ECLAC, United Nations January, 2006 Volume 1, Issue 1

Division of International Trade and Integration

Notes on
International Trade
THE HONG KONG CONFERENCE: AN ASSESSMENT

Overview consensus between them: the are authorized by WTO. This

1. The Sixth WTO Ministerial Con- United States, the European reduction must be made without
ference in Hong Kong achieved Union, Brazil, India, Japan and loopholes that enable the same
the goals that had been set by Pas- Australia. resources to be allocated by
cal Lamy when he assumed his new other means, by broadening the
4. Of the three agricultural is-
responsibilities as Director General definition of the so-called “blue
sues –market access, export
of WTO in September 2005: a box”, as suggested by the indus-
subsidies and domestic sup-
stocktaking meeting and the setting trialized economies. This delicate
port- export subsidies was the
of guidelines for completing the balance on agriculture must be
most easily dealt with, as the
work of the Doha Round in 2006. weighted against the negotiation
United States uses relatively
on industry and services, where
2. These were not, however, the few direct export subsidies and
there are other difficulties that
original goals for this Sixth Ministe- the European Union had al-
are significant, but fewer than in
rial Conference of WTO. It had ready made a domestic com-
agriculture. The United States,
been hoped, in particular, to reach mitment to eliminate them in
agreements on “modalities” for 2013. The most difficult is mar-
liberalization, which did not occur. ket access, an area where the
The main achievement was thus to European Union has the most
keep the negotiations going. The problems. Its proposal excludes
meeting in Hong Kong began by 8% of agricultural tariff lines
considering a comprehensive draft from the negotiations and al-
which was based on the guidelines though it claims to be flexible International Trade flows.
of the “July package” of 2004, but in this area, the gap with the
non of the political and technically demands of the developing
complex decisions required were countries is excessive. The
taken. In the days prior to the Con- World Bank notes that the ex-
Topics in this series:
ference some agreements of poten- clusion of just 2% of such
tial benefit for developing countries items is sufficient to reduce by
were reached in the area of intellec- 75% the potential benefits of ⇒ Administration of trade agree-
tual property (see paragraph 18 this round for developing ments
below), which lightened the minis- countries.
⇒ Integration and convergence of
ters’ agenda. 5. The difficulties are not mi- trade agreements
3. Lamy inherited a troubled sce- nor. In agriculture, progress
nario and a very poor outlook for needs to be made simultane- ⇒ Multilateralism and regionalism
the Hong Kong meeting. It is ously in market access, ending
therefore not a bad result to have export subsidies and a substan- ⇒ International economic outlook
produced a declaration and a plan tial reduction in domestic sup-
⇒ Competitiveness
of work with specific dates for port. With regard to market
2006. The original goals of the access, in addition to substan- ⇒ Macroeconomics and export
ministerial meeting were more tial tariff reductions, the num- performance
ambitious, but Lamy managed to ber of exclusions must be lim-
reduce expectations, postpone ited, with compensation in ⇒ Innovation and export develop-
major decisions and, most impor- those sectors in the form of ment
tantly, keep the process going large quotas; in relation to do-
while maintaining the commit- mestic support, the reduction ⇒ Latin America and Asia-Pacific
ment of the main actors. As the must be based on current
negotiations continue, it is in- amounts, and not on the sub- ⇒ Dispute settlement
creasingly difficult to maintain the stantially higher amounts that
Page 2 Notes on Volume 1, Issue 1

THE HONG KONG CONFERENCE: AN ASSESSMENT, continued

the European Union and Japan are of conclude the Doha Round successfully in (NAMA), there was confirmation of the
course determining the extent of the agri- 2006 and it is implied that application will type of element that should be con-
cultural opening that they will concede begin during 2008. tained in the specific modalities for the
conditional on the level of opening that 8. A reading of the Decla- holding of the negotiations.
The Declaration
the developing countries can offer in in- ration confirms that the For example, the bands of
confirmed issues that
dustry and services. negotiations of the Doha tariff cuts (4) and the use of a
had been previously “Swiss formula”, respectively,
6. Tensions in the group leading the nego- round are fundamentally agreed but required but there are no specific figures
tiations will increase in the course of negotiations on market approval by the to focus the negotiations on
2006. In fact, although the United States access and to a much
Ministers. access during 2006. A number
and the European Union share difficulties lesser degree on the
of varying degrees in dismantling their strengthening of disci- of qualifications were also in-
domestic agricultural subsidies and sup- plines such as antidump- cluded, at the request of some
port, the United States is showing more ing or subsidies. The Declaration continues of the developing countries, which
flexibility in responding to this challenge, with a developmental rhetoric as a key as- could serve to moderate the NAMA
as it sees that greater opportunities for pect of maintaining the involvement of reductions.
agricultural exports either to the Euro- most of the developing countries. Neverthe- 12. Meanwhile, and with a view to
pean Union or to developing countries less, the recommendations and decisions are meeting the development goals of the
will follow from the progress made on the increasingly concentrated in the LDCs, a Round, the Declaration refers to the
three pillars of the agricultural negotia- category in which Haiti is the only Latin balance between agriculture and NAMA
tion. In turn, the Group of 20 (G-20) American country. There is also relatively in relation to market access. That is, not
includes countries with very different greater attention to the Work Programme only is a global balance sought in the
potential levels of agricultural competi- on Small Economies which could bring result of the negotiation, but a specific
tiveness, so that when the final decisions benefits to a greater number of such coun- link was also established between the
are taken, the offensive or defensive sen- tries in the region, especially in the Carib- negotiations for agricultural and non-
sitivities of the developing countries will bean. agricultural products. The Declaration
become apparent. As the degree and cov- indicates that “To that end, we instruct
erage of agricultural liberalization offered Specific Issues our negotiators to ensure that there is a
by the United States, the European Union comparably high level of ambition in
Agricultural and Non-agricultural Products
and Japan will also have a negotiating link market access for Agriculture and
with the depth of the opening offered by 9. The Declaration confirmed issues that had NAMA.” This will enable the develop-
the developing countries in industry and been previously agreed but required approval ing countries to resist current pressures
services, this will create more tension in by the Ministers. These include the elimina- for significant reductions in their tariff
the group of developing countries, de- tion of export subsidies for agricultural prod- protection for non-agricultural products
pending on their greater or lesser willing- ucts in 2013 (the date is to be confirmed in return for the reductions they obtain
ness to opening up these sectors. when the modalities have been completed), in agriculture. Nevertheless, it may work
and commitments for a substantial reduction out differently: as a justification for
7. The Declaration specifies three points
“by the end of the first half of the implemen- some developed countries to be less
in time for 2006: (i) 30 April for agreeing
tation period” (the date of which is not speci- ambitious in agriculture if there are no
on the modalities for the main negotiating
fied). It also contains specific issues relating equivalent “concessions” in NAMA.
topics (tariff reduction and treatment of
to cotton, including the elimination of export
subsidies); (ii) May-July, the period in 13. Also in relation to domestic support
subsidies in 2006. The main issue concerning
which the revised lists of offers for liber- for agriculture, the ministers decided
this product, however, is the domestic subsi-
alization should be presented, possible that they would be guided by three
dies applied in the United States, some of
provisions for implementation and rec- bands of subsidies, on which the reduc-
which were recently challenged in WTO pan-
ommendations on aid for trade; and (iii) tion targets would be based. There is a
els.
the second half of 2006, in which the provision which, while ensuring the
activity will depend on 10. Although the practical effects of the deci- overall reduction of these subsidies, is
(i) and (ii), and also sion on export subsidies may be minor, as the also concerned to limit the possibility of
include the final offers United States applies relatively few direct reallocation among the different boxes,
of services, plus some subsidies to its agricultural exports and the especially between the amber and blue
responses and recom- European Union has already planned to elimi- boxes. But there is still much work to
mendations for deci- nate them in 2013 as part of its internal re- be done in working out the specific
sions in the context of form process, the value of the decision lies in details of the reductions in these meas-
special and differenti- consolidating this commitment in an interna- ures.
ated treatment, small economies and the tional treaty.
14. It is clear that all of the elements
least developed countries (LDC). In addi- 11. In the aspects relating to access to both needed to complete the modalities exist
tion there is a renewal of the resolve to agricultural and non-agricultural markets, (and have been discussed on many oc-
Notes on Volume 1, Issue 1 Page 3

THE HONG KONG CONFERENCE: AN ASSESSMENT, continued

casions) and so the possibility of making access to the goods market and trade in ser- States and Japan included wording that
progress as scheduled depends exclusively vices. This trade-off may turn out to be dis- allow them to exclude sensitive sectors
on political decisions that have been post- advantageous for the developing countries, (in particular, dairy products, chicken,
poned. In this context, the pertinent ques- as this is a very dynamic activity and very textiles, sugar, rice and fisheries prod-
tion is whether the Hong Kong meeting was little is known about the legal consequences ucts). Many of the products of LDCs
able to generate the climate needed for these of making international commitments. The do not comply with health or other
substantial decisions on trade opening in adoption of international commitments on regulations, which means that despite
agriculture, industry and services to be taken this issue should therefore be carefully evalu- the benefit of preferential treatment,
in the next few months. The previous course ated. This does not mean that the develop- they could still be excluded from access
of events does not offer much reason for ing countries should not move forward in to those markets. Another major restric-
optimism. opening up the services sector, as this would tion in this area is the unilateral estab-
bring significant competitiveness gains, but lishment of rules of origin, an issue
Trade in Services their commitments may involve significant which also reduces the magnitude of
institutional changes and regulatory ap- this concession to LDCs. This is why
15. The text of the Declaration shows an
proaches that require a strengthening of development aid linked to trade should
imbalance in the treatment of the topics,
their capacities. be focused on supporting the physical
which was strongly resisted by the develop-
infrastructure and development of the
ing countries. In fact,
Intellectual Property competitive export offer of those coun-
the Ministers “take
tries.
note” of the reports of 18. Of particular interest is the formalization
the Chairmen of the of the public health amendment made to the
Agreement on Trade-Related Aspects of Trade Facilitation
negotiating groups on
agriculture and non- Intellectual Property Rights (TRIPS Agree- 22. With regard to trade facilitation,
agricultural products ment) one week before the beginning of the including the problems of the land-
(annexes A and B of the Declaration). Yet at Conference. This amendment confirms the locked countries, it is important to note
the same time, in relation to services, para- agreement’s flexibility in relation to medicine that this was the only negotiating group
graph 27 of the Declaration specifically patents in specific circumstances and an report presented at the Ministerial Con-
states that: extension for LDCs of the implementation ference in Hong Kong that was agreed
“We are determined to intensify the negotia- period for the provisions of the agreement. by consensus. In this area, the negotia-
tions have moved forward with specific
tions in accordance with the above principles
Market Access for the Least Developed Countries identification of initiatives which could
and the Objectives, Approaches and Time-
be implemented. Nevertheless, the
lines set out in Annex C to this document 19. Another positive result for LDCs are the
problems of technical and financial
with a view to expanding the sectoral and specific decisions adopted in relation to mar-
assistance for developing countries re-
modal coverage of commitments and improv- ket access for their products, which indicate
main a key element for implementation
ing their quality. In this regard, particular that:
and the actual level of resources avail-
attention will be given to sectors and modes “developed-country Members shall, and able for such assistance will only be
of supply of export interest to developing
developing-country Members declaring them- known at the end of the Round. This
countries.”
selves in a position to do so should: (a)(i) issue, according to various estimates,
16. Annex C referring to the services sector Provide duty-free and quota-free market could bring significant gains in terms of
contains a precise number of negotiating access on a lasting basis, for all products welfare,
objectives, lists in detail the type of restric-
200

originating from all LDCs by 2008 or no 180 especially

tive meas- later than the start of the implementation 160
for LDCs.
The text of the 140

ures that period in a manner that ensures stability, 120

This is
Declaration shows an
should be
100

security and predictability.” what leads

imbalance in the
80

eliminated 60
ECLAC
treatment of the topics, 20. Even though most of these countries 40

and the to pro-

already have preferential treatment for ac-
20

which was strongly specific 0

cess to the markets of the developed coun- pose that

opposed by some points
tries, there are three significant aspects to efforts be
developing countries. w h i c h World exports, 1980-2004(1995=100)
this decision: (i) it includes the developing made in
w o u l d the region to move forward with a cer-
countries in the initiative to benefit LDCs;
serve to tain degree of independence from the
(ii) an attempt is made to establish this pref-
guide the negotiations on new and existing deliberations in WTO, by implementing
erential access “on a lasting basis”; and (iii)
commitments in relation to services, includ- those initiatives that the Latin American
free from quotas, a particularly important
ing timelines other than those on which countries are supporting in the Doha
aspect.
agreement had been reached. Round. At this level, a special contribu-
21. The practical impact of this measure, tion from the regional financial organi-
17. An attempt is clearly being made to de-
however, may be limited, as Canada, United zations would be welcome, so that the
fine a trade-off in this negotiation between
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THE HONG KONG CONFERENCE: AN ASSESSMENT, concluded
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principle of linking the coverage and depth of commitments to 26. The history of the GATT negotiations, especially the Uruguay
the level of financing available could also be implemented, on the Round, shows that it is not in the context of the ministerial meet-
understanding that there is a large number of administrative ings –the highest decision-making body in this type of organiza-
measures which could already be promoted, in view of both their tion– that the negotiations have been concluded, nor is it where the
beneficial impact and their low cost. greatest progress was made. The Uruguay Round was supposed to
conclude at the meeting in Brussels in December 1990 but this was
Provisional Evaluation not possible. The Director of GATT (Arthur Dunkel) submitted
one year later a document on his own responsibility that contained
23. The big question is still to what extent the Hong Kong meet-
the essence of what the Uruguay Round had ultimately been. This
ing has managed to provide new impetus to the Round. It is too
document was the basis for the final agreement of the Uruguay
soon to give a definitive opinion, but one favourable signal is that
Round adopted in December 1993 at a meeting in Geneva.
so far there have been no negative statements from the develop-
ing countries. Some press reports, however, do seem to indicate a 27. As on other occasions, Latin America did not come to this Min-
deterioration in the personal relationships of some of the key isterial Conference with a regional approach, but rather a number of
ministers involved. There also appears to be countries from the region participated with
In short, the Hong Kong meeting proposals for agricultural liberalization (in the
a favourable perception of the relatively
did not produce major G-20, the Group of 33 and other groups) and
participatory process of drafting the Decla-
ration, which to some extent answered the achievements but did maintain smaller groups were active in relation to im-
calls for transparency and inclusion which the dynamics of the process and proving disciplines –antidumping, fisheries
have been made on previous occasions. The defined a work agenda for 2006. subsidies-, the link between the TRIPS Agree-
fact that Brazil and India were influential in ment and the Convention on Biological Diver-
achieving this result (mainly on behalf of G- sity, and issues relating to their condition of
20) means that they share in the responsibility and are thus developing country.
obliged to continue their support for the process, although the 28. Unlike in previous rounds, the developing countries and Latin
specific progress achieved may still be small. America, in particular, are proving to be more informed and to have
24. All things considered, the main beneficiary has been the Di- greater negotiating capacity. The G-20 has become a leader in the
rector General of WTO, Pascal Lamy, who took on the formal negotiations and Brazil, its main organizer, has become a central
role just four months ago, although he had been working since actor in the entire process. An issue that is still to be considered is
June or July in preparation for the ministerial meeting. By defin- the reluctance of developing countries, including many from the
ing the expectation for the Hong Kong meeting at an early stage, region, to participate in the efforts in WTO while they are enthusi-
he managed to focus on achieving a declaration. Not having a astic about signing more ambitious and more complex bilateral and
declaration would have been a clear sign of failure. In contrast, regional agreements which cover the same issues that they refuse to
achieving a comprehensive declaration (unlike the situation in consider in the context of WTO.
Cancún), independently of its substantive contents, means that 29. In short, the Hong Kong meeting did not produce major
the meeting remains duly recorded in the history of the Organiza- achievements but did maintain the dynamics of the process and
tion. A meeting without results would mean an early loss of defined a work agenda for 2006. Various obstacles remain, and the
Lamy’s political capital and perhaps structural damage to the main decisions have been postponed. Only at the beginning of the
credibility and prestige of WTO. second half of 2006 there will be clearer signals of the hoped-for
25. A smaller meeting is expected to take place in April, which evolution of this round. For the moment, the outlook remains
would make it possible to have a second ministerial meeting with- highly complex and the likelihood of success will depend on a
out having to wait another two years, and prior to December stronger commitment from the main negotiating parties, in particu-
2006. Such a meeting would also be free of the heavy procedures lar the United States and the European Union.
of WTO ministerial meetings. Holding the meeting in Geneva
helps to make it more flexible.

The topic covered in this issue* is also considered in the following documents of the Division:
• Latin America and the Caribbean in the world economy, 2004 Trends 2005
• FAL Bulletin FAL No.232, December 2005
* The opinions expressed in this document, which has not been submitted for formal editing, are the sole responsibility of the author
and do not necessarily coincide with those of the Organization.

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