RNM UPDATE 0518

December 2, 2005

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this
electronic newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

Special Issue: With WTO Ministerial Looming, Doha Round Talks Disheartening for Caribbean

- UPCOMING EVENT

Need for ‘Development Issues’ to Permeate WTO Talks

Things have gone wrong for embattled global trade talks, dubbed the Doha Development Round.
“Instead of permeating the negotiating agenda, the “development dimension” has been in
relegation, emblematic of how the Round has been consumed by the interests of rich nations, as
opposed to being centered on those of developing countries,” said Director General of the
Caribbean Regional Negotiating Machinery (RNM) Ambassador Dr. Richard Bernal.

The focus of deliberations at the recently concluded 2005 Commonwealth Heads of Government
Meeting (CHOGM) in Malta, Commonwealth leaders unequivocally said of World Trade
Organization (WTO) talks that “at the core of the Doha Round is the imperative of delivering
development dividends.” This viewpoint is shared by Caribbean leaders and Trade Ministers, who
have consistently called for development issues to be front-loaded in the negotiating agenda.

Commonwealth leaders urged rich nations to “give more than they receive” in WTO talks, noting
that they define success in the Doha Round to be “the extent to which there are early and
substantial dividends for all developing countries, and the extent to which the development
dimension permeates all aspects of the negotiated outcomes.”

What was significant in such pronouncements coming out of the CHOGM was that they were
coming from a grouping of over fifty countries, which represent one quarter of the world’s
governments, one-third of the world’s population and one-fifth of global trade. The grouping
reiterated the importance of integrating development into the agenda of Doha Round talks, doing
so immediately prior to the convening of the Hong Kong Ministerial. The CHOGM was one of the
last such high-level meetings ahead of Hong Kong involving leaders from a range of developing
countries, and because of its focus on global trade talks it sent a powerful signal that these
countries remained very troubled over how development issues are being positioned in the
negotiating agenda. This concern found expression in a series of Africa, Caribbean and Pacific
Group meetings and a G90 Ministers of Trade meeting convened in Brussels this week (see
www.acpsec.org/en/trade/programme_ACP_Trade_meetings_e.htm), as a preparatory exercise for
the Hong Kong Ministerial.

1
An ACP and G90 Declaration were released today, coming out of the respective Ministerial-level
meetings convened this week (see www.crnm.org). Further to the ACP Ministerial encounter, ACP
Spokespersons were appointed for subject areas, centered on five clusters to be taken up at Hong
Kong:

Non-Agricultural Market Access (NAMA) - Jamaica

Agriculture - Benin

Rules - Fiji

Development - Central Africa (country yet to be confirmed)

Services - Southern Africa (country yet to be confirmed)

“Reclaiming Development”, but Lamy has Different View

At a meeting of the Committee on Trade and Development (CTD) earlier this week, Argentina,
Brazil, India, Indonesia, Namibia, Pakistan, the Philippines, South Africa and Venezuela tabled a
submission that lashed out at what was referred to as attempts by some developed countries to
“sow division” amongst poor nations, and also “re-interpret the framework and trajectory of the
negotiations.” Charging that some developed nations were undermining the developmental
objectives of the Doha Round, the group of developing countries argued for an ambitious “aid for
trade” package to be launched in Hong Kong.

At a time when a representative group of developing countries delivered this stinging assessment
of the treatment of development issues in the Round, WTO Director General Pascal Lamy
expressed a decidedly different view regarding on-going negotiations, being somewhat conciliatory
about the status quo - offering a cautionary note to poor countries Monday (November 28) by
suggesting that “what is already on the table can translate into a good result for development.” In
this vein, he maintained that the real gains for development would come from the reduction of
subsidies and tariffs in both the developed and developing countries. He noted that there was a 25
percent expansion between 1995 to 2003 in the exports of developing countries. Their share of
world trade moved from 40 to 42 percent, he said; noting further that their agricultural exports
moved from $300 billion to $350 billion, and trade increased among developing countries by 30
percent. Lamy was of the view that the agricultural subsidy reduction made so far offered
possibilities, and developing countries should make use of it. “It would certainly be disastrous if
what we have disappears because we fail to move the negotiations forward,” he added, noting,
“developing countries cannot afford to put aside these advantages and benefits.”

Lamy’s viewpoint highlights clear differences in interpretation between what he believes has been
achieved in development and what developing countries feel still needs to be done for
development dividends to be harvested.

2
Politically Charged issue of Agriculture hindering Progress on ‘Development’

Success in global trade talks by the measure of whether development issues have indeed
permeated the negotiating agenda has thus far proven elusive in Doha Round talks, that since their
inception in 2001 have been marred by discord principally in Agriculture, affecting negatively on
how development issues are featured in the negotiating agenda.

The fault-lines for discord appear to be squarely in the court of rich nations, that have spent the
better part of the last four years since the Round was launched agonizing over the extent of
concessions in Agriculture; the expectation on the part of some being that once there was
consensus in this regard then there would be attempts to take on other aspects of the negotiating
agenda falling outside of this contentious issue. A similar fate has beset NAMA talks, hamstrung
by disagreement on how to move forward.

For landmark concessions to take place in Agriculture, ‘conditions’ must be right politically in
certain rich nations, and for the time being they are not. Amongst themselves, certain countries
are taking an uncompromising stand, although oft-heard assurances that farm trade needs to be
unblocked is a pledge that many countries repeatedly make. There is vocal dissent on the part of
EU countries like France whose political leaders have warned the EC’s top trade negotiator that he
is overstepping his negotiating mandate in Agriculture, and suggesting further that they will be
holding a tight leash around him in respect of what he commits to in this regard.

Confidence Lost

Less than two weeks before the start of the WTO’s Hong Kong Ministerial, meant to reinvigorate
floundering global trade talks, there has been a loss of confidence in the process on the part of the
Caribbean. There is a feeling that issues germane to these countries have been side-lined.

But there is a realization, too, that the issues the year-end Ministerial was originally set to tackle
have been scaled-back, calling into question an ambitious outcome for the Hong Kong Ministerial,
and raising uncertainty over whether it will be able to inject momentum in the process that is set to
unfold in 2006. In what must have been an awkward admission in respect of how negotiations had
fallen behind, the WTO chief was compelled at the beginning of last month to call on Members to
warm to the idea of “recalibration”.

Modifying Draft Ministerial Declaration

In the Draft Ministerial Text circulated November 26, there are three categories of text: i) texts
where convergence is full, such as in Trade Facilitation; ii) texts which are not fully agreed on, such
as Services and Rules; and, iii) texts that are not agreed, namely Agriculture and NAMA.

3
Mr. Lamy has seen that text come under much scrutiny in a series of ‘green room’ meetings, with a
view to making modifications to it. As the subject of intense debate, there are questions over what
it has set out, how it has done so and how it has fallen short in reflecting certain viewpoints, be it
on issues or the extent to which it has or has not captured agreement. In particular, concerns
centre on the status of the Text’s Annexes. There was disagreement on how to deal with annexes
on Agriculture and NAMA for instance, with some countries appealing for the situational reports
prepared by the chairpersons of the respective negotiating groups not to be included with the
Ministerial Declaration.

Late in the day yesterday (December 1), a revised Text was released, that reflects iterations - in
respect of export subsidies, trade-related measures (as relates to Cotton), and Services - emerging
from consultations held this week in Geneva (see www.crnm.org for Revised Text). The latest
revision includes both reports in respect of Agriculture and NAMA as annexes A and B, opposition
to their inclusion notwithstanding.

In a statement to the WTO General Council today (December 2), the Chairperson of the Sixth WTO
Ministerial Conference Secretary for Commerce, Industry and Technology of Hong Kong, China
Mr. John Tsang announced the names of six Ministers from various regions to assist him as
facilitators at the Conference. Guyana’s Trade Minister Hon. Clement Rohee has been appointed
to deal with specific development-related issues. The other facilitators have been tasked with
Agriculture, NAMA, Services, Rules and other issues, respectively.

Greater Emphasis on Development Issues, but WTO Talks Disheartening for Caribbean

In an effort to burnish WTO talks at this juncture, the sentiment emerging from Geneva is to inject
development into the Hong Kong deliberations, with calls to more fully reflect the interests and
concerns of developing countries in the current Round. On its own responsibility, the WTO
Secretariat has in recent days attempted to “highlight the broad parameters of the development
dimension, to identify specific issues of interest to developing countries and to describe the
potential gains which could accrue to developing countries from the conclusion of the
negotiations.”

But, despite this recent scurry of activity to bring the “development dimension” in focus, there is a
deep disconnect between what rich nations would rather focus on and the expectations poor
countries have of the Round. The move now to take on development issues almost seems to be
undertaken grudgingly, somehow being pursued to appease the rank and file of poor nations.
Caribbean countries, amongst the smallest and most vulnerable in the world, particularly feel that
their issues are not receiving sufficient attention in the negotiating agenda, and now must face the
ominous fallout stemming from recent WTO rulings regarding two key commodity exports –
Bananas and Sugar –that do not auger well for their collective futures. While Caribbean countries
are committed to and are active participants in international trade negotiations, some uncertainty
has emerged concerning the benefits to be derived and costs entailed. The current trajectory of
WTO talks is disheartening for the Caribbean. In fact, the CHOGM recognized the difficult
development and trade challenges faced by small, vulnerable states, especially those traditionally

4
dependent on preferential market access arrangements. Leaders called for “urgent and concerted
action to provide phased adjustment and other transitional measures to safeguard their interests,
and also financial support to assist them in repositioning their economies to take advantage of new
growth opportunities.”

Caribbean Bananas and Sugar on Precipice of Disaster, Courtesy of WTO

At a time when the Doha Round is failing the Caribbean, the WTO system is putting this vulnerable
Region in a corner over two commodities at the heart of its agricultural identity and social fabric.
The prospects of the banana and sugar industries in the Region are being held to ransom by the
multilateral trading system, poised precariously above the arms of disaster. Recent WTO rulings
have forced the hand of the EU to make decisions, that Caribbean countries have been barred
from influencing, that threaten the livelihoods of tens of thousands of families in several Caribbean
countries. The economies and growth prospects of these countries are also at the mercy of policy
decisions made in Europe, that have now placed some of the worlds smallest, most vulnerable
countries on the brink of social and economic crisis.

On November 29, the European Union announced a new import tariff of 176 euros per tonne, in
respect of its tariff-only regime, to apply from January 1, 2006 to bananas imported mainly from
Latin American or MFN suppliers. The new import regime will also include a duty-free annual
import quota of 775,000 tonnes for ACP bananas, also to apply from January 1, 2006.

The single tariff rate has been widely criticized in the Caribbean. The tariff level will effectively
cripple the Region’s banana industry, as it would inevitably lead to lower prices and incomes for
farmers and the loss of predictability and stability. Some banana farmers in the Region will not be
able to compete, and therefore face the prospect of being displaced from an industry that has
sustained entire communities across the Caribbean for generations. The Region’s banana
supplying countries “face a grave economic crisis, that is not of their making,” declared a Brussels-
based envoy for the smallest group of Caribbean banana supplying countries, the Windward
Islands.

The potential loss of market access to the EU, because of the loss of preferences, would spell
disaster for the Caribbean. The senior diplomat lamented that “the tariff and other arrangements
now proposed by the Commission will unquestionably lead to a collapse in banana prices and the
consequent elimination of the most vulnerable banana exporters, with devastating impact.”
Characterizing the current regime as providing a “vital lifeline” for small, vulnerable Caribbean
banana suppliers, the diplomat noted that it enabled “secure, remunerative and stable market
access both for the ACP and the Latin American suppliers;” and because of this, several countries
have been calling for the postponement of the implementation of the tariff proposal, to allow for
negotiations aimed at achieving a fair solution for all.

The Caribbean has reacted with dismay, too, to the announcement November 24 that the EU
would proceed with a 36 percent price cut in respect of its sugar regime. A decision was also
taken to extend the transition period from two to four years. Guyana’s Minister of Foreign Trade

5
and CARICOM Ministerial Spokesperson on Sugar Hon. Clement Rohee described the hefty price
cut as “outrageous” and “unconscionable.”

The decision is a betrayal of the long-standing relationship between Europe and the Caribbean, in
respect of a key commodity export. The decision is particularly hard for the ACP Group to fathom,
as certain EU member states were offered an additional euros 2.2 billion to a package that had
already committed to over euros 5 billion, while in stark contrast a paltry euros 40 million in
accompanying measures has been earmarked to be shared amongst the eighteen ACP sugar
supplying countries. The decision harshly discriminates against small, vulnerable ACP sugar
supplying countries and European sugar supplying countries. This concern was highlighted at an
encounter this week in Brussels, between the ACP Group and EC Trade Commissioner Peter
Mandelson. “It seems that the Commission has got its way by throwing extra billions in
compensation at European farmers and industry. The ACP are left with a draconian price cut and a
paltry euros 40 million in assistance to share. [The ACP are] by far the biggest losers in this
reform,” said Ambassador George Bullen, Chairman of the ACP Consultative Group on Sugar and
Ambassador of the Eastern Caribbean States to Brussels.

Doha Round Coming up Short in Advancing ‘Development’

With the Hong Kong Ministerial looming, the Caribbean is questioning just how genuine the
offensive now set in motion to extricate the Round’s “development dimension” from a state of limbo
is. Somehow, the last minute jostling by some developed countries to bring to center-stage talk of
development has cheapened an agenda that from its very inception should have sought to
advance a plan for poor countries to reap ‘development dividends’. Questions remain, too, over
the nature of the development package that would ultimately be brought forward in any discussions
on the issue in Hong Kong.

Some WTO-watchers have characterized this latest move as an ‘eleventh hour’ attempt to pacify
those countries the Round was meant to target when it was launched, at a time when it has
alienated them and faces a serious credibility problem, in the run-up to Hong Kong. Critics contend
that the move is an attempt also to deflect attention from certain rich nations’ unwillingness to press
ahead on the controversial Agriculture discussions on the table, and for this reason it is hard to
dispel concerns that ‘development’ is not being addressed in a serious or meaningful way in the
agenda.

For all its promises to integrate development into the negotiating agenda, the Round has come up
short thus far in making this a reality, as it has in placing development on the front-burner of the
negotiating agenda.

6
UPCOMING EVENT

- December 13 to 18: Sixth WTO Ministerial Conference, Hong Kong (for host government website see
http://www.wtomc6.gov.hk/)

Recipients of RNM UPDATE are authorised to forward this newsletter to other addresses. We
welcome suggestions for additions to our mailing list. If, on the other hand, you wish to be removed
from the list, kindly inform us.

For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528