Cablegate: May 2005 Meeting of the Rules Negotiating Group To

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 GENEVA 001384

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PASS USTR FOR ALLGEIER, DWOSKIN
STATE/EB/OT FOR CRAFT
USDA/FAS/ITP FOR SHEIKH, MTND/HENKE, FAA/SE/WILSON
USDOC FOR ALDONAS, SPETRINI, JACOBS

E.O. 12958: N/A
TAGS: ETRD WTRO USTR
SUBJECT: MAY 2005 MEETING OF THE RULES NEGOTIATING GROUP TO
DISCUSS REGIONAL TRADE AGREEMENTS

SUMMARY
1. On 17-18 May 2005, the Rules Negotiating Group met to discuss
potential clarifications of substantive disciplines of regional
trade agreements ("systemic issues") and a draft Chairman's text
setting out possible reforms to improve the WTO's review of the
agreements ("transparency"). In the context of transparency, the
Group held a second discussion of the Secretariat's draft "mock"
presentation of a services agreement, to assist Members to
envision a possible future format for Secretariat-prepared
factual reports of services agreements. The next meetings of the
Rules Group dedicated to regional trade agreements were scheduled
for 13-14 June and 11-12 July 2005. End Summary.
SYSTEMIC ISSUES
2. The meeting began with a formal discussion of two Australian
papers on "systemic" issues. (TN/RL/W/173/Rev.1 and TN/RL/W/180)
Australia reiterated its four proposed criteria for determining
whether free trade agreements and customs unions eliminate duties
on "substantially all trade" (SAT) in accordance with GATT rules:
(1) a required minimum tariff line coverage (70 percent at date
of entry into force and 95 percent at final implementation); (2)
a "highly traded products" test (prohibiting exclusion of any
product comprising more than 0.2 percent of bilateral trade, or
any one of an RTA partners' top 50 exports); (3) consideration of
"but for" trade (products that would be traded, "but for"
prohibitive tariffs); and (4) a maximum phase-out period of 10
years for duty elimination.
3. The Australian papers stimulated good engagement from
Members, but there was little explicit support for the details
contained within the proposals. Members split on the issue of
the ten-year phase-out period, with Costa Rica, Barbados, the
United States, and others emphasizing that additional time may
sometimes be necessary to ensure comprehensive coverage. Many
Members, including China, Egypt, Costa Rica, Malaysia, Barbados,
Kenya and Zimbabwe, focused their remarks on concerns over
treatment of developing countries, reiterating the need for
special and differential treatment.
4. The United States cited six additional possible "evaluative
criteria" for assessing satisfaction of the substantially all
trade requirement. It also voiced concerns about Australia's
reliance on 6-digit tariff lines to evaluate percentage coverage,
the imposition of a test based upon trade coverage at the time of
entry into force, the "highly-traded products" test, and a strict
10-year phase in period, rather than the 15 years that the United
States and others have needed to maximize coverage at the time of
final implementation.
5. Norway, as on previous occasions, took the most overtly
negative position, insisting that further elaboration on the
complementary obligation to eliminate "other restrictive
regulations of commerce" was a precondition for progress on the
SAT criterion, based partly on the notion that preferential rules
of origin can undermine the SAT test. Switzerland opined that
the 95 percent test, in effect, required duty-free treatment for
all, not just "substantially all," trade. New Zealand supported
Australia's 95 percent tariff line test, but suggested that a
single test was not sufficient, and suggested that a minimum
percentage of trade flow also should be required. New Zealand
and some other Members also supported the 10- year phase-out
rule.
6. Brazil appreciated the introduction of the "but for" test,
but voiced concern about the highly-traded products test,
because, for some small countries, such a threshold could
effectively cover all trade. In addition, Brazil and India
agreed with the United States in questioning Australia's proposed
use of 6-digit tariff lines for determining tariff line coverage.
Barbados cited international principles of treaty interpretation
to oppose Australia's view that regional agreements that had not
been specifically notified to the WTO as "interim agreements"
were not entitled to be phased in over ten or fifteen years.
7. The Rules Group also discussed a paper from the European
Communities on systemic issues (TN/RL/W/179). This paper appears
to make significant changes in the EC position in a few areas.
Notably, for the first time in 30 years, the EC accepts tariff
line coverage as one possible criterion for evaluating
substantially all trade, in combination with recent trade flow
data. The EC paper also states that no subset of regional trade
agreements (e.g., Enabling Clause agreements) can, a priori, be
excluded from the Rules Group's discussion, and argues that
Members should avoid drafting new rules to protect the lowest
common denominator, (i.e., those RTAs with the least trade
coverage).
8. On the issue of a combined average minimum tariff and trade
coverage, Switzerland thought the EC submission needed further
consideration. Chile and Colombia voiced limited support, but
Australia noted that it would tend to facilitate the exclusion of
a major sector (such as agriculture). The United States heralded
the changes in the EC position on tariff line coverage, agreed
with its ambitious aspects, but questioned why an average of
tariff line coverage and trade flow coverage was necessarily
better than each factor being assessed independently.
9. On development, the European Communities claimed there was a
"lack of coherence" given that some developing countries had
negotiated RTAs under GATT disciplines, while other developing
countries, often having larger economies, negotiated their
agreements under the Enabling Clause. The EC argued that the
size of the economies of the developing country parties, and the
potential affect on third parties, should determine whether
regional agreements between developing countries should be
examined pursuant to GATT Article XXIV or the Enabling
Clause. By suggesting "we won't change it if you don't use
it," the EC is trying to recruit support of smaller developing
countries against the larger developing countries. The EC made
an obvious effort to permit its future agreements with the
Africa, Caribbean and Pacific countries to be subject to easier
disciplines than those that currently apply to agreements between
developed and developing countries. Barbados welcomed the EC's
proposal to consider different levels of development, but Costa
Rica and China rejected it entirely, with Costa Rica arguing that
developed countries have a responsibility to insist that
developing country RTA partners meet GATT standards. Many
delegations were interested in seeing further development of the
ideas in the EC paper.
TRANSPARENCY
10. The discussion of the Chair's latest draft note on
transparency was held in informal mode. In both the general
discussion and in the section-by-section discussion, many Members
focused on how new transparency rules would address agreements
between developing countries notified pursuant to the so-called
Enabling Clause, rather than under the GATT disciplines. Chile
noted that the discussion concerned transparency rules for
Enabling Clause agreements, not a change to the substantive
rules. The section-by-section discussion was fairly technical.
When addressing what information would be notified, most Members
agreed that all data should be provided electronically. The EC
caused a stir by asking for the insertion of brackets in the
draft text, with respect to the provision of information relating
to tariff rate quotas, suggesting that it might not be willing or
able to submit such information during an examination conducted
by the Committee on Regional Trade Agreements (CRTA). The Chair
concluded the discussion by reminding the delegates that the Note
was a work in progress and by noting that he hoped to have a
revision ready by the June 2005 meeting.
11. The Rules Group also discussed the Secretariat's Mock
Presentation of a services agreement, which attempted to
demonstrate how the Secretariat might undertake new
responsibilities in the CRTA examination under the transparency
reforms contemplated in the Chair's Note. Introductory remarks
noted the difficulty in obtaining data on trade in services, and
a request was made (and supported by many Members) for a
representative of the WTO's statistics bureau to attend the next
meeting to discuss services statistics.
12. A few Members, including Chile, noted that it was not
possible in every instance to rely on current voluntary
classification tools, such as the UN CPC and the WTO
Secretariat's W/120, when examining coverage in services

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agreements. Most services agreements apply a negative list
approach (all services sectors covered, unless specifically
exempted) and the parties may choose to use domestic
Classifications or one of the parties may use the CPC. Hong Kong
China insisted that some kind of standard form should be used for
analyzing coverage for all agreements, so that there could be
"comparability" between agreements. The United States and Canada
noted that comparability was not the appropriate reference for
the determination of compliance of services agreements with WTO
requirements. Moreover, if an agreement had not been negotiated
pursuant to a different format, it would be distortive for the
Secretariat to try to fit a square peg in a round hole. Canada

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recalled that Members are required to examine RTAs in accordance
with GATS Article V, not against commitments under the GATT. The
United States reiterated the purpose of the Secretariat
presentation is to provide further transparency concerning what
is contained in the agreements, not to engage in judgment calls.
Malaysia ventured to suggest that this discussion should
preliminarily be taking place in the Council for Trade in
Services. The United States expressed appreciation for the
Secretariat's ability to remain factual and objective in most

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parts of the draft, but also pointed out examples of where that
may not have been the case. The United States recalled
difficulties highlighted by the Secretariat with the use of the
available classification tools and the need for Members to assist
the Secretariat by supplying data and information on their
domestic services regimes. Deily

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