Briefing by Deputy U.S. Trade Representative Peter Allgeier on Core Negotiation Areas

AMBASSADOR ALLGEIER: Thank you very much Christin and thank you for joining us today. I'll have a few comments and then open it for questions.

Obviously the process of negotiations here in Hong Kong has begun in earnest and the entire US delegation is working actively with the facilitators and with the other members of the WTO to make this a successful conference.

Ambassador Portman has already met with each of the three facilitators, Minister Kituyi, Minister Rohee and Minister Khan. We've also been reaching out to other delegations into groups, for example, we've already met with the Africa group, met with the group of C5 cotton-producing countries from Africa, and met with what is known as the GRULAC, which is the Latin America group - it is all of the countries of Latin America and the Caribbean.

At a meeting today, our deputy Schuchat met with the CARICOM countries. Ambassador Portman will be meeting later today with a group of 20. So, we've been reaching out to all the various groups across the board and on the whole range of negotiating subjects.

Our overall objective here in Hong Kong is really quite simple and that is to move beyond the status of the negotiations that has been described in the draft declaration and the annexes, which are being put before the ministers.

The major obstacle to moving in these key areas, however, is the lack of forward movement in agricultural market access. In all our meetings we are hearing this, we are hearing it repeatedly and we are of course, we also feel that way ourselves.

In fact, this frustration over the lack of movement in agricultural market access has gotten to the point that it has spawned a new group of countries. A group of ten countries that today put out a letter indicating their frustration and demonstrating that by explicitly linking movement in NAMA to movement in agriculture, and particularly market access.

One doesn't have to endorse their tactics to just recognize that this is a sign of how a great the frustration is at the lack of movement in this key area.

Now, while we share the view that our priority should be on movement in agricultural market access, we're not going to put down our tools. We certainly want to continue to work to build on the foundation that has been created thus far by the negotiations in Geneva. Let me just give you some examples of where we think that we can accomplish important things here in Hong Kong.

First of all, in agriculture, we think it should be possible to agree on an end date for the elimination of all forms of export subsidy. I want to be clear this is not just a question of asking one party to sign on to an end date for their own practices but there are practices in the United States that would fall under this same category.

As you look back at the framework of July of 2004, it's not just export subsidies in the classic European sense, but its other export subsidization practices. Export credits, for example, where we have indicated that we are prepared to discipline. There is the question of commercial displacement in the area of food aid to the extent that that exists. There is the question of disciplines on state trading enterprises, that is not something that certainly affects us, but it affects other countries.

So, setting an end date for the elimination of all of these practices would be something that would be an important step forward in agriculture, and it is something that most of the major countries would have to make a contribution to.

In NAMA, we would hope that we'd be able to agree on a structure at least for the tariff reductions, and also that there could be some direction on pursuing sectoral initiatives for tariff reduction or tariff elimination. It's a method that has been used in the past successfully in the WTO. We think that it should be part of the NAMA negotiating structure in this round as well.

In services, clearly we'd like to see a strengthening of the negotiations there. One of the things that could be accomplished here in Hong Kong would be a clearer endorsement of the practice of looking at various key sectors, and defining for a key sector what would be a package of strong commitments in market openings. So, that then when we negotiate through the existing method of the request offer, countries would say well in financial services, or in telecommunication services, or express delivery, we all ought to be seeking to have to take on certain commitments in, let's say, express delivery. That would help to raise the level of the quality of the services -- commitments that people are making. So there would be kind of a guideline there for everybody who is going to take commitments in express delivery.

Then there is development and there are several elements of additional development specific steps that we could take. I say additional elements, because anybody who looks at the situation of development in trade, knows perfectly well that the biggest contributions to development that trade negotiators can make are in the areas that I already identified – that is market access in agriculture, market access in manufactured goods trade, market access in services. But beyond that, there are some developments of specific elements that we're talking about here as part of the Hong Kong Ministerial that are very important that we should continue to work on.

One is access to medicines, TRIPS and health. This is something that was completed last week in Geneva. You'll recall that it started with a declaration by the Ministers at the Doha Ministerial when we launched this round and said that we needed to address and provide some clarification on the TRIPS of how to address the issue of access to medicines in situations of emergency and severe health need.

We know have completed that process of amending, or at least, putting forward for ratification an amendment to the TRIPS itself addressing the issue of countries that don't have the ability to manufacture key medicines themselves, and how they ensure consistent with amended TRIPS that their populations can have access to medicines at reasonable prices.

That is a very important commitment that countries made and that we followed through on just recently and will become part of this declaration here in the Hong Kong Ministerial.

Secondly, there is the market access element of dealing with developing countries or providing

developing countries with additional access, even beyond what we would be doing in NAMA in agriculture and services. And that is this issue of tariff-free, duty-free, quota-free treatment for the least developed countries. That is something that the United States is committed to doing with other countries and we're working on that as part of these negotiations here.

The United States, at least according to the World Bank and the IMF, is the most open economy among the developed economies to the end products of the least developed countries. If you look at the 2005 global monitoring report, and what they do is they rank countries by the degree of restrictiveness to the products of the least developed countries. The lower the number, the less restrictive the economy. And in 2005 the ratings were that the United States got a rating of 5 and the European Union got a rating of 13. So, as I said, the lower the number, the less restrictive that market is to the products of the least developed.

So we have, certainly among the developed countries, the most open market to the least developed countries. And moreover, the trends show that our market is becoming more open to them in the sense that we're taking a greater share of the products from the least developed than was the case 10 years ago, and the European Union is taking a smaller share of the imports from the least developed countries compared to 10 years ago. So just to give you the numbers, over the last 10 years, we moved from taking 20.5% of the least developed countries' exports to 22.7% of their exports. The European Union used to take 39.6% of their exports and now takes 29.2% of their exports. So the European Union does still take a higher share than we do but the trends are that we're taking a growing share; they're taking a declining share. That said, we're still ready to move further to open our market to the least developed to follow up on the commitment that was made in the Doha Ministerial itself.

One of the themes that is very, very clear here in Hong Kong is the even closer linkage or integration between the trade negotiations and the trade capacity building, the support for countries to take advantage of the openings that we negotiate.

I'm sure that most of you have already heard the announcement that Ambassador Portman made when he gave our national statement today in the Plenary and that is that the United States will be increasing, actually will be doubling, our trade capacity building, our aid for trade financial support, from the current level of $1.3 billion per year to the level of $2.7 billion per year in 2010 and the one thing I particularly want to emphasize here is this money is grant money. In other words, it is not a loan that has to be repaid and so this of course makes it even more valuable for countries as they use this money to finance changes in their economies, in their institutions, in their infrastructure so that as markets open, either in the developed countries or in the other developing countries, they're able to take advantage of it. They're able to get their goods to the markets that we are opening.

So those are the areas that we see as the areas most promising for work here in the remaining days at the Hong Kong Ministerial. Hope that other countries will be prepared to work along these lines but first and foremost it's most important that we see some forward movement on market access in agriculture. I will stop there and be happy to respond to any questions that people have.

QUESTION: Daniel Cruz, Bureau of National Affairs. Can you explain what is being done to resolve the differences on the duty-free quota-free issue for LDC's? Our understanding is both the U.S. and Japan are opposing full product coverage, that they're opposing the idea of making this permanent and that the U.S. is somehow linking this to the single undertaking. If you could clarify on that?

AMBASSADOR ALLGEIER: Well, first of all I don't think that there's any difference among the countries, that what we're aiming at is to provide duty-free quota-free treatment for products originating in the least developed countries and that treatment would last as long as a country is in that category of least developed countries. We're working with countries on a number of fronts to make this as meaningful as possible. There obviously is the issue of product coverage.

Now even those who say well they're already providing this treatment have provisions within their programs for safeguards, for example, if there is a surge of imports from a least developed. For example, if you look in the "everything but arms" approach of the European Union they do have a safeguard provision and so everybody has to have some way of dealing with very sensitive products from these countries.

One thing about least developed countries is that there very well may be, and there are in certain countries, highly competitive operations. If you look at some of the least developed countries they are among the world's largest suppliers of textiles and apparel. So, one has to take that into account, both for sensitivity in one's economy but also then what is the impact on other countries. For example, if you have a country that is a very competitive supplier of a product and it is sitting right next door to a country that is basically at the same level of income and the first country suddenly gets duty-free treatment and it's neighbor does not get duty-free treatment, well what do you think is going to happen? There's a strong incentive for investment to move across the border to that county that's getting the preference from the country that doesn't have it. So one has to take into account those sorts of situations as well and that's what we're working through with not only the other preference-giving countries but also with the least developed countries, and we are hopeful that we will work out something by the end of this conference that will be a significant step forward in providing this kind of treatment for the least developed countries.

QUESTION: It's regarding cotton. You have been meeting with the countries from Africa, what is exactly being discussed, what is on the table at this moment? I know, at least we heard from your Secretary of Agriculture, that this week in the U.S. the Congress might approve some changes. What does that mean for the meeting here? The Africans say that that's not enough basically. Where are we in this?

AMBASSADOR ALLGEIER: Well, where we are is we are in a very intensive dialogue with the countries for whom cotton is so important in West Africa and the dialogue is across the whole range of issues that are plaguing this particular commodity in these countries. Which is to say, we're talking about all of the impediments that they are facing with this commodity. For example, farmers in West Africa are getting about 50% of the world price whereas the farmers in other countries are getting about 80% of the world price and so obviously there there is a problem in terms of how changes in world prices get transmitted back to the farmers. Price increases don't get transmitted as effectively to the farmers in West Africa as they do in the rest of the world.

The other thing is that the yields in Africa are the lowest in the world. They're certainly about half of the average and I think they're one third of the average yield in the United States. Production inputs cost about twice as much for the African farmer, raiser of cotton, producer of cotton, as those inputs cost others, and there's no denying it. Then there's the trade environment in which they're currently competing, including subsidies. So all of these factors are things that are being discussed and we have people from our private sector, our National Cotton Council, here that have been working with these countries on productivity, on distribution, on quality, all of these things.

At the same time we are working with them on the trade side. I mentioned subsidies. We, our Congress more accurately, is in the process of eliminating a program that we have called Step 2, which provides funding for people to buy U.S. cotton. That is a major subsidy program that is being dismantled and so we are discussing that, explaining that to the producing countries in West Africa. The other thing of course is that our proposal is to sharply cut domestic subsidies and ultimately eliminate them. Similarly on market access we have a very bold proposal on that in agriculture that would affect cotton. Now, we are committed to the July 2004 framework, which says about cotton, that we should address cotton ambitiously, expeditiously and specifically, within the agricultural negotiations and we are committed to do that. The problem is that the agricultural negotiations are held up by what I identified earlier, is the lack of movement on agricultural market access. So frankly the single greatest step that this conference could take on behalf of cotton would be to get the agricultural negotiations moving by getting the market access part of agricultural negotiations moving.

QUESTION: Regarding NAMA items, what are the sectors that you are ready to work on during this conference?

AMBASSADOR ALLGEIER: In NAMA?

QUESTION: Yes.

AMBASSADOR ALLGEIER: Well, we're open to sectors that are of interest to both developed and developing countries. I think the sectors that are of greatest interest to the United States, or among the greatest interests, are medical equipment, electronics, chemicals, forest and paper products. There's a whole range of sectors that we're interested in.

But we're also ready to work with others. I think that there are some of the Asian countries that are interested in gems and jewelry. That could be a promising sector. There are a number of other sectors that we would be amenable to working on.

QUESTION: Esther Leung, Radio Television Hong Kong.

A follow-up question on the duty free/quota free question. Is the United States committed to giving this so-called early harvest, meaning once it's agreed, say at the end of this conference, then this duty free/quota free program will be effective, say early next year, or are you insisting that it should be part of the single undertaking, meaning it will be implemented only after the Doha round is completed?

AMBASSADOR ALLGEIER: Our view is that there should be a decision at this conference to provide the duty free/quota free treatment to products originating from the least developed countries, but that that would necessarily be actually delivered, if you want to use that term, as part of the overall package of the Doha agreement.

There are a couple of reasons for that.

One, in the case of the United States, the only way we can provide this treatment is through legislation. And in order to do that, we feel that the way to do it is as part of a larger package. And we've always been very clear that that is the implementation method and timetable that we contemplate, and I think other countries also contemplate that.

Also, there are a number of legal issues that need to be ironed out. These are not necessarily legal issues that the United States has raised, some of the other countries have raised, as to what would be the legal anchor for this within the WTO system. There are a number of ways that one could go; either through the enabling clause, or through a waiver, or through some other previous decisions of the WTO.

So those things need to be ironed out. I don't think they are the type of thing that could be ironed out easily in a ministerial. So we certainly see a ministerial commitment to that, and then the details being worked out in time to implement it at the time of the overall package.

QUESTION: Barry Wilson from the Western Producer newspaper in Canada.

On the export competition pillar, when you talk about disciplines on STEs, could you contemplate the possibility of an STE with an export monopoly like the Canadian Wheat Board, or does discipline imply getting rid the monopoly? Is it possible, in other words, to have a non-trade-disporting export monopoly?

AMBASSADOR ALLGEIER: Well, I don't know whether there is. I mean we would have to see what sort of proposals are put forward. Basically what we want to ensure is that there is not trade distortion resulting from such an entity. So, that's part of the negotiation.

QUESTION: Manufacturers Alliance. My question is about China and the NAMA negotiations, which are of prime interest to the US manufacturing sector; and in particular, the all-important coefficients in the Swiss formula. The US has long stated that China should not have special differential treatment as a developing country. Is the US position that China should adopt the coefficients in the developed country part of the formula, rather than the developing country side?

AMBASSADOR ALLGEIER: We recognize that China took on very, very significant obligations when it joined the WTO, and is still implementing those, although we're getting to the end of the implementation period.

That said, we believe that China needs to make an appropriate contribution to trade liberalization here. At this point, we do not have an agreement yet on two coefficients, although we think that that's probably the way to go. So we would have to assess that situation in the context of what is the structure of the negotiations on non-agricultural market access. So that is something that still has to be negotiated.

QUESTION: Monica from Business Standard, India.

My question is again on NAMA. About two days ago our Commerce and Industry Minister Mr. Kamal Nath had said that 'What I have proposed to the G4 is let's put aside any kind of coefficient. Let's just talk straight and find out how much each of you is willing to offer in terms of percentages, and India would in turn be willing to offer two-thirds of whatever percentage cut the US or the EU is willing to offer.' So what's your take on that?

AMBASSADOR ALLGEIER: Well, first of all, it's a bit more complicated than a simple percentage cut. One of the things that is in the mandate from the Doha ministerial, is that we would pay special attention to cutting high tariffs, tariff peaks, and get rid of tariff escalation.

And that is exactly why we support the Swiss formula. And so our view is that we want to see real, new business opportunities created. And that means change in the situation that faces business people now, whether it's trying to sell to the United States or trying to sell to India. And our feeling is that the best way to look at that is to look at the impact of various coefficients of the Swiss formula. So we think that you get a better picture of what each side is contributing if you do it that way, rather than if you pick some arbitrary percentage cut, and work that way.

I mean there's a lot of dissatisfaction with the approach that was taken in the Uruguay round. And that was with that sort of average percentage cut. So we think that the better way is to look at this Swiss formula.

And then as to what the relationship should be between the cuts that are made by developed countries and developing countries, there one has to look again at the impact of both the tariff cuts, whatever that formula is, and then the flexibility that is allowed to developing countries under Paragraph 8, for example, of the July Framework.

That's a rather complicated process, to see how those cuts hit in various industries and products of interest, whether it's the US that's assessing it or anybody else. So it's not easy to just say 'Well, we'll just take two-thirds of what we cut.'

QUESTION: It becomes clear that almost everybody here agrees that agriculture is the core of the negotiation, everybody but Europe. And since Mr. Mandelson put it clearly that they won't make any new offer here in Hong Kong about this issue, are you already talking about the next, the Hong Kong II, how will you find a way of solving this deadlock? Is there any other suggestion at the table, besides the Brazilian proposal of a meeting of heads of state, to make, let's say, Europe change its mandate and make a really useful offer?

AMBASSADOR ALLGEIER: We certainly have read the same statements that you described. Our hope, of course, is that when the EU continues to interact with the countries here and realizes how strongly people feel about the need for improvement in their proposal on market access, that there will be some change.

If that is not the case, obviously then we think that it will be important for them to make those changes in the very near future, if we are going to be able to complete this round by the end of 2006, which is what everybody's objective has been up until now, and I expect will continue to be. Certainly it will remain our objective.

So the EU is going to have to decide for itself whether and when it's going to be in position to modify its position on agricultural market access. In the meantime, as I said, we're not going to just sit back on our hands. We're going to push, in the areas that I mentioned and in other areas, to get as much progress as possible in Hong Kong. I think nobody really believes that we're going to complete everything that we had hoped in Hong Kong.

So that's going to require some kind of a process beyond Hong Kong, but I think it is most important that we concentrate on these next few days in moving things as far as possible and not start prematurely to be speculating on how we are going to deal with things after Hong Kong. We need to be giving thought to that and be ready to define that by the time we leave Hong Kong, but we should not be distracted by that and end up doing even less in Hong Kong than we are capable of.

QUESTION: I had just a very quick question on the NAMA letter that the lady from India asked about. Did I correctly understand you, what is your position on the demand that the flexibility of Paragraph 8 be endorsed as a stand-alone item that is not linked to the outcome of the formula discussions?

AMBASSADOR ALLGEIER: Well, if I recall, from 7^th grade algebra, when you have simultaneous equations, you have to solve them simultaneously and solve the variables simultaneously. And so that is the situation that we are in right now with respect to NAMA. It was very clear if you look at the framework of July, there are brackets around those numbers and that tells you something. That was not agreed upon. And the reason it wasn't agreed upon is because it has a relationship, whether one likes it or not, with the other elements of the formula. Just as the different variables in agriculture do. So, we accept that the developing countries will have access to that kind of flexibility in Paragraph 8, but the precise value of that has yet to be determined, negotiated and negotiated, as I said, simultaneously with the other variables.

QUESTION: Wait my real question was. My real question was on services, is the ASEAN

AMBASSADOR ALLGEIER: Well then you should have asked you real question.

QUESTION: No that was just clarifying question. How acceptable is this demand by the ASEAN's that the services text be radically be re-written and the modal and sectoral objectives be removed?

AMBASSADOR ALLGEIER: We think that would be a major, major mistake. We think that the services text itself, it isn't everything we wanted we would have…we would liked to have had a much more ambitious services text, or the annex that Fernando De Matteo did.

And so to step back from that we think would be a major mistake. I think we can do two more questions.

QUESTION: Ambassador Allgeier, my name is Ravi Kant, I represent Washington Trade Daily.

AMBASSADOR ALLGEIER: Just remember we said there were two more questions Ravi,

which means you get one. You don't your multiple questions.

QUESTION: I'll just ask one question, which has two components.

AMBASSADOR ALLGEIER: No, no, no. You get one question Ravi., for once we are going to hold you to one.

QUESTION: Ambassador Allgeier,

AMBASSADOR ALLGEIER: No it's eighth grad ethics. Go ahead Ravi.

QUESTION: Sorry, You know Ambassador Allgeier, today hearing you that you are suddenly stepping up the ante on agriculture. For example, Ambassador Portman, Pascal Lamy, everybody is talking about a step forward at Hong Kong and that is that they invariably mean an end date to the elimination of export subsidies, but today what I am hearing from you is something totally new. Namely, that we need to have a real push in the market access pillar where there is no agreement on the bands, no agreement on the thresholds, no agreement among the formula proposals that have been put on the table. Are you serious that you really want to push market access at this point of time when there is no, no agreement at all on the end date on export subsidies? And just a related question in services,

AMBASSADOR ALLGEIER: No, no, it is not related to services. Services is not related to agriculture.

QUESTION: On services you know Ambassador, Ambassador Portman (sic) it is very interesting to hear that the level of ambition of the US is so high, but you know the World Bank, The International Monetary Fund, all of them, keep saying that the real developmental gains in the services trade liberalization is in a mode called Mode 4 and where we hear total silence from the US. What exactly is the US up to on this?

AMBASSADOR ALLGEIER: All right, first of all I really I don't think, Ravi, that it is fair to characterize my comments about agricultural market access as something new from the United States. This has been a clear theme, not just of the United States, but other countries. I am just reporting what other countries say. Right? And since we put forward our proposal on domestic support, back on October the 10^th, and so we and others have been saying very clearly for a long time that the next step, the step that's necessary to unblock the negotiations at this point, is market access advances by the European Union, to bring that part of the negotiations in agriculture up to a negotiating shape comparable to the others. Now at the same time, we think we should move ahead on this question of the end date for export subsidies and as I said before it's all forms of export subsidies. On the quote: "Related question of services," that is a very important area for us and I don't think that there is any secret that Mode 4 is a very difficult one for us, even though obviously, there are many, many professionals who are able to move to the United States and perform their services in the United States. I know that there are certain areas of services providers that people would like to see us open up further. Obviously we have to work with our congress to see what we are able to offer in negotiations and this is an area in which there is very strong congressional feeling. And we have to deal with that in the course of the negotiations. So it remains to be seen what we can do in that area and you will just have to tune in at a later date Ravi to see exactly what that is. So one last question.

QUESTION: Thank you. Larry Fan of China Business News. Can you comment on the G10, of which Japan is a member, the G10's proposal on agricultural tariffs and market access? Thank you.

AMBASSADOR ALLGEIER: We think it is inadequate.

QUESTION: Can you be more specific?

AMBASSADOR ALLGEIER: Yes, it doesn't cut agricultural tariffs nearly deeply enough. And it provides much too much flexibility in terms of excluding products from full formula cuts and it also does not include anything on tariff caps.

QUESTION: Do you think that is a fair position of not having tariff caps?

AMBASSADOR ALLGEIER: I'm sorry do I think it's a fair?

QUESTION: Do you think it is a fair position on the part of the Japanese insisting not to have a tariff cap?

AMBASSADOR ALLGEIER: Well, I don't know if I'd get into whether it's a question of fairness. I think it's inadequate in terms of providing the kind of opportunities for market access that we and others are seeking in the agricultural area.

Thank you very much.