and (asymmetric tariff cuts, exemptions for special and sensitive products and unbound tariffs);sensitive products and unbound tariffs);
longer implementation periods;longer implementation periods; subsidies allowed on non-trade concerns (vulnerability, subsidies allowed on non-trade concerns (vulnerability,
food security and environmental issues);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 a ban on certain trade defence measures applied by
developed countries with regards to specific countries developed countries with regards to specific countries and/or product categories;and/or product categories;
special safeguard possibilities for developing countries special safeguard possibilities for developing countries under certain conditions under certain conditions
The EP and Hong KongThe EP and Hong Kong
44thth Parliamentary Conference on Parliamentary Conference on the WTO – IPU + EPthe WTO – IPU + EP
30 MEPs30 MEPs Meetings with senior Meetings with senior
representativesrepresentatives Two main topics: Two main topics:
– Concluding the roundConcluding the round– International coherenceInternational coherence