AT the ongoing World Trade Organisation (WTO) negotiations, the stakes are high for all those involved. WTO members have expressed a strong commitment towards both the Doha Development Round (DDR) that was launched in 2001 and the Hong Kong (HK) Ministerial Conference that was initiated in 2005. Unfortunately, however, despite their efforts, it is evident that a lot more time will be required in order to reach conclusive decisions and agreements.

When negotiations were on the verge of collapse in 2005, the Hong Kong committee of the WTO decided to establish modalities. These modalities were intended to phase out all forms of agricultural export subsidies, make cuts on tariffs placed on agricultural products, reduce tradedistorting domestic support, and make industrial products more accessible.

Finally, the committee aimed to ensure that the Regional Trade Agreement (RTA) Transparency Mechanism reached an agreement by April 20, 2006. That deadline was not met. The next deadline for submitting a comprehensive draft of a schedule based on these modalities is July 31. Regrettably, the formal and informal parlays that have been taking place around the world along with a series of conferences in Geneva have thus far amounted to nothing but "futile efforts."

There are three identifiable areas of divergence of opinion amongst the members that are preventing negotiations from advancing smoothly. Firstly, there is the question of exactly how much of a tariff reduction is necessary for agricultural products. In this case, the European Union (EU) should be the main respondent, as they have been imposing high tariffs along with innumerable non-tariff barriers. The EU has offered to eliminate export subsidies completely by 2013, in accordance with the HK Declaration.

According to Peter Mandelson, the EU Trade Commissioner, the EU proposes to cut 60% of all tariffs in the highest bracket and will maintain 8% of its tariff lines on sensitive products. They aim to fulfill this goal by 2010. However, most other members, such as the G-20 and the Cairns Group including Australia and New Zealand, insist that they begin as early as 2008 and that they complete 70% of the project by 2010.

Several WTO members also have certain reservations concern-

ing the proposal itself. They have realized that as per the EU proposal, the EU will reduce agriculture tariffs by an average of 38-39% with 142 sensitive product tariff lines. This would be similar to awarding dutyfree and quota-free market access by the WTO members to 97% of products originating from LDCs. The EU, the US, Japan, and Canada have more than 10,000 tariff lines. Out of these 3%, i.e., more than 300 tariff lines will remain outside the so-called gracious market access facility for poor countries.

Bangladesh, the biggest exporter among LDCs, has been exporting products and services covering 200-230 tariff lines. Thus the developed and stronger developing countries could easily avoid providing duty-free and quota-free entry to any product of Bangladesh by keeping 300 items of its interest away from the facility.

The other 49 LDCs, of which 31 are WTO members, could view these decisions as even more useless, since most of them have products covering less than 100 export tariff lines. In agriculture also, Brazil, China, India, South Africa and other promising exporters of agro-products do not have exporting capacity that exceeds 100 tariff lines.

Therefore, if they agreed with the EU tariff-cut proposal, it would not bring them any benefit, as the EU could maintain its current high tariffs on 142 tariff lines. The only achievement that would be made through present negotiations is that members would agree to cut tariffs by a general reduction formula that would replace the average tariff cuts mandated by the Uruguay Round Agreement in 1994. This shift will help to cut high tariffs by a larger margin and lower tariffs by lesser margins.

Secondly, a magnitude of agricultural subsidies reduction is needed to establish a level playing field. The developed and more developing countries have been maintaining both export and domestic subsidies, which severely distort fair trade. US farmers and exporters are being provided an incentive of one-dollar cash bonuses for every dollar worth of agricultural production. Members of WTO from developing nations urged the members from more developed nations to phase out all forms of export subsidies and to carry out a substantial reduction in trade-distorting domestic support, which is estimated to amount to one billion dollars every day across the developed world.

In HK, the WTO members agreed in Final Bound Total Aggregate

Measurement of Support that there would be three bands for reductions on domestic support. There would also be trade-distorting domestic support with higher linear cuts in higher bands. In both cases, the member with the highest level of permitted support will be in the top band. The other two members with the second and third highest levels of support will be in the middle band and all other members, including all members of developing countries, will be in the bottom band. Since the US is in the top band, it will have to cut subsidies more. However, the US has proposed to cut domestic and export subsidies on an unquantified basis sometime in the future. Australia, Canada, Japan, and New Zealand also did not propose sufficient cuts, which aggravated the EU.

Thirdly, in order to increase market access of industrial goods, larger cuts in tariffs on industrial products are required. In this case, industrial economies including the US, EU, and Japan want emerging developing countries -- Brazil, China, India, and South Africa -- to seriously consider submitting better offers. The Non-Agricultural

Market Access (NAMA) issue has now become a bargaining factor.

The agricultural negotiations were initiated in early 2000 under Article 20 of the Agreement on Agriculture (AoA) to cut import tariffs and reduce domestic and export subsidies. However, it was not reasonable to put counter pressure on the developing world to reduce their industrial tariff, which is already 26% on average. The developed countries clearly recognise the developing world's weak bargaining position regarding this agriculture issue, so their strategy works well so far.

Unfortunately for the developing nations, the developed world has been disregarding the Doha Agreement on NAMA, which states: "The NAMA negotiation shall take fully into account the special needs and interests of developing and least-developed country participants including through less than full reciprocity in reduction commitments." The EU and Japan proposed to NAMA that developed countries could impose a tariff as high as 10% and developing countries a tariff of 15%, including flexibilities.

On the other hand, developing countries proposed for a tariff of 5% for developed countries and a tariff of 15% for developing nations, with a 10% flexibility to protect some sensitive sectors from industrial tariff cuts. The EU disagreed with this offer, arguing that it would be

meaningless.

For example, Brazil has a total of 9,000 tariff lines. If it excludes 10% of these lines from the proposed tariff reduction, 900 lines would be removed. The entire sector of motor vehicles and their parts, IT products, steel products, and footwear could be included this category.

The EU insisted that there must be a comparable interest in both agricultural and industrial products, as mentioned in the HK Declaration: "We instruct our negotiators to ensure that there is a comparably high level of ambition in market access for Agriculture and NAMA. This ambition is to be achieved in a balanced and proportionate manner consistent with the principle of special and differential treatment."

Taking advantage of the principle of comparability, developing countries want flexibility on 10% of tariff lines in industrial products, while the EU wants flexibility on 8% of tariff lines in agricultural products.

Aside from these three major hurdles, there are some other issues where divergence exists. In RTA Transparency Mechanism, the WTO is trying to improve the relationship between the RTAs and the WTO.

However, divergence exists in two areas: one regarding the bodies that apply the transparency mechanism, and the other regarding the scope of the transparency mechanism.

In the area of Special and Differential Treatment, no effort has been taken so far to implement the decision taken in HK for providing duty-free and quota-free market access to 97% of products originating from LDCs. In the Trade Facilitation area, it is estimated that halving the cost of bureaucratic trade procedures could result in saving around 300 billion dollars a year.

Unfortunately, the developed members are not yet up to speed in their technical assistance program for capacity-building and customs procedure improvement of the developing and least developed countries.

WTO authorities have been trying to determine why they failed in maintaining the timelines. They say the Round is more difficult than expected, because it is so large and complex.

Maybe they are right, but it is also true that WTO members have not yet achieved their goals, which include enhancing effective trade-related technical assistance and providing aid for trade to LDCs on a priority basis to maximize the benefits of integrating their economies into the multilateral trading system. The trading world is expecting an early resolution of this present impasse, otherwise all hopes of developed, developing, and least developed countries encompassing the WTO will be jeopardised.

Bijan Lal Dev is a trade analyst.