Cablegate: December 17 Meeting of Tnc

R 191605Z DEC 08



E.O. 12958: N/A

SUBJECT: December 17 Meeting of TNC

1. Summary. At a meeting of the Trade Negotiations Committee (TNC)
on December 17, 2008 WTO Director General Lamy recognized with
disappointment that it is not possible to conclude the Agriculture
and NAMA modalities before the end of the year, but stressed the
need to continue work in early 2009 toward concluding the Doha Round
while defending the rules of the multilateral trading system.
Agriculture and NAMA consultations will resume early in the new year
based on the latest draft texts issued on December 6, and Members
will also restart work in the other negotiating areas. DG Lamy also
announced the WTO will use the Trade Policy Review Body (TPRB) to
provide a forum where Members can monitor and discuss any trade
restricting measures taken since the financial crisis. Lamy
mentioned that several Members had raised the possibility of an
early harvest for Trade Facilitation, Duty Free Quota Free (DFQF),
cotton, and bananas. Agriculture Chair Crawford Falconer said he
was convinced that the remaining differences in Agriculture are
bridgeable and announced plans for an Open Ended meeting early in
2009 to allow for a bottom-up exercise to go through the text.
Falconer also said that if there were to be an early harvest, it
should include cotton. NAMA Chair Luzius Wasescha said the major
outstanding issues were sectoral agreements and requests for
specific flexibilities by Argentina, South Africa, and Venezuela and
announced plans for an Open Ended in January. The Chairs of other
Negotiating Groups made brief statements on the state of play on
their issues, with the Rules Chair announcing forthcoming texts this
week. Forty-two countries made interventions, with most expressing
support for DG Lamy's call to continue work toward Modalities in
Agriculture and NAMA in the new year and to resume other key areas
of negotiations. Despite widely shared disappointment with the
current state of affairs, Members refrained from finger pointing.
Members' views differed on the idea of an early harvest and what it
should include. There were a number of calls by Members for a full
meeting of the Ministerial Conference to be held by the end of next
year, and Switzerland offered to host it. The Swiss also pointed to
the annual Trade Minister meeting they will hold in Davos in January
as a first opportunity for Ministers to take stock and reengage. End


2. DG Lamy reported that Members' overall positions on sectorals,
cotton, and the Special Safeguard Mechanism (SSM) had not changed
enough to warrant calling a Ministerial this year. Though Members
were not far from an agreement on these issues, the necessary
political drive to close the remaining gaps was lacking. Looking
ahead, conclusion of the Round should remain the focus for 2009.
Members should resume work to conclude modalities in Agriculture and
NAMA based on the revised texts, continue to make progress on the
other negotiating areas, and work to strengthen the relevance of the
WTO in the global economic system-beyond just providing a forum for
negotiations. Lamy reported some Members had raised the possibility
of an early harvest for Trade Facilitation, Duty Free Quota Free
(DFQF), cotton, and bananas, noting that Trade Facilitation warrants
some acceleration since it has the greatest consensus. He did not
offer a personal view on the idea of an early harvest but noted that
the areas suggested warrant priority attention, starting with Trade

3. Beyond negotiations, Lamy reminded Members that the WTO has a
responsibility to follow up on commitments made by world Leaders to
avoid taking trade protectionist measures during the financial
crisis. He proposed the TPRB as a forum for Members to monitor and
discuss trade restrictive measures. The first such review of the
TPRB will take place in the second half of January. (Bolivia
subsequently raised concerns in the General Council about
establishing this mechanism without prior consultation among
Members, so it appears that the General Council Chair will hold
consultations on this early in the new year.) Lamy also agreed to
proposals by Egypt and Japan to report periodically on the findings
of the Secretariat's financial crisis task force, with the first
report coming this week. The WTO will also continue to monitor
trade finance and continue efforts to develop a clear roadmap for
Aid for Trade. On the latter, the WTO needs to keep the focus on
trade mainstreaming in national development policies and keep
pressure on donors for the mobilization of funds, particularly in
light of the global financial crisis. Lamy also mentioned that
Members needed to discuss when to schedule the next regular meeting
of the Ministerial Conference and that the GC Chair would consult
with Members to get their views.


4. Agriculture Chair Falconer expressed his hope that the emerging
consensus in the latest text would not be lost in the coming months.
He identified cotton, sensitive products, tariff rate quota (TRQ)
creation, tropical products, preferences, and remaining high tariffs
in developed countries as the areas where most of the remaining work
is needed. If there is to be any early harvest, it should be for
cotton. One of Falconer's regrets in his revised text was that he
could not include results on tropical products and preference
erosion, but he expressed hope the July agreement could be the basis
for a deal once the EC and the Latin countries worked out their
differences on bananas. He plans to hold an Open-Ended in the new
year to go through the text and then restart the cycle of Open-Ended
and issue-specific work.

5. NAMA Chair Wasescha gave a short report commenting on the status
of discussions about country-specific flexibilities and providing a
work program for 2009. On Argentina and Venezuela, Wasescha said
that members need to examine specific details about the use of
flexibilities. On South African Customs Union, he described a
proposal based on discussions with members: a Swiss coefficient of
20 with 18 percent half-cut flexibilities and 5 years of grace on
textiles, apparel, and footwear or a Swiss coefficient of 22 with 16
percent half-cut flexibilities and three years of grace on textiles
an apparel. (Note: South Africa later discredited this proposal
insisting that it still needs 3 percent of no-cut flexibilities, in
addition to 16 percent half cut flexibilities and harshly
criticizing the U.S. and EC for their lack of understanding of their
special situation.) Wasescha reported that he will hold an
Open-Ended meeting on his new text in early January and will resume
small group meetings. The negotiating group will also look at data
to help Members assess the value of the concessions in the text. He
will consult with members on how to advance non-tariff barrier
discussions and will hold consultations with members on the key
remaining hurdle, sectoral agreements.

6. The Services Chair reported that the situation was unchanged
from July but that he intended to restart meetings in early 2009 to
build on the progress made during the July signaling conference.

7. The Rules Chair said that he would issue new draft texts on
antidumping, horizontal subsidies, and a roadmap of fisheries
subsidies in the coming days. He also announced that he would be
convening Members early next year to start conducting an initial
review of the transparency mechanism for Regional Trade Agreements
(RTAs) and would also elicit views from the Chairs of the Committee
on RTAs and the Committee on Trade and Development and the
Secretariat on their experience so far in implementing the

8. The TRIPS Special Session Chair announced his intention to
intensify work in January and mentioned he might do papers to help
focus on specific issues, leading to a draft text.

9. The Trade and Environment Chair reiterated the work programs he
had laid out in July for all elements of paragraph 31, noted that
the intermittent time period had permitted capitals to do necessary
internal analytical work on environmental goods of interest, and
expressed hope that delegations will be better prepared to offer
their submissions on environmental goods in the new year.

10. The Trade and Development Special Session Chair noted some
progress in clarifying thoughts on the Agreement-specific proposals
and the Monitoring Mechanism but that no new revised language has
been achieved. He plans to continue work on all elements in the
Hong Kong mandate in 2009 and will resume meetings in the third week
of January.

11. The Trade Facilitation Chair announced plans for a meeting in
late February and suggested that Members needed to consolidate
multiple proposals into single documents and improve their proposals
to reflect commonalities.


12. Cote d'Ivoire on behalf of the Africa Group, Jamaica on behalf
of the ACP Group, and Tanzania on behalf of the LDC Group welcomed
the new Agriculture and NAMA texts as reflecting the current state
of negotiations while raising some persistent concerns on remaining
issues. On Agriculture, the Africa and LDC Groups stressed the
importance of resolving cotton and welcomed some progress in SSM,
and the ACP Group stressed the importance of bananas and tropical
products. On NAMA, the ACP Group emphasized sectorals should be
voluntary. On preference erosion, Tanzania reported that the LDCs
do not have a consensus on the issue of disproportionately affected
(DA), and Cote d'Ivoire called for a just solution that is based on
the reality of export statistics. All three Groups raised concerns
about sectorals that cover products in the preference erosion
solution, and they supported cotton for early harvest. The Africa
Group raised the importance of making progress in Rules, Services,
and Trade Facilitation, while the ACP Group urged caution in
proceeding with Trade Facilitation as an early harvest because of
the additional work needed on capacity building and special and
differential treatment. South Africa supported cotton and DFQF as
early harvests, and Egypt supported cotton for early harvest, saying
Trade Facilitation is not ready yet. Burkina Faso on behalf of the
Cotton-Four supported an early harvest for cotton.

13. Indonesia on behalf of the G-33 agreed the draft texts were a
good basis for further work in Agriculture and NAMA and said that
the G-33 has shown flexibility as demonstrated by recent progress on
the issues of Special Products and SSM. The underlying principle of
SSM is that it should be simple, effective, and not burdensome and
must provide a safeguard to the most vulnerable. The latest
Agriculture text has captured some of this, but more intensive work
is needed. Barbados on behalf of the Small and Vulnerable Economies
(SVEs) supported the G33 statement on SSM, regretting there has been
no discussion of additional SSM flexibilities for SVEs.

14. Brazil on behalf of the G-20 noted the gap in political will to
conclude a deal and emphasized that Agriculture is the key to the
Round. While supporting the new Agriculture text as the basis for
negotiations, Brazil noted that the unbracketed numbers on overall
trade distorting support (OTDS) represents a conditional position
and expressed concern that developed countries have reduced the
level of ambition in market access and domestic support. Speaking on
its own behalf, Brazil said that the failure to reach modalities can
be explained by excessive ambition and new calls for concessions
that came in late in the negotiations, clearly referring to the
United States position on NAMA sectorals. On early harvest, Brazil
urged caution, expressing concern about the potential impact on the
Single Undertaking.

15. The EC emphasized the need to resume work in early 2009 on
Agriculture and NAMA modalities based on the latest draft texts and
to pursue further progress in Services, the three TRIPS issues,
Trade Facilitation, and Rules. They said they were open to an early
harvest in Trade Facilitation. Canada pushed for work to continue
on Rules, Services, and Trade Facilitation, and Japan also stressed
the need to advance negotiations on Rules and Services. The EC,
Canada, Japan, and many others also supported Lamy's call for the
TPRB to monitor trade restrictive measures in a transparent way.

16. The United States representative welcomed the draft Agriculture
and NAMA texts and stressed that the primary focus of the WTO should
be to conclude the Doha Round, especially in light of the current
economic crisis. All negotiating groups should resume work in the
new year, with Services, Trade Facilitation, fish subsidies, and
environmental goods and services being important ingredients in any
final Doha agreement. He also supported Lamy's idea for public
monitoring of new restrictive trade measures. Emphasizing the
importance of Aid for Trade as a complementary activity to the
negotiating mandate, he announced that the US increased annual Aid
for Trade spending to 2.3 billion in fiscal year 2008, an increase
of 60 percent from the previous year. He closed by assuring Members
that Washington is working very closely with the Obama transition
team to ensure that early attention is given to the DDA by the new

17. Ecuador, Colombia, Costa Rica, Guatemala, and Honduras raised
the issue of bananas and the EC's failure to comply with the July
agreement. Ecuador threatened cross retaliation, possibly in the
areas of Services and Intellectual Property, and possible new
litigation on the legality of the EU's Economic Partnership
Agreements (EPAs) and certain EU subsidies.

18. Venezuela, Bolivia, and Cuba made statements criticizing the
lack of transparency in the small group negotiations on Agriculture
and NAMA and emphasizing the need to focus on development in the
Doha Round. Venezuela criticized Members who talk about the need to
avoid protectionism and yet are practicing it by subsidizing the car
industry, banks, and others. There seems to be a double standard
where subsidies seem to be the good kind of protectionism, while
tariffs are the bad kind.


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