Beijing, China, 9 December 2004

The State of the Doha Development Agenda Negotiations and the Impact of the DDA on China's Economic Environment

China WTO Forum

Keynote address by
Dr. Kipkorir Aly Azad RANA
Deputy Director-General
World Trade Organization

Mr. Minister,
Distinguished representatives from the public and private sectors and from the academic community,
Honoured Guests,
Ladies and Gentlemen,

I am extremely happy to be with you on the third anniversary of China's accession to the WTO. It is indeed an important day today and I am sure that many of you will look back at what your country has achieved in this period with a great deal of pride. In my view this pride in your achievement is completely justified. China has achieved what many developing countries aspire to achieve. A stable economic growth; an attractive base for foreign direct investment; and since 2001, an important Member of the World Trade Organization. But the path to that success must not have been easy. I am sure it would have required dedication, patience, self belief and above all perseverance, including during the fifteen years that China was in the process of negotiating its accession to the WTO.

As you are all aware, China completed its long process of accession to become a Member of the WTO in December 2001, just a few weeks after the launch of the Doha Round. Three years later, we are celebrating China's integration into the multilateral trading system. The continuing story of outstanding economic success is a tribute to the vision and professionalism of China's policy makers. Progressive liberalisation of trade and investment has played a key role in China's economic growth and development over the past 25 years. China has always been an economic force to reckon with and for years has played a central role in contributing to global economic output. This role has only become stronger with China's entry into the WTO, where it now is increasingly providing inspiration to other developing country Members.

It is a happy coincidence that this third anniversary celebration is taking place amidst the conduct of the transitional review in connection with paragraph 18 of the Protocol on the accession of China to the WTO. The goal of the transitional review is to allow WTO Members to examine and report on China's progress in meeting its obligations under the various Agreements. WTO Members are encouraged by China's implementation of its WTO commitments, which have progressed and are now in an important phase. China has made noteworthy strides in promulgating laws and regulations, and building transitional administering authorities. In a period of evolving regulations, the importance of regulatory transparency, predictability, stability and consistency is paramount. Many efforts have been made by China to fully conform to WTO rules and each day brings in new changes. While on the flight to Beijing, I read that China is to open five new cities to foreign banks as part of its commitment to gradually open up its domestic banking sector. What was specially noteworthy is that this is being done ahead of the schedule that China agreed with WTO Members. These efforts are praiseworthy and the WTO will be more than willing to assist China in these efforts. China has been, and will remain, an important recipient of WTO's technical assistance and capacity-building activities.

China has made important strides in the three years since it joined the WTO. Recently compiled international trade data by the WTO shows that China already imports more goods that Japan and it is expected that China will surpass Japan's total merchandise exports in 2004. China is also likely to very soon become the world's third largest trading nation behind the United States and Germany. The growth in communications, so essential in today's world, is equally impressive. China already has the fourth largest internet market in the world. And judging by the communications infrastructure being put in place, there is no doubt that China will quickly vault to the top of the league.

Personally, I have always been an ardent admirer of China's stupendous growth. China has achieved a great deal in the last few years. But the potential of benefiting from the multilateral trading system is far from exhausted. It is fortuitous, and many would say even providential, that the launch of the Doha Development Agenda broadly coincided with China's entry into the WTO. As you are aware, Ministers at Doha adopted an ambitious agenda with development issues and concerns of developing countries at the heart of this agenda. It is the current status of this Doha Development Agenda, commonly referred to as the DDA, that I will now focus on.

We have come a long way since the Doha Ministerial meeting. Members have seen periods of progress and consensus; but there have also been times when divergences of views have not been able to be resolved. Many feared the worst when Members failed to reach an agreement at the Cancun Ministerial in September 2003. The WTO found itself in a precarious situation. There were strong pressures on the multilateral trading system from a proliferation of prospective regional arrangements. A target to resuscitate the DDA by December 2003 did not produce any significant results. Elections in some key countries also diverted attention away from the DDA. Members had no choice but to inject substantial momentum into the negotiations by the summer of 2004.

It was clear that this could only be done by restoring confidence in the process. The General Council Chairman and the Director-General of WTO made renewed efforts to move the stalled negotiations, while continuing to emphasise the principles of transparency and inclusiveness not only in their consultations, but also in their entire process. Clearly, seeking consensus amongst 148 Members at diverse levels of development and a negotiating agenda as complex and sensitive as the Doha round, was never going to be easy. Nevertheless, the concerns of all the Member countries had to be taken on board, since a process which did not associate all its constituents would never be sustainable. Moreover, past experience had shown that while strong political commitment from the major trading nations was a necessary condition for success, it would not be sufficient. All Members had to play their part. And this they did, responding very positively and constructively to this challenge, reflecting their support of the multilateral trading system.

In the lead-up to the July 2004 General Council, Ministers met in various formats and groupings around the world. This intensive ministerial-level activity provided much needed political support for the DDA, there were still considerable problems in translating it into concrete progress in the negotiations in Geneva. Consensus remained elusive. As common ground was being reached on some issues, on others the gap seemed to remain as wide as before, if not wider. Even though time was running out and nobody wanted a failure, yet Members did not seem willing to yield ground from their favoured positions.

The various negotiating groups and the Trade Negotiations Committee met frequently and in a variety of formats in order to narrow the differences in preparation for the final push. The Director-General, as Chairman of the Trade Negotiations Committee, worked in very close coordination with the Chairpersons of negotiating groups and the membership in a joint effort to build common ground.

All these efforts yielded results and, I am happy to say, the multilateral system prevailed. Members showed they were committed to making progress on the DDA. Perhaps nothing symbolised this better than the recently concluded agreement late July 2004, commonly referred to as “the July Decision”. Members collectively demonstrated a spirit of co-operation and goodwill. This Decision, formally adopted by the General Council on 1 August 2004, has put in place framework agreements ensuring continued progress in the DDA negotiations, and while it may not be perfect, the July Decision did achieve a text which reflects a very fine balance of interests.

The main elements of the Decision are as follows:

On Agriculture, while far-reaching commitments were reached on all three pillars of the negotiations — domestic support, export competition and market access — there remain a number of gaps to be filled and thorny issues to be resolved. On export competition, despite the important commitment to eliminate export subsidies, Members will still need to fix an end date. With respect to domestic support, while it is accepted that countries with higher subsidy levels will reduce much more than those with minimal subsidies, the actual level of commitments to be assumed still needs to be carefully negotiated. On market access, while agreement was reached that reductions would be made through a tiered formula, Members will need to negotiate the actual percentage reductions to be made by developed and developing countries. The Decision also calls for tariff reductions to be made through a tiered formula that takes into account the different tariff structures of developed and developing countries. All countries, other than least-developed countries, are expected to undertake substantial improvements in market access for all agricultural products, including sensitive products. Special and differential treatment for developing countries will include not only longer time-frames and lower reduction commitments, but also the ability to designate some products as Special Products which will be eligible for more flexible treatment and a new Special Safeguard Mechanism for developing countries. However, Members will still need to establish which products can be designated as “sensitive” and “special” and agree on disciplines to ensure that flexibility in this area is not used to circumvent market access commitments.

On Cotton, which is so important particularly to farmers from least-developed countries in West Africa, the Decision confirms that the trade-related aspects of this issue will be addressed “ambitiously, expeditiously and specifically” within the agricultural negotiations and that work to be undertaken will encompass all three pillars of market access, domestic support and export competition. A sub-committee on cotton has been established. This shall report periodically to the main Agriculture negotiating group. Work shall also continue on the development assistance aspects of cotton.

There is no doubt that China has a big stake in the negotiations on Non-Agricultural Market Access (NAMA). Annex B of the Decision sets out the initial elements for future work on modalities in this area, and provides some guidelines on the scope and approach to be taken in the negotiations. It recognizes that a formula will be used as a tariff reduction modality and indicates that a sectoral tariff component will also be pursued. The principles of special and differential treatment and less than full reciprocity in reduction commitments are to be fully incorporated in such modalities. In fact, Annex B includes several provisions that deal with the specific needs of developing-country Members and instructs the Negotiating Group on Market Access to further elaborate on them. For example, in the case of least-developed countries, it recognizes that they shall not be required to apply the formula nor participate in the sectoral approach, and clarifies that they are only expected to substantially increase their level of binding commitments. The framework also establishes the steps to be taken with regard to non-tariff barriers. It goes without saying that much technical work and negotiations will be required in order reach agreement on modalities in this area.

China has been particularly active in ensuring that Development issues are an integral part of the negotiations. In the July Package too, development permeates the whole of the text and the Decision commits Members to fulfilling the development dimension of the DDA. Special consideration shall be given in the negotiations to the specific trade and development-related concerns of developing countries, including capacity constraints. Prominence is also given in the Decision to the mandate of making existing special and differential treatment more precise, effective and operational. A deadline of July 2005 has been set for the Committee on Trade and Development meeting in Special Session to review all outstanding agreement-specific proposals on special and differential treatment and to report to the General Council with clear recommendations for a decision. The Committee has also been directed to address all other outstanding work, including on the cross-cutting issues, the monitoring mechanism and the incorporation of special and differential treatment into the architecture of WTO rules, and report, as appropriate, to the General Council.

Members also agreed that in the ongoing market access negotiations, special attention shall be given to the specific trade and development-related needs and concerns of developing countries, including capacity constraints, and concerns relating to food security, rural development, livelihood, preferences, commodities and net food imports, as well as prior unilateral liberalization, which have been directed to be taken into consideration in the Agriculture and NAMA negotiations. In the context of the concerns of least-developed countries, the Council confirmed that nothing in this Decision would in any way detract from the special provisions already agreed to by Members in respect of these countries.

Trade in Services continues to be a very important part of the negotiations. The Decision reaffirms the commitment of Members to making progress in the services negotiations. Members who have not yet submitted their initial offers are urged to do so as soon as possible. A deadline of May 2005 has been set for the submission of revised offers. China continues to be a major service provider, and will no doubt play an important role in these negotiations

On the Singapore Issues, there is agreement to commence negotiations on Trade Facilitation. To this effect, the WTO Trade Negotiations Committee established the Negotiating Group on Trade Facilitation on 12 October 2004. The aim of these negotiations will be to clarify and improve three existing GATT Articles with a view to expediting the movement, release and clearance of goods across borders, including goods in transit. This will help to make international trade transactions easier and less expensive. Negotiations in trade facilitation means that governments will soon begin to deal with the red-tape, inefficiency and sometimes questionable practices which can, in some cases, distort trade more than tariffs or quotas. On the other three issues — Relationship between Trade and Investment, Competition Policy and Transparency in Government Procurement — there will be no negotiations in the WTO during the Doha Round.

With regard to the other areas of negotiation, namely, the Dispute Settlement negotiations, Rules, Trade and Environment and TRIPs, Members reaffirmed their commitment to making expeditious progress in line with the Doha mandates. They similarly reaffirmed the high priority Ministers at Doha gave to the other elements of the Work Programme which do not involve negotiations, particularly issues of interest to developing countries, and instructed that reports should be made to the next Ministerial Conference.

Finally, Members agreed to continue the negotiations beyond the timeframe of 1 January 2005 set in the Doha Ministerial Declaration, and agreed to hold the next Ministerial Conference in Hong Kong, China in December 2005.

While there is much to celebrate about the July Decision, there is still a lot of work to be done. There cannot be any room for complacency, and Members must show the same focus, determination and flexibility that made the July Decision possible. In fact, the road ahead is bumpy and needs to be carefully negotiated. While the July Decision made it possible for the necessary decisions on key issues to be taken to ensure continued progress on the DDA, it does not in any way herald the end of the Round. However, it has clearly provided us with signposts. But the goals have to be achieved. Fulfilling all the Doha mandates would require our collective commitment to build on the July Decision and I am sure that China would continue to play a leading role in advancing these negotiations.

Since returning from the summer break, Members have turned their attention to the technical work which needs to be completed before modalities can be agreed. At the last TNC meeting, the Director-General stated that it is only when work on these technical issues is considerably advanced can we determine with any certainty the next steps that need to be taken in the DDA Work Programme. It would be futile and counter-productive if Members set themselves ambitious goals at this stage of the negotiations. Notwithstanding this, it is important that progress is made on all fronts bearing in mind the mandate and deadlines specified in the July Decision.

Shortly, at its end-of-year meeting, the General Council will review progress across all fronts on the basis of reports from the various WTO bodies, including from the Director-General as Chairman of the TNC. It is also intended to conduct a further overall review of progress next spring when Members will begin preparing for the Sixth Ministerial Conference. The continued engagement of all delegations, including leading trading nations such as China, will be crucial in this new phase of work. All WTO Members have a collective interest in strengthening the multilateral trading system, as there is no credible alternative to it.

Foreign trade is crucially significant for development. Liberalizing import markets for foreign suppliers is a way to eliminate existing market distortions and facilitate purchasers in Member countries to procure the goods and the services that are most cost-effective for them and of the best possible quality. It is true that trade liberalization exposes import competing industries in individual countries to greater competition, but this is what will also improve the productivity of these industries through innovation and competitiveness. Member countries themselves need to contribute to this process chiefly by improving macroeconomic and domestic regulatory framework, as well as the physical and organizational infrastructure to back up trade and private-sector investment

In the final analysis, trade liberalization on its own is not enough to meet all the economic and social challenges facing nations. However, the dramatic importance of trade as an engine of economic growth and development cannot be overstated. Studies done by the World Bank, the International Monetary Fund and the Organization for Economic Cooperation and Development, all indicate that the gains from liberalization of trade under the DDA could run into many billions of dollars, with developing countries gaining a sizeable share, which would help facilitate their efforts to alleviate poverty and achieve economic growth and development.

Let me conclude by saying that China's continued engagement in the technical phase of the negotiations is extremely important. Developing countries, like China, must use this round of negotiations to promote their development objectives and the July Decision of the General Council is exactly the basis to build upon. The July Package has both rights and obligations. Countries have to now maximise the gains, including by expanding upon the flexibilities and special and differential treatment provisions inherent in the Decision.

Let me once again thank the organisers of this China WTO Forum. With so many distinguished participants, this forum is indeed an excellent opportunity to assist the public and private sectors and the academic community in their efforts to develop the right strategies for economic growth through participation in global trade. The theme of the Conference “China and the WTO: Meeting the Challenges Ahead” goes to the heart of the mission of the World Trade Organization, which was created in the belief that greater openness of world markets would improve the investment environment, generate economic growth and be a powerful force for creating jobs and reducing poverty. I am sure that this is exactly what this country will achieve in time to come and will continue to play an important role in the WTO.

I wish all of you the very best.

Ganxie Zhu Wei.