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General Affairs Council
Luxembourg, 18 October 2005
Ministers, colleagues,
The Doha negotiations recently entered a new phase – a long awaited one - with two months to go before the Hong Kong Ministerial meeting in December. At this meeting WTO members must register decisive progress if the Round is to succeed in 2006. If Hong Kong fails, we will be looking at a scaled down Round, with all the loss of economic and business opportunities this will involve.
The week before last, the College of Commissioners reaffirmed their support for the Commission negotiators, Mariann Fischer Boel and myself, to work towards a good result at Hong Kong, which would put us on course to complete the Round in a balanced and ambitious way. I welcome this opportunity to review with the Council the state of the negotiations, and how we should take them forward within our mandate.
In the last few days there has been a welcome sign of progress in the negotiations.
Previously, member countries had been locked – or deadlocked - in discussion of the structures and methods of negotiation, rather than discussing the numbers which will show what each is really prepared to do in the four sectors of the negotiation. These are, of course, tariff and subsidy reductions in agriculture, market opening for industrial goods and for services, and the strengthening of multilateral trade rules. For most of this year we have been treading water, not negotiating.
The EU has in recent months been the most vocal in calling for progress. In July we initiated the G4 informal group of EU, US, Brazil and India in order to press for a breakthrough. In particular we have pressed the United States to make concrete proposals on domestic support in agriculture, to open the way for wider negotiations across the full Doha agenda.
Last week the United States finally did table those proposals. Many thought that they would not be prepared to pre-empt the future Farm Bill before Hong Kong. But they have. The proposals tabled last week are unsatisfactory in some important respects, notably on disciplines within the so called blue box category of support payments. In agriculture, what the money is spent on is more important than how much is spent. But they would clearly alter the nature of US crop support and therefore involve reform. As Pascal Lamy said, “the US have crossed the threshold of domestic subsidy reform” - even if their offer does not match the EU’s own CAP reforms already in the process of implementation.
This rather sudden US move meant – again in Pascal Lamy’s judgement - that two of the three pillars of the agricultural negotiation had reached a broadly similar stage of progress – given that the July 2004 Framework Agreement had already signalled the way ahead on the export competition pillar.
But discussions on the third major element, agricultural market access, were still at the level of process rather than numbers. This is the reason why, last week, all major players tabled initial proposals on what they could offer in market access: the US, the G10, followed by the EU and then the G20. This happened rapidly. It was not an option for the EU to sit on the sidelines, not to put numbers, albeit preliminary ones, on the table when all others were doing so. We did not make a unilateral move. We briefed Member States representatives on the spot in Geneva as fully as we were able, and received, I believe, full support from them at the time.
At the heart of the EU mandate is of course the imperative need for balance within the agricultural negotiations and across the different areas of negotiation, linked to the principle of the single undertaking. I have made clear that no agreement will be reached on agriculture until agreement is reached on other issues. Nothing is agreed until everything is agreed.
Negotiations on non agricultural issues now also have the potential to move ahead, but I readily admit they have not yet done so adequately. In industrial goods, the most recent talks confirm that a large WTO majority support entering negotiations on the basis of a Swiss formula for driving down tariffs, with different coefficients for developing and developed countries. This is an approach the EU has advocated. We have now gathered much support for this.
In services, where progress has been least satisfactory to date, a core group of countries has recently been launched with a mandate to deliver by Hong Kong approaches that will produce new and better commitments. In both areas, the work on “structures” is close to completion, but serious discussions have not started in earnest on “ambition”, or numbers.
This is regrettable. But there is a reason. There is a sequence in the political dynamic of this negotiation, which requires conditional moves first on agriculture in order to trigger the next moves on other issues. The great majority of WTO members have been waiting for American and European signals on agriculture, which they consider to be owing to them from the Uruguay Round. Indications by the EU and US that we are ready to move on agriculture, in the context of an overall deal, are the key to unlock the rest. The results must be simultaneous, but the process can only move forward in phases.
We are not yet through this door, because what is on the table in agriculture so far is still quite far apart. There is, for example, insufficient focus and movement on protecting products with Geographical Indications. There needs to be further convergence in the proposals and demands of all the main players. In my view the EU must be ready, within the limits of the negotiating mandate, to engage further in this negotiation. If we do not, we will provide the ideal excuse for others who have less interest than us in the Round to walk away scot free, leaving the EU in the dock. Our opening bid last week was prudent, and falls well within the negotiating mandate. It implies an average cut in tariffs lower by more than 10 points than that of the Uruguay Round, and it was in some respects less forward than the position put forward by the more defensive G10 group of importing countries. We have a margin for manoeuvre and therefore we are in a position to continue to talk, as long as our negotiating partners show realism and willingness to move in this part of the negotiations.
When we do engage, we must once more make clear, with greater precision, the conditions we attach to any conditional movement on our part. That means serious and early engagement on industrial goods and services.
To be precise, for industrial goods we will specify both what we are prepared to give and what we expect to receive from others. We are putting forward proposals on both the industrial tariff reduction formula and the figure for the reductions themselves. We will press for adoption of a formula with a Swiss co-effient, that compresses duties within certain corridors for developed and developing countries, although not Least Developed Countries. The levels we are suggesting are ambitious and reflect the parallel efforts we are making in agriculture. We need clear evidence now that others support this level of ambition and are ready to negotiate modalities by Hong Kong that will deliver it.
In services we have proposed a negotiating method that would request WTO members to commit a given number of service sectors through both quantitative and qualitative benchmarks, with necessary flexibilities for developing countries and exceptions for LDCs. Again, we now need others to come in behind what we are proposing.
We are also submitting precise improvements to the anti-dumping instrument, in order to prevent abuse as more and more countries revert to its use.
We shall be asking others to respond to these EU proposals because they all correspond to last year’s Framework Agreement. If they do not we shall be entirely justified in calling a halt, provided that, by then, we have ourselves placed on the table a position on agricultural market access that is seen by the WTO membership as offering the basis for agreement, within, of course, the envelope provided by the present CAP reform.
Let me be clear. It is absolutely and unequivocally not the intention of the Commission to use the DDA negotiations to precipitate a new phase of CAP reform.
I think it is essential in return that the Council agree that, so long as your negotiators stick within the mandate, they must be given latitude to set their tactics. If not, they cannot negotiate. I have explained what I consider the dynamics of the talks to be, and the conditions we attach to any further movement. If the Council were to restrict our ability to explore further movement following initial proposals, this would be tantamount, in my view, to a significant tightening of the mandate. I believe we need clarity today that this is not the Council’s position.
There is, of course, a quid pro quo for granting that latitude to the negotiator. This is full and rapid dialogue and transparency between us at all stages. If, as I hope is the case, things are moving in the talks, I believe we need to intensify and strengthen our mechanisms for this communication. I shall be pleased to come back to the Council in November. And I am happy to explore other ways of strengthening the flow of information during this intense period of activity, in addition to the regular briefings of the 133 trade Committee and Member States representatives.
To conclude, let us recall what is at stake. This is a Round that the EU has promoted and supported over several years. If it succeeds it will give the strongest shot in the arm to the world economy, with real benefits for needy developing countries. The benefits may be worth $100 billion per year, and the EU will share those considerable gains. A successful trade negotiation would also be a huge achievement for the multilateral system we hold dear. Surely it would be the wrong reaction, and a terrible mistake for the EU, at the first sign of serious movement in the talks - movement that we have been calling for - to lose confidence and pull in our horns. I hope that is not the message of our meeting today.
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