US embassy cable - 05GENEVA2629

UNCLAS SECTION 01 OF 02 GENEVA 002629 
 
SIPDIS 
 
PASS USTR FOR DWOSKIN, HAFNER 
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, USTR, WTRO, Trade 
SUBJECT:  WTO REGIONAL TRADE AGREEMENTS: ENABLING CLAUSE 
TRANSPARENCY 
 
 
1.  On October 3, 2005, the WTO Negotiating Group on Rules held 
an informal meeting devoted to discussing to the extent to which 
new transparency procedures being considered in the Doha Round 
for regional trade agreements (RTAs) should also cover RTAs 
entered into between developing countries under the rubric of the 
so-called Enabling Clause (the 1979 GATT Decision on 
"Differential and More Favorable Treatment" of Developing 
countries (L/4903)).  Paragraph 2(c) of the Enabling Clause 
explicitly permits developing countries to derogate from GATT's 
fundamental most-favored-nation treatment requirement for 
"regional or global arrangements" among developing countries "for 
the mutual reduction or elimination of tariffs."  Such agreements 
now account for a large portion of mutual tariff remission 
agreements around the world, are rarely notified, and receive 
scant, if any, review in the WTO's Committee on Trade and 
Development (CTD).  Previous discussions of the issue in the 
Rules group had been highly political, with developing countries 
seeking an a priori exclusion of such agreements from any new 
notification, information-sharing and multilateral review 
procedures. 
 
2.  This particular meeting appeared to move beyond the previous 
polemics.  Developing countries such Brazil, Malaysia, Egypt, 
China, Ecuador, Thailand, Barbados, Kenya, Pakistan, and the 
Philippines continued to rely on general arguments that Enabling 
Clause agreements should not be subject to review in the WTO's 
Committee on Regional Trade Agreements (CRTA), but most conceded 
that increased transparency would be valuable with respect to all 
RTAs. 
 
3.  India elaborated its position at length.  After stating that 
it supported increased transparency generally, India identified 
several "sensitivities."  It claimed that in contrast to the 
requirements of GATT Article XXIV governing customs unions and 
free trade agreements, the Enabling Clause did not necessarily 
require a mandatory or multilateral review.  It also argued that 
since most Enabling Clause agreements cover a small percentage of 
world trade, those countries should not be subject to any 
burdensome review process in the CRTA, particularly given the CTD 
mandate that grants jurisdiction to the CTD over all issues 
concerning development.  India also argued that if the CRTA were 
to be the forum for Enabling Clause agreements, it should also 
provide a forum for review of GSP programs, which are allowed by 
virtue of another paragraph of the enabling clause, be subject to 
the transparency provisions under discussion.  (Note: We 
understand this concern stems from frustration with the lack of 
transparency concerning multiple EU GSP programs. End Note.) 
 
4.  Korea stressed that the task of increasing transparency was 
not to change the legal nature of the Enabling Clause, and sought 
clarification on the practical difference between procedures 
contemplated under GATT Article XXIV and the Enabling Clause. 
The European Communities, Chile, Columbia, Japan, New Zealand, 
Hong Kong, China and Chinese Taipei joined the United States and 
Korea in supporting reviewing Enabling Clause agreements in the 
CRTA and sought further information on developing countries' 
specific, practical objections to the particular transparency 
elements being considered in the Rules Group.   Argentina also 
supported reviewing Enabling Clause agreements in the CRTA to 
increase efficiency and transparency.  Canada took issue with 
some of India's points, noting that the Enabling Clause does have 
an obligation to consult, that although "south-south" RTAs may 
have a minimal impact on the global market, they can impact 
regional markets as well as neighboring markets, and that steps 
could be taken to lessen the burden on developing countries. 
Australia suggested discussing the types of information needed 
for transparency. Barbados, an ACP country,  notably, notably did 
not join India in arguing for CTD jurisdiction, wondering what 
the great burden was in notifying agreements to the CRTA. 
 
5.  Toward the end of the discussion, India argued that any 
improvements in transparency for Enabling Clause agreements 
should be negotiated in the CTD, to which the Chair vehemently 
objected as an improper delegation of negotiating authority.  He 
reminded Members that the Rules meetings were open to all 
Members, including members of the CTD, and that they were welcome 
to attend future discussions.  In concluding the discussion, the 
Chair acknowledged that Members generally agreed that additional 
transparency would be helpful, but expressed disappointment that 
the discussion had not focused more on the practical concerns of 
the developing countries regarding the specific elements under 
consideration in the negotiations.   Accordingly, he plans to 
continue the informal discussions by focusing on the specific new 
procedures being discussed in the Rules Group for RTAs, whether 
any raise particular concerns regarding developing country rights 
and obligations under the Enabling Clause, and if so, how to 
address such concerns.  In approaching this problem, he 
underscored that the intent was by no means to change the legal 
rights and obligations of developing countries under the Enabling 
Clause, but rather to explore the extent to which certain 
proposed procedural reforms might or might not be appropriate for 
all agreements. 
 
6.  Comment: The United States sees coverage of Enabling Clause 
agreements as an essential element of an eventual Rules Group 
agreement on transparency.  All WTO Members have an interest in 
being better informed about RTAs between developing countries, 
whether their neighbors or competitors.  The WTO reforms being 
contemplated for regional trade agreements envisage greater 
Secretariat responsibility in collecting and presenting 
 
SIPDIS 
information. Accordingly, there seem to be few if any legitimate 
practical reasons for developing countries to resist having 
Enabling Clause RTAs covered. End Comment.  Allgeier