By  on September 27, 2005

GENEVA — The Hong Kong trade summit in December must reach concrete deals on key issues if a final global market-opening agreement is to be reached by the end of 2006 in the Doha liberalization talks, senior diplomats said.

"We have to conclude the round by the end of 2006," said an ambassador from a large Asian country. "If not, we're in trouble. We have to have an outcome in Hong Kong."

Some senior World Trade Organization trade diplomats estimate that if the talks don't close next year on a successful note, the round, as one put it, "could run into the sand and get ditched."

The summit's key goal "is to define the blueprint for the end game," said Crawford Falconer, New Zealand's ambassador to the WTO and chairman of the politically sensitive agriculture segment of the talks.

A successful outcome in the WTO-sponsored talks launched in November 2001 would help lower barriers to international commercial flows worth nearly $11 trillion in 2004. The last Doha Round summit — held in Cancún, Mexico, in September 2003 — collapsed because of differences between rich and poor nations, mainly over farm trade.

A framework agreement brokered in July 2004 in Geneva managed to salvage the talks, but lingering differences over agriculture and a long list of other issues has prevented the negotiations from picking up momentum in most areas.

Negotiators are seeking to finalize by the Hong Kong meeting modalities or blueprints that will provide the parameters for negotiators to hammer out final deals next year, in particular on agriculture and trade in industrial goods. They would include numerical targets, dates and formulas for slashing tariffs and subsidies.

Coming up with results to meet the concerns of West African cotton producers over trade-distorting subsidies is also high on the agenda. Progress in other areas — such as trade facilitation aiming to simplify customs clearance procedures and on revision of global rules on antidumping, subsidies and countervailing duty measures, as well as coming up with enhanced market opening offers in commercial services — also is viewed as crucial for things to fall in place at the summit.

"We should have something close to full modalities in Hong Kong," said Carlo Trojan, the European Union ambassador to the WTO.In a similar vein, a senior Latin American trade official, who declined to be identified, said, "If we have clean modalities in Hong Kong, we can finalize the talks in 2006."

The WTO's new trade chief, Pascal Lamy, said an agreement must be reached in Hong Kong, "which takes us two-thirds of the way to concluding the round."

Lamy has set his sights on getting the WTO's 148 member countries to provide first approximations of what the Hong Kong parameters might look like by mid-October and to have a final draft ready to go to capitals by mid-November.

But chief negotiators from rich and developing countries as well as powerful industry groups say reaching a deal on the end-game terms is no easy task, and they do not rule out another failure if leaders don't muster the political will to make the necessary concessions at Hong Kong.

The same sources argue it will require "a lot of political leadership at the highest levels" and serious horse trading in back rooms, plus a big dose of flexibility all round — notably from the major trading powers — especially in agriculture brief, if solid deals are to be reached in Hong Kong.

Earlier this month, influential business leaders from the U.S., Japan, Mexico, Canada, Australia and Europe said the talks were in crisis and called for "strong political leadership" to put the talks on track for a final deal.

Moreover, the powerful Coalition of Service Industries warned last week that the Doha Round "is in serious danger of failing to fulfill its great promise," and said "political will is needed now to energize the round."

CSI said if Doha does not produce "substantial new business opportunities for service providers," it will have failed.

In view of the difficulties, many chief negotiators admit privately that they are now focused on trying to conclude the round "with a lower level of ambition" for a market-access package to cut tariffs, subsidies and other barriers to global commerce.

The industrial powers, spearheaded by the U.S., EU and Japan, have set lofty goals for lowering tariffs in industrial goods, but at the same time have lowered the level of ambition in agriculture — an area of immense interest to developing countries — complain envoys from developing countries.In 2003, world trade in manufactured goods totaled $5.4 trillion, and trade in agriculture, $674 billion.

The U.S. insists it still wants an ambitious outcome, as President Bush outlined in a keynote speech to the United Nations earlier this month.

"The elimination of trade barriers could lift hundreds of millions of people out of poverty over the next 15 years," Bush told world leaders. "The stakes are high…so we must bring the Doha trade talks to a successful conclusion."

But Bush also highlighted this would only happen if others came on board.

"The U.S. is ready to eliminate all tariffs, subsidies and other barriers to free flow of goods and services as other nations do the same," he said.

Lamy has identified agriculture as the area in which progress is "needed urgently," and which, in particular, requires the U.S. and the EU to resolve their differences.

"The ball is in the court of the major players, the U.S., the EU, to deliver results," said Manuel Teehankee, ambassador of the Philippines to the WTO.

In earlier trade negotiations in the Nineties, the U.S. initially walked away from signing off on market-opening deals in financial services and telecommunications services because it considered the market-access package on the table inadequate.

Senior U.S. negotiators have signaled Washington will not sign off on any deal in this area this time, either.

"We need to see real, concrete, tangible opportunities for the round to be of interest to us," said a senior U.S. official.

A big objective of the U.S. is to bring tariffs down, the U.S. official noted.

"Where's the market access — that's what the WTO is all about," the official said.

But the key players shaping the agenda of the Doha Round are not only the U.S. and the EU, but also the big emerging economies of Brazil and India.

Both Brazil and India, backed by other emerging countries in new coalitions, such as the G20, which includes Argentina and South Africa, have put Brussels and Washington on notice that they want to see their demands on agriculture met first before they contemplate examining seriously the ambitious market-opening demands of rich nations on industrial tariff cuts.Developing countries want rich countries to agree to deep cuts in trade-distorting farm subsidies and to provide bigger market-opening opportunities by lowering tariffs and removing other impediments.

"Agriculture must come first, otherwise there's no hope for industrial tariffs," said a senior WTO trade diplomat.

Negotiators admit that countries are jockeying for advantage and positions could rapidly shift in the run-up to the summit, or during the summit, if deals are struck. Moreover, some of the demands also are tactical and driven by defensive considerations to counter pressures by trading partners to lower barriers in areas deemed sensitive.

Stefan Johanneson, chairman of the Non-Agricultural Market Access committee, which covers industrial goods, told a negotiations session in Geneva last week that positions are still "very far apart" on a tariff-cutting formula and how flexibilities would apply for developing countries, trade officials said.

Developing countries so far also have shown little enthusiasm on sectorial initiatives by the U.S., Japan and others seeking to remove all tariffs for a range of sectors, from chemicals and electronics to gems, jewelry and sports goods.

Rich countries also want big emerging countries with potentially lucrative markets, such as India and Brazil, to slash industrial tariffs that on average are much higher compared with duties in industrial nations.

"We need clear results in industrial tariffs and that means agreeing on finalizing a formula first," said a senior Indian official.

Gomi Senadhira, Sri Lanka's WTO ambassador, said a key objective of the round on industrial goods is "to reduce peak and high duties in products of interest to developing countries, like textiles and clothing."

Some seasoned trade diplomats believe that, at the end of the day, a politically balanced package deal is likely to be one that delivers cuts in tariffs of around 30 to 40 percent and warn that countries with goals that are set too high could wind up disappointed. Such a scenario could put the whole round in jeopardy, they added.

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