Ambassador Schwab: Good morning everyone.
We came to Geneva this week seeking a breakthrough to keep the Doha
negotiations moving forward by breaking the impasse in agriculture and in
industrial market access. The big
task this week has been to deliver on the Doha promise to substantially improve
market access in agriculture through programs of fundamental reform and by
reducing barriers to industrial goods.
We came here as a leader in the system.
Just last October the United States took a risk that’s associated with
leadership by putting on the table a major agricultural offer expecting that it
would be matched by similar bold moves by others. Regrettably, that hasn’t happened
We have been similarly bold in terms of access proposals in the manufacturing
sector. Unfortunately, we have not
seen the necessary progress and the focus has been on loopholes up to this
point, or exemptions to liberalization, rather than to the offers that deliver
the kind of market opening needed to spur new trade flows and to realize the
promise of a true development round.
For agriculture there are two principal shortcomings. First of all the tariff cutting formulas
that are currently on the table do not really deliver the kinds of cuts that are
required to expand trade flows.
Second, possible gains from tariff formulas are undermined by loopholes
proposed by both developed and developing countries. These are the three S’s -- sensitive
products, special products, and special safeguards for agriculture.
For industrial goods the blockage is due to a combination of an unambitious
formula with ambitious flexibilities.
Until we improve these flaws we will not fulfill our promise in Doha and our
responsibility to create a more market-oriented environment for the world’s
farmers and ranchers, manufacturers, workers, service providers, and obviously
We will be continuing our discussions this morning. The Green Room reconvenes at 11:00
o’clock, and we will be working hard for a strong result. Market access contributes fundamentally
to development and we all know that trade can be a powerful tool to generate
income gains that dwarf foreign assistance. We have a handout that will be
distributed that articulates some of the key relationships between development
and market access.
We’ve done good work in other areas of Doha up to this point, but the core
contribution to development comes from global market opening. In other words, creating new flows that
will be the yardstick that is used to measure our success.
Let me stop there and turn the microphone over to Secretary Johanns, and then
we will both be happy to answer any questions.
Secretary Johanns: Thank you very much, Ambassador. The Ambassador’s comments were quite
thorough so I’ll offer only a couple of thoughts just to maybe fill in a few
things that have occurred that are very important over the last 48 hours.
The first thing I want to say again, and it always bears repeating. We are here for a purpose. We want this round to be
successful. We are very very
committed to the round. And even
though it has oftentimes been very difficult sledding, we are still optimistic
that this round can come together and can move the world forward when it comes
to world trade.
As I reminded you yesterday, in October of last year we took a very very
significant risk. We exceeded the
expectations of the world with the offer that we tabled in October of 2005 and
it truly did jump-start the round.
All of a sudden the buzz was that we had a round and that we were off and
going. But that was based upon the
notion that we had to achieve market access as a condition to that proposal.
Market access is not only important to the United States but important to the
rest of the world. As has been said
so many times, you can review about any study and the conclusion reached is that
the opportunity for real advancement will come out of the market access
Over the last 24 hours, the last 48 hours, we’ve had an opportunity to debate
three areas that have always been out there. We knew at some point we would come to a
debate on those areas, and that happened this weekend. Those three areas are what we have come
to refer to as the three S’s -- sensitive products, special products, and
special safeguard mechanisms. I
will be very very candid with you.
After that debate I am worried.
We had an extensive discussion about those loopholes and what they
The advanced developing countries would benefit from a piece of this in a
very significant way. In fact
listen to this, if you will. Under
the G33 proposal, 94 to 98 percent of their market, the developing countries
would be blocked to our producers.
I don’t know of anybody that could make a case that that turns out to be
a fair result when it comes to market access.
Then you add into that the potential for sensitive product designation by
developed countries. Then you add
into that special safeguard mechanisms available to developing countries, and
you can begin to understand why I am worried.
In fact in some of the discussion there was an analysis done of the G20
proposal, which as you know has gotten some additional discussion over the past
48 hours because of the EU’s thoughts on that. You add in these factors and literally
your market access drops to about 40 percent. That would be concerning to anyone.
That is not robust market access.
That will not even meet the Uruguay round. That doesn’t even meet the lowest
expectations of just about anybody who has participated in these
In some conversation I had last night I was asked maybe a rather loaded
question about whether that means that what has happened is that there’s been a
back-tracking on market access and that sort of thing. I would never judge a round or its
result by one day of meetings. That
would be unfair to the round. We’ve
been working on this, after all, for four and a half years. But these are very very critical
We will do our part. We will cut
our subsidies as we have proposed, and dramatically so as our October offer has
proposed. But in return, we have to
see market access. This weekend,
quite honestly, there certainly was not a step forward in that regard.
With that, I appreciate the opportunity to offer a few thoughts, and as the
Ambassador indicated, we would be happy to entertain a few questions before we
go on to our next meeting.
Question: Could you give us a sense of how you see
things unfolding over the next month if it’s clear that there’s going to be no
breakthrough at this meeting this weekend?
And do you think it’s worth coming back here in July to try to make
progress if there’s been no progress here?
Ambassador Schwab: Obviously the path forward is the topic
of the conversations that we’re going to be having in the Green Room and
subsequently the TNC, Trade Negotiating Committee, presumably later on
today. At the request of the Green
Room participants, the G6 countries, the G6 Ministers met last night with
Director General Lamie and the outcome of that needs to be shared with the Green
Room participants before it’s shared with the media. However, we were talking clearly about
what is the way forward. When we
have clearly reached something of an impasse here, does that mean that the round
is dead? The answer is no. We don’t believe so. And as Mike Johanns indicated, we remain
fully committed to an ambitious, robust round and have no intention of giving up
There are plenty of examples of trade rounds that have faltered and
ultimately been resurrected. The
Uruguay round being the most recent, where there was in essence a collapse in
1990 and then in 1993 the round was ultimately closed. That’s not to imply a timeframe, but I
don’t think anyone is prepared to, or certainly we’re not prepared to give
Some of the critical issues, though, how can you have a multilateral trade
round without market access? I
think in agriculture it’s very clear that with respect to domestic subsidies,
for example we have well-defined parameters. The Amber Box, the Green Box, the Blue
Box. When it comes to the loopholes
we find we really have a Black Box. Until we figure out what’s in it, this is
not a negotiation that is going to come together.
Question: If I could follow up, is there any
reason in thinking that things will change in four weeks?
Ambassador Schwab: I would say it’s too early to tell. We would hope so, but it’s too early to
tell and the United States is prepared to engage in this in the most
constructive manner possible, working with trading partners. But obviously the experience of the last
several days has been somewhat disheartening.
Question: There is a general feeling among many
Ministers here who have privately and publicly said that you are going back to
Washington as a hero in terms of what has happened. How would you like to ensure that the
perception that is there among Ministers that the US is not part of the problem
in terms of coming up with a fresh offer on domestic support in the coming days
to ensure that there is a success in this round?
Ambassador Schwab: The US was very forthcoming in October
and put an offer on the table that quite frankly, by any measure, is the most
ambitious offer that is sitting on the table in terms of agriculture. Certanily in terms of market access,
with very very significant implications in terms of cuts in domestic subsidies
in the United States.
It’s something that we’re committed to do, and in our offer we’re talking
about significant cuts, 60 percent in the Amber Box; 53 percent overall; and as
Secretary Johanns can articulate, this would require significant major reforms
in US farm programs.
We have never taken the position that this offer was the be all and end all.
It has always been a negotiable offer.
You can’t come to the table and say this is our offer, take it or leave
it. However, the United States is
not in a position, nor should our trading partners be in a position to settle
for some mediocre version of a trade round that doesn’t deliver real market
access and new trade flows.
Therefore, there is a calibration that is necessary, and until and unless
there is more market access on the table, it’s hard to imagine having a further
dialogue on domestic support.
Secretary Johanns: Susan has outlined it very very
well. The offer in October was very
bold. It’s still regarded as a very
bold offer. It has tremendous
impact no our farm program. It
changes our farm program. You can’t have the same farm program because it
doesn’t fit any more. You just
don’t have the available money in the appropriate boxes to have the same farm
But again, the important point is, and we made no bones about this when we
put the offer out there, is that market access to us was a key, but it’s not
only key to us, it’s the key to this round. The success of this round will be judged
by how much trade occurs between countries in the world.
So unfortunately this weekend with the three S’s that I mentioned, the
loopholes, we all of a sudden begin to realize that the market access even under
the most minimum approach wasn’t there.
If you in effect allow for developing countries, for example, to have a
process that shields 94-98 percent of their market, my goodness, how could you
possibly argue that you made progress?
So like I said, I would not judge the round by one meeting or one day’s worth
of meetings, but these are very very worrisome developments, and developments
that have to be resolved.
So now our offer even looks more bold compared to what we’re seeing in market
access. My hope is that over the
next month here, we can come to a resolution on these really key, important
Ambassador Schwab: Let me just add one thing about the
entire conversation about domestic support. The United States is by no means the
largest user of domestic subsidies in agriculture. In fact the European Union, for example,
subsidizes at a rate that is three times that of the United States. So to put into perspective the US offer,
I mentioned that under our proposal we would cut 60 percent in the Amber
Box. If the US subsidized, at the
end of this round, at the same rate as the EU, adjusted for differences in
production, obviously, and the EU did a 75 percent cut in its Amber Box so that
at the end of the process we weren’t at a 3 to 1 ratio or a 2 to 1 ratio, we
were at a 1 go 1 ratio, the US cut in the Amber Box would be 34 percent,
not 60 percent. So to give you a sense of how incredibly
committed we are and how it’s reflected in the statistics, that is a specific
example relative to where, for example, the EU’s domestic subsidies are.
Question: You emphasized the necessity for US
producers to achieve better market access.
At the same time in the beginning of this press conference you said that
market access is the key for developing, poor countries. How sure are you that
the poor developing countries will be able to compete with US exports on these
new markets that you are talking about?
Ambassador Schwab: I would edit slightly your
question. When we were talking
about market access in agriculture we’re not just talking about potential
markets for US agricultural exporters, we’re talking about potential markets for
all agricultural exporters, and in particular, and if you look at the
development implications of enhanced agricultural market access, you find the
developing countries stand the most to gain.
Here you’re talking about not just increases in north/south trade, you’re
also talking about increases in south/south trade. So for example, and this is agriculture
and non-agriculture, but 70 percent of the tariffs paid by, the duties paid by
developing countries, are paid to other developing countries.
One of the wonderful things about trade policy and trade negotiations is that
you can in fact have a win/win. You
can have the economic pie grow.
There are going to be segments of any of our economies that are hurt, and
I think it is important that we not dismiss this notion that there are sensitive
products, there are special products.
We fully accept that they need to be there. The question is at what point are you
moving beyond reasonable and just using this as an excuse, as a loophole, to
block market access?
Secretary Johanns: A couple of things I would mention. Our growth in imports in agricultural
products is faster than our growth in exports. We used to have a very very large trade
imbalance in favor of the United States when it came to agriculture. We exported far more than we
imported. Now it’s about even and a
lot of that is coming from developing countries. I can name countries, for example Brazil
and India, who have a trade surplus with us in the agricultural area.
What we are finding is that developing countries actually are very very
successful in competing for our marketplace and they’re seeing in many areas
So the advanced developing countries in some respects are world class
competitors. I would point to
Brazil on soybeans. Let me just be
honest with you, and I’m speaking as the Secretary of Agriculture for the United
States, they are world class competitors.
They are very very good at what they do.
So these advanced developing countries, they continue to see growth, they
continue to see growth not only in our market but around the world. They are true beneficiaries of the
opportunity to trade, and it improves their economies.
So it’s an interesting thing, but when you study the figures, the advanced
developing countries have really done very well with trade.
Question: I was just wondering, you’ve stressed
the differences over these Black Box issues, the three S’s. I was wondering
whether during your discussions, which took up a lot of the G6’s time yesterday,
whether you saw any narrowing of differences, particularly on the numbers, what
the G33 has proposed in terms of the 20 percent, the [inaudible], narrowing
which could serve as a basis for further negotiations through the month of July
and which could result in an agreement.
Ambassador Schwab: Unfortunately not. The short version of the answer is we
tried, this was a concerted effort over a number of hours to say all right,
let’s step back from the tiers and the cuts. The US proposal is for a 66 percent
average cut. The EU’s proposal is
for a 39 percent average cut. The
G20 proposal, depending on how you do the calculation, is about a 52 percent
We said let’s step back from that and see if maybe we can at least narrow the
differences on the loopholes, on the exceptions. And we went through every one of these
very specific and very arcane treatment of sensitive products, what is the basis
for Tariff Rate Quotas, the growth rates for Tariff Rate Quotas, the maximum
deviation if you’re going to have a sensitive product, the number of lines or
proportion of your trade that would be covered by special products, all those
things that you’re talking about.
And we did not find closure or even narrow the range in any one of
those. I think that was really sort
of a turning point for us because we came here thinking okay, let’s see if we
can push forward in terms of the market access side of the equation to sort of
loosen things up so that we can get into a negotiation on all the other
items. That was, as Mike said, not
a step backwards, but it was a real eye opener. If you look at the G20 proposal on cuts
and you apply these loopholes, you could be talking about a 40 percent, not a 52
percent cut, and that takes you well below what was accomplished in the Uruguay
round, and let us note for the record that the Uruguay round was not applauded
for its outcomes in agriculture.
Question: Some of your trading partners are
basically saying here that the United States is being held at gun point by the
US Congress on cotton, textiles, movement on special professionals and
maritime. Could you respond to
that? Thank you.
Ambassador Schwab: I would say that all of the democracies
represented here have their own political equation that they deal with, and in
our case the administration is committed to a bold, ambitious, robust outcome
for a variety of reasons. First and
foremost, it’s the right thing to do.
But it also happens to fit in terms of a political equation where the
politics of trade are such, and this is every country. This isn’t just the United States. Every single country. The politics of trade are such that
individual commodity groups or producers that could be negatively impacted from
trade liberalization in your market are going to be very active and very vocal
and very focused in their opposition.
And the support of the proponents tends to be more diffused. The most obvious being consumers. When was the last time you saw consumers
rise up to support a major trade enhancing negotiation? It doesn’t happen. And yet consumers are the biggest
beneficiaries. Other manufacturers
or producers in terms of changes in the competitive landscape and enhancements
in productivity also gain.
So in terms of a political equation, most of us find that the larger the
package, the more beneficiaries and proponents you pull together and the more
enthusiastic they are so as to help balance politically those who would rather
not see barriers come down or see subsidies come down.
Secretary Johanns: If I might just offer a thought on that,
when we built our October offer we consulted with the United States Congress,
both sides of the aisle, both the House and the Senate. We literally went to them with a
proposal that said if we table this we will be cutting money out of key farm
programs. Now that’s one heck of a
message to take up to any legislative body. We said to them in return for that we’re
going to be asking for market access and described for them what we were going
to do. To the credit of the United
States Congress, understading the importance of trade to the world, they said go
ahead and table the offer and we will back you up.
Now to this day, and at the end of this weekend, the Ambassador and I cannot
go back home and say to our Congress that we’ve delivered on market access. In fact when we have to explain to them
what the three S’s mean, we will be asked over and over again, isn’t this a
retreat from market access? And
we’ll have to answer that. We’ll
have to deal with that issue.
But even today our United States Congress is backing us up on this
proposal. Now are they very clear
about the need for market access?
Absolutely, just like we are.
Just like we are. Because
that’s the key to the round. That’s
what’s going to make this round successful. That’s what’s going to give the world
opportunity. That’s what’s going to allow developing countries to continue to
grow and expand. That’s what’s
going to improve the world economy for least developed countries. So even today the United States Congress
is with us.
So to suggest that they’re out there doing anything but supporting us is just
unfair to them. They are taking a tremendous, tremendous step for the world here
in backing us up on this proposal.
No one was saying to us as we left Washington last week, pull the
offer. Go to Geneva and pull the
offer. We haven’t seen the market
access. Pull the offer. They’re saying do everything you can to
try to make this round successful. And I just think to suggest that they’re
headed in a different direction is unfair to them. They’ve hung in there with us and even
today want this round to be successful.
Ambassador Schwab: I would add to that, Mike is absolutely
right. Congress has been very
patient with us and this is fully bipartisan. The letters, the press conferences, the
briefings. We really do enjoy
bipartisan support for the potential of a large round. And I would also say in the Congress’s
defense, if you look at what this Congress has accomplished on trade in the last
several years, it includes not just enactment of trade liberalizing FTAs. It also includes repeal of the Byrd
Amendment, it includes repeal of the Foreign Sales Corporation tax. So there have been some good moves on
trade in terms of the Congress.
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