European Parliament Committee on International Trade — Brussels

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Chairman, Members of Parliament,

May I begin by thanking you for giving me this opportunity to clarify a number of points, often poorly understood or ill-perceived outside the walls of the WTO, concerning the state of the Doha Development Agenda negotiations. The round has progressed considerably since I last saw you in Geneva in the month of March. By way of introduction, allow me to read you a few excerpts from the international press concerning the multilateral negotiations:

Take this quote from The Economist, for example:

  • “Protectionist sentiment in Europe and America dragged this round out for seven years and imperilled it until the very end. There are reasons to believe that this sentiment will continue to gain strength in the industrial countries.”

  • Again from The Economist:
    “Fatigue now reigns in Geneva” — “A round which took three years to devise and seven more to complete is out of date even as it is finished.”

  • At the same time, the French press talks of a “betrayal of the fundamental interests of the country” (Quotidien de Paris) and a “hard-won deal” (Le Figaro).

  • An agreement like this leaves Europe outside world trade (Les Echos).

In actual fact, these words, despite their familiar ring, all date not from yesterday, or last month, or even last year, but from the final days of the Uruguay Round in 1992 and 1993! If these lamentations in the press had been anything to go by, the conclusion of an agreement would appear to have been not very likely and even less desirable. Some saw in it an abdication on the part of the developed countries, and others a death sentence for the developing countries. And yet today everyone agrees that the Uruguay Round increased world income by several hundreds of billions of dollars, and that the establishment of the WTO by the Marrakesh Agreement marked an important advance in world governance. We should endeavour not to repeat these mistakes as we approach the end of the Doha Round, and I therefore propose that we take an objective look at the state of the negotiations.

I will begin, if I may, by examining the general balance of the agreement being prepared, before going on to review certain features of special concern to the European Union.

First of all, a few words regarding the overall balance of the agreement. As you know, the WTO operates on the principle of a single undertaking, that is to say, the principle of a complete agreement in which nothing is concluded until everything has been concluded. Specifically, this enables Members to negotiate mutual and cross concessions with the certainty of arriving at a balanced agreement, while retaining blocking powers for use in the event of their finding the package as a whole unsatisfactory.

The negotiating programme adopted in 2001 comprises a score of issues, including agriculture, industrial goods, services, anti-dumping rules, fishing subsidies, and environmental goods and services. All these vessels must reach port at the same time, even though at the moment they are sailing at different speeds.

For the time being, the negotiations are focused on agriculture and industrial goods, and the main mutual concessions to be made are roughly as follows: the developed countries must reduce their subsidies and their levels of agricultural protection, obtaining in exchange better access to developing-country markets for their industry. Of course, the North-North and South-South dimensions are also important. In fact, the United States has offensive interests in Europe, just as Malaysia and Thailand may have them in China or in India.

Within this context, our first constraint is the need to maintain a balance between the agricultural and industrial components. This equality of “ambitions” between the two pillars was established by the ministers in Hong Kong in 2005.

To this principle of balance we then must add the need for fairness. As the stated aim of the Doha Round is to promote development, the principle of imperfect reciprocity must be applied, with the rich countries contributing more than their poorer partners. This dual quest for balance and fairness calls for a complex alchemy which explains, among other things, the time needed to reach an agreement.

Is that balance attainable today? I think it is, considering the current proposals and the work that remains to be done. There are three main issues on the table for consideration in the next few weeks: the reduction of agricultural subsidies in the rich countries, the reduction of agricultural tariffs, and the reduction of the tariffs on industrial goods.

These three issues form the subject of two compromise texts submitted last week by the chairmen of the agricultural and industrial negotiating groups. These revised texts are the means of enabling us to arrive at an interim agreement on agriculture and industrial goods which could — I ought to have said should — be achieved during the month of June.

Let us start with agriculture. You will recall that the elimination, by 2013, of export subsidies, which have a particularly toxic effect on the operation of world markets, was already the subject of a compromise at the ministerial meeting in Hong Kong.

With regard to domestic subsidies, the proposals currently on the table would make it possible to lower the ceiling on the most trade-distorting subsidies (amber box) by 70 to 80 per cent. Moreover, caps per product would be established to limit the concentration of these subsidies. As for the so-called “blue box” subsidies, which do less harm to trade, they would be capped at 2.5 per cent of production. Finally, it remains to confirm the criteria for ensuring that green box subsidies continue not to hurt international trade.

Secondly, there is the question of agricultural customs duties. The present proposals envisage the approximate halving of these duties for the developed countries and a roughly 36 per cent reduction for the developing countries. The tariff peaks would also be sharply reduced by applying heavier cuts to the highest customs duties.

The draft agricultural agreement suggests that WTO Members, including the developed countries, be authorized to protect a limited number of “sensitive products” for which, in exchange for a lesser reduction in their customs duties, these countries would have to offer market access in the form of quotas. The developing countries would also be able to protect certain so-called “special” products to ensure their food security and the livelihood of their subsistence farmers. A special safeguard mechanism to protect against any sudden deterioration in the terms of trade or sharp increases in imports is also provided for developing Members.

Where do things stand as far as non-agricultural products are concerned? With respect to industrial customs duties, there are two important factors at work: the binding, that is to say, the placing of a ceiling on the duties authorized at the WTO, and the reduction of the duties actually applied, even though the commitments undertaken by the Members of the WTO only relate to the bound duties, that is to say, the ceilings.

The draft agreement envisages that by the end of the round most developing-country (excluding LDC) customs duties will be bound. That would be a crucial advance for economic operators in terms of transparency and legal certainty for exporters to these markets.

Where reductions in customs duties are concerned, the package currently on offer has genuine market-opening potential. The draft would enable economic operators to save around 40 billion dollars in customs duties (of which one third would come from exports to developing countries and two thirds from exports to developed countries), all this without counting the new trade flows generated by the agreement.

As with agriculture, the draft compromise provides for flexibility for the developing countries, which could limit the cuts applicable in relation to a restricted number of tariff lines. However, the average of the bound (and applied) customs duties of the developing countries would fall from about 30 per cent to nearly 12 per cent. This would be the first time that the developing countries had agreed to reduce their tariffs, since in the previous round they mainly bound their customs duties, with only the developed countries actually reducing them.

We can now return to our first question, namely: from the European point of view, is the package I have just outlined a balanced one?

Only you Europeans can answer that. My intention is merely to throw light on what the negotiators sometimes tend to conceal in order to leave themselves some bargaining space. Please bear in mind that for Europe, with respect to both agriculture, where the Union has export interests (since Europe is not only the world's leading importer of agricultural products but also its leading exporter), and industry, there is now the possibility of an agreement that would bring two or three times the benefits of the previous round.

I would now like to say a few words about the benefits of the round that extend beyond this core issue of agriculture and industrial goods.

The Union also has much to gain from the negotiations on opening up trade in services. As distinct from agriculture and industrial goods, services are not affected by import tariffs. It is more a question of negotiating statutory market-opening commitments for specific sectors and modes of supply. In parallel with the adoption of agricultural and industrial modalities, I am therefore expecting to chair a ministerial-level conference on services, at which delegations will be able to exchange views on the content of the offers they intend to submit during the summer.

Europe could also profit from other important advances that this round could bring, for example, in relation to trade and the environment and trade facilitation, which, among other things, concern customs procedures, reductions in fishing subsidies and improvements in the transparency of anti-dumping measures.

Finally, the Union could use the WTO as a springboard for its development policy. The texts proposed have considerable potential where economic development is concerned, but many countries will need assistance in realizing that potential. That is where Aid for Trade should come in. By agreeing to raise the level of its Aid for Trade to 2 billion euros by 2010 the European Union has taken a decisive step towards achieving the millennium goals and building developing-country capacities. Thus, it will be promoting the growth of those countries which in a few years will be, rather than its competitors, its most promising trade partners.

In February of this year, we adopted a roadmap intended, among other things, to increase developing country ownership of Aid for Trade; to shift emphasis to monitoring implementation with a focus on country, regional and sectoral priorities; and to launch work on improving aid programme evaluation.

In general, as you have just heard, the conclusion of the Doha Round is a major challenge for the world and for the European Union in particular.

In the short term, I hope that by the end of June we shall have a ministerial meeting in Geneva that enables us to stabilize the agreement in principle on agricultural subsidies, agricultural tariffs and tariffs on industrial goods, and to establish a nucleus onto which, by the end of the year, we will have been able to graft the numerous other elements I have just described. As the technical work is already well advanced, it is now mainly a question of political will.

In today's world with its many anxieties, whether they be economic, social or political, the solution lies not in withdrawal and protectionism but in a combination, still to be explored, of openness and the international and domestic disciplines by which it must be accompanied if it is to be of benefit to all. The international component of these disciplines is the job of the WTO. A WTO which you Europeans yourselves wanted and did much to help to build. A WTO which you need and which needs you.

Thank you for your attention.

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