Report by the Chairman of the Trade Negotiations Committee

As you know, the TNC met in informal mode last Friday to exchange views on the next steps in the DDA negotiations, including what sort of path forward Ministers should map out when they meet in December.

On that occasion I reported to Members on the themes I had heard so far in my consultations on the current status and next steps in the DDA in preparation of the 8th Ministerial Conference in December. I do not intend to repeat my full remarks to the TNC since they were circulated in JOB/TNC/15.

Although a number of delegations said that the elements I had outlined were not yet ambitious enough or specific enough, I sensed broad support for these elements which Members acknowledged reflected the prevailing reality of our negotiations. I also sensed convergence on the centrality of the development dimension in the phase ahead including delivering for LDCs as priority under any paragraph 47 exercise.

Although in principle several delegations said that they were open to exploring different approaches in our work ahead, a number them also emphasized that such approaches needed to remain consistent with the Doha mandate and not undermine the principles and practices which have served us — transparency, inclusiveness and the centrality of the multilateral process.  Finally, views were also exchanged on the role that the WTO could play in responding to emerging global challenges including its role in keeping protectionism at bay in this current worrying global macroeconomic situation.

What we need now are concrete steps to generate trust in the ability of the WTO family to keep moving forward our agenda. To meet this credibility test, we have to keep working across the entire WTO agenda by looking at and beyond MC8. We obviously are not there yet and we will need to keep working hard with the General Council Chair over the coming weeks.

So that is my report Mr Chairman. While I have the floor, let me briefly address an issue of importance for trade, which is not part of the negotiating agenda but which on the ground has a lot of bearing on trade, especially for developing countries, which is trade finance.  In a joint letter that the President of World Bank Robert Zoellick and I sent to G-20 Leaders in Seoul last year, we raised the issue of the potential unintended consequences of the Basel frameworks of prudential regulation for the finance industry on the availability of trade finance in particular for low income countries.

While trade finance received a preferential regulatory treatment under the Basel I framework, in recognition of its safe, mostly short-term character, the implementation of Basel II proved difficult for trade, notably because of the rules governing risk waiting, and in particular the confusion between a country's risks, and the risks associated to single operations. I do not insist on the technical detail suffice it to say that following this letter to the G-20 we were asked together with the World Bank to enter into a dialogue with the Basel Committee, with the help of the International Chamber of Commerce.

We focused our discussions with the Basel regulators in demonstration that trade finance is one of the safest, if not the safest, form of finance in this world; and that it promoted a form of finance that contributed to development through trade.

The Basel Committee announced yesterday that they had now agreed to take a number of these comments on board.  They have announced a number of flexibilities which were not there in Basel II in order to avoid harming trade finance with poor countries. So, that is good news for trade, not only North-South trade but also South-South trade and we know we need to do more in this field. So, an important development and also a successful example of co-operation between international organizations and of how we can use our convening capacity, our expertise and the Working Group on Trade Debt and Finance. We will continue our dialogue with the Basel regulators to address what could be, and there probably will also be unintended consequences on trade on the Basel III stage of regulation. So more to come in the future, but so far we have scored on two issues which are of importance for developing countries and I think I needed to bring this to your attention. This concludes my report of today.  Mr Chairman, thank you.