“Doha Development Agenda of Trade Negotiations”



“Doha Development Agenda of Trade Negotiations”

By Dr. Magda Shahin[1]

The objective of this research project is to update Egypt’s parliamentarians with recent developments in international trade and their economic and welfare implications. In particular, it covers four main issues: regional trade agreements; the Doha Development Round; trade and poverty reduction; and liberalization of trade in services. The four policy briefs conducted under this project were undertaken by the Egyptian Center for Economic Studies, and funded by United Nations Development Program in the context of a program of collaboration between the Egyptian People’s Assembly and the United Nations Development Program.

For over 54 years, the General Agreement on Tariffs and Trade (GATT) has regulated and supervised commercial relations between countries, yet it never became an international organization with an independent legal framework. The GATT, known as the rich men’s club, came into force in January 1948 upon signing by 23 countries[2], which were referred to as “Contracting Parties” and were mostly composed of developed countries. The GATT remained a provisional agreement and was never ratified by parliaments for two reasons that have proven to date to be two major impediments in the face of commercial relations. The first were the labor standards and the second the “restrictive business practices” by the multinational companies aiming at market controls and price discrimination. In fact, the Havana Agreement, which was targeting the establishment of an international trade organization, never came into being. It was utterly rejected by the American Congress, fearing that such an agreement would curb its authority and ability to legislate commercial laws.

Transforming the international trading system from a system controlled by a provisional agreement to one that is regulated by an international organization, in the aftermath of the Uruguay Round (1986-1994), was a great leap. The Round left developing countries exhausted after seven years of long and tedious negotiations that overwhelmed them with new commitments for liberalization and adapting their domestic legislation to their new international commitments. Unlike the seven preceding rounds, the Uruguay Round talks were not confined to trade in goods and tariff reduction, but exceeded it to trade in services, trade-related intellectual property rights, and trade-related investment measures. Although the Contracting Parties in GATT had the choice of joining an agreement and not the other, such a luxury was not granted in the World Trade Organization, as it was mandatory for its member states to join all the negotiated agreements in the framework of what became to be known as the “Single Undertaking.”[3]

The establishing agreement of the WTO, known as the “Marrakech Agreement,” is a sort of an umbrella covering all the Uruguay Round results. The annexes to the so-called cover-agreement include 22 international agreements, including the GATT,[4] in addition to 6 Understandings[5]. All of these agreements, decisions, and understandings are brought into one single document of 558 pages, entitled: “The Results of the Uruguay Round of Multilateral Trade Negotiations-Legal Texts,” or briefly referred to as “The Final Document.” Occupying thousands of pages, the “Commitment Tables” of all member countries were also attached to the Agreement, which were no longer called “Contracting Parties” but member states[6]

GATT Negotiation Rounds

|Year |Place/ name of |Negotiated Issues |Number of negotiating |

| |Negotiations | |countries |

|1947 |Geneva, Switzerland |Tariffs |23 |

|1949 |Annecy, France |Tariffs |33 |

|1951 |Britain |Tariffs |34 |

|1956 |Geneva |Tariffs |22 |

|1960-61 |Geneva (Dylan Round) |Tariffs |45 |

|1964-67 |Geneva (Kennedy Round) |Tariffs and Anti-Dumping Measures |48 |

|1973-1979 |Geneva (Tokyo Round) |Tariffs and Anti-Dumping Measures, the Four Framework |99 |

| | |Agreements (dairy products, government procurement, meat, trade| |

| | |in civilian aircraft) | |

|1986-1994 |Morocco (Uruguay Round) |Tariffs, Non-Tariff measures, Intellectual Property Rights, |122 |

| | |Dispute Settlement, Textile and Clothing, Agriculture, | |

| | |Establishment of the World Trade Organization. | |

The question is: what is this WTO that attracts so much attention? First, it represents the regulatory framework of the international trading system that sets the rules, principles, rights and obligations to regulate the trading relations of the member states. Second, it represents a contractual framework for the agreements concluded by member states and that became part of their national legislation. Third, it represents the third pillar of the Bretton Woods institutions, the World Bank and the International Monetary Fund.

The idea of launching a new round of trade negotiations just five years after concluding the Uruguay Round was not agreeable to most developing countries having barely had the chance to catch their breath. The gap persisted between developed countries allied with some major developing agricultural countries, on one hand, and other developing countries, including Egypt, India, Pakistan, Malaysia, and a number of African countries, on the other. The latter objected to a new round of trade negotiations, arguing that the term “Round” implicitly means accepting to address new issues as well as agreeing to a comprehensive framework of new obligations and more concessions with a view to reaching a single undertaking, similar to that of the Uruguay Round.

At the end, however, countries advocating a comprehensive round of negotiations had the lead. Developing agricultural countries were hoping to instigate a new round of negotiations to get the EU to offer additional concessions for further liberalization of their trade in agriculture. The Fourth Ministerial Conference, held on 9-13 November 2001 in Doha (Qatar),[7] which came right after the September 11 attacks, succeeded in launching a new round of trade negotiations, called “The Doha Development Agenda.” The American Administration had a vested interest in making the Doha Ministerial a success to help mobilize the support of the international community in its war against terrorism.

It came as no surprise, five years after the September 11 attacks, that these negotiations had hit a dead end in July 2006. Given the name “Development Round,” developed countries should have paid more attention to the developmental needs and problems of developing countries. Instead, developing countries were rushed into more liberalization and opening up of their markets. During the Doha negotiation rounds developing countries were constantly hastened and pressured into opening their markets through the reduction in their tariff rates of non-agricultural products and the liberalization of the services sector. On a different level, the U.S. and the EU did not have the true will to respond to developing countries’ requests to reduce subsidies in agriculture and opening the EU markets for the agricultural products from developing countries.

The Outcome of the Fourth Ministerial Conference in Doha

The Doha negotiations were no easy task. The outcome remained pending till the final hours of the Ministerial Conference. This forced the head of the conference, Qatari Trade Minister, to extend the work of the conference for 24 hours. In what follows, I will try to explain the results of the Doha negotiations wherein the international community acknowledged the developmental needs of the developing as well as the least developed countries:

1- The relationship between the Trade-Related Intellectual Property Rights Agreement and Public Health: African countries were finally triumphant over the developed countries—in particular over the US—having succeeded to negotiate sufficient flexibility enabling them to obtain medicine at lower prices from other producing developing countries, such as Brazil and India, which the American drug companies had so far fiercely rejected. The United States had shown a great deal of flexibility during the Doha conference when it agreed on a compromise language, which favored to a large extent developing countries’ positions and interpretations.

2- Implementation Issues: Since the first ministerial conference held in Singapore in 1999, developing countries called for an overall assessment of the extent countries had implemented their commitments and the difficulties they had encountered in the framework of the Uruguay Round before resuming any negotiations inflicting additional commitments upon them. Developing countries insisted on dedicating a separate Ministerial Declaration to the implementation issues, thus confirming their importance for them. Developing countries summed up the implementation issues into the following four categories:

A. The slow pace of developed countries in liberalizing certain sectors, which are of export importance to the developing countries;

B. The imbalance between the rights and obligations;

C. Failure to achieve the expected benefits of the Uruguay Round agreements and increase the rate of trade of the developing countries.[8]

D. Failure to implement the principle of special and differential treatment.[9]

3- The Doha Ministerial Declaration:[10] In its introduction, the Declaration emphasizes the importance of paying greater attention to the needs and interests of developing countries and places them at the heart of the future work program of the organization. The Declaration then presents the work program of the organization in 40 paragraphs, dealing with the various topics starting from the implementation issues to which the conference dedicated a separate ministerial declaration, as previously mentioned, to issues of agriculture, services, investment and competition, environment, and e-commerce. It also includes other issues proposed by the developing countries, which they succeeded to incorporate in the work program of the organization, such as the external debt crisis and transfer of advanced technology, in addition to the technical assistance program of developing countries and least developed countries.

Doha Development Round of Trade Negotiations

It is worth noting that the confinement of the Doha Round to the three previously mentioned topics (liberalization of agriculture, market access of non-agricultural goods, liberalization of trade in services) does not suggest eliminating or setting aside other areas of concern for developing countries, which will inevitably resurface once the three core issues are finally dealt with. Consequently, the responsibility falls upon developing countries to reinitiate the topics of concern to them, i.e. implementation issues, after the three main areas have been settled, and defend them vigorously.

i. Agriculture[11]

The conflict on liberalization of agriculture appeared inevitable from the onset of the negotiations in Doha between agriculturally-based economies and the US on the one hand, and the EU on the other hand. The EU in particular had a steadfast position against entirely removing export subsidies, which was the position spearheaded by Ireland and France within the EU. This position was not supported by other EU members like Great Britain, Netherlands, and Germany, which bear the brunt of subsidies within the framework of the Common Agricultural Policy (CAP), fearful that the burdens would increase with the enlargement of EU membership.

As a result of the continued pressure exerted by the Americans in Doha, Pascal Lamy, chief negotiator for the EU at the time,[12] realized that for the countries of the EU not to carry the blame for any failure, he had to agree to gradually removing subsidies on exports, without committing himself, however, to any specific time frame. As for the two other topics within the framework of agricultural liberalization—reduction of domestic subsidies and market access—the text of the Doha declaration seemed quite elastic and loose as regards to any frameset for liberalization. The Doha declaration merely referred to the necessity of improving market access and reducing domestic subsidies in a substantive way.

The fifth ministerial conference held in Cancun (2003), failed to bring about a consensus. Nevertheless it succeeded in increasing the animosity of the developing countries and escalating their fears with the evident shift in the path of the negotiations, which failed to deliver its developmental objectives in light of the constant pressure by developed countries. The latter pressed for issues of relevance to them and at the expense of the developing countries’ interest, such as the environment and government procurement. In addition, the U.S. and the EU specifically tied any concessions on their part in the field of agricultural subsidies with concessions from developing countries in opening up their markets and reducing tariffs on their imports of industrial goods. It was also evident that developed countries had loosened up to the commitments they had undertaken two years earlier in Doha, notably translating special and differential treatment into tangible treatment. In light of such developments, the agricultural group of 20 was formed at the Cancun conference to defend their agricultural interests. On their part, the group of 20 came forth with its proposal for a general framework on agriculture liberalization. It requested, among other things, the setting up of a specific time schedule, which should entirely remove export subsidies by 2010. The group has also produced a list of strategic products calling for its prime liberalization. This request was totally denied by the US and EU. Negotiators succeeded, at the sixth ministerial conference in Honk Kong, in agreeing to remove export subsidies on agricultural goods by 2013, which was accepted after extensive negotiations by the EU.

The proposal of the G-20 countries included a specific call to developed countries to abstain from subsidizing their farmers. The US refused categorically the request by the G-20 to lower its domestic subsidies to about $12 billion at a time its domestic subsidies reached $60 billion.

Talks on “market access” were not more successful. The rate and method of reduction remained a subject of dispute between member states. The EU and Japan continued to press for the reduction method agreed upon in the Uruguay Round, which meant that reduction of tariffs will not be applied on a linear basis, but on the average of a total number of agricultural products. Such a method allowed circumventing the lowering of peak tariffs on the sensitive products, while concentrating the rate of reduction on the less important products, which was not accepted by the agricultural exporting developing countries. The EU member states also rejected the request of the G-20 to reduce tariffs on agricultural products by half, or by 51 percent.

Egypt’s position regarding agricultural liberalization

Egypt is not in a favorable position due to diversity of its interests and its affiliation to several groups with conflicting objectives. Egypt is dominantly a net food importer. Hence, Egypt had arranged during the Uruguay Round negotiations to form an alliance with countries such as Pakistan, Jamaica, Mexico, and a number of African countries that came to be known as “The Net Food Importing Developing Countries.” This was in order to protect its interests against any potential negative impact emanating from the agricultural reform process, which would require a reduction of domestic subsidies and the removal of export subsidies, which would necessarily result in a rise in the international prices of agricultural products.

Egypt, however, is also an exporter of food and agricultural products. Consequently, it considered it in its own interest to join the “agricultural G-20” which heavily pushes for liberalization of the agricultural sector and the opening of developed countries’ markets, notably that of the US and the EU. Proponents of the Partnership Agreement with the EU are of the view, however, that it is not in Egypt’s interest to push for more liberalization on the multilateral level in the WTO, as this would only mean chasing Egyptian products out of the European market from more competitive producers such as Brazil and Argentina. Hence, Egypt needs not to rush into backing the G-20 for a quicker opening of the EU market, so as to preserve the preferential treatment it succeeded to negotiate within the Partnership Agreement with the EU.

With the Doha Round of negotiations being suspended, it is prudent for Egypt to involve in the meantime its parliamentarians, the private sector, and civil society more effectively. It is also vital to help them formulate policies and strategies, which are in Egypt’s best interest with a view to strengthening the capacity of its negotiators (government representatives) to defend Egypt’s national position when negotiations resume.

ii. Market Access in Non-Agricultural Products

The topic of market access for non-agricultural products has been a debatable issue between developed and developing countries from the commencement of the first ministerial meeting in Singapore. There was overall consensus among developing and developed countries on the importance of resuming the liberalization process in the fields of agriculture and trade in services under the explicit mandate contained in the two agreements.[13] While developing countries, with Egypt at the forefront, have resisted the developed countries’ attempts to include the liberalization of non-agricultural products under a new round of trade negotiations.

In the view of many developing countries, negotiations regarding market access target them primarily, especially through demanding that they reduce tariff barriers to levels that had not been agreed upon in any of the previous rounds of trade negotiations. Developed countries for over fifty years reduced custom tariffs among themselves based on the principle of demand and supply while at the same time having the liberty to decide the rates of reduction as well as the sectors to liberalize. Even though negotiations were to address tariff peaks in developed countries, many fear tariff reductions at incremental rates in developing countries would lead to de-industrialization.

In spite of developing countries’ wariness, the EU and US succeeded in extracting a concession from developing countries in the sixth ministerial conference held in Hong Kong. It was agreed that tariffs on industrial goods would be reduced on a “line by line”[14] basis, which leads to steep reductions on tariff structures in all countries without any consideration to the varying levels of economic and industrial development. The application of this formula had been refused by developing countries since the Doha ministerial and until the first few days of the Hong Kong conference.

The Swiss formula includes the non-linear reduction, which reduces the high industrial tariffs in an incremental manner. The EU continues to reject applying such a reduction method to any agricultural tariff reductions and affirmed that it would maintain the method adopted in Uruguay round, i.e. the linear reduction method. Such a method is known for its flexibility and ability to protect sensitive products, by lowering tariffs on sensitive products at minimal rates and reducing tariffs on the less sensitive goods at higher rates in order to fulfill the committed average reduction.

Egypt’s position regarding market access for non-agricultural products

Egypt has taken an opposing position to this issue during the Doha Round negotiations. Egypt is already strongly committed to gradually reduce its tariffs and does not need any outside pressure to expedite such reduction or to widen its span to include all tariff categories of non-agricultural products. As for the call to developed countries to lower tariff peaks, especially in the textiles and clothing or other products of interest to the developing countries unanimously, this could negatively affect Egypt’s advantages negotiated through the Partnership Agreement with the EU or the Qualifying Industrial Zones Protocol (QIZ) with the US.

iii. Liberalization of Services

Talks on the liberalization of services are less advanced than in agriculture and market access for non-agricultural products. Out of the 149 member countries of the WTO, only 47 countries presented proposals on the liberalization of services sector (71 if EU members are included as separate states, i.e. 25 members). The EU has worked in collaboration with the US to change the supply and demand method adopted under the Uruguay Round and to move to a faster method of liberalization, with a wider span to include more service sectors. Developing countries were wary of this liberalization method that encompasses compulsory means of liberalization, which they felt would undermine the flexibility granted to them under the GATS that allowed them to choose which sectors to liberalize and in accordance with the levels they see appropriate.

However, there is a number of developing countries that do not object to speeding up the process of liberalization in the services sector. Countries like Brazil and Argentina, among others, having reached a significant level of modernizing their services sector, do not hesitate to engage in negotiations for greater liberalization of the services sector in return for more liberalization in the agricultural sector and removal of agricultural subsidies. Furthermore, there is a growing conviction among other developing countries, including Egypt, of the importance of further liberalization in the service sectors to raise the standards of living. This is particularly so because services represent inputs that are vital for developing production and increasing commodity exports. Several developing countries are seeking to emulate India as one of the fastest growing economies in the world for the overall rate of growth it achieved in the 1990s based on the fast growth in the services sector. In the 1990s, the services sector alone has grown by 9 percent annually, representing almost 60 percent of overall growth in India’s economy. Moreover, the highest rates of growth were achieved in information technology and outsourcing[15] services. Under such circumstances, India has been able to take firm and clear positions in the negotiations on services compared to other developing countries to the extent that it did not hesitate to compromise in a number of areas in exchange for receiving concessions from developed countries within the context of the liberalization of services sector.

Conclusion

The key question at this point is what are the consequences for Egypt after the suspension of the Doha Round negotiations? Some would argue that there is no real interest for Egypt in the multilateral trade negotiations. Egypt is liberalizing irrespective of the outcome of the Doha Round. Moreover, Egypt is actively engaged in alternative forums embodied in bilateral and regional trade agreements with parties of considerable trading weight, such as the EU, Turkey, and Russia etc. with which Egypt is able to negotiate special preferential treatment.

However, this should not undermine the WTO negotiations and their effects on its member states in general and Egypt in particular. No doubt, Egypt would benefit from multilateral trade negotiations regarding the reduction of agricultural subsidies along with the reduction of tariffs from the EU.

This would strengthen Egypt’s bargaining position in its negotiations with the EU, especially in light of the fact that it is more difficult to negotiate reduction of domestic subsidies bilaterally with the EU. The same applies to the negotiations on services where the best outcomes could be reached in a multilateral setting, which would encourage the EU to take a more flexible positioning granting more access to Egypt’s workforce. And finally, it is important to recognize the collective force of developing countries in reaching more positive results through the possibility of exerting unified pressure as opposed to bilateral negotiations with the EU.

In conclusion, it is difficult to suggest which path is best for Egypt, whether it be the multilateral, bilateral, or regional. Egypt is trying to obtain as many concessions as possible from developed countries on the multilateral level, while making the least compromises on its part. As for bilateral and regional trade agreements, it is incumbent upon Egypt to give more concessions in return for what it might gain in terms of special and preferential treatment. Consequently, it could be best for Egypt to opt for a blend of multilateral, regional and bilateral commitments. Overall, the failure of the Doha round will not be in Egypt’s interest. This is due to the fact that any failure that may occur on the multilateral level would directly reflect on Egypt’s negotiations on the bilateral and regional levels.

This Policy Brief was written by Ambassador Magda Shahin, Director of Trade Related Assistance Center (TRACS), The American Chamber of Commerce in Egypt

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[1] Ambassador Dr. Magda Shahin is Director of the Trade-Related Assistance Center (TRAC) and Former Assistant Minister to the Minister of Foreign Affairs in Egypt.

[2] The United States, Britain, France, Canada, Norway, Holland, Belgium, Luxemburg, Czechoslovakia, Australia, New Zealand, South Africa, China, Syria, Lebanon, Pakistan, India, Ceylon, Burma, South Rhodesia, Brazil, Chile, Cuba. China, Lebanon and Syria have all withdrawn from the GATT after only two years of coming into force

[3] The Uruguay agreements were signed as a “Single Undertaking” on the 15th of April 1995 in Marrakech. This notion was used for the purpose of preserving the cohesion of the agreements as a whole and to ensure that countries, 120 at the time of negotiations, will not sign agreements that only suit their interests and leave out other agreements that might not be of interest to them. This ensured that all countries, after signing in Marrakech and the ratification of parliaments, would adhere to the package as a whole. The system of the organization is different from that of the GATT 1947 where countries had the option to refuse joining an agreement if it did not serve their interest.

[4] The GATT became an agreement amongst the agreements of the Uruguay Round. Anngst the agreements of the Uruguay Round. And in order to distinguish it from the old GATT, it is referred to as ʻGATT 1994ʼ. The main difference between them is that GATT 1947 is the original agreement made up of 38 articles, whereas GATT 1994 includes the amendments and adjustments that came into force in 1995.

[5] The difference between Agreement and Understanding is that the former is an international agreement that establishes rights and obligations, whereas the latter is merely an interpretation that mainly aims at elucidating the provisions of the international agreement. Excluded from that is the understanding regarding the rules and regulations of the dispute settlement, which includes rights and commitments going beyond the GATT or for that matter any other international agreement. (Said El Naggar: “The Basic Rights of Developing Countries under the GATT and the WTO”—The Economic and Social Commission for West Asia United Nations, NY, 1999)

[6] Today membership has reached 150 with Saudi Arabia joining the WTO in Hong Kong in December 2005, and Vietnam in December 2006.

[7] Paragraph 1 of Article 4 of the Agreement establishing the WTO entitled “the Structure of the WTO” states that ministerial conferences are to be held at least once every two years. The following are the ministerial conferences held in the framework of the WTO:

• The first ministerial conference held from the 9th to the13th of December 1996 in Singapore;

• The second ministerial Conference held from the 18th to the 20th of May 1998 in Geneva;

• The third ministerial conference held from the 30th of November to the 3rd of December 1999 in Seattle, United States;

• The fourth ministerial conference held from the 9th to the 13th of November 2001 in Doha, Qatar;

• The fifth ministerial conference held from the 10th to the 14th of September 2003 in Cancun, Mexico;

• The sixth ministerial conference held in December 2005 in Hong Kong, China

[8] It was expected that the Uruguay Round would raise the level of welfare between 212 and 510 billion US dollar, with the share of developing countries estimated at between 86 to 122 billion US dollars. Safadi And Laird (1996): “The Uruguay Round Agreements: Impact on Developing Countries,” World Development Journal, Volume 24, No. 7.

[9] Developing countries wanted to negotiate a much more objective “special and differential” treatment since the concept was only confined to providing developing and least developed countries with longer grace periods after the conclusion of the Uruguay Round. Developing countries sought to raise again the non-reciprocity principle that prevailed under the GATT, which meant that developing countries were not obligate

[10] WT/MIN (01)/Dec/1/Ministerial Declaration.

[11] The agreement on agriculture relied on three pillars: market access, domestic support, and export subsidies. Regarding market access, it means the elimination of all restrictive practices and non-tariff barriers, replacing them with tariffs, which should facilitate the binding of tariff rates and their subsequent reduction. The second pillar deals with the member states agreement to reduce domestic subsidies granted to farmers in general by 20 percent in developed countries within six years, and by 13.3 percent in developing countries within ten years. Concerning export subsidies, the third pillar, agricultural countries headed by Brazil called for the elimination of export subsidies on agriculture, due to the distorting effects that they may have on free trade. The total elimination of export subsidies has been finally agreed to in the Hong Kong conference, as export subsidies will be entirely eliminated by 2013.

[12] Currently acting as secretary general of the WTO.

[13] Under Article 20 on the liberalization of agriculture, and article 19 of the agreement on trade in services

[14] Which is to stop the from using the formula that is used to reduce the average tariff rate, which consequently allows countries to maintain high tariff rates regarding sensitive and strategic commodities and taking into account developmental needs.

[15] “South Asia and Trade in Services: Where Does the Commonality Exist?” by Pranav Kumar in “Trade Insight, Volume 1, No.2, 2005.

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