Examination of Witnesses (Questions 328
- 339)
WEDNESDAY 7 MAY 2003
DR SUPACHAI
PANITCHPADKI and MR
STUART HARBINSON
Q328 Chairman: Perhaps I could start
the batting. What does the Harbinson Draft do to address market
access for developing countries, export subsidies and dumping,
export credits and food aid, and trade-distorting domestic support?
Does the Harbinson Draft do enough to satisfy developing countries,
what would be enough to satisfy developing countries and to ensure
their continued support for the post-Doha agenda?
Mr Harbinson: I think that is
a "yes"! First of all, before coming to the question
I have to explain the general background to this exercise, which
is that the trade ministers' meeting in Doha in November 2001
issued some instructions as to what they wanted to happen in various
fields of trade. The starting point for the exercise in agriculture
is really paragraph 13 of the Doha Ministerial Declaration, which
is a reasonably long paragraph, referring to "the long-term
objective of establishing a fair and market-oriented trading system,
through a programme of fundamental reform". It talks about
aiming at substantial improvements in market access, with a view
to phasing out all forms of export subsidies and substantial reductions
in trade-distorting domestic support. It said that in all areas
of the negotiation special and differential treatment for developing
countries should be an integral part of the negotiations, and
that we should take non-trade concerns into account. This is a
summary of the charter that we were given for our negotiations.
As the chairman, I am guided by that. These are my terms of reference.
I have to say, although this is the Doha Development Agenda, the
ministers' instructions in the agricultural area do not say, "Do
everything possible for developing countries and do nothing for
developed countries". That was not the way it was. In a sense,
therefore, your question is unfair. Having said that, there is
a lot for developing countries in my paper, because this is the
Doha Development Round and we are aiming in particular substantially
to increase or improve market access for developing countries.
I have adopted a sort of banding approach, under which the higher
tariffs would have to come down more than the lower tariffs. I
have a formula to deal with tariff escalation, so that the tariffs
for imports of processed products in developed countries would
have to be reduced more than the tariffs for primary products.
One of the big complaints of developing countries is, for example,
that they can export their coffee beans but they cannot export
their processed or roasted coffee: this is done in developed countries.
The idea is therefore to try to encourage developing countries
to do more processing by reducing the barriers to the processed
goods in the developed countries. Also in the paper I have suggested
the reduction and eventual phasing-out of all export subsidies.
I have a formula in there which is flexible, and members can choose
whatever period they want. I had in mind in the paper something
like 10, 11 or 12 years—something like that, but it could
be quicker. I have also suggested the reduction of trade-distorting
domestic support by 60% in the case of what we call the amber
box and 50% in the case of what we call the blue box, which are
production-limiting subsidies. I think that there is a lot there.
Particularly in response to concerns the developing countries
have raised, I have suggested that we should allow them to categorise
a limited number of products as special products, which are essential
for their livelihood and food security, so that they would not
have to open up their own markets with respect to these products.
I have suggested also that there should be a special safeguard
mechanism so that, in the event of there being a sudden influx
of imports of a particular product which is threatening their
own domestic production, they could erect some temporary barriers.
I have also done what I can to safeguard preferential margins
of access for some of the traditional suppliers to, particularly,
the European market. Clearly one of the worries is that, with
tariffs coming down, for some of the poorer countries who currently
enjoy a preferential access—probably they have a zero tariff—the
margin of their preference will be reducing as the general tariff
comes down, and they fear this would erode their ability to export
to Europe in particular. So we have said that, wherever possible,
these margins of preference should be maintained and that measures
should be taken through technical assistance and other means to
try to encourage them to diversify their exports. We have given
them a longer period of time with respect to the reduction of
tariffs in the developed countries for these sensitive products.
So that is it briefly, but I think that there is a lot in it for
developing countries.
Chairman: Perhaps we could come back
to agriculture in a moment. Now that the Director General is here,
perhaps we could set it in context.
Q329 Tony Worthington: A preliminary
question about the Millennium Development Goals, on which the
world community came together. I was at a conference where I very
much got the impression that your predecessor, Mike Moore, said
something like, "We're very sympathetic to the Millennium
Development Goals". What is the position of the WTO in terms
of, say, formally embracing them?
Dr Supachai: I have been to several
UN meetings and several meetings which have been supported by
the UN—for example, the last one, the World Summit on Sustainable
Development—to try to provide input from the trade affairs
side. As you know, some of the major Millennium Development Goals
include reducing poverty by half by 2015; giving all children
of eligible age access to education by 2015; water supply, and
so on. These are things that certainly could be achieved partly
by having more international aid. The target is around US$ 50
billion a year. At the moment, however, despite calls for international
aid by various meetings, summits and the Finance for Development
meeting in Monterrey, not even half of that figure has been reached.
On the other hand, if we can help to free up trade in this round
by tackling market access, rules, agriculture—then we could
be looking at generating income flows to developing countries
worth many times over the international aid target of US$50 billion.
That is why trade could be a very powerful means of helping to
meet with the financial targets necessary to achieve the kind
of growth rate necessary to reduce poverty. In many countries
around the world, trade would account for half of the achievable
growth rate. Many countries around the world these days are trying
to create jobs by using "domestic stimulus measures".
However, the in the face of widespread unemployment, these measures
cannot do very much, especially if the interest rates are too
high and if there are exchange rate fluctuations. On the other
hand if developing countries can have market access the can export
and also import more. Trade would thus be another means for countries
to gain more income and more jobs. Twice a year, the UN Secretary
General, Kofi Annan, organises meetings of the Chief Executive
Board meetings the WTO together with the World Bank and the IMF
have been asked to join. We have attended these meetings since
the time of my predecessor to make sure that trade plays an important
role in addressing development issues, particularly poverty—which
I think is the key issue in the Millennium Development Goals.
Q330 Tony Worthington: I am wondering
why you have not explicitly said that as a goal of the WTO—to
embrace the Millennium Development Goals.
Dr Supachai: We have said it many
times.
Q331 Tony Worthington: You have?
Dr Supachai: Yes, we have said
that many times. In Johannesburg I stated it quite clearly. In
many of the speeches I have made around the world I have always
made it a point to say that we are not working for trade per
se. That is why we have been explaining these trade and development
goals. That is why this round is called a development agenda.
The issue at hand, which is very crucial for us, is how to link
trade with a development strategy. It seems to be a quite simple
and autonomous process, but it is not really so. If you look at
some of the World Bank programmes and the so-called PRSP, the
Poverty Reduction Strategy Papers, you will hardly see any inclusion
of the trade agenda. This is not to blame the World Bank, because
their targets are mostly education, water and health. When the
donor countries make donations to the World, most of the conditions
they attach will be, "Please go and invest in human resources"—which
is the right thing to do. But, at the same time as investing in
human resources, you must also find the means for those human
resources, which are becoming more educated and more skilful,
not to be wasted. It is not either/or. It is aid plus trade. It
is development plus trade all the time. That is why, when we mention
our support for the Millennium Development Goals, we would like
the World Bank to incorporate our trade agenda into the PRSP programme
— which they are now doing. In order to achieve the Millennium
Development Goals, we attend all of these meetings, summits and
UN Chief Executive Board meetings but, at the same time, we try
to work on what we call coherence. One of the principles I announced
when I came into this office was that of coherence. We cannot
work on trade alone. As much as we would like to help developing
countries in their process of development, it is not really our
competence. We can help by working with UNCTAD, World Bank, UNDP
and sometimes with the IMF.
Q332 Tony Worthington: Would it be
possible for you to give us an overall assessment of where this
round has got to? We have been in Europe and in the United States,
following this. It looks daunting. There does not seem to be the
necessary movement around. Are you confident that you will conclude
this round, or will you need an extension to it?
Dr Supachai: It is a good question,
to be thinking in pragmatic terms. For trade negotiators, I think
that to have a deadline and to have some urgency is a necessity.
We cannot shoot at moving targets and say, "Okay, if you
want more to be achieved, then we will shift the time a bit".
It is imperative, under the present uncertain circumstances in
the world economy today, that there should be some positive signals
sent by this institution through the Doha Development Agenda.
You must have seen the recent news of various institutions putting
in the effort to adjust their growth targets and predictions.
The predictions are all downwards, with rising joblessness and
lack of consumer confidence here and there. So there are a lot
of uncertainties around the world these days. This round is supposed
to be creating certainties, not only in the area of expanding
market access, particularly for goods that are of interest for
the developing countries, but also in terms of improving upon
the rules. We will be discussing the rules in this round, and
not only the rules on how to reduce subsidies in agriculture but
also the subsidy rules in general, dealing with forestry or fisheries,
as well as rules that deal with trade remedies, because some countries
sometimes abuse the trade remedies measures. We will also be dealing
with some new rules proposed by Europe.
Q333 Tony Worthington: You refer
to agriculture. It is my impression that, unless there is real
movement on agriculture, this round will be deemed a failure.
Dr Supachai: You are right.
Q334 Tony Worthington: And that depends
upon the United States and the European Union. Are you seeing
signs of movement there at all? They are both going to have to
move from their present position, are they not?
Dr Supachai: On the US side, although
they have just recently adopted their new Farm Bill, the proposal
they have made in the area of agriculture is a very strong, serious,
ambitious proposal — more ambitious than what is contained
in the Harbinson paper. That is their position. If they go in
that direction and if people challenge them, they have to take
up the challenge and go through with that. On their side, they
are aiming at ambitious goals. On the side of the European Union,
we see a different kind of ambition. It is much less. The formulas
suggested from both sides tend to differ. On the one hand, I think
that there is a prevalent view that, for those who have high tariffs,
we have to reduce the tariffs more, and not just reduce the tariffs
on an average basis—because it would take a few generations
to do that. That is why there is a blend of formulas in the Harbinson
paper. You ask what we are seeing. From the US side, because of
their ambitious proposal, if people take them up on that, they
would definitely have to come forward. From the European Union
side, we have been given to understand that we cannot link the
two together—the domestic or internal exercise they are
conducting on CAP reform with the multilateral requirements. Although
we cannot link them together, we expect the CAP reform to go ahead
for its own sake. It is certainly good for Europe in general.
But countries negotiating on agriculture also expect that if Europe
can go on with the CAP reform, it will have positive repercussions.
It would help countries to know that Europe has some room to manoeuvre.
It would help to move the position of other countries as well.
At the moment we see somewhat extreme positions from various sides,
which will not be moved. We are not just saying that the US and
the EU should be moving. We are also saying it of the Cairns Group,
which has the full agricultural reform position. They should also
be thinking of finding some solutions on how to move their own
position and also other positions. In order to move on agriculture,
we need moves in the area of non-agricultural market access. We
need moves in the area of services. I would say that this is a
round which is not an agricultural round. Although it is called
a development round, it is a balanced round. It is comprehensive,
in that it contains the interests of all parties concerned. It
contains services, which is not really a development issue but
which could be of interest to developing countries. Manufacturing,
if they deal with textile tariffs as they are supposed to, is
also of interest to developing countries. I would say that there
is a chance, in spite of the fact that it may seem difficult up
front and that people hardly seem to be moving on agriculture.
You must have seen it in former rounds. In the Uruguay Round—and
I keep comparing it with what I have seen in the Uruguay Round—we
did not see any real moves in agriculture in the first three years.
It took a few meetings, a few breakdowns, a few protests in the
heart of Europe, in Brussels, before they moved on agriculture.
In those days it was much less complex than it is now. There was
the Blair House accord between the US and the EU. Nowadays there
is a much wider participation and it makes the whole thing more
complicated. I still have hope, however. The round is important
for everyone—not only in the area of agriculture but in
other areas—which should motivate countries to move also
on agriculture, in order that the whole round can move.
Q335 Mr Battle: You say that the
round is not just about agriculture but is more inclusive. I am
wondering how wide the brackets of themes and issues are becoming.
In particular, with reference to the new issues. I get the impression
that many developing countries do not want the new issues to be
on the agenda, but I am not clear why. I sometimes hear that it
is because they do not have the capacity to deal with them and
it will take them a long time to build in that capacity. Is that
really an excuse because they do not want to engage in those issues
at this time? What is your view about the new issues?
Dr Supachai: If you look back
at the past history—and, for the record, I am saying this
upon information from the developing countries—they were
saying mainly that in the Uruguay Round they were asked to undertake
negotiations and agreement in the areas of intellectual copyright
protection, the so-called TRIPS. That was not at their demand;
that was a demand which came from the advanced countries. In the
beginning it was supposed to be an agreement to avoid counterfeit
practices. It was raised as a very basic security issue on counterfeit,
but it eventually became a full-scale intellectual property right
agreement. According to some of the developing countries they
felt that they had no choice but to accept it because it would
be exchanged for something that they would gain in the two areas
of agriculture and the termination of the textile quota agreement,
the multi-fibre arrangement. The complaint is that developing
countries think that they have not been given the right kind of
exchange, because they had to undertake the full programme of
TRIPS—which has been proved by the World Bank to be quite
costly. This is a World Bank report, where they assessed the cost
of putting the TRIPS regime into practice. It was quite a few
hundred million dollars per year for the developing countries,
which is quite expensive. At the same time, the agriculture negotiation
did not meet the full expectations of the developing countries,
and the multi-fibre arrangement, which was turned into the Agreement
on Textiles and Clothing, ATC, has a long life of 10 years—wherein
you see a lot of so-called back-loading. The first two stages
see the removal of only 20% with 80% back-loading in the last
two years. So the benefits of liberalisation have been slow in
coming. This is one reason why they have this concern about accepting
new issues. Secondly, developing countries often say that the
new issues could give rise to rules and regulations which could
perhaps be used unnecessarily to restrict rather than to promote
trade. You can imagine rules on standards and so on, and all kinds
of rules which could be used to reduce trade. This is the second
fear of the developing countries. The third is the fear of the
cost of implementation. Accepting new rules or agreements always
entails the creation of new human resources, a new set of laws,
new institutions, new premises—all of these things. They
would have some reluctance, therefore. It does not mean that the
new issues proposed in this round are not necessary. I think that
we do see the need to be looking at, for example, trade and environment.
It is something that could be beneficial even for developing countries.
But we have to be cautious regarding the dividing line between
trying to harmonise the rules on a multilateral agreement on environment
and the GATT rules, and making sure that these should not be abused
in such a way that environmental rules are used to block trade.
Even though developing countries may have found it difficult at
the beginning to involve themselves with trade and environment,
we are now seeing a good engagement in our Committee on Trade
and Environment. So we are seeing that involvement. The new rules
that the developing countries may be talking about are the so-called
Singapore issues, which contain four issues: rules on trade facilitation;
rules on transparency in government procurement; multilateral
rules on investment; and multilateral rules on competition. I
do not think that developing countries are against involving themselves
in all of these issues. I think that the request from the beginning
was to have more studies; to have more clarification in the meantime,
so that they would know what these would entail. If people were
to go into negotiations on all of these rules, what would be entailed?
What kind of framework would there be? How much would they have
to change their internal rules and regulations? How much cost
would they have to bear? What kind of suggestions could they bring,
to exchange for something which would be demanded by the other
sides? This is why they are concerned. However, I think that I
can say that our working groups which have been considering the
clarification of all of these issues have been making reasonable
progress. Even developing countries which in the beginning would
have been reluctant to join a discussion have become involved.
When I say that, please do not translate it to mean that I am
pushing for this negotiation come Cancun. What I am trying to
say is that we have a duty to perform, in which we need to work
on the clarification of the issues; we need to extend our technical
assistance, which we have been doing in big numbers, to the developing
countries—so that they have a better understanding of all
of these new issues. Upon the request of developing countries,
we will be providing some of this technical assistance.
Q336 Mr Khabra: Could I take your
mind back to the question of agriculture and food security and
could you tell us what is the status of the development box proposals?
What assessment has been made of the likely impact of specific
development box proposals on developing countries? Are special
safeguards and strategic products designed to serve the same purpose
as the development box?
Dr Supachai: In principle, the
boxes try to accommodate the various needs of various countries
to give some support to agriculture. The intention is to try to
reduce the distorting supports. In principle, therefore, countries
were looking for the need to reduce the number of boxes and the
amount of money involved in each individual box. That seems to
me to be the idea of the whole exercise, tackling the distortions
in agricultural trade. Developing countries would like to have
some special treatment, because they allege that they could not
make use of the kinds of boxes made available to the members.
Even in relation to the green box—which is supposed to be
helpful or useful if they want to give support to agricultural
development in the field of technology, research work, rural development—some,
though not all, developing countries tend to think that they might
not be able to use it. That is why they suggested the development
box. According to what I understand is being included in the Harbinson
paper, there are various areas of treatment that will give so-called
Special and Differential Treatment to the developing countries.
Mr Harbinson: The Director-General
is quite right. Based on the Doha Declaration, we are pursuing
issues under what we call the three pillars of the agriculture
negotiations. These are market access, export competition and
domestic support. We are trying to integrate Special and Differential
Treatment for developing countries into each of these three pillars.
So we are not following the idea of creating a special box, as
it were, but we are integrating the Special and Differential Treatment
into each of these three areas. It is very pervasive actually,
if you read my paper. I have to say also that it would be wrong
to think that all developing countries think the same. There are
many different strands of thought. For example, I mentioned the
concept of special products—we did call it "strategic
products" to start with, we are now calling it "special
products"—and the special safeguard mechanism. These
proposals are designed to provide food security and address the
livelihood concerns of a number of developing countries, but they
are by no means uncontroversial with other developing countries.
Increasingly, trade in agriculture, and in other areas of trade
as well, is South-South trade. There are competitive agricultural
developing countries who do not want to see additional barriers
erected against their exports in other developing countries. For
example, you would find that, on the one hand, India might have
a slightly different perception to, on the other hand, Argentina
or Malaysia. The latter two would be wanting to export to other
developing countries, and so they are less happy to see this.
It would be rather difficult, therefore, to construct a development
box per se, because it would not be able to answer to all
of the needs of the very diverse number of developing countries.
Q337 Mr Khabra: In certain years,
countries like India have surplus food but they do not have access
to the international market, with the level of competition. What
do you think should be done to address that problem?
Mr Harbinson: I think that what
should be done to address this sort of problem would be to ensure
that India can have effective market access in other countries.
This means reducing tariffs, for example; perhaps increasing tariff
quotas in some cases, and proceeding in that way. It probably
also means doing away with export subsidies. If you are trying
to compete in export markets, if one product is coming with a
huge subsidy and you are not able to do that, then you are at
a serious disadvantage. I think that these are vital issues to
be addressed in a negotiation, and they are being addressed.
Q338 Mr Walter: I have a couple of
questions on agriculture and one vaguely topical one, which is
the Chirac proposals for a moratorium on the use of export subsidies,
the misuse of export credits and food aid in agricultural products
to Africa. Do you have a view on those proposals?
Mr Harbinson: These are rather
topical proposals which are probably in the process of being considered
by a number of major governments at this point of time. We will
have to wait and see, quite frankly, how that pans out. I do not
think that it would be appropriate for me at this stage to express
a view. In any case, it is a different thing. The Chirac initiative
is a unilateral gesture, aimed at a particular part of the world.
That is not the WTO approach. We are going for permanent multilateral
solutions across the board.
Q339 Mr Walter: Can I bring you back
to the bigger picture of CAP reform and the EU's position within
WTO negotiations? We have had discussions with European Commissioners;
we have had discussions with the US Department for Agriculture
and the Special Trade Representative in Washington. We are in
a situation where the Director-General has talked of the various
boxes—the green box, the amber box, the blue box, et cetera.
We still end up with a situation — this is certainly the
read we get in Brussels from Commissioner Fischler — that,
at the end of the day, the EU will continue to be spending something
of the order of US$ 50 billion a year on agricultural support.
It is moving away from direct subsidies, export-related subsidies,
but it is nonetheless agricultural support. Can the WTO negotiations
on agriculture succeed without a really fundamental reassessment
by the EU of how it sees agricultural support? We are talking
about the quantum, not just the qualitative way of looking at
it.
Mr Harbinson: Again, this is not
so easy for me to comment on, as an impartial chairman of a negotiation.
There is no doubt—based on what many participants in the
negotiations tell me—that many countries around the world
are looking for some fundamental reform in the way the European
Union finances its agriculture business and trade, because it
is protecting markets and it is distorting trade at present. If
Commissioner Fischler's proposals went through as regards decoupling
subsidies from production, this would at least be significant
in terms of making the subsidies less trade-distorting. By removing
the link with production, I think that you would end up with a
situation in which trade was less distorted. This would certainly
be a move in the right direction as far as the reform of international
agricultural trade is concerned.
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