Trade Ministers Provide New Impetus for WTO Discussions

APEC Trade Ministers at the June meeting issued a breakthrough statement on the Doha Development Agenda in which they reached a new understanding on the shape and core elements for non-agricultural market access, or NAMA. The Ministers agreed on a formula for the calculation of future tariffs that they hope will lead to the unblocking of stalled WTO trade negotiations. The agreement should deliver substantial improvements in market access opportunities.

The agreement revolves around the "Swiss formula" used to calculate tariff reductions in non-agricultural products with coefficients to be negotiated for tariff reduction applied on a line-by-line basis. The agreement includes the principle of binding all tariff lines and making them subject to the tariff reduction formula. At the same time, it recognizes the need to address APEC Members' concerns regarding the treatment of low unbound lines and encourages APEC officials to find a pragmatic solution to developing sector initiatives on a voluntary basis, a pragmatic approach to addressing non-tariff barriers, and special and differential treatment for developing Members including less than full reciprocity in reduction commitments.

"The APEC stand-alone statement (on DDA) came at a very appropriate time because there was a wave of pessimism in Geneva," says Dr. Gerardo Traslosheros Hernandez, Mexico's Senior Official to APEC, in a telephone interview from Mexico City. Adds Alan Bowman, Canadian Chair of the Committee on Trade and Investment: "This is the most specific WTO statement we have had in APEC since I joined five years ago."

The quantity of the tariff cuts has yet to be decided as details have yet to be worked out on the calculation of a coefficient in the mathematical formula used to calculate the tariff reductions. But one of the distinctive features of the Swiss formula is to make a deep cut in tariffs, explains Ambassador Choi Seok Young, Executive Director of the APEC Secretariat in Singapore. "We did not expect that we could reach agreement on this matter before the meeting," admits Ambassador Choi. "Considering APEC's decision-making process is based on consensus, any one economy could have extended an objection ... In the end, ministers produced a very unexpected outcome."

Reaching a collective position means that APEC Member Economies will be able to present a united front to WTO members. That's important as APEC economies account for roughly half of the world's trade and represent a cross-section of developed and developing economies.

The Ministers noted that time is short and a huge amount of work remains to be done to improve the progress of trade negotiations. They committed themselves to producing an ambitious and balanced outcome at the upcoming Sixth WTO Ministerial Conference to be held in Hong Kong in December. This would involve agreeing upon modalities for agriculture and non-agricultural market access, an ambitious outcome in services, significant progress in trade facilitation and the integration of the development dimension into all areas of the negotiations.

In addition, Ministers committed themselves to making every effort to achieve by July a tiered formula for achieving substantial reductions in trade-distorting domestic support, the process for eliminating all forms of export subsidies by a credible date to be agreed, and special and differential treatment for developing Members including safeguard mechanisms.

On other fronts, Ministers agreed to develop model measures on trade facilitation for Free Trade Agreements (FTAs) and Regional Trading Agreements (RTAs) that can be endorsed by APEC Leaders in November. The trade facilitation measures in areas such as transparency, consistency, the release of goods, modernization and paperless trading, risk management, express shipments, and fees and charges, will benefit business in particular.

Given there has been such a proliferation of FTAs and RTAs in the Asia Pacific region in recent years this was a "very positive outcome," notes Mexico's Dr. Traslosheros "APEC economies should aim to make the FTAs/RTAs building blocks instead of stumbling blocks and the way to do that is to find areas of convergence," he explains. "And in order to do that we must proceed topic by topic to find model provisions that APEC economies can aim to apply in their own regional or sub-regional (trade) arrangements." Dr. Traslosheros also notes that such models could be extended to other areas such as investment and services.

The Ministers also agreed to forward the APEC Best Practices to the Geneva Caucus to support efforts by the WTO to clarify and improve the disciplines and procedures applied to FTAs/RTAs. The Best Practices were proposed at the APEC Trade Ministers' meeting in Chile in June 2004. The Best Practices apply to FTAs and RTAs currently being negotiated by more than half of APEC Member Economies. "The past year has shown that by applying APEC Best Practices to the FTA negotiations underway around the region, we have made the process more transparent and less complicated," noted Mario Matus, Chile's Senior Official and Chief Trade Negotiator. "The commonalities that are becoming apparent now between different FTAs and RTAs negotiated between quite different economies around the region is reassuring."

Trade Ministers also endorsed a series of Anti-Counterfeiting and Piracy measures including guidelines for authorities to seize and destroy pirated goods. The measures include combating trans-national networks that produce and distribute counterfeit items and establishing guidelines for authorities to inspect, suspend, seize and destroy pirated goods and equipment. The package also involves measures to enable legal and enforcement systems to curtail online piracy and develop guidelines to prevent Internet sales of counterfeit goods. Contact between and the sharing of information between customs and law enforcement agencies will also be encouraged and education and training on the issue will be promoted throughout the region.

While each economy is taking steps to fight counterfeiting, actually reaching a collective agreement on the issue is "symbolic," explains Ambassador Choi. "This initiative was endorsed by all APEC members and it means that any member can raise the issue of counterfeiting and piracy by other economies and it can then be discussed within the APEC framework. The members can then exert peer pressure on economies which face piracy problems and that's important."

Finally, APEC Trade Ministers called for closer public and private sector coordination in fighting corruption in the Asia Pacific region; agreed to hold a workshop in New Zealand in August on establishing a multilateral legal framework to enable members to access each other's data on lost and stolen passports; and announced that developing member economies will receive increased assistance for activities in APEC's high priority economic and technical cooperation sectors through the new APEC Support Fund, or ASF. The ASF received final approval at the Korea meeting, with Australia generously committing Aus$3 million over three years.