Report from Geneva

By July 22, 2008Policy Experts, Trade

Negotiations at the World Trade Organization (WTO) “Mini-Ministerial” meeting called by Secretary-General Lamy technically started Monday, but real negotiations did not start until today. Lamy called the meeting in a gamble to break the deadlock between industrial and developing countries over agriculture and industrial trade.

In what is called “Green Room” meetings, ministers from key countries negotiate with each other in an attempt to narrow differences and increase the points of agreement. These green room negotiations have started on agricultural trade, and will move to industrial trade (Non-Agricultural Market Access – NAMA) later today. Then, on Thursday, there will be a “signaling conference” for services in which countries are expected to signal what more they are willing to do to liberalize trade in services – which, until now has been virtually nothing.

Both the European Union and the United States advanced new agricultural offers – the EU raising the amount of its subsidy cut to 60 percent, and the United States cutting its agricultural subsidy ceiling to $15 billion. (Ambassador Schwab statement.) Unfortunately, neither of these offers appeared to have the desired effect—kickstart this week’s negotiations. Brazil sneered at them, and that pretty much set the tone. Things will become even more fun when the other developing country leader – India’s Trade Minister Kamal Nath arrives tomorrow. He was in India today to participate in a Parliamentary vote of confidence, which the government won.

The NAM’s principal activities in Geneva have been to work close in with U.S. NAMA negotiators, and I discussed NAMA strategy with Dan Price (Assistant to the President for International Economic Affairs and Deputy National Security Advisor for International Economic Affairs), and Deputy USTRs Peter Allgeier and John Veroneau. We all agree that the key to a NAMA deal that would provide new market access for U.S. manufacturers is the sectoral agreements. The overall tariff-cutting formula options that have been proposed are simply too weak to cut deeply into the tariffs of the high-tariff countries, particularly Brazil, China, and India. In rough terms, the formula deal would have the United States cut its industrial tariffs in half, while the high-tariff countries would cut theirs one-tenth – and even that would not occur in some cases until 10 years out.

Sectoral agreements, on the other hand, particularly if they take tariffs to zero, would provide real market access. The NAM has been pushing sectorals for seven years, initiating the zero tariff coalition years ago, constructing a tariff model to simulate the results of various negotiating formulas, and buttonholing anyone who would listen.

Now, sectorals have finally become the name of the game. The big news is that the European Union has come on board and insisted there have to be sectorals in order to get enough balance.

But the key high-tariff countries say “no”. They want to stick to a weak formula cut that will shelter them from cutting tariffs a lot. And that is where the dividing line is on NAMA. The Industrial countries are insisting there have to be sectorals if there is to be a deal, and the developing countries are insisting there can be no deal with sectorals. Something like the irresistible force meeting the immovable object.

The negotiating strategy on sectorals that will be played out by the U.S. negotiators is a good one. Can’t discuss it at this point, but it is good, and has a reasonable chance of succeeding. And our negotiating team is the best. So with a great team and a great game plan, it can work. But if the other team simply does not want to play, then nothing can work.

We will know more tomorrow.

Frank Vargo, NAM’s man in Geneva
July 22, 2008

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