Cancun Is Halfway Point for Doha Agenda

Posted September 3, 2003 at 4:24pm

The European counterpart to U.S. Trade Representative Robert Zoellick, Pascal Lamy was confirmed by the European Parliament in September 1999 as the EU’s trade commissioner.

From 1984 to 1994 he worked in Brussels as chief of staff to Commission President Jacques Delors, representing the president at the Group of Seven meetings.

He answered questions from Roll Call regarding the EU’s position on the Cancun meeting, the agriculture dispute with the United States and genetically modified foods.

ROLL CALL: What is likely to be achieved at the World Trade Organization ministerial meeting in Cancun? Can there be any breakthroughs, or will the discussion be confined to “modalities”?

EUROPEAN UNION TRADE COMMISSIONER PASCAL LAMY: The Cancun Ministerial Conference is the halfway point in the work on the Doha Development Agenda. While, of course, we have to take stock, we more importantly need to add energy to the whole negotiation process, so as to make sure that the round is on target for completion at the end of 2004, as scheduled.

After a busy summer in Geneva and elsewhere, in particular where we have worked hard with the Americans — as requested by other WTO members, progress has been made above all on agriculture and industrial tariffs. We now have a draft ministerial text on the table, which will be the basis for discussions at Cancun where ministers have to make the necessary decisions for the further course of the negotiations. That at least is good — the text is clear and the decisions for ministers are evident. But, that said, it is difficult for many of us in a number of areas. As such it reflects the largely predictable differences between WTO members as to the content of decisions in Cancun. The text is insufficiently balanced in some areas, notably agriculture, and insufficiently ambitious in others, I think of industrial tariffs or environment. We need the burdens of this tough process to be shared more fairly.

The discussions at Cancun will be about setting the framework for the next phase of negotiations on the market access side as well as on the rules side of the DDA. Agriculture and industrial market access are no doubt among the hottest issues. But a decision will also be needed on the modalities of the negotiations on investment, competition, transparency in government procurement and trade facilitation. Decisions are also needed on geographical indications and on environment. And across the whole range of these issues, Cancun will have to integrate the development aspirations of the round. Cancun must take account of the different needs and stages of development of WTO members and offer flexibility accordingly in order to make trade work for all. By settling the issue of TRIPS and health possibly even before Cancun we would give a strong signal to this end.

Therefore, in order to ensure the much-needed breakthroughs at Cancun, we need WTO members, both developed and developing countries, to put all their efforts into the common goal, which is to ensure increased market opening within the context of strengthened and new multilaterally agreed rules. Clearly, given the amount of work in front of us, ministers at Cancun will not have time to enjoy the beaches!

ROLL CALL: Halfway through the Doha round, skepticism abounds that any major world trade liberalization agreement can be achieved by the end of 2004. Is there any reason for optimism?

LAMY: Obviously, the Doha agenda is huge and ambitious: 146 countries to negotiate over 20 topics, with a strong focus on development. The successful outcome of this program of negotiations is the EU’s No. 1 trade priority, and we continue to work hard to achieve this goal. We also remain convinced that the conclusion of the round by the agreed deadline remains fully within our reach if WTO members, in Cancun, are ready to step up to the plate. But don’t underestimate what has been achieved so far: compared to where we were at the same point in the Uruguay round, progress in the Doha Development Agenda has been positively racy.

ROLL CALL: Agriculture is a major sticking point on the road to agreement. The EU has expressed willingness to cut domestic subsidies from $70 billion to $28 billion a year, but this is still far above the U.S. level of $19 billion, which the U.S. is willing cut to $10 billion. Can’t Europe do better?

LAMY: For over 10 years now, Europe has continuously moved in the reforming direction. This is also the aim of the recent reform of our Common Agricultural Policy agreed to in June: to de-couple support from production, further reducing the trade distorting aspect of our support for agriculture. The difference, to our mind, is that the U.S. has moved in the opposite direction — increasing subsidies in the farm bill. The fact is that support per farmer, and as a percentage of GNP, is broadly comparable in the EU and the U.S. And with Europe’s enlargement to 25 member states next year, the amount of support per European farmer will dramatically decline. Enlargement will double our number of farmers and increase our agricultural area by 50 percent, while the amount of subsidies will remain the same as they are today, with just 15 member states.

ROLL CALL: The United States has proposed elimination of agricultural export subsidies, while the EU speaks of “partial elimination.” What does “partial elimination” mean? As of now, EU subsidies amount to more than $2 billion a year compared to $15 million for the United States. Shouldn’t the EU cut these subsidies drastically?

LAMY: The EU and the U.S. agreed in August a framework for addressing the agricultural questions in the WTO. On export support the key is parallelism. Our moves to reduce export subsidies and even eliminate them for products of interest for developing countries must be matched by parallel efforts by the U.S. in its own forms of export support (export credits and food aid). This delivers on the commitment adopted in Doha to address all forms of export support, whether those used by the U.S. or by other big agricultural players such as Australia or Canada in the form of state trading enterprises. This is what burden sharing is really about.

ROLL CALL: The U.S. wants to cut tariffs on agricultural products drastically. What is the EU position on this?

LAMY: The EU is today the world’s largest importer of food products, No. 1 importer of food products from developing countries, importing more than the U.S., Australia, Japan and Canada together and also the world lead importer of agricultural products from the world’s poorest countries. We already promised, back in February, to reduce tariffs by an average of 36 percent. But we have been ready to listen to our trading partners, to tackle the problem in different ways. Which is why, under the joint EU-U.S. approach of August, we have agreed to reduce tariffs on food products according to a blend of formulas while at the same time preserving the elements of flexibility and recognizing the existence of sensitive products, an element of great importance for developing countries. In the Uruguay round, the EU and U.S. pulled off a famous deal known as Blair House. Perhaps our blending deal should be called the Maxwell House project!

ROLL CALL: How can Europe justify a five-year moratorium on imports of genetically modified agricultural products when there is no scientific evidence that genetically modified products are harmful and much evidence that they are beneficial, reducing the need for pesticides? Also, aren’t proposed GM labeling requirements so onerous as to constitute a trade barrier?

LAMY: You ask a lot of different questions in one there, so excuse me if I am rather lengthy in response.

First, let’s get the facts right: Contrary to many other countries, there is no ban on the import of GM products in the EU. A large number of GM products have been authorized for importation and cultivation in the EU since the early ’90s. Soybeans are the most salient example; every year, the EU imports several million tons of GM soybean, among others from the U.S.

The EU biotech legislation provides for a case-by-case authorization regime based on scientific assessment. Many other countries have adopted a similar regime; even the U.S. looks at GM crops on a case-by-case basis. The recently adopted guidelines of the UN Codex Alimentarius acknowledge that for GM food a pre-market assessment should be performed on a case-by-case basis. The EU legislation is fully in line with this principle.

The EU agrees that biotechnology is not inherently unsafe, but concerns about it have to be addressed seriously and in a responsible manner. The U.S. had experiences with the GM maize Starlink some years ago. This is something we do not want to repeat in the EU.

Reference is often made to a so-called “moratorium” in the EU on approval of new GM varieties. This relates to the fact that since October 1998, no new GMOs have been authorized for release into the environment due to the fact that the EU’s regulatory regime was incomplete. This new regulatory framework was adopted in March 2001 and entered into force in October 2002 and has recently been complemented with the adoption of rules on traceability and labeling.

The entry into force of these improved rules on approval procedures has enabled biotech companies to submit revised applications for approval of their innovative products. Recently two cottonseed oils for food use have been placed on the market in the EU following authorization. A number of new applications for marketing of GMOs are at an advanced stage of examination and may therefore be granted over the next months in line with EU legislation.

As to the environmental benefits of GM crops, this is a controversial subject. Currently, 75 percent of the GM crops’ acreage consists of herbicide tolerant crops. The cultivation of these crops results in a shift of herbicide use rather than in a reduction of herbicide consumption. Whether this is good for the environment is a question for experts; but this is certainly debatable, and many people actually see GM crops as a means to increase herbicide consumption. In addition, so far, commercially available GM crops have little or no direct benefits for consumers. Hence the rejection of GM food by many consumers, and not only European consumers, who do not see any advantage in GM food while remaining wary of potential risks.

Regarding labeling and traceability, in the EU, just as in the U.S., the consumer’s right to know is a powerful concept. Labeling is necessary to ensure an informed choice. Our requirements are by no means a trade barrier. First of all, they equally apply to domestic products and to imported products. In fact, these new rules will increase public trust and therefore ease the marketing and trade of biotech products. Indeed, even as the EU rate of approvals picks up, it is unlikely that we reach a system of synchronous approvals between the U.S. and the EU in a near future. Thus, traceability will be a facilitator of trade rather than a hindrance. The U.S. has come a long way to acknowledge the crucial importance of traceability in its recent efforts to combat bioterrorism.

ROLL CALL: The EU is seeking to restrict use of such geographic indicators as “Feta” and “Parmesan” by foreign food producers, yet it refuses to honor the label “Idaho potatoes.” How can this be justified?

LAMY: We believe that geographical indications are important to reward the quality products of our farmers, and there is large number of developing countries that share this view. Geographical indications such as parma ham, darjeeling tea, jasmine rice or Antigua coffee are, in a way, the trademark of the poor.

As to “Idaho potatoes,” the EU has never refused to honor that label. What’s more, producers of “Idaho potatoes” have never sought such protection in the EU. “Idaho potatoes” is a registered certification mark in the U.S., as it is the case for “Florida Oranges” and “Washington Apples,” which are also U.S. certification marks and not geographical indications.

U.S. producers of “Florida Oranges,” for example, have applied for and registered in the EU. Likewise, the Washington State Apple Commission has registered its U.S. certification mark also as a EU mark. More examples of EU certification marks that include U.S. geographical names relate to Napa Valley. So what is sauce for the goose should also be sauce for the gander. And for Idaho potatoes …

ROLL CALL: On the nonagricultural front, the U.S. has proposed moving toward elimination of tariffs on manufactured goods by 2015. Is this realistic?

LAMY: We understand the U.S.’s ambition in this area. But in a sense the EU’s own “more realistic” stance has been vindicated, in that developing countries would simply not be ready to live with such a radical stance. Furthermore, for some countries such as small islands in the Pacific or in the Caribbean, the issue of revenue is not negligible since over 40 percent of their resource for government comes from import duties.

ROLL CALL: What will it take to convince the developing world that reducing tariffs will encourage “South-South” trade and expand markets?

LAMY: Facts speak louder than words: Look at Chile or China. Even Foreign Direct Investment flocks in when there is a reasonably low level of duties since you can certainly count on producing products with inputs you never had the possibility to use before. Why are Morocco and Egypt coming on board for the Information Technology Agreement, slashing tariffs on high-tech products? They have understood that zero duties in these areas are the best recipe to attract investment. That’s why both the EU and U.S. are looking for the Doha Development Agenda to deliver just that: development — in this case, by further trade-opening between developing countries (South-South trade) as well as North-South trade expansion.