Inside US Trade | September 14, 2001
To help break two deadlocks in the preparations for the next ministerial of the World Trade Organization, Quad countries are working on a joint response to the demands of developing countries for more benefits in the implementation of existing trade agreements and are trying to figure out an indirect way of incorporating some of the European Union's trade-related environmental issues into the agenda for negotiations.
The U.S. opposes most of the substantive EU demands on environment, but is willing to finesse the issue by working on language for a potential ministerial declaration on sustainable development, informed sources said. However, the environmental issue is divisive within the Quad, as well as with other WTO members, a senior official said.
Both the effort on the environment and implementation will be reflected in Quad papers that will feed into the multilateral preparation process, with the implementation paper expected by the middle of next week. It is unclear to what extent the paper would go beyond an earlier Quad implementation paper that had been almost universally rejected as insufficient. The new Quad paper will outline what steps could be taken before the ministerial, at the ministerial and as part of new negotiations to address developing countries' implementation demands, trade officials said.
The Quad response would feed into a paper being prepared by the chairman of the General Council for WTO members on September 24. Chairman Stuart Harbinson also expects to float elements of a draft declaration in the beginning of October.
The Quad work flows out of an informal ministerial held in Mexico early this month, where agriculture, implementation and environment were identified as some of the hardest problems remaining.
Senior U.S. and EU officials have highlighted the good atmosphere at the meeting, but other trade diplomats pointed out that there have been no substantive concessions from key trading partners to match the positive mood. Neither the U.S. nor the EU clearly indicated what positions they were willing to change to make a new negotiation possible, these critics said.
At the Mexico meeting, EU trade commissioner Pascal Lamy gave a general indication of flexibility on agriculture. U.S. Trade Representative Robert Zoellick did not rule out that the U.S would agree to have antidumping rules on the agenda, but neither did he indicate the U.S. would accept this agenda item, participants said. EU officials have been pointing to that fact as an indication of U.S. flexibility.
Lamy indicated that he could see a ministerial declaration on agriculture that would go beyond Article 20 of the Uruguay Round agriculture agreement, provided it did not demand the elimination of export subsidies. He also indicated acceptance of the Uruguay Round model that an agriculture agreement reflect concessions on domestic and export subsidies as well as more market access.
However, Lamy did not indicate how far the EU could go and to what end date and benchmarks the EU could agree for the negotiations. A benchmark would define when countries would begin the actual negotiations with the exchange of negotiating offers. Japan has taken a hardline on the benchmark issue and demanded that if it is to be included in an agriculture text, it must also be set for other areas of negotiations, according to a senior official. A U.S. trade official briefing congressional staff last week highlighted Japan's hardline position in the agriculture negotiations as a problem, according to informed sources.
Lamy's Mexico comments were not directly cleared with EU Agriculture Commissioner Franz Fischler in advance of the Mexico meeting, but the two commissioners have been in contact on the Qatar preparation continuously, according to informed sources. Fischler, who is the EU's chief agriculture negotiator, has in the past insisted that a new ministerial declaration must use Article 20 but could include a timeline for concluding the negotiations.
At this point, Fischler would be able to accept a declaration that "reflects" Article 20 and is compatible with the EU's policy reflected in Agenda 2000, sources said. That means it must reflect the fact that the EU will not eliminate support for the agriculture industry, but will move increasingly towards decoupling it from production, an official said. This means an expansion of payments not considered trade distorting, such as payments to farmers for animal welfare measures, he said.
A senior EU official late last week did not reveal in a member state briefing how the EU wants to handle the issue of benchmarks and a timeline or the controversial issue of multifunctionality, sources said. But he clearly indicated that he expects a final ministerial declaration text to end up between a draft Seattle ministerial declaration that was very specific about the goal of agriculture negotiations and Article 20, which is very general, sources said.
U.S. Trade Representative Robert Zoellick said at a Sept. 4 press conference that the Mexico ministerial pointed to ways for solving the pending disputes. However, he implied the U.S. is somewhat above the fray by saying that the U.S. is in "kind of an in between position" since it is not a demandeur in many issues and is "primarily interested" in a market access round. Both the EU and Japan have rejected such negotiations as narrow.
Zoellick said that he emphasized the importance of moving forward on agriculture at the ministerial, but that he is also "trying to help Pascal move some of his issues" in order to help him reach a deal acceptable to EU constituencies. Informed sources said Zoellick has signaled to trading partners that he needs agricultural reforms internationally in order to keep congressional demands for more farm aid in check.
At the Mexico meeting, the U.S. floated the idea that the EU, U.S. and members of the Cairns Group should begin work on drafting a potential agriculture text for a ministerial declaration, but it is unclear to what extent that has been accepted. Both the EU and Japan had initially been interested in putting off any decisions on the agriculture text until the end of the preparation process.
In addition, the U.S. and EU are also working on a draft proposal for the ministerial declaration regarding the obligations of the Agreement on Trade Related Intellectual Property Rights and countries' rights to protect public health against infectious diseases. Similarly, developing countries are working on drafting a TRIPs and health statement in the expectation that this would lead to a separate declaration to be issued at the next ministerial, sources said. The U.S. and EU are at odds with developing countries over language drafted by Harbinson calling for restraint in bringing WTO challenges to public health measures under TRIPS rules (Inside U.S. Trade, Aug. 31, p.15).
Senior Quad officials were expected to meet late this week in Paris in the margins of a trade committee meeting of the Organization for Economic Cooperation and Development. Those plans were made before the terrorist attacks took place in the United States.
Senior-level officials from capitals were expected to meet in Geneva in early October in order to prepare an informal meeting of trade ministers in Singapore. That meeting was initially scheduled for Oct. 6 & 7 but Zoellick this week expressed a preference to have it take place a week later on October 14 & 15 following a meeting of the Asia Pacific Economic Cooperation forum, informed sources said.
Most of these dates were discussed before the terrorist attack on the United States on Sept. 10, which has served to delay several trade meetings between the U.S. and trading partners as well as multilateral sessions.
Informally, Geneva trade officials are speculating whether the Nov. 9 to 13 ministerial will be moved from Qatar, especially if the U.S. identified the source of the terrorist attack in the Middle East and launched a counterattack. However, a spokesman for the WTO said this week that nobody had asked the director general formally to move the ministerial.
The EU is pressing the environmental issue against almost universal opposition from WTO members including the U.S. The U.S. particularly opposes the EU effort to strengthen countries' ability to take precautionary health and safety measures in the face of uncertain science. The U.S. also does not want to expand the WTO rules to allow government sanctioned eco-labels, and in general wants to little negotiating on environment in the WTO beyond pursuing changes in trade policies that would also have an environmental benefit.
A USTR official on Sept. 7 told the House Ways & Means Committee that it is apparent the EU's demands on incorporating the precautionary principle into WTO agreements is not going anywhere and that the U.S. hopes Lamy would convey this message to EU member states in a Sept. 7 informal meeting of trade ministers, informed sources said.
Separately, a senior EU official hinted to member states that the EU will have to back off its direct demands for the precautionary principle and eco-labeling by saying that the issues could remain on the agenda in a ministerial declaration if they were not directly addressed that way, sources said.
This seems to be a reference to an EU idea that the issues could be placed on the agenda indirectly through a section of a ministerial declaration that focuses on existing WTO rules, trade officials said. WTO members have discussed the need to set up negotiations under existing rules, which has generally been focused on such issues as antidumping, subsidies and TRIPs issues, they said. But in that context, it may be possible to address the precautionary principle under the Agreement on Sanitary and Phytosanitary Measures, these officials said.
But it remains unclear how much further the U.S. is willing to go in the EU direction beyond hortatory language and its proposal of reviving the Committee on Trade and Environment's work on identifying policy changes that would support trade expansion and environmental protection simultaneously, such as a reduction in subsidies for agriculture or fishing, sources said.
The EU official also highlighted to member states that any ministerial declaration would have to include a strong statement that environmental rules should not be used to protect against imports, informed sources said. He also repeated a long-standing EU argument that WTO members are now recognizing the importance of the environmental issue to the EU, sources said.
But a trade diplomat from a developing country this week expressed skepticism about the EU's emphasis on the political importance of environmental issues. He said that environmental protection is not the only issue for globalization critics and that the EU does not highlight other issues raised by them, such as the growing divide between rich and poor countries or the debt burden. The Commission's approach distorts public concerns raised in Europe, he said. In addition, environment is not the core business of the WTO like agriculture and implementation of trade agreements, the trade official said.
The U.S. trade official last week highlighted a distinct U.S. policy shift on handling investment in the WTO, according to informed sources. She said the U.S. was trying to get protection for manufacturing investment on the same footing as services investment under the General Agreement on Trade in Services, they said. This implies WTO investment rules would include such principles as transparency and national treatment but also go beyond that, sources said.
Japan and other proponents of investment rules in the WTO are advocating a longer list of key elements to be covered in an investment agreement, but rule out an investor-state provision that would allow a private investor to sue a government for the exercise of its regulatory power. However, investment remains a difficult issue in the preparations for the ministerial, although possibly easier than agriculture, implementation or environment, a senior Geneva official said.Inside US Trade:
