Trade union view of WTO Ministerial 2005
INTERNATIONAL CONFEDERATION OF FREE TRADE UNIONS (ICFTU)
Analysis of the Hong Kong Ministerial Declaration
From 13-18 December 2005, the 6th Ministerial Conference of the World Trade Organisation (WTO) took place in Hong Kong, with the objective of making substantial progress in the round of Doha trade negotiations that began in November 2001.
At the end of the Hong Kong Conference, a Ministerial Declaration was adopted. This document provides an overview of the different decisions that were taken in Hong Kong, including in each case a summary of the outcome with regard to trade union demands. This is followed by a shorter analysis of the expectations for negotiations over 2006. The conclusion indicates priority areas for trade union action over the coming months.
PART 1: THE HONG KONG DECLARATION
The Ministerial Declaration covers six main areas, each of which is accompanied by an Annex, namely: Agriculture, Non Agricultural Market Access (NAMA), Services, Rules, Trade Facilitation, and Special and Differential Treatment (S&D). Besides these six areas a number of other issues that are part of the Doha Agenda are taken up in the Ministerial Declaration, such as TRIPS, Implementation, Least Developed Countries (LDCs), the Integrated Framework, Aid for Trade, and Coherence.
Part I of this document concentrates firstly on the three main areas under discussion in Hong Kong, namely Agriculture, NAMA and Services. The remaining areas for negotiation are then brought together in the last section of Part I. In each case, a summary concerning the outcome regarding trade union demands is provided at the end of each section.
Agriculture
The most concrete outcome in Hong Kong on Agriculture [1] was related to export subsidies, but there was also some movement with regard to domestic support and market access (tariff reduction).
The Hong Kong Declaration states that modalities for agriculture on all the outstanding issues should be established no later than 30 April 2006 - in other words, all substantive negotiations would have to be concluded by that date. Although that deadline may be missed, the months up to the end of April 2006 are expected to see highly intensive negotiations. The degree of liberalisation concluded in Agriculture is expected to have a great impact on the level of liberalisation in the areas of NAMA and services.
Export Subsidies
With regard to export subsidies (one of the three pillars in Agriculture negotiations) an end date was set for the elimination of all export subsidies by 2013. Eliminating export subsidies has been one of the key issues in the Doha Round, as these subsidies have contributed to dumping of agricultural products in developing countries' markets and to low world market prices for agricultural products. Although the main focus has been on the elimination of export subsidies, other forms of export support such as food aid (to ensure the elimination of commercial displacement while simultaneously taking into account the interests of food aid receiving countries), export credits and state trading enterprises have also been addressed. The Hong Kong Declaration not only sets an end date for the elimination of export subsidies but also sets the same date of 2013 for elimination of the other forms of export support. The text further states that parallelism (i.e. equivalent treatment of the above-mentioned differing forms of export support) has to be guaranteed by the modalities and that a substantial part of the elimination has to be realised by the end of the first half of the implementation period.
The end date of 2013 was a disappointment for many developing countries, which had hoped for 2010. However, the European Union was not willing to give way on the 2010 date, mainly due to opposition from France, which did not want to change the European Commission's mandate on Agriculture.
Domestic Support (Amber box, Blue box and Green box)
The second pillar in Agriculture is domestic support. This has been divided into three categories, in so-called boxes, namely the Amber box, the Blue box and the Green box. The Amber box contains all domestic support that distorts production and trade. This includes price support and subsidies related to production. Minimal levels of support are allowed (called 'de minimis' support), but anything above that has to be reduced. These reduction commitments are called the Total 'Aggregate Measurement of Support' (AMS). The Blue box contains trade distorting support that is, however, subject to conditions aimed at reducing distortion and which requires farmers to limit production. The negotiations are focused on what kind of support can be included in the Blue box, and what limits should be set. The Green box contains subsidies that are not trade distorting, or only cause minimal distortion. These include direct income support to farmers that is not related to production levels or prices, environmental protection, and regional development programmes. Negotiations focus on whether some of these permitted provisions for support should be limited.
The reductions of domestic support, in particular Amber box and overall trade distorting support will take place by using bands, cutting higher levels of support more than lower levels. Discussions have long focused on which country would be in which band, and what level of reduction would be applied. There is still not complete agreement on this; however, in Hong Kong it was decided that there will be three bands for reductions in Final Bound Total AMS (i.e. in the Amber Box) as well as in the overall cut in trade-distorting domestic support, with higher linear cuts in higher bands. In both cases, the Member with the highest level of permitted support (the EU) will be in the top band, the two Members with the second and third highest levels of support (the US and Japan) will be in the middle band and all other Members, including other developed country and all developing country Members, will be in the bottom band. The 'de minimis' level of allowed trade distorting support, which is 5% of all agricultural production for developed countries and 10% for developing countries, would be cut by between 50% and 80% for developed countries. This percentage is still under negotiation. No additional progress was made on criteria to further constrain the Blue box. Green Box criteria will be reviewed to ensure inter alia that programmes of developing country Members that cause not more than minimal trade-distortion are effectively covered .
There is some scepticism around the likely reduction commitments that are supposed to be made by the developed countries. For example the proposed EU reduction commitments would mainly cut the bound or maximum allowed level of support, but would not lead to substantial cuts in the level of support that is actually applied, therefore enabling trade distorting support to continue.
Market Access
The market access pillar deals with the reduction of tariffs on imports of agricultural products. In Hong Kong, agreement was reached on using four bands for structuring tariff cuts, but the width of the bands is not decided upon yet, nor is the tariff reduction formula. Part of the negotiations on tariff reductions for agricultural products focuses on the possibilities for excluding certain products from tariff reduction or setting up a safeguard mechanism to protect domestic markets against sudden import surges due to tariff reductions. In that respect there is agreement that a number of products can be identified as 'sensitive products' to which 'lesser than formula' cuts will be applied, both for developed and developing countries. No specific decisions on the number and treatment of sensitive products were reached in Hong Kong. The risk of the category of sensitive products is of course that exactly those products will be excluded by developed countries from the (full) formula that are of most interest to developing country exporters. The percentages proposed by the EU and G-10 [2] (8% and 15% respectively) would allow for a significant degree of protection against imports from developing countries in areas of interest to them.
Besides the category of sensitive products which can be used by both developed and developing countries, developing countries can also identify 'Special Products' (SPs) that will be exempted from tariff cuts. The Hong Kong Declaration states that developing countries will have the flexibility to self-designate an appropriate number of tariff lines as Special Products guided by indicators based on the criteria of food security, livelihood security and rural development. Developing countries will also have the right to have recourse to a 'Special Safeguard Mechanism' (SSM) based on import quantity and price triggers, with precise arrangements to be further defined. The inclusion of Special Products and a Special Safeguard Mechanism have been important issues for a group of developing countries that has organised together around these issues, called the G-33.
Cotton
The Hong Kong Declaration agreed on a number of issues related to cotton (paras. 11-12). All forms of export subsidies for cotton are to be eliminated by developed countries in 2006. On market access, developed countries will give duty and quota free access for cotton exports from least-developed countries (LDCs) from the start of the implementation period at the end of the Round. Trade distorting domestic subsidies for cotton production should be reduced more ambitiously than under the general agriculture negotiations, and the agreement on cotton should be implemented over a shorter period of time than generally applicable.
Although agreement was reached on these cotton issues, there was disappointment over the fact that no concrete dates were included for the reduction of domestic support, given that domestic support in cotton has much more significant negative effects for small cotton producers than export subsidies. Cotton has been a key issue since the WTO Ministerial in Cancún, where it was put on the agenda by a number of cotton producing African countries, and it has been since then a key issue within Agriculture, although little progress was made before Hong Kong. In particular the US government has been criticised for its export subsidies and domestic support that have harmed poor African cotton producers. Much pressure was therefore put on the US in Hong Kong to come forward with some commitments. The results are rather limited and have enabled the US administration to refrain from politically costly decisions with regard to cuts in domestic support. The cotton dossier has shown how negative the impact of export subsidies and domestic support can be for small farmers in developing countries, and so the negotiations on this issue have come to be seen as a key area to gauge the development effectiveness of the Doha Round.
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Agriculture
The Agreement on Agriculture must be revised to ensure that developing countries may make use of the policy tools necessary to defend and develop national and local systems of food production, protect the rights of agricultural workers and their trade unions as well as small producers (most of whom are women), raise rural living standards and enhance food security, i.e. universal access to adequate levels of food at affordable prices.
In this regard, clear provisions for special and differential treatment are needed to ensure that developing countries possess the necessary degree of flexibility, especially with respect to their demands regarding special products and a specific safeguard mechanism .
The elimination of all agricultural export support, including export subsidies, is urgent and an early end-date for their elimination must be set in Hong Kong. All forms of dumping must cease. All trade-distorting cotton subsidies should be phased out as quickly as feasible. At the same time, developing countries need increased stable and predictable access to industrialised country agricultural markets.
Domestic agricultural subsidies must be reduced and reoriented in ways that encourage socially and environmentally sustainable methods and protect the rights, the living standards and the health and safety of agricultural and plantation workers, rather than overwhelmingly benefiting corporate agri-business as at present.
The WTO must not be used to undermine existing Multilateral Environmental Agreements such as the Biosafety Protocol to the Biodiversity Convention.
Summary - Outcome of Union Demands on Agriculture
Trade unions had called for an end to all forms of agricultural dumping and the phasing out of agricultural export subsidies on the basis of an early end-date, with particular speed in the case of cotton. These goals were to some extent met in Hong Kong, although the date of 2013 can hardly be called an 'early' end-date for agricultural export subsidies. While the end-date for elimination of cotton subsidies of 2006 is positive, export subsidies only represent a small part of trade distorting support and no progress was made on an end-date for the reduction of trade distorting domestic support in cotton.
Unions had called for developing countries to have the necessary policy tools to defend their own food production and their rural workers and producers, with adequate attention to their demands regarding special products (SPs) and a special safeguard mechanism (SSM). Some progress was made on SPs and the SSM in Hong Kong, and these demands are part of the continuing negotiations.
Unions had further called for reduction and reorientation of domestic agricultural subsidies, and for increased access for developing countries to industrialised country agricultural markets. Again, the outcome in these areas remains under negotiation.
Non-Agricultural Market Access (NAMA)
NAMA [3] covers the negotiations on all non-agricultural products including industrial products, fish and forest products, and raw materials. The negotiations focus on the reduction of both tariffs and non-tariff barriers to trade.
Different types of 'Swiss formula' for tariff cuts
Since the start of the round, the negotiations on NAMA have always been very ambitious, aiming for steep tariff cuts. During the negotiations in July 2004 there was much pressure on countries to adopt a non-linear 'Swiss formula', which would reduce high tariff rates much more steeply than low tariffs and lead to harmonisation of tariffs. The so-called July Framework of July 2004 nonetheless left some room for further discussion on the formula. During the last year a number of proposals were put forward by developed and developing countries; however, all were based on a Swiss-type formula, and hence all included steeper reductions for high tariffs on a line-by-line basis. As it is bound tariff rates that would be reduced, countries like South Africa which currently have applied rates that are already close to their bound rates would be much more seriously affected than would other developing countries whose current applied rates are far below their bound rates.
Some of the proposals that were tabled are based on a simple Swiss formula, with two coefficients [4] , one for developed countries and one for developing countries. Values of the coefficients proposed ranged from 10 and 15 (EU) to 6 and 30 (Pakistan). Other proposals, called Swiss type proposals, take as the basis for the coefficient the average tariff level of each country, resulting in multiple country specific coefficients. Proposals based on this principle are the ABI proposal (Argentina, Brazil and India) and the Caribbean proposal. The Caribbean proposal goes a step further than the ABI proposal in that it also assigns credits to developing countries for specific situations such as dependence on preferences, dependence on tax revenue from import tariffs, a limited export base, etc.
Although convergence was arising over the course of 2004 and 2005 on the use of a Swiss formula, options had been kept open until Hong Kong for the use of a non-Swiss formula. But in Hong Kong a decision was finally taken to use a Swiss formula. No agreement was reached on the number of coefficients or the value of coefficients. Therefore both possibilities, a simple Swiss formula or a Swiss type formula, are still on the table. However it is certain that there will be at least two coefficients.
A decision is expected on the final structure of the formula as well as on the value of the coefficients over the coming few months. A deadline for modalities on NAMA was set for the 30th of April 2006. Both types of formula will lead to steep tariff cuts, but (depending on the choice of the coefficients) the ABI or Caribbean formula would lead to less steep cuts for developing countries than the simple Swiss formula.
Preference Erosion
Another issue concerns preference erosion (i.e. reduction of tariff preferences) for a number of developing countries (e.g. the ACP group, or LDCs in general) when developed countries' tariffs are reduced steeply, so placing them in competition with other developing countries. In this regard, an ABI formula would be expected to have greater impact on such countries than a Swiss formula, as it would probably lead to more preference erosion through steeper tariff cuts in developed countries. Some general language on the need to address preference erosion and on the situation of small and vulnerable countries is included in the Hong Kong Declaration.
Tariff Binding
Many developing countries still have a large number of unbound tariff lines (i.e. where no maximum import tariff levels are set). In order to apply any tariff reduction formula, evidently unbound tariffs have to be bound first. The negotiations therefore focused on the form and level of binding.
In Hong Kong it was decided that unbound tariffs would be bound by adding a non-linear mark-up to the applied tariff. This will then be the base rate for tariff cuts. The non-linear mark-up will consist of adding a number of percentage points to the applied tariff. This could be either a constant number of percentage points or a different number of percentage points depending on the level of the applied rate (i.e. the lower the applied rate, the higher the mark-up and the higher the applied rate the lower the mark-up).
No decision has been taken on this number yet, but proposals on the number for the mark-up have ranged from 5 to 30 percentage points. [5] LDCs are not required to reduce tariffs but are expected to bind their tariffs substantially. All other developing countries have to bind 100% of their tariffs. Countries that have bound less than 35% of their tariffs (the so-called 'paragraph 6' countries [6] ) are required to bind 100% of their tariffs, but will not be asked to reduce their tariffs.
'Paragraph 8' flexibilities for developing countries
Concerning flexibilities for developing countries, the third key issue in NAMA negotiations, these are provided for in paragraph 8 of the July framework. Developing countries can exempt up to 5% of their tariff lines from the tariff reduction formula, or identify up to 10% of the tariff lines for 'less than formula' tariff cuts. These flexibilities were agreed upon in July 2004 although they were kept within square brackets. They have not been discussed substantially since. A number of countries [7] had submitted a communication (TN/MA/W/65) on paragraph 8 flexibilities at the end of last year, demanding that developing countries should be able to retain the right to adjust upwards the percentages of tariff lines exempted from full tariff reduction, or subject to reduced tariff reduction, if needed to enable countries to manage the adjustment of sensitive sectors and to prevent the social disruption caused by job losses and closure of enterprises that would result from further liberalisation. The Hong Kong Declaration does not have any additional language on the flexibilities.
Sectoral Negotiations
The NAMA negotiations framework also provides for sectoral negotiations. Such negotiations aim to eliminate or harmonise all tariffs in a sector. A number of sectors have been identified for tariff elimination or harmonisation negotiations. These are bicycles, chemicals, electronics/electrical equipment, fish, footwear, forest products, gems and jewellery, pharmaceuticals and medical equipment, raw materials and sporting goods, textiles, apparel and auto/autoparts. The Hong Kong Declaration specifies that participation in such sectoral negotiations should be 'on a non-mandatory basis'.
Non Tariff Barriers
Discussions in NAMA not only focus on tariff reduction but also on Non Tariff Barriers (NTBs). A large number of NTBs have been identified, but no agreement has been reached with regard to these NTBs. Some of the NTBs are dealt with in other negotiating groups, and some are dealt with bilaterally.
Linkage of NAMA to Agriculture
The Hong Kong Declaration includes a paragraph on the linkage of NAMA and Agriculture with regard to market access for developing countries, stating that ambition on market access should be comparable in both areas of negotiations.
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NAMA (Non-Agricultural Market Access)
Ø Current efforts to undermine the principle of less than full reciprocity for developing countries (e.g. through a 'Swiss formula' for tariff reduction) must stop. That principle must be given precedence in the negotiations of any retained formula for tariff reductions or the level of tariff bindings, to ensure developing countries have the policy space to undertake legitimate domestically-based industrial development strategies. Similarly, in any decision on rapid advancement of NAMA negotiations under a 'sectoral approach', developing countries should not be put under pressure to take part. Developing countries (particularly least developed countries) that do bind their tariffs should be able to alter that commitment on grounds of justified social and development purposes.
Ø Any push for expanding market access through harmonisation of tariff cuts could produce serious adverse effects on factory closures, unemployment, deindustrialisation and increased poverty in many countries, developed and developing alike. Therefore, before finalising their negotiating concessions, countries should be required to conduct an ex ante impact assessment, possibly at product or product group level, of the effects of these negotiations on development, decent work and standards of living with special attention to labour intensive sectors, including an analysis of the gender impact. The WTO, the ILO, UNCTAD and other relevant international institutions should work together to ensure developing countries have the necessary financial resources and independent technical assistance to undertake such impact assessments, which further require the involvement of trade unions to convey their views on how proposed concessions would affect the sectors they represent.
Ø An evaluation of non-tariff barriers (NTBs) should be undertaken, with the involvement of specialised UN agencies as well as trade unions and other civil society groups concerned, in order to ensure that reasonable requirements for consumer and environmental protection remain untouched by WTO rules.
Ø The issue of preference erosion must be addressed through longer implementation periods and international assistance measures wherever any changes to preferential schemes are contemplated.
Summary - Outcome of Union Demands on NAMA
Unions had opposed the use of a Swiss formula and called for developing countries not to be subject to a requirement to bind all tariffs. These objectives were not attained in Hong Kong. The centre of attention is now shifting to the issue of what type of Swiss formula, which coefficients and what mark-ups for developing countries are to be adopted. Unions will need to be active in supporting development interests in these areas over the coming months.
Unions had supported the use of 'paragraph 8' flexibilities for developing countries to exempt certain tariff lines from tariff liberalisation. While the 'paragraph 8' flexibilities were not questioned in Hong Kong, there is still no agreement as to the status of these flexibilities and whether they are linked to the formula or not.
We had further called for developing countries to have additional flexibilities so as to be able to exempt and protect further tariff lines if that was rendered necessary due to employment and social disruption. There was no decision along these lines in Hong Kong, although neither is it excluded from further negotiations now.
We had further emphasised the importance of employment impact analyses, both with regard to NAMA and generally; these were not taken up in the final declaration.
Services
The main outcome in Hong Kong on services [8] was the adoption of Annex C, which will be used to intensify the negotiations and which seeks to expand the sectoral and modal coverage of commitments and to improve their quality. Annex C contains a number of specific objectives under each of the 'Modes' of trade in services; language on Government Procurement, Subsidies, Domestic Regulation and an Emergency Safeguard Mechanism (ESM); and language on negotiating methods.
Annex C provisions
On Subsidies, the Annex states that 'Members should intensify their efforts to expedite and fulfil the information exchange required for the purpose of such negotiations, and should engage in more focused discussions on proposals by Members, including the development of a possible working definition of subsidies in services'. On Government Procurement, the Annex states that Members should 'engage in more focused discussions and put greater emphasis on proposals by Members, in accordance with Article XIII of the GATS'. On the ESM, the Declaration states that Members 'should engage in more focused discussions in connection with the technical and procedural questions relating to the operation and application of any possible emergency safeguard measures in services'.
On Domestic Regulation, Members are asked to develop text for adoption, based on the proposals and possible elements for GATS Art VI.4 disciplines. In this regard, Art. VI.4 states that qualification requirements and procedures, technical standards and licensing requirements should not constitute unnecessary barriers to trade in services. Elements for disciplines that have been identified are: licensing requirements and procedures, qualifications requirements and procedures, technical standards, and regulatory transparency.
GATS Negotiating Methods
The services negotiations have been based on a request-offer approach whereby countries make bilateral requests to other countries; after receiving such requests, countries make offers in the form of a list of commitments they are willing to make. Over the course of the negotiations so far, initial offers have been followed by revised offers. Given that a number of countries were not satisfied about the quality and quantity of the offers, ways have been explored to increase this quality and quantity. In June last year some proposals circulated to move from a voluntary approach to a mandatory approach, with benchmarks that would establish minimum commitments (numerical targets) in services sectors. In the run up to Hong Kong a large number of developing countries clearly opposed benchmarking and other mandatory approaches. Although numerical benchmarking was taken out off the draft Services Annex, the draft text that was sent to Hong Kong still contained mandatory plurilateral elements.
The Annex C that was finally adopted in Hong Kong provides for plurilateral negotiations but in a somewhat weaker form than in the draft. Paragraph 7 on plurilateral approaches states that members ' shall consider' plurilateral requests in a specific sector or mode of supply, as opposed to the wording 'shall enter into plurilateral negotiations' that was in the draft. So although not mandatory, it can be expected that pressure will be put on countries to enter into plurilateral negotiations, in parallel to a continuation of the existing bilateral negotiations process.
Such plurilateral negotiations on a sectoral basis are expected to be initiated by countries that have an interest in liberalising in a certain sector, and continue work that was initiated in the so-called 'friends' groups. The main GATS sectors, many of which may well proceed towards plurilateral negotiations, are Legal Services, Other Professional Services, Computer and Related Services, Other Business Services, Postal and Courier, Telecommunications, Audiovisual, Construction and Related Engineering, Distribution, Education, Energy, Environmental, Financial, Health (just health insurance), Tourism, Maritime Transport, Air Transport, Other Transport (listing specifically road, rail and pipelines), Logistics, Modes 1 and 2, Mode 3, and Mode 4.
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Services
Ø There is growing concern that the outcome of these GATS negotiations could undermine the universal service obligations of governments and their capacity to regulate crucial aspects of the market. Such obligations should not be subject to the constraints of GATS commitments, and governments must preserve full prerogatives in certain specific areas. Public services and services of general interest should therefore be excluded from further GATS negotiations. Across all GATS negotiations, provision should be made on a horizontal basis for access to universal quality services at uniform and affordable prices. Such universal public provision is vital to move towards achieving the Millennium Development Goals.
Ø The contradiction in the preamble of GATS, between its stated goals of liberalisation and regulation, must be resolved through a clarifying statement which would state explicitly that existing or new government regulations cannot be challenged through WTO disputes settlement procedures.
Ø The 'positive list' approach to GATS commitments must be maintained to enable WTO members to choose to preserve their policy space, in view of the quasi-irreversible nature of any undertakings. Current proposals to establish quantitative and, effectively, compulsory 'benchmarks' stipulating minimum levels of GATS liberalisation should be discarded, therefore.
Ø More transparency around the negotiations is a necessity. Negotiators should be required to assess the impact of any commitments on development, employment and gender, both on a sectoral and overall basis, as required by Article XIX of the GATS treaty, before governments enter into commitments.
Ø The competences and structure of the WTO do not enable it to regulate the temporary cross-border movement of workers, as envisaged under the Mode IV negotiations, in a manner that protects migrant workers' rights and consequently the WTO should not be the place for decisions in this area. Should any governments nonetheless make offers in this area, these must be preceded by formal trade union consultation and refer to respect for national labour law and existing collective agreements in receiving countries, as well as fundamental workers' rights, in order to ensure that migrant workers receive employment conditions equal to those of nationals.
Summary - Outcome of Union Demands on Services
Unions had called for countries to be able to maintain their ability to choose whether or not to take part in GATS negotiations. The weakening of the language in Annex C constituted a measure of progress in that regard. However, WTO members will still be put under considerable pressure to take part in negotiations when requests are made of them.
There has not been any progress concerning union demands for a strengthening of GATS provisions to guarantee the right to maintain regulations and to introduce new regulations without any possibility of challenge through the GATS, nor regarding union demands for vital public services to be excluded from the GATS.
Development, Coherence and other Issues in Hong Kong
Special and Differential Treatment (S&D)
In Hong Kong, five LDC proposals on special and differential treatment [9] (detailed below) were adopted as part of the development package; however many of the other S&D proposals remain unresolved. A deadline has been established for the remaining proposals, but this is set for the end of 2006, leaving the S&D discussion lagging behind the discussions on Agriculture and NAMA.
The five LDC proposals that have been agreed upon concern, firstly, quota and duty free access for products of LDCs. However, countries are able to exclude up to 3% of tariff lines from this quota and duty free access. This will provide enough leeway for developed countries to exclude the most sensitive products.
The other LDC proposals that were adopted include proposals with respect to waivers for LDCs; with respect to TRIMS, allowing LDCs to maintain, on a temporary basis, existing measures or to introduce new measures that deviate from their obligations under the TRIMs Agreement; and with respect to LDCs being only required to undertake commitments and concessions to the extent consistent with their individual development, financial or trade needs, or their administrative and institutional capacities. In this regard further technical and financial assistance and coordination of development assistance would be required.
While the adoption of the above five LDC proposals is positive, many other proposals remain unresolved. It remains to be seen whether the quota and duty free access proposals will result in adequate improvements to deliver benefits.
Trade Facilitation
Annex E refers to the trade facilitation negotiations [10] which take place on the basis of proposals tabled by Members. These proposals are divided into three categories: (I) proposed measures to improve and clarify GATT Articles V (on freedom of transit), VIII (fees and formalities connected with importation and exportation) and X (publication and administration of trade regulations); (II) proposed provisions for effective cooperation between customs and other authorities on trade facilitation and customs compliance; and (III) cross-cutting submissions.
Discussions are expected to move now into text-based negotiations. Annex E refers to the need to identify members' trade facilitation needs and priorities as well as cost implications. A major issue in the negotiations on trade facilitation is the financing of compliance with certain commitments, and whether the disputes mechanism can be invoked with regard to such commitments.
Rules
Annex D of the Ministerial Declaration provides further detail on progress in this area [11] , which aims to improve transparency, predictability and clarity of the relevant disciplines. No specific decisions are included in Annex D. The main areas under discussion are anti-dumping and subsidies and countervailing measures, as well as regional trade agreements (RTAs).
Issues in the area of anti-dumping include the need for improvements to avoid unwarranted use of anti-dumping measures as well as to limit the costs and complexity of proceedings. Issues in the area of subsidies include broad agreement on the strengthening of disciplines on subsidies in the fisheries sector, including through the prohibitionof certain forms of fisheries subsidies that contribute to overcapacity and over-fishing. The negotiations with regard to RTAs aim to clarify and improve the WTO's disciplines and procedures on regional trade agreements, in particular with regard to transparency and disciplines such as transition periods and the developmental aspects of RTAs.
Implementation issues
Implementation-related issues [12] have been lagging behind other negotiations all along. Although these are critical issues for developing countries they do not seem to get adequate attention.
Again in Hong Kong, no substantial decisions were taken with regard to these implementation issues. The Director General is directed to lead the consultative process on these issues. The Declaration states that the General Council will review progress and take any appropriate action no later than 31 July 2006. Issues include those 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 and those related to the relationship between the TRIPS Agreement and the Convention on Biological Diversity, with some members questioning the negotiating mandate on these issues.
Trade-Related Intellectual Property Rights (TRIPS)
The main decisions on TRIPS [13] were taken before the Hong Kong Ministerial and were welcomed in the Ministerial Declaration. Two decisions were taken, one on TRIPS and LDCs, and one on TRIPS and public health.
Just before the start of the Ministerial in Hong Kong, on the 6th of December, an agreement was reached on the amendment of the TRIPS agreement, basically transforming the August 2003 decision for a waiver into a permanent amendment of the TRIPS agreement (art. 31 bis). That waiver was meant to enable poorer countries to obtain cheaper generic versions of patented medicines by setting aside a provision of the TRIPS Agreement (art. 31 (f)) that could hinder exports of medicines manufactured under compulsory licensing to countries that are unable to produce them. However, this amendment will still not take away the difficulties with implementation that had existed under the waiver. The procedures have been criticized by experts for being too burdensome and unworkable in practice, as is perhaps indicated by the fact that the mechanism has not been used since its introduction more than 2 years ago. A proposal by the African Group to remove many of the procedural requirements has not been seriously discussed.
Also before Hong Kong, the TRIPS Council took the decision to extend the transition period for LDC members to provide protection for trademarks, copyright, patents and other intellectual property under Article 66.1 of the TRIPS Agreement, which had been due to expire on 1 January 2006, until 1 July 2013.
Least Developed Countries (LDCs)
LDCs [14] are to benefit from specific measures that members have agreed upon, some of which are referred to above and which include quota and duty free access for products from LDCs, implementation of LDC modalities and priority for sectors of interest to LDCs in services, facilitation and acceleration of LDC accessions, extension of the transition period for LDCs for compliance with the TRIPS agreement, and the enhancement of technical assistance and capacity building for LDCs.
Aid for Trade
The Aid for Trade concept [15] gained in importance over the course of 2005. The Hong Kong Declaration states that: 'Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade... Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access. However, it can be a valuable complement to the DDA'.
Two critical issues should be emphasised here. Firstly, the effectiveness of this instrument will depend on the resources available, and the share of 'new' resources, since building supply side capacity stands to be costly. Secondly, as the Hong Kong Declaration states, the aid for trade instrument should not be a substitute for trade benefits from the Doha round.
Integrated Framework
The Integrated Framework [16] is based on a partnership of six international agencies (namely WTO, World Bank, IMF, UNCTAD, International Trade Centre (ITC) and UNDP) and was established to support LDC governments in trade capacity building and the integration of trade issues into national development plans such as PRSPs.
In Hong Kong the enhanced Integrated Framework set up by the IMF and World Bank at their autumn meetings was welcomed. It is to be used as an instrument for LDCs' trade development and should contribute to reducing supply side constraints. A taskforce of LDC members and donor countries is to provide recommendations to the IF Steering Committee by April 2006, in particular with regard to increased and predictable funding, the mainstreaming of trade into development plans and PRSPs, and improvement of decision making and management structure. The enhanced IF is to enter into force no later than 31 December 2006.
Although this is positive in principle, it remains to be seen whether sufficient resources will be available to address supply side constraints. In addition, the integration of trade into development plans and PRSPs needs to be undertaken in coherence with other policy priorities such as employment policies and decent work strategies, or it risks to have negative effects in such areas.
Coherence
The Hong Kong Declaration welcomes [17] further and enhanced cooperation with the Bretton Woods institutions, based on the coherence mandate of the Marrakech Agreement. It further states: 'We agree to continue building on that experience and expand the debate on international trade and development policymaking and inter-agency cooperation with the participation of relevant UN agencies'.
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Development, Employment and Trade
Ø Determining the impact of trade liberalisation on the level and quality of employment is essential in evaluating the contribution of the Doha Round's results to raising living standards, promoting development and eliminating poverty. It should, therefore, be thoroughly taken into account.
Ø The current path of liberalisation gives too little attention to the costs. A more comprehensive set of transition policies needs to be developed, including adequate social protection. Ignoring such costs would further increase poverty both in developing and industrialised countries, due to increased unemployment and the shift of formal to informal and unprotected employment. In particular, an emergency work programme needs to be established with a remit to study growth, exports and employment in the textiles and clothing sectors, in order to put in place a comprehensive industrial and trade policy approach aimed at coping with the impact of the end of the quota system.
Ø Decent work is fundamental to the realisation of the goals of sustainable social and economic progress. That is why, as indicated above, trade negotiations must take place on the basis of a fully informed assessment (with the involvement of trade unions) of their impact on the level and stability of employment, respect for fundamental workers' rights, equality between women and men, good working conditions, social protection and access to quality public services. The pursuit of short-term competitive advantage through the violation of fundamental workers' rights undermines long term development prospects, and the WTO must go beyond the unfulfilled commitments of previous WTO Ministerial Declarations on core labour standards. Export processing zones, where workers' rights are significantly repressed, constitute a distortion of trade and such production should be ruled impermissible under WTO rules.
Regarding the implementation of WTO procedures and decisions:
Ø It is a key objective of the Doha Round to qualitatively increase developing country participation in the WTO. This necessity has become apparent since the 5th Ministerial Conference and needs to be facilitated through further improvements in transparency of WTO working methods and procedures in order to enable smaller countries to participate effectively in future WTO decision-making.
Ø Another area that requires full attention by negotiators is the provision of special and differential treatment for developing countries allowing adequate flexibility in the implementation and interpretation of the various WTO agreements when required by their economic and social development. In particular, implementation of the TRIPS agreement must ensure that all developing countries can achieve access to low-cost medicines in case of health need, as in the case of anti-retrovirals for treating HIV/AIDS.
Ø It is the responsibility of governments to provide adequate funding for employment assistance when jobs are lost. The international institutions and the 'demandeur' countries should assist developing countries to implement such policies, including the provision of funding for development of infrastructure and skills.
Ø Given the legally binding nature of WTO rights and obligations, the WTO's dispute settlement understanding (DSU) should provide a fuller role for whichever UN agencies are concerned specifically in any particular complaint and, as recommended by the Sutherland report, should open disputes panel and appellate body hearings to the public, developing criteria and procedures requiring acceptance of amicus curiae submissions.
Ø The WTO's 2004 World Trade Report demonstrated significant misunderstanding of the role of trade unions, a perspective that needs to change urgently. To remedy the lack of scope for representation of workers' interests in the WTO, it needs to be made more transparent and accessible through the creation of a formal consultative structure such as the trade union advisory committee (TUAC) to the OECD, as recommended by the ILO's World Commission on the Social Dimension of Globalisation.
Ø The WTO should take steps to ensure the full involvement and assistance of key UN agencies including the ILO in WTO processes and in the current negotiations, as a move towards granting observer status and as part of a genuine integration of the WTO into the UN system as a whole. Achieving such coherence should be facilitated through a decision to convene a first-ever global meeting of Trade and Labour Ministers, with the participation of trade unions and employers' organisations
Ø Regarding the conduct of WTO business, trade unions consider it essential that:
The requirement for a thorough analysis of social, gender and environmental concerns, including employment, workers' rights and related provisions, should be made a mandatory item in future trade policy review mechanism (TPRM) examinations of WTO members. Trade unions' presentations or their written contributions must be part of these examinations, as required.
The General Council should agree to the need for comprehensive examination of the impact on employment and development which may result from the progressive implementation of trade liberalisation measures, and set up a formal mechanism to develop specific guidelines within its terms of reference.
Summary - Outcome of Union Demands on Development, Coherence and other Issues
Trade unions had called for any 'Aid-for-Trade' development assistance to be additional assistance and not to be used as a quid-pro-quo for concessions by developing countries in other areas. It remains unclear to what extent these goals will be achieved, as the Hong Kong Declaration was not specific regarding these issues.
Unions had emphasised the importance of the S&D and TRIPS demands of developing countries. Some minimal progress was achieved in these areas, but much more is needed over the course of the negotiations in 2006.
As noted in the section under NAMA above, no specific progress was made on the issue of employment impact assessments, nor on the inclusion of employment and labour standards issues in WTO mechanisms such as its trade policy reviews (TPRs) (although neither were TPRs on the agenda for the Hong Kong Ministerial).
Trade unions had called for reference to be made to the ILO in the paragraph on coherence. This was not attained. However, while no specific UN organisations are mentioned, this text certainly leaves open the possibility for the ILO to be included more intensively in cooperation with the WTO.
PART 2: EXPECTATIONS FOR THE WTO NEGOTIATIONS IN 2006
Agriculture
Agriculture is generally considered to remain key in the negotiations. This is the most important area for developing countries and the level of liberalisation agreed in agriculture can be expected to have a major impact on the level of liberalisation in other areas. In the Ministerial text, deadlines are set for WTO members to establish modalities no later than 30 April 2006, i.e. all the outstanding issues are to be settled by that date. Therefore, a number of agriculture meetings have been scheduled. Following a negotiating week from 23-27 January, further such negotiations are scheduled from 13-17 February, from 20-24 March and from 18-21 April.
The main outstanding issues that have to be resolved by the end of April cover all three negotiating pillars. In export competition, modalities need to be developed for elimination of export support other than export subsidies, such as food aid, trade-distorting practices of state trading enterprises, and export credits.
With regard to domestic support, modalities need to be defined on the level of reduction in the different bands, both for Amber box support and overall support. The disciplines for the Blue box have to be agreed upon, as well as the reduction of the 'de minimis' (the amount of permitted trade distorting support). A review of the Green box is another part of the work ahead.
With regard to market access there was agreement in Hong Kong on having four bands for tariff reduction, but the thresholds for the bands still have to be set, the reduction formula has to be agreed upon, and the percentage of sensitive products as well as the reduction for sensitive products have to be negotiated. Finally, the designation of Special Products and details on the Special Safeguard Mechanism have to be worked out.
The timeline of 3 months is very short, making it very hard to reach an end result by that time. Yet agriculture is closely linked to the NAMA negotiations, especially now that paragraph 24 of the Hong Kong Declaration links explicitly the levels of ambition in the two areas with regard to market access for developing countries. Whether full modalities for NAMA can be set by the end of April will depend mainly on the progress that can be made in Agriculture, and particularly if an agreement can be reached among the major players - the US, EU, Brazil and India. Both Brazil and India are considered likely to give ground substantially on NAMA (as discussed further below) if Agriculture can be resolved.
NAMA
NAMA negotiating slots are scheduled for 2-3 February, 27 February - 3 March, 20-24 March, and 19-21 April. Modalities are aimed for by 30 April 2006. The main issues that remain on the table and require a solution before the end of April are the coefficients of the formula, and the choice between a simple Swiss and a Swiss type formula; the mark-up for binding of tariffs; and the flexibilities and whether they are discussed separately from the formula. Members are also supposed to look at ways to deal with preference erosion and small vulnerable economies. And finally Members have to set out ways and timelines for dealing with sectoral negotiations and NTBs. Depending on the outcome of the discussion on coefficients, there might be more movement on sectoral negotiations (i.e. if there are low tariff reductions through the formula, it makes it more likely that the overall NAMA negotiations will be followed up by sectorals).
With regard to the coefficient, differing ranges of coefficients have been mentioned. Developed countries are mostly in favour of a simple Swiss formula with low coefficients set between 6 and 10, with a possible 15 for developing countries. Developing countries are in favour of high coefficients of at least 30 for developing countries if there is to be a simple Swiss formula, or are in favour of the ABI formula (which is however less advantageous for preference receiving countries). It is considered quite likely that negotiations will lead to the use of a simple Swiss formula, in which case developing countries will need to achieve high coefficients so as to minimise the tariff reductions they are required to make.
With regard to the binding of tariffs, the decision in Hong Kong included the use of a non-linear mark-up, which means that the permissible tariff level will be calculated by taking the currently applied tariff level and increasing it by a certain number of percentage points. The applied rate plus the mark-up will determine the tariff to which the reduction formula will be applied. It will therefore be important for developing countries to get as high a mark-up as possible in order to preserve policy space in this area. In the end, however, what really counts is the formula for tariff reduction.
With regard to the paragraph 8 flexibilities for developing countries agreed in July 2004, as noted above these were not discussed or changed in Hong Kong. The main focus of negotiations now is on the issue of whether these flexibilities should be separated from the formula, which is a demand led by the Group of 11 countries [18] that was loosely formed before Hong Kong, and which submitted a paper in November on 'reclaiming development' and on flexibilities for developing countries. In Hong Kong the group submitted a letter referring to these two submitted papers.
Also regarding paragraph 8 flexibilities, the proposal by a number of developing countries to allow for higher percentages of tariff lines to be excluded or subject to lower cuts, if needed to manage adjustment and avoid social disruption caused by job losses, was not taken up in Hong Kong. For many developing countries, the flexibilities mentioned in paragraph 8 of the July framework constitute minimum values that should be increased. Clearly, trade unions in particular would strongly support such a demand, should the countries concerned raise it once more.
Sectoral negotiations are taking place at different paces in the sectors mentioned in Annex B of the Hong Kong Declaration. The negotiation on textiles and clothing is apparently limited to proposals for the moment. The Hong Kong Declaration did not set a clear deadline for negotiations on sectors to be finished. As most sectoral initiatives deal with more than just 'formula' tariff cuts (or are likely to deal with more than formula cuts), these negotiations can be done after the formula and coefficients in the main NAMA negotiations are known (supposedly by 30 April 2006) - meaning that if the main NAMA deal results in low levels of tariff cuts, it is all the more likely that the 'demandeurs' in these areas will concentrate their efforts on sectoral initiatives.
Concerning preference erosion, the Hong Kong Declaration stipulates that work should be intensified to identify possible solutions that address the concerns of preference receiving countries. Again, there is a lack of specificity regarding the extent to which such concerns would need to be addressed as part of the 'full modalities' to be adopted by 30 April 2006. Paragraph 21 of the Declaration, addressing the concerns of small and vulnerable economies, allows for additional flexibilities for those countries identified as small and vulnerable. Those countries have to work out in what way they can use this paragraph to address their concerns.
Overall, many commentators consider that a large number of developing countries might agree to a NAMA agreement provided they achieved something on Agriculture. For example, Brazil already showed some flexibility with regard to the EU on NAMA in making a proposal that was then taken off the table again. Many developing countries appear sanguine about NAMA impacts as they fall into categories that will enable them to limit the impacts for the time being (i.e. LDCs, or the 'paragraph 6' countries that have bound less than 35% of their tariffs). Other countries might be able to negotiate additional flexibilities, such as the newly acceded countries and the small and vulnerable economies. However, there remain a number of countries (at least 27) that will be more or less greatly affected, depending on the structure of their tariffs and the difference between bound and applied tariffs. If the industries that stand to be affected by tariff reductions are highly labour intensive, it is clear that significant unemployment would be likely to result. Other countries will be affected through preference erosion (primarily LDCs and ACP countries).
Services
In services the main focus is expected to be on plurilateral negotiations now that the Hong Kong Declaration has given a strong push in that direction, although presumably these would be operating in tandem with a continuation of bilateral negotiations. There are already a number of countries and Friends groups preparing for plurilateral proposals. These plurilateral negotiations will be organized around different sectors of interest, where Friends groups already exist. The leading countries can be expected to gather a group of requesting 'demandeur' countries (i.e. those with offensive interests in a sector) and jointly table a proposal for requests in a particular sector. Such requests will be put forward to a number of countries in which the demandeurs have an offensive interest.
Proposals for plurilateral requests have to be tabled by the 28th of February, or shortly thereafter, and it is likely that a number of requests are going to be tabled. Requests are likely to be made to the larger developing countries. Revised offers must then be provided by 31 July with final schedules to be concluded by 31 October.
Existing Friends groups with their Chairs are: Audio-visual services (Chinese Taipei), Air Transport (New Zealand), Computer-related services (Chile), Construction services (Japan), Education (New Zealand), Energy services (European Communities), Environmental services (European Communities), Financial services (Canada), Legal services (Australia), Logistical services (Switzerland), Maritime services (Japan), Mode 3 (Switzerland), Mode 4 (Canada (but with India coordinating requests in this area)), Express Delivery services (USA), and Telecommunications (Singapore).
Once the plurilateral requests have been made (by 28 February) it will be entirely clear which sectors have been chosen, although the list above of Friends Groups is likely to reflect the sectors for plurilateral negotiations. Once requests are tabled it will also be clearer what kind of commitments are aimed for, and which countries are targeted. Possible target countries that have been frequently mentioned include, in addition to most or all OECD countries, Brazil, Argentina, Colombia, Chile, Egypt, Kenya, Morocco, Nigeria, South Africa, China, India and ASEAN countries such as Malaysia, Thailand and the Philippines. The sectoral negotiations will include focus and commitments on investment and government procurement.
The horizontal, rules part of the GATS negotiations will continue as well, with particular focus to be given to domestic regulation, especially now that sectoral negotiations may emphasise domestic regulation.
Movement towards a full agreement on services may be difficult to realize over the short time period indicated above, particularly given that services negotiations require involvement of other Ministries in many cases.
Development and other Negotiating Issues
Continued negotiations will take place on Special and Differential Treatment, where a large number of proposals remain unresolved, in order to get a satisfactory outcome before the end of the round, i.e. before the end of December 2006. On Implementation issues, there is a deadline of 31July for the General Council to take 'any appropriate action'.
In other areas such as Trade Facilitation; TRIPS; Rules; Aid for Trade; the establishment of an enhanced Integrated Framework; and Trade and Environment, the overall deadline of the end of December 2006 applies. However, there are interim targets, established in most cases by the WTO secretariat, mainly in April and July for particular reports to be prepared, proposals to be submitted, etc.
CONCLUSIONS
Many issues remain to be resolved before the end of the year, with a substantial part of issues supposed to be dealt with by the end of April, in order to finish the round by the end of 2006 - a deadline which has been stressed generally in order to enable the Round to be concluded before the expiry of the Trade Promotion Act in the US, which provides for a fast-track process for adoption of trade agreements. The Hong Kong Conference showed that substantial differences remain between developed and developing countries, which might turn out to be too great to be resolved over this relatively short time period.
Meanwhile, the developmental dimension of this 'development round' remains somewhat hypothetical, as shown by the continuing emphasis by WTO members on trade liberalisation without any proper assessment of its impacts on employment levels, decent work and development. While issues of employment and labour standards remain central to the trade union agenda on trade, they continue to be difficult to raise in the negotiations, with labour standards in particular appearing to remain beyond the scope of the Doha Round.
From a trade union perspective, affiliates will need to maintain pressure on their governments in a range of areas of urgent concern in the WTO negotiations, including the following:
Ø To undertake employment impact assessments (covering both the level and the type of employment, including the impact of trade on core labour standards) in all areas of the negotiations;
Ø To achieve the highest possible coefficients and high mark-ups for developing countries in NAMA negotiations;
Ø To secure and increase ' paragraph 8' NAMA flexibilities for developing countries, particularly those linked to social and employment concerns;
Ø To address the issue of preference erosion in a satisfactory manner;
Ø To make zero commitments in areas relating to vital public services, and to minimise any commitments that are made and include the strongest possible limitations (i.e. explicit exemptions from GATS commitments) to protect their rights to regulate;
Ø To provide adequate improvements for developing countries in world agriculture, including through better access to industrialised country markets;
Ø To support progress on the adoption of further developing country proposals in the area of special & differential treatment (S&D);
Ø To push for inclusion of the ILO in structured cooperation with the WTO, on the basis of the references to coherence and inter-agency cooperation in the Hong Kong Declaration.
[1] Paragraphs 4-12 of the Hong Kong Declaration, accompanied by Annex A.
[2] The G-10 countries are Bulgaria, Korea, Iceland, Israel, Japan, Mauritius, Norway, Switzerland, Liechtenstein, and Chinese Taipei.
[3] Paragraphs 13-24 and Annex B.
[4] The coefficient in a simple Swiss formula is calculated on the following basis:
[(tariff x coefficient) divided by (tariff + coefficient)]
For example, if a current bound tariff is 10%, then a coefficient of 30 in a simple Swiss formula would yield a new bound tariff of 7.5% (i.e. [(10x30) / (10+30) = 7.5]. Conversely, if a coefficient of 6 is applied to the same bound tariff of 10%, that would yield a new bound tariff of 3.75 % (i.e. [(10x6) / (10+6) = 3.75].
[5] This can be illustrated by taking an example. If a constant mark-up of 15% is added to an applied tariff of 15%, this would provide a bound rate of 30%. This tariff of 30% would then be reduced by applying the tariff reduction formula that are agreed. With a 10 coefficient in a simple Swiss formula [i.e. (tariff x coefficient) divided by (tariff + coefficient)], the new bound rate will become 7.5 (i.e. [(30x10) / (30+10) = 7.5].
[6] The Paragraph 6 countries with bound levels lower than 35% are : Cameroon (0.1%), Congo (3.2%), Côte d'Ivoire (22.9%), Cuba (20.4%), Ghana (1.2%), Kenya (1.6%), Macao (15.6%), Mauritius (5.3%), Nigeria (6.9%), Sri Lanka (28.3%), Suriname (15.1%) and Zimbabwe (9.0%).
[7] Argentina, Brazil, Venezuela, China, Egypt, India, Indonesia, Namibia, Pakistan, Philippines and South Africa.
[8] Paragraphs 25-27 and Annex C.
[9] Paragraphs 35-38 and Annex F.
[10] Paragraph 33 and Annex E.
[11] Paragraph 30 and Annex D.
[12] Paragraph 39.
[13] Paragraph 40.
[14] Paragraph 47.
[15] Paragraph 57.
[16] Paragraphs 48-51.
[17] Paragraph 56.
[18] Argentina, India, South Africa, Brazil, Philippines, Tunisia, Egypt, Venezuela, Namibia, China and Pakistan.
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