RNM UPDATE 0407

May 7 , 2004

Prepared by the Communications Division of the Caribbean Regional Negotiating Machinery (CRNM), this electronic
newsletter focuses on the RNM, trade negotiation issues within its mandate and related activities.

• HUNTE: “SIDS CONSTITUTE A SPECIFIC CATEGORY OF DEVELOPING COUNTRY”

• FTAA DEADLINE IN JEOPARDY, EXTENSION OF TALKS PRUDENT
• INFORMAL FTAA DELIBERATIONS REVEAL COMPROMISE
• US FTA TALKS WITH ANDEAN COUNTRIES UNDERWAY SOON
• WTO PRELIMINARY RULING ON COTTON SUBSIDIES SLAMS UNITED STATES
• SETBACK FOR US IN GAMBLING CASE
• WTO BRIEFING
• NEWS BRIEFS
• UPCOMING EVENTS

HUNTE: “SIDS CONSTITUTE A SPECIFIC CATEGORY OF DEVELOPING COUNTRY”

The Washington, DC-based Center for Global Development hosted a forum, April 26, at which
Joseph Stiglitz presented a recently completed study that reviews the potential and challenges of
the World Trade Organization’s (WTO) Doha Round.

H.E. Julian R. Hunte, President of the 58th Session of the United Nations General Assembly and
Minister of External Affairs, International Trade and Civil Aviation, St. Lucia, participated as one of
the discussants. His presentation centred on revamping WTO provisions that give expression to
the principle of special and differential treatment (S&DT) for developing countries to take into
account small island developing states (SIDS); a category that most recently was given due
account in the Johannesburg Plan of Action of the 2002 World Summit on Sustainable
Development.

He underscored that SIDS’ adjustment and growth are constrained by both levels of development
and small size. In addition, the presentation considered: i) the profound impact of preference
erosion on SIDS; ii) S&DT and non-reciprocity; and, ii) SIDS be “required to undertake
commitments and concessions only to the extent consistent with their capacity for adjustment, level
of development and administrative and institutional capabilities for implementation”. This would
also relate to longer periods being extended to SIDS to “implement obligations”. (The presentation
can be downloaded from http://www.cgdev.org/Events/Stiglitz.cfm)

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Participants at the forum included, the Director-General of the Caribbean Regional Negotiating
Machinery (RNM), Ambassador Dr. Richard Bernal, and Commonwealth Secretariat Deputy
Secretary-General, Mr. Winston Cox.

FTAA DEADLINE IN JEOPARDY, EXTENSION OF TALKS PRUDENT

Lead CARICOM Ministerial Spokesperson for the Free Trade Area of the Americas (FTAA) and
Minister of Foreign Affairs and Foreign Trade, Jamaica, Hon. K.D. Knight, recently expressed
concern over the outstanding differences in FTAA negotiations. There appears to be growing
sentiment that the Trade Negotiations Committee (TNC) level may not be the best platform to deal
with the current impasse. An informal ministerial session, convened under the auspices of the
FTAA Ministerial Co-Chairs, might be more appropriate for the “purpose of resolving, as far as
possible, the primary difficulties contributing to the current deadlock”, by spurring political
momentum.

The Inter-American Dialogue hosted Ambassador Bernal at a forum centred on Caribbean issues,
May 5. As an invited speaker he delivered a presentation titled: ‘CARICOM External Trade
Priorities: The Multilateral, Hemispheric and Regional/Bilateral Agenda, and Coherence with the
CSME’.

In reviewing the current state-of-play in the FTAA negotiations, and associated ‘stumbling blocks’
to progress in that theatre, Dr. Bernal cautioned that the deadline for concluding FTAA negotiations
“is in jeopardy”. The RNM head argued that an extension of the deadline should seriously be
considered, “if it is going to enable us to get a better agreement.” Ambassador Bernal has
signalled that challenging work still lies ahead in the negotiating effort for the hemisphere-wide
trade pact.

INFORMAL FTAA DELIBERATIONS REVEAL COMPROMISE

At the behest of United States Trade Representative, Ambassador Robert Zoellick, and Brazilian
Foreign Minister, Celso Amorim, the US and Brazilian Co-Chairs of the FTAA’s TNC met in
Washington, DC, April 29 to May 3. They met to advance flexibility in the treatment of Agriculture,
intellectual property rights, market access and other divisive issues in the common tier of rules and
disciplines or common set of obligations of the hemisphere-wide trade pact, currently under
negotiation. The expectation is, on the basis of consensus, negotiating instructions could be
advanced.

The informal consultations from late April into early May have reportedly narrowed divergent
positions on an appropriate balance in the common set of obligations. Specifically, compromise
was identified in the area of intellectual property rights and agricultural export subsidies. Other
problematic negotiating areas, such as market access and services, were also considered. In a
joint communiqué issued at the close of their consultations, May 3, the TNC Co-Chairs
characterized the consultations “to date” as having “made good progress toward consensus on
preparation of guidance by the TNC….to the FTAA negotiating groups”. They further indicate that
there was agreement for the need to continue informal consultations. To this end, there will be a

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meeting again “later in May in order to make further progress in the FTAA negotiations”. (The
communiqué is available on and can be downloaded from the RNM website (www.crnm.org))

FTAA talks have been deadlocked for months. The TNC Co-Chairs have tried unsuccessfully,
three times since the start of the year, to convene a key TNC. Wide gaps have persisted over the
scope of the common tier. At the heart of the impasse are divergent positions on the ‘vision’ of the
FTAA, which directly impacts on building consensus on the appropriate balance for the common
set of obligations. Finding compromise - on the one hand - for demands that agricultural subsidies
and dispute settlement disciplines be treated in the FTAA context (and not shifted to the WTO
theatre), and – on the other – for disparate views concerning what the principal focus of the
common tier should be, namely a singular focus on market access, as compared to a much
broader one to encompass provisions for intellectual property rights, services and investment
commitments, are major impediments to unblocking the gridlock in the common set of obligations.
This difference in level of ambition – hinged on priority areas for respective parties - goes back to
the Eighth FTAA Ministerial Meeting, in Miami, November 2003, which produced a ‘compromise'
Ministerial Declaration for the Americas-wide trade pact.

The Eighth Ministerial Meeting Declaration signified the introduction of the principle of ‘flexibility' in
defining the character of the hemispheric trade accord. The vision of the FTAA, which forms the
core of the Eighth Ministerial Meeting Declaration, reaffirms commitment to a comprehensive and
balanced Agreement, but introduces an element of flexibility into negotiations; which seeks to
accommodate the needs, sensitiveness and ambitions of all FTAA countries. The vision, which
represents a compromise between US and Brazilian ambitions, introduces a two-tiered structure
into the negotiations; intended to address divergences concerning the scope of negotiations. On
one level, countries will negotiate a common and balanced set of rights and obligations in all nine
negotiating areas, which will be applicable to all of them. Countries that so choose can agree to
additional obligations and benefits, on a ‘plurilateral basis'. Central to the vision, however, is the
principle of ‘appropriate balance of rights and obligations where countries reap the benefits of their
respective commitments'.

US FTA TALKS WITH ANDEAN COUNTRIES UNDERWAY SOON

Negotiations between the United States and Colombia, Peru and Ecuador are slated to begin
shortly. A first round of negotiations on a US-Andean free trade agreement is set for Bogota, May
18 to 19.

Negotiations will get underway with Colombia in the first instance. Peru and Ecuador are expected
to join these talks at a later stage.

In a letter to USTR Zoellick, Trade Ministers from Colombia, Ecuador and Peru formally requested
the US consider allowing Bolivia to participate in negotiations, initially as an observer. The US has
expressed its willingness to ultimately include Bolivia.

The Bush Administration notified Congress, in November last year, of its intent to negotiate a US-
Andean trade pact.

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WTO PRELIMINARY RULING ON COTTON SUBSIDIES SLAMS UNITED STATES

A preliminary ruling was issued recently in a case brought forward by Brazil concerning United
States cotton subsidies to farmers and agribusiness interests. Reportedly, Brazil argued that the
subsidies violated WTO rules on Subsidies and Countervailing Measures and the Agreement on
Agriculture.

The interim WTO panel report, issued April 26, found that US cotton subsidies did indeed
contravene global trade rules. A final report will likely be released in June. US trade officials
immediately signalled that the United States would appeal the WTO decision, if there were no
changes from the interim report. A White House spokesperson, in remarks April 27, said, “we
believe that United States farm programs were designed to be and are fully consistent with our
WTO obligations…there is no immediate impact on our farm programs”.

It has been suggested, the preliminary ruling has set an important precedent for other developing
countries who too feel that they have been negatively affected by the billions of dollars provided in
cotton subsidies by the US (and certain other developed countries) for their farmers.

In September 2003, preceding the Fifth WTO Ministerial Conference in Cancún, Mexico, Benin,
Burkina Faso, Chad and Mali made a very public appeal to the United States and the European
Union (EU) to cut subsidies to their cotton farmers. The four West African cotton-producing
countries maintained that the billions of dollars a year spent by the US, in particular, on cotton
subsidies distort the market, depressing world prices.

The West African countries pressed for Ministers at Cancún to agree on a timetable for eliminating
the subsidies and for compensation to be provided to their countries while the subsidies are
phased out. The four West African countries continue to maintain that cotton must be treated as a
separate issue in global trade talks, and not be subsumed under the general agriculture
negotiations [there appear to be signs that this position may be changing – see ‘WTO BRIEFING’
overleaf]. The United States, however, has called for cotton not to be treated as a separate issue.

SETBACK FOR US IN GAMBLING CASE

RNM UPDATE 0405 (April 2, 2004) reported on a preliminary decision in an interim WTO panel
report (sharply criticized by the United States) on a trade dispute between the United States and
Antigua & Barbuda, over Internet gambling; which apparently found that US prohibitions in place
regarding Internet gambling are an unfair trade barrier.

According to diplomatic sources, the Antigua & Barbuda challenge to the US ban on Internet
gambling has been upheld. Apparently, a final WTO panel report, issued in April, remained
unaltered from the previous preliminary ruling.

The panel decision was hailed by Antigua & Barbuda officials as an important ruling for all
developing countries attempting to diversify their economies, a source said. The source added,
“this unprecedented ruling, in favour of Antigua & Barbuda, emboldens the country to further
develop other areas of the cross border supply of services, which hold tremendous potential in

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efforts to diversify the economy”. A senior Antiguan representative told RNM UPDATE, “the final
WTO panel report represents an important gesture to small developing economies that the
multilateral dispute settlement mechanism is fair and can work for them”.

WTO BRIEFING

Trade Ministers from the United States, the European Union, Brazil, South Africa (both Brazil and
South Africa are leading members of the G-20) and Kenya (representing the G-90) met in London,
May 1 to 2, as part of efforts to revive the troubled WTO Doha Round. The informal meeting was
hosted by USTR Zoellick.

Informed sources have revealed the sentiment at the meeting was that a Framework Agreement
could be attainable by July this year.

The London meeting has been described as an opportunity to give “clear instructions to
negotiators”, in the context of priorities for “moving forward”. Reportedly, deliberations centred on
Agriculture, non-Agricultural Market Access, development issues and the so-called “Singapore
Issues” (i.e. Investment and Competition rules, Trade Facilitation and transparency in Government
Procurement). According to sources close to WTO talks, in an effort to determine the approach to
agricultural market access in a Framework Agreement the meeting considered a proposal for the
use of more general text language. This has been attributed to continued divergence among key
WTO Members on the formula to be used for reducing agricultural tariffs.

The London meeting is a precursor to other informal meetings intended to further advance global
trade talks. A “mini-ministerial” meeting, to be chaired by Mexico, is set to take place on the
margins of the annual ministerial council of the Organization for Economic Cooperation and
Development, in Paris, slated for May 13 to 14. Over two-dozen Trade Ministers are expected to
attend.

Breakthroughs were not expected from the London meeting. It is too early, though, to tell if the
necessary flexibility needed to restore momentum to deadlocked negotiations has been achieved;
certainly, that meeting forms the basis for the upcoming “mini-ministerial” - in mid-May. The
meeting is part of a process to galvanize consensus on problematic negotiating areas over which
there continues to be disparate positions. CARICOM remains committed to the resumption of
substantive negotiations and meaningful progress.

Trade Ministers from Least Developed Countries met separately, in Dakar, Senegal, May 4 to 5.
Senegalese Trade Minister and chairman of the meeting, Awa Gueye Kebe, characterized the aim
of the meeting as enabling “the least developed countries to make concrete proposals as a
negotiating force".

The meeting’s final declaration - the “Dakar Declaration” - was released at the close of the two-day
meeting. It has been reported that a compromise approach on the “Singapore Issues”, specifically
in Trade Facilitation as part of the Doha Round’s single undertaking, and on the stance of four
West African countries on the treatment of cotton subsidies as separate from global trade talks in
Agriculture, was under consideration at the meeting. On the latter point, representatives of West

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African countries have signalled that any shift in the position of the treatment of cotton subsidies
separately rests on assurances from developed countries that the cotton issue will not languish in
farm trade talks. However, emerging from the Dakar meeting positions on certain other
fundamental issues remain immutable. Seventy-eight delegates from developing countries
participated. WTO Director-General, Supachai Panitchpakdi, EU Trade Commissioner, Pascal
Lamy, and United Nations High Representative for the Least Developed Countries, Landlocked
Developing Countries and the Small Island Developing States, Anwarul Chowdhury, also attended
the meeting. Representatives of non-governmental organizations were present, as well.

Agricultural trade reform remains the centre-piece of global trade talks. Bridging differences over
farm trade liberalization, namely: agricultural export subsidies, domestic support and opening
markets, is key a determining factor for progress in the Doha Round.

NEWS BRIEFS

Mercosur/Mexico to work toward FTA

Brazilian Foreign Minister, Celso Amorim, and his Mexican counterpart, Luis Ernesto Derbez, have
signalled that their two countries stand ready to work towards a Mercosur-Mexico trade pact.

Japan/Mexico FTA to be Signed

A free trade agreement between Japan and Mexico is set to be signed in late Summer 2004. A
final agreement on the trade accord was reached in March this year, following sixteen months of
negotiations.

High-Level Meetings in Botswana

The Seventy-Ninth Session of the Africa Caribbean Pacific (ACP) Council of Ministers was held in
Gaborone, Botswana, May 3 to 5. The Twenty-Ninth ACP-EU Council of Ministers Joint Session,
also convened in Gaborone, followed – May 6 to 7.

US/Australia to sign Trade Accord

The US-Australia free trade agreement is expected to be signed in Washington, DC, May 18.
USTR Zoellick and his Australian counterpart, Trade Minister Mark Vaile, are set to sign on behalf
of the United States and Australia, respectively. Negotiations were finalized in February 2004,
following eleven months of talks.

Colorado Springs pulls out of race for FTAA Secretariat

The FTAA TNC Co-Chairs have advised that the City of Colorado Springs “has decided that it does
not wish to be considered further as a potential site for the Permanent Secretariat of the FTAA”.
Correspondence to this effect from the City of Colorado Springs was received, by the Co-Chairs,
April 26. Effectively, there are nine candidate sites remaining, inter alia: Atlanta,

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Chicago, Galveston, Houston, Miami, San Juan (USA); Puebla and Cancun (Mexico); Panama
City; and, Port-of-Spain.

UPCOMING EVENTS

May 10 to 12: Fourth Meeting of the UK-Caribbean Forum, London. Ambassador Bernal will head
the RNM team to the meeting.

May 10 to 14: ‘WTO Geneva Week’

May 13 to 14: WTO “mini-ministerial” (on the margins of the annual ministerial council of the
Organization for Economic Cooperation and Development). Hon. Clement Rohee, CARICOM
Ministerial Spokesperson for WTO issues and Minister of Foreign Trade and International
Cooperation, Guyana, will take part in that meeting. Ambassador Bernal and RNM Coordinator for
WTO Matters, Dr. Peter Gonzales, will accompany him.

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For More Information Contact:

Nand C. Bardouille
Caribbean Regional Negotiating Machinery
3rd Floor, The Mutual Building, Hastings Main Road, Hastings, Christ Church, Barbados
Tel: (246) 430-1678
FAX: (246) 228-9528