Memorandum by Ian Pearson MP, Minister
for Trade, Foreign and Commonwealth Office and Department of Trade
1.1 Government policy on the Doha Development
Agenda (DDA) is led and co-ordinated by the Europe and World Trade
Directorate of the Department of Trade and Industry (DTI).
1.2 DTI has responsibility for all dossiers
of the DDA, with the exception of the Agriculture negotiations
and elements of the Trade and Environment negotiations which are
led by the Department for Environment, Food and Rural Affairs.
A number of other Government departments have a significant input
into the development of trade policy, notably the Department for
International Development, HM Treasury and the Foreign and Commonwealth
Office. Policy is developed in close contact with the UK Permanent
Representation in Brussels and the UK Mission in Geneva.
2.1 I set out below responses on each of
the areas on which the Sub-Committee have requested comments:
Outcome the UK would like to see from the Hong
2.2 The UK is committed to achieving a successful
outcome to the Hong Kong Ministerial. The Ministerial should deliver
a package that would allow a conclusion to the Round by the end
of 2006 that is pro-development andthrough liberalising
developed world marketshelps build a more competitive European
2.3 Building a freer and fairer multilateral
trading system has the potential to lift millions out of poverty.
A pro-development outcome in the DDA would result in improved
participation by developing countries in the world trading system,
particularly through substantially increased market access and
the dismantling of trade-distorting subsidies by industrialised
countries. A development-friendly result will also ensure poor
countries are given the flexibility to decide, plan and sequence
trade reforms as part of a wider poverty reduction and development
2.4 WTO Members have adopted an unofficial
end date of the end of 2006 for the Round. In June 2007, US Trade
Promotion Authority (USTPA) expires, with uncertainties over whether
it will be renewed setting an effective deadline for conclusion
of the DDA. USTPA (also known as fast-track authority) means that
Congress must accept or reject any agreement in its entirety,
rather than being able to unpick aspects of the agreement.
2.5 To meet the end 2006 deadline, WTO members
are aiming to make significant progress at the Hong Kong Ministerial
Conference, 13-18 December 2005. A successful outcome at Hong
Kong would see agreement on substantial liberalisation of agricultural
and industrial goods, significant steps forward in services and
trade facilitation, wide-ranging Special and Differential Treatment
measures for developing countries across the dossiers and a "round
for free" for LDCs.
Work which has been done by the UK to contribute
to a successful outcome
2.6 The UK is an active player in trade
policy and champion of the multilateral trading system. The UK
set out its distinctive trade philosophy in the July 2004 White
Paper "Making globalisation a force for good". Liberalisation
can offer huge opportunities but done too quickly it can be disruptiveespecially
for developing countriesas seen by the experience of "shock
therapy" liberalisation in the 1980s. Developing countries
need flexibility when implementing trade reforms, while many will
also need assistance to develop their supply side capacity.
2.7 The UK government has a large programme
of research in trade policy, much of it commissioned by the Department
for International Development, which is used to inform UK policy
and influence the international trade debate. In addition, the
UK provides considerable assistance to developing countries and
LDCs to develop their capacity to negotiate effectively in the
field of trade policy. UK funding to developing countries for
Trade Related Capacity Building stands at £178 million since
2.8 UK work has been focused on the following
Influencing the Commission and other
EU Member States. Under the Common Commercial Policy, the Commission
negotiates on trade matters on behalf of the 25 member states.
The UK plays an active role in EU working groups, notably at the
weekly meeting of the Article 133 Committee (the Council's working
group on trade policy). Ministers and senior officials also have
regular programmes of bilateral contacts with Member States to
discuss trade policy. The UK has consistently made the case for
bold steps in DDA negotiations, such as the EU's offer in May
2004 to eliminate export subsidies, and moving away from a mercantilist
approach to negotiations where reforms are seen as "concessions".
During the Presidency the UK
has supported the Commission in its role of negotiator. In particular
it has pushed for improved transparency between the Commission
and Council and looks to deliver through the Council an ambitious
European approach in Hong Kong, with development at its heart.
The requirement to act as an impartial chair of the Council during
the UK's Presidency of the EU has meant that although the UK will
still intervene where necessary on issues of critical national
importance, the UK has significantly reduced its national interventions
in EU fora.
Ministers and senior officials engage
regularly with key WTO Members (notably the members of the so-called
G4EU, US, India and Brazilwhich act as the negotiating
dynamo for the DDAalongside G90, G20 and LDC representatives)
through telephone calls, meetings and visits.
The UK has used its Presidency of
the G8 in 2005 to highlight aid, trade and debt. A statement on
trade at Gleneagles in July helped to display the level of commitment
from world leaders to an ambitious conclusion to the DDA and highlighted
the need for aid for trade for poorer countries.
The UK has been making the case for
the development of an effective package of trade related technical
assistance and capacity building to help unlock the development
benefits offered by the DDA. Such a package would help poorer
countries build their capacity to trade to take advantage of increased
access to international markets. At Gleneagles, the G8 countries
committed to "increase our help to developing countries to
build the physical, human and institutional capacity to trade,
including trade facilitation measures". A DFID-funded high-level
group developed proposals on aid for trade which have informed
World Bank proposals in this area. As a major donor, the UK is
actively involved in discussions with other donors and recipients
on the detail of the World Bank proposals. There will be a World
Bank hosted side event at Hong Kong. In addition to the World
Bank initiative, the UK is pressing for countries to make financial
pledges on trade related aid ahead of Hong Kong.
Role the EU should play in the Ministerial
2.9 The EU is one of the major players at
the WTO and will have a fundamental part to play in putting together
a package at the Hong Kong Ministerial. The EU is a member of
both the Five Interested Parties (a small grouping, representing
a range of opinions which negotiates on agriculture) and G4 group
(a core group covering negotiations across the piece).
2.10 The aim of the WTO Membership is to
whittle down the number of issues to be decided at Hong Kong to
a small core. Taking an overloaded agenda to Hong Kong risks recreating
the conditions for similar failure to the Cancun Ministerial in
September 2003. This means that there will need to be rapid progress
on the DDA during November.
2.11 One lesson learnt from Cancun is that
it is not enough for the EU and US alone to agree a deal and expect
the rest of the Membership to fall into line. In particular, Cancun
saw the emergence of strong developing country voices in the WTO
and the G20, G33 and G90 (all groupings of developing countries
and LDCs) now have real negotiating weight in Geneva. It is telling
that the G4 now has two developing country representatives alongside
the EU and US, whereas the old Quad contained Canada and Japan.
2.12 At the Conference, the EU will need
to play a constructive role to help forge a consensual deal, which
provides sufficient balance between the different dossiers to
be acceptable to the Council of Ministers.
Statement of 10 October by the EU's Trade Commissioner
on the EU's negotiating proposals
2.13 The EU offer of 10 October, alongside
the US offer of the same day, has helped to re-energise agricultural
negotiations in Geneva. The Commission is working within the parameters
set by the Council of Ministers in a series of Council Conclusions
which form the mandate. Of particular importance in this regard,
as reiterated at the General Affairs and External Relations Council
on 18 October, is that the Commission must not go beyond CAP reform
in the offers that it makes in WTO negotiations.
2.14 The UK has a long-established position
of encouraging the EU to make ambitious offers to help deliver
a genuinely pro-development outcome. The latest EU offer went
considerably further than previous EU positions, notably on domestic
support where the EU put a 70 per cent cut in its "amber
box" (the most trade distorting forms of domestic support)
on the table. The EU called on other WTO Members to develop more
detailed proposals to match the EU offer to eliminate export subsidies.
In the judgment of Ambassador Falconer, the Chair of the Agriculture
Special Session, WTO Members are sufficiently close together in
the pillars of domestic support and export competition that it
is possible to see the shape of the deal at Hong Kong in these
2.15 The 10 October offers revealed the
distance between the WTO Membership on market access. Whereas
the US called for cuts of between 55 and 90 per cent, the EU proposal
would mean an average tariff cut of around 24 per cent. Within
the Five Interested Parties, the EU offer on market access was
rejected by the US, Brazil and Australia, with pressure on the
EU to table a second offer. Brazil called for a minimum 55 per
cent average tariff reduction by the EU.
2.16 The challenge for the Commission since
10 October has been to construct a second offer on market access
that is sufficiently ambitious for the WTO Membership, while still
staying within CAP reform. The Commission tabled a second offer
on 28 October that envisages an average reduction of 38.9 per
cent in EU tariffs, which takes the Commission very close to the
edge of its negotiating mandate. Initial reaction from members
of the FIPs has been mixedthe offer has not been rejected
but the US and Brazil have demanded that the EU move further.
Bridging this gap over the coming weeks will be of central importance
to the delivery of a successful outcome at Hong Kong.
Removal of agricultural export subsidies
2.17 Agricultural export subsidies are highly
trade distorting, having the effect of lowering world prices for
commodities by dumping high volumes of subsidised goods onto the
world market. These goods can undercut developing country farmers
in their own markets, while their effect on world prices means
that competitive exporters earn less for their produce. In the
short term, elimination of export subsidies could be expected
to cause some difficulties for Net Food Importing Developing Countries
by increasing their food bills. However, in many cases we anticipate
that higher prices will result in a supply response, allowing
these countries to move towards self-sufficiency.
2.18 In an open letter of 10 May 2004, then
Commissioners Lamy and Fischler offered to eliminate all EU export
subsidies on agricultural goods, conditional on parallel movement
in DDA negotiations by other WTO Members to address the trade-distorting
forms of their export competition instruments. The Commission
for Africa Report recommended an end date for export subsidies
of 2010. Her Majesty's Government have adopted this recommendation
and are pressing the WTO Membership to agree an end date of 2010
for export subsidies at the Hong Kong Ministerial. WTO Members
must also agree equivalent disciplines on the other forms of export
competitionexport credits, export guarantees, food aid
and State Trading Enterprises.
Achievement of solutions on agricultural market
access which are acceptable to all sides
2.19 Agriculture remains the most heavily
protected sector of the global economy, with trade flows highly
distorted by subsidies and tariffs. Agricultural negotiations
are the motor of the Round, with the G20 (a grouping of developing
countries led by Brazil, which co-ordinates on agriculture) making
it clear that progress in agriculture is a pre-condition for any
movement on non-agricultural goods or Services. While the agriculture
sector is politically sensitive in many developed countries, gains
in these sectors are central to the delivery of the development
aspect of the DDA. In the poorest developing countries, on average,
agriculture represents 40 per cent of GDP, 35 per cent of exports
and 50-70 per cent of total employment.
2.20 The welfare gains that could be realised
by a substantial liberalisation of market access dwarf the benefits
on offer in the pillars of domestic support and export competition.
Market access is the most contentious pillar, with less progress
having been made in the Framework Agreement of July 2004 than
on domestic support or export competition. As mentioned above,
even after the set of offers triggered by the US offer on 10 October,
WTO Members are some distance apart on market access.
2.21 Whether WTO Members will be able to
reach an accommodation on market access goes to the heart of whether
Hong Kongand the DDA in generalwill be able to deliver
a development-friendly outcome. As mentioned above, despite the
EU offer having been rejected by the US and G20 as insufficiently
ambitious, several Member States consider that the offer goes
to the edge (or even over the edge) of the Commission's negotiating
mandate from the Council. Breaking the current impasse will require
the EU to put a further offer on the table, or for other WTO Members
to row back their overall ambition for the round. We believe that
it will be possible to develop an EU offer that would be acceptable
to a critical mass of the WTO Membership.
2.22 From the UK perspective, we need to
see Special and Differential Treatment mainstreamed in the market
access negotiations so developing countries can design and pace
liberalisation in a way that suits their needs. We want developing
countries to have lower reduction commitments than developed countries
in any formula and to have access to meaningful Special Products
(based on food security, livelihood security and rural development)
and a Special Safeguard Mechanism. We also want LDCs to emerge
from the round free of any new obligations.
Liberalisation of trade in services and goods
2.23 Studies suggest that liberalisation
of trade in services and goods has the potential to deliver substantial
welfare gains for developed countries, and for developing countries
also if done in the right circumstances and appropriately sequenced.
A successful outcome in goods and services in the DDA would be
a powerful impetus towards the creation of a more competitive
European economy, helping the EU deliver on the Lisbon Agenda.
Consistent with our trade philosophy, we are clear that developing
countries should not be forced in DDA negotiations to liberalise
in these sectors.
Non-Agricultural Market Access (NAMA)
2.24 An ambitious result on NAMA (covering
industrial goods, fish and fish products) will be a critical element
of a deal for the European Union, particularly for the developed
Member States with the strongest export potential. Many Member
States want to see increased market access in NAMA (and progress
on Services), as a trade-off for the opening up of European markets
in agricultural goods. The EU priority in NAMA has been characterised
as improved real access to third country markets. The UK is working
hard within the EU to ensure no new obligations are imposed on
LDCs and that any NAMA agreement for developing countries respects
the principle of less than full reciprocity and maximises Special
and Differential Treatment. We recognise the importance for developing
countries of maintaining flexibility.
2.25 The parameters of the current NAMA
negotiations are set by Annex B to the Framework Agreement of
July 2004, which was a re-statement (with some additions) of the
Derbez text prepared at the 5th WTO Ministerial Conference in
Cancun. WTO Members share a common goal of agreeing full modalities
on NAMA and Agriculture at Hong Kong. But, as mentioned, there
is a shared perception that progress on NAMA and Services negotiations
is contingent on progress on Agriculture. Agreement on a market
access formula and reductions of domestic support in agriculture
has the potential to trigger progress in NAMA negotiations. Pascal
Lamy (Director General of the WTO) has recently called for parallel
movement on NAMA and agriculture but this is yet to translate
into movement in negotiations.
2.26 Negotiations since the Framework Agreement
have focused on agreeing the tariff reduction formula. There are
currently a number of tariff reduction scenarios being discussed,
involving two types of formula: known as the Swiss and ABI (Argentina/Brazil/India,
also known as the Girard formula).
2.27 The Swiss formula is a non linear,
harmonising formula that is effective at reducing high tariffs
and peaks and narrowing tariff escalations. This means that those
countries with higher initial tariffs are therefore required to
make larger cuts under a Swiss formula. A simple Swiss formula
takes the following form:
2.28 The problem with a single coefficient
Swiss formula is that developed and developing countries with
the same tariff level would make the same reductions, which would
not deliver on the Doha concept of "less than full reciprocity"especially
as developing countries tend to start with higher tariffs. This
would make it inappropriate given the UK's principles. Use of
multiple coefficients is one way of addressing this, ensuring
that developing countries and developed countries are treated
2.29 Norway, Pakistan, EU and US have proposed
variants on the Swiss formula. Pakistan and the US have proposed
dual coefficient formulae, where A is a single coefficient, with
one value for developed, and another for developing country Members.
EU and Norway have also suggested the use of credits, where developing
countries use credits (given, for example, for high binding of
tariffs) to increase their coefficient. Throughout, as set out
in the Framework Agreement, the poorest countries (LDCs) will
not be required to make reductions.
2.30 The ABI formula is a variation of the
Swiss formula but uses a national bound average of the base rates
and a coefficient, B, that can be varied to reflect different
initial tariff levels. The ABI formula, whilst still a harmonising
formula, is less harmonising than a single coefficient Swiss formula,
giving developing countries lower proportional cuts. A proposal
by Caribbean states also takes this form.
2.32 There has been a perception in 2005
of an emerging consensus around a Swiss formula with variable
coefficients. Finalising the formula and its coefficients will
require agreement on the treatment of the flexibilities set in
paragraph 8 of Annex B to the Framework Agreement. A priority
for the UK will be maximising flexibilities for developing countries.
The formula must address the issues of tariff peaks (defined either
as greater than 15 per cent or more than three times national
average applied tariff), high tariffs and tariff escalation identified
in the Doha Ministerial declaration.
2.33 Agreement on a formula should open
up discussion on deeper than formula cuts for certain sectors,
with special attention paid to sectors of interest to exporters
in developing countries. In addition, a number of developed countries,
notably Japan and the US, have a particular interest in elimination
or harmonisation in a number of sectors of key interest. Negotiations
on sectors are less important for the EU than for either the US
or Japan with the EU likely to ask for special treatment for fewer
sectors than the US.
2.34 Throughout negotiations, ensuring the
integration of adequate Special and Differential Treatment for
developing countries in a package at Hong Kong will be a critical.
As stated in the Framework Agreement, it is proposed that LDCs
and weak and vulnerable developing countries should not be required
to make formula reductions or, in the case of LDCs, participate
in any sectorial approaches. Developed countries, and developing
countries in the position to do so, should grant duty-free and
quota-free market access for non-agricultural products from LDCs.
Further, the UK will argue that all developing countries should
be given optimal flexibility to sequence their trade reforms and
not be forced to liberalise.
2.35 On other elements within the NAMA mandate,
there is little prospect of significant progress on Non Tariff
Barriers by Hong Kong. Preference erosion is an important issue
for a number of WTO Members and will need to be addressed in a
broader package at Hong Kong.
2.36 Across the DDA mandate, the UK will
look to ensure that negotiations contribute towards the goal of
sustainable development. In the Committee on Trade and Environment
Special Session is negotiating under paragraph 31(iii) of the
Doha mandate to liberalise the trade in environmental goods and
services. The aim is to agree tariff cuts for environmental goods
which go beyond those that will be agreed across the board in
the main NAMA negotiations. By Hong Kong, it is hoped that the
CTESS can agree on a list approach and perhaps also on a core
list of mutually agreed environmental goods. However, this is
ambitious, not least because India has tabled an alternative approach
to fulfilling the mandate that does not include the elaboration
of a list.
2.37 In order to try and progress the services
negotiations, a number of WTO members (including the EU) have
begun to explore negotiating methods to complement the bilateral
request-offer process. A number of proposals have involved the
request-offer process being supplemented by complementary plurilateral
and multilateral negotiating methods.
2.38 The UK believes that departing from
the current request-offer process could be counterproductive and
could derail the services negotiations in the short time available
before Hong Kong. Whilst not opposed in principle to the exploration
of complementary approaches to the services negotiations, a number
of countriesincluding the UKare determined that
proposals should take into account the need to respect in full
the architecture and flexibilities built into the GATS. It will
be important to avoid setting up structures that will put pressure
on developing countries to liberalise.
2.39 Current EU proposals recognise a distinction
between developed and developing countries in setting targets
and the need for balance in the negotiations. But of course Commission
proposals always have to reflect the overall balance of all member
states' views, rather than that of the UK alone. The UK's established
preference is for a settlement that avoids all new mandatory requirements
on developing countries to liberalise services, and we will continue
to work towards this goal. We are particularly determined to ensure
the maintenance of flexibilities to reflect the individual circumstances
of developing countries and preserve Members' ability to respond
to targets based on their own national policy objectives.
2.40 The UK has three overall objectives
for the current round of WTO Services negotiations:
(i) To ensure progressive liberalisation
in developed countries and to increase the opportunities for developing
countries in international services trade, while fully respecting
WTO Members' national policy objectives and right to regulate;
(ii) To ensure any further liberalisation
of trade in services ensures legal certainty, creates an enhanced
and predictable business climate and so secures new economic opportunities;
(iii) To secure an overall balanceacross
services, agriculture and NAMA negotiationsto promote a
successful conclusion to the Round.
2.41 A lot of work remains to be done in
order to progress the WTO services negotiations by the Hong Kong
Ministerial Conference. Ultimately this will depend on the political
will of WTO Members and capacity of developing countries to participate
fully in the negotiations. It is vital that WTO members begin
to focus their attention on a common understanding of objectives
for Hong Kong and an agreed level of ambition for the negotiations.
2.42 Exploration of complementary approaches
to the services negotiations must not become a substitute for
the bilateral request-offer process. All WTO members have underlined
the primacy of the request-offer process and the need to intensify
bilateral engagement. Crucially the exploration of complementary
approaches should seek to underpin the current flexibilities within
the GATS, allowing all developing countries to decide in which
sectorsif anythey make market opening commitments
and the extent and type of market opening they grant. All countries
must retain the ability to make commitments which are consistent
with national policy objectives and levels of development.
2.43 Hong Kong must provide a strong statement
towards delivering on the development aspects of the services
agenda. This means underlining the need to operationalise the
LDC modalities with regards to improving their effective participation
in the multilateral trading system and continuing to make positive
efforts to ensure that LDCs secure a share in the growth of world
trade commensurate with the needs of their economic development.
2.44 Progress must be made on the rules
elements of the services negotiations in order to strike an overall
balance with market access ambitions. Political guidance is required
to establish clear objectives and a way forward on both the domestic
regulation and the GATS rules (ie Emergency Safeguard Mechanism,
Subsidies and Government procurement) components of the current
2.45 The current process of informal discussion
within the Council for Trade in Services has helped to tease out
different positions and explore concepts and ideas. In the run-up
to Hong Kong work should focus on building consensus on an agreed
way forward. Meetings in Geneva should allow Members to begin
to move beyond known positions and to start work towards establishing
a higher level of convergence.
2.46 Transparency in Government Procurement
was one of the so-called Singapore Issues (alongside trade facilitation,
trade and investment and trade and competition) included in the
DDA mandate when the round was launched in Qatar in 2001. However,
the 5th Ministerial Conference in Cancun in September 2004 ended
without agreement, with Members in deadlock over the inclusion
of the Singapore Issues in the Single Undertaking. In advance
of the Framework Agreement of July 2004, the Commission helped
to break the post-Cancun impasse by offering to drop all the Singapore
Issues (apart from trade facilitation) from the DDA mandate. There
will be no negotiations at the WTO on transparency in government
procurement within the DDA mandate.
2.47 Outside the trade round, the review
of the text of the Government Procurement Agreement (the WTO's
plurilateral agreement of 1979 covering public procurement, with
signatories including US, EU, Japan and Canada) is nearing completion,
with negotiations starting on the listing of purchasing authorities
to be covered under the agreement. The signatories are committed
to agreeing the final text by Hong Kong if possible. This deadline
is strongly supported by the European Commission and the UK.
2 November 2005