USTR - Remarks by Deputy U.S. Trade Representative Susan Schwab and a Senior U.S. Trade Official
Office of the United States Trade Representative


Remarks by Deputy U.S. Trade Representative Susan Schwab and a Senior U.S. Trade Official

Remarks by Deputy U.S. Trade Representative Susan Schwab
And a Senior U.S. Trade Official
World Trade Ministerial Meeting, Hong Kong
Friday evening, December 16, 2005

AMBASSADOR SCHWAB:  Thank you very much.  For those of you who were with us earlier this afternoon, there was a question raised about services.  I thought I would bring you all up-to-date on services and then offer some observations about some developments that we are picking up in terms of various developing country interests. 

On services, I had mentioned earlier this afternoon that there was a technical level discussion.  Minister (Kim) is the facilitator for that.  It was the first meeting that has taken place on services, and the outcome -- you will not be surprised to learn -- the outcome is at best uncertain.  There were a variety of proposals floated, a lot of interventions.  It was an active, technical-level dialogue, but there were a number of countries, developing countries primarily, that have concerns that the current text and Annex C – the current text and annex are too strong.  They'd like to see it weaker.

There is a large group of developed and developing countries that like the text as it is. They articulated that. There are countries that would like to see some strengthening of the text. The facilitator suggested that it might be a good idea for the group to go back, and groups of countries get together and think about where they want to go from here. Whether the text is opened for purposes of discussion and debate of weakening it or strengthening it, stay tuned, because beyond that, we don't know how it will come out.

Related to this, something that we've been picking up over the last couple of days with the intense focus on the least-developed countries -- and we've all talked a lot about cotton and duty-free, quota-free. The United States announced a major trade capacity building initiative, funding a couple of days ago. 

Lost in this is the very significant number of developing countries that are developing countries but not least-developed countries.  And we have been hearing on a bilateral basis, quite steadily over the last 48 hours, and I understand several Green Room interventions.  While I'm not in a position to name names, there are an increasing number of developing countries that have expressed concern that their issues are not being addressed and have not yet been addressed.  These are countries that are conscious of the importance of increased South-South trade and that enhanced market access -- particularly in agriculture, but not exclusively in agriculture -- would most assuredly benefit them.  In some case, these are countries that are concerned that some of the proposals being floated in duty-free, quota-free would ultimately work to their detriment.  But I thought I would mention that because that's been an interesting development in the last day or two. 

Let me turn the microphone over to my colleague to talk about agriculture.

SENIOR U.S. TRADE OFFICIAL:  Thanks, Madam Ambassador.  Just to put our work in context here a little bit for you.  You'll recall this summer the negotiations as a whole had been stalled, largely because agriculture had been unable to make progress from the work in the previous year.  Countries challenged the United States, as the leader in this process, to come forward with something to spur the talks forward.  On October 10th, about 66 days ago, we did make a major proposal where we would envision deep cuts in tariffs and trade-destroying domestic support over a five-year period.  And then ultimately, over a 15-year period, complete elimination of all these trade-distorting measures in agriculture tariffs, trade domestic support, trade-distorting domestic support. 

This re-energized the talks.  We had a very busy October.  We were pulling things along.  G20 came out with a proposal that was also very ambitious.  We had active discussions in Geneva on the technical basis.  The missing piece was, well, where is the other main player, the European Union?  Where is their level of ambition?  How deep are they willing to cut?  Where's the EU proposal? 

The EU proposal did come out on October 28th and it was a major disappointment to us, the Cairns group, the G20, other developing countries, other exporters.  Since then we've been struggling to find our balance in these talks, rather than pulling the negotiations forward we've been pushing against a string, I think. And, nonetheless, we've been trying to use this conference here to make some progress.  We've got a bunch of key players here together ready to hopefully work constructively, and we're trying to find areas that we can make incremental progress, even if we can't agree on everything. 

And that gets us to the state of the talks in the last couple of days.  We have focused in on a couple of areas in agriculture where there is a chance to make some progress. These include the export competition pillar generally, and the need for export subsidies in particular.  The level of ambition in market access, specifically, how we might deal with sensitive products.

And these are two discrete areas that, even if we can't get the whole of the market access puzzle unlocked, at least we can take a step towards progress.  Unfortunately, we haven't really had progress in that either.  The small-group discussions that we've had have run into [stubbornness] from particular parties, particularly the European Union, who had stated that they've made their offer, they're not going to improve it, and they want everyone else to step forward.   And as a consequence, we haven't really seen any measurable progress in agriculture. 

Now, this is the fifth day of this conference.  Everybody is getting tired and cranky, and so no doubt that would reflect some of the assessment here.  But it is also a time when people really have to dig deep and say, “Are we coming here for nothing, or are we going to actually try and find some area where we can all step forward and show some ambition?”

Our proposal's on the table.  We're ready to go to zero.  We're happy to see if people want to push us to go further and faster.  But we really need some negotiating partners to step up to do that. 

Hopefully, we'll see that tonight.  Export subsidies – let's set that end date.  Let's negotiate parallelism, deal with state trading enterprises.  Let's do what we need to do there.  Let's talk about market access.  Let's talk specifically about how we cut tariffs. 

That's what we're about.  Hopefully we'll get there.  We certainly think that the world system and the world economy will benefit if we do. 

QUESTION:  Two questions, which I think are for your colleague. The first is on state trading enterprises.  Earlier today, a European briefer said that – this is on export competition – said that the Brazilians had said if you set an end date for elimination of export subsidies, basically you won't get anything for it. This is a symbolic act. You should do it without getting any concession in return.  Is that an accurate assessment of the situation?

And the other is, on the subject of state trading enterprises, Australian Trade Minister Mark Vaile, for example, gave press conferences today in which he's really questioning whether the Australian Wheat Board should be -- consider this, or really up for debate. Has there been any serious discussion about state trading enterprises?  I don't pick up anything on any actual discussion of this.

SENIOR U.S. TRADE OFFICIAL:  Fair enough question.  As you know, state trading enterprise reform is a top priority for the United States.  We want to see the right to export broadly available, in agricultural markets in particular.  I think the problem that we have this week gets back to maybe a deeper problem, going back to the EU proposal, that the U.S. proposal proposed deep cuts in our own programs, deep cuts in our own tariffs. The Europeans have come forward and said, “All we want to do is lock in our existing programs.  No further domestic support reform for us.  All we want to do is provide a tariff proposal that allows us to protect our sensitive programs.”

That's a very bad dynamic to have in negotiation because that encourages bad behavior from state traders, who say, “Fine, we're not going to offer up state trading if you're not offering up anything.”

So what we want to do is encourage everyone to be ambitious here.  We're ready to deal with export competition, export credits for example.  We've got a program; we're ready to reform it.  That's why we would see value in an end-date for export subsidies, and we would see value in meaningful commitments on state trading.  We're going to try and push that tonight.

QUESTION:  So the Australians and the New Zealanders and the Canadians are basically saying "We're not offering you anything?"

SENIOR U.S. TRADE OFFICIAL:  They've been resistant to any meaningful commitments, in part because they don't see anything coming back to them from the Europeans.

AMBASSADOR SCHWAB:  This is just symptomatic -- I mean your question -- this is just symptomatic of the problem we've been facing all week.  We can talk about what can developed countries do unilaterally for least-developing countries.  This is, after all, a development-focused round.  But the fact of the matter is, that kind of a dialogue -- particularly when we're talking about mainly bilateral concessions -- goes back to a sort of a colonial era, paternalistic approach to development.

If you look at World Bank studies, IMF studies, a range of studies from think tanks, the fact of the matter is 70% of the tariffs paid by developing countries are paid to other developing countries.  South-South trade is a significant potential boon for global economic growth, apart from what developed countries can do.

The developed countries have to be willing to come in and be ambitious, as the United States has indicated we're prepared to be, and take on some of the difficult politics associated with that.  But you can't expect that kind of thing to happen absent a more robust set of exchanges.  We're waiting for the EU.

QUESTION:  Wall Street Journal:  I wondered if the Ambassador could comment on what the significance is for this meeting of the announced new alliance among developing countries that connects the advanced developing countries with the poorest of the poor.  If that's having any effect in the discussions that you guys are having back and forth?  And then, stepping back a little bit, if there's any sort of larger and longer-term significance to an alliance like that to the enterprise that you guys are pursuing?

SUSAN: At this stage of the game, I think it's a little bit early to know what the focus is going to be.  Recognize that it was agreed in Doha, when this round was kicked off, that the emphasis of this round should be on development, and I think we've all embraced that.

We've made a very strong case that, to get real development gains, you have to have significant moves in market access.  And we stand by that, starting in agriculture.  I think if you have been listening to the developing countries, whether it's a Brazil, or an India, Costa Rica, any number of developing countries that have been speaking up, they recognize that market access is critical.

The only report I've seen so far today – when you move from meeting to meeting to meeting, you don't -- some time six or seven o'clock tomorrow morning, I'll get a chance to see what was generated today.  The only report I saw today was that a number of the developing country groups have come together.  I think that is terrific because there is a lot that they need to talk about among themselves related to advanced developing versus least-developed; how this round is going to shape up so that all developing countries benefit, not just a narrower slice of developing countries because it is important for the least-developed that the more advanced developing countries also are able to grow and develop.

I think it is good that they are getting together and talking.  There are some differences of opinion that, clearly, we've heard about in our bilaterals, and in some of the small group meetings that we've had.

QUESTION:  Do they provide a counterweight to the U.S. and EU in this dynamic [inaudible] complete?

AMBASSADOR SCHWAB:  I hope that they will be talking about moving the talks forward and focusing on some of the really big fundamental development-related issues, like market access in agriculture -- like market access in services, quite frankly.  If you think about what happens when a service provider, an express delivery company or a financial services provider, goes into a developing country, or any country, what's the first thing they do?  They are setting up infrastructure, distribution networks, regulatory underpinnings.  You're talking about trade facilitation and trade-capacity building brought in by the private sector.  There are a lot of developing countries that have figured out that that is in their interests.

So I'd like to think, I hope that we'll see a broader coalition of developing countries come in and say, "Let's get the decisions made on these more narrowly-drawn development issues and let's get to the meat of the matter and talk more broadly about the development needs."  And the development needs come right back to market access.

QUESTION:  I have two questions.  The first one pertains to the continued lack of progress in the talks.  There are all indications that if the progress remains slow, most of the important actors will go for bilateral and plural-lateral trade agreements.   Do you think it will mean the death of Doha trade talks, first?  Second is, the U.S. has offered LDCs duty-free, quota-free market access, but some people are saying, including some NGO's and some LDC's, that these offers contain some exemptions, including in crucial sectors like textiles.  What are your comments?  Thank you.

AMBASSADOR SCHWAB:  Thank you.  Is this the end of the Doha round as we know it?  No, not yet.  Too early to make that prediction, and we're still hopeful.  We've got a year to go.  We had greater ambitions for Hong Kong than have been realized, but that doesn't mean that we aren't in a position to move the ball forward.

On your question as to bilateral negotiations, the economist in me feels very strongly that multilateral agreements, particularly trade-liberalizing agreements, are much more beneficial.  That said, free trade agreements -- bilateral or groups of countries -- can be used very, very effectively to meet ambitions, to create precedents in areas like services or intellectual property, to go further than lowest-common-denominator solutions.

In the case of the United States, before coming out here last week we closed a free trade agreement with Peru for example.  The United States at this point has FTA's with 13 countries -- 12 or 13 countries, I should know the number -- that represent over 30%, 35% of our trade globally.  That is another way to go, but I think that certainly in terms of the broader interests of the developing world a more robust multilateral solution makes more sense.

In terms of duty-free, quota-free, the United States is committed to including virtually all products and lines in it.  There are some differences of opinion, even within developing countries, as to what and who should be included, as you probably know.

QUESTION:  Couple of questions. First to clarify on Geoffrey's question, is the U.S. getting involved in the state-traded entities issue or is it just not staying out of the way while the EU and Australia and Canada duke it out?  Also, if you could give us an update on the NAMA state of play for industrial goods and maybe tell us a little bit about where Ambassador Portman's been all day?  We haven't seen him.  I guess he's in meetings, but what's he doing and is he making progress?  (Laughter.)

SENIOR U.S. TRADE OFFICIAL:  That's kind of nosey, don't you think?  (Laughter.) On state trading, we've got very high ambitions for state-trading reform.  Our proposal from October 10th calls for several things:  elimination of the monopoly authority in state traders, elimination of disguised export subsidies, and greater transparency in their operations.  To us, it's a fundamental part of the export competition pillar, and we're pushing the state traders as hard and as aggressively as the EU.

We certainly do agree that these countries, Canada, Australia, New Zealand, they're going to be big winners in this negotiation.  They're not making much at all in the way of a contribution.  Certainly this is what they should contribute in terms of freeing up trade.

AMBASSADOR SCHWAB:  On NAMA, last night NAMA was one of the topics of the Green Room.  I think they finished at the Green Room at 2:30, 3 o'clock this morning, so that's where Ambassador Portman was until 2:30, 3 o'clock this morning as far as I know.  I wasn't around when he got back to the hotel.

They circulated inputs from a variety of countries, and I don't know whether those are public documents or not, but they are documents certainly to be seen, to be witnessed. They come in all shapes and sizes.  Some are direct potential amendments to the text; some are conceptual in nature.  But they were distributed last night with potential changes to the declaration.

Some countries are pushing for structural changes.  Nothing was resolved, and really right now they're looking for common threads.  The U.S. position has not changed in that we feel very strongly that the higher tariffs need to take the highest cuts, lower tariffs the lesser cuts.  The Swiss formula with two coefficients is the way that we would like to see – we'd like to see everyone move in that direction.

In terms of what Ambassador Portman has been doing today, I've seen him once.  We crossed paths once.  He's been doing a lot of Green Room-type activity.  The Green Rooms are coming with increasing frequency and showing up midday, showing up in the evening, bilateral consultations, meetings with small groups of countries, that kind if thing.  As are his surrogates.  If there were a breakthrough, he'd be here announcing it.  We're working.  We've got a ways to go.  What, 48 hours?  40 hours left in this exercise.  Yes, sir.

QUESTION:  Inside U.S. Trade:  I want to follow up on the NAMA question.  Has there been any progress from what you've seen specifically on this issue of the relationship between the formula that developing country tariffs would be subject to, and extra flexibilities they're getting in the context of an agreement?

And then on services, there is sort of a buzz around the building now, people thinking that this might be a repetition of what happened in Cancun with investment and competition.  Obviously, they are different situations, but there do seem to be some parallels.  Can you comment on that, and is there a reason we should expect that what happened with investment and competition in Cancun won't be repeated with services here?

AMBASSADOR SCHWAB:  In the case of NAMA, part of the frustration that we have about not having seen more of an advance in agricultural market access is we're not seeing a whole lot of progress elsewhere, other than, as I've said, some of the narrowly-drawn issues that we're trying to address for developed -- least-developed countries.

So, on NAMA, yes, there were various proposals floated, some included sensitivities.  But really, until you come up with a formula, a broader formula, it is premature to have an in-depth conversation about waivers and exceptions, you know, to that formula.  And they aren't at the formula yet.  They're still talking about the broader structure.

In terms of the broader of services, I do not -- I think the conversation that took place today was natural in view of the fact that this was the first time there was a more generalized discussion about services.  There are differences of opinion about the text.  What is interesting about it, though, is the differences of opinion are all over the map.  You have countries that would like to water down the text.  Countries that would like to strengthen the text, countries that are comfortable with the text.

And it isn't a North-South, developed-developing country thing.  You've got developed and developing countries that recognize that services trade can be a real boon to development, to economic development, and developing and developed countries that have come together to support at minimum maintenance of the current text and ideally some topping off.

QUESTION:  The National Journal:  Madam Ambassador, on services, it is our understanding that one of the key sticking points is that those who would like to water down the text, or weaken the text, or change the text downwards would like to take out those requirements in the text that would commit countries to at least sit down if they're asked and talk about services liberalization.

The question, I guess, is why should we care?  This would require them to actually make concessions and it's my understanding that we only have about 15 or 16 or 18 countries where we have offensive service ambitions at this point.  Those aren't the countries that are actually supporting this text change.  So, why do we care, except are we worried that those 15 or 16 countries that we do have offensive interest in might decide to use this as an excuse not to want to talk to us when we really want to talk to them?

AMBASSADOR SCHWAB:  Where to start responding to that?  Part of the challenge -- I've been in this job for two months.  The nomenclature has changed since I was last in the international trade arena.  And part of the challenge with the services negotiation is this use of the word "plural-lateral."  And that's one of the words that is being challenged by some of the opponents, some of the individual countries that would like to water down the text, this concept of plural-lateral.

And, as you know, the services negotiation has not be structured in the way, for example, the government procurement code was structured with an opt-in, opt-out formula.  And as you look at the importance of services to all of our economies.  And in the United States, you know, you're talking -- depending on how you define it -- 80% of our economy, we've got tens of billions of dollars in terms of trade surplus in services in a lot of developing countries with major service economies.

When you're talking about that, you are talking about the next frontier in terms of multilateral trade agreements, and coming into that discussion, the gaps is multilateral use, is a worldwide, is a WTO-wide agreement.  And moving forward from that general agreement on trade in services, we see – and most of us, you know, most countries would agree -- that this should be done on a multilateral basis, on an MFN basis.

The United States has provided in the request-offer formula -- as you know in the services negotiations, you've got the bilateral, the so-called plural-lateral and the multilateral categories.  And we're not yet talking about sectors.  I mean, recognize this is all negotiating about negotiating at this point.  We very much like to be engaged in a conversation about sectors.

But before we get to that, it's the framework, the discussion.  It is, as with everything else here, trying to come up with the modalities for the dialogue.  In the case of services, we have under the bilateral framework, have more than 100 requests that we've put out.  I think we've gotten responses from 69 countries.  So, certainly from a U.S. perspective, we have global interests in services trade, and a lot of other developed and developing countries feel the same way.

QUESTION:  German news agency DPA:  In the next 48 hours, do you think you'll be able to get an agreement on this duty-free, quota-free package that you've been working on now for the last three days?  Do you think that is a possibility?  And secondly, Mr. Mandelson had said that negotiations now are in a very worrying phase. You've talked about tired and cranky negotiators.  Would you say that we are in a point of crisis now?  Thank you.

AMBASSADOR SCHWAB:  My understanding from previous negotiations like this is that there is always a cranky phase, and that most of the businesses done in the last 48 hours.  There's clearly been an uptick in the intensity of the dialogue going on.  You see that from the Green Room conversations or the number of conversations going on in the Green Room.  I think we are hopeful that there will be a resolution and a final agreement in duty-free, quota-free.

But as with everything else, this is all ultimately going to be part of a large package, or it isn't going to be part of a large package.  And there are significant interests that have not been addressed -- that are fundamental to developing countries and some developed countries -- that haven't been addressed yet.  And we would like to see those addressed in the next 24-48 hours, at minimum to move the conversation forward so we can make progress at the next set of dialogues.  Ambassador Portman has suggested those should be sooner rather than later, and those should probably be in Geneva.

QUESTION:   Bloomberg:  Can you just give us a run-down in terms of what's planned tonight in terms of meetings?  And there is some talk of either A new NAMA text coming out or an overall text coming out tonight. 

AMBASSADOR SCHWAB:   My understanding is this evening, they go back in -- what, 7 o'clock, Green Room at 7 o'clock.  They go back in the Green Room at 7 o'clock.  They're going to start with agriculture, then they're going to talk NAMA and "anything else, other."  There's an other category and we don't know what other is at the moment.

[Inaudible from press.]

AMBASSADOR SCHWAB:  Rumours, exactly, possibly new text.  I mean, based on, as I'd mentioned, last night, there were over a dozen documents distributed.  Just different suggestions, textural changes, conceptual ideas.  And there are rumours that those are being put together and that there might be some kind of a unified text, a bracketed text, presented, but we don't know for sure.  We do know that they're going to be starting it with agriculture in the Green Room at 7:00.

QUESTION:  South China Morning Post:  With the NAMA talks, I know that there had been some numbers that have been floated, and I think it is the U.S. and EU who have reached a consensus on two coefficients.  I know originally the number ten was proposed when the EU was talking about a single coefficient.  How was that changed?  Are there numbers that have been battered about more frequently by the U.S. and the EU in terms of the two coefficients?  How would you stand or how would you view a minimum of two?

AMBASSADOR SCHWAB:  Let me suggest that I'm not in a position to talk about the EU's position on NAMA.  The U.S. position remains the same, which is support for the Swiss formula with two coefficients.  I'd just as soon not talk about specific numbers.

Let me note, however, it's worth remembering that the United States has by far and away the most open market in the world at this point in terms of our tariff levels and the few non-tariff barriers that we have.  So we have an interest in how NAMA plays out, but we're in a position where an awful lot of access is already provided to the U.S. market.  Just witness our current trade deficit.

QUESTION (follow on):  Could I follow on real quickly, sorry, to the idea of less than reciprocity on behalf of developing and LDCs.  And then the idea of parallelism, that there's a new NAMA-11, I think they are calling themselves, that came out today that are kind of touting the idea that parallelism should be in place between the agricultural cuts and the NAMA cuts.  What's your take on that?

AMBASSADOR SCHWAB:  Well, I think one of the issues and one of the reasons that we have been pointing out so steadily that the road to broader market access discussions, whether it's in NAMA or services, must ultimately go through agriculture.  As long as the EU has an agricultural proposal out there that is so unambitious, it is so easy for others to hide behind that and not be forthcoming -- other countries, advanced developing countries, other developed countries, to hide behind the EU and not be forthcoming in services and not be forthcoming in manufactured goods.

MODERATOR:  We have time for one more question.

QUESTION:  Bureau of National Affairs:  Peter Mandelson during his briefing this morning made a passing reference to what he said was a proposal by the U.S. last night in the Green Room on NAMA.  He said Ambassador Portman had put that forward and that the EU had endorsed that proposal.  I was wondering if you could explain what that proposal is, assuming there is one.

AMBASSADOR SCHWAB:  I've articulated the U.S. position on NAMA already.  You don't want to hear me say it again.

QUESTION:  I'm sorry, I was wondering if there was a new proposal last night?

MODERATOR:  Great, thank you all very much.

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