December 14, 2005, Hong Kong, Press Release

Facing mounting pressure from developing countries led by G-20, G-33 and the African Group on farm trade liberalisation, developed countries are making all out efforts to rope in Least Developed Countries, LDCs, who constitutes roughly one-fourth of the WTO membership. While the European Union, EU, is using every opportunity to highlight duty and quota free market access, the United States, US, and Japan are promising to increase their aid under “Aid for Trade”.

“Duty free, quota free access to LDCs should be for all their goods and not be reversible,” the EU Trade Commissioner, Peter Mandelson, said and refused to make any commitment on India’s demand of a development package for developing countries. While the US Trade Representative, Robert Portman, said the US would offer new development assistance to add momentum to the Doha Development Agenda, DDA. The US pledged to double its annual aid-for-trade funding from $1.3 billion in 2005 to $2.7 billion in 2010, assuming Congress supports this commitment. The US move follows EU development assistance offers earlier in the week boosting trade assistance to EUR1 billion annually, and Mandelson said Europe plans to double that by 2010. Japan too pledged to provide US$10bn in the next three years to aid LDCs development.

However, the poor countries have not shown much enthusiasm on the developed countries’ offers of more aid-for-trade. A press release issued by the African Group, which comprises of many African LDCs stressed that the Group attaches high priority to the current round of multilateral trade negotiations. The overwhelming sentiment expressed by the African Group was that members came to Hong Kong with the hope to be able to conclude the round by 2006. For the African Group too, removing distortions in agriculture trade market is an important, especially in cotton export subsidies.

Meanwhile, in agriculture negotiations, the developing countries are stepping up pressure on EU to agree on an end date for elimination of export subsidies. The EU is trying to take shelter under the garb of other elements of export competition pillar viz., food aid, export credit and state trading enterprises. This has led to tension between the two trading giants – the US and the EU. The rift between the two burst into the open, when the Mandelson called for radical reform to the US system of food aid for developing nations. “Washington sends aid donations in the form of domestic corn, wheat and other commodities, but cash is quicker and less likely to affect the delicate balance of local trade. Food aid for poor countries and emergency relief can be a tool to advance development and for humanitarian relief but the US program is designed to give support to US agricultural producers,” Mandelson told a news conference.

In response to Mandelson’s scathing attack on food aid programme Portman hit back by saying he did not understand the EU “obsession” with food aid. A press release by the US Trade Representative, USTR, claims that the US food aid programme is not trade distorting. “The US food aid has recently averaged less than 2 percent of US agricultural exports by value and less than 3 percent by volume. Food aid from all sources accounts for less than 1 percent of world agricultural trade. Forty-five percent of all food aid is delivered to countries that are not members of the WTO. More than 60 percent of this food aid is delivered to countries classified as LDC by the United Nations,” the press release added. The USTR spokesperson said Washington had put forward a proposal to tighten food aid to ensure it did not skew local commerce.

On non-agricultural market access (NAMA), after realizing the EU’s attempt to shift focus away from agriculture, where it is facing the heat from all quarters, India along with seven other developing countries formed a coalition to ensure that the principle of “less than full reciprocity,” as mandated in the Doha Agenda, must be fully respected. This is a pre-emptive step, which developing countries have taken to block any ploy by the EU to seek trade-offs in NAMA in lieu of reduction in farm subsidies. The Group, which is co-chaired by India and South Africa, includes Argentina, Brazil, Indonesia, Namibia, Venezuela and Egypt.

In a nutshell, negotiations are moving very slowly. So far the negotiations are focusing on three issues, namely, agriculture, NAMA and development. Clearly the expectations are not very high and now the members aiming to have something more on what they agreed in the “July Package”.