Hailing Hong Kong, completing Doha
Contrary to the doom and gloom scenarios advanced by many, the WTO
ministerial conference at Hong Kong concluded successfully on December 18,
2005, making significant progress towards completing the Doha Round. True,
the conference did not produce dramatic results.
But that was just as some among us had predicted: with the final round of
negotiations still a year away, few accomplished negotiators could be
expected to put their best offers on the table.
Two key factors explain why the failure to achieve progress in agriculture
at Cancun turned into success at Hong Kong. First, having learned from its
mistake at Cancun, where it had made common cause with the European Union,
the US chose to forge partnership with developing countries at Hong Kong.
Because the US has a strong comparative advantage in agriculture while the
EU lacks it, developing countries with comparative advantage in
agriculture were its natural allies. On one hand, the tactic helped
persuade developing countries that the US was genuinely interested in
agricultural liberalisation and on the other hand it intensified pressure
on the EU to liberalise.
Second, the grouping of 20 larger developing countries known as G-20,
initially formed at Cancun to counter the US-EU alliance, came of age at
Hong Kong. While the G-20 naturally used its leverage to promote the
interests of its membership, it also worked constructively to advance the
Thus, early during the conference, led by ministers Kamal Nath of India
and Celso Amorim of Brazil, the G-20 joined hands with the grouping of 90
smaller developing countries known as G-90 and successfully negotiated
duty and quota-free access for the products of the 50 least developed
countries (LDCs) into developed country markets.
Later, in an important act of leadership, minister Nath broke ranks
with Brazil and with China on his side, went on to support the reasonable
EU demand that the date for the end to agricultural export subsidies be
set at 2013 instead of 2010. That support provided the necessary balance
to clinch the deal on exports subsidies.
The Hong Kong conference has moved WTO members significantly closer to a
final Doha agreement. In addition to agreeing to end agricultural export
subsidies by 2013, the member countries have made progress on tackling
domestic agricultural subsidies.
They have agreed to create three tiers of countries whereby the EU, which
is by far the biggest user of such subsidies, will be required to make the
deepest cuts; the US and Japan, the next largest users of the subsidies,
will be subject to the next deepest cuts; and the remaining countries will
be subject to the smallest cuts. While the final agreement is to be
reached on April 30, 2006, under the current proposals, the cuts for the
EU are expected to be in the 70-80% range and for the US and Japan in the
On market access in agriculture, the member countries have agreed to base
tariff cuts on four bands defined according to the existing level of
tariffs with deeper cuts applied to higher tariffs. Precise modalities
meaning threshold levels of these bands and the extent of the cuts are to
be negotiated by April 30, 2006.
On market access in non-agricultural products, the member countries have
explicitly adopted the Swiss formula that would cut higher tariffs more
and lower tariffs less. Again, the modalities meaning the precise levels
of cuts are to be negotiated by April 30, 2006. There has been less
progress in services but even here deadlines have been set for the
submission of the offers.
A key achievement of the conference has been to address several
demands of the LDCs. For example, developed countries have agreed to open
their markets for 97% or more products on a duty-free basis to them. The
LDCs will also not be required to undertake reciprocal tariff cuts in any
products. While trade economists question the advisability of both these
measures as ways to assist the LDCs, they remain intensely popular with
the latter. The conference also made significant progress towards
"aid for trade" for the LDCs.
These achievements notwithstanding, hard bargaining at Hong Kong has left
developed country leaders uniformly sceptical that the Doha Round can be
brought to a successful conclusion. The risk is that this scepticism can
become self-fulfilling. That will be sad for developing countries
including India, which have fought hard to give the negotiations their
Thus, at Doha, late commerce minister Murasoli Maran had valiantly fought
against the inclusion of the Singapore issues - investment, competition
policy, government procurement, and trade facilitation - into the
negotiating agenda. With that objective achieved except for innocuous
trade facilitation issue, the round is now squarely focused on trade
liberalisation that produces win-win bargains.
Considerable progress has also been made on trade liberalisation front
along the lines sought by India and other developing countries. A failure
at this juncture will not only wipe out these gains, it will also
strengthen the hands of the US and EU labour lobbies' that may then return
with vengeance with their self-serving and damaging demand for the
inclusion of labour standards into the WTO.
With LDC demands effectively addressed or on the way to being addressed,
the larger developed and developing countries such as the US, EU, Japan,
Brazil, China, India and South Africa must now focus efforts on completing
modalities of negotiations. They must quickly get down to the business of
putting precise numbers on the agreed upon bands and associated magnitude
of liberalisation of domestic subsidies and market access.
Given the progress already made as summarised in the annexes of the Hong
Kong declaration, this is a task well within reach. Minister Nath may even
wish to take the lead and call a mini-ministerial conference in New Delhi
to complete this crucial step in the negotiations.
Times December 25 2005