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Non-agricultural Market Access and Services in Doha Round following the July 2004 Framework Agreement

Presentation to the Cordell Hull Institute/Friedrich  Naumann Stiftung

William A. Reinsch, President

National Foreign Trade Council

October 5, 2004

·  This is a timely meeting today.  We are all in the process of thinking through the next steps that are necessary on the march toward a successful conclusion to the Doha Development Agenda negotiations. I welcome this opportunity to engage in a dialogue on how to reenergize the talks.

· I’ve been asked to say a few words about NAMA and services post-July framework.  I’d like to start by making a general observation, which is that we now have a situation where the agriculture framework is much further along than the NAMA or services negotiations.  The agriculture text is both more detailed and clearer on the overall endpoints.  This is a terrific development, and also a necessary one, given the centrality of agriculture to any final comprehensive agreement.  For the past few years, the main discussion has always been centered on the need for meaningful reform and liberalization of agriculture.  We now have an outline and roadmap on agriculture, which is no small accomplishment.  Many thought we couldn’t get there.

· This has important implications for the NAMA and services negotiations. One thing it clearly means is that WTO members can no longer hide behind agriculture and avoid making tough decisions about NAMA and services.  As we head into 2005 and are faced with another major ministerial at the end of next year, the most important goal must be for NAMA and services to catch up with agriculture in terms of its ambition and level of detail.  One of our overall objectives should be to aim for negotiating modalities in all three major areas of the negotiation (agriculture, services, NAMA) by theHong Kong ministerial meeting next December.  If we can’t do that, and assuming US Trade Promotion Authority is extended next year, it is hard to envision completing the negotiations before the 2007 expiration of TPA.  That means we have a lot of work to do this year and next.  

· I think this is eminently possible, but it will take a “real coalition of the willing.”   Some of the key ingredients for making this happen are 1) continued focus on results and ambitious liberalization; 2) constructive involvement of the G-20 countries; 3) an overall emphasis on the positive linkages between the three areas of the negotiation; and 4) a willingness of lesser developed countries to focus on their own stakes in a meaningful outcome of the trade talks.    

· I’d like to elaborate on some of these points with respect to NAMA and services.

· First, on the level of ambition and NAMA.  The NFTC continues to believe it is time to conclude the unfinished business of the GATT by eliminating industrial tariffs.  We came out with a bold proposal on this idea when the Doha agenda was first launched.  While the “Derbez text” on NAMA – which was agreed to as part of the July package- sets the overall sights lower, the challenge now for us is to achieve as much ambition possible through that text.  This means pushing for an ambitious non-linear tariff cutting formula, building support for zero sectoral initiatives and creating as much momentum as possible in the direction of reducing and eliminating tariffs. 

Two other important aspects of the NAMA negotiations are the trade facilitation negotiations and the non-tariff barrier component.  A comprehensive approach in tackling tariff and non-tariff barriers is critical for many industries.  For sectors such as autos, lack of real action on NTBs will mean no new market access in critical markets in Asia and elsewhere.

· On NTBs, the NFTC is working on a new paper on regulatory and tariff transparency (notifications inadequate, no adequate public data base) as critical, horizontal issues, such as regulatory policies, to be addressed in the NAMA negotiations.  These issues are central to achieving effective liberalization of goods trade across the WTO membership.  I will certainly share our papers with you as soon as they are finalized.  We hope to promote these ideas in Geneva.

· Pushing ambitious liberalization of services is also critical.  As with NAMA, it is time for catch up in terms of specificity and inclusiveness.  The desired process is straightforward enough – WTO members need to put forth meaningful offers on what they are prepared to liberalize.  Those 40 or so that have already put offers on the table need to do a lot more to improve the quality of the offers.  The framework agreement calls for tabling revised offers by May of next year; a deadline we hope will be met.  I suspect many countries have been holding back, waiting for progress in agriculture.  Now is the time to take the next step forward in this area. 

·  On services, there are some sensitive issues for the US, namely Mode 4 dealing with the temporary movement of business personnel.  Many Americans view this issue primarily in the context of either immigration or terrorist threats.  Neither is a perspective conducive to meaningful negotiations.  Despite the highly sensitive nature of this issue, the NFTC believes something needs to be agreed to in this area due to it being a high priority for developing countries like India.  It also might present an opportunity for US business to focus on good governance and due process procedures here as a way to address the growing and urgent problem of securing US business visas.

·  Second, on the G-20 and FIP (Five Interested Party group involving the US, EU, Australia, India and Brazil).  Both of these groups, and their ability to work constructively toward a common goal of a meaningful and successful conclusion to the Round, will be very important to the ultimate outcome of the DDA.   They played very useful roles in the agriculture negotiations and arriving at the general framework package in July.  Now the true test will come in terms of their ability to be forthcoming on NAMA and services.  These are bottom line issues for advanced countries and the US business community.  There needs to be a big and substantial result in these areas for US business, which means that for countries like Brazil, India, China and other middle income developing countries, they have to open up their markets in a significant way as part of this negotiation.  And they have to demonstrate leadership beyond matters solely in their self-interest.  

• The US has noted on several occasions that there are centrifugal forces within the G-20 that may make it difficult for them to maintain unity.  Thus far, they’ve proved those predictions wrong, but we all need to make sure they don’t focus on unity at the expense of progress.  Their leaders have an opportunity to help shape the trading system for the next decade or so, but they can only do that by leading and not surrendering to the least common denominator in the group.

·  This brings me to positive linkages.  What we really need is an upward spiral of ambition that recognizes the win-win nature of ambition across the board.  Brazil, for example, will be in a much better position to achieve its ambitious objectives on agriculture if it demonstrates a willingness to be similarly ambitious on NAMA and services.  The political economic facts are that we will all win big if we recognize that we all have very sensitive issues and powerful special interest lobbies that can only be overcome by gains elsewhere.  That is why major rounds have worked in the past and it is the only way they will continue to be the main broad multilateral vehicle for liberalization in the future.

·  This brings me to one final point – the role of developing countries.  As NFTC reports have shown, developing countries stand to gain from open and rules-based trade.  Developing countries pay most of their duties on trade with each other.   I hope that they will focus less on the issue of preserving temporary and disappearing tariff preference regimes and more on how to integrate their economies more fully into the global trading system.  It is worth reading the so-called “enabling clause’ that gave GATT legality to these preference regimes back in what I believe was 1979.  One important caveat was that they not interfere with or prevent broader multilateral liberalization.   

·        I cannot emphasize this point strongly enough.  The developing countries have thrown their weight around so far, with notable success.  They have forced meaningful progress on agriculture, and, with the US losing the cotton case and the EU the sugar case, they may well be able to build those victories into further concessions on agriculture subsidies.

·        That means, however, that it is time for them to put something on the table as well.  For the US, which already has fairly low tariffs and few quotas – especially with those on textiles and apparel expiring in January – meaningful gains in market access in goods and services will be necessary to sell any agreement to a Congress increasingly skeptical about free trade and free riders.

·        That means, among other things, we are going to have to do a better job of addressing the special and differential issue.  Those words permeate the negotiating text, but we are rapidly reaching the point where we have to give them meaning, which will, inevitably, mean making some distinctions between stages of development – distinctions which, after all, reflect current economic realities. 

·        While there is little dispute that the least developed countries should receive such treatment, we have to address the countries who don’t want to acknowledge their success.  One of the trends of the last ten years has been the growth of what people are starting to call upper and lower middle income developing countries, some of whom want to continue to define themselves as “developing.”  Dealing with these definitions in a way that doesn’t let them all off the hook will be one of the challenges of the Round.

·  I think I will stop there so we can open it up to questions and discussion.