Doha breakthrough awaited

BY REAGAN D. TAN, BusinessWorld Reporter The Philippines’ lead negotiators at the World Trade Organization (WTO) are hoping the United States and other developed countries show greater "indications" of offering more concessions in this week’s make-or-break talks on the Doha Round. Representatives from the European Union, the United States, and developing countries Brazil and India will be meeting in New Delhi to discuss contentious agriculture and industrial issues that led to a 2005 deadlock in multilateral trade negotiations. Officials have said that for the 2001 Doha Round to succeed, an agreement has to be reached this year. "All are hopeful that something will come out of this but the problem is the Americans. They are exacting a high [price] for cutting farm subsidies. The issue is how far will the Americans be willing to go," Jose Antonio S. Buencamino, Manila’s special trade representative to the WTO in Geneva, Switzerland, told BusinessWorld in a telephone interview on Monday. The Doha talks stalled, among others, after developed countries such as the US and EU refused to cut domestic subsidies for agricultural products, a stance rejected by developing countries which could not afford to give similar support and thus were unable to compete globally. Mr. Buencamino said poor countries are also concerned that Brazil and India - considered leaders of the group of developing countries - may "suddenly build a consensus" with the economic powerhouses to chop tariffs or accept a minimal cut in farm subsidies in exchange for greater market access. "Our concern is precisely that the market access doesn’t come at a high price," he said, adding, however, that India and Brazil have given assurances that they would not back down from earlier positions. WTO Director-General Pascal Lamy earlier this year called on member countries to be more flexible, and the trade organization has set a June "deadline" in light of the looming expiration of the United States’ trade promotion authority, which prevents the US Congress from amending any trade proposals except to vote whether to accept or reject it. A deal will require Washington to make deeper cuts in farm subsidies, the EU and some leading developing country importers such as India to accept lower farm tariffs, and for developing countries as a whole to slash industrial duties. Agriculture Undersecretary Segfredo R. Serrano, who heads the Philippine delegation in the WTO agriculture talks, on Monday said it has been difficult because the US "has not showed anything first." "Developing countries have always said that we are willing to engage. But it can’t be unconditional. They (developed countries) should show something first. We are the developing countries should we be the first to [give concessions]?" In a recent forum, Mr. Serrano said the EU appears to be veering toward accepting a framework proposed by the G20 group of developing countries that will effectively cut farm tariffs by an average of 29%. But the US, he said, has "nothing to commit - not even indicatives" and is asking for an average 58% slash in agricultural tariffs. "For the Europeans to say something as big as that is a big indication. But we haven’t heard anything from the Americans," Mr. Serrano said. On the issue of farm subsidies, developing countries are proposing a cap of $12 billion, but the US appears to be pushing for $22-billion limit on domestic support, Mr. Buencamino said. Mr. Serrano has said a possible consensus would be $15 billion, which the EU may also be amenable with. He also said the US may just be holding back because its negotiators deem the time is still "premature." Mr. Buencamino said that while there is no strong indication yet as to what the outcome of the talks in India would be, it pays to be optimistic since "there is progress." "[But] when you say ’there is progress’, it just means that the talks aren’t breaking down. But the negotiations are slow," he added. The meeting in New Delhi, India - described by Mr. Buencamino as "one of the most critical" - will be attended by EU Trade Commissioner Peter Mandelson, Indian Commerce Minister Kamal Nath, US trade representative Susan Schwab and Brazilian Foreign Minister Celso Amorim. RP readiness crucial in deal with US With the United States recently sealing a bilateral trade pact with South Korea and closer yet to concluding similar agreements with Thailand and Malaysia, Filipino businessmen want to strike a deal with the US to avoid being left behind. But not all local businessmen are gung-ho for a free trade arrangement (FTA), allegedly because of the lack of preparedness of some industries particularly in the agriculture and services sector. Analysts have said the element of preparedness is vital since the US is a far more developed country. But some businessmen, backed by no less than President Gloria Macapagal-Arroyo, have started exploring FTA talks. Makati Business Club executive director Alberto A. Lim said that while an FTA would certainly provide opportunities for the Philippines, the business sector is "not united". There are "uncompetitive" producers who are batting for the deal as a means of survival, while others would want to study the matter further to avoid a position where the Philippines wood be put an a disadvantage. "Our competitiveness is affected by [the lack of] infrastructure, power costs, and the high cost of doing business. If we go into an FTA because our goods are not competitive, we won’t have a big bargaining position," he said. "Manufacturing, for example, is dwindling as a sector. They need to gain special access that’s why they want an FTA," he added. Mr. Lim maintained it is the "weak ones pushing for the FTA [with the US]" and that the rest are not in "urgency mode." A troubled garments sector as well as the tuna industry based mainly in General Santos City have vocally called for the trade deal given competition from cheap Chinese garments and a looming preferential tariff scheme for Thai tuna. Philippine Chamber of Commerce and Industry (PCCI) President Samie Lim, however, said the unpreparedness tag is "untrue" as business groups are spearheading efforts to identify sensitive products and areas of negotiations. "That’s completely untrue. We have done a one-year study on 23 sectors. We are in constant communication with businessmen because ... when we go to the [negotiation] table, we should be very prepared," he said. "We are much better prepared now than a few years ago." The US in August last year signed a Trade and Industry Framework Agreement (TIFA) with the Association of Southeast Asian Nations (ASEAN). The TIFA is seen as a stepping stone to a full-blown FTA, but so far, formal trade talks between the United States and its former colony have not begun. Earlier this month, the US and South Korea concluded its trade deal after 10 months of talks. Talks with Thailand were stalled after a recent coup while those with Malaysia have been described as in the "advanced stages". Analysts also believe an RP-US economic treaty would be difficult to achieve given that the United States’ Trade Promotion Authority Act is set to expire this year. This means that trade agreements America enters into would have to be coursed through Congress and be subject to a tedious review. Senior Trade Undersecretary Thomas G. Aquino has said business groups have not formalized a united stance on how to proceed in engaging the US. "It takes two - for government and for the business organization and others as well to start talking among themselves in trying to find out what the sensitive areas are," he said. "Discussions were encouraging to really start the ball rolling." "[But] they have to speak out more ... the President wants it, the problem is the ’how-to’ to make sure everybody is consulted," he said. Agriculture Undersecretary Segfredo R. Serrano said the government is still facilitating consultations with critical sectors such as agriculture and services. "Government is still undertaking [consultations]. But the losers will definitely say that [they are unprepared]. The government wants them to air their concerns and then we try do something about it," he said. Sought for comment, trade lawyer Jeremy I. Gatdula of Makati-based Trade Advisory Services said the US would want certain policy reforms or conditions such as better protection of intellectual property rights, labor, human rights, and environment in the Philippines before giving the go signal. Another trade lawyer, Ma. Tanya Karina A. Lat of the Initiative for Dialogue and Empowerment through Alternative Legal Services, Inc., said Philippine industries are not prepared for give-and-take negotiations. "There’s a need for us to focus on ’old economy’ which has been neglected. We haven’t industrialized and an FTA with the US would hurt us even further," she said, warning that the government should not proceed "blindly" and must first study "opportunity costs". Sergio R. Ortiz-Luis, Jr., president of the Philippine Exporters Confederation, Inc., said the country should start preparing "for the inevitable" and try to finalize a negotiating stance. "We should have an FTA. Not having one is disadvantageous ... Even at the WTO (World Trade Organization Doha round), we were unprepared. But what can we do ... we have to compete," he said. "There will be winners and losers because all of them (local businessmen) will probably say they’re not ready... [but while] we are preparing others are already negotiating," he said. Special trade envoy Donald G. Dee has said the Philippines will continue to pursue the trade agreement with the US but by phases or by sectors - starting with the garments industry. Mr. Dee said he would lead a delegation to the United States this month to lobby for more trade room for light industries such as garments, houseware and handicrafts, jewelry, and food, among others. However, John D. Forbes of the American Chamber of Commerce said that while American businessmen are in favor of the US having an FTA with the Philippines, it may not want a per-sector approach. "We’re in favor but we don’t expect anything soon... My idea is that the US Congress wants a complete package," he said. Mr. Forbes also said that the Philippines should be prepared to give concessions in exchange for greater market access since negotiating an FTA is "like handling a double-edge sword".-Report from BusinessWorld