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WTO: 2005 NEWS ITEMS

10 November 2005
DIRECTOR-GENERAL

Lamy says differences require “recalibration” of Hong Kong expectations, calls for “negotiating spirit” to advance trade talks

Director-General Pascal Lamy, in his report to heads of delegations on 10 November 2005, said that informal meetings of a number of ministers during the past few days have not been able to bridge differences, which would now require members to “recalibrate” their expectations for the Hong Kong Ministerial Conference. He stressed the need to maintain the ambition of the Round, and for Hong Kong to mark a step forward in successfully completing the talks next year. Mr. Lamy's report follows.

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I would like to welcome you all to this meeting, the purpose of which is to review the state of play in the negotiations in the light of what has taken place since we last met in this format one week ago.

As I mentioned last week, a number of Ministers met in London on Monday in what was probably the first cross-cutting discussion at that level, moving beyond the issue of Agriculture to the rest of the negotiating agenda. It would not be true to say that any substantive progress was made in that small group, but there were a number of useful exchanges, and the willingness of the Ministers involved to look at the negotiations in a horizontal way was a positive sign.

Following that meeting, I continued my process of consultations which I started last week, capitalising on the presence of a larger number of Ministers here in Geneva. In an initial session on Tuesday, Ministers, Vice-Ministers and Ambassadors from a range of Members took part in a discussion of the current situation, an assessment of the prospects for Hong Kong and the possible next steps. This was followed by two sessions with Ministers only, to have cross-cutting discussions on first, the market access aspects of Agriculture, NAMA and Services on Tuesday, and second, development-related issues on Wednesday.

Before I go into what took place during these sessions, I would like to say a word about the process I used. I know that some of the delegations involved were unhappy with my decision to hold some discussions among certain of you only, and I am sorry for that. I can assure you that no offence was intended to any participant. I would like to convey to you that I believe that the Chair has to use all the means at his disposal to explore initial points of common ground with the aim of developing convergence in the time-honoured manner — concentric circles, while fully acknowledging that any decision can only be taken by the entire membership. The starting point, or the smallest circle if you prefer, is always something which creates dissonance among those who are not included. As I said to the many of you with whom I spoke last night, we know it has to be done, but at the same time we have trouble accepting that it is being done. But, ultimately, this has to be part of the trust that you, the Members, place in any Chair. And let me tell you that it is my strong belief that the Chair has to be at the service of the entire membership, you.

I have repeatedly given you my assurances of my strong commitment to transparency and inclusiveness. I stand by these. Nothing can replace the inclusive format of the whole membership as we are this morning — the earliest possible opportunity after the meetings of the last two days.

To close this chapter on the procedures of meetings in the last few days and the reactions thereto, let me tell you that my assistants — who are not always kind to their boss — have not failed to transmit to me in sometimes undiplomatic and insistent ways, the concerns and views of some of you.

Let me now turn to the substance of those meetings. I opened the initial session on Tuesday by giving my diagnosis of the situation. I will repeat it now, and I can say right now that nothing that took place over the last couple of days has led me to change it.

We have both some bad news, and a little good news on the negotiating front.
I will start with the bad news: there is not a sufficient level of convergence among Members on the level of ambition in the key areas of the negotiations, which would allow the Chairs to draft “Full Modalities”, meaning by that a text with number or parameters on all elements of the July 2004 framework.

This, of course, leads us to the question of whether we can jump from the July 2004 Framework directly to full modalities by Hong Kong, or whether we need an intermediary stage at Hong Kong instead. If we try this jump and we miss it, we might lose what has already been achieved — and this is not at all desirable.

Let me give you a few examples of differences that make it difficult to arrive at full modalities at this time. Some have said they are not in a position, at this stage, to move further on Agricultural market access, unless there is more on the table on NAMA, Services or GIs. Others have said they are only able to keep their offer on reduction of Domestic Subsidies if there is an improved offer on market access in agriculture on the table. Yet others say they can only agree to table a proposal of cuts of its industrial tariffs (NAMA) which would bite in applied rates if there is an improvement in, and to the extent of, a new offer on Agricultural market access. And we also hear from other sides that they will only discuss NAMA if there is a sufficient degree of precision on Special Products and the Special Safeguard Mechanism.

All of this adds up to some very wide gulfs, and it is only part of the picture. On horizontal issues of particular importance to developing countries, like preference erosion, which remains very divisive; small economies, or on less controversial issues such as the the treatment of LDCs; not forgetting tropical products, cotton and the Aid for Trade package, consultations and negotiations are not advanced enough.

So the question is whether — to use the words of the Indian Minister Kamal Nath - we “recalibrate” the expectations for Hong Kong — to what can reasonably be achieved or whether we are ready to run the risk of making Hong-Kong an “announced failure”.

Obviously there is a risk that by recalibrating Hong Kong we take pressure off the negotiations and start losing precious time. But the deadline of end of 2006 remains. The question is not to stop walking, but to advance step by step towards Hong Kong. We need to recreate a “negotiating spirit” among members which has been absent these last days. And, as I have already said, I do not think “take it or leave it attitudes” will help us make progress in the negotiations.

So what is the good news? First, it is my sense that nobody wants to reduce the level of ambition for the Round. This, in itself, is proof that there is a will — and where there is a will there is a way. We just have to find that way.

Second, if you look in a dispassionate way at what is already on the table, you will see that what is already there is not negligible. I am not saying we have enough on the table. All I am saying is that we are all better off being realistic — and this means recognising that the material on the table is such that if it disappears you will all have a problem. You all surely have an interest in preserving what has been achieved until now.

My message, therefore, to those in Tuesday's meeting was that I saw the need for reflection, maybe for adjustment but that I certainly saw the need for continued negotiations, in a focused and realistic way.

The two following sessions took up substance in a cross-cutting way, as I suggested we must now start to do at last week's Heads of Delegation meeting. We need to do this because for many of you the single undertaking is not enough of an insurance policy against uneven results. The reality is that there is a trust deficit among Members, which handicaps the whole negotiation.

Hence the usefulness of the first session on Tuesday night, where we managed to talk turkey on market access in Agriculture, NAMA and Services. The discussion did start to provide a sense of the proportionality which might be needed across these three areas. This is something we need to develop rapidly.

It was also clear to me from what was said that we all need to work much more on numbers, and I suggest that any delegation which has its own numbers could use the Secretariat as a clearing house for them, whether they want to share them with others or even just so that they can be checked.

In yesterday's session, we had a discussion on developmental aspects of the DDA negotiations, taking note that the Chair of the General Council is consulting on the non-negotiating elements of the package, many of which are equally important parts of the Development Dimension of our overall work programme. There is a recognition that the largest development gains will come from substantial results in each one of the areas under negotiation, taken together, particularly Agriculture, NAMA, Services and Trade Facilitation. It is clear that we will start to see the shape of the development package by advancing in these areas.

Equally, development issues under the negotiations will not move until all issues move, and this includes the trade aspects of cotton. At the same time, while keeping high the ambition on the market access side, we will clearly have to address issues such as small economies or preference-erosion, and build the necessary base for an Aid for Trade package for the end of the Round that will help translate the development package of the Round into reality. Some initiatives might well still be within reach at Hong Kong, such as harvesting a number of Agreement-specific S&D proposals, including for LDCs, but I do not believe our discussions have revealed any significant substantive advances.

So much for the history of the last two days. Now, what does this mean in practical terms? If we all agree that we cannot reach “Full Modalities” by Hong Kong, then we must necessarily recalibrate our expectations for our Conference. We must carefully reflect on what we want to achieve at and after Hong Kong, in order not to reduce the level of ambition of the whole Round.

This probably means we are looking at having a range of numbers — the outer parameters — in the July 2004 Frameworks, and corresponding texts in the rule-making parts of the negotiations. This would still have to make up an overall package, and would have to be, by definition, balanced.

We would try to capture as much as possible what has been achieved since July 2004, so that we have a package available for Hong Kong which is clearly a step forward compared to the July Framework. We should also consider that whatever would be needed in terms of further concessions in order to achieve full modalities shortly after Hong Kong.

We all know we need to go to Hong Kong with a draft text for Ministers and that we have less and less time in which to develop the elements of this text. We must now find a way of moving towards these elements, in full cognizance of our recalibrated ambitions for them and the need to capture the progress we have made, and we must do this by helping the Chairs take advantage of the bottom-up approach. I have also suggested to the Ministers that we need their full cooperation and involvement in this to move forward. They are very willing to do this, and I am considering how we can go about it. It has to start, of course, through their instructions to you, their negotiators in Geneva.

To sum up, and to highlight what I am putting to you as questions this morning:

1.    do you all agree with my diagnosis of the situation, and
2.    do we need an intermediate stage in Hong Kong before we go to full modalities?

If so, this means has to be reflected in the Chairs' work and they need your guidance.

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