Order Code RL33176
CRS Report for Congress
Received through the CRS Web
The World Trade Organization:
The Hong Kong Ministerial
Updated December 9, 2005
Ian F. Fergusson, Coordinator
William H. Cooper, Vivian C. Jones, and Danielle J. Langton
Foreign Affairs, Defense, and Trade Division
Charles E. Hanrahan and Susan R. Fletcher
Resources, Science, and Industry Division
Jeanne J. Grimmett
American Law Division
Congressional Research Service ˜ The Library of Congress
The World Trade Organization:
The Hong Kong Ministerial
Summary
The 148 members of the World Trade Organization (WTO) are preparing for the
6th Ministerial summit to be held in Hong Kong on December 13-18, 2005. WTO
Ministerials are held every two years to bring together trade ministers from member
states, often to make political decisions for the body. The Hong Kong Ministerial will
be used to “take stock” of the ongoing Doha Development Agenda (DDA) round of
trade negotiations. The members will not be asked to agree to a package of modalities
(methods by which the round is negotiated) because substantial disagreements are
still evident among the members. The outcome of these negotiations could provide
a substantial boost to the world economy, but if the round itself is not completed,
there may be repercussions for the WTO as an institution and for the architecture of
the world trading system.
Agriculture is perhaps the most significant challenge the members with which
the members will grapple at the Ministerial. Members are attempting to seek
modalities in the areas of tariffs and domestic support and are seeking to agree on a
time-line for the elimination of export subsidies. In other negotiating areas, trade
ministers may be asked to finalize modalities or to set new deadlines to finalize those
modalities. Ministers may approve the draft ministerial calling for a Swiss tariff
reduction formula in the non-agricultural market access talks, while new modalities
designed to provide impetus to the services negotiations may be considered. With
regard to the Trade Related Aspects of Intellectual Property Agreement (TRIPS), the
WTO members acted before the Ministerial to approve the final amendment of the
TRIPS agreement to incorporate the 2003 Decision on access to medicines. In the
area of special and differential treatment for developing countries, the Ministerial
may approve 5 initiatives benefiting the least developing countries (LDC), the most
controversial of which is the extension of duty-free and quota-free access to all LDC
products.
The outcome of the Ministerial potentially has significant implications for
Congress. Any agreement resulting from the round must be approved by Congress,
and there is pressure to come to an agreement well before the expiration of U.S. trade
promotion authority on July 1, 2007. In addition, any agreement on agriculture may
affect the drafting or necessitate the revision of the next farm bill that may be
considered by Congress in 2007. Congress has also expressed an interest in shielding
U.S. trade remedy laws from negotiations. This report will be updated to reflect the
outcome of the Ministerial.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Possible Outcomes for the Ministerial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stakes of the Doha Round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Export Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Geographical Indications (GIs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Evolution of the Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Major Issues and Status of Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Negotiating Format . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Mode-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Negotiations on Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Delays in Other DDA Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Non-Agricultural Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Major Negotiating Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tariff Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tariff Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Special and Differential Treatment for Developing Countries . . . . . . 18
Non-Tariff Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Sectoral Approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trade Remedies and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
U.S. Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Progress of Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Major Developments and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Determination of Injury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Determination of Dumping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Special and Differential Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Intellectual Property Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Access to Medicines
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Traditional Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Trade Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Trade Facilitation Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Negotiating Issues in Trade Facilitation . . . . . . . . . . . . . . . . . . . . . . . 28
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Special and Differential Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
S&D Negotiations in the Doha Round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Implementation Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Technical Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Dispute Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Environment and Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Outlook for Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
The World Trade Organization: The Hong
Kong Ministerial
Introduction
The 148 members of the World Trade Organization (WTO) are preparing for the
6th Ministerial summit to be held in Hong Kong on December 13-18, 2005. WTO
Ministerials are held every two years to bring together trade ministers from member
states, often to make political decisions for the body. In the ongoing Doha
Development Agenda (DDA) round of WTO trade negotiations, it was hoped that at
the Hong Kong Ministerial trade ministers would be able to agree on a package of
modalities (methodologies or formulas that are used to negotiate trade concessions)
by which the round is negotiated. As it became clear in the fall of 2005 that such
modalities would not be finalized in Hong Kong, the ministerial has become an
opportunity to take stock of the round, and perhaps a venue for trade ministers to
come to a “meeting of the minds” in order to move the round forward.
The outcome of the Ministerial potentially has significant implications for
Congress. Any agreement resulting from the round must be approved by Congress,
and there is pressure to come to an agreement well before the expiration of U.S. trade
promotion authority on July 1, 2007, which permits Congressional consideration of
trade agreements on an up or down basis with no amendments, provided that
negotiating mandates and timelines are adhered to by the Administration.1 In
addition, any agreement on agriculture may affect the drafting or necessitate the
revision of the next farm bill that may be considered by Congress in 2007.
This report describes the ‘state-of-play’ of the Doha Development Agenda
(DDA) negotiations at the eve of the Hong Kong Ministerial. Separate sections on
Agriculture, Non-Agricultural Market Access, Services, Rules, Trade Facilitation,
Special and Differential Treatment, Intellectual Property Issues, Dispute Settlement,
and Trade and Environment provide background on the negotiations and details of
the proposal. This report will be updated to reflect the outcome of the Ministerial.
Background
The current round of WTO trade negotiations were launched at the 4th WTO
Ministerial meeting at Doha, Qatar in November 2001. The work program devised
at Doha folded in continuing talks (the built-in agenda) on agriculture and services
and launched negotiations in several areas including non-agricultural (industrial)
1 Due to various reporting requirements in TPA, some observers maintain that a Doha Round
agreement would need to be completed by the end of 2006 or early 2007 to be able to be
concluded by Congress.
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tariffs, disciplines for existing WTO agreements on antidumping and subsidies, and
topics relating to special and differential (S&D) treatment for developing countries.
The Members agreed to a January 1, 2005 deadline for the completion of the talks.
Negotiations have proceeded at a slow pace, due in part to the number of
countries participating (148) and their diverse interest. (See country group box, p.3)
More than four years into the negotiations and after several deadlines have passed,
agreement on negotiating modalities — methodologies such as tariff reduction
formulas by which negotiations are conducted — still elude the agriculture,
industrial market access, services, and other negotiating groups. The 5th Ministerial
— which took place September 10-14, 2003 in Cancún, Mexico — ended without
agreement on agricultural modalities or on whether negotiations would commence
on the so-called Singapore issues (trade facilitation, government procurement,
investment, and competition policy).
A negotiating Framework Agreement was reached in July 2004. This agreement
provided broad guidelines, though not specific modalities, for completing the Doha
round negotiations in agriculture, services, industrial tariffs, and trade facilitation.
The Agreement abandoned the January 1, 2005 deadline for the completion of the
negotiations. While the July Agreement did not set a new deadline, many consider
the new de facto deadline to be set by the parameters of the expiration of trade
promotion authority in the United States.
The Agreement also set December 2005 as the date for the 6th Ministerial to be
held in Hong Kong. It was hoped that negotiators would have final modalities
prepared for approval at this Ministerial. However, despite a flurry of activity in the
agriculture negotiations in October and November 2005, the WTO’s Director-
General Pascal Lamy announced on November 8 that achieving specific formulas and
goals for the Doha Round would not be possible by Hong Kong.
At the Ministerial, trade ministers from the member states will receive progress
reports on the state of the various sectoral negotiations in the form of a draft
Ministerial declaration prepared by the Director General of the WTO. While the
abandonment of Hong Kong as a critical decision-making event has been seen by
some as a setback, it also prevents the Ministerial from becoming a high-profile
failure as some considered the 5th Ministerial in Cancun. Without the pressure of
negotiating an agreement in a tense atmosphere, trade ministers may be able to make
progress at the political level on some hitherto intractable problems.
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COUNTRY GROUPS IN WTO TRADE NEGOTIATIONS
African, Caribbean and Pacific (ACP countries also Lome Convention
countries) — developing country group of former colonies of Europe which
maintain strong ties to EU:
Cairns Group — grain exporters: Argentina, Australia, Brazil, Canada, Chile,
Colombia, Fiji, Hungary, Indonesia, Malaysia, New Zealand, Philippines,
Thailand, Uruguay.
Quad Group (also “Old Quad”) — developed country trade leaders: EU, U.S.,
Japan, Canada.
New Quad Group (also Group of 4 or G4) — critical developed and developing
market leaders: U.S., EU, Brazil, India.
Five Interested Parties (FIPS also Non Group of 5 or NG5) — helped negotiate
the 2004 Framework Agreement on agriculture that now serves as the basis for the
Doha round. Quad plus one: U.S., EU, Brazil, India and Australia.
Friends of Antidumping — seeks reforms of rules that would affect U.S. and
European Union antidumping investigations. Members include Japan, South
Korea, Chile, Colombia, Costa Rica, Hong Kong, Norway, Switzerland, Taiwan
and Thailand.
Friends of Mode 4 — Mode 4 is the movement of natural persons in order to
supply a service in another country. 12 member countries include India, Mexico,
Indonesia and Thailand
Group of 10 (G-10) — net food importers and subsidizers, includes Switzerland,
Japan, Norway.
Group of 20 (G-20) — primary developing nations united on agricultural
negotiations: Argentina, Bolivia, Brazil, Chile, China, Egypt, Guatemala, India,
Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa,
Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.
Group of 33 (G-33) — Developing countries concerned with protecting
developing country agricultural markets from low-priced import competition from
industrialized countries and other large agro-exporters.
Group of 90 (G-90) — poorest or least developed nations.
Prepared by J. Michael Donnelly, Information Research Specialist, Congressional Research
Service.
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Possible Outcomes for the Ministerial
The draft ministerial text that was released by Secretary General Pascal Lamy
follows his recognition that the members were too far from convergence on major
issues to use the Hong Kong Ministerial as a venue to agree on specific modalities
for the negotiations. After M. Lamy released his “no-surprises” draft on November
26, 2005, WTO members have met in order to modify the draft in some form. Some
members reportedly are seeking to place ranges of figures for tariff or subsidy cuts
in the draft and some are seeking to place areas of agreement in the draft text. A new
draft incorporating some of these convergences was released on December 1, 2005,
and was considered at the December 1-2 WTO General Council meeting in Geneva.
For the most part, these items reflect convergences reported by the sectoral
negotiating chairs in their reports to the General Council. Generally, these
convergences reflect a step beyond the July Framework Agreement, but fall short of
full negotiating modalities. The following bullets reflect some possible outcomes of
the Ministerial for each negotiating sector.
! Agriculture. The Ministerial may seek to adopt some aspects of
the draft ministerial text including the use of three bands for
reducing developed country domestic support, the commitment to a
parallel elimination of export subsidies, and the use of a 4-band
approach to limit agriculture tariffs. The Ministerial may also set a
modalities and a timeline for an “early harvest” decision on cotton.
! Services. The final ministerial declaration may reemphasize the
importance of services negotiations, commit WTO members to
raising the quantity and quality of commitment offerings, establish
deadlines, and, perhaps, provide modalities that will be used to
accelerate the pace of the negotiations.
! Non-Agricultural Market Access. The Ministerial may provide
direction to the negotiations with agreement on the use of a Swiss
tariff reduction formula, may decide to extend duty and quota-free
access for LDCs, and may set a new date for the establishment of
full modalities.
! Trade Remedies. While the draft ministerial text and the rules
annex did not report consensus on any negotiating issue, it called for
the establishment of a deadline to produce a text-based negotiating
instrument. The ministerial may establish such a date and could
provide guidance on what topics should be reflected in the
negotiations.
! Intellectual Property Rights. On December 6, 2005, the WTO
General Council approved the final amendment of the TRIPS
agreement to incorporate the 2003 Decision on access to medicines.
No action is expected on the negotiations concerning traditional
knowledge and folklore and the relationship between TRIPS and the
Convention on Biological Diversity.
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! Trade Facilitation. The draft ministerial text reflects a high degree
on convergence on trade facilitation. The upcoming ministerial may
result in a more specific agreement on when to begin text-based
negotiations for trade facilitation and that agreement may include
more specific commitments on technical assistance or special and
differential treatment.
! Special and Differential Treatment. The Ministerial may consider
the five agreement-specific proposals concerning the LDCs, the most
controversial of which concerns the extension of duty and quota-free
access for all LDC products. The Ministerial may also set a deadline
for the General Council to take action on implementation issues.
! Dispute Settlement. The draft ministerial takes note of the work of
dispute settlement negotiations, but does not recommend any
specific course of action.
! Trade and Environment. The Ministerial may adopt language
from the draft text to identify environmental goods in which tariffs
and non-tariff barriers may be reduced or eliminated.
Stakes of the Doha Round
The economic value of prospective WTO liberalization under the Doha round
to the United States and the world economy could be significant. One model
indicates that world net welfare resulting from certain Doha scenarios could increase
by $574 billion and by $144 billion in the United States.2 Other studies present a
more modest outcome with world net welfare gains ranging from $84 billion to $287
billion by the year 2015.3 Nonetheless, because trade liberalization involves the
shifting of economic resources into more productive uses, it inevitably involves
dislocations, including job losses and plant closures, to some groups and regions.
The future of the multilateral trading system may also hinge on the successful
conclusion of the Doha Round. If the round does not conclude, or concludes with a
superficial agreement, the world trading system could be affected in numerous ways.
2 Drusilla Brown, Alan Deardorff, and Robert Stern, “Computational Analysis of
Multilateral Trade Liberalization in the Uruguay Round and Doha Development Round,”
University of Michigan Discussion Paper 490, December 12, 2002,
(www.spp.umich.edu/rsie/workingpapers/wp.html).
3 Thomas W. Hertel and Roman Keeney, “What is at Stake: The Relative Importance of
Import Barriers, Export Subsidies and Domestic Support,” in Anderson and Martin, eds.,
Agricultural Trade Reform in the Doha Agenda (Washington: World Bank, 2005); and
Kym Anderson, Will Martin, and Dominique van der Mensbrugge, “Doha Merchandise
Trade Reform: What’s At Stake for Developing Countries,” July 2005, available at
(www.worldbank.org/trade/wto). The different outcomes in these studies are due
substantially to the assumptions concerning the liberalization resulting from the Doha Round
as well as from differences in the econometric models themselves. For example, the World
Bank studies do not attempt to quantify services liberalization.
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First, it may result in the loss of confidence in the institutions of the WTO. One of
the achievements of the Uruguay Round was the establishment of a binding dispute
settlement system, in which countries have recourse to challenge the trading practices
of other members. However, a failure of the WTO to further trade liberalization in
areas which are significant to its members may bode ill for the legitimacy of its other
institutions, including dispute settlement.
Second, an unsatisfactory outcome of the Doha Round may accelerate the trend
toward regional and bilateral free trade agreements. While some of these agreements
are quite comprehensive and do result in substantially free trade between the partners,
others are more political documents that include what is convenient and leave out
whole economic sectors. In addition, regional and bilateral agreements are often
negotiated between countries of different economic power, and the resulting
agreement reflects the interests of the dominant negotiating partner. However, the
drawback of these agreements to the world economy is one that the multilateral
trading system was designed to avoid, namely trade diversion4 and increased
complexity from a “spaghetti bowl” of rules, multiple tariff rates, and arbitrary rules
of origin. If the Doha round is not seen as moving forward, these regional and
bilateral deals increasingly may form the basis for the world trading system.
The Doha Round presents challenges to both developed and developing
countries. Developed countries are challenged to negotiate an agriculture agreement
that provides meaningful reductions to tariff and subsidies that impede the market
access of producers with comparative advantage, often developing countries.
Developing countries are also looking to see meaningful market access commitments
in labor intensive industrial products. The challenge for developing countries is to
provide meaningful market access in industrial products and services, partly to reduce
their own inefficient barriers, but also to allow political cover in developed countries
to proceed with liberalization beneficial to developing countries. Developing
countries are also challenged to fully participate in the round, and not to invoke the
mantra of special and differential treatment to avoid liberalization that is ultimately
in their own interest.
Agriculture5
Agriculture has been among the most difficult areas to negotiate in the Doha
Round, yet progress in agriculture seems to be outpacing progress in other areas. The
Doha Round mandate and the July Framework for the agriculture negotiations call
for substantial improvements in market access; reductions of, with a view to phasing
out, all forms of export subsidies; and substantial reductions in trade-distorting
domestic support. These three aims have come to be termed the three pillars of the
agriculture negotiations. Although negotiators have focused on the three pillars, two
4 Trade diversion occurs when the lower tariffs under a trade agreement cause trade to be
diverted away from a more efficient producer outside the trading bloc to a producer inside
the bloc.
5 This section was written by Charles E. Hanrahan, Senior Specialist in Agricultural Policy,
Resources, Science, and Industry Division.
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other issues are also being negotiated: a sectoral initiative for cotton calling for the
accelerated elimination of trade-distorting subsidies for cotton and a proposal for
additional protection for geographical indications (GIs).6
In preparation for the Hong Kong meeting, the United States, the EU, the G-20
developing countries (such countries as Brazil, India, and China) and the G-10 group
of net importers of agricultural products (which includes Switzerland, Norway, and
South Korea) have each made proposals for specific modalities to address the three
pillars.7 There are major differences among the proposals that are not likely to be
bridged before the Hong Kong meeting, casting doubt on the likelihood that full
modalities in agriculture would be agreed. The United States, for example, has made
its offer to substantially reduce domestic subsidies conditional on gaining substantial
market access for agricultural products from the EU and, especially, the developing
countries. The EU, however, has indicated it will not move further on agricultural
market access unless developing countries agree to open markets for services and
industrial products, and the United States makes concessions on the treatment of
geographical indications for food and agricultural products. The G-20, for its part,
indicates it will not make substantially improved offers on industrial products and
services, until there is progress on domestic farm subsidies and market access. The
G-10 argues strongly for maintaining high tariffs for agricultural products, although
some members like Japan have taken a more conciliatory stance.
A draft of a declaration for the Hong Kong Ministerial Conference, now being
discussed by trade ministers, notes that “much remains to be done in order to
establish modalities (for agriculture) and to conclude the negotiations.” As proposed,
the draft declaration would commit WTO member countries to complete negotiations
on modalities and to submit comprehensive schedules of concessions by dates in
2006 to be determined. A report of the Chairman of the agriculture negotiating
committee is appended to the draft declaration. The Chairman’s report illustrates the
range of proposals on the three pillars, but make no recommendations for reconciling
differences.8
Market Access
In the July Framework, all WTO members agreed to make substantial
improvements in market access for all products. The framework provided no tariff
reduction formula, but directed that tariffs would be reduced on a tiered and
progressive basis, with higher tariffs receiving the deepest cuts. Tariff reductions
6 Although effectively treated by the EU as an agricultural market access issue, the
negotiations over additional protection for GIs is taking place in the WTO’s Council for
Trade-Related Aspects of Intellectual Property Rights (TRIPS).
7 For details on the U.S., EU, G-20, and G-10 agriculture negotiating proposals, see CRS
Report RL33144, WTO Doha Round: Agricultural Negotiating Proposals, by Charles
Hanrahan and Randy Schnepf. A detailed discussion of the July Framework agreement is
in CRS Report RS21905, Agriculture in the WTO Doha Round: The Framework Agreement
and Next Steps, by Charles E. Hanrahan.
8 “Draft Ministerial Text,” [Job(05)/298], [http://www.wto.org/english/thewto_e/minist_e/
min05_e/draft_min05_text_e.doc].
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would be from “bound” or permitted (and higher) levels, not from lower applied
rates. An “appropriate” number of import sensitive products could be shielded from
deep tariff reductions, but market access would have to be provided for such products
by expanding tariff-rate quotas (TRQs).9 Special and differential treatment would be
available for developing countries.
The U.S. and EU market access proposals are far apart. The United States
proposes to cut the highest agricultural tariffs by 90%, with the maximum tariff
capped at 75% for developed countries. The maximum developing country cap
would be 100%. The number of sensitive products would be limited to 1% of the
total number of tariff lines, which for the United States, would be about 20 products.
The EU, in contrast, would reduce the highest agricultural tariffs by 60% and allow
a maximum tariff of 100% for developed countries. Up to 8% of tariff lines (in the
EU case 176 products) could be classified as sensitive and there would be no tariff
cap for such products. The EU proposes keeping the special safeguard (SSG)
mechanism in the current WTO agriculture agreement to allow reimposition of tariffs
for sensitive products when imports meet certain trigger levels. The G-20 proposes
that developed countries cut their highest agricultural tariffs by 75%, and cap the
maximum tariff allowed at 100%. The highest developing country tariffs would be
cut by 40%; the tariff cap would be 150%. Like, the United States, the G-20
proposes limiting the number of sensitive products to 1% of tariff lines. (The World
Bank has concluded that if more than 2% of farm products were exempted from tariff
cuts or given minimal cuts, the poverty impact of a Doha Round agriculture
agreement would be negligible.10) The G-20 would keep the SSG for developing
countries only. The G-10 proposal on market access, which has been characterized
as “defensive” calls for a maximum tariff cut of 50% with flexibility ( i.e., the
maximum cut could vary in either direction by 10%. With plus-10% flexibility, the
G-10 would limit the number of sensitive products to 10% of tariff lines, while with
minus-10% flexibility, the number of sensitive products would be 15%). The G-10
applies the same tariff reduction formula to both developed and developing countries
and does not call for any maximum tariff cap.
Export Competition
In the July Framework, WTO members agreed to the elimination of export
subsidies and the elimination of export credits with repayment periods beyond 180
days. Also eliminated would be terms and conditions for export credit programs that
allow them to operate as subsidies (e.g., interest payments, minimum interest rates,
9 In a TRQ, a so-called market access quota is combined with a specified tariff level to
provide the desired degree of import protection. Imports entering during a specific time
period under the quota portion of a TRQ are subject to a lower, or sometimes a zero, tariff
rate. Imports above the quota’s quantitative threshold face a much higher (usually
prohibitive) tariff. Currently, TRQs apply to U.S. imports of certain dairy products, beef,
cotton, green olives, peanuts, peanut butter, sugar, certain sugar-containing products, and
tobacco.
10 World Bank, Agricultural Trade Reform and the Doha Development Agenda, Washington,
DC., 2005, Chapter 2, “What is at Stake: The Relative Importance of Import Barriers, Export
Subsidies, and Domestic Support.”
CRS-9
reduced premia, etc.). Trade distorting practices of state trading enterprises (STEs)
would be eliminated as would food aid that displaces commercial sales.
The U.S. proposal calls for eliminating agricultural export subsidies by 2010
and bringing export credit guarantees in line with commercial terms to prevent
subsidization. The monopoly status, export privileges, and special financial
privileges of STEs would be eliminated. WTO members would have broad
discretion to meet emergency food aid needs and needs of low income countries; all
other food aid transactions would be subject to tighter disciplines. The EU proposes
eliminating export subsidies by 2012, putting export credit programs on a
commercial footing, and applying disciplines on STEs similar to those proposed by
the United States. However, the EU proposes tighter disciplines on food aid than
does the United States, including moving gradually to untied and cash only food aid,
something the United States opposes. The G-20 calls for eliminating all forms of
export subsidies over five years, and emphasizes that food aid rules should not
compromise emergency humanitarian food aid. The G-10 has made no proposals
for the export competition pillar. It is generally agreed that differences in the export
competition negotiations (excepting food aid) are much narrower than in the market
access or domestic support pillars and that something close to full modalities for this
pillar might be agreed at Hong Kong.
Domestic Support
As with market access, the July Framework calls for a harmonizing approach
to reducing trade-distorting domestic subsidies: countries that subsidize more should
cut more. The framework agreement requires a cut in the overall level of trade-
distorting support as well as cuts in its individual components. Although support
currently categorized as non-trade distorting would be reviewed, the framework does
not call for reductions of such support.
The U.S. proposal on domestic support would impose an overall cut of 75% in
trade-distorting support for the EU and Japan, the two largest subsidizers of their
farmers; for the United States the overall cut would be 53%. For the most trade-
distorting domestic subsidies (those directly linked to production and trade), the
United States would impose an 80% cut on the EU and Japan, and on itself, a 60%
cut. The United States argues that cuts of these magnitudes would result in real
reductions in U.S. trade distorting subsidies and should meet concerns of G-20
developing countries like Brazil who allege unfair competition from such subsidies.
The EU, however, proposes reducing overall trade-distorting domestic support by
70% for itself and Japan, and 60% for the United States. The EU would also cut its
most trade-distorting component of support by 70% and the United States’ by 60%.
The G-20 proposal would apply an overall cut of 80% for the EU and Japan, and
75% for the United States. The most-trade distorting component of support would
also be cut by those same percentages. The G-10 proposal calls for an overall cut of
80% for the EU and a 75% cut for the United States and Japan. The most trade-
distorting component of domestic support would be cut by 80% for the EU and 75%
by the United States and Japan.
CRS-10
Cotton
Four least-developed African countries — Benin, Burkina Faso, Chad, and Mali
— have proposed a sectoral initiative for cotton that would entail the complete
elimination of export subsidies and trade-distorting domestic support.11 Although
not specifically mentioned in the Doha round negotiating mandate, cotton was
identified as a key to a successful conclusion of the Doha Round following the
Cancun Ministerial and was identified as a priority issue in the July Framework.12
The July Framework recognized the importance of cotton for certain developing
countries and stated that cotton will be “addressed ambitiously, expeditiously, and
specifically” within the agriculture negotiations. The Framework noted that there
were trade-related aspects of the cotton issue dealing with all three pillars of the
agriculture negotiations. In addition, the Framework said that the development
assistance aspects of the initiative also would be addressed. A cotton subcommittee
of the agriculture negotiating committee was established to deal with the initiative.
The draft declaration for the Hong Kong Ministerial calls for reaffirming the July
Framework’s priority accorded to the cotton issue.
Currently, there are two main proposals for dealing with the trade-related
aspects of the sectoral initiative on cotton.13 One is a revised proposal from the
African group and the second is an EU proposal, both of which call for decisions to
be made at the Hong Kong Ministerial. The African proposal calls for export
subsidies on cotton to be eliminated by the end of 2005. Trade-distorting domestic
support would be completely eliminated by January 1, 2009, with 80% eliminated by
the end of 2006 and 10% each in 2007 and 2008. The market access aspects of the
initiative would be addressed by duty-free and quota-free access for cotton and cotton
products from least-developed countries. An emergency fund would be established
to deal with depressed international prices. Additionally, this proposal calls for
technical and financial assistance for the cotton sector in African countries.
The EU proposal calls for the Hong Kong Ministerial to endorse more ambitious
and faster commitments on cotton than for agriculture as a whole. The EU provides
details of its proposal for cotton, but without assigning numerical targets, which is
11 The original proposal, WTO Negotiations on Agriculture, Poverty Reduction: Sectoral
Initiative in Favour of Cotton: Joint proposal by Benin, Burkina Faso, Chad, and Mali,
Committee on Agriculture, Special Session, (TN/AG/GEN/4), May 16, 2003, was revised
in WTO, General Council, Poverty Reduction: Sectoral Initiative on Cotton: Wording of
Paragraph 27 of the Revised Draft Cancun Ministerial Text: Communication from Benin,
(WT/GC/W/516), October 7, 2003. These documents can be retrieved from
[http://www.wto.org]. For a detailed discussion of the initiative, see CRS Report RS21712,
The African Cotton Initiative and WTO Agriculture Negotiations, by Charles E. Hanrahan.
12 Statement by the Chairman of the General Council. Doha Development Agenda: Informal
Heads of Delegation Meeting, December 9, 2003. [http://www.wto.org/english/news_e/
news03_e/stat_gc_chair_9dec03_e.htm]. Paragraph 1(b) of the July Framework agreement
addresses the cotton issue.
13 These new proposals are discussed in [http://www.wto.org/english/news_e/
news05_e/cotton_18nov05_e.htm]
CRS-11
consistent with its position that Hong Kong should not be about deciding numbers
(i.e., actual modalities). For export subsidies, the EU proposes an earlier end date for
elimination. As to market access, the EU indicates that it is willing to eliminate all
duties, quotas and other quantitative restrictions on imports from all countries. For
domestic support, the EU would eliminate all trade-distorting subsidies for cotton.
The EU indicated that all its cotton commitments “will already be in place, as far as
the EU is concerned, from 2006.”
The U.S. position on the cotton initiative has been that cotton should be dealt
with as an integral part of the agriculture negotiations. Thus cotton subsidy
reductions or market access commitments would be made as part of an overall
agreement on agriculture. A more ambitious result for cotton, then, would depend
on the underlying agriculture agreement. According to the WTO summary of the
cotton subcommittee meeting in which the initiative was discussed most recently, the
U.S. Deputy Trade Representative indicated that the United States agrees that the
outcome for cotton should be “more than the average” (i.e., the general outcome for
agriculture.)14
Geographical Indications (GIs)
GIs are place names (or words associated with a place) used to identify products
(for example, “Champagne”, “Tequila” or “Roquefort”) which have a particular
quality, reputation or other characteristic because they come from that place.15 The
EU maintains a register of more than 700 protected GIs. France has the largest
number of protected GI’s on the register — 141 — of any other EU member country.
For the EU, guaranteeing protection to GIs is a critical component of a strategy of
developing EU agriculture as a source of high-value products that include both foods
as well as wines and spirits.16 The EU considers that GIs, because they affect trade
in agricultural products, should be considered an issue in the agricultural market
access pillar. Its position is that the protection accorded GIs for food products should
be at the high level accorded GIs for wine and spirits under the WTO Trade Related
Aspects of Intellectual Property (TRIPS) Agreement. The U.S. view has been that
GIs should be negotiated as an intellectual property, not an agricultural, issue and that
the existing protection for GIs for food and agricultural products provided in WTO
agreements is adequate. Complicating the U.S. position is the EU’s insistence on
linking expanding protection for GIs to reaching agreement on the three pillars:
market access, export competition, and domestic support.
The Doha Declaration called for completing work started in the Council for
Trade-Related Aspects of Intellectual Property Rights (TRIPS) on the establishment
14 The African and EU proposals for a sectoral initiative on cotton as well as the U.S.
reaction are also discussed in “U.S. Links Cotton-Specific Moves on Overall Agriculture
Deal,” Inside U.S. Trade, November 18, 2005.
15 For a detailed discussion of GI’s, see CRS Report RS21569, Geographical Indications
and WTO Negotiations, by Charles E. Hanrahan.
16 John Baize, “EU’s New Farm Policy Signals the Way on Quality,” World Perspectives,
pp. 4-5, July 2, 2003.
CRS-12
of a multilateral system of notification and registration of GIs for wines and spirts
and for addressing the issues related to extending the protection of GIs to products
other than wines and spirts.17 The July Framework agreement noted that issues
related to the extension of the protection of geographical indications provided for in
Article 23 of the TRIPS Agreement to products other than wines and spirits remained
unresolved. Although under negotiation in the TRIPS council, the EU has made GIs
an agricultural trade issue by conditioning its market access offer on progress with
GIs.
In its agricultural modalities proposal, the EU proposed extending Article 23
protection to all products; establishing a multilateral register of protected GIs, with
legal effect in all WTO member countries; and prohibiting use of well-known GIs on
a short list. The EU notes that all of these proposals would need to take into account
existing trademark rights. The U.S. agriculture modalities proposal does not address
the issue of GIs, but the U.S. position has been that existing trademark laws provide
adequate legal protection for GIs.
Outlook for Hong Kong. The Ministerial may seek to adopt some aspects
of the draft ministerial text including the use of three bands for reducing developed
country domestic support, the commitment to a parallel elimination of export
subsidies, and the use of a 4-band approach to limit agriculture tariffs. The
Ministerial may also set a modalities and a timeline for an “early harvest” decision
on cotton.
Services18
“Services” covers a wide-range of economic activities. Services also account
for more than 80% of U.S. private-sector non-agricultural employment and close to
60% of U.S. GDP (as of 2004). Advancements in information technology are making
more types of services, such as accounting consulting services, tradeable across
national borders. Yet, multilateral rules on trade in services, in the form of the
General Agreement on Trade in Services (GATS) under the WTO, are in their
infancy, having been in force only since 1995, with the implementation of the
Uruguay Round Agreements. The current negotiations are designed to refine and
expand on the rules in the GATS.19
Evolution of the Negotiations
WTO members acknowledged that the GATS was rudimentary and that for it
to develop into an effective system of rules they would have to do more work.
17 Paragraph 18 of the Doha Declaration addresses the issue of geographical indications
[http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm#trips].
18 This section was written by William Cooper, Specialist in International Trade and
Finance, Foreign Affairs, Defense, and Trade Division.
19 For more information on the services negotiations, see CRS Report RL33085, Trade in
Services: The Doha Development Agenda Negotiations and Goals, by William H. Cooper.
CRS-13
Therefore, they mandated, in Article XIX of the General Agreement on Trade in
Services (GATS), that new negotiations on services commence no later than five
years after the Uruguay Round agreements entered into force, that is by the year of
2000. Thus, the services negotiations became, along with the agricultural
negotiations, part of the so-called built-in agenda. The negotiations did begin in
2000, but the early start has not ensured early progress.
By March 2001, the negotiators had established the guidelines for the
negotiations but not much else: negotiations would proceed using the “request-offer”
format in establishing commitments for market access; all services sectors and
subsectors would be subject to negotiation; and negotiators would seek progressive
trade liberalization in services, while recognizing the sovereign right of member
states to regulate their national services sectors. The Doha Ministerial Declaration
of November 2001, folded the services negotiations into the agenda of the DDA
round. The Ministerial Declaration reaffirmed the guidelines but mandated deadlines
to spur the negotiators: WTO members were to submit their initial requests for
market access and national treatment commitments from each member by June 30,
2002 and their initial offers of commitments they would be willing to make by March
31, 2003.
Any momentum (which was modest at best) that had been attained in the
services negotiations was halted, along with the other aspects of the DDA
negotiations, with the failure of the September 2003 Cancun Ministerial. By that
time, only a few WTO members, including the European Union (EU) and the United
States, had submitted their requests and made initial offerings per the deadlines set
down in the Doha Ministerial Declaration.
The July 2004 Framework, in an effort to recharge the negotiations, reaffirmed
the mandates contained in the Doha Ministerial Declaration. The July Framework
specifically charged the negotiators to complete and submit their initial offers as soon
as possible, to submit revised offers by May 2005 and to ensure that the offers are of
“high quality.” The presence of the services negotiations in the Framework is
considered important to the U.S. business community. It had been concerned that
the WTO negotiators’ commitment to services might be lost in the midst of concerns
about agriculture. The Framework places services on par with the negotiations on
agriculture and on market access for non-agricultural goods.20
Major Issues and Status of Negotiations
The negotiations on trade in services, by consensus, are proceeding very slowly,
lagging behind even the troubled negotiations on agriculture and NAMA. WTO
officials and others, including representatives of the U.S. business community, have
cited lapsed deadlines and the low quality and quantity of offers made by participants
to date as indicators of problems with the negotiations. All members (except the 55
members classified as the least -developed countries (LDCs)) were to have submitted
20 One business representative stated that the services industry had to fight to have services
given this level of importance. Meeting with John Goyer, Vice-President for International
Trade Negotiations and Investment, U.S. Coalition of Services Industry. August 9, 2005.
CRS-14
their initial offers by March 31, 2003. The July 2004 framework stipulated that all
127 non-LDC members were to have submitted revised offers by March 31, 2005,
but as of November 2005 only 28 had done so. The United States and the European
Union (which represents 25 members) met the deadlines. In his July 11, 2005 report
to the WTO on the status of the negotiations, Alexandro Jara, Chilean Ambassador
to the WTO and the then-chair of the Council for Trade in Services, noted that the
average member-country offer covered only 51-57 service subsectors out of a total
of more than 160.21
The complexity of the negotiations may go a long way in explaining the retarded
pace. However, negotiators and other observers have suggested several other
underlying causes rooted in process and substance.
Negotiating Format. Some negotiators and other observers have suggested
that the “request-offer” negotiating format might be stalling the process, because it
is time-consuming and tedious. At the suggestion of WTO officials, some members
have suggested ways to alter the format to accelerate the process. The United States
and the EU, among other WTO members, separately have proposed formats that
would include numerical targets, for example, that WTO members agree to liberalize
trade in a certain percentage of core sectors. Some have proposed plurilateral
negotiations whereby subgroups of countries jointly present offers to other
subgroups. Some developing countries, such as Brazil that are highly protective of
their services industries, have criticized these proposals as deviating from the
“request-offer” format that is mandated by the Doha Ministerial Declaration and
subsequent decisions. They are wary of losing the flexibility implicit in the “request-
offer” format.
Mode-4.22 Mode-4 delivery, temporary entry of supply personnel, has become
one of the most controversial issues at this stage of the negotiations in services. It
has divided many developed countries and developing countries, although differing
positions have emerged among members of each category. Much of developing
country criticism of the United States has been regarding mode-4. It has also created
some tension between the U.S. business community and the U.S. government. All
of this criticism is despite the fact that mode-4 accounts for less that 1% of world
trade in services.23
The controversy arises in part because the issue of mode-4 delivery is closely
related to immigration policy in the United States and some other countries, and
comes at a time when the United States has tightened restrictions in response to the
21 World Trade Organization. Council for Trade in Services. Report by the Chairman to the
Trade Negotiations Committee. 11 July 2005. TN/S/20 available at [http://www.wto.org].
22 The GATS defines four modes of supply of services: across borders (mode 1); temporary
movement of service buyer to country of supplier (mode 2); long-term commercial presence
of supplier in country of buyer (mode 3); and temporary movement of supplier to country
of buyer (mode 4).
23 World Trade Organization. Trade Directorate. Trade Committee. Working Party of the
Trade Committee. Service Providers on the Move: Economic Impact of Mode 4.
TD/TC/WP(2002)12/Final. Available at [http://www.wto.org]. p. 12.
CRS-15
attacks of September 11, 2001. In addition, some Members of Congress have warned
that changes in U.S. immigration laws that might be implied under mode 4 must be
handled via the normal legislative process and not within trade agreements.
Negotiations on Rules. Not much has been accomplished regarding
establishing rules on subsidies and emergency safeguard measures for services.
Developing countries, especially East Asian developing countries, consider these
issues a high priority. However, the negotiators have not been able to resolve basic
questions, such as, what would constitute a countervailable subsidy, how would it be
measured and how to measure import surges to which a WTO member could apply
safeguard measures. Negotiations on government procurement have also proceeded
slowly.24
Delays in Other DDA Negotiations. Some observers have suggested that
the time and attention devoted to the agriculture negotiations has diverted interest
from the services negotiations. Furthermore, a number of developing countries, for
example India and Brazil, have directly linked progress in the services negotiations
with progress in the agricultural negotiations. Specifically, they have demanded that
the EU and the United States be more aggressive in reducing or eliminating subsidies
and tariffs on agriculture before they will either make initial offers or improve on
their initial offers.
Outlook for Hong Kong
WTO negotiators will probably attempt to resolve differences over process and
substance in the services negotiations. Judging from statements from WTO officials,
the aim of the WTO trade ministers will likely be to emerge from the Hong Kong
Ministerial with a statement that reemphasizes the importance of services
negotiations, commits WTO members to raising the quantity and quality of
commitment offerings, establishes deadlines, and perhaps provides modalities that
will be used to accelerate the pace of the negotiations.
Non-Agricultural Market Access25
Talks on Non-Agricultural Market Access (NAMA) refer to the cutting of tariff
and non-tariff barriers (NTB) on industrial and primary products, basically all trade
in goods which are not foodstuffs. While other areas of WTO negotiations have
received greater scrutiny in the Doha round, trade of industrial and primary products,
the subject of the NAMA negotiations, continue to make up the bulk of world trade.
Nearly $8.9 trillion in manufactures and primary products were traded worldwide in
24 World Trade Organization. Council for Trade in Services. Report by the Chairman to
the Trade Negotiations Committee. July 11, 2005. TN/S/20 available at
[http:www.wto.org.] Also information was obtained in a meeting with John Goyer, Vice-
President for International Trade Negotiations and Investment, U.S. Coalition of Services
Industries.
25 This section was written by Ian F. Fergusson, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
CRS-16
2004, accounting for 81% of world trade activity.26 In the United States, industrial
and primary products accounted for 70% of exports and 83% of imports in 2004.27
Hence, the outcome of these negotiations could have a substantial impact on the U.S.
trade pictures and on the overall U.S. economy.
Previous to the Doha Round, industrial tariff negotiations were the mainstay of
GATT negotiations. These rounds led to the reduction of developed country average
tariffs from 40% at the end of World War II to 6% today. However, average tariff
figures mask higher tariffs for many labor intensive or value-added goods that are
especially of interest to the developing world. Seen from the developed world
perspective, gains from the NAMA talks in this round are to be had from the
reduction of high tariffs in the developing world, particularly from such countries as
Brazil, India, and China. In previous rounds, developing countries were not big
players in the market access talks, which has helped to perpetrate the heavy tariff
structure in those countries. Developing countries are leery of opening up their
markets to competition, often making the argument that protectionist policies have
been employed in the development of many successful economies, from the
European and North American economies in the 19th century, to the rise of the East
Asian tigers in the 20th . However, as negotiating positions have made clear,
developed economies will demand more access for their industrial products as a price
for opening up their agricultural sectors, where many developing countries have a
comparative advantage.
As in other sectors, negotiations on NAMA have been conducted on the basis
of the July 2004 Framework Agreement, which provided the basis on which to
conduct negotiations on modalities. While many useful discussions have taken place,
no agreement on modalities have been reached, and the Draft Ministerial Declaration
of November 25 on the NAMA talks “note that much remains to be done in order
to establish modalities and conclude the negotiations.”28 Dates for finalization of
modalities also remain unresolved.
Major Negotiating Issues
Tariff Reduction. The Framework Agreement endorsed the use of a non-
linear formula applied on a line-by-line basis as a modality to conduct tariff reduction
negotiations. A non-linear formula works to even out or harmonize tariff levels
between participants. This type of formula would result in a greater percentage
reduction of higher tariffs than lower ones, resulting in a greater equalization of
tariffs at a lower level than before. A common non-linear formula is the Swiss
formula, which has come to dominate discussions of the tariff reduction formula in
Geneva. The formula is,
26 World Trade Organization, International Trade Statistics 2005, p. 3.
27 Bureau of Economic Analysis, “ International Trade in Goods and Services, 2004 Annual
Revision,” June 10, 2005.
28 Draft Ministerial Text, [Job(05)/298], available at [http://www.wto.org/english/
thewto_e/minist_e/min05_e/draft_min05_text_e.doc].
CRS-17
T= at/(a+t)
where T, the resulting tariff rate, is obtained by dividing the product of the coefficient
(a) and the initial tariff rate (t) by the sum of the coefficient (a) and the initial tariff
(t). Selection of the coefficient is key, where a lower coefficient results in a lower
resulting tariff (T).
An harmonization formula would also work to reduce tariff peaks and tariff
escalation, another stated goal of the declaration. Tariff peaks are considered to be
tariff rates above 15% that often protect sensitive products from competition. Tariff
escalation is the practice of increasing tariffs as value is added to a commodity. As
an example of tariff escalation, cotton would come in with a low tariff, fabric would
face a higher tariff, and a finished shirt would face the highest tariff. Tariff escalation
is often employed to protect import-competing, value-adding industry. The emphasis
on tariff peaks and escalation results from findings that the use of peak tariffs and
escalations are particularly levied against the products of developing countries, as
well as becoming increasingly costly to the consumer in developed countries. The
Framework does not specify an implementation period for tariff cuts, but developing
countries are to be afforded longer implementation periods.
Currently two main tariff formulas are on offer, both based on the Swiss
formula. The first option proposed by developed countries is the simple Swiss
formula with the coefficient taking one value for developed and another, higher,
value for developing countries. For example, Pakistan proposed that the developed
countries have a coefficient of 6 and developing countries a coefficient of 30.29 The
EU in its cross-cutting proposal of October 2005 proposed a coefficient of 10 for
developed countries and advanced developing countries and 15 for LDCs. This
proposal has been criticized in the developing world for differentiating between
developing countries, which runs counter to current WTO practice.
Distinct from the simple Swiss formula proposal with multiple coefficients is
the proposal put forth by Argentina, Brazil, and India, known as the ABI proposal.30
ABI also uses the Swiss formula, but it proposes the coefficient to be the tariff
average of each country, thus each country would have its own coefficient. ABI
would not result in tariff harmonization between countries because there would not
be a common coefficient, however, it would result in a certain harmonization within
each country’s tariff schedule.31
Tariff Binding. The framework encourages the continued binding of tariffs
and uses bound tariffs as the baseline for the reduction formula. Tariffs are bound
when a country commits to not to raise them beyond a certain level. Therefore,
binding has been seen as the first step in tariff reduction. Bound tariffs are often
29 “The Way Forward, Communication from Pakistan, (TN/MA/W/60), July 21, 2005.
30 “Market Access for Non Agricultural Products,” (TN/MA/W/54), April 15, 2005.
31 Sam Laird, “Economic Implications of WTO Negotiations on Non-Agricultural Market
Access.,” [http://www.nathaninc.com/nathan/files/ccLibraryFiles/Filename/000000000044/
Economic%20Implications_Laird.pdf].
CRS-18
significantly higher than applied tariff levels, which has led to questions as to the
usefulness of reductions from bound rather than applied rates. For its part, the EU
still seeks cuts from applied rates. Reductions from applied rates would result in
greater cuts to actually applied tariffs. However, the use of the applied rate may
serve as a disincentive for countries to undertake unilateral liberalization. Under this
reasoning, countries would hesitate to undertake unilateral tariff reductions if they
knew that multilateral liberalization efforts would use the applied rate that the
country had already unilaterally lowered as a starting point. It may also increase the
incentive to raise applied rates prior to negotiation.32
Under the Framework, tariff reductions would be calculated from the bound,
rather than the applied, level. Under the Framework, reductions in unbound tariff
lines would be calculated from twice the currently applied rate, however this
suggestion was not repeated in the Chairman’s statement. Now discussions are
centered around a ‘non-linear mark-up approach,’ one that would add a certain
number of percentage points to the applied rate of the unbound tariff line in order to
establish the base rate on which the tariff reduction formula would be applied.
Discussions have ranged from 5-30 percentage points as an addition, which would
generally result in lesser bound rates than under the Framework. The Framework
also provided flexibility for developing countries who have bound less than 35% of
their tariff lines. They would be exempt from tariff reduction commitments in the
Round provided that they bound the remainder of their non-agricultural tariff lines
at the average tariff for all developing countries..
Special and Differential Treatment for Developing Countries. The
Framework provides several flexibilities (known as Paragraph 8 flexibilities) to
developing country members. It permits developing countries longer periods to
implement tariff reductions. Developing countries may also choose one of the
following flexibilities: (1) apply less than formula cuts for up to 10% of tariff lines
provided that the cuts applied are no less than half the formula cuts and that the tariff
lines do not exceed 10% of the value of all imports, or (2) keep tariff lines unbound
or not applying formula cuts for 5% of tariff lines provided they do not exceed 5%
of the value of a member’s imports. Least developed countries (LDCs) would not be
required to apply formula cuts, nor participate in the sectoral cuts, but would
undertake to “substantially” increase the level of bound tariffs. Developed-country
participants and others are encouraged to grant LDCs duty free and quota free access
to their markets by a date to be negotiated.
In the negotiations since the July Framework, the relationship between the
Paragraph 8 flexibilities and the formula negotiations have proved controversial.
Certain developed country proposals have linked the flexibilities to the value of the
coefficient of the tariff reduction formula. Thus, according to these proposal, if
developing countries want a differentiated coefficient, they would have to give up
certain of the Paragraph 8 flexibilities.
32 Joseph Francois and Will Martin, “Formula Approaches for Market Access Negotiations,”
The World Economy, January 2003, p. 17.
CRS-19
Non-Tariff Barriers. The industrial market access talks also encompass
negotiations on the reduction of non-tariff barriers. Non-tariff barriers include such
activities as import licensing, quotas and other quantitative import restrictions,
conformity assessment procedures, and technical barriers to trade. The framework
instructed members to submit notification of NTBs so negotiators could identify,
examine, categorize, and, ultimately, conduct negotiations on them. The framework
“takes note” of several modalities by which negotiations on NTBs could proceed.
The draft ministerial text noted that members were holding bilateral discussions on
NTBs, and groups of members were discussing NTBs by product sectors, and by
specific NTBs. No agreements have been reached on the reduction of NTBs or on
the procedures to negotiate such reductions.
Sectoral Approaches. WTO members have agreed to consider the use of
sectoral tariff elimination as a supplementary modality for the NAMA negotiations.
Sectoral initiatives, such as tariff elimination or harmonization, permit a critical mass
of countries representing the preponderance of world trade in an item to agree to
eliminate tariffs in that good. Such an arrangement requires the participation of the
major players, however, because under most-favored-nation principles those tariffs
would be eliminated for all countries, even those not reciprocating. The 1996
Information Technology Agreement is one such sectoral tariff elimination agreement.
Sectoral negotiations have been proposed for bicycles, chemicals,
electronics/electrical equipment, fish, footwear, forest products, gems and jewelry,
pharmaceuticals and medical equipment, raw materials and sporting goods.33
Textiles, apparel, and auto parts have also been mentioned for sectoral negotiations.
While some developing countries have participated in these discussions, and have
proposed some sectors, other developing countries have questioned engagement in
sectoral negotiations prior to settling on a formula for negotiations.
Outlook for Hong Kong
Even if the resolution of full modalities are off the table at the Hong Kong
Ministerial, the Ministerial could provide direction to the negotiations with
agreement on the use of a Swiss tariff reduction formula, a convergence noted in the
draft ministerial declaration, and will likely set a new date for the establishment of
modalities. Discussions may also provide political direction to resolve such issues
as the binding of developing country tariffs, issues related to sectoral tariff
elimination, and a decision on extending duty and quota free access for least
developed countries. However, much also depends on the outcome of the agriculture
negotiations or the willingness of the participants to trade concessions between
negotiating sectors.
33 “Draft Ministerial Text,” (Job(05)/298, Annex B) p. B-4.
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Trade Remedies and Related Matters34
Background
The United States and many of its trading partners use antidumping (AD) and
countervailing duty (CVD) laws to remedy the adverse impact of alleged unfair trade
practices on domestic producers. These statutes are permitted by the WTO as long
as they conform to the Agreement on Implementation of Article VI (Antidumping
Agreement, ADA) and the Agreement on Subsidies and Countervailing Measures
(SCM), as adopted in the Uruguay Round of trade negotiations.
Under pressure from trading partners (including Japan, Korea, Brazil, Chile,
Colombia, Costa Rica, Thailand, Switzerland, and Turkey) which had become
concerned with a perceived general increase in the use of trade remedy measures,
U.S. negotiators agreed to a Doha round negotiating objective which called for
“clarifying and improving the disciplines” under the ADA and SCM.
This objective has been criticized by many in Congress who are concerned that
future U.S. concessions on trade remedies could lead to a weakening of U.S. laws
that are seen to ameliorate the adverse impact of unfair trade practices on domestic
producers and workers. Other Members, who have expressed concern about the
economic inefficiencies caused by AD and CVD actions, especially as they relate to
higher prices to U.S. consumers and consuming industries, have expressed some
openness to considering changes to the WTO agreements.
U.S. Legislation
Support for U.S. trade remedy laws is especially strong in the Senate, where,
following an adverse WTO panel decision on a controversial trade remedy law, 70
senators wrote a letter to President Bush arguing strongly for retaining the law.35 S.
Con Res. 55 (Craig, introduced September 29, 2005) seeks to express the sense of
Congress that the United States should not be a signatory to any DDA agreement that
would “lessen the effectiveness of domestic and international disciplines” or “lessen
in any manner the ability of the United States to enforce rigorously our trade laws.”
On the other side of the debate, legislation has also been introduced that would give
consuming industries standing in trade remedy cases (H.R. 4217, Knollenberg,
introduced November 3, 2005), or to comply with certain WTO rulings on trade
remedies.
Progress of Negotiations
According to a report by the Chairman of the Negotiating Group on Rules, work
on trade remedies has taken place in three overlapping phases. First, negotiators
34 This section was written by Vivian C. Jones, Specialist in International Trade and
Finance, Foreign Affairs, Defense, and Trade Division.
35 Letter to President George W. Bush, signed by seventy Senators, including Robert C.
Byrd, Max Baucus, and Mike DeWine, February 4, 2003.
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presented formal written papers indicating the general areas in which the participants
would like to see changes in the agreements. A compilation of the 141 proposals was
published by the Chairman in August 2003, just prior to the Cancun Ministerial.36
Second, after Cancun (and ongoing), negotiators began discussing their positions in
more detail, sometimes proposing legal drafts of suggested changes.37 This phase
helped negotiators develop a clearer idea of what proponents of specific changes are
seeking, and helped proponents develop “a realistic view of what may and may not
attract broader support in the group.”38 The third phase consists of bilateral and
plurilateral meetings for technical consultations, partly aimed at developing a
possible standardized questionnaire which administering officials could use in AD
investigations in order to reduce costs and increase transparency.39
Many observers believe that any consensus on changing the ADA, SCM, or
other trade remedy agreements is likely to involve perceived successes in other areas
being discussed in the DDA, such as improved agricultural market access or services
trade. Therefore, any accord involving changes in trade remedies is not likely to take
place until the end of the round.
In the draft negotiating text for the Hong Kong Ministerial issued by Director
General Pascal Lamy on November 28, 2005, WTO members “affirm our
commitment to the negotiations on rules.”40 Appendix D of the document states that
“the achievement of substantial results on all aspects of the Rules mandate, in the
form of amendments to the Anti-Dumping (AD) and Subsidies and Countervailing
Measures (SCM) Agreements, is important to the development of the rules-based
multilateral trading system and to the overall balance of results in the DDA.”41 This
assertion is controversial given the substantial opposition in Congress to any
concessions that may weaken U.S. trade remedy laws.
With regard to trade in fisheries, the draft also suggests that WTO members are
committed to “enhancing the mutual supportiveness of trade and the environment,
[WTO members] note that there is broad agreement that the Group should strengthen
disciplines on subsidies in the fisheries sector” through prohibiting subsidies that lead
36 WTO Negotiating Group on Rules. Note by the Chairman. “Compilation of Issues and
Proposals Identified by Participants in the Negotiating Group on Rules. TN/RL/W/143,
August 22, 2003, p. 1.
37 See WTO Negotiating Group on Rules. Report by the Chairman to the Trade Negotiations
Committee. TN/RL/13, July 19, 2005, p. 2.
38 Ibid., pp. 1-2.
39 Ibid.
40 World Trade Organization, “Doha Work Program.” Draft Ministerial Text issued by
Secretary General Lamy in preparation for the Hong Kong Ministerial, November 26, 2005,
WTO Document No. JOB(05)/298, [http://www.wto.org/english/thewto_e/minist_e/
min05_e/draft_text_e.htm].
41 Ibid, p. D-1.
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to over-fishing and overcapacity.42 In this context, the draft directs the Negotiating
Group on Rules to intensify and accelerate the negotiating process.43
Stakeholders
A coalition of developed and developing countries, known as the “Friends of
Antidumping,” — including Brazil, Chile, Colombia, Costa Rica, the European
Union, Hong Kong, India, Israel, Japan, Korea, Mexico, Norway, Singapore,
Switzerland, Taiwan, Thailand, and Turkey — were largely responsible for pressing
the inclusion of trade remedy talks in the Doha Development Agenda, and have
advanced discussions in several areas that seem to be generating interest. U.S.
negotiators, pledging to push an “offensive agenda” in trade remedy discussions,44
have submitted papers addressing measures to improve transparency in the
investigative process, prevent circumvention of AD and CV duties, and clarify the
“standard of review” provisions in dispute settlement deliberations. Canada,
Australia, the European Union (on its own behalf) and New Zealand — who with the
United States are considered “traditional” users of antidumping actions, have also put
forward several proposals.
Major Developments and Issues
Most of the action in the WTO Negotiating Group on Rules has been focused
on the Antidumping Agreement, largely because AD actions make up the largest
share of trade remedy actions worldwide. Since the present texts of the trade remedy
agreements are highly detailed, and were “painstakingly negotiated” over at least
three multilateral trade rounds,45 the issues that negotiators are attempting to “clarify
and improve” tend to be quite specific in nature. However, much of the discussion
seems to be based around a few central themes, such as refining methodology for
determining injury and existence/extent of dumping or subsidies, giving more
specific guidance on conduct of reviews, and providing “special and differential
treatment” for developing countries. Broadly characterized, many of the “clarification
and improvements” offered could tend to limit or proscribe the ability of countries
to grant relief to domestic manufacturers.
Determination of Injury. Proposals that would affect injury determinations
include requiring administrative authorities to clarify that there is a direct correlation
between the injury to domestic producers and dumping of the targeted merchandise.
Another proposal affecting injury determinations seeks to establish an “economic
interest test’ or “public interest test” to determine whether or not the domestic
economy or domestic consuming industries might be injured to a greater extent than
the domestic producer.
42 Ibid, p. D-2.
43 id.
44 “USTR Zoellick Says World Has Chosen Path of Hope, Openness, Development, and
Growth.” Office of the U.S. Trade Representative. Press Release, November 14, 2001
[http://www.ustr.gov].
45 Ibid.
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Determination of Dumping. Proposed changes in methodology for
calculating dumping and subsidies margins could affect both dumping/subsidies
determinations and the level of duties assessed if an affirmative determination is
made. First, a prohibition on “zeroing” is being pushed by the Friends of
Antidumping. “Zeroing” is the process in which, when calculating dumping margins
for targeted merchandise, administrative authorities factor in a zero (rather than a
negative amount) if a subgroup of the merchandise is found to have a negative
dumping margin. The Friends of Antidumping group alleges this practice leads to
erroneous findings of dumping as well as inflated dumping margins. U.S. use of
“zeroing” is being challenged in WTO dispute settlement proceedings on a number
of fronts.46
Second, the Friends of Antidumping, India, and the European Union have
submitted papers advocating the establishment of a mandatory “lesser duty rule.”
This proposal would require investigating authorities to impose an AD or CV duty
lower than the full dumping margin if it is determined that the lesser amount is
sufficient to offset the injury or threat thereof suffered by the domestic industry.
Third, the Friends of Antidumping recommend that the Antidumping Agreement
require increased use of “price undertakings” or alternative measures negotiated with
the exporting country in which the price of the targeted merchandise is increased to
eliminate the dumping, or the product is no longer exported to the United States.
Some developing countries favor mandatory use of such actions by developed
countries in AD investigations involving developing countries. U.S. antidumping
law already allows such negotiated agreements (called “suspension agreements” in
U.S. law), but they are not used very often.47
Reviews. The current ADA and SCM specify that each AD or CVD order
must be terminated after five years unless authorities determine in a review that its
expiration would be likely to lead to a recurrence of dumping or subsidization, and
subsequent injury to the domestic producer. Some WTO Members claim that
authorities base review determinations inordinately on submissions by the domestic
industry, and that, therefore, AD or CVD orders are likely to remain in place as long
as the domestic industry opposes their removal. On this basis, some favor a
mandatory termination of AD or CVD orders within five years. Others favor a more
moderate approach that would list specific circumstances or definitive factors that
authorities must consider before extending the orders. Others criticize the length of
time that sunset review procedures take to complete and favor a mandatory twelve-
month time limit.48
46 These disputes are (1) DS294, United States — Laws, Regulations, and Methodology for
Calculating Dumping Margins (brought by European Communities, panel report distributed
October 31, 2005); (2) DS322, United States — Measures Relating to Zeroing and Sunset
Reviews (brought by Japan, panel established April 15, 2005; and (3) DS325, United States
— Antidumping Determinations Regarding Stainless Steel from Mexico (brought by Mexico,
request for consultations January 10, 2005, no panel established as yet).
47 19 U.S.C. 1671c (countervailing), 19 U.S.C. 1673c (antidumping).
48 See World Trade Organization Negotiating Group on Rules. Compilation of Issues and
(continued...)
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Special and Differential Treatment. Because developing countries are
regarded by some to be especially vulnerable to trade remedy action, developing
countries have been negotiating for special treatment. One proposal advanced by
these countries would make a lesser duty rule and/or price undertakings mandatory
in AD actions involving developing countries. Other recommendations include an
increase in the dumping margin that is considered de minimis, and consequently not
actionable under the AD and SCM. Some Members also favor a type of standardized
questionnaire that administrative officials could fill out when conducting trade
remedy investigations. Proponents of this methodology say that it would increase
predictability, cut costs, and increase the transparency of investigations.
Other Negotiations. In the Negotiating Group on Rules, other negotiations,
including rules governing fisheries subsidies and regional trade agreements, are also
ongoing. Topics being discussed on fisheries subsidies include which subsides should
or should not be prohibited, and how they should be implemented. Talks on regional
trade negotiations are aimed largely at increasing the transparency of these
arrangements.
Outlook for Hong Kong
While the draft ministerial text and the rules annex did not report consensus on
any negotiating issue, it called for the establishment of a deadline to produce a text-
based negotiating instrument. The ministerial may establish such a date and could
provide guidance on what topics should be reflected in the negotiations.
Intellectual Property Issues49
The Doha Ministerial Declaration called for discussions on implementation of
certain aspects of the TRIPS agreement, including the relationship between TRIPS
and public health (access to medicines), on the creation of a multilateral registration
system for geographical indications of wines and spirits, and on the relationship of
TRIPS to the Convention on Biological Diversity50 and to traditional knowledge and
folklore. The draft ministerial declaration for Hong Kong notes the progress made in
these discussions, but announces no new decisions on them. However, just prior to
the Ministerial, the WTO members announced an agreement on the TRIPS and
public health issue. For a discussion of geographical indications, including the issue
48 (...continued)
Proposals Identified by the Participants in the Negotiating Group on Rules. Note by the
Chairman. August 22, 2003, TN/RL/W/143, pp. 58, 143 [http://www.wto.org].
49 This section was written by Ian F. Fergusson, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
50 The U.N. Convention on Biological Diversity entered into force in 1992 and was signed
by the United States in 1993. However, it has never been ratified by the U.S. Senate. Its
main objectives are the conservation of the world’s biodiversity, the sustainable use of such
diversity, and the equitable distribution of proceeds from the exploitation of such diversity.
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of extending the protection accorded to wines and spirits to other agricultural
products, see the agriculture section (p.9, above).
Access to Medicines
The ability of developing and least developed countries (LDCs) to access
medicines to fight public health epidemics such as HIV/AIDS, tuberculosis, malaria,
and other infectious diseases within the context of the TRIPS Agreement has been
an issue that has bedeviled the Doha Round since its inception. The dispute pits the
needs of developing countries in obtaining access to medicines to fight public health
epidemics against developed country patent holders, who maintain that patent
protection provides financial incentives to innovate new drugs. The negotiations
have taken on a symbolic significance as some developing countries considered
these negotiations as a gauge of the commitment of developed countries to take their
concerns seriously in the negotiations.
In agreeing to launch a new round of trade negotiations at Doha, trade ministers
adopted a “Declaration on the TRIPS Agreement and Public Health” on November
14, 2001. This declaration recognized certain “flexibilities” in the TRIPS agreement
to allow each member to grant compulsory licenses for pharmaceuticals and to allow
each member to determine what constitutes a national emergency, expressly
including public health emergencies. Compulsory licenses are issued by governments
to domestic manufacturers to produce a product without the authorization of the
rights-holder, and within certain disciplines, are consistent with the TRIPS
agreement. Paragraph 6 of the Declaration directed the WTO Council on TRIPS to
formulate a solution to a corollary concern, the use of compulsory licensing by
countries with insufficient or inadequate manufacturing capability.
The “Paragraph 6” solution was reached on August 30, 2003. It consisted of a
Decision and a Chairman’s statement as a clarification. The Decision is in the form
of a waiver from current TRIPS rules with negotiations to follow on a permanent
amendment to the treaty. The Chairman’s statement, which does not have the status
of a binding legal document, reflects what it terms “several key shared
understandings” of Members concerning the interpretation and implementation of the
Decision including a pledge by 11 developing countries not to use the waiver
provision except under “extreme urgency,” and that the Decision’s provision should
not be used for commercial or industrial policy objectives.
The Decision permits the use of compulsory licenses by LDCs and by
developing countries with insufficient manufacturing capabilities to authorize the
manufacture of generic pharmaceuticals to treat “HIV/AIDS, malaria, tuberculosis
and other epidemics” by third-country producers. Compulsory licenses have always
been authorized by the TRIPS agreement for domestic purposes, however, the
agreement did not account for countries without domestic manufacturing capacity.
The Decision will allow such a country to source certain generic pharmaceuticals
from a country with manufacturing capacity by issuing a compulsory license to that
manufacturer, although it may be necessary to do so through the host government.
On the eve of the Hong Kong Ministerial, WTO members agreed on a method
to amend the TRIPS agreement to incorporate the 2003 Decision. Soon after the
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2003 Decision, negotiations bogged down over how to incorporate it into the
agreement: either to amend the actual text of TRIPS, or to incorporate it as an Annex,
and also how to treat the accompanying Chairman’s statement. The United States
had sought a footnote to the TRIPS agreement incorporating both documents, and
had rejected positions that ignore or downplay the Chairman’s statement. The EU
tabled a proposal to include the Decision as an Annex, but without the Chairman’s
statement. Several developing countries such as Argentina, Brazil, India, and South
Africa sought to amend TRIPS itself based on the Decision also without including
the Chairman’s statement. The Decision worked out by the General Council and
approved on December 6, 2005, provided for the TRIPS agreement to be amended
with the inclusion of an annex and an appendix to TRIPS. The Chairman’s statement
was reread at the time of General Council approval without debate; however, it does
not constitute part of the written Decision.51
Traditional Knowledge
A second issue that is subject to Doha round negotiations is the relationship of
the TRIPS agreements to the Convention on Biological Diversity and the protection
of traditional knowledge and folklore. This negotiation was meant to address
concerns by certain developing countries that traditional remedies or genetic
materials that are the basics for pharmaceuticals are being patented by companies in
developed countries without compensation. India, together with Brazil and other
developing countries, proposed language for the draft ministerial declaration that
would commit members to start negotiations to provide greater protection and
compensation for genetic materials and traditional knowledge originating in
developing countries. The language would amend TRIPS to require that patent
applicants disclose the country of origin of biological materials and traditional
knowledge, obtain consent from the country of origin, and share the proceeds with
the country of origin.52 The United States and other developed countries generally
have opposed commencing negotiations to amend TRIPS to address this issue and
the Draft Ministerial declaration did not address this issue.
Outlook for Hong Kong
The WTO General Council approval to amend the TRIPS agreement to
incorporate the 2003 Decision on access to medicines provides a resolution to a
lingering irritant between developing and developed countries. However, no action
is expected on the negotiations concerning traditional knowledge and folklore and
the relationship between TRIPS and the Convention on Biological Diversity.
51 “Implementation of Paragraph 11 of the General Council Decision of 30 August 2003 on
the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
Public Health,” (IP/C/41), December 6, 2005.
52 “India, Brazil, Call for Changes to TRIPS Agreement at Hong Kong,” Inside U.S. Trade,
October 4, 2005.
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Trade Facilitation53
There is no standard definition of trade facilitation in public policy discussions,
but it can be broadly defined as “the simplification, harmonization and automation
of international trade procedures and information flows.”54 Within the context of
trade negotiations, trade facilitation has focused on customs procedures such as fees
and documentation requirements, but it may also involve the environment in which
transactions take place, including the transparency and professionalism of customs
and regulatory environments. Trade facilitation aims to increase the speed and
reduce the cost of trade through more efficient policies and management. Estimates
of potential savings from trade facilitation vary, but studies tend to agree that trade
facilitation becomes more important in reducing overall costs as trade is further
liberalized. As international trade flows increase, national administrations must cope
with increased traffic, straining national budgets. Trade facilitation, by increasing
efficiency, could mitigate this problem. Small and medium enterprises may benefit
from trade facilitation in greater proportion, because they are often priced out of
international trade due to relatively high administrative costs for transporting small
volumes. Developing countries have a particular interest in trade facilitation
discussions because they will have to significantly reform their policies and
procedures to implement an agreement. These reforms are expected to be costly, and
will require financial and technical assistance from developed countries.
Trade Facilitation Negotiations
There has been ongoing multilateral work on trade facilitation for more than
fifty years, including in the context of the GATT. However, trade facilitation did not
enter multilateral trade discussions as a separate policy issue for negotiation until the
Singapore WTO ministerial in 1996, when it was introduced as one of the so-called
Singapore issues. The other Singapore issues, including government procurement,
competition, and investment policy, were dropped from the agenda for the Doha
Development Agenda (DDA) in the July 2004 Framework Agreement. Developing
countries initially opposed including any of the Singapore issues in the Doha round,
but accepted trade facilitation because of its potential benefits to development if
combined with technical assistance. The modalities for trade facilitation include
special and differential treatment (S&D) provisions that reach beyond those of other
agreements.
The Doha Ministerial Declaration established that negotiations on trade
facilitation would take place after members reached a decision to begin such
negotiations, by “explicit consensus,” at the Fifth Session of the Ministerial
Conference in 2003, in Cancun, Mexico. According to the Doha Ministerial
Declaration, the Council on Trade in Goods was to review and clarify relevant
53 This section was written by Danielle Langton, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
54 Carol Cosgrove-Sacks, “How to Achieve Efficient and Open Collaboration for Trade
Facilitation?,” Trade Facilitation: The Challenges for Growth and Development, United
Nations Economic Commission for Europe. (New York and Geneva: 2003).
CRS-28
aspects of Articles V, VIII and X of GATT 1994, and identify the trade facilitation
needs and priorities of members, particularly developing country members. The July
Framework Agreement includes modalities, but certain key negotiating issues are yet
to be resolved. Since 2004, trade facilitation negotiations have reportedly been
among the smoothest of the WTO negotiating areas. Members began to submit
proposals to revise the relevant GATT articles in early 2005, and the trade facilitation
negotiating group has compiled these proposals to facilitate text-based negotiations,
which have yet to begin. Developed countries and multilateral institutions have
continued to provide technical assistance to developing countries on an ad hoc basis.
The modalities described in the July 2004 Framework Agreement cover three
core negotiating issues of trade facilitation: improving the relevant GATT articles;
providing technical assistance to developing countries; and identifying and
considering the needs and priorities of all countries, including special and differential
treatment (S&D) for developing countries. S&D has traditionally meant longer
implementation periods for developing countries, but the framework goes further to
state that the extent and timing of entering into commitments shall be directly related
to the capabilities of developing country members. Also, the members agreed in the
framework that developing countries will not be required to undertake infrastructure
investments beyond their means. The Framework encourages developed country
members to provide technical assistance to developing countries, but does not
provide specifics on how much to spend or specific areas of assistance. It also does
not specifically state whether negotiations will result in guidelines or binding rules
in trade facilitation.
Reviewing and clarifying the GATT 1994 Articles V, VIII, and X is a major
focus of the negotiations. Each of these articles concern different aspects of trade
facilitation, and they were initially agreed to prior to the formation of the WTO.
Article V describes the rights of goods passing through a territory between countries.
Article VIII requires efficient and fair fees for moving goods in and out of countries.
Article X requires transparent trade regulations and the equal enforcement of these
regulations, including a judicial review process. WTO members have submitted
proposals for strengthening these articles, and their proposals will form the basis for
text-based negotiations to take place sometime after the Hong Kong Ministerial.
Negotiating Issues in Trade Facilitation. An agreement on trade
facilitation may not be as straightforward as it appears from the modalities in the July
2004 Framework Agreement. Trade facilitation may include “behind the border”
measures to tackle corruption and other administrative issues, and these measures are
interrelated with other efficiency-enhancing measures beyond trade facilitation. In
developing countries, agreeing on reforms for trade facilitation may require
discussions that go beyond the traditional realm of trade negotiations. Trade
facilitation measures may require passing new legislation, amending existing laws,
or establishing new domestic institutions. It may be difficult for trade negotiators to
agree to such measures, which will have significant costs and may not be possible
without technical assistance from developed countries.
The potential cost of trade facilitation measures is daunting for many developing
countries. Costs vary by country depending on the degree of change needed, and are
difficult to estimate. The poorest countries may require the greatest change to
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implement trade facilitation measures, and are the least able to afford the costs of
such change. It is also not known how much must be spent on trade facilitation to
begin to realize its benefits, and this amount is likely to vary by country. Trade
facilitation may entail costs in the following areas: new regulation, institutional
changes, training, equipment, and infrastructure. The question of who will pay the
potentially high costs of trade facilitation has not yet been fully answered. The July
2004 Framework Agreement states that developed countries should provide support
to developing countries to implement trade facilitation measures, and that developing
countries will not be required to implement trade facilitation measures that they do
not have the means to implement. The Agreement explicitly discusses the costs
relating to infrastructure investments, but is not as explicit about other significant
costs of trade facilitation measures.
Unlike in other negotiating areas, technical assistance is an integral component
of the trade facilitation negotiations. Technical assistance is important to trade
facilitation negotiations because of the potentially high costs and capacity
requirements for implementation. One of the main sticking points in technical
assistance for trade facilitation is a “chicken and egg” problem: before committing
to any binding agreement, developing countries would like developed countries to
provide detailed technical assistance plans. Conversely, many developed countries
insist on seeing more concrete commitments from developing countries before they
will provide details about plans for technical assistance. There are other issues that
may arise within the discussions on technical assistance. There are concerns about
coordination of technical assistance activities, and integration into general
development strategies. Developing countries would prefer a more comprehensive,
integrated approach, but it is easier for developed countries to provide “one-off”
activities without significant coordination. There is also concern about how a
country’s capacity to implement trade facilitation measures will be determined.
Allowing countries to assess their own capabilities could present problems, if they
argue a lack of sufficient capacity in order to avoid trade facilitation obligations.
Meanwhile, many countries would likely balk at delegating that authority to a
committee or other entity.
Finally, there is no consensus on whether an agreement on trade facilitation
would result in rules subject to WTO dispute resolution, or whether an agreement
would merely comprise guidelines for best practices. Developing countries prefer not
to be subject to binding trade facilitation rules, but the United States and other
developed countries believe that a rules-based agreement would be most effective to
ensure that measures are implemented. However, some experts observe that outside
pressure from binding obligations will have no tangible impact if developing
countries lack the capacity implement the obligations. Insofar as technical assistance
provided during the negotiations may increase the capacity of developing countries
to take on trade facilitation obligations, it may also have a positive effect on the
willingness of developing countries to consider binding commitments. Technical
assistance has already had an impact on developing country attitudes toward trade
facilitation, because as developing countries implement trade facilitation measures
they become more aware of the potential benefits of a trade facilitation agreement.
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Outlook for Hong Kong
According to the WTO Director General Pascal Lamy, trade facilitation is an
area where there is a high degree of convergence. This does not mean that an
agreement on trade facilitation is imminent, or that any significant commitments are
likely to emerge from the Hong Kong ministerial. What it does mean is that member
countries are moving forward with the work outlined by the July 2004 Framework
Agreement, and they have relatively few disagreements about how to proceed. The
upcoming ministerial may result in a more specific agreement on when to begin text-
based negotiations for trade facilitation. There may also be more specific
commitments on technical assistance or special and differential treatment. The draft
Report by the Negotiating Group on Trade Facilitation to the Trade Negotiating
Committee summarizes the work accomplished thus far and what remains to be done,
and it includes a list of the proposals that have been tabled. The Report is included
as Annex E to the Draft Ministerial Text.
Special and Differential Treatment55
Through Special and Differential Treatment (S&D), developing countries are
allowed favorable treatment in the negotiations and flexibility in implementing WTO
agreements. This flexibility usually takes the form of longer implementation periods,
but may also include partial implementation, such as reducing tariffs to a lesser
degree than developed countries. Special treatment may include preferential market
access and technical assistance for negotiating and implementing agreements. S&D
is negotiated within each of the specific negotiating areas, such as agriculture and
services, but also within a Special Session of the Committee on Trade &
Development (CTD).
S&D is based upon two main premises: first, to assist developing countries’
transition into the global trading system; and second, to allow developing countries
to maintain trade policies supportive of their development strategies. Some experts
question whether S&D is beneficial for development at all. Economists point out
that developing countries gain the most from trade negotiations in liberalizing their
own markets, and S&D is often used to avoid liberalization. On the other hand, trade
liberalization is known to redistribute income among different sectors in a country,
and while the net effect may be positive for economic growth some segments of the
population may suffer significant hardship. S&D may help reduce the hardship
resulting from trade liberalization in developing countries, and thus promote
development friendly outcomes.
There is no official list of developing countries that are eligible for S&D, with
the exception of least developed countries (LDCs). LDC status is based upon income
and determined by the United Nations, and LDCs may receive further preferential
treatment in WTO agreements. Aside from LDCs, developing countries in the WTO
are self-identified, and they are all eligible for the same S&D provisions. Most
55 This section was written by Danielle Langton, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
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developed country WTO members favor differentiating developing countries into
multiple tiers, because developing countries vary widely in their income and
development levels. As an example, Brazil and South Africa are currently eligible
for the same S&D provisions as lower income developing countries such as
Nicaragua and Ghana. Developed countries argue that they could make S&D
provisions deeper and more meaningful for developing countries if there were
multiple tiers of S&D provisions. Developing countries, however, are reluctant to
consider that option. The lower income developing countries reportedly do not want
to lose the negotiating leverage gained from being grouped with the higher income
countries, and the higher income countries do not want to risk losing eligibility for
S&D provisions.
S&D Negotiations in the Doha Round
Prior to the Doha Ministerial, WTO member countries criticized the overly
general and ineffective application of S&D provisions contained in the Uruguay
round. In response, the Doha Ministerial Declaration mandated that all S&D
provisions should be “reviewed with a view to strengthening them and making them
more precise, effective and operational.” The CTD was tasked with fulfilling the
Doha mandate on S&D. As the discussions progressed, significant divisions between
developing and developed countries on S&D became clear. One important point of
divergence has been whether to negotiate the cross-cutting issue of establishing
multiple tiers of S&D provisions for countries at different development levels. The
developing countries have held that S&D discussions should focus entirely on
agreement-specific S&D proposals, while developed countries maintain that the
cross-cutting issues are important. The July 2004 Framework Agreement dealt with
this divide by instructing the CTD to complete the review of all outstanding
agreement-specific proposals mandated by the Doha declaration, and to address all
other outstanding work, including on the cross-cutting issues. It further instructed
the CTD to issue a report to the General Council with recommendations for a
decision by July 2005, a deadline that was not met.
In order to move beyond the deadlock on S&D, members agreed to prioritize the
five agreement-specific proposals pertaining specifically to LDCs in preparation for
Hong Kong. They hoped to reach consensus on the LDC proposals in time for the
Hong Kong ministerial, but there is still reportedly disagreement on the language of
these proposals. The most controversial proposal states that developed country
members should provide duty free and quota free market access for products
originating from LDCs. The disagreement over this proposal is focused on whether
this access should be binding and applicable to all products and all LDCs. The
United States has indicated that it is willing to accept this proposal except in the case
of textiles, because of concerns about textile imports from Bangladesh. The other
four proposals are: (1) to require the General Council to respond within 60 days to
requests from non-LDCs for waivers to implement measures in favor of LDCs; (2)
to exempt LDCs from certain obligations under the Agreement on Trade-Related
Investment Measures (TRIMs); (3) to link LDC obligations with their capacity to
implement the obligations; and (4) to urge bilateral and multilateral donors to ensure
that conditions for assistance to LDCs are consistent with their rights and obligations
under the WTO.
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Implementation Issues. Developing countries have concerns about the
implementation of commitments made during the Uruguay round of WTO
negotiations. Some of these issues were resolved at the Doha Ministerial, but many
issues remain outstanding. The concerns tend to deal with the implementation of
agreements in a way that is beneficial to and does not cause undue hardship to
developing countries. In many cases the agreement language does not specify the
treatment of developing countries, and the actual implementation of the agreement
has been contrary to developing country expectations. Implementation issues are
found within a wide variety of negotiating areas and are dealt with primarily by the
committee responsible for the relevant negotiating area. Outstanding implementation
issues are found in the area of market access, investment measures, safeguards, rules
of origin, and subsidies and countervailing measures, among others. Some of the
implementation issues may possibly be resolved by clarifying S&D provisions.
However, since the work in clarifying S&D provisions is proceeding slowly
negotiators may focus on some of the issues from an implementation standpoint.
Technical Assistance. Trade capacity building (TCB) and technical
assistance (TA) are discussed within the individual negotiating areas as well as
within the CTD. TCB is provided to developing countries to strengthen their
institutional capacity to participate in WTO negotiations, meet WTO obligations, and
integrate more fully into the global economy. TCB is provided from donors on both
a bilateral and a multilateral basis. The WTO provides workshops on various WTO
topics, maintains a global TCB database, and manages four major funds for financing
TCB activities (the Global Trust Fund; the Doha Development Agenda Trust Fund;
the JITAP Common Trust Fund; and the Integrated Framework Trust Fund). Critics
have commented that TCB lacks coordination in the WTO, and despite the variety
of funding sources the centralized sources of TCB funds are inadequate. In 2003,
total contributions to the TCB trust funds totaled $45 million. In that same year, total
bilateral TCB commitments equaled approximately $1.46 billion. Multilateral
commitments to TCB equaled approximately $1.29 billion in the same year.56
Another area of controversy is whether donors should commit to providing TCB as
part of a WTO agreement, or whether TCB should simply be encouraged in the
agreement.
Outlook for Hong Kong
The Ministerial may consider the five agreement -specific proposals concerning
the LDCs, the most controversial of which concerns the extension of duty and quota-
free access for all LDC products. The Ministerial may also set a deadline for the
General Council to take action on implementation issues.
56 2004 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity
Building. December 2004.
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Dispute Settlement57
The WTO Understanding on Rules and Procedures for the Settlement of
Disputes (Dispute Settlement Understanding or DSU), which entered into force
January 1, 1995, with the Uruguay Round package of agreements, provides the legal
basis for dispute resolution under virtually all WTO agreements and is the primary
means of enforcing WTO obligations. The DSU introduced significant new elements
into existing GATT dispute settlement practice intended to strengthen the system and
facilitate compliance with dispute settlement results. In particular, the DSU makes
the establishment of a panel, the adoption of panel and appellate reports, and the
authorization of requests to retaliate virtually automatic, and adds a right to appellate
review of panel reports on issues of law and legal interpretation. Its system of
deadlines and timelines expedites proceedings at various stages of the process, seeks
to ensure that compliance with adverse panel reports is achieved, if not immediately,
within “a reasonable period of time,” and allows disputing parties to exercise their
rights under the DSU by defined dates. Certain unilateral actions in trade disputes
involving WTO agreements, such as suspending WTO concessions or other
obligations without multilateral authorization, are prohibited. The system has been
heavily used, the WTO Secretariat reporting 335 complaints filed between January
1, 1995 and November 21, 2005; roughly half involve the United States either as a
complainant or defendant.
Current dispute settlement negotiations, which are taking place in the Special
Session of the WTO Dispute Settlement Body (DSB/SS), are an extension of talks
begun under a Uruguay Round Ministerial Declaration that called on WTO Members
to complete a full review of dispute settlement rules and procedures within four years
after the WTO Agreement entered into force, and to decide at the first WTO
ministerial meeting held after completion (in effect, the 3rd Ministerial Conference
held in Seattle in late 1998) whether to continue, modify or terminate them. While
there was much discussion of possible revisions and a draft text containing
amendments to the DSU was circulated at the Seattle Ministerial, consensus could
not be reached at that time. No decisions on reforms were taken by WTO Members
subsequent to the Seattle meeting and the future of the review remained unclear until
WTO Members agreed at the Doha Ministerial Meeting in November 2001 to
continue negotiations on “improvements and clarifications” of the DSU, with the aim
of reaching agreement by the end of May 2003 and bringing the results into force “as
soon as possible thereafter.” Further, dispute settlement negotiations would not be
conducted, concluded, or their results brought into force as part of the single
undertaking planned for Doha negotiations as a whole.
In the absence of probable consensus by the May 2003 deadline, the outgoing
Chairman of the SS/DSB, Peter Balás (Hungary), drafted a Chairman’s Text of
proposed amendments to the DSU dated May 28, 2003, in which he incorporated
numerous proposals, including those involving consultation procedures, third-party
rights, procedures for terminating panels before they complete their work, remand
authority for the Appellate Body, sequencing of requests for authorization to retaliate
57 This section was written by Jeanne J. Grimmett, Legislative Attorney, American Law
Division.
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with requests for compliance panels, procedures for terminating retaliatory measures,
awards for litigation costs, and special provisions for developing countries. No
action was taken on the document and in July 2003, the WTO General Council
extended the talks until May 31, 2004. With additional proposals submitted but little
progress by the new date, the WTO General Council agreed in the August 2004
Doha Work Program that work in the dispute settlement negotiations would continue
on the basis set out by the new DSB/SS Chairman David Spencer (Australia), in his
June 2004 report to the WTO Trade Negotiations Committee. The report stated that
there was “agreement among Members that the Special Session needs more time to
complete its work, on the understanding that all existing proposals would remain
under consideration and bearing in mind that these negotiations are outside the single
undertaking.” In addition, the Chairman did not recommend a specific target date for
completion, noting, however, that one might be considered later.
Among specific concerns, an early problem raised under the DSU, originally
identified during the implementation phase of the U.S.-European Communities (EC)
banana dispute, was that of “sequencing,” that is, a gap caused by the failure of the
DSU to integrate Article 21.5, which provides that disagreements over the existence
or adequacy of compliance measures are to be decided by recourse to DSU
procedures, with the processes and deadlines of Article 22, which permits the
prevailing party in a dispute to request authorization to retaliate within 30 days after
the compliance period ends if the defending party has not complied with its
obligations by that time. The EC argued that a full compliance proceeding (including
consultations) was called for; the United States argued that, given the 30-day
deadline for retaliation requests, it would lose its right to request authorization to
retaliate if it waited for a compliance panel to complete its work. While sequencing
remains an issue in the negotiations, parties to disputes have resolved existing
difficulties by entering into ad hoc bilateral agreements in specific disputes under
which, for example, the complaining party requests both the establishment of a
compliance panel and authorization to retaliate, the defending party objects to the
level of retaliation proposed — an action that automatically sends the request to
arbitration — and the arbitration is suspended pending completion of the compliance
panel process (including any appeal). Another case-based problem arose with the
enactment of U.S. “carousel” legislation in May 2000, under which the USTR is
required periodically to rotate lists of items subject to authorized trade retaliation
unless certain exceptions apply, the legislation in large part a reaction to the EC’s
failure to comply with the WTO decision faulting the EC’s prohibition on hormone-
treated beef. The EC argued that changing a list would be a unilateral action not
authorized under the DSU.
Along with the issues just described, the negotiations have taken up a broad
range of other topics, with over 50 working documents publicly circulated by
Members and other informal proposals and compilations made during the course of
the talks. The United States has generally sought increased transparency and access
to the process through open meetings, timely access to submissions and final reports,
and guidelines for amicus briefs. It has also proposed shorter time frames (in tandem
with clarifying the sequencing issue), and has called for steps that would give
Members more control over the process, such as requiring the WTO Appellate Body
to issue interim reports for comment by disputing parties; allowing the deletion from
an appellate report, upon agreement by the disputing parties, of findings that they
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view as not necessary or helpful to resolving the dispute; and giving parties the right
to mutually suspend panel and appellate proceedings to allow them to work on a
solution to the case. In October 2005, the United States also suggested draft
parameters concerning both the use of public international law in WTO dispute
settlement and the proper interpretive approach for use in disputes. Its proposed
interpretive guidelines are aimed at ensuring that WTO adjudicative bodies neither
supplement nor reduce the rights and obligations of WTO Members under WTO
agreements and, among other things, describe types of “gap-filling” that should only
be addressed through negotiations, including a panel’s reading a right or obligation
into the text of an agreement by, for example, extrapolating from a different
agreement provision.
The EC has proposed, among other things, permanent panelists, remand
authority for the Appellate Body, a prohibition on carousel retaliation, enhancing the
availability of compensation before resort to retaliation, and a formalized way to
terminate multilateral authorization to retaliate. Japan has sought, inter alia, greater
enforcement options and a larger Appellate Body membership. Canada has proposed
procedures to protect business confidential information and the creation of a panel
roster. The EC, Japan, and Canada have also proposed varying degrees of
transparency in dispute proceedings. Proposals by developing country Members
generally reflect Members’ lower level of capacity and a desire to have developing
country interests reflected to a greater degree in panel and appellate reports and
dispute proceedings as a whole. These Members have proposed, among other things,
extended timelines in cases in which they are involved, including extensions for
consultations, brief filing, and the implementation of adverse results; provisions to
ensure that a developing country panelist is included in all panels in which a
developing country is a disputant, and the possible authorization of collective WTO
retaliation where a developing or less-developed country Member is a successful
complainant. They have also proposed ways of dealing with financial and human
resource limitations in disputes, including increased technical resources for
developing countries and the awarding of litigation costs to a developing country
Member that has prevailed in a case. Developing countries have been critical of
some transparency proposals, such as allowing non-Members to submit amicus briefs
to panels, on the ground that non-Member participation in disputes would undermine
the intergovernmental character of the dispute settlement process and that added
requirements that might be placed on Members, such as responding to amicus briefs
within prescribed timeframes, would be particularly burdensome to developing
countries. While developed country Members submitted revised proposals, generally
on an informal basis, during recent dispute settlement negotiations, no revised
developing country proposal was put forward during this time.
Outlook for Hong Kong
In his November 25, 2005, report to the Trade Negotiations Committee,
Chairman Spencer communicated that over the past 18 months of negotiations there
had not been consensus of the sort needed to establish a foundation for an agreement.
Instead, he noted, “the work of the Special Session has been based primarily on
initiatives by Members to work among themselves in an effort to develop areas of
convergence to present to the Special Session as a whole.” The report states that
during this period contributions and discussions had taken place on topics such as
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“remand, sequencing, post-retaliation, third-party rights, flexibility and Member
control, panel composition, time-savings and transparency.” For the future, he
continued, “the onus will remain on participants in the negotiations to continue to
develop areas of convergence so as to lay the basis for a final agreement to improve
and clarify the DSU.” Following the Chairman Spencer’s suggestions, the revised
Draft Ministerial Text issued December 1, 2005, takes note of the progress made in
the dispute settlement talks so far and directs the DSB/SS “to work towards a rapid
conclusion of the negotiations.” However, no agreement on dispute settlement issues
is expected at Hong Kong. Because the Draft Ministerial Text reaffirms the
Decisions and Declarations adopted at Doha and takes into account the General
Council Decision of August 2004, dispute settlement negotiations apparently will
continue on their separate track, with results to be adopted separately from any Doha
single act.
Environment and Trade58
In general, environmental issues are not expected to be a major focus at the
Hong Kong ministerial meeting, given the predominance of other priority issues.
However, the elements of the environmental paragraphs in the Doha Declaration will
be discussed, with the likelihood that attention in the environmental area will focus
on the issues of environmental goods and services, and of fisheries.
When the WTO was established in the 1994 Marrakech Agreement,
environment was a prominent and often controversial issue. Issues related to
environment and trade were closely linked in 1994 to the somewhat amorphous need
for “sustainable development.” And in April 1994 a “Decision on Trade and
Environment” accompanied the Marrakech accords, stating: “There should not be,
nor need be, any policy contradiction between upholding and safeguarding an open,
non-discriminatory and equitable multilateral trading system on the one hand, and
acting for the protection of the environment, and the promotion of sustainable
development on the other.” The issue was resolved in 1994 with the establishment
of the Committee on Trade and Environment (CTE), which has been meeting ever
since on a regular basis to identify the relevant issues.
The Doha Ministerial Declaration in 2001 included environmental elements in
paragraphs 31 and 32. Paragraph 31 states agreement for negotiations “with a view
to enhancing the mutual supportiveness of trade and environment...” and identified
three issues: (i) the relationships between WTO rules and trade obligations in
multilateral environmental agreements (MEAs), limiting the scope of the discussion
to the relationships only among those nations that are parties to the MEAs; (ii)
procedures for regular information exchange between MEA Secretariats and the
relevant WTO committees; and (iii) the reduction and/or elimination of tariff and
non-tariff barriers to environmental goods and services. This paragraph also states,
“We note that fisheries subsidies form part of the negotiations provided for in
58 This section was written by Susan R. Fletcher, Specialist in Environmental Policy,
Resources, Science and Industry Division, and Jeanne J. Grimmett, Legislative Attorney,
American Law Division.
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paragraph 28,” i.e., negotiations on WTO rules, a mandate covering anti-dumping,
subsidies, and countervailing measures.59
The CTE has held extensive discussions of the relationship between MEAs and
WTO rules. It has been noted in these discussions that there has not yet been a
dispute involving an MEA and WTO rules, and there appears to be wide agreement
that when all parties are parties to an MEA, the MEA rules should apply.
Complications develop when a possible dispute might arise between parties and non-
parties to an MEA; discussions continue on this and other technical legal points.
However, it appears unlikely that discussions at the Hong Kong ministerial will
attempt to resolve outstanding issues related to this negotiating element.
Outlook for Hong Kong
The Draft Ministerial Text issued November 26, 2005, and revised on December
1, 2005, reaffirms the paragraph 31 Doha mandate “aimed at enhancing the mutual
supportiveness of trade and environment” and calls upon Members to intensify
negotiations on all matters listed in the paragraph. It recognizes the progress that has
been made in the CTE on the relationship of WTO rules to MEA trade obligations
and the work undertaken toward inter-organization information exchange. Finally,
it recognizes recent work regarding environmental goods and services through
numerous submissions and discussions in the CTE and proposes to instruct Members
either to continue their work by developing commonality on various approaches to
negotiations in the area or else to compete work by 2006 by identifying
environmental goods for the reduction or elimination of existing tariff and non-tariff
barriers.
In addition, the Draft Ministerial Text, as it addresses rules negotiations, notes
that broad agreement exists that the Negotiating Group on Rules should strengthen
disciplines on subsidies in the fisheries sector, including prohibiting certain forms of
subsidies that contribute to overcapacity and over-fishing. It calls on participants “to
undertake further detailed work to, inter alia, establish the nature and extent of those
disciplines, including transparency and enforceability.” The Draft also states that
“appropriate and effective” special and differential treatment of developed and less-
developed country Members “should be an integral part” of these negotiations,
“taking into account the importance of this sector to development priorities, poverty
reduction, and livelihood and food security concerns.” Finally, the Draft Ministerial
Text, in addressing negotiations on Non-Agricultural Market Access (NAMA), notes
that limited discussion has been held in the NAMA Negotiating Group regarding
environmental goods since July 2004, but that the CTE has undertaken substantial
work on the issue during this period. It further states that close coordination between
the two negotiating groups would be needed in the future and that “a stock taking”
of the CTE’s work by the NAMA Negotiating Group would be required at the
appropriate time.
59 Paragraph 32 outlines instructions for discussions in the CTE — not negotiating items —
and includes the effect of environmental measures on market access; relevant provisions of
the Agreement on Trade-Related Aspects of Intellectual Property Rights; and labeling
requirements for environmental purposes.