US embassy cable - 05GENEVA2505

UNCLAS SECTION 01 OF 05 GENEVA 002505 
 
SIPDIS 
 
PASS USTR FOR ALLGEIER AND DWOSKIN 
EB/OT FOR CRAFT 
USDA FOR FAS/ITP/SHEIKH, MTND/YOUNG 
USDOC FOR ITA/JACOBS 
 
E.O. 12958: N/A 
TAGS: ETRD WTRO USTR, Trade 
SUBJECT: OCTOBER 13, 2005 - MEETING OF THE WTO TRADE 
NEGOTIATIONS COMMITTEE (TNC) 
 
 
Summary 
 
1. The meeting of the WTO Trade Negotiations Committee (TNC) 
on October 13, 2005 featured a more upbeat atmosphere evident 
since the lift given to the process by the new U.S. 
agriculture proposal.  Director-General Lamy and many other 
speakers observed a new impetus in the negotiations, while 
many Members allowed themselves to guardedly express hope that 
the upcoming Sixth Ministerial Conference in Hong Kong, China, 
can be a success.  At the same time, however, participants 
remained realistic about the shortness of time and the 
difficult challenges ahead. 
 
2. Lamy set the tone in his opening remarks by noting this 
week's developments seemed to have reignited the negotiations. 
He saluted the important contribution from the United States 
on agriculture, and he referred as well to the positive role 
played by other proposals including those of the EU, the G-20, 
and the G-10, but Lamy also underlined that positions on 
agricultural market access remain very far apart - too far 
apart for real negotiations to occur.  The chair of the 
agriculture negotiations echoed this message.  Quite a number 
of other delegations welcomed the positive momentum engendered 
by recent proposals, many singling out the U.S. agriculture 
proposal for special mention, with Australia and Mexico 
emphasizing that it is time for movement on market access. 
 
3. Besides the United States, several speakers - for the EU, 
the G-20, and the G-10 - took advantage of the meeting to 
outline their proposals.  Brazil, speaking for the G-20, 
underscored that the tariff reductions specified in the 
group's market access proposal represented a "maximal limit" 
for developing countries.  G-10 members, including Agriculture 
Minister Iwanaga for Japan, emphasized they are willing to 
improve market access but the outcome must be equitable for 
food-importing countries.  Japan and Norway rejected a tariff 
cap.  Benin, speaking for the four cotton countries, voiced 
concern that none of the recent agriculture proposals included 
specific solutions on cotton, and warned that there could be 
trouble in Hong Kong if the issue was not explicitly 
addressed. 
 
4. Other themes of the meeting included broad support for 
Lamy's proposed roadmap for Hong Kong and beyond, including 
taking a bottom-up approach in preparing texts for ministerial 
consideration and making the process as transparent and 
inclusive as possible. 
 
Lamy's Statement 
 
5. Lamy began his statement by recalling the roadmap leading 
up to the Sixth Ministerial Conference that he enunciated at 
the previous TNC and foreshadowing the substantial amount of 
work that will be required next year to convert what is agreed 
in Hong Kong, particularly with respect to modalities, into 
specific commitments.  Outlining what he described as an 
"incompressible" number of drafting and legal episodes, he 
concluded that the Ministerial Conference must be a success or 
the 2006 target will be missed. 
 
6. He then assessed the current state of play, beginning with 
agriculture and judging that "the engines of the negotiating 
plane have been switched on again" in large part because of an 
important contribution from the United States. 
 
    - The U.S. proposal puts domestic support on a par with 
      export competition in terms of its negotiating shape 
      even if there are elements where further approximations 
      are necessary, according to Lamy. 
 
    - On market access, however, Lamy said that positions 
      remain too far apart for real negotiations to commence, 
      despite proposals by several participants - the G-10, 
      the EC, the United States, the G-33, and the G-20. 
 
    - Development must be kept at center stage, he said, which 
      means addressing special and differential treatment in 
      an inclusive way and making every possible effort to 
      advance the cotton dossier. 
 
7. Lamy then turned to other issues, outlining areas where 
convergence is needed leading up to Hong Kong. 
 
    - On NAMA, there is an emerging consensus over a Swiss 
      formula with a limited number of coefficients, he said. 
      By mid-November, there needs to be 1) a range of numbers 
      for the formula, 2) comparable detail on flexibilities, 
      and 3) a way to fix the base rate for unbound tariffs. 
      This is the minimum before addressing issues such as 
      preference erosion, sectoral, and non-tariff barriers. 
    - On services, Lamy said that Members need to define a 
      level of ambition that matches the ambition elsewhere in 
      the negotiations, and devise a plan for achieving it. 
 
    - On rules, Lamy urged Members to intensify the ongoing 
      text-based negotiating process, so that by Hong Kong 
      there has been a rigorous consideration of proposed 
      amendments to the agreements. 
 
    - The greatest development gains will stem from 
      substantive areas, he reiterated, so it is by advancing 
      these areas that a development package will appear.  It 
      is "still possible and necessary" to harvest agreement 
      on a good number of agreement-specific proposals, he 
      said, beginning with those of the LDCs. 
 
    - Members also must ensure that implementation and 
      TRIPS/public health are addressed in an appropriate way, 
      he said, along with "building the necessary base" for an 
      aid for trade package by the end of the round. 
 
8. In their informal consultations, Lamy urged Members to aim 
for "fresh ideas" that can be brought back to the overall 
membership and catalyze negotiations, consistent with goals of 
transparency and inclusiveness.  He said he would be reaching 
out to different Members and groups, and he reported that he 
would be continuing the consultative process on outstanding 
implementation issues, including those related to GIs, with 
the assistance of relevant chairs and two Deputy Directors- 
General, Rufus Yerxa (on GIs and TRIPS/CBD) and Valentine 
Rugwabiza (on TRIMS). 
 
9. Lamy closed by recalling the importance of a bottom-up 
approach whereby the text for ministers grows out of 
convergence in the negotiations.  That, however, puts "severe 
pressure" on negotiators to deliver results in a very short 
time.  But it can be done, Lamy emphasized, and Members should 
stand by the target of a comprehensive draft text by mid- 
November - about thirty days from now "counting every day as a 
working day." 
 
Statements by Chairs 
 
10. Lamy invited the chairs to make statements, noting that 
two chairs - the trade facilitation chair, Ambassador Noor, 
and the dispute settlement understanding (DSU) chair, 
Ambassador Spencer - were not present. 
 
Agriculture 
 
11. Ambassador Falconer agreed with Lamy's assessment of the 
agriculture negotiations, referring to his written report 
(TN/AG/20) and adding that political momentum is needed in the 
next week or ten days to maintain the pace for Hong Kong. 
There have been considerable advances, but Members do not have 
the luxury to move at a leisurely pace - further political 
guidance is needed quickly.  On the three pillars: 
 
    - Falconer reported that Members have come a long way on 
      export competition and further movement on parallelism 
      is grounds for confidence, but agreement is linked to 
      the other pillars and will not come automatically. 
 
    - Because of recent developments, including the U.S. 
      proposal, there is now a basis for believing that a deal 
      on domestic supports is "possibly within reach," but it 
      too is linked to other parts of the negotiations. 
 
    -    On market access, participants are making proposals and 
      talking numbers but positions remain a "very long way 
      apart and it is not yet possible to discern the basis of 
      a deal with any confidence." 
 
NAMA 
 
12. Ambassador Johannesson agreed with Lamy's roadmap for Hong 
Kong, saying it is "absolutely necessary" to reach modalities 
at MC6 because twelve months is the bare minimum required to 
finalize and verify schedules and commitments.  Members are in 
the midst of an intensive meetings schedule, he reported, 
including formal negotiations on September 21-22 where Members 
discussed three key issues of formula, flexibilities, and 
unbound tariffs in an integrated manner on the basis of 
contributions by Pakistan and Mexico. 
 
13. He further reported that informal consultations have been 
frank, useful, and they have revealed divergences "of utmost 
concern" on key elements.  Extremely wide gaps remain on 
formula and flexibilities, he reported, with Members retaining 
very different expectations over expected outcomes, including 
over the nature of contributions by developed and developing 
countries.  Gaps on unbound tariffs are less wide, he said, 
but they are there.  The challenges lies on these issues, he 
said, and he urged Members to get started on solving those 
issues now. 
 
Services 
 
14. The recently departed services chair (and current Deputy 
Director-General) Jara began by bringing Members up to speed 
on offers - 69 initial offers have been submitted so far, 
along with 29 revised offers.  He commented that many Members 
still have not made a submission - despite the fact that 
initial offers were due two and a half years ago - and the 
hoped-for conclusion of the round is now only fifteen months 
away. 
 
15. The key question for Hong Kong, he said, is how to better 
specify objectives for market access and rules.  On market 
access, he said there is wide agreement that request/offer 
should be the primary instrument, but there is also interest 
in complementary approaches to better organize negotiations 
and reach a higher level of ambition.  A related issue, then, 
is how to set new targets without encroaching on flexibilities 
for developing countries.  But it is important to remember 
that more offers and more commitments do not necessarily 
equate to higher levels of liberalization.  That is the goal, 
he said, even if it only locks in existing levels of 
liberalization. 
 
16. The new chair, Ambassador de Mateo Y Venturini of Mexico, 
picked it up from there, emphasizing his resolve to get a good 
draft package ready for Hong Kong that can guide the 
negotiations next year.  To facilitate work on an initial 
draft text, he is circulating a list of possible elements with 
three main components - 1) objectives for the negotiations, 2) 
ways to achieve the objectives, and 3) timelines.  These are 
not rigid concepts, he said, just an attempt to structure the 
debate. 
 
Rules 
 
17. Ambassador Valles Galmes said that work on antidumping is 
receiving the most attention, and it is has moved past the 
philosophical stage.  Although substantive differences remain 
great, he reported that he is committed to a comprehensive 
draft text early next year and to that end he is working on 
the development of legal operative text through an intensified 
schedule of plurilateral consultations.  He is looking to 
Members to select key issues for focus in this advanced stage 
of the negotiations.  Due to the difficulty of the technical 
issues, he is working with Friends of the Chair.  He stressed 
that the Friends process is not a veiled attempt to prioritize 
issues, but rather a way to move through the heavy schedule 
ahead.  He reported that he is also looking for draft texts on 
subsidies, fish, and transparency in RTAs in Hong Kong. 
 
TRIPS Special Session 
 
18. Since his last report, Ambassador Ahmad reported that 
Members succeeded in overcoming procedural differences and 
held useful, productive discussions over three proposals - the 
EC proposal, the joint proposal, and the proposal by Hong Kong 
China.  To date, however, substantive differences remain - 
there is no sense of direction and no narrowing of differences 
among Members. 
 
Trade and Environment 
 
19. Ambassador Ali recalled that discussions have focused on 
paragraph 31(iii) of the Doha Declaration, including 
environmental goods liberalization, following calls by many 
Members to intensify work prior to Hong Kong.  There have been 
two main approaches, he explained, a list approach in which 
some delegations have identified lists of specific projects 
they would like considered in the negotiations, and an 
environmental project approach in which environmental goods 
and services would be liberalized within a framework of 
environmental projects undertaken at the national level. 
Discussions continue, he said, including an informative 
information exchange session that took place the day before 
the TNC, focusing on five broad topics including wastewater 
management, solid and hazardous waste management, air 
pollution control, renewable energy projects, and 
environmentally preferable products.  Ali closed by 
emphasizing the importance to participants of other parts of 
the mandate. 
Trade and Development 
 
20. Faizel Ismael said his consultations indicated that work 
for Hong Kong on S&D should focus on the five proposals from 
the least-developed countries.   Work would also proceed on as 
many of the remaining African proposals as possible.  He noted 
he has been unable to advance the negotiations on any 
proposals however because neither the LDCs nor the Africans 
have been prepared, although the LDCs have signaled that they 
expect to be ready by next week to continue work.  He further 
reported that he will meet with the chairs of the other 
relevant bodies to review the status of the category two S&D 
proposals that were referred to those bodies for 
consideration. 
 
United States Statement 
 
21. Ambassador Allgeier introduced the recent U.S. agriculture 
proposal, describing it as a response to repeated calls for 
the United States to clarify what it is willing to do on 
domestic supports.  With this proposal, the United States "has 
crossed the political Rubicon of reform," he emphasized, and 
he hoped it would mark a turning point and be a sufficient 
basis for unlocking progress in the broader negotiations.  He 
emphasized the proposal is conditional, however, and it must 
be met with equivalent ambition by other Members or it cannot 
be sold at home.  The full text of Ambassador Allgeier's 
statement can be found on USTR's website. 
 
Statements by Other Members 
 
22. Thirty Members made statements, many expressing hope for 
success in Hong Kong while at the same time conveying a 
realistic sense of the challenges ahead.  Much of the 
discussion centered on agriculture.  Other themes included 
concern about the shortness of time, support for Lamy's 
roadmap for Hong Kong and into 2006, agreement on a bottom-up 
approach in preparing texts for ministerial consideration in 
Hong Kong, and recognition that the negotiating process must 
be transparent and inclusive.  Some other specific points made 
by other delegations may be of interest to Washington 
agencies: 
 
- Quite a number of speakers welcomed the positive 
momentum in the negotiations, many acknowledging the 
impetus created by the recent U.S. proposal.  Mexico and 
Australia (on behalf of the Cairns Group) underscored that the 
time has come for movement on agricultural market access. 
 
-  China recognized the important contribution of the U.S. 
proposal, but it also expressed concern about the depth of 
real reductions, blue box disciplines, and the lack of special 
and differential treatment components in all three pillars. 
 
-  On behalf of the G-20, Ambassador Hugueney of Brazil 
reviewed the group's two recent proposals - on market access 
and domestic supports - saying that the G-20 was asked to 
provide its vision of ambition, and it came through in a sign 
of unity from Members with offensive and defensive interests. 
The 36-percent average tariff cut for developing countries is 
as far as they can go, he stressed.  He foreshadowed that more 
proposals from the G-20 are in the works on issues such as 
sensitive products; tropical products; the treatment of 
recently acceded Members; how to deal with subsidized exports 
from developed countries into developing country markets; 
product-specific caps on domestic support, monitoring, and 
surveillance; state-trading enterprises; and export 
restrictions. 
 
-  Ambassador Trojan recapped the EU's contributions on 
agriculture, emphasizing that the EU can deliver what it is 
proposing on domestic supports - "while we have heard some 
good news from the U.S. earlier this week, we are certainly 
not yet there."  He said the EU has gone far on market access 
and commitments should be based on both tariff reductions and 
TRQ expansion.  Sensitive products are an important part of 
the equation, he said. 
 
-  Switzerland presented the G-10 concept of allowing Members 
to choose between two options on agricultural market access. 
At one point in his intervention, Ambassador Wasescha 
questioned whether the authors of some proposals could pay the 
price if their ambitions are fulfilled. 
 
-  G-10 members Norway, Japan, and Chinese Taipei added that 
they are willing to contribute on agriculture, but the outcome 
must be equitable for them.  Agriculture Minister Iwanaga of 
Japan ruled out a tariff cap and said the Japanese people will 
never accept an outcome that destroys its agriculture. 
Norway's representative hit similar themes. 
 
-  Ambassador Bhatia of India supported the G-20 proposal, 
stating that agriculture represented a major development 
outcome of the round.  He called for a balanced outcome on 
services to promote development, and he pushed back on Lamy's 
assertion that a consensus seems to be forming around a NAMA 
formula, putting the focus instead on the previous Argentina- 
Brazil-India (ABI) proposal. 
 
-  Indonesia spoke on behalf of the G-33, emphasizing the 
importance of special products, food security, and rural 
livelihoods.  The Philippines, Cuba, and El Salvador picked up 
similar themes. 
 
-  Brazil, Norway, and Thailand stressed the importance of a 
text-based process on rules, particularly antidumping, with 
Norway calling for "firm clear guidance with a high degree of 
specificity to guarantee a meaningful result" in the round. 
Others - including Colombia and Peru - made passing references 
to the issue. 
 
-  Benin noted that recent proposals lack solutions on cotton, 
and he warned that there could be trouble in Hong Kong if 
cotton is not taken into account, including the trade and 
development aspects.  Mauritius mentioned the elimination of 
cotton subsidies, improving market access opportunities 
through bound duty-free and quota-free access, and creating an 
emergency fund for cotton producers. 
 
-  Mauritius (speaking for the ACP) bemoaned the push for 
progress on agricultural market access, saying it is not in 
the interest of most WTO Members, and he welcomed recent 
proposals calling for policy space and flexibilities for LDCs 
and small economies. 
 
-  Peru, Colombia, and Ecuador highlighted the importance of 
tropical products, with Peru describing the issue as an 
offensive dimension of special and differential treatment and 
Colombia opining that some market access proposals offer 
little hope on this issue. 
 
-  Bolivia, Brazil, Colombia, Cuba, Ecuador, Peru, and India 
raised TRIPS/CBD, with Cuba calling for a ministerial 
declaration in Hong Kong.  Peru and Colombia said they seek an 
obligation for patent applications to disclose the source and 
country of origin of any genetic resources or traditional 
knowledge, together with proof of prior informed consent and 
an assurance that benefits are equitably shared. 
 
-  There seemed to be differences of opinion over 
complementary approaches to request/offer in the services 
negotiations.  Australia and Norway expressed support; India 
seemed willing to look at alternatives to request/offer; 
Brazil and Thailand put the focus on existing guidelines; and 
Mauritius registered "clear objection." 
 
-  Venezuela's representative made a singularly unhelpful 
presentation, saying there seems to be little commitment by 
developed countries for agriculture reform and warning the 
developed world to be wary of making "false promises" to 
developing countries.  There are still debts to be paid on 
S&D, she said, and the credit of some Members should be 
cancelled. 
 
Lamy's Conclusion 
 
23. Lamy concluded by saying there seemed to be convergence 
around his diagnosis that the negotiations are re-ignited.  He 
said he took a couple of other clear messages away from the 
meeting, including the importance of transparency and the 
centrality of development.  On this latter point, he said he 
agreed with the gist of India's message - the main development 
gains from the round would indeed come from substantive 
pillars such as agriculture.  In closing, Lamy noted a strong 
sense of urgency in the room - here we are talking of days, he 
said, while at our next meeting we will be talking of hours. 
Shark