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### Viewing cable 05PRETORIA4757, SOUTH AFRICA: SPEECH ON RECLAIMING THE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05PRETORIA4757 | 2005-12-02 15:04 | 2011-08-24 01:00 | UNCLASSIFIED | Embassy Pretoria

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 04 PRETORIA 004757

    SIPDIS

    E.O. 12958:  N/A
    TAGS: ETRD ECON SF XA
    SUBJECT: SOUTH AFRICA: SPEECH ON RECLAIMING THE
    DEVELOPMENT CONTENT OF THE DOHA DEVELOPMENT ROUND

    REF: NONE

    ¶1.  (U) Deputy Minister of Trade and Industry Dr. Rob
    Davies delivered the following speech entitled:
    Reclaiming the Development Content of the Doha
    Development Round.  Davies delivered this speech to
    the National Consultative Conference on the WTO
    Ministerial in Hong Kong on 17 November, 2005.  The
    text of this speech is provided below.

    Begin Text:

    Reclaiming the development content of the Doha
    Development Round by Dr Rob Davies Deputy Minister of
    Trade and Industry

    17 November 2005

    Recent proposals by some major industrial countries
    in the World Trade Organisation (WTO) are threatening
    the developmental content of the Doha Development
    Agenda (DDA). These proposals seek both to sow
    division among developing countries and to re-
    interpret the framework and trajectory of the
    negotiations that in a self-serving manner, narrow,
    limit and ultimately - undermine the developmental
    objectives of the DDA. It is thus timely to reclaim
    the developmental content of the Round.
    The Ministerial Declaration that launched the Doha
    Round proclaimed that the needs and interests of
    developing countries, who make the majority of WTO
    members, would be placed at the centre of the
    negotiations. This was not an act of charity but was
    based on an understanding that promoting development
    in developing countries is an essential impetus to
    sustained global economic growth from which all
    countries can benefit. A key to sustained global
    growth lies in unlocking the growth potential of
    developing countries and we have consistently argued
    that, to achieve this, developing countries must
    pursue economic development and industrialisation in
    sectors where they possess comparative advantage. The
    strategic objective for the negotiations is thus for
    industrial countries to undergo structural adjustment
    by reducing a range of protective and support
    measures in inefficient sectors in their economies.
    Such adjustment will open up new flows of trade and
    investment, promote industrialisation, trade and
    development in developing countries and establish a
    virtuous cycle of global economic growth.

    An early conclusion of the current round of
    negotiations, consistent with the mandate agreed in
    Doha in 2001 would deliver the best overall context
    for such an outcome. More open and undistorted
    international trade would create an environment in
    which developing economies may diversify their
    exports by destination and in higher value production
    and deepen their integration into the global trading
    system. These were the strategic considerations that
    underpinned South Africa?s support for the launch of
    negotiations in Doha in 2001. In reclaiming the
    development content of this round of negotiations in
    the WTO, we also need to reassert the essential
    principles of proportionality, asymmetry, less than
    full reciprocity and special and differential
    treatment in favour of developing countries. These
    principles underpin South Africa?s approach to
    development and are expressed along three main
    dimensions.

    First, the DDA must provide enhanced access to
    industrial country markets for the exports of
    developing countries. This should cover exports in
    agriculture, industrial goods and services. On
    industrial tariff negotiations, the developmental
    objectives of the round require the reduction and
    elimination of tariff peaks and tariff escalation on
    products of export interest to developing countries.
    While the average tariff rate in industrial countries
    are low, the level and the frequency of tariff peaks
    (higher than 15%) and escalation (tariffs that
    increase with value added) remain a matter of concern
    in a number of key sectors of direct interest to
    developing countries. In general, the growth of
    industrial exports from developing countries to
    industrial countries is inversely related to the
    degree of tariff protection in the latter. The
    critical issue is how fast producers in the North
    move out of these sectors where they have lost
    comparative advantage.

    Developing countries are prepared to make a
    contribution to the industrial tariff negotiations in
    this round, provided that their concessions are
    commensurate with their levels of development in a
    full expression of the principle of special
    differential treatment. This is essential to ensure
    that the reform processes are carefully managed for
    sectors that are for employment or industrial policy
    reasons. Thus, negotiations on industrial tariffs
    must accomplish two things simultaneously: (i) ensure
    that the remaining high tariffs, tariff peaks and
    tariff escalation in developed countries are
    eliminated and (ii) ensure sufficient flexibility
    that accommodates the sensitive sectors and
    adjustment needs of developing countries.

    Second, the removal of anti-development structural
    distortions in international agricultural trade is a
    central objective of the DDA. Through a combination
    of high tariffs, massive domestic support and export
    subsidies, industrial countries are able to retain
    inefficient agricultural production at the cost of
    promoting agricultural development in developing
    countries. At the same time, developing countries
    cannot be expected to pay for this needed reform in
    agriculture by acceding to overly ambitious demands
    by industrial countries for concessions in industrial
    tariffs and services that do not take into account
    the realities of their levels of economic and
    institutional development. Larger economies,
    responsible for most distortions need to make the
    larger adjustments.

    Third, it must be acknowledged that not all
    developing countries stand to gain from the DDA in
    the short to medium term. Indeed, least developed
    countries (LDCs) and small, weak and vulnerable
    countries do not have the supply capacity to obtain
    the benefits that will arise from new export
    opportunities of the DDA. Moreover, many will face
    significant adjustment costs including from the
    erosion of preferences. An ?aid for trade? package
    should be established to address these concerns. For
    those economies that face adjustment costs,
    assistance must be provided to cushion the negative
    effects of the reform process. Assistance will also
    be required to advance efforts at diversification and
    competitiveness in order to take advantage of new
    trade opportunities in the medium term. The programme
    could also focus on building capacity to meet
    international product standards as well as any new
    WTO obligations that emerge from this round (trade
    facilitation, for example). For LDCs, a package of
    specific measures to foster their integration into
    the world trading system is required particularly
    that industrial countries make a commitment to grant
    LDCs duty free quota free market access.

    Recent developments

    The WTO Mini-Ministerial held in Geneva on 8-9
    November was considered important to provide further
    impetus to negotiations in advance of the 6th
    Ministerial Conference in Hong Kong scheduled for 13-
    18 December 2005. This followed a meeting on 10
    October 2005 where the United States (US) submitted
    its agricultural proposal. This was a significant
    move by the US because agriculture has always been
    understood as the key to unlocking progress across
    the DDA. The US offer generated momentum in the
    process but deeper analysis indicated that it did not
    meet the objectives of the Doha mandate for
    substantial reductions in domestic support. Although
    it was inadequate, as an opening gambit, the proposal
    set the stage for further engagement and
    negotiations. On 12 October 2005, the G20 submitted
    its detailed proposal indicating a range of targets
    for agriculture. The proposal was balanced - a
    genuine middle ground - that aims to eliminate export
    subsidies and achieve substantial, real reduction in
    the trade distorting domestic support provided by
    industrial countries to their farmers.
    Tariff reduction in the agricultural sector offers
    over 90% of the overall benefits for developing
    countries that would arise from a combination of
    subsidies elimination, reductions in domestic support
    and lower tariffs. In this respect, the G20 proposed
    a reasonable target for agricultural tariff reduction
    in industrial countries (54%) and offered 36% tariff
    reduction for developing countries on the basis of
    fundamental principles underpinning the negotiations
    - special and differential treatment and less than
    full reciprocity for developing countries. Following
    the proposals by the G20 and the US, the European
    Union (EU) came under considerable pressure to make
    its proposal as soon as possible. At the Zurich
    meeting, the European Commission (EC) made an
    improved offer on domestic support reduction and
    indicated it would submit a comprehensive response by
    27 October 2005. Between the Zurich meeting and 27
    October 2005, the EC came under severe pressure from
    some EU Members to remain within the mandate and
    framework set by its agreed reform of the Common
    Agricultural Policy (CAP) reform.

    On 27 October, the EC submitted its proposal that has
    precipitated the current impasse in the negotiations.
    Whereas the US proposed to reduce tariffs by an
    average of 75% and the G20 proposed 54%, the EU
    offered only a 45% reduction along with a series of
    caveats that would, by all accounts, empty their
    offer of any meaningful content in the most important
    aspect of the agricultural negotiations. Furthermore,
    the EU made its offer conditional on a series of
    demands that imply enormous adjustment burdens on
    developing countries particularly the so-called
    advanced developing countries (India, Brazil, China,
    South Africa among others) in the areas of industrial
    tariffs and services.

    While offering ?constrained flexibility? for
    developing countries, the EU proposed a 10% ceiling
    of industrial tariffs for both developed and
    developing countries. This would have the perverse
    effect of requiring massive tariff reduction by
    developing countries but minimal adjustments for
    industrial countries whose tariffs levels are already
    low (3-4% average). Though not alone on services, the
    EU has explicitly proposed that developing countries
    meet certain predetermined numerical targets and
    benchmarks in making commitments in the services
    sector. This would eliminate existing flexibilities
    for developing countries and would fundamentally
    alter the accepted negotiating format for services
    negotiations. Moreover, the proposal reflects a
    profound insensitivity to real world conditions in
    developing economies not least that service
    regulations in developing countries are evolving
    through ongoing assessments - in a dynamic manner -
    to ensure they meet a complex set public policy
    objectives.

    The EU proposal in fact goes beyond the negotiating
    mandate agreed in Doha. The EU also called -
    implicitly - for further differentiation among
    developing countries (so-called advanced and
    vulnerable developing countries) and re-introduced
    the issue of Geographic Indications. Both issues
    polarise the WTO membership. Finally, contrary to
    spirit of any negotiation at this stage, the EU
    indicated that this was its final offer for Hong
    Kong. In retrospect, the EU proposal and subsequent
    engagement appears designed to cause impasse because
    of an extremely limited negotiating mandate in
    agriculture. Following the meeting, it appears the EU
    has managed to shift - or at least share ?
    responsibility for the impasse. The impression is
    being created that the impasse is a result of
    intransigence - in equal measure - by several WTO
    Members. It is this distortion of perspective on the
    process that needs to be corrected.

    Way Forward

    The prospects for the 6th Ministerial Conference in
    Hong Kong do not appear promising. WTO Members are
    keen to avoid a re-run of the Cancun debacle. At this
    stage there are two possibilities. First, the EU
    makes an improved agricultural offer and reduces its
    ambition in industrial tariffs and services in
    advance of the Hong Kong Conference. This appears
    unlikely. Second, expectations for Hong Kong may have
    to be effectively managed. In this respect, the key
    objectives would be four-fold: (i) to avoid a
    complete breakdown of negotiations and recriminations
    as had happened following the failure in Cancun; (ii)
    to capture and consolidate the considerable and
    important work that has been undertaken in the last
    year through a status report to the Conference; (iii)
    to deliver some tangible benefits for the poorest WTO
    members with some decisions in favour of least
    developed countries (LDCs), an agreement on the ?aid
    for trade? package and a final solution on the TRIPS
    and Public Health issue and (iv) to agree to continue
    and intensify work in 2006 without compromising the
    Doha mandate.

    Development must remain the essential measure for
    defining success in this round of WTO negotiations.
    This should be understood as providing enhanced
    access to the goods and services exports of
    developing countries and removing the structural
    distortions in agriculture through the elimination of
    export subsidies and substantial real reductions in
    domestic support. Developing countries will make a
    proportional contribution by reducing barriers to
    trade in a manner that is consistent with their level
    of institutional and economic development. For the
    weaker and more vulnerable economies, a package of
    measures under a strengthened aid for trade package
    should be implemented to meet transitional adjustment
    costs and to boost their capacity to take advantage
    of new trade opportunities in the medium term. The
    immediate obstacle to meeting these objectives is the
    EU failure to make a meaningful offer on market
    access in agriculture.

    Issued by: Ministry of Trade and Industry
    17 November 2005
    Source: Department of Trade and Industry
    (http://www.dti.gov.za)

    TEITELBAUM

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