USTR - Briefing by Deputy U.S. Trade Representative Peter Allgeier and Deputy U.S. Trade Representative Susan Schwab
                 
The Office of the United States Trade Representative

Briefing by Deputy U.S. Trade Representative Peter Allgeier and Deputy U.S. Trade Representative Susan Schwab
12/17/2005


Briefing by Deputy U.S. Trade Representative Peter Allgeier
And Deputy U.S. Trade Representative Susan Schwab
World Trade Organization Ministerial, Hong Kong
Saturday, December 17, 2005

AMBASSADOR ALLGEIER: Thank you very much and thank you for joining us. I'll have a few comments at the beginning and then we'll open the floor for questions.

I have some good news, and I have some bad news.  The good news is as we approach the final 24 hours of the negotiations, we have an opportunity here, a very large opportunity, to put together an outcome at Hong Kong that would be extremely positive for development, which after all is our principal objective in the Doha Development Agenda.  The bad news is that if we aren't successful in the next 24 hours, we will miss that opportunity.  We should not miss that opportunity because not only would it be a setback for the negotiations overall, but it would be something that was missed for promoting the development of hundreds of millions of people and advancing in our joint goal of using trade to promote development.

You look at trade, and you see the trade is the engine of development.  Countries that have embraced freer trade in their policies, combined with economic reform and the kind of openness in their domestic economies, have been the developing countries that have been recorded the largest gains in development and alleviation of poverty.

Let's just review the agenda that we have before us as we enter this last 24 hours of negotiation to see what is possible on behalf of development.  First of all, of course, is that the principle gain that we could get for development would be in the areas of market access.  Time and time again, studies have shown that these are where the major gains are possible for developing countries.  Not just in improved access to the developed country markets, but very fundamentally in their access to each other where the majority of the duties that they pay, that their businesses pay, are to other developing countries.  70% of what developing countries pay in duties, what their companies pay -- it's a cost to their companies, it makes them less competitive -- is to other developing countries.

So, first of all, agriculture.  That remains the key, and market access remains the key to agriculture itself.  The largest single contribution that we as a community could make to development in the next 24 hours would be to have a significant advance in market access for agriculture.  Yes, it's something that the United States is interested in.  Yes, it's something that other countries are interested in.  But primarily it is something that the developing countries are interested in and would benefit from.

There are other aspects to agriculture that would be helpful to the negotiations and therefore get us closer to our goal of completing a development round, such as in the area of export subsidies.  We could agree on a near-term date for the elimination of export subsidies.  And let me be very clear on this: doing that is not something that is a contribution by one trading partner.  The United States is ready to contribute to that in the sense that if there were an end date set, it would apply not just to the export subsidies of the European Union, but it would apply to anybody who is using export credits.

The United States has such programs.  It would also apply to the disciplines that we would have to negotiate, and we're ready to negotiate, on food aid.  Let me be very clear here, we're ready to negotiate disciplines on food aid to deal with any instances of commercial displacement.   In other words, if there are certain practices within our food aid program or other people's food aid programs that are seen as potentially displacing commercial sales, we're prepared to take on obligations to discipline those.

And those would fall into place on the same schedule as the phase-down in elimination of export subsidies in the European Union.  Similarly, other countries would have to contribute in terms of disciplines on state trading enterprises.  For example, if there is a monopoly export desk -- such as in the Canadian Wheat Board, but other countries such as Australia and New Zealand have state trading enterprises – those would be disciplined in the same time frame as the other export competition practices.  So that would be a very useful complement to an advance on market access in agriculture.

In industrial trade -- where practically two-thirds of world trade is in manufactured products – there also, we could have a very important step forward that would benefit developing countries if we were able to agree on an approach that would meet the Doha mandate of dealing with high tariffs, tariff peaks and tariff escalation.  That is one of the principle objectives of the Doha round in manufacturing trade.  And it is an objective that the developing countries have been seeking for decades.  And we and others are proposing an approach to that that would be the most effective way of bringing down the high tariffs, and that is the so-called Swiss formula.  Basically, it's a formula that makes the deepest cuts in the highest tariffs.  So if we could agree on that, and within that, agree that there would be differential treatment for developed countries and developing countries. That is, one might use a more rigorous Swiss formula for the developed countries, and a more lenient one for developing countries.

Now I say more lenient. It still has to deliver real market access opportunities. So it has to change the situation on the ground. And the best way to measure that is, how much are exporters going to save in customs duties at the end of the Doha round, compared to the beginning of the round?  That is the measure of what kind of opportunities we're creating.

And if you're a business person, and calculating your opportunity to get into a market, one of the things you're going to ask yourself is, am I still going to have to pay millions of dollars or billions of dollars, in customs fees and duties to get into that market?  Obviously, enterprises in developing countries are probably least able to afford those kinds of costs.

In services, there too we have an enormous opportunity to open markets for services. Unfortunately, many people look at an opening of their market for services as a concession.  Actually, the only concession it is, is it's a concession to greater competitiveness by that economy.  And too many of the economies in the developing world are hampered by inefficient financial sectors, inefficient telecommunications sectors, inefficient distribution sectors, and express delivery, energy sectors.  An economy that has an ineffective, costly set of sectors like this just isn't going to be able to compete internationally. And all its manufacturers, and all its farmers, aren't going to be able to compete.

We see that clearly in the case of cotton, that the infrastructure for getting the product from the farm to the markets, even just outside of the country, is inadequate and antiquated.  And that is one of the biggest contributions we can make to help farmers in the developing world tap into the global market.

So those are the main areas of market access: services, manufactures and agriculture.  But we're negotiating other things here, as well. There's been an enormous amount of attention given to aid for trade.  And as you know, the United States announced the other day that we would be doubling our aid for trade over the next five years, from $1.3 billion now to $2.7 billion in five years.

There are three things about this I want to emphasize.  Number one, this is new money.  This is not a rebundling of programs that we've had and coming in and saying, "Okay, here is a big number."  It is not "box shifting," to use a phrase from another part of the negotiations.  This is new money.  Number two, it is grant money.  It doesn't get any better than that.  You accept the money; you don't have to pay it back.  But the third thing is, that it is money that is used in combination with the plans of these countries as to how they are going to tap in to the opportunities that we create through the negotiations.  And so it is not just the United States saying, "Okay, here is the money and here is how you'll have to use it."  It is working with these countries to say, "Alright, what are the new opportunities that are being created by these negotiations?  And how in you country can money best be used, so that your farmers, your ranchers, your entrepreneurs, can take advantage of these new opportunities?"

There are a number of things, also, that are possible for us to achieve while we are here relating to the least-developed countries -- the 50 countries that are on that UN list.  There are a number of things that we already have done on their behalf and with them.  And there are additional steps that we can take, in the last 24 hours that we are here, for the negotiations.

As you know, last week in Geneva, we reached agreement -- this is actually for more than just the least developed, but it tends to be particularly important to them -- on the provisions of the WTO having to do with intellectual property, the so called TRIPS Agreement, and making an amendment to the TRIPS agreement, making an amendment that would facilitate access to medicines for poor countries that do not have the ability to manufacture such medicines themselves.  And this is a commitment that we made when we launched these negotiations at Doha in November of 2001.  And we have now delivered on that commitment.  It is a very important commitment that the WTO members made at that time.  There are other provisions that we are agreeing upon for least-developed countries.  They will not be required to cut their tariffs in order to benefit from the other tariff cuts that the rest of us are making, either in agriculture or manufacturers.  They will not be required to make concessions in opening their services markets, although we think that would be contribute to their development, but that is their choice.  They would still get whatever benefits flow from the services commitments that we and other countries make.  We also have agreed to give them additional time to come into compliance with the obligations on intellectual property that we all took on in the Uruguay round.

So there are a number of things that we are doing on behalf of the least-developed countries.  And of course one of the things that we are spending a lot of time on and a lot of effort is can we fashion a program for duty-free, quota-free treatment for the least-developed countries.  This would be a commitment that would be taken in the first instance by the developed countries, which already have in place very extensive preference programs.  For example, in the United States, we have the Generalized System of Preferences (GSP) for granting duty-free treatment to developing countries.  We have had that program for 30 years.  It has continued to expand.  When people first started it in the mid-70's, it was a very modest program, but over the years there has been a steady expansion of that program.  And one of the areas of expansion has been that we – basically 10 years ago – added an enhanced set of benefits, that is, broader product coverage for the least-developed.  So we've had a special program for duty-free treatment for least-developed countries for 10 years in the form of our enhanced benefits within our GSP.

In addition, of course, many of these least-developed countries benefit from our AGOA program – Africa Growth Opportunities Act Program.  This in the last several years for Africa has been an enormous stimulus to diversification of their economies.  If you talk to the ministers from countries such as Kenya or Lesotho or any of the other African countries in AGOA, they will tell you that this has been a major contributor to expansion of employment and new opportunities for people, and particularly women in the garment industry, over the last several years.  So we are committing to build on that program and move toward the objective of duty-free, quota-free treatment for the least-developed countries.

We're also encouraging the larger developing countries -- countries such as Brazil or Argentina, Korea -- to have programs of their own for the least-developed countries.  We're not insisting that they have the kind of broad coverage, comprehensive coverage that we have, but again it would be a first step that then undoubtedly would be built upon over the years in their program.

So we are prepared to embrace duty-free, quota-free treatment for the least-developed countries, and we were working very late last night with other countries to achieve that goal.  As it is, the least-developed countries – and particularly from Africa – already have a great deal of duty-free treatment coming into the United States.  Right now from the least-developed countries, 83% of everything in our tariff schedule is duty-free for the least-developed.  If you are a least-developed country, or if you are a country in Africa and you benefit from AGOA, 91% of our tariff lines are available duty-free for countries that are in the AGOA program.  So we already provide very extensive access for these countries.

I know a lot of people look at the textile and apparel sector and say, "Well, what are you going to do about that?"  Well, let me tell you what already we are doing.  We import.  Last year, we imported $4.8 billion in textiles and apparel from the least-developed countries.  That is more than half of their exports of textiles and apparel to the entire world.  So we've starting off with a very large base.  In terms of the least-developed, again, 22% of their textiles and apparel they send to us are duty-free already.

So all of these – if you think back to this whole package of measures and possibilities that I described – that would be a very significant contribution to development and a down payment on a very successful Doha Development Agenda.

So let me stop there and see if you have any questions that either Ambassador Schwab or I could answer.

QUESTION:  Yesterday in the Green Room after hours of debating agriculture it looks like one of the delegations said that they don't have the mandate to negotiate the end date for export subsidies.  How do you see the day today after all of this that happened yesterday night, will there be a new text?  Are you expecting a new text by 12 o'clock?  How are you to proceed the rest of the day?  Second question, you've been involved in other negotiations and even in the WTO, one day to the end of this one, how are we?  Are we closer than previous Ministerial meetings to some kind of an agreement or are we further away than, for example, even Cancun or Doha?  Thank you.

AMBASSADOR ALLGEIER:  First of all, we have within our grasp in the next 24 hours the possibility of a very significant package of measures, decisions I should say, that would move us forward in meeting our objectives of unleashing the power of trade for development in the form of a successful Doha agreement at the end of next year.  The potential is there, as I said, it is just beyond our fingertips but it requires all of us in the next 24 hours, as we negotiate, to do so in a very, to mix metaphors, sure-footed way to reach that potential. The decision, or the question, that all of us are going to have to ask is: are we willing to stretch in order to achieve this?  When I say stretch, I mean, to listen to what the other countries are saying and then to bridge the differences between our positions and other countries' positions.  I'm saying this from each country's perspective.  We can do that, and certainly the United States is approaching the day with that perspective.

Comparing it with others, I think that every Ministerial has its own character and it's very hard to make comparisons as to where were you at D – 24, at these other Ministerials.

AMBASSADOR SCHWAB:  Let me just add the question specifically about agricultural export subsidies.  A decision on that, as far as the United States is concerned, is a necessary but not sufficient part of the equation.  As Ambassador Allgeier mentioned, market access is still critical, absolutely critical, to the development agenda.  We mentioned earlier, mentioned actually on a number of occasions, if you look at the EU agricultural proposal tariff cuts, the market access component, and compare it to some of the others, the U.S. agricultural proposal would have average tariff cuts of 66%.  The average tariff cut for the G20 countries, their proposal, will be 54%.  In the case of the current EU proposal, that is less than 40%.  If you go back to the World Bank studies, World Bank studies tell us that 63% of the gains from trade liberalization in this round for developing countries would come from agriculture, agricultural market access.  Of that, 93% would come from cuts in agricultural tariffs. So, yes there are issues associated with the commitment date for elimination of export subsidies, that is a critical decision, but that is necessary but not sufficient when we're talking about a truly robust outcome for developing countries.

QUESTION: Has President Bush made any attempt in the last couple of days to call other leaders to attempt to jump-start the talks or to push them in a new direction?

AMBASSADOR ALLGEIER:  First of all, President Bush, since the beginning of the Doha round has continuously pressed forward with other leaders to make this a successful round and he continues to do that.  In every bilateral meeting he has, the success of Doha is at the top of the agenda for the economic issues that he discusses with our partners.  Of course, he has, in the context of the G8 and in various summits, has laid out for us and for other countries, a major challenge in terms of cutting and eventually eliminating subsidies.  That is an extremely significant decision by the President that that would be our policy.  That was what enabled us to put forward that proposal on October 10th to move the negotiations forward.  I think that everybody involved in the negotiations recognizes that that was a major step up in the prospects for success of this round of negotiations.  That has not as yet been met by equally bold steps by other major trading partners but we certainly appreciate what our President did, and continues to do, to give impetus to these negotiations.

QUESTION: At a press conference this morning U.S. farmers were very frustrated and upset by the draft text and what they see as lack of progress in market access as opposed to unilateral action by the U.S. on cotton market access and reform of food aid. My question is what you would say to them and whether you still hold out any real hope at this stage of making progress on market access?

AMBASSADOR ALLGEIER:  I'm sorry I didn't hear the last part of your question.

QUESTION: How far back?

AMBASSADOR ALLGEIER:  Just the last sentence.

QUESTION: I'm asking you what you would say to them and whether you still hold out any hope at this point of making any real progress in market access?

AMBASSADOR ALLGEIER:  Well that is, it's an enormous challenge for us to make that progress.  Obviously it depends upon decisions that are made in places other than within our delegation.  That said, if these negotiations are going to succeed we cannot take the focus away from the steps that are going to be most important in order to succeed. That is agricultural market access.  For countries that are saying we need to make this a pro-development round and this Ministerial needs to have an important developmental outcome, we've got to keep our eye on where are the biggest returns.  When they asked a famous bank robber Willie Sutton why he robbed banks, he said "because that's where the money is", so when you ask us well why do we focus on agricultural market access, that's where the development is.  We have to keep ourselves focused on that, and we challenge all other trading partners to do the same.

AMBASSADOR SCHWAB: I would add here, that in any trade negotiation like this where one is ambitious and forward-leaning, there is always going to be resistance at home.  These are not easy decisions to make.  Peter Allgeier talked about the increase in aid for trade.  That's coming out of the U.S. taxpayers' pocket.  That is new money.  In the case of the agricultural package when it was introduced on October 10, it was with the understanding that we were trying to be ambitious and bold, and prompt other countries to do the same.  We were working very hard to ensure that our agricultural community understands that there are great potential gains here in the multilateral trading system of benefit to developing and developed countries alike.  We hope that they will be patient while we see if we can realize the full potential of the Doha development agenda.

QUESTION:  Ambassador, the U.S. has been under a lot of pressure to make a specific commitment in relation to domestic subsidies for cotton.  Can you say, is the U.S. willing to make any such specific commitment and to have it front-loaded within the agriculture package? Or would you still continue to insist that any reduction in domestic subsidies for cotton would just simply be part of the overall commitment?

AMBASSADOR ALLGEIER:  In June of 2004, all of the countries in the WTO -- including the cotton countries, including the United States and other countries that produce cotton -- agreed that the solution to the problem, the trade solution to the trade problems of the cotton countries, could best be resolved in the context of an overall reform of agriculture through these agricultural negotiations.

It was understood and it was agreed that in terms of dismantling subsidies, for example, that one can really only dismantle subsidies when one is doing it across commodities.

And also, one can only do it if everybody is doing it more or less at the same time.  And we have this opportunity within these negotiations to do that in a way that we have not had that opportunity in more than 50 years of the GATT and the WTO.

So, that remains the best path to reduce and ultimately eliminate the domestic supports.  And by the way, the United States is the only country that has put forward a proposal that takes us all the way to the elimination of domestic supports.

Now, obviously, the cotton countries would like to see this happen as quickly as possible, and that is our objective as well.  That is why we want to push the agriculture negotiations to a conclusion by the end of next year.  And the first step -- the most immediate step, I should say -- for doing that is to get the market access part of those negotiations into the same shape that everybody acknowledges the domestic subsidies part of the negotiations already are, as a result of the U.S. proposal on 10th October.

And more precisely, your question is, well, what about front-loading whatever changes are made and can we make a commitment to that?  Until we know what we are going to be doing as a collective on reducing domestic supports and eliminating them -- and until we know what we're going to be doing on market access – you can't really say, "Well, I'm going to do X or Y" as far as implementation.

Let me just say that we take very seriously the other part of that deal of July 2004.  One part was this would be addressed in the agriculture negotiations.  The other part is that cotton would be addressed ambitiously, expeditiously and specifically.   Our other colleague Karan Bhatia, the other Deputy USTR, has been working - and it's not an exaggeration - continuously, not an exaggeration, around the clock.  And he's been working ambitiously, expeditiously and specifically on cotton the entire time we've been here, working with the Cotton Four, the Cotton Five and other countries in Africa, and other places – mostly Africa -- that produce cotton.  And also with countries that are big purchasers of cotton, countries like China and India.  And we challenge all countries to say right up front that we are prepared to provide duty-free, quota-free treatment for cotton when we implement that program.

So, we are working as hard as we can, and we see that there is a chance here.  This is another one of the opportunities we face this week.  We can move these agriculture negotiations forward.  That would be the biggest contribution that we could make to resolving this cotton program, including the reduction and ultimate elimination of the subsidies that you raised.

QUESTION:  My question is about service.  Given the nature of service negotiation and the progress we have made so far, I wonder if the U.S. will pursue bilateral agreements with certain countries they have key interests, for example, China and India.  Thank you.

AMBASSADOR ALLGEIER:  Well, of course, we already have pursued, if you want to call them, bilateral services agreements with other countries in the context of the free trade agreements that we have done with countries -- both developed countries such as Canada and Australia, and developing countries in Latin America, the Central American countries. Ambassador Schwab is working with those countries to complete the entry into force, implementation of the CAFTA DR -- and in countries in North Africa, such as Morocco; in countries in the Middle East such as Bahrain.

In all of these agreements, we have probably the most advanced, if you want to call them bilateral services chapters, which is a bilateral services agreement, that any people are negotiating globally today.  And so, we certainly are talking to other countries about the possibilities of such bilateral free trade agreements.  We are not talking about that at this point with China, but other countries in Asia.  We're actively negotiating, for example, with Thailand.  We completed an agreement with Singapore.  And we will continue to pursue such agreements, whether or not we are successful here in Hong Kong, and whether or not we are successful with the Doha round because this is such a fundamental piece of the picture in expanding trade bilaterally and in promoting development in developing countries.

QUESTION:  I think most agree that 2007 is a key date, a deadline for WTO because of our trade promotion authority, which expires.  We were told yesterday at a briefing that there is no chance that TPA (Trade Promotion Authority) could be extended.  Even if the U.S. got its way in its proposal, why would we assume that that would have any better chance of passing Congress, a WTO agreement?

AMBASSADOR ALLGEIER:  I'm sorry, why it would have a better chance of passing than what?

QUESTION:  Than a TPA.

AMBASSADOR SCHWAB:  The way the process works:  In the United States, as you know, our legislative approach to trade policies since 1974 has been referred to as either Fast-Track or now Trade Promotion Authority.  And under that authority that is granted by the Congress to the U.S. executive branch periodically, trade agreements can be enacted through the United States Congress in a finite period of time with an up or down vote, meaning no amendments and no filibusters.  That is how TPA works.  This current authorization for the use of TPA -- Trade Promotion Authority -- expires, as you noted, in 2007.

Generally, when an executive branch,  when a President of the United States has sought trade promotion or Fast-Track Authority, that legislation does not go through under Fast-Track – that is fully amendable, filibusterable bill – that is a piece of legislation that could move quite slowly or not move at all if you had large numbers of members of Congress who either wanted to amend it or vote against it.  And therefore, while it is always going to be a challenge to get any trade legislation enacted, any trade liberalizing legislation enacted, it's a particular challenge to get trade promotion authority enacted.

QUESTION:  BBC.  On agricultural market access, American farmers have a couple of specific barriers in the EU: hormones and beef, and on genetically-modified crops.  In these negotiations, are you looking for any movement on those issues from the EU?  Or are you leaving it to dispute settlement procedures?

AMBASSADOR ALLGEIER:  We're pursuing those bilaterally.  This is a multilateral forum, and if everybody brought their bilateral problems into this forum, then we would get totally distracted and we would not be able to move forward with global trade liberalization.

So we are continuing to press, obviously, to get the access that we think we're entitled to in the EU market on those products and others, but we're not bringing that into this picture.  Or any of our other bilateral issues with the EU, by the way.

QUESTION:  I'm Claudius Ross from the Brazilian daily Folha de São Paulo.

You mentioned President Bush's commitment to the trade agenda.  And as you know better than I do, President Lula of Brazil called President Bush in order to suggest a summit meeting early next year to try to put some political input in this negotiation. Considering the difficulty the ministers are having here to reach even a modest agreement, do you consider that it is the right time to convene the summit meeting, and would it be useful if called?

AMBASSADOR ALLGEIER:  Well, I think to ask that question 24 hours before the ministers have completed their work – or to answer it – would be premature.  Certainly President Bush has spared no effort, his personal effort, in moving these negotiations forward, not only in meeting with other leaders and challenging other leaders, but actually in making very difficult political decisions at home that enable us to negotiate in a way that keeps alive the prospects of a very ambitious outcome.

And I mention domestic subsidies. It's hard to think of an issue like domestic subsidy that is more sensitive.  Because when you think about it, it covers the entire country.  It's got rice farmers in the South, it's got dairy farmers all over the country, it's got grain farmers in the Midwest, it's got cotton farmers in the South.  So that was a very, very difficult political decision.

Ambassador Schwab mentioned the aid for trade. I think you're all aware of the enormous deficits that we have, the fiscal deficit that we have, in our federal budget.  And as she said, the money for this – this is new money -- it's not going to be paid back to the taxpayers of the United States. The only way it comes back to us is via expanded growth in the developing countries, which we all benefit from, but in a very indirect way and well into the future. So the President, the first evidence of his commitment, are these tough political decisions that he has made.

As for the prospects for a summit, that is something that all of us will have to assess after the Hong Kong Ministerial.  And let's face it.  The time of presidents and prime ministers is extremely valuable, and so one wants to use it at the most opportune and the most important points.  And so there will have to be a joint decision made by a number of presidents and prime ministers as to when they can make the best contribution as a group, by coming together, to these negotiations.  At this point, I think it would be premature to speculate on exactly when that point would be.

QUESTION:  New Age, Bangladesh.  About the aid for trade, this seems to have become quite a significant part of the development package.  I just would like to have some clarifications on that.  When you say new money, do you mean that it has not already been promised at the G8 summit, the Overseas Development Assistance, or under MDGs?  It's my understanding that the USTR does not have a mandate to make such commitments.  It needs an approval like the tariff quota, tariff line, duty restriction removal thing.

The other thing is, would this aid for trade package, would this be bound under WTO rules?

AMBASSADOR ALLGEIER:  Okay, three questions: first of all, new money – what does new money mean?  New money means that it is money that has not previously been committed.  In other words, we have in this last year committed to a certain amount of money for aid for trade.  As I said, it's something on the order of $1.3 billion.  If you just straight line that, in other words, if we continue to just put out $1.3 billion, that's old money, in a sense.  It's the continuing of that.

This is new money in the sense that we are saying, we're not just going to give it the same very high levels.  PS, postscript, it's the highest level that any individual country gives to aid for trade.  What we're saying is, we are going to make specific increases in what we have been giving, building off that base, over the next five years.  And that is not something that there had been a decision on previously.

In terms of the mandate for the USTR to announce this, Ambassador Portman made that announcement only after obtaining clearance through all of the agencies that are involved in putting together the President's budget, including the Office of Management and Budget.  Any of the positions we take here in the negotiations are not positions that we make up in the office of the U.S. Trade Representative.  These are positions of the entire Administration, and it involves not only other agencies but it involves the approval of the White House.  So this is a decision that has been made by the President; that this is what he is going to put in his budget in the coming five years.

And then there was the question of whether this is, quote, "bound within the WTO."  There are no provisions within the WTO for binding assistance, financial assistance.  That is something that is done outside of the WTO, in a formal sense.  What we're doing, though, is we are coordinating what we're doing on the financial side with what we're doing on the trade side.

QUESTION:  Reuters.  I just wondered if you could talk about where things stand in the services talks.  A lot of developing countries seem to have anxiety about Annex C, thinking it will enforce them to engage in negotiations, and perhaps take on commitments that they don't want to take, and would like to either see it, as I understand it, changed somehow or dropped altogether.

And then also, I just was curious about the NAMA -- how optimistic you are of getting a Swiss-type formula, and whether there would be language in the text that would allow sectoral talks to begin shortly after the start of the year?

AMBASSADOR ALLGEIER: Ambassador Schwab is our lead on the services negotiation, so I'll ask her to deal with that first. Please.

AMBASSADOR SCHWAB: Thank you, Peter.  Last night, there was a lengthy meeting with Minister Kim from Korea, who is the facilitator for services.  It involved 15-18 countries where the text and the annex that were developed in Geneva were discussed in great detail to see where there was potential for change.

There were potential amendments proffered both that would weaken the text -- or would have weakened the text -- and that might have strengthened the text.  During the course – the way the process worked was, there was a lengthy discussion and debate about each one of the paragraphs where changes might be considered.

I would say it is very important to note that in the services negotiations, there is nothing that resembles a North-South, developed-developing country split.  There are many developing countries that are among those that would like to strengthen the current text or maintain the current text.  And there are developing countries that would like to weaken the current text.  Therefore, all of these were brought into play during the course of the discussion last night.

I think that the reason that you find as many developing countries as you do embracing the services negotiation is this recognition that Ambassador Allgeier alluded to earlier that services has the potential to be -- services trade has the potential to be an unbelievable tool of development, of economic development.  If you are talking about, for example, express delivery, express package delivery, the presence of an efficient and effective express package delivery entity in your country opens your access to 98% of the world's consumers.

Similarly, a financial services entity that will come into your market, or a telecom entity -- all of these, when they come in, they are doing what amounts to trade-capacity building.   They are laying infrastructure, improving communications, and enabling domestic indigenous corporations, companies, entrepreneurs to build their capacity and to take advantage of export markets and enhanced efficiencies domestically.  So, you see a lot of developing countries' support for strengthening the services and maintaining the services text.

After the discussion last night, among this group, Minister Kim went back and came up with a text that he articulated as being as close to a consensus text as possible based on the discussion that had transpired during the previous four or five hours.  That text was then brought into the Green Room, into the CCG, last night and introduced to the members there.

AMBASSADOR ALLGEIER:  I think what we will do is, we will take those who are on the line and that will be the end of the questions that we can take.

There was the question about sectorals in NAMA.  As you know, in the July framework, sectorals in NAMA were identified as the key element in liberalizing manufacturers trade.  We have already had great success with that in the WTO with the information technology agreement, but also with sectorals that we did in the Uruguay round.

And again from a business standpoint, remember, that import duties that you have to pay, are a cost of business and they reduce your competitiveness and your ability to provide these products to consumers at the lowest price.  And so that is what we have to look at.  Are we reducing the payment that people have, the tax that people are paying in the form of import duties?  And sectorals are an excellent complement to a very strong formula to achieve that objective.

QUESTION:  Civil Society Trade Network of Zambia.  My question is basically on the conditions of AGOA.  One of the conditions is a pest-risk analysis, which is very long and very cumbersome and by the time it is finished -- it is all about 12 months -- and by the time the finished analysis, usually the exporters, the motivation for them to export the products to the U.S. is usually gone.  And also on the aspect (inaudible) use setting, when a country is not performing well politically or the political environment, you can easily withdraw the AGOA benefit.  So the success of AGOA basically living in Africa is questionable and I think if you—those conditions are revised, some of the conditions are revised, then probably we can say that it is a success from AGOA.  Thank you.

AMBASSADOR ALLGEIER:  Thank you.  Of course, we do believe that there has been very significant success from AGOA to date, but obviously we want to build on that success.

Let me talk about that specific issue that you raised about the pest-risk analysis.  This is part of the sanitary and phyto-sanitary standards that every country in the world has.  Now, they are not identical in every country.  But every country has the obligation to protect its own agricultural sector from being damaged by various agricultural risks of pests and so forth.  And so we all have these standards.

And one of the difficulties that countries that are resource-poor have is having their farmers be able to meet the standards in other countries markets.  And so, you are right.  It takes a long time to do the pest-risk analysis, and then if there is a problem, to put into place the kind of measures in the exporting country that will enable its farmers to send their product to the big markets of the world.

And so, I think that another way to look at this is that when they go through that risk-analysis for AGOA, not only are they developing their capability to ship that agriculture product to the United States, but their farmers and those along the distribution chain to the export market are being prepared to do that in other markets as well.  And we combine the work on the pest risk analysis with aid to help the country spread the knowledge about how to meet these standards.  And so rather than looking at it as an impediment, it is actually a stepping-stone to even expand the trade.

AMBASSADOR SCHWAB:  Let me also mention one item about AGOA and the, for example, Generalized System of Preferences.  Under AGOA, Peter mentioned that 91% of tariff lines under AGOA are duty-free.  One of the things that we have noticed with some of the preference programs is the processes are not the problem; the problem is the lack of knowledge and information by potential exporters in the developing countries that could benefit.  There are many preferences that developing countries could apply for under, for example, the Generalized System of Preferences that they have not applied for, and part of the trade-capacity building exercise should help them enhance that.

AMBASSADOR ALLGEIER:  Since we are running out of time, perhaps we could have quickly your three questions and then we will answer them as a group.

QUESTION:  Ambassador Allgeier, Neil Gough from the South China Morning Post.  I just wanted to ask, in terms of banking a Hong Kong deal on duty-free, quota-free for least-developed countries.  You know, there are a number of proposals that have been put forward.  I know a group of LDCs has suggested 90-95% of their products be allowed in DFQ (duty-free, quota-free) just as a way of kind of putting a number on that in terms of what, you know, developed countries might be—what exemptions they might get.  What is your reaction to that and is there—are you able in any way quantify what you would hope to achieve in terms of exemptions from QFDF (quota-free, duty-free)?  Thanks.

QUESTION: Inside U.S. Trade.  With respect to the NAMA talks, has there been any discussion or movement, on Brazil, India and other developing countries' demands that the flexibilities provided for in Paragraph 8 be stand-alone?

QUESTION:  Today, there will be presented a new ministerial draft.  What should we expect from this new text?  And can you tell me if this new group of G100 have had a real new impact on the negotiations?  Thanks.

AMBASSADOR ALLGEIER:  Okay, thank you.  First of all, with respect to duty-free, quota-free, I think the question was could we imagine having a duty-free, quota-free coverage for 90-95% of products from the least-developed?  The gentleman said that was a proposal of least-developed countries.  Certainly, we think that that is a very achievable goal, and we think that is a decision that is achievable at Hong Kong.

In terms of NAMA and the question of the flexibility in the so-called paragraph 8, everybody accepts that there will be that kind of flexibility, that flexibility, in the NAMA formula.  The question is exactly what the quantity will be.  And our view is that that number is integrally related to the other numbers in NAMA – the formula and some of the other variables – and those have to be agreed upon together because the ambition in that negotiation is a result of what all of these different numbers are.  And so you have to do them simultaneously, and that is why they were put in brackets back in July 2004.  If that had been agreed, if those numbers were agreed in 2004, there wouldn't be brackets around them.

And then in terms of this new ministerial draft and the role of the G100 or the G110, those countries all were deeply involved in the negotiations.  They participate in various groups.  I mean, some of them are in the least-developed groups, some of them are in the ACP, some of them are in the Africa group.  So there are different configurations that countries use, depending upon the issue.  This is one configuration, but all those countries have been involved through a number of groups previously.

Thank you very much.

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