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AMBASSADOR SUSAN SCHWAB: We are very pleased to be here. Cairns is a long way to go for us. We're here because it was important for us to be here to congratulate the Cairns Group on its 20th anniversary and thank Mark Vaile and Mr. Howard for convening this group.
And this is such a critical point in terms of the potential for a Doha Round agreement and for our desire to see the Doha Round come together, for us to help resuscitate the patient as it were.
It was worth coming here and I think it was worth every mile that we flew in those little metal tubes at 38,000 feet. I'm going to be very, very brief in terms of what I have to say, and what I have to say is very similar to what I was able to share with colleagues from Cairns Group today.
In the last three-plus months I've had the opportunity to visit multiple countries. We've done close to 35 bilaterals by this point, ministerials. I had the opportunity in the last three weeks alone to visit with ministers at the ASEAN Ministers Meeting in Kuala Lumpur with the G20 group of ministers in Rio last week, last weekend and now here with the Cairns Group.
And the Cairns Group is known for being a group of developed and developing countries that is pro-trade, that believes in trade, believes in open markets, and has been in the past and at present a real influence in terms of multilateral trade negotiations.
We are here because we are committed to a successful outcome with the Doha Round negotiations. Obviously the Doha Round is in trouble; there are fundamental differences that separate the parties. The pro-trade countries, the countries that are committed to an ambitious, big, robust package, a balanced package in agriculture, in manufacturing, in services, and in a variety of other areas such as trade facilitation, reduced export subsidies and so on we're talking about in the Doha Round negotiations. We would like to see that all come together.
There are other countries that are prepared to settle for something less than the kind of ambitious outcome that we think is called for in the Doha Declaration of 2001 in the framework agreement and implied in the Hong Kong Ministerial in December.
And we are here to try to make that a reality.
Now how do we get there? First and foremost, market access. If this is a development round, then the way to achieve economic development in the immediate poverty and developing countries is to generate more trade, global trade, and more international trade-flows. And the only way to do that is if the reduction of trade barriers results in new trade rules. That is first and foremost on our minds.
In addition the Doha Round mandate, the Doha Declaration calls for in agriculture the elimination of export subsidies. We think that is a terrific outcome -- in fact the only major outcome from the December Ministerial -- and significant disciplines in domestic agricultural support.
We are also supportive of that, and as you probably know last October the United States put on the table a very bold package in agriculture to help restart the Doha Round negotiations when they had stalled out. And that proposal contains dramatic cuts in domestic support and dramatic cuts in tariff barriers, so it's balanced between market access and cuts in domestic support.
We have indicated that we know this is a negotiation, that you don't put something on the table and say, take it or leave it; that you don't say when another country puts a proposal on the table that it's non-negotiable. You don't get to yes by saying no to everything. So we've also indicated that our proposal is negotiable, that we are even prepared to do more in terms of cutting domestic support than we have on the table if and when there is significantly more market access on the table in agriculture.
Again, as I mentioned, NAMA services being two other major elements in this negotiation, if you are serious about development you're serious about market access. The exercise here in the last two days has been exactly the kind of dialog that it's going to take to get us back to the table for more formal negotiations. It was clear from the breakdown in July in Geneva that formal negotiations of ministers in Geneva and artificial deadlines don't get you "yes." What it's going to take is small groups, affinity groups like Cairns Group, bilaterals, small groups of countries that are open-minded about negotiating about this agreement to come together very quietly and to share what-ifs, to exchange what-ifs, the kind of stretching that we all know we need to do if this agreement is going to come together.
The Cairns Group meeting has been a great opportunity for us to continue that kind of dialog and for other countries to engage in that kind of dialog with, do it themselves with each other.
I think I'll just stop there.
And Mr. Secretary?
SEC. MIKE JOHANNS: Thank you. Well, let me offer a few thoughts and then Susan and I will be happy to take any questions that you might have.
Well, a good place to start is to say congratulations to the Cairns Group, the 20th anniversary. That's important; it's a milestone. They have made many important contributions during their history. And we share much in common with this group. We share reform objectives, we want to reduce tariffs, we want to reduce trade-distorting support, we want to eliminate export subsidies, and we also share a common commitment to the Doha Round.
We all understand the benefits that would result to the world's economy if we are able to reach an agreement. It is important.
It's also important to reflect on the purpose of the round. It is a development round. Developing countries would definitely benefit from lowered trade barriers, which equates to greater market access. We disagree with those who suggest that WTO members should somehow settle for less ambition in this round.
We cannot achieve the objectives of the Doha Round if developing countries, for example, are allowed to exempt 20 percent of their tariff line from reductions.
We quoted a World Bank study on a number of occasions, but it's an important study. It indicates that agriculture around the world has the most to gain from reducing trade-distorting import tariffs. It indicates 93 percent of the benefits to developing countries come from this kind of market access.
So doing all we can to achieve market access is so terribly important to this round.
Now we also have to recognize that the benefit in reducing tariffs would literally evaporate if the three S's in what we've come to identify as the black box are loosely defined, would equate to huge loopholes where literally market access disappears.
I want to offer also a few comments if I could on the Farm Bill in the United States. Many have asked what course we will pursue for future farm policy. After conducting more than 50 listening sessions across the United States, and I conducted over 20 of those myself, I can tell you that I expect to respond to the call for change that we've heard in many of those sessions.
I have three objectives. One is that our farm policy needs to be equitable, it needs to be predictable, and it needs to be beyond challenge. Equity requires greater support of those 60 percent of U.S. farmers who currently receive no support whatsoever from farm policy. Producers of just five crops in the United States receive about 93 percent of the subsidies.
Predictability requires that we help producers to mitigate the inherent uncertainties of the industry. I believe we can do a better job of providing that predictability to our producers.
Thirdly, farm policy needs to be beyond challenge. We need to pay attention to the potential WTO challenges. The Brazil Cotton Case demonstrated the importance of protecting our policies from litigation. I stand by these reform objectives with or without a Doha Agreement, but how we structure our policy proposals within this framework would certainly be influenced by progress in the Doha Round. We have said that we can be flexible on domestic support if we gain market access. Some, of course, asked the next question, How flexible can you be? -- to which I respond, How much market access is being offered?
I intend to do the right thing for U.S. agriculture by proposing reform. But there is flexibility in how we do it if we see progress in the Doha Round.
I believe that every moment that is lost these days is really an opportunity lost, and I believe that there are some false expectations that somehow this improves after the November elections. Quite honestly I don't subscribe to that theory at all. We have an historic opportunity right now, and we have the support of our farm lobby, our House, our Senate and the White House in doing what we are trying to do.
So we're going to do everything we can to get a successful result. I just wanted to offer, if I might, a few concluding thoughts on the October proposal from the United States.
Let there be no doubt about it -- and I said this in my testimony before the House and Senate Ag Committees -- the U.S. proposal would force significant change in how we provide farm support. We are proposing to go from a $19 billion cap on our most trade-distorting support to $7.6 billion, a 60 percent reduction. At the time the world was calling for us to step up and do 55 percent, we went beyond what was asked.
We estimate that this is going to have a significant impact on how we operate these programs. In fact I would suggest that we will have to reform our programs if this proposal were to go forward.
But all this is dependent on getting a successful round. All of it is dependent on our ability to move this process forward.
Now for us the key issue again is market access. You don't get market access if developing countries are simply allowed to take 20 percent of their tariff lines off the table. You don't get market access if literally you're talking about substance products being at the 80 percent level. It just literally disappears and evaporates.
We are very committed to this round. We are very committed to making it a successful round. We're going to do all we can to achieve that result.
Thank you. I'll take some questions.
SEC. JOHANNS: The question was, Mr. Mandelson is coming to the United States next week, and both of us will be meeting with him while he is in the United States. The question we were asked is, what will we be saying to him?
The point I would make to Mr. Mandelson is the point that we've been making for a long time, and that is that the European Union needs to open up its marketplace. There are many ways of subsidizing agriculture. One of the ways is through a direct payment, a subsidy. Cash is delivered to a producer.
Now when it comes to that area, they are number one. They provide greater subsidies than anybody. And even under the ambitious proposal we tabled, when that is all said and done if that were the proposal that became the agreement they would still be subsidizing at a rate of two to one versus the United States. They are very, very heavy subsidizers.
The second way of protecting agriculture is tariffs. They have a very, very protective agricultural system with very high tariffs. For us, the key to this is that the tariffs have to come down and market access has to be the key. And there isn't any reason to fear that. The European Union actually accounts for 20 percent of the agricultural imports to the United States, which have grown significantly in past years because our consumers are so open to products from the outside.
So these will be the issues that I hope we will talk about. We all need reform, and this is a great opportunity to do that.
AMB. SCHWAB: I think there are a couple things on Mr. Mandelson's agenda. As we understand it, he wants to have conversations with us about our expectations in terms of the Doha Round. As Secretary Johanns said, we will be more than happy to share those perspectives with him. There are a lot of countries that are the member states of the EU that believe in development, feel very strongly about development, and helping alleviate poverty in developing countries. It is important that he hear from us and from others-- World Bank, IMF, some of the development organizations that are Washington-based -- that the way to get to development is market access.
I think you've probably spent some time on Capitol Hill to get a sense of how our Farm Bill will come together and I think Secretary Johanns talked about the way that process works. As Secretary Johanns noted, the EU's average agricultural tariff is more than twice that of the United States. And he has significantly more control over that than we do perhaps over our Farm Bill given the fact that it is the Congress of the United States that will be working very hard to develop that Farm Bill and incumbent upon us to make the case with them.
I think that probably answers your question.
REPORTER: The European Union seems to have been implying, I want you to move first on subsidies. And you seem to have been implying that you'd like them to move first on market access. So who is actually going to move? How are you going to past this, we're each waiting for each other?
AMB. SCHWAB: Here is the deal. It is going to be substance and not form that gets us to "yes." It is substance, not chronology. It's not some specific date that is a magic date, and it is not an exercise in rock, paper, scissors. I don't know whether you play rock, paper, scissors. The U.S. went first last October. We went first with a very big, very bold, very ambitious offer with the understanding and the expectation that other countries would match that proposal. Guess what? Didn't happen.
The go-first exercise is not one that is rewarded in this business. However -- and this is the point I was trying to make earlier -- I don't think it is a rock, paper, scissors exercise that's going to get us an agreement. It is, rather, the quiet conversations, the exploring what-ifs, exploring red lines, sharing ambitious, going beyond where we think we were going to end up, that has to take place in the thinking and the negotiating of a lot of key players-- by the way, not just the EU and the U.S.
Advanced developing countries also are part of this process and have to be part of this process.
And it is in the quiet exchange of those potential outcomes that we found out whether there's conversions or not. And at that stage of the game, the question of who goes first slips away. Don't you think? I don't know; maybe you've got a different take?
SEC. JOHANNS: Yeah. I don't regard it as who goes first or not. We did go first last year. We did demonstrate significant leadership. Not only did we go first, our President said and now has said on a couple of occasions, one of those occasions a year ago in the United Nations, you know what, we should just simply work toward eliminating trade-distorting domestic support. Eliminate it.
Now if that isn't a bold move, I have never seen one. It was a remarkable statement by a U.S. president. And we're willing literally to engage in that kind of discussion.
The other thing I would say is this. When we arrived here, we were asked a lot about the proposal put forward by Australia. Now, we didn't come here to negotiate; this is not a negotiating session. We didn't come here to endorse the proposal; we're not endorsing that proposal. But what we are saying, what we are endorsing is this whole idea of, let's get some discussion going, let's get some ideas out there.
We think this would be very, very difficult and asks us to go $5 billion beyond where we're at. But the important point here is that Australia has stepped forward, made the proposal, and has people talking.
And so we applaud them for that effort. The reaction of the EU was no. You don't get to yes by saying no.
And I just believe that more of this discussion, not less, needs to occur. And I think that's the greatest hope we have to get to an agreement. Let's put your proposals out there, get your ideas out there, and see where we go from there.
REPORTER: You said it needed to be equitable, predictable and beyond challenge. How would you sell message of making it more equitable to five commodity groups that get the vast bulk of subsidies?
SEC. JOHANNS: Farmers are farmers. You know I grew up on a farm, and 60 percent of our farmers maybe grow a crop different than what I grew up with. I kind of grew up in corn and soybean country, but they are still farmers. I mean they may be growing fruits, they may be growing vegetables.
Now those farmers are not coming in and saying, I want to push aside program crops and become one of them. That's a very important point to understand. And in fact, those 60 percent are not asking to be program farmers, not a single one of them has said I want to be a program crop which is a subsidized crop.
What they are saying is, we need funding for research and phytosanitary, sanitary enforcement, market promotion, those kinds of things. So actually the five program crops, they can understand that. Research makes a huge difference. It may be research that allows us to more effectively have plants that are pest-resistant, that sort of thing.
So I haven't seen any real conflict there. But again, probably a major reason for that is that the nonprogram crops are not coming in and saying, I want to be a program crop, I want to be a subsidized crop.
REPORTER: Ambassador Schwab, you say you want to dialog on issues. Cairns used to be the shipbuilding city, and of course one of the most egregious trade parities in the world was the Jones Act ban on the use of foreign-made ships in U.S. coastal shipping. Is that something which you could see tackled in the Doha Round, or is that something which is beyond negotiation?
AMB. SCHWAB: You ask a good question about red lines and about sensitivities, and the United States in terms of our services market is clearly the most open market in the world. And in fact two-thirds of our market for services is entirely open. It was basically put on the table during the Uruguay Round.
There are a couple of areas where we are less open than we could be. Maritime is one of them. That is an extremely sensitive area, and no I don't see that being part of the negotiation.
That said, services negotiations as a whole stalled out the way the rest of the negotiations stalled out, and we were anticipating a second round of offers end of July, July 31, as part of the Doha Round negotiation. That second round of offers never took place, and so none of us know what is on the table or what could potentially be on the table in terms of market access.
But you asked about the sensitivity in maritime and my response is, that is very sensitive and I have a hard time imagining that being on the table.
That said --
REPORTER: The question was actually about manufacturing, where ships are manufactured, where ships are built, rather than a services issue. It's an industrial issue. Foreign built ships.
AMB. SCHWAB: The Jones Act.
AMB. SCHWAB: No, no. Cargo preference, Jones Act, all of the whole maritime sector is obviously an extremely sensitive one, and in terms of the NAMA issues -- I mean in terms of the market access issues -- there are no exceptions, exemptions, flexibilities for developed countries in the Doha mandate, if that's the question you were asking.
REPORTER: -- package on the title by March that's good enough to convince Congress to extend the Trade Promotion Authority. What do you think of the chance (unclear) in advance? Is it strictly necessary to have a Doha agreement??
SEC. JOHANNS: The answer to your second question is yes. Without an extension of Trade Promotion Authority, we're not in a position to implement a Doha Round Agreement. So I think that was why we were very much hoping that we would have a break-through in the Doha Round negotiations by the end of July because as of the end of July if you worked backwards from July 1, 2007, when current allocation of Trade Promotion Authority expires, we would have to have finished the negotiation by the end of 2006.
So the current time table by any stretch of the imagine requires an extension of TPA. In terms of your initial question, it is clearly going to be difficult to extend Trade Promotion Authority. It is not impossible, and Trade Promotion Authority has been extended many times in various forms. The last time unfortunately took a number of years before it was reauthorized.
We are convinced that if there is the potential for a strong Doha Round outcome, we will be in a much better position to convince Congress to extend Trade Promotion Authority. I think that's the point that [inaudible] is referring to. And I think what we're talking about is not completing the negotiation in that timeframe but really having a breakthrough so that we're in a position to go to the United States Congress and talk about the market access potential, the gives and gets, and they will then have a sense of what we will be using the Trade Promotion Authority for.
REPORTER: What timetable do you need that to occur in? By March?
AMB. SCHWAB: Well, we can go to the Congress at any point and ask for an extension of Trade Promotion Authority. It doesn't actually expire until July 1, 2007. So they don't really need it until after July 1, 2007. But thinking in terms of if you're going to go to the Congress, introduce a piece of legislation and seek the extension, you want to do that earlier rather than later.
REPORTER: (unclear) are you any more concerned that developing world market (unclear) is harder than you previously thought?
AMB. SCHWAB: No. I think we have always maintained, throughout the negotiation we've maintained that when we're talking about market access we're talking about market access in developed countries and developing countries. Pretty late-advanced developing countries, not the least developed countries. If you look at any of the studies, World Bank, IMF, OECD, any of these studies, it's very, very clear that one of the chief impediments to development is barriers to (unclear) trade.
And 70 percent of the tariffs that are paid by developing countries are paid by under-developed countries. So one of the interesting phenomena in this negotiation is the very key role that developing countries are playing inside, the inner core. I think it's a very healthy development in terms of multilateral trade negotiations. With that role though comes a lot of responsibilities, and what you see whether you are in the ASEAN Trade Ministers, with G20 meeting, or even Cairns Group is that there is no uniform, unified developing country position.
There are developing countries that are very pro-trade and really get and understand the way to development is to open markets. And there are some developing countries that still aren't there yet, that still have not come to grips with the importance of opening up their markets, unilaterally quite frankly in the context of these negotiations.
So I think a split -- you see the evidence of it. I think the protectionists are in the minority though. You should talk to some of the developing country ministers who are here and ask them. Certainly in the Cairns Group kind of environment, that's --
Do you have any other thoughts on that?
SEC. JOHANNS: I think that's true. If there were one point to be made here, every country has their issues. And that's certainly true for the developing countries. But they stand to gain so much from this round. There is no mileage whatsoever in improving your economy by closing your economy. It won't happen.
The developing countries will benefit from this round because literally the tariffs will come down, market access will be achieved, and there's just no question that they will benefit from this round in a significant way. And as the studies indicate, it comes from market access.
We can reduce subsidies and we in the United States believe that needs to happen. All those things, we can provide aid, we can do all those things which will benefit world common market access. And that's very true for the developing countries.
REPORTER: Can you help us with a time table of that? What's the process, when it gets drafted, put to Congress? And how does that interplay with the WTO negotiation?
SEC. JOHANNS: A lot has happened already. We've done our Farm Bill Forums across the country. We wrapped those up by the end of last year. We have released -- and these are on the USDA website -- analysis papers, and we've released the comments from all those Farm Bill listening sessions.
We identified five themes that we wanted to do a really in-depth analysis, and so we tasked our USDA economist to do that. And these are not submitted as policy of the administration or as policy proposals, but they were submitted with the idea of really encouraging thought.
So that has occurred. We just released our last paper of those five.
The House and the Senate have been doing both field hearings and hearings within the Beltway in Washington. And they will probably conduct those through the end of the year, maybe even some into next year.
The administration is currently thinking that we will submit our proposals for a Farm Bill in January of next year. And then the House and Senate will start writing the Farm Bill, doing mark-up on a Farm Bill I would say in the April/May timeframe.
Now, those dates need to be a little bit flexible. One thing that is definite is that we have to do a Farm Bill next year. That's a definite. Sometime next year you've got to wrap up a Farm Bill.
REPORTER: The programs run out?
SEC. JOHANNS: They run out at the end of the crop year for 2007.
AMB. SCHWAB: It's October.
SEC. JOHANNS: Yes. And then there's language that if we don't get a Farm Bill they can literally revert back to a farm program dating back to the 1930s.
AMB. SCHWAB: 1933. A 1933 piece of farm legislation.
REPORTER: (unclear) then?
AMB. SCHWAB: Not pretty.
SEC. JOHANNS: It would not be. You don't want to go there. Upon that issue there is solid agreement on all sides of the aisle, so this has to be done in '07.
REPORTER: With an APEC meeting you, that topic, what correction did you propose to get that program back on track?
AMB. SCHWAB: I think the APEC meeting provides another forum for ministers to get together both in formal sessions of open-minded countries but also informal small groups, bilaterals. If you go to the appropriate website, the APEC ministerial declaration from May from which [inaudible] was a strong commentary about the Doha Round. I think it gave a number of us a sense of guidance going forward, and we brought that sense with us to Geneva when we came back to Geneva during the course of the summer.
So again I think the opportunity in Hanoi in November will be one where a lot of key players get together and are able to exchange perspectives and catch up and as I said get into the kind of "what if" conversations that ultimately would lead to a breakthrough if a breakthrough is to be found.
SEC. JOHANNS: Last question.
REPORTER: You talked quite a lot of trying to make progress in smaller groups more than [inaudible]. One of the developments in recent years has been the influence or role of these groupings of the G20, G6. Do you think in fact that now the time has come to forget that and start from scratch? Again, do you think some of these groups that have basically lost their initial purpose and have actually led to the impasse that we've had?
AMB. SCHWAB: I would say, I sort of think of these as affinity groups, and I would let them speak for themselves as to whether they have lost their purpose. I think healthy debate within some of these groups or debate within some of these groups is healthy. I don't think there's a problem with that, and the G10 has a certain personality, and the NAMA 11 has a personality, and the G20 and the G33 and Cairns Group, again some sort of distinctive competency. And it's useful. It's a useful opportunity for getting countries together that have similar perspectives to come up with positions.
G6 is a little bit different in that the G6 had become the proxy for the membership. And it was very clear in June, July that the membership of the WTO said well G6 ought to go up and come up with the outline for an agreement that the rest of the membership could look at.
And the G6 was unable to do that. In meeting after meeting after meeting G6 has been unable to deliver. I have said that it was a collective-- you know, what happened in July was a collective failure on all of us in the G6 shared a collective responsibility for what happened.
Evidently that is not the vehicle. I mean, that is not the group that is going to get us to yes. And having other coalitions, other groups of open-minded countries, again I'm not talking about blind-minded countries but open-minded countries that are able to stretch, able to come up with innovative ideas. Secretary Johanns mentioned Mark Vaile's proposal, the Australian proposal. We may not endorse it, it may be farther than we think it could ever get.
On the other hand, it's out there, it's different, it's new, and it starts a conversation going. So I think there's a purpose for all of these groups.
I think ultimately at the end of the day each member of the WTO is going to have to represent his own interests, and there will come a time when the members of the G20 have to decide, do they represent the lowest common denominator or the highest common denominator opinion within that group?
SEC. JOHANNS: Okay. Thanks, everybody.
AMB. SCHWAB: Thank you.