Monday, July 24, 2006

WTO Doha Development Agenda, Susan C. Schwab and Mike Johanns

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Ambassador Susan C. Schwab, United States Trade RepresentativeFacts on Global Reform, File is in PDF format.

Transcript of Press Availability on the Doha Development Agenda with Ambassador Susan C. Schwab and Mike Johanns, Secretary of Agriculture WTO Headquarters, Geneva, Switzerland 07/24/2006
Ambassador Schwab: Good morning everyone.

We are obviously very disappointed that the G-6 Ministers were not able to reach an agreement last night. The United States came to Geneva with the flexibility to offer more on domestic support and market access. We took seriously the admonition of the leaders of the G-8 Summit in St. Petersburg, but unfortunately the promises of flexibility and market access coming from St. Petersburg did not materialize in Geneva.

Unless we figure out how to move forward from here we will have missed a unique opportunity to help developing countries and to spur economic growth.

While the United States was prepared to do more, yesterday’s focus on the loopholes in market access, on the layers of loopholes, revealed that a number of developed and advanced developing countries were looking for ways to be less ambitious, to avoid making ambitious contributions.

But that doesn’t mean the United States is giving up. ‘Doha Lite’ has never been an option for the United States; it is still not an option. There was no package on the table yesterday that we could have recommended to the President or to the United States Congress.

That said, the United States remains committed to a successful Doha Development agreement. One that creates real market openings, that brings new economic opportunities, opens markets for all WTO member countries. We feel strongly that we need to avoid the temptation in the coming weeks and months as we sort out where we go from here. We feel strongly that we need to avoid the temptation of pulling anything off the table. We need to focus on how we move forward, how we make a success of the Doha round, how we achieve the promise of the Doha round without degenerating into a finger-pointing exercise.

Let me end my formal comments by extending our appreciation and thanks to Director-General Pascal Lamy for his tireless efforts. We look forward to working with him as we move forward to see the Doha Round realize its full potential.

Thank you.

Secretary Johanns: Let me, if I might, start my comments by also expressing my appreciation to Director-General Lamy. He has worked very, very hard through this process and diligently worked to try to close the gap.

We in the United States also appreciate the good work of the WTO, the World Trade Organization. We believe in it, we believe that it is key to the future of the world, and we are absolutely committed to its success.

I also want to indicate at the outset how much I appreciate the leadership of our President. It was our President that some weeks ago, actually some months ago, announced maybe to the surprise of the world, that he favored the complete elimination of trade-distorting subsidies. His commitment to ambition in this round has truly been an inspiration to me and to Susan.

I also want to express my appreciation to our Congress and to our commodity groups. In October we tabled a really historic, ambitious, bold offer. Just to remind everyone, we proposed cutting our Amber Box, which is the heart of our farm program, by 60 percent. It would have eliminated the possibility of the same farm program. It just wouldn’t fit. The cut was too dramatic. We also proposed cutting the Amber Box and the De Minimus Boxes, rather the Blue Box and the De Minimus Boxes. In the case of the Blue Box we went well beyond what was called for by the July framework. During the many weeks of very difficult negotiations they hung in there and stuck with us on this proposal.

Some weeks ago at a time when there was a transition in our government from Ambassador Portman to Ambassador Schwab, we felt that it was very important that we return to Geneva, all of us, to speak to our colleagues from around the world. We had a whirlwind trip those days that we were here. We spoke to you at that time. We met with Ministers from over 90 countries. It was a rather remarkable 72-hour period of time.

The issue that we raised during those discussions was an issue that we had had conversations about before, but we felt it was an issue that we revisit and give our colleagues from around the world the opportunity to offer their input. That issue was the level of ambition in this Doha round. We used words like ‘Doha Lite’ to try to describe a lesser result and ambition to describe a strong result. To the contrary, to the contrary our colleagues from around the world committed again to an ambitious Doha round.

Now any study that has ever been done relative to this round or to trade in general will tell you that the real gains will be made in market access. It’s not something we invented because we happened to think it up, it is something that has been studied, economically analyzed, and the future of this world depends upon our ability to wrestle the trade distortion out of our market access situation.

So we returned to the negotiating table with Ambassador Schwab, and my next thank you is to her because she maintained that strong level of ambition and commitment to get an ambitious result from the Doha round.

We said from the very beginning and we said over the last couple of days, look, we will be flexible. If we can see ambition in market access we can be ambitious, as we have been, with domestic support.

Well, let me just give you one example. I’ll kind of approach this from two different angles. Approach number one is developed countries, the EU proposal. We finally got down to some specifics. You all know that around the world a lot of beef is grown. We’re not the only country that grows beef. There was this talk about 800,000 tons of beef that would come in, and I must admit I was confused by it. I really couldn’t see it in what was being tabled. Well, as it came out it was pretty clear that beef was going to be a sensitive product so therefore there would be a TRQ for beef.

The current tariff for high quality beef in the EU is 80 percent. That blocks the market. There is no more effective trade distortion than that. To just simply block the market, to close the door. Under the proposal, the new tariff would be 61 percent. That is still a remarkable blocking of the market. It makes it impossible to compete. It makes it impossible to sell beef into that marketplace.

So the TRQ, we finally found out after discussion, for the whole world ladies and gentlemen, would allow in 160,000 tons of beef. That’s two percent of the market. That’s what we were getting. For the world. That wasn’t a bilateral discussion, this is a multilateral discussion.

We then went on to the discussion about developing countries and I said a few weeks ago when we were here I was worried about what was being proposed for developing countries. Now advanced developing countries are world class competitors. This would be China, this would be India, this would be Brazil, this would be other countries around the world that quite honestly can compete with anybody very effectively. Yet in the proposal that they tabled, it essentially blocked 95 to 98 percent of their market. Not our figures. That was an analysis done right here at the TWO.

So in the end, what we were faced with is this: we’ve got a very bold proposal already, we’ve announced our willingness to be flexible but we’re still not seeing the market access that is necessary for world trade. And again, let me just wrap up my comments and say this. Many countries will come before you today. The multilateral process is bigger than any one country, the United States included . It is a process that is designed to lift people out of poverty, to open up new markets, to increase trade flows so all have an opportunity for economic advancement.

I just rest my case by saying and asking the question, can anybody seriously argue, for example, that 160,000 tons of beef, two percent of the marketplace, is an increase in trade flow? Can anybody seriously argue that advanced developing countries literally arguing for 95 to 98 percent of their marketplace being protected in agriculture is going to result in an increase in trade flows? I think not.

But I agree with Susan. I strongly feel that even though today truly represents a failure, let’s be blunt about it, that this isn’t a time to pull offers off the table, to talk about take it or leave it. If you look at the history of the Uruguay round it stopped and started a number of times. We are committed to the multilateral process, we are committed to these negotiations, we are committed to the WTO, and we have a President who is committed to the elimination of trade distorting domestic support. We have a historic opportunity here.

It is very, very difficult for us today to sit here before you and recognize this is where we’re at, but we’re going to do everything we can to encourage this discussion to continue to occur. There’s too much at stake not to.

Question: Fishermen from Asia were having a press conference a half an hour ago and they said that the WTO is for the rich only and it works for the poverty of the poor, making the poor more poor, and that they would like to dismantle it. What is your reaction?

Ambassador Schwab: I think the WTO is and should continue to be a real friend of developing as well as developed countries. The WTO is a venue where developing countries, no matter how small, have the opportunity to come in and enforce their rights, require that other countries meet their obligations vis-à-vis that country. It is a forum where the dispute resolution process enables developing countries to make a case.

In the case of the Doha round negotiations, the large majority of developing countries would not have been asked to make any contributions whatsoever in terms of market access. In fact they would have been 100 percent beneficiaries of this round without being required to pay anything for this round. This as a development round is fine for the middle tier and certainly the least developed countries, so this is a wonderful organization for developing countries in that it promotes their rights, it promotes growth and economic development, and access for their goods in other markets in ways that no other institution in the world could help them, and I would note that the implications of trade generated growth are so much greater than anything that you can get in overseas development assistance. Any comparison you look at, the benefits to those farmers, to those fishermen, from trade far out-pays anything that an official aid agency could ever provide.

Question: My question would be about a possible timetable. Has there been any kind of timetable, any idea of when these talks could get restarted? Probably at the next ministerial of the WTO next year?

Ambassador Schwab: I think we should defer to the Director-General in terms of the schedule going forward. As Secretary Johanns noted, this is a serious failure that we find ourselves in and the question is how to regroup and how quickly could one regroup and move forward and in what manner. I think Pascal Lamy will address that today.

I think the members of the WTO need to stand ready, willing and able to engage in this process. I don’t think we can leave it entirely up to the Director-General. The Director-General shouldn’t be expected to do this on his own, shoulder this burden on his own. Hence our comment that it is within our power not to pull anything off the table, to make sure that we are positioned to move forward and generate more momentum when we have a sense of the best direction to go in. So I would defer to Pascal Lamy in terms of timing and pacing, but I think the key role for individual members of the WTO, particularly those of us in a leadership role, is to do everything we can through bilateral meetings, through small group meetings. There are a series of opportunities coming up and opportunities we can create for ourselves to help him, to help the Director-General move the process forward.

Question: Secretary Johanns, I hear you mention the TRQ on beef. As I understand it, the combined tariff cuts and TRQ on beef would give an extra 800,000 tons of access to the European market. I was surprised to hear you use that as an example because as I understand it the US doesn’t export beef to the EU because of the hormone ban.

Secondly, did you make any new offer on domestic support at all? Thanks.

Secretary Johanns: The hormone ban on beef, I would love to spend the next 15 minutes visiting with you about that. We absolutely want to ship beef to the European Union. The European Union uses a number of mechanisms, phyto-sanitary/sanitary mechanisms, in addition to their tariffs that really create challenges, and I’m being very diplomatic here, really create challenges in terms of our ability to sell products into their marketplace. But let there be no doubt about it. We want to sell beef to the European Union, we want to sell grains, we want to sell poultry, and yet we continue to struggle with them on phyto-sanitary/sanitary bans. We’ve, as you know, exercised our rights in the WTO process, I might add successfully, but we still struggle to find entry to that market.

I ask you to study that 800,000 ton figure very, very carefully because once I came to understand what they were promising, I have to tell you I was very surprised. What the TRQ actually promises is 160,000 tons worldwide. The way they get up to 800,000 tons is somebody did a study saying, but we may need additional beef. We’re not going to give it to you in a TRQ, we just may need it. So the study says that you will have the possibility of selling that into our marketplace.

Now there is no definition of market access that I know of that says that that’s the appropriate approach to bind an agreement between parties in a multilateral basis. So in effect what you end up with is a maybe on the vast majority and a binding on 160,000 tons that we get to share with the whole world, or the whole world gets to share is a better way of putting that. That’s two percent of the marketplace. That’s just really minuscule. That really isn’t opening at all, that isn’t market access even setting aside that phyto-sanitary/sanitary issue which again I think is very, very clear, we need to overcome to get the marketplace open in the first instance.

In terms of our flexibility, let me remind everyone again, there is one leader in the world who has called for the elimination of trade-distorting domestic support. You know where our President stands on this issue and he hasn’t been shy about repeating that statement. And like I said, I think he probably surprised a lot of people in the world.

We came here and expressed our willingness to be flexible. To be flexible on domestic support, to be flexible on market access. But in the end when we studied the market access proposals on the table there was no there there. There was no additional market access that we could grab a hold of and say we are making progress. In fact, speaking of ‘Doha Lite’, ‘Doha Lite’ got a lot lighter in the past 30 days. All of a sudden we came to realize that not only was there going to be substantial protection and barriers in developed countries, but in these advanced developing countries that are world class competitors to everybody, that they were basically arguing that 95 to 98 percent of their ag market should be protected. That they would have the ability to choose when, how and if they would do business. And that was the proposal.

Now again, if somebody can make a case to me that that somehow was market access that we could respond to, I’m all ears, but I didn’t see it. Just the facts, not indicting anybody, but the reality is the facts are that there was no there there on market access.

Question: I’m sorry. To be clear, you're saying you didn’t put anything new on the table?

Secretary Johanns: We did. We indicated our flexibility from the very first statement.

Question: But you didn’t make any new offer with any numbers yesterday?

Secretary Johanns: What we did in the opening yesterday is we said we are ready to be flexible. We have to see something in market access. And quite honestly, we didn’t see it. It wasn’t there. There just was nothing there that we could grab onto that allows us to take that step. There was just simply nothing there.

Ambassador Schwab: Let me add to that. We not only said we were prepared to do more in terms of cutting trade distorting subsidies along with obviously our commitment to eliminate export subsidies, we also indicated that we understood that other countries had some sensitivities that they would want to protect. And that we were even prepared to allow sensitive products, the scope of sensitivities, to be greater than that which had been in our position in October, but not to the extent of negating the fundamental market access purpose of this round.

Question: There is a general perception among the trade ministers who attended the meeting yesterday that your maximalist agenda on market access does not quite match with your minimalist agenda on the trade distorting domestic support because there was no clarity in terms of balance between what you are ready to reduce in trade distorting domestic support and what you in turn want in the market access. That’s just one issue.

The second issue is you keep mentioning about these layers of protection through the special products. Can you actually indicate as you indicated in the case of beef for the European Union, can you actually indicate what are the products that you Rae currently facing problems entering into markets like China or India? Given the low tariffs, you have a tariff of about five to ten percent on wheat; you have a tariff of zero percent on many dairy items. What exactly is it that you're facing in terms of your entry into the emerging economies? Because the general argument is you are not a competitive exporter in relation to Argentina or Brazil or Australia or Thailand.

Secretary Johanns: Ravi, let me take a first attempt at your question and let me again maybe study a little history in terms of our domestic support proposal.

Our farm programs by and large fit into a classification that you’re all very familiar with. We call it the Amber Box. That really is the majority of the US farm programs. They are slotted into that box.

When we were out there talking to our colleagues around the world about what they thought we should do in terms of our proposal, some said you’ve got to cut your Amber Box by 50 percent; some said you’ve got to cut your Amber Box by 55 percent. We listened to that very, very carefully. We consulted with Congress, our commodity groups, our President, and we decided that we should cut our programs by 60 percent in the Amber Box.

Now what’s the bottom line, ladies and gentlemen? That eliminates those programs. They don’t fit any more. Our farm program has just disappeared because there is no other way you can pigeon-hole our programs into any other area.

Go to the July framework. The July framework said that we should be at five percent of production on the Blue Box. We thought long and hard about that. We could have safely, confidently chosen to abide by that July framework and it would have been all the protection we needed. But the world was asking for leadership by the United States, and again, we debated that with our President and our Congress and our commodity groups, and we said you know what? We’re going to go beyond the July framework and we’re going to cut that to two and a half percent.

Now let me explain to you the significance of that. There was a lot of uneasiness that we might take our counter-cyclical program and slide it over to Blue Box. We could have done that had we chosen to keep it at five percent. We said to ourselves, the world needs greater leadership than that, and we literally cut it to a point where we can’t fit our counter-cyclical program into the Blue Box. Another piece of our program just disappeared.

People have raised the issue about the De Minimus Box. We don’t use a lot of De Minimus, we use some. But cost out the programs. They don’t fit into the De Minimus Box.

So in effect what we have said to our farmers in the United States is that programs that date back to the Great Depression, to the 1930s, will disappear. Will disappear.

Now if that isn’t dramatic I don’t know how you could possibly describe these programs.

Now by comparison we said look, from day one we said look, we know we’ve done something really dramatic, we know we’ve eliminated the possibility of our farm programs continuing in their form in the United States, we know that we are flying in the face of 75 years of history here with our farm programs, we have to have market access.

Meaningful flow of trade. We’re not asking for the world. We’re just asking that we be able to look at what we accomplish and see trade moving. Does anybody want to argue with me that trade is moving when 95 to 98 percent of a marketplace is protected? Anyone want to argue with me that trade is moving when what you really come down to with beef products is 160,000 ton TRQ for the whole world? Does anybody want to make that case? It’s not a case you can make.

Now in terms of specific products, here’s the problem with your analysis. That would be like the United States saying look, folks, we want a trade agreement that says we can deal with you when and if we choose to and we’ll decide under what circumstances we’ll deal with you. That’s in effect what this proposal is in terms of developing countries, whether it’s wheat or any other product.

Now Ravi, as you know, wheat’s probably a poor example because even though there have been tenders for wheat, the phyto-sanitary/sanitary requirements put in place for example by India have made it impossible for us to enter that market. We hope we can change that. We hope we can bring about a more sensible approach because phyto-sanitary/sanitary barriers can also be very very effective barriers to trade.

So the bottom line is we did submit a very very bold proposal. It stands as a bold proposal. The world acknowledged it as a bold proposal, but we even said from day one this is negotiation. We will be flexible. We announced it again during the course of this meeting. And I have to tell you, I have reached the conclusion, as I said, that in the last 30 days ‘Doha Lite’ got a lot more light in the market access area.

Question: Do you think, Ambassador Schwab, first do you think that disputes will increase in this meanwhile since countries have no other choice than to try to resolve their issues in the dispute settlement body?

And secondly, do you think now is the time to perhaps renew the attempt of the FTAA since this trade agreement will not be completed?

Ambassador Schwab: I think that it is probably inevitable that disputes will increase. I think that we all need to be mature and sensible in terms of how we approach the next several weeks and several months to make sure that the progress we have made in connection with the Doha Round isn’t lost and that we’re in a position to build on it going forward.

I think going to your second point, I think the critical issue going forward is before jumping to conclusions about this kind of approach and that kind of approach, the US remains fully committed to the multilateral trading system and to the World Trade Organization. We also have a very ambitious agenda in terms of bilateral and regional negotiations and we’ll see how that plays out.

For my part, over the next several months and weeks, and days actually, I intend and I know Secretary Johanns intends to be very active in terms of exploring options and seeing what we can do to move forward on a multilateral agenda. That means in my case travel, not yet confirmed but as early as next week. Next month I’ll be going to meet with the ASEAN Trade Ministers. There is a meeting of CAIRNS Group Trade Ministers scheduled in September. The APEC Summit, the APEC Ministers meeting in Vietnam in November. So there are a series of meetings and engagements that will punctuate these efforts to move the ball forward.

Thank you.

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