Report from Geneva, IV

By July 25, 2008Policy Experts, Trade

Sorry to be posting this so late, but the U.S. Government briefing on today’s developments occurred very late, and I stuck around after that to get some more of my points in.

What happened today is that Director-General Lamy worked with the “Group of Seven” (G7) core countries to agree on an outline of points where there have been key differences. The text is a positive development, but “breakthrough” is too strong a word because at this stage it is only being forwarded to the broader group of countries participating in the “green room.”  They may or may not endorse it, and will probably seek some changes.  In addition, while of the Group of Seven core countries, India did not veto the text it indicated it was being forwarded without India’s approval. Moreover, the text is really only an outline of key points. It is not a self-contained text and if agreed by all, its points would be incorporated into the existing agricultural and NAMA texts.

That the text was developed and passed the Group of Seven hurdle, however, is a very positive step – and without this development the Mini-Ministerial quite probably would be coming to an end.  The text allows forward movement to the next step, and of course each step has its own perils.

Regarding the content of the Non-Agricultural Market Access (NAMA) text, the content of the three alternative tariff formulas and the amount of product exclusions remains a problem.  The anti-concentration content also remains a problem.   I will go into greater detail tomorrow.

The non-tariff barrier part of the existing negotiating text was not altered in any way, which is fine since it has not been controversial or opposed by anyone and actually ha  ne of the best chances of being approved pretty much as is – including the auto industry component.

The sectoral part was strengthened significantly by noting that certain (undesignated) countries will agree to participate in at least two sectorals. That is a big change from the vague “maybe we will, maybe we won’t” earlier position. Also, an incentive was put into the language that developing countries could be allowed to have a slightly weaker tariff cutting formula for the rest of their imports if they participated in a sectoral. This is to the U.S. advantage since so much more market access is gained by having countries participate in sectorals than is lost by a one-point tariff formula change.

The sectoral component is only worth something if key countries participate. The idea is to have Brazil, China, and India participate in sectorals. If they do not, the sectoral in itself will produce relatively little. The idea behind the sectorals is to produce more balance for the United States. If the country participation or the industry sectors included do not give the United States enough balance at the “end of the day” when the results of formula cuts, NTBs, and sectorals are added up, then there is no deal.  And the tariff cutting formulas are pretty weak.

Don’t forget that what is being discussed in Geneva now are just the “modalities,” the guidelines for the negotiations – not the negotiations themselves. Trade negotiations never follow a straight line, and their various upward and downward movements should not be seen too dramatically.

However, today’s development was positive and indicates for at least six of the seven “Group of Seven” countries a desire to try to reach an agreement.  That counts for a lot. But the outlier – India, could still take the whole thing down.

NAM’s Man in Geneva
Frank Vargo

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