The Hindu Business Line : Revised WTO framework agreement — Affirming faith in multilateral trade

The WTO Director-General, Mr Supachai Panitchpakdi (left), and Mr Shotaro Oshima, chairman of the WTO's general council, in Geneva... Success in cobbling together a cohesive plan of action on agreements.

TRADE Ministers of 147 countries stitched together a new deal to reinvigorate the stalled trade liberalisation talks under the Doha Development Agenda (DDA) in Geneva on July 31, after intense negotiations. The World Trade Organisation (WTO) deserves praise for managing to cobble together a cohesive plan of action in the form of a package of framework and other agreements.

In the words of the WTO Director-General, Dr Supachai Panitchpakdi, the deal would vastly enhance members' chances for successfully completing the crucial Doha Round stymied ever since the collapse of the WTO Ministerial Conference in Cancun, Mexico, in September 2003.

The final text of the framework agreements adopted by the Trade Ministers sets the parameters of the future package in five vital areas: Agriculture, industrial products, development issues, trade facilitation (one of the four Singapore issues, with other three — competition, investment, and transparency in government procurement — having been dropped at the insistence of a majority of developing countries) and services. Though these framework agreements are not final, they do denote significant commitments by the members.

For the first time, member governments resolved to abolish all forms of agricultural export subsidies by a certain date, while agreeing to substantial cuts in trade-distorting domestic support in agriculture. As part of this deal, a significant breakthrough in cotton trade offering great opportunity for farmers of West Africa and the developing world was also achieved.

Governments resolved to launch negotiations to set new rules streamlining complex trade and Customs procedures to bring down the transaction cost to trade and industry. The members also set ambitious guidelines for opening trade in manufactured products and a clear agenda for improving rules that would greatly benefit developing countries.

Emboldened by the enthusiastic participation of the Trade Ministers, the WTO Chief was confident that the headway now made would provide momentum in other key areas such as rules, services, environment, reform of dispute settlement procedures and intellectual property organisation.

That 10 months after the Cancun fiasco members displayed such political courage and commitment restores faith in the belief that governments truly set store by multilateralism and rule-based trading that provide a level playing field for all the stakeholders.

The WTO General Council chairperson, Mr Shotaro Oshima, who is Japan's Ambassador to the WTO, rightly stated that the text has emerged "from an arduous process of discussion and negotiations." In the coming months, members would develop the agreed framework or what is known as the Oshima Text into specific commitments so as to complete the Doha Round as soon as possible. With 10 precious months lost after Cancun, the scheduled launch of the Doha Development Agenda would not be feasible till end 2005.

The European Union Trade Commissioner, Mr Pascal Lamy, always given to colourful choice of phrases, drew inspiration from architecture to describe the outcome of the July meeting of the WTO. He said that in Doha — when talks were launched in November 2001 — "we laid down the plans to add one more floor to the WTO building". In Cancun, trade ministers were supposed to frame the construction but lack of coordination among all the technical teams aborted the effort and "today after a week of hard work, we have adopted the frame and there is still the wiring to do from now on".

Be that as it may, the results of the gruelling deliberations in Geneva need to be summed up in key areas.

In agriculture, the framework pact would mean significant farm trade liberalisation compared to the Uruguay Round, thanks to the efforts of G-20 spearheaded by India and Brazil with their Commerce/Trade Ministers, Mr Kamal Nath (and Mr Arun Jaitley earlier) and Mr Celso Amorim, respectively safeguarding the subsistence existence of farmers of the developing world.

The essence of the framework pact in agriculture is that it would bring a substantial cut in trade-distorting farm support, end trade-distorting export competition practices, particularly in developed countries, and open up agriculture markets. All developing countries would benefit from special treatment, allowing them to liberalise less over a longer span.

The world's 50 indigent countries do not have to give any commitments. What is particularly noteworthy is that big subsidisers would make the deepest cuts.

The deal would vastly improve market access. Farm tariffs would be cut according to a single-tier approach: the higher the tariff, the higher the tariff cut.

However, countries can select a certain number of sensitive products, which would be treated more leniently. But developed countries, in an adroit move, wrested that, as compensation, tariff rate quotas (TRQs) have to be opened to ensure better market access.

As non-farm products (industrial goods) account for 90 per cent of world trade and 70 per cent of developing countries trade in goods, non-agricultural market access (NAMA) has become crucial as lowering tariffs in this regard meant trade expansion. A lowering of tariffs by around 50 per cent is estimated to contribute enormously to trade expansion .

The framework provides an ambitious formula to cut tariffs: A non-linear formula, with deeper cuts for higher tariffs for all products, without a priori exclusions. The text also presages possibilities for more ambitious tariff cuts/elimination for certain sectors, in particular those of interest for developing countries.

There are also special rules for developing countries, as they would have longer gestation periods and flexibilities in tariff cuts. The text also provides guidelines for addressing non-tariff barriers (NTBs) to trade.

On services, the text gives a political push to the ongoing negotiations, which are based on requests and offers. Improved offers should be tabled by May 2005. Services account for between half and two-thirds of the economies of both developed and developing countries with 15 of the world's 40 leading service exporters being the latter.

Opening up possibilities for foreign firms to provide services such as telecoms, banking, distribution or tourism, as well as temporary entry of foreign professionals by way of service providers, either from the developed world to developing world or vice-versa, are important for efficient economies.

On trade facilitation — one of the Singapore issues — the text provides for launch of negotiations. Excessive Customs procedures and red tape could cost 5 per cent of the value of the imports, thus causing an obstacle to trade.

The Geneva framework adopts guidelines for the negotiation aimed at expediting the movement, release and clearance of goods, with developing countries commiting according to their capacity to implement them.

The agreement also calls for strengthening of provisions on Special and Differential (S&D) Treatment in favour of developing countries and also implementation issues from the unfinished Uruguay Round.

At the end of the day, what counts is not the gain and loss to one country but the benefits that accrue to multilateralism itself, particularly when regional trading agreements and extension of preferential trade pacts among participants make mockery of free and fair global trade.

The Geneva process has stemmed the creeping erosion in multilateralism by bringing on board countries to enable them to comply with rule-based trading norms for ensuring development, growth and employment everywhere.