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WTO decision proof trading system can work

Monday, 2 August 2004

European Union: WTO decision proof multilateral trading system can work for all

Following the conclusion of negotiations on Sunday morning, the World Trade Organisation (WTO) has taken a decision which effectively completes half of the trade negotiations launched in Doha in November 2001 - the Doha Development Agenda (DDA). The text adopted sets the parameters of the future package in five key areas: agriculture, industrial products, development issues, trade facilitation, and services. To complete the Round, the framework needs to be filled out, notably with figures. The DDA is crucial to bolstering international economic growth and helping developing countries integrate into the global economy. The decision gives a clear signal that the multilateral trading system can deliver on the real needs of all its Members, especially developing countries, and maintain an ambitious round that is broad in scope.

Speaking from Geneva, EU Trade Commissioner Pascal Lamy said: “The DDA is about making trade work for all, and delivering growth and development. After the setback in Cancun, today's decision shows that the multilateral trading system is alive and kicking. But we are only half way: we need now to rapidly conclude this round, thus bringing good news to a world economy in need of stimulus.”

“The EU letter we circulated in May appears to have triggered a much needed impetus in the talks which have now succeeded. It is another demonstration that when Europe stands united we can punch our weight and moreover, to the benefit of the entire trading community, especially developing countries,” Lamy said.

Commenting on the agreement, EU Agriculture Commissioner Franz Fischler said: “Today we got a deal which will boost the world economy, farm trade and the opportunities for poorer countries. This agreement also ensures that other rich countries will follow the EU on its reform path.”

“The EU's reformed farm policy will not be called into question. Now, EU farmers have a clear perspective, developing countries will see better market access and less unfair competition.”

The text adopted today - known as the “Oshima text” by reference to the current Chairman of the WTO General Council, Ambassador Oshima - sets clear and precise parameters on each of the key issues under negotiation. In the months ahead, WTO Members will develop the agreed framework into concrete, detailed and specific commitments with a view to completing the Round as soon as possible.

The DDA's final result remains an indivisible package in the form of a Single Undertaking for all WTO members: “nothing is agreed until everything is agreed.” In addition to the five issues addressed in today's decision, the final result should also satisfactorily cover the remaining items on the agenda such as trade and environment, dispute settlement, geographical indications (GIs) or anti-dumping rules.

It has been agreed that the next WTO Ministerial will take place in Hong Kong in December 2005.

Key elements of the Geneva agreement

The framework agreement will deliver much greater farm trade liberalisation compared with the Uruguay Round. It will bring a substantial cut in trade-distorting agriculture support, the elimination of trade-distorting export competition practices and a significant opening of agriculture markets. All developing countries will benefit from special treatment, allowing them to liberalise less over a longer period. The world's 50 poorest countries do not have to undertake any commitments. Today's decision fully recognises the EU's fundamental farm policy reforms and ensures that other rich countries also make their farm support systems more trade-friendly.

A solution for cotton
The framework recognises the vital importance of cotton for a certain number of developing countries, and addresses the issue ambitiously, expeditiously and specifically within the agriculture negotiations. The work will encompass all trade-distorting policies affecting the sector, from import tariffs, trade-distorting cotton subsidies to export subsidisation. The EU for its part has already abolished all export subsidies and tariffs for cotton and has undertaken a fundamental reform of its cotton subsidies eliminating the most trade-distorting support.

Industrial products
Trade in non-agricultural products represents around 90% of world trade and 70% of developing countries’ trade in goods. Lowering tariffs means trade growth. A decrease in tariffs of around 50% has been estimated to increase world trade by around € 200 billion.
The agreement provides for a reduction of tariffs according to the following principles:

- Ambitious formula to cut tariffs: a non-linear formula, with deeper cuts in the highest tariffs for all products, without a priori exclusions. The text also foresees possibilities for more ambitious tariff cuts/elimination for certain sectors, in particular those of interest for developing countries (so-called sectoral initiatives)

- Special rules for developing countries: developing countries would have longer transition periods and more flexibility in tariff cuts.

- The particular situation of Least Developed Countries (LDCs): the world's 50 poorest developing countries will be exempted from having to reduce their industrial tariffs. They will only be required to bind their tariffs in order to enhance the transparency and predictability of their trading systems.

- Developed and emerging developing countries are invited to provide LDCs with duty-free and quota-free access to their markets – as the EU has done in its Everything But Arms initiative (EBAs) – to support diversification and increase their integration in the multilateral trading system.

- The text also provides guidelines for addressing non-tariff barriers to trade.

Services represent between half and two thirds of the economies of both developed and developing countries. 15 of the world's 40 leading service exporters are from developing countries.

Opening up possibilities for foreign firms to provide services - such as telecoms, banking, distribution or tourism, as well as the temporary entry of foreign professionals - is vital to modern and efficient economies.

The text gives a political impetus to the ongoing negotiations which are based on requests and offers. Improved offers should be tabled by May 2005.

Members who have not yet presented offers should do so as soon as possible.

Cutting down red-tape at the border: launch of negotiations on trade facilitation
Excessive customs procedures and red tape can represent up to five percent of the value of imports, thus creating an important obstacle to trade. Recent studies calculate that halving the costs of customs procedures could lead to savings of up to €300 billion.

Today's decision adopts guidelines for the negotiations aimed at expediting the movement, release and clearance of goods. Developing countries will adopt commitments according to their capacity to implement them.

The other so-called Singapore issues (competition, investment and transparency in public procurement) are dropped from the Doha Agenda but work on them will continue in the WTO.

Development issues
The agreement calls for the strengthening of provisions on Special and Differential Treatment (SDT) in favour of developing countries. On trade-related assistance (TRA), the agreement welcomes the progress made and underlines the continued commitment of WTO members to improve the quality, quantity and co-ordination of TRA to help developing countries participate effectively in the negotiations and facilitate their implementation of WTO rules.

The EU is committed to providing TRA. From 2001-2003 we have committed €2 billion and have again set aside for the next four to five years an amount of €2 billion.


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