Ambassador Schwab: Good afternoon. It’s 6:00 o’clock here and we’ve been going pretty much straight through for the last, it feels like two days.
We just came from a Heads of Delegation Meeting at the WTO where the Director-General announced a suspension of the Doha Round negotiations. The tenor of the dialogue among the members of the WTO was generally along the lines of what we expressed. Mainly a lot of disappointment that we weren’t able to wrap this up, a recognition that this is a serious failure, but an expression that it is worth investing in seeing if there is some way to salvage the Round going forward.
Secretary Johanns and I got here a day and a half ago for what was to have been two days of intense meetings to see whether we could bridge the differences and as we sat through the G-6 meeting and the G-6 meeting consisting of Australia, the United States, Brazil, India, Japan, it became quite clear as we went around the room starting with market access that there was no there there. All of the flexibilities that we had hoped to see in the wake of the G-8 Summit, and recognizing that Trade Ministers had had an opportunity spend a couple of days in the capital to obtain additional flexibilities as suggested, as requested by the leaders, those flexibilities were not evident.
Secretary Johanns and I got here with sufficient flexibilities, both in terms of potential cuts in trade distorting subsidies and in terms of increased market access, ready to deal and come up with an ambitious, robust, balanced round and unfortunately most of our trading partners showed up with exactly the same positions as they had two, three weeks ago when the last set of Doha Round negotiations hit the skids.
The result then was a Doha Round package, or the potential for a Doha Round package that really doesn’t meet the promise of the Doha Round. This is a Round that is known as the Doha Development Agenda where the key focus is on alleviating poverty. The pledge in the Doha Round framework is for "substantial increases in market access" so as to achieve new trade flows. It was evident from the conversation that the new trade flows were not going to be forthcoming and that we were not going to meet the promise of Doha in terms of alleviating poverty and generating global economic growth and development.
Let me turn to Secretary Johanns to add his comments and then we’d be happy to answer your questions.
Secretary Johanns: Let me at this point recognize that when we started this process many years ago it was the goal to bring development to the world through the Doha Development Round. Any study out there would indicate that that is going to occur by increasing market access. In other words, giving countries the ability to sell their products in other parts of the world. This is what raises the standard of living and economic study after economic study has indicated that.
In the last weeks, especially the last 30 days, I’ve indicated that Doha Light became lighter and lighter and it really has. One would almost need a scorecard to keep track of the European Union proposals. Two weeks ago they indicated that they though the landing zone was going to be in the vicinity of the G-20 proposal. They then indicated here that they could not get to the G-20 proposal in terms of market access, that they would be south of the G-20 proposal on market access.
The challenge became even greater when they outlined their approach to sensitive products. For example, I’ll just give you one quick example. Around the world many countries raise beef, therefore selling beef into a marketplace is very important. The current tariff for high quality beef in the European Union is 80 percent. With the tariff proposal out there, their new tariff would be 61 percent, so still a very very high tariff. They also indicated that they would likely designate this product as a sensitive product which means that they would put in place a TRQ.
So we got to probing about how much beef was that? How much beef would the world be able to sell into the European Union? The answer to that was 160,000 metric tons. That’s about two percent of their marketplace. That is virtually no market access. That is saying to the world that all of you get to divide up 160,000 metric tons.
Now they’re making the case that you get 800,000 tons, but from that, the extra tonnage is what they anticipate their consumers might need. It is not granted by the TRQ. So it truly is a situation where we haven’t been granted market access.
Then we moved to a discussion of special products with the developing countries. Let me just remind you again, the developing countries in many cases are world class competitors. China is a developing country, South Korea is a developing country, Brazil is a developing country, and I could go on and on. In many areas these countries compete not only effectively with us, but they compete very effectively with the rest of the world.
The developing countries have tabled a proposal and I didn’t see any flexibility whatsoever in what they tabled. It’s a G-33 proposal and it basically says that they would have the right to protect 95 to 98 percent of their ag marketplace. Ninety-five to 98 percent in the growing economies of the world, they would have the ability under their proposal to say when they would deal with us, how they would deal with us, what products they would deal with us on. It just is a devastating proposal in terms of market access. It basically gives the developing countries a pass on market access.
Well, the final result of all of this is that the ambition of our October proposal which was historic, very very significant, has not been matched by the very thing we said back in October was necessary, and that’s market access.
So the Director-General has suspended the negotiations. I think it’s terribly unfortunate. My hope is that this will give the world an opportunity to consider the importance of the Doha Development Round and find a way, find a pathway to move forward.
Questions? We’d be happy to take questions.
Question: Ambassador Schwab, some have argued that the other aspects of the Round, that is the trade capacity building, services, trade facilitation, I won’t mention rules, but actually more important than reducing low tariffs and already low tariffs. What’s the US idea on these other issues? Should they proceed on a regular track or are they also delayed?
Ambassador Schwab: Director-General Lamy made it clear that given that this is a single undertaking, meaning nothing is agreed until everything is agreed, nothing moves forward until everything moves forward, that when he suspends the discussion on modalities, the framework for agriculture and non-agriculture market access, that all of the other negotiating tables are also suspended. I think that’s one of the sad things about the situation we find ourselves in. A lot of progress has been made in trade facilitation.
In the case of trade capacity building and aid for trade, I would note that the US commitment to double our trade capacity building contribution from $1.3 billion to $1.7 billion, that remains on the table. That does not go away, and we will continue with that commitment regardless of what happens with the Doha Round. But all of the other aspects of the Round are in suspension. It would be our hope that if we are able to resuscitate the Round going forward that all of these will move forward.
I would raise a question in terms of your premise which is it is incomprehensible that this could be called a development round without market access being at the core and whether you look at [inaudible] studies or World Bank studies or IMF studies or Institute for International Economics studies, market access, in particular market access to agriculture, is the single most important contribution that we can make to development in developing countries. Similarly market access in manufacturers, market access in services. Also elimination or disciplines in trade distorting subsidies. As you will recall, one of the only things to come out of Hong Kong was a global commitment to eliminate export subsidies. Again, that’s the kind of thing that we want to see going forward and ultimately getting implemented but it can’t be called a development round or a successful round absent real market access, real market opening that makes new trade flow.
Question: Ambassador Schwab, can you explain why the US at a meeting like this doesn’t put a specific offer on the table to improve your proposal on subsidies? I understand everything you’ve said so far that you just didn’t see any flexibility from the others on market access, I understand completely, but even just the question of tactics. To avoid all the blame and so forth and to at least give some possibility that the others might be shamed into being more forthcoming, what is the harm in putting an offer on the table that’s contingent on good offers coming from the other side.
Ambassador Schwab: There is a very fundamental, straightforward answer and that is the United States cannot be in a position of negotiating with ourselves. We put a bold, ambitious offer on the table in October with significant cuts in domestic support, with significant cuts in market access. The most ambitious proposal that is out there, period, full stop. And that was conditional and it was in anticipation of reciprocal market access being proffered. That did not happen.
So we agreed with this process whereby Director-General Lamy would use [inaudible] or these bilats. Recognizing that the complicating factor with this negotiation is it’s sort of circular, triangular nature where what we want from the EU and the advanced developing countries cannot be paid for by us, it’s paid for by the advanced developing countries on the part of the EU or the developing countries that want [domestic] support on our part need to see us act, so you’ve got this triangular exercise.
The way we decided to address it was to have Lamy as a facilitator do confessionals, and I will tell you that when we sat down with Lamy we were very forthcoming and very clear in our flexibilities,
both in terms of cuts in domestic support and in terms of market access ambitions. And it became very clear yesterday as we were going around the room at the G-6 that we were probably the only country during the confessional process that put a significant, a significantly more flexible offer on the table in the context of the confessionals. And when I spoke to Lamy later, I said here we’re going through this exercise on market access and it’s very clear there’s no there there and that nobody has moved. You can’t expect the United States to put its offer on the table, and he said no, nor should you given the fact that there are clear gaps that are not going to be reconcilable.
So we basically put our flexibilities on the table and Lamy recognized that they were just going to be pocketed if we had put them on the table formally in the G-6. So that really is the answer.
Question: What good is the WTO in policing the world’s trade if the 149 members can’t come together on agreement of the modalities of trade? And what does it mean in terms of Farm Bill discussions?
Secretary Johanns: In terms of your question about the value of the WTO, there is significant value in the WTO. We firmly believe in a world trading process that is based upon rules, that recognizes that there are going to be principles upon which we trade with each other. We have gone to the WTO on occasion to seek enforcement of their rules. Other countries have gone to the WTO to do likewise, relative to programs we have. It is a mechanism by which the world can deal with and manage its trade relationships.
So let me just assure you that we are absolutely committed to the WTO process and the multilateral process.
The second question you asked was the impact on the Farm Bill. We heard so much in the Farm Bill forums that I did about the need for reform in subsidies that I really believe that we should proceed forward with the Farm Bill. It is very important that we do so. Keep in mind, 60 percent of US farmers receive virtually nothing from the Farm Bill. Ninety-three percent of the subsidies go to five crops -- corn, wheat, rice, cotton and soybeans.
This is truly a situation where every four or five years we get an opportunity t examine farm policy. I believe it’s important for all farmers to examine farm policy, to draft farm policy that is equitable, that is predictable, and that is beyond challenge.
Question: Secretary Schwab, does the US have a special role as the world’s leading trader in these negotiations? A moral role or a bully pulpit type role? Or are we just one more player in these negotiations?
Ambassador Schwab: The United States clearly has taken on a leadership role in these negotiations. The United States was instrumental in these negotiations being launched in 2001. They faltered in 2003. We helped resuscitate them in 2004. Then again in the fall of 2005 we put on the table a very ambitious proposal in terms of agricultural market access and cuts in domestic subsidies.
So the United States has taken on a clear responsibility here, and if you go to the President’s statements at the UN General Assembly last fall, last September, the President went so far as to say that he is committed, we are committed to the elimination of tariffs and subsidies if our trading partners are willing to do the same. So this has been a very high priority for President Bush and a very high priority for the United States.
The catch is it takes two to tango and it takes 149 to reach a consensus for a Doha Round agreement. While the United States has been as much a leader and as forward leaning as could be possibly imagined, unfortunately several key developed country and developing country, advanced developing country trading partners, have not played their role, have not bellied up to the bar to play their role.
Question: Ambassador Schwab, what does the suspension actually mean in this context? How long are these talks going to be suspended? Is it years? What’s the imposition on that?
Ambassador Schwab: That really depends on conversations that are going to go on over the next several weeks and presumably months. Pascal Lamy did not mention a specific timeframe in terms of reconvening the group. I think there is a sense that we shouldn’t reconvene ministers until we have a way forward.
I will tell you this, Secretary Johanns and I have already launched a number of bilaterals. We have a lot of work ahead of us. I will be traveling the end of this week, next month I’ll be headed to Asia, be meeting with the trade ministers of ASEAN, probably make one or two stops along the way to talk about Doha Round negotiations and how we might resuscitate them in September. The CAIRNS Group is meeting in Australia. Secretary Johanns and I will be meeting with that group. And that is a group that has in past rounds been instrumental in moving the ball forward in terms of agricultural market access. Then in November we have the APEC Summit in Vietnam and the APEC Trade Ministers Meeting, so that is another example of a group that has been very ambitious.
Secretary Johanns has a trip planned to India. We anticipate the Japanese Agriculture Minister will be visiting the United States in September or October. So what you’re looking at going forward in the near term is a great deal of activity in small groups, bilaterals, affinity groups as it were, to see where there is potential for breaking loose the log jam.
Question: You mentioned new flexibilities that you had. Does that include in terms of the offensive interests on agriculture market access? And what do you make of the fact that all of the other, or at least four of the five other G-6 members are blaming the US for the breakdown?
Ambassador Schwab: Let me note that five out of the other six members are not doing that. It is very, if you look at any of the statements it’s very clear that the United States is in very very good company. Australia and Brazil were clearly supportive of market access ambitions.
The countries that have tended to be finger-pointing at this point are the ones that are reluctant to act in terms of market access. And quite frankly, all of the finger-pointing that is taking place is not going to alleviate poverty, is not going to help one farmer, is not going to help lift one family out of a destitute situation. It’s just a way of moving on without moving into substance. That’s not the way we do business.
Question: Can I ask you a question about the confessional round? Just the mechanics. The way you’ve stated it is that only Pascal Lamy knew what precise flexibility the United States was offering here. How do you know, do you know from him that the other partners were not [inaudible]? How does everybody know what they know? I’m a little confused.
Ambassador Schwab: What happened was Pascal Lamy, we sat down with Pascal Lamy last Monday right after the G-8 and he had gone through an initial set of bilaterals. An initial set of confessionals, and he said flat out to everyone that at this stage of the game the gaps are too wide, the gaps are too unbridgeable for him to imagine a common landing zone. That was immediately after the G-8 Summit. We agreed that all of us would go back to capitals and to talk to our leaders so as to return this weekend with additional flexibilities. That is exactly what Secretary Johanns and I did.
In addition to spending time at the White House we also spent time up on the hill and we met with the Senate Finance Committee and the House Ways and Means Committee and the Senate Agriculture Committee and the House Ag Committee and we met with commodity groups. So we came back with those flexibilities.
Each of us, presumably, put on the table with Lamy enough information, and enough flexibility or so we thought, so that Lamy would be in a position to start applying a round of "what if" with each of us. Unfortunately, Lamy came back and said sorry, there was not sufficient movement for me, Lamy, to see convergence or the potential for convergence. And when we started going around the room yesterday talking about market access, and in particular talking about all these loopholes -- the Black Box, the sensitive products, the special products, the special safeguard mechanisms. When we started going around the room it was very clear that no one had budged from the positions they took four weeks ago, and quite frankly, four months ago. At that point when we took Lamy aside and said where is everybody else’s flexibility? He acknowledged that while the US had provided flexibilities there were not, again, sufficient commonality to close the deal.
What he said was if he thought there was potential for convergence he would have considered doing his own text, but there wasn’t, and that really was distressing, I must say.
Question: You’re saying, just to clarify, that he said in a public forum, I’m sorry, I haven’t seen this, in the press reports today out of Geneva. But he’s acknowledging that the US was flexible but others are not? Is that what you’re claiming?
Ambassador Schwab: No, no. What I am saying is that all we know is what we told him. We can’t tell you what the others told him. So we know that we provided for him significant flexibilities in the US position contingent on, conditional on additional market access being on the table.
Question: But he in a sense told you, you're now saying, that the US offer was in some fashion not matched by the other partners.
Ambassador Schwab: What he said was there was insufficient convergence. We had either, you either drop your sights to Doha Light or others up their sights to an ambitious Doha outcome. Clearly the Australians had provided additional flexibility so it was not just us. And I can’t go into specific positions being taken by different countries because this was taking place in the context of this G-6 meeting, but clearly the Australians had brought to the table more flexibility, for example. But what we saw, what became evident was that several of the others had not moved off of positions that they had held for the last four weeks or more. Unfortunately, that meant there would be no convergence, and when we talked to Lamy in the evening yesterday, as things started getting pretty rocky, he acknowledged that it would not be useful for the US to put its flexibilities on the table at this point because they would be pocketed and we would still not have convergence. So I think that’s the message.
Question: I’d like to ask Ambassador Schwab where she’s going to be traveling this weekend, who she’s going to be meeting with, and also, what do you think now are the prospects for completing a Doha Round before President Bush loses the Trade Promotion Authority?
Ambassador Schwab: We are still working out final arrangements for this weekend’s travel. I hope to be able to tell you tomorrow where I’m headed this weekend but until it’s finalized it’s probably inappropriate to talk about it.
In terms of the Doha Round, timing of the Doha Round, the key to this week’s activities was to get a breakthrough so we could conclude the Doha Round negotiations by the end of 2006. And only by completing the Doha Round negotiations by the end of 2006 would the agreement be ready in time for us to use Trade Promotion Authority before it expires on July 1, 2007.
At this stage of the game we do not expect to be able to use the current TPA authority to enact a Doha Round agreement if and when one comes together.
Question: Ambassador Schwab and Secretary Johanns, earlier today you indicated, the Brazilians indicated as well, that there will be an increase in the number of trade disputes brought to WTO. Do you think US rice will be the first challenge to be brought? Do you see other US crops being challenged? Will the United States be taking other countries to the dispute mechanism at WTO?
Secretary Johanns: The decision about other countries being taken to the dispute mechanism is a USTR decision. I’ll let Susan offer a thought on that.
But I think I can offer a thought on other countries looking at our program. The answer to your question is I have anticipated all along that other countries will be looking at our programs if the Doha Round doesn’t move forward. I’ve talked very publicly about the cotton case and the difficulty that that presented. Brazil has asked for additional consultation on that. Of course we have heard talk of other countries pursuing the rice program. We’ve had duties and countervailing duties out of Canada on our corn program which, as you know, we eventually removed but still a lot of concern about that program. So I just have to anticipate that if truly this round were not to collapse, if you will, to come to just a flat end, I think you would have other programs looking at our programs. It just seems inevitable. And I would say we’re not going to be alone. The European Union has those issues also, so this is a situation where you could see cases filed before the WTO.
Ambassador Schwab: And let me note when we’re talking about the EU, since they seem to be doing the majority of the finger-pointing at this point, the finger-pointing can’t hide the fact that their average agriculture tariffs are twice as high as ours and that their farm subsidies are more than three times what ours are. So they have not been a profile on political courage here.
Question: Secretary Johanns, a few months ago you were talking about the possibility of knowing fairly soon what the shape of a deal would look like to kind of assuage those who wanted to extend the current Farm Bill. What are your views now with this much greater uncertainty, whether we can have a deal, not have a deal, or what shape an eventual deal might take if somehow these talks could be revived? What is the impact of that greater uncertainty now on those who would push for the status quo and not support some of the reforms that you’ve been talking about in the administration?
Secretary Johanns: Matt, here’s what I would offer. I think I indicated at the time that we’d have a better picture pretty quickly as to where the Doha Round was going, and believe me, today we have a better picture. It’s been suspended. There are no negotiations planned in the future. This Round has been suspended at this point in time. Nothing additional will happen on the Round. The negotiating teams have stopped. The trips to Geneva that we’ve been making over the past year are likely to significantly decrease if not just outright stop. This Round has truly been suspended.
We have this question about Farm Bill because we write a Farm Bill in 2007. I’ve worked very very closely over the last year and a half with Congressman Goodlant and Senator Chambliss. I think they’re very very capable of writing an excellent Farm Bill. They’re out there doing field hearings, we’ve done our forums. We’ve certainly picked up from farmers consternation about parts of our subsidy program.
Admittedly there are some places, I went out to Lubbock, Texas, and they want the same Farm Bill word for word, they don’t want me to change one single word in the Farm Bill. But that was not a universal theme that I heard as I was out across the country talking about the Farm Bill.
So I believe we’re headed toward writing a Farm Bill in 2007. I believe a lot of good work is being done by the House and the Senate. We’re certainly going to have our ideas. Our commodity groups have been very engaged. So it seems to me that we should avail ourselves of the opportunity to look at farm policy and the opportunity will be before us next year.
Thank you, everybody. We really really appreciate you coming on the call.
Ambassador Schwab: Thanks very much.