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I. General Considerations 1. The World Trade Organization (WTO) General Council Decision of 1 August 2004 [note 1] intended to break the deadlock in the negotiations under the Doha Work Programme (DWP). Following the setback of the Cancun Ministerial Conference in September 2003, agreement was reached on what has come to be called the “July Package”. This revived a process considered moribund by many. The new lease of life to the negotiations presents a number of complex and difficult challenges for all low-income Commonwealth of Independent States (CIS)-7 countries, not only for those that are already WTO members but also for those in the process of accession [note 2]. 2. The General Council Decision is divided into a general part and four annexes. The latter spells out future work on agriculture, non-agricultural market access (NAMA) negotiations, services and trade facilitation. The former mandates members to continue negotiations on the main elements of the DWP, including those linked to the development objectives of the DWP. In particular, it recognises the importance of expanding trade-related technical assistance (TRTA) to developing countries and low-income countries in transition [note 3]. There is also an explicit reference to the need to continue the work programme on small and vulnerable economies [note 4] in pursuit of its objective of fuller integration into the multilateral trading system, but “without creating a sub-category of Members”. 3. The substantive part of the July Package does not refer explicitly to the low-income countries in transition, but recognises the specific concerns of “newly” or “recently” acceded members ( RAMs) [note 5]. Annex A, the Framework for Establishing Modalities in Agriculture (hereafter Agriculture Framework) calls for “specific flexibility provisions” for RAMs. Annex B, the Framework for Establishing Modalities in Market Access for Non-Agricultural Products (hereafter NAMA Framework) instructs the Negotiating Group on NAMA to elaborate “special provisions” for RAMs that take into account their “extensive market access commitments undertaken as part of their accession.” Furthermore, in a statement made during the adoption of the Modalities for the Treatment of Autonomous Liberalisation [note 6] the Chairman of the Special Session of the Council for Trade in Services (CTS) acknowledged the need to address the particular situation of this group of countries [note 7]. 4. On the basis of paragraph 9 of the Doha Ministerial Declaration, RAMs refer to seven countries that have acceded to the WTO after the Seattle Ministerial Conference in 1999, namely: Albania, Croatia, Georgia, Jordan, Lithuania [note 8], Moldova and Oman [note 9]. Thus, of the CIS-7 countries only Georgia and Moldova are officially members of the RAMs. The Kyrgyz Republic, like other countries that acceded to the WTO before the Seattle Ministerial Conference [note 10], did not succeed in being included in paragraph 9 of the Doha Ministerial Declaration. The Kyrgyz Republic’s later attempts (particularly in the negotiations on the Modalities for the Treatment of Autonomous Liberalisation on Services [note 11]) to obtain official recognition as a newly acceded member have also been unsuccessful. Moreover, Armenia became a WTO member only in February 2003. The question whether to open paragraph 9 of the Doha Ministerial Declaration and add other members to the list of RAMs became even more controversial after China declared itself a newly- acceded member. China promotes this negotiating position individually, but has played a positive role in seeking special provisions regarding RAMs in the July Package. 5. It is evident that the liberalisation measures undertaken by the four CIS-7 countries that are WTO members are more extensive than the commitments of those of the original members of the WTO. Thus, the simple average of bound duties for all products of these countries is: for Georgia, 7.2 per cent; for the Kyrgyz Republic, 7.4 per cent; and for Moldova, 6.7 per cent [note 12]. In the case of Armenia, it is even less. All four countries agreed to participate in the majority of the ”zero-for-zero” sectoral initiatives. On services, they accepted commitments to practically liberalise fully almost all of the 155 sub-sectors. 6. Since the commitments of RAMs and other low-income economies in transition are relatively recent and fairly extensive, this implies in most cases, significant efforts and high adjustment-related costs. Consequently, there is less room to undertake further commitments. The reference of the July Package to the need to allow some flexibility or a special treatment to RAMs is already a success. However, this recognition does not yet mean that the interests of CIS-7 countries will be fully considered. These countries still face an enormous challenge to ensure their effective and active participation in the negotiations, particularly regarding the identification and development of their individual negotiating positions. As a number of issues are only enunciated, the content of the future flexibilities or special treatment given to RAMs, which could include other low-income economies in transition, will depend on the outcome of the negotiations. Moreover, these countries should be aware that longer implementation periods for them would only be temporary exemptions. Sooner or later, they will have to face some additional liberalisation commitments as a result of ongoing negotiations. 7. Another important issue to consider throughout the negotiations is the timeframe. Members have finally realised that the deadline for finalisation of the negotiations established in paragraph 45 of the Doha Ministerial Declaration, i.e. 1 January 2005, is not achievable. The July Package does not indicate any new deadline for finalising negotiations. It merely states that the negotiations will continue “...leading to the Sixth Session of the Ministerial Conference” [note 13]. Nonetheless, the real schedule for the negotiations is dependent upon the negotiating authority and political processes of the major trading partners. The only real deadline, as of today, is the expiration of the US fast track trade negotiating authority on 30 June 2007, unless it is renewed [note 14]. 8. The CIS-7 countries, like some other less-advantaged WTO members, do not have the resources to and need not follow negotiations in all of their detailed developments. However, each one of them needs not only to understand the ongoing negotiations on the whole, but should also identify the critical points that concern its interests. This will assist in effectively promoting their negotiating positions, both individually and through strategic alliances, based on commonality of interests. These countries need to be concentrated on the issues that are of direct interest and are still open. Naturally the large trading partners will have the heaviest workload, since they are the most concerned by future reforms of trade in agriculture products. Likewise, they are demanding an ambitious level of market access liberalisation and have important interests in services. 9. The CIS-7 countries acceding to the WTO should monitor the evolution of ongoing negotiations for at least two reasons. Firstly, it can be assumed they will “absorb” a big part of the precedents established in recent accessions. Secondly, there is a need to improve their negotiating capacity to be able to contribute to the achievement of good terms of accession and to prepare them for a quick integration into daily WTO activities.
10. The Agriculture Framework (Annex A of the General Council Decision) is the most comprehensive of the Annexes. It goes into great detail in covering the issues that will be negotiated in the traditional three pillars of reform in international agricultural trade, i.e. domestic support, export competition and market access. In addition, it contains sections on cotton; least-developed countries (LDCs); RAMs; monitoring and surveillance; and other residual issues such as sectoral initiatives, export taxes, geographical indications and export prohibitions. Nevertheless, it should be expected that several provisions of the First Draft Modalities on Agriculture [note 15] would continue to be used as a reference on the “open” issues . 11. A large part of the population of the CIS-7 countries (around 50 per cent) works in the agricultural sector or is directly dependent on it. Consequently, it is important to ensure that the negotiated commitments are implemented without major setbacks in their economic, financial and social stability. The main concerns facing the RAMs [note 16] and transition economies [note 17] in the agricultural negotiations relate to market access and domestic support. 12. At present, WTO members protect agricultural products mainly through tariffs, except for a few exceptions such as Chinese Taipei, the Philippines and the Republic of Korea for rice. However, members have resorted to non-tariff barriers (NTBs), i.e. sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), special safeguards, etc. as an alternative means of protection. Discussions on agricultural market access since the Uruguay Round negotiations have focused broadly on two issues: the high levels of out–of-quota tariffs and the quotas themselves – quota size, quota administration and the in-quota tariffs [note 18]. None of the CIS-7 members has the right to establish tariff quotas [note 19]. 13. Annex A stipulates that “substantial overall tariff reductions will be achieved as a final result from negotiations” and that “each member (other than LDCs) will make a contribution”. The lack of any specific figures regarding tariff reductions has been considered an important setback in the agriculture negations. The revised First Draft Modalities proposed a compromise between the “Uruguay Round approach” (linear cuts) and the harmonising “Swiss formula” (which would result in steeper cuts for higher tariffs), the two approaches receiving the most support in the negotiations so far. An illustration of the tariff cuts that developed and developing countries would be expected to make are [note 20]: Table 1 A. Developed countries: three bands of tariff rates cut over 5 years
Table 2 B .Developing countries: four bands of tariff rates plus a “special products” category, cut over 10 years
15. Before Cancun, the European Communities (EC) -United States (US) proposal switched to an alternative approach: a “blended formula” that separated products into three groups with the number of products in each group subject to further negotiations. One group of tariffs would be cut according to the Uruguay Round approach; a second according to the Swiss formula and a third would be duty-free. Several other proposals included those of Norway, the G-10 and the G-20. Kenya proposed that for developing countries the reductions should apply the linear Uruguay Round approach with certain flexibilities and those LDCs and other countries (such as the borrowers of the World Bank’s International Development Association (IDA) [note 23]) should not have to cut tariffs at all. 16. The Agriculture Framework moved away from the blended formula and proposed a “tiered approach”. It is expected that this new approach takes better account of the bound tariff structures of all participants and responds to the concern that the Swiss component within the “blended formula” might impose unnecessarily harsh adjustments on RAMs [note 24]. The number of bands, the thresholds for defining the bands and type of tariff reduction in each band remain under negotiation (paragraph 30 of the Agriculture Framework). 17. The identification of two types of products: “sensitive products” (for both developed and developing countries, paragraph 31 of the Agriculture Framework) and “special products” (paragraph 41) presents valuable opportunities for RAMs and other low-income economies in transition to obtain certain flexibilities within ongoing negotiations, in terms of exemptions or progressivity in tariff reductions. The number of tariff lines that would be proposed by members as sensitive, taking into account existing commitments for these products, is subject to negotiations. The notion of “special products” is provided only for developing countries. They will have the flexibility to identify a number of special products based on criteria of food and livelihood security as well as rural development needs. The criteria for selection and treatment of these products are to be negotiated. RAMs and other low-income economies in transition should seek to be considered as developing countries so that they can have take advantage of this flexibility taking into their rural development needs. 18. An additional major issue on which RAMs and other low-income economies in transition should concentrate their efforts is on the establishment of a special agricultural safeguard (SSG) [note 25] and a special safeguard mechanism (SSM). The SSG can be used if the government reserved the right to do so in its schedule of commitments on agriculture [note 26]. Among those countries that acceded to the WTO after the Uruguay Round, only Bulgaria, Chinese Taipei, Ecuador and Panama managed to include a number of products as being subject to SSG. The issue of SSG remains under negotiation (paragraph 38) and a new SSM will be established for use only by developing country members. It would be in the RAMs’ interest to negotiate a special safeguard instrument, be it SSM, SSG or both, which would be applicable to them [note 27] and perhaps other low-income transition economies. 19. Finally, an issue on which negotiations will be complex as the interests are fundamentally conflicting is the “substantial reduction in trade-distorting domestic support”. More than 40 official proposals containing positions on domestic support have been submitted. Among four CIS-7 members of the WTO, only Moldova has committed to reducing its trade-distorting domestic support in the amber box (i.e. reducing the total aggregate measurement of support (AMS)). The other three members are required to keep it within the de minimis level (five per cent of the value of agricultural production). In the domestic support discussions, RAMs and transition economies argued for special and differential treatment (as in the case of market access commitments). They are demanding more flexibility in providing certain subsidies (for example, for debt and interest payments) and to be allowed to raise their limit of 5 per cent on de minimis subsidies (transition economies are treated as developed countries). According to them, the flexibility in this area would be temporary—and would not lead to additional distortions in agricultural trade [note 28]. With respect to the common RAMs proposal of more flexibility regarding future domestic support commitments, the request is only for longer implementation and grace periods [note 29]. However, this would seem to be insufficient, especially for Moldova and Armenia which, due to their relatively late accession to the WTO, did not subscribe to the two mentioned proposals of transition economies on agriculture in contrast with Georgia and the Kyrgyz Republic which did. 20. The future consequences of new disciplines on export credit guarantees or insurance programmes will not have a negative impact on CIS-7 countries because their export credits and guarantees are not subsidised. However, the new disciplines in this area together with other elements of reform in the export competition pillar, especially the elimination of export subsidies, would translate into concrete gains for them. 21. The CIS-7 countries should seek to operationalise the flexibilities accorded to them in the Agriculture Framework and draw concrete benefits from the potential opportunities contained therein. They must work forcefully both individually and through strategic alliances based on commonality of interests. The four CIS-7 countries should elaborate their individual positions in the agriculture negotiations and to readapt their alliance with other transition economies taking into account the recent enlargement of the EC and the evolution of the Agriculture Framework on the issue of RAMs.
22. Negotiations on NAMA had been difficult prior to and during Cancun. Developing country members in particular were not at all in agreement with the draft that emerged in Cancun. However, it has to be borne in mind that market access liberalisation in industrial products has been, historically, the bread and butter of the WTO/GATT. The tariff reductions achieved through 50 years of tariff negotiations are often cited as a measure of the success of the system. Within NAMA negotiations there are several major interdependent issues of special interest to CIS-7 countries, namely the formula of tariff reductions and special provisions for RAMs, including the treatment of low duties, sectoral initiatives and NTBs. 23. Whereas the NAMA Framework covers important technical details about such modalities, its introductory paragraph clearly sets out the ambiguous status of the document. It indicates that additional negotiations are required to reach agreement on the specifics of the elements included, specifically: on the formula; treatment of unbound tariffs; flexibilities for developing countries; the sectoral tariff component and preferences. On the modalities that have been proposed so far, the majority agree on the use of a formula that would result in steeper cuts for higher tariffs. However, there is disagreement on whether to use the formula approach on a line-by-line basis or on the tariff average. There are a number of formulas that have been proposed, including linear cuts combined with formulas. The generally agreed objective is to eliminate tariff peaks and high tariffs. The EC has proposed the “compression mechanism” to achieve this aim [note 30]. 24. The formula approach for tariff negotiations on NAMA takes into consideration several proposals submitted so far, namely by China [note 31], the EC [note 32], Japan [note 33], Korea [note 34] and the US [note 35]. Although formulas are very technical by nature [note 36], it is extremely important to understand their general properties in the context of the tariff reduction scenario, particularly for CIS-7 countries, given their specific situation of tariff structure and level of national tariffs [note 37]. The proposals make the reduction rate dependent on the initial tariff rate, although there are wide divergences on which tariffs would be considered - the applied or the bound ones. 25. The treatment of the lower tariff rates differs significantly among the proposals. For this particular parameter, the US proposal is the most “radical”, envisaging the elimination of all tariffs at or below 5 per cent. Such a proposal should be of serious fiscal and budgetary concern for CIS-7 countries, because they would be forced to eliminate a very significant portion of tariffs already extensively reduced during their accession negotiations. For example, in the case of Moldova, the number of bound tariffs for non-agricultural products at or below five per cent, excluding tariffs bound at zero, amounts to 11.2 per cent of all tariff lines [note 38]. The other CIS-7 countries are in a similar situation. 26. Below is a comparative overview of the different “duty reduction scenarios” for the CIS-7 countries [note 39]: Table 3
Source: WTO Website *Note : The maximum of tariff-bound duties of Georgia, the Kyrgyz Republic and Moldova are 20 per cent. 27. On flexibilities within the NAMA negotiations [note 40], RAMs propose to reduce their tariffs on the basis of a request/offer approach, while exempting low tariffs from further reduction commitments. Finally, the position of the RAMS is that they should receive special treatment regarding new implementation periods that would be finally agreed in the Doha negotiations. Their objective is to maintain the time frames for implementation negotiated during their accession. 28. According to paragraph 12 of the NAMA Framework, “the possibilities of supplementary modalities such as zero-for-zero sector elimination, sectoral harmonisation , and request and offer, should be kept open” pending agreement on core modalities for tariffs. The Girard Text [note 41] proposed the following sectors for zero-for-zero elimination: electronics and electrical goods; fish and fish products; footwear; leather goods; motor vehicle parts and components; stones, gems and precious metals; and textiles and clothing. 29. Finally, other challenges in NAMA negotiations are related to the participation of CIS-7 countries in the NTB negotiations. Paragraph 14 of the NAMA Framework prescribes that all participants had to make notifications on NTBs by 31 October 2004 and to proceed with identification, examination, and ultimately negotiations on NTBs. Although the deadline has already passed, as with other deadlines, this may not be binding. Thus, if the time limit is extended, the CIS-7 could refer to submissions by Bulgaria, Croatia, Egypt and Mexico to the Negotiating Group on Market Access in 2003 [note 42], as good examples of NTB notification.
30. Given the quality and quantity of offers presented (48 out of 148 members at present) it was decided to extend the deadline for presentation of new offers and the improvement of the existing ones until the end of May 2005. There is considerable uncertainty on whether the level of progress in services would match that of the negotiations in agriculture. RAMs have a good starting point with the reference to them in the Statement by the Chairman [note 43] of the Special Session of the Council for Trade and Services (CTS) (see paragraph 3 above), mentioning the need to take into account the particular situation of this group of countries “when requests are made”. Nevertheless, the modalities do not dispense RAMs or other CIS-7 countries from submitting their offers. 31. RAMs and other CIS-7 countries should aim to improve their participation within negotiations on services as demanders. Current negotiations provide an opportunity to address a number of substantive and procedural issues concerning the liberalisation of temporary movement of natural persons with the objective of attaining effective liberalisation. CIS-7 countries, like developing countries in general, have comparative advantages only across a narrow range of services activities. The primary mode for most of these is Mode 4. Most initial offers of specific commitments of developed countries submitted so far do not include any substantial improvements to existing commitments in this area. The CIS-7 countries should promote more actively their position on this issue especially within a multilateral format of discussions, alongside with other groups of countries with the same or similar interests [note 44].
32. The Modalities for Negotiations on Trade Facilitation were finally agreed by explicit consensus, opening the way for negotiations to start in this area within the single undertaking of the DWP. At the first meeting of the Negotiating Group on Trade Facilitation held on 15 November 2004, members agreed on a work plan and a schedule of meetings [note 45]. The negotiations shall aim to clarify and improve relevant aspects of Articles V (Freedom of Transit), VIII (Fees and Formalities Connected with Importation and Exportation) and X (Publication and Administration of Trade Regulations) of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit. An eventual multilateral agreement on trade facilitation should aim for provisions on effective cooperation between customs on trade facilitation and customs compliance issues. Here, what is required is a clear assessment of CIS-7 countries’ interests from the point of view of six out of the seven CIS-7 countries which are landlocked developing countries. In addition, the regional perspective could be a basis for future participation of the CIS-7 in the work of the new negotiation group. 33. Much flexibility is included in these Modalities for developing countries and LDCs, in particular relating explicitly to their implementation capacity and their requirements of support for infrastructure development. Implementation is thus closely linked to the availability and effectiveness of technical and financial assistance for such infrastructure. Low-income economies in transition could request specific TRTA and support for capacity-building in this area on the basis of the reference in the introductory part of the General Council Decision.
34. The Cotton Initiative has a prominent place in the General Council Decision, not only in the Annex of the Agriculture Framework but also in the body of the Decision itself. The main challenge for the interested countries is again to ensure that the commitment to address the issue “ambitiously, expeditiously, and specifically within the agriculture negotiations” is given concrete content. As per the mandate of the General Council Decision , WTO members set up a body on 19 November 2004 to focus on cotton as a specific issue in the agriculture negotiations. The interested countries are yet to take full advantage of it and work effectively within this subcommittee. 35. The interested CIS-7 countries, especially Uzbekistan, which is the world’s fifth largest exporter of cotton, could work in a coordinated manner with other key players of the Cotton Initiative [note 46] and also with their representatives in financial institutions, the Food and Agriculture Organization (FAO) and bilateral development partners.
36. The vital role of TRTA in economic development is generally well-recognised which is proven by its prominent place in the July Package. Thus, reconsidering TRTA for low-income economies in transition seems opportune. These countries should ask for more focused TRTA, adapted to their specificities and a better-suited division of labour in the activities of various international donors. The role of TRTA for low-income economies in transition is multifarious; inter alia, it is indispensable for accession process and effective participation in the WTO negotiations; it is a tool to facilitate the implementation of WTO commitments; it assists in the adjustment of their legal framework to the WTO rules and disciplines; and it promotes trade and economic development, etc.
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