The World Trade Organization: The Hong Kong Ministerial

CRS Report for Congress
The World Trade Organization:
The Hong Kong Ministerial
Updated January 20, 2006
Ian F. Fergusson, Coordinator,
William H. Cooper, Vivian C. Jones, and Danielle J. Langton
Foreign Affairs, Defense, and Trade Division
Charles E. Hanrahan and Susan R. Fletcher
Resources, Science, and Industry Division
Jeanne J. Grimmett
American Law Division

Congressional Research Service ˜ The Library of Congress

The World Trade Organization:
The Hong Kong Ministerial
The World Trade Organization (WTO) held its 6th Ministerial summit in Hong
Kong from December 13-18, 2005. WTO Ministerials are held every two years to
bring together trade ministers from member states, often to make political decisions
for the body. Although an original goal of the Ministerial was to agree on a package
of modalities (methods by which the round is negotiated) for the ongoing Doha
Development Agenda (DDA) round of trade negotiations, this aim was dropped in
order to avoid a high-profile failure similar to previous Ministerials at Cancun and
Seattle. Rather, members agreed to some modest advancements in agriculture,
industrial tariffs, and duty and quota-free access for least developed countries. The
final outcome of these negotiations could provide a substantial boost to the world
economy, but if the round itself is not completed, there may be repercussions for the
WTO as an institution and for the architecture of the world trading system.
Agriculture has become the most significant challenge for the members in the
negotiations. At the Ministerial, members agreed to an elimination of export
subsidies by 2013. Members also agreed to a three band approach to cutting
domestic support and committed to achieving specific modalities areas of tariffs and
domestic support by April 30, 2006. Trade ministers agreed to use a Swiss tariff
reduction formula in the non-agricultural market access talks with specific modalities
to be agreed by April 30, 2006. Members also reaffirmed a commitment to
completing the services negotiations. With regard to the Trade Related Aspects of
Intellectual Property Agreement (TRIPS), the WTO members acted before the
Ministerial to approve the final amendment of the TRIPS agreement to incorporate
the 2003 Decision on access to medicines. Members also made a commitment to
extend duty-free and quota-free access to all LDC products.
The outcome of the Ministerial potentially has significant implications for
Congress. Any agreement resulting from the round must be approved by Congress,
and there is pressure to come to an agreement well before the expiration of U.S. trade
promotion authority on July 1, 2007. In addition, any agreement on agriculture may
affect the drafting or necessitate the revision of the next farm bill that may be
considered by Congress in 2007. Congress has also expressed an interest in shielding
U.S. trade remedy laws from negotiations. This report will be updated to reflect the
outcome of the Ministerial.

In troduction ......................................................1
Background ..................................................1
Outcome of the Ministerial......................................2
Stakes of the Doha Round.......................................5
Agriculture .......................................................6
Agricultural Negotiating Proposals............................7
Agriculture in the Hong Kong Ministerial...........................7
Export Competition........................................8
Domestic Support.........................................9
Market Access............................................9
Cotton ..................................................10
Agriculture, NAMA, and LDCs..............................10
Doha and the 2007 Farm Bill....................................10
Geographical Indications (GIs) ..................................11
Services ........................................................12
Evolution of the Negotiations...................................13
Major Issues and Status of Negotiations...........................14
Negotiating Format.......................................14
Mode-4 .................................................14
Negotiations on Rules.....................................15
Delays in Other DDA Negotiations...........................15
Results from Hong Kong.......................................15
Non-Agricultural Market Access.....................................16
Major Negotiating Issues.......................................17
Tariff Reduction..........................................17
Tariff Binding...........................................18
Special and Differential Treatment for Developing Countries......19
Non-Tariff Barriers.......................................19
Sectoral Approaches......................................19
Trade Remedies and Related Matters.................................20
U.S. Legislation..............................................20
Progress of Negotiations.......................................21
Stakeholders .................................................22
Major Developments and Issues.................................22
Determination of Injury....................................23
Determination of Dumping.................................23
Reviews ................................................23
Special and Differential Treatment...........................24
Other Negotiations........................................24
Results in Hong Kong.........................................24
Intellectual Property Issues.........................................24
Access to Medicines .........................................25
Traditional Knowledge........................................26

Trade Facilitation.................................................27
Trade Facilitation Negotiations..................................27
Negotiating Issues in Trade Facilitation.......................28
Outcome of Hong Kong........................................30
Special and Differential Treatment...................................30
S&D Negotiations in the Doha Round.............................31
Implementation Issues.....................................32
Technical Assistance......................................32
Dispute Settlement................................................33
Hong Kong and Beyond........................................36
Environment and Trade............................................36

The World Trade Organization: The Hong
Kong Ministerial
The 6th Ministerial of the World Trade Organization (WTO) was held from
December 13-18, 2005, in Hong Kong. WTO Ministerials are held every two years
to bring together trade ministers from member states, often to make political
decisions for the body. In the ongoing Doha Development Agenda (DDA) round of
WTO trade negotiations, it was hoped that at the Hong Kong Ministerial trade
ministers would be able to agree on a package of modalities (methodologies or
formulas that are used to negotiate trade concessions) by which the round is
negotiated. As it became clear in the fall of 2005 that such modalities would not be
finalized in Hong Kong, the ministerial became an opportunity to take stock of the
round, and to achieve some modest, incremental steps on which to build a full
The outcome of the Ministerial potentially has significant implications for
Congress. Any agreement resulting from the round must be approved by Congress,
and there is pressure to come to an agreement well before the expiration of U.S. trade
promotion authority on July 1, 2007, which permits Congressional consideration of
trade agreements on an up or down basis with no amendments, provided that
negotiating mandates and timelines are adhered to by the Administration.1 In
addition, any agreement on agriculture may affect the drafting or necessitate the
revision of the next farm bill that may be considered by Congress in 2007.
This report describes the outcome of the Doha Development Agenda (DDA)
negotiations. Separate sections on Agriculture, Non-Agricultural Market Access,
Services, Rules, Trade Facilitation, Special and Differential Treatment, Intellectual
Property Issues, Dispute Settlement, and Trade and Environment provide background
on the negotiations and details of the proposal.
The current round of WTO trade negotiations were launched at the 4th WTO
Ministerial meeting at Doha, Qatar in November 2001. The work program devised
at Doha folded in continuing talks (the built-in agenda) on agriculture and services
and launched negotiations in several areas including non-agricultural (industrial)
tariffs, disciplines for existing WTO agreements on antidumping and subsidies, and

1 Due to various reporting requirements in TPA, some observers maintain that a Doha Round
agreement would need to be completed by the end of 2006 or early 2007 to be able to be
concluded by Congress.

topics relating to special and differential (S&D) treatment for developing countries.
The Members agreed to a January 1, 2005 deadline for the completion of the talks.
Negotiations have proceeded at a slow pace, due in part to the number of
countries participating (149) and their diverse interests. (See country group box, p.3)
More than four years into the negotiations and after several deadlines have passed,
agreement on negotiating modalities — methodologies such as tariff reduction
formulas by which negotiations are conducted — still elude the agriculture,
industrial market access, services, and other negotiating groups. The 5th Ministerial
— which took place September 10-14, 2003 in Cancún, Mexico — ended without
agreement on agricultural modalities or on whether negotiations would commence
on the so-called Singapore issues (trade facilitation, government procurement,
investment, and competition policy).
A negotiating Framework Agreement was reached in July 2004. This agreement
provided broad guidelines, though not specific modalities, for completing the Doha
round negotiations in agriculture, services, industrial tariffs, and trade facilitation.
The Agreement abandoned the January 1, 2005 deadline for the completion of the
negotiations. While the July Agreement did not set a new deadline, many consider
the new de facto deadline to be set by the parameters of the expiration of trade
promotion authority in the United States.
The Agreement also set December 2005 as the date for the 6th Ministerial to be
held in Hong Kong. It was hoped that negotiators would have final modalities
prepared for approval at this Ministerial. However, despite a flurry of activity in the
agriculture negotiations in October and November 2005, the WTO’s Director-
General Pascal Lamy announced on November 8 that achieving specific formulas and
goals for the Doha Round would not be possible by Hong Kong.
Outcome of the Ministerial
The WTO Secretary General Pascal Lamy released a draft ministerial text on
November 26, 2005.2 This “no-surprises” draft followed his recognition that the
members were too far from convergence on major issues to use the Hong Kong
Ministerial as a venue to agree on specific modalities for the negotiations. A new
draft incorporating some additional areas of convergences was released on December
1, 2005, and was considered at the December 1-2 WTO General Council meeting in
Geneva. For the most part, these items reflect areas of agreement reported by the
sectoral negotiating chairs in their reports to the General Council. Generally, these
convergences reflect a step beyond the July Framework Agreement, but fall short of
full negotiating modalities. A summary of sector-by-sector results of the Ministerial
follow in bullets below:

2 The final Ministerial Declaration (WT/MIN(05)/DEC), December 18, 2005 is available at
[ h t t p : / / www.wt o.or g/ engl i s h/ t h ewt o_e/ mi n i s t _ e/ mi n05_e/ f i n al _t ext _ e.pdf ] .

African, Caribbean and Pacific (ACP countries also Lome Convention
countries) — developing country group of former colonies of Europe which
maintain strong ties to EU:
Cairns Group — grain exporters: Argentina, Australia, Brazil, Canada, Chile,
Colombia, Fiji, Hungary, Indonesia, Malaysia, New Zealand, Philippines,
Thailand, Uruguay.
Quad Group (also “Old Quad”) — developed country trade leaders: EU, U.S.,
Japan, Canada.
New Quad Group (also Group of 4 or G4) — critical developed and developing
market leaders: U.S., EU, Brazil, India.
Five Interested Parties (FIPS also Non Group of 5 or NG5) — helped negotiate
the 2004 Framework Agreement on agriculture that now serves as the basis for the
Doha round. Quad plus one: U.S., EU, Brazil, India and Australia.
Friends of Antidumping — seeks reforms of rules that would affect U.S. and
European Union antidumping investigations. Members include Japan, South
Korea, Chile, Colombia, Costa Rica, Hong Kong, Norway, Switzerland, Taiwan
and Thailand.
Friends of Mode 4 — Mode 4 is the movement of natural persons in order to
supply a service in another country. 12 member countries include India, Mexico,
Indonesia and Thailand
Group of 10 (G-10) — net food importers and subsidizers, includes Switzerland,
Japan, Norway.
Group of 20 (G-20) — primary developing nations united on agricultural
negotiations: Argentina, Bolivia, Brazil, Chile, China, Egypt, Guatemala, India,
Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, South Africa,
Tanzania, Thailand, Uruguay, Venezuela and Zimbabwe.
Group of 33 (G-33) — Developing countries concerned with protecting
developing country agricultural markets from low-priced import competition from
industrialized countries and other large agro-exporters.
Group of 90 (G-90) — poorest or least developed nations.
Prepared by J. Michael Donnelly, Information Research Specialist, Congressional Research
Ser vice .

!Agriculture. Members agreed to eliminate export subsidies, and
“export measures with equivalent effect” by 2013, a date favored by
the European Union (EU). Members agreed to cut domestic support
programs with a three band methodology. As the largest user of
domestic agricultural subsidies, the EU was placed in the highest
band. The United States and Japan were placed in the second band
and lesser subsidizing countries were placed in the third band.
However, the actual percentage cuts that these bands represent
remain subject to negotiation. Members also renewed a commitment
to achieve a tariff cutting formula by April 30, 2006.
!Cotton. Members agreed to eliminate export subsidies for cotton
and to provide duty-free and quota-free access for LDC cotton
producers by year-end 2006. Members also agreed to reduce
domestic support for cotton in a more ambitious manner than for
other agricultural commodities as an “objective” in the ongoing
agricultural negotiations.
!Least-Developed Countries (LDC). Members agreed to provide
duty-free and quota-free access for LDC exports by 2008. However,
this agreement provides the caveat that 3% of tariff lines can be
exempted as sensitive products such as textiles, apparel, and
!Non-Agricultural Market Access (NAMA). In the NAMA talks,
members agreed to adopt a Swiss formula approach, one in which
higher tariffs are decreased more than lower tariffs. However, the
exact formula is yet to be determined, although members agreed to
a April 30, 2006 deadline to achieve a formula. The exact nature and
scope of special and differential treatment for developing countries
in tariff reduction also remains to be resolved.
!Services. No substantive breakthrough was achieved in the services
negotiations. Draft ministerial language that would have clarified
specific sectors and modes of supply as subject to negotiations were
watered-down at the insistence of some developing countries.
Language that allowed for plurilateral negotiations was also
restricted by tying members’ obligations under the process to their
development status.
!Intellectual Property Rights. Members agreed to a permanent
amendment of the Trade-Related Aspects of Intellectual Property
Rights Agreement (TRIPS). The amendment would enable
developing and least developed countries without domestic
manufacturing capability to issue a compulsory license to a third-
country producer to manufacture generic drugs to access medicines
to fight public health epidemics such as HIV/AIDS, tuberculosis,
malaria, and other infectious diseases. This agreement will become
effective when it is ratified by two-thirds of the membership.

!Trade Remedies. While the Ministerial text and the rules annex did
not report consensus on any negotiating issue, it called for the
preparation of a text-based negotiating instrument.
!Trade Facilitation. No major breakthroughs in trade facilitation
were announced in Hong Kong and the Ministerial declaration did
not agree on a date for beginning text-based negotiations. The
ministerial served as a review of progress and a discussion of plans
for future work.
!Dispute Settlement. The Ministerial takes note of the work of
dispute settlement negotiations, but does not recommend any
specific course of action.
!Trade and Environment. The Ministerial reaffirmed its
commitment to Doha language “aimed at enhancing the mutual
supportiveness of trade and environment.” It also noted the
cooperation between negotiating groups to identify environmental
goods in which tariffs and non-tariff barriers may be reduced or
eliminated and to reduce or to eliminate fisheries subsidies.
Stakes of the Doha Round
The economic value of prospective WTO liberalization under the Doha round
to the United States and the world economy could be significant. One model
indicates that world net welfare resulting from certain Doha scenarios could increase
by $574 billion and by $144 billion in the United States.3 Other studies present a
more modest outcome with world net welfare gains ranging from $84 billion to $287
billion by the year 2015.4 Nonetheless, because trade liberalization involves the
shifting of economic resources into more productive uses, it inevitably involves
dislocations, including job losses and plant closures, to some groups and regions.
The future of the multilateral trading system may also hinge on the successful
conclusion of the Doha Round. If the round does not conclude, or concludes with a

3 Drusilla Brown, Alan Deardorff, and Robert Stern, “Computational Analysis of
Multilateral Trade Liberalization in the Uruguay Round and Doha Development Round,”
University of Michigan Discussion Paper 490, December 12, 2002,
( www.spp.umi c r s i e / wor ki ngpaper s / ml ) .
4 Thomas W. Hertel and Roman Keeney, “What is at Stake: The Relative Importance of
Import Barriers, Export Subsidies and Domestic Support,” in Anderson and Martin, eds.,
Agricultural Trade Reform in the Doha Agenda (Washington: World Bank, 2005); and
Kym Anderson, Will Martin, and Dominique van der Mensbrugge, “Doha Merchandise
Trade Reform: What’s At Stake for Developing Countries,” July 2005, available at
( The different outcomes in these studies are due
substantially to the assumptions concerning the liberalization resulting from the Doha Round
as well as from differences in the econometric models themselves. For example, the World
Bank studies do not attempt to quantify services liberalization.

superficial agreement, the world trading system could be affected in numerous ways.
First, it may result in the loss of confidence in the institutions of the WTO. One of
the achievements of the Uruguay Round was the establishment of a binding dispute
settlement system, in which countries have recourse to challenge the trading practices
of other members. However, a failure of the WTO to further trade liberalization in
areas which are significant to its members may bode ill for the legitimacy of its other
institutions, including dispute settlement.
Second, an unsatisfactory outcome of the Doha Round may accelerate the trend
toward regional and bilateral free trade agreements. While some of these agreements
are quite comprehensive and do result in substantially free trade between the partners,
others are more political documents that include what is convenient and leave out
whole economic sectors. In addition, regional and bilateral agreements are often
negotiated between countries of different economic power, and the resulting
agreement reflects the interests of the dominant negotiating partner. The drawback
of these agreements to the world economy is one that the multilateral trading system
was designed to avoid, namely trade diversion5 and increased complexity from a
“spaghetti bowl” of rules, multiple tariff rates, and arbitrary rules of origin. If the
Doha round is not seen as moving forward, these regional and bilateral deals
increasingly may form the basis for the world trading system.
The Doha Round presents challenges to both developed and developing
countries. Developed countries are challenged to negotiate an agriculture agreement
that provides meaningful reductions to tariff and subsidies that impede the market
access of producers with comparative advantage, often developing countries.
Developing countries are also looking to see meaningful market access commitments
in labor intensive industrial products. The challenge for developing countries is to
provide meaningful market access in industrial products and services, partly to reduce
their own inefficient barriers, but also to allow political cover in developed countries
to proceed with liberalization beneficial to developing countries. Developing
countries are also challenged to fully participate in the round, and not to exclude
themselves with the mantra of special and differential treatment to avoid
liberalization that ultimately may be in their own interest.
Ag r i c u l t u r e 6
Agriculture has been among the most difficult areas to negotiate in the Doha
Round, yet progress in agriculture seems to be outpacing progress in other areas. The
Doha Round mandate and the July Framework for the agriculture negotiations called
for substantial improvements in market access; reductions of, with a view to phasing
out, all forms of export subsidies; and substantial reductions in trade-distorting
domestic support. These three aims have come to be termed the three pillars of the

5 Trade diversion occurs when the lower tariffs under a trade agreement cause trade to be
diverted away from a more efficient producer outside the trading bloc to a producer inside
the bloc.
6 This section was written by Charles E. Hanrahan, Senior Specialist in Agricultural Policy,
Resources, Science, and Industry Division.

agriculture negotiations. Although negotiators have focused on the three pillars, two
other issues related to agriculture are also being negotiated: 1) a sectoral initiative for
cotton calling for the accelerated elimination of trade-distorting subsidies for cotton;
and 2) proposals to establish a multilateral system of notification and registration for
wines and spirits and the provision of additional protection for GIs of agricultural
products. 7
Agricultural Negotiating Proposals. In preparation for the Hong Kong
meeting, the United States, the EU, the G-20 developing countries (such countries
as Brazil, India, and China) and the G-10 group of net importers of agricultural
products (which includes Switzerland, Norway, and South Korea) each made
proposals for specific modalities to address the three pillars.8 Major differences
among the proposals cast doubt on the likelihood that full modalities in agriculture
would be agreed in Hong Kong. The United States, for example, made its offer to
substantially reduce domestic subsidies conditional on gaining substantial market
access for agricultural products from the EU and, especially, the developing
countries. The EU, however, indicated it would not move further on agricultural
market access unless developing countries agreed to open markets for services and
industrial products, and the United States made concessions on the treatment of
geographical indications for food and agricultural products. The G-20, for its part,
indicated it would not make substantially improved offers on industrial products and
services, until there was progress on domestic farm subsidies and market access. The
G-10 argued strongly for maintaining high tariffs for agricultural products, although
some members like Japan have taken a more conciliatory stance.
A draft of the declaration for the Hong Kong Ministerial noted that “much
remains to be done in order to establish modalities (for agriculture) and to conclude
the negotiations.” As proposed, the draft declaration would commit WTO member
countries to complete negotiations on modalities and to submit comprehensive
schedules of concessions by dates in 2006 to be determined. A report of the
Chairman of the agriculture negotiating committee appended to the draft declaration
illustrated the range of proposals on the three pillars, but made no recommendations9
for reconciling differences.
Agriculture in the Hong Kong Ministerial
In Hong Kong, WTO member countries made only limited progress in reaching
agreement on precise numerical formulas or targets (modalities) for liberalizing

7 Although effectively treated by the EU as an agricultural market access issue, the
negotiations over additional protection for GIs is taking place in the WTO’s Council for
Trade-Related Aspects of Intellectual Property Rights (TRIPS).
8 For details on the U.S., EU, G-20, and G-10 agriculture negotiating proposals, see CRS
Report RL33144, WTO Doha Round: The Agricultural Negotiations, by Charles E.
Hanrahan and Randy Schnepf. A detailed discussion of the July Framework agreement is
in CRS Report RS21905, Agriculture in the WTO Doha Round: The Framework Agreement
and Next Steps, by Charles E. Hanrahan.
9 “Draft Ministerial Text,” [Job(05)/298], [
mi n05_e/draft_min05_text_e.doc].

agricultural trade, the original aim of the Hong Kong Ministerial, but the Hong Kong
agreement does set new deadlines for completing the Round in 2006.10 According
to the declaration, modalities for cutting tariffs on agricultural products, eliminating
export subsidies, and cutting trade-distorting domestic support would be agreed to
by April 30, 2006. Based on these modalities, member countries would then submit
comprehensive draft schedules by July 31, 2006. The Doha Round would be
concluded in 2006. Completing negotiations by year-end would allow enough time
to submit an agreement to Congress before the expiration of the President’s TPA
authority in mid-2007 and before the expiration of the U.S. farm bill in September


The Hong Kong declaration deals with all three pillars of the agricultural
negotiations — export competition, domestic support, and market access — and also
with the controversial issue of the nature and pace of reform of trade-distorting cotton
subsidies in the United States and other developed countries. Most progress was
made in negotiations on the export competition pillar with an agreement on a specific
end date for the elimination of export subsidies, but difficult negotiations remain on
establishing new disciplines for other forms of export competition. Detailed
negotiations are yet to be carried out for domestic support and market access.
As throughout the Doha agricultural negotiations, market access, and especially
how to deal with access for import-sensitive products, remains the thorniest issue, not
least because of EU intransigence on this pillar. Some agreement was reached on
how to deal with export subsidies and market access for cotton, but this issue still pits
the United States, which argues for handling the reduction of trade-distorting support
for cotton within the domestic support pillar, against the cotton-producing African
countries who insist on an early harvest of reductions in cotton support.
Export Competition. The most concrete outcome of the Hong Kong
Ministerial was an agreement to eliminate agricultural export subsidies by the end of
2013. The European Union (EU), the largest user of export subsidies, had opposed
setting an end date, maintaining that WTO members needed to determine first how
other forms of subsidized export competition — export credit programs, insurance,
export activities of State Trading Enterprises (STEs), and food aid — would be
disciplined. The United States and Brazil, among others, had been demanding an end
to such export subsides by 2010 to be followed by negotiations on other forms of
export completion. As a compromise, the declaration calls for the parallel
elimination of all forms of export subsidies and disciplines on measures with
equivalent effect by the end of 2013. The end date will be confirmed, however, only
after the completion of modalities for the elimination of all forms of export subsidies.
With respect to other forms of export competition, the declaration included the

10 Paragraphs 3-12 of the declaration deal with agriculture and cotton; the text of the
declaration, available at [ thewto_e/
mi nist_e/min05_e/final_text_e.pdf].

!Export credit programs should be “self-financing, reflecting market
consistency, and of a sufficiently short duration so as not to
effectively circumvent real commercially-oriented discipline”;
!On exporting STEs, disciplines will be such that their “monopoly
powers cannot be exercised in anyway that would circumvent the
direct disciplines on STEs on export subsidies, government
financing, and the underwriting of losses”; and
!On food aid, a “safe box” will be established for “bona fide” food
aid “to ensure there will be no impediment to dealing with
emergency situations.” However, disciplines will be established on
in-kind food aid, monetization, and re-exports to prevent loopholes
for continuing export subsidization leading to elimination or
displacement of commercial sales by food aid.
Domestic Support. On trade-distorting domestic support, WTO members
agreed to three bands for reductions, with the percentages for reducing support in
each band to be decided during the modalities negotiations. The EU would be in the
highest band and be subject to the largest reduction commitments, while Japan and
the United States would be in the middle band. (The U.S. proposal would have
subjected Japan to a higher percentage cut of its domestic support.) All other WTO
members, including developing countries, would be in the bottom band. The
declaration states further that “the overall reduction in trade-distorting domestic
support will still need to be made even if the sum of the reductions in the components
of trade-distorting support would otherwise be less than the overall reduction
requirement. (This appears aimed at ensuring that the United States does not engage
in box shifting to maintain its current spending levels.)
Market Access. The declaration calls for four bands for structuring tariff
cuts, with the relevant band thresholds and within-band reduction percentages to be
worked out during modalities negotiations. The treatment of sensitive products
(those to be exempted from formula tariff reductions) was also left to modalities
negotiations. A preliminary draft of the declaration would have required WTO
member countries to ensure that, for sensitive products, the greater the deviation from
agreed tariff reduction formulas, the greater would be the increase in tariff rate
quotas. The extent to which tariff rate quotas for sensitive products are expanded
remains a key determinant of the market access gains that would result from the
The declaration also ensured that developing countries would have two
privileges not otherwise available to developed countries: (1) the right to self-
designate a number of tariff lines to be treated as special products (with lower cuts
in tariffs) based on certain criteria — food security, livelihood security, and rural
development; and (2) the ability to impose a special safeguard mechanism (SSG) on
imports based on both import quantity and price triggers.11

11 SSGs are presently available to all WTO members (not just developing countries) that
have them listed in their country schedules. See CRS Report RL32916, Agriculture in the
WTO: Policy Commitments Made Under the Agreement on Agriculture, by Randy Schnepf.

Cotton. On cotton, the declaration reaffirms the commitment (made in the July
2005 Framework Agreement) to ensure an explicit decision on cotton “within the
agriculture negotiations and through the Sub-Committee on Cotton expeditiously and
specifically.” The declaration calls for developed countries to eliminate all forms of
export subsidies on cotton in 2006. This coincides with the United States’
elimination of its Step 2 program for cotton by August 1, 2006, as contained in the
pending 2006 budget reconciliation act (S. 1932, Deficit Reduction Act of 2005).
Step 2, which compensates U.S. millers and exporters for using high-priced
American cotton, was declared in violation of WTO rules in the Brazil-U.S. cotton
case. 12
On cotton market access, the declaration calls on developed countries to give
duty and quota free access to cotton exports from least-developed countries (LDCs)
from the beginning of the implementation of a Doha Round agreement. Not agreed
to, but certain to be revisited during the modalities negotiations in 2006, was a
provision that “trade-distorting domestic subsidies for cotton should be reduced more
ambitiously than under whatever general formula is agreed and that it should be
implemented over a shorter period of time” than for other commodities.
Agriculture, NAMA, and LDCs. Two other provisions in the declaration
touch on agriculture. One is a provision in the declaration calling (for the first time
in Doha Round negotiations) for balance between agricultural and non-agricultural
market access (NAMA) modalities. The declaration recognizes that it is important
to advance the development objectives of the Round through enhanced market access
for developing countries in both agriculture and NAMA. As a result, the declaration
calls for a “complementary high level of ambition” in market access for both these
components of the round. Second, in a departure from special and differential
treatment, the declaration calls for all developed countries, and developing countries
in a position to do so, to provide duty-free and quota-free market access for products
originating from LDCs, with some exceptions, by 2008 or no later than the beginning
of the implementation period. These aspects of the Hong Kong declaration are
discussed more fully elsewhere in this report.
Doha and the 2007 Farm Bill
Current Doha reform proposals suggest that substantial changes could be needed
for several components of U.S. agricultural policy, the authorizing statute for which,
the 2002 farm bill, expires in 2007. The agreement in the declaration to eliminate
export subsidies would most likely affect exports of milk and milk products, the
principal beneficiaries of U.S. agricultural export subsidies. Direct export subsidies
for other eligible agricultural commodities have been little used since 1995. The
emerging Doha agreement on export competition also suggests that the effectiveness
of traditional export credit guarantees in supporting U.S. commodity exports into
price-competitive markets would be reduced. However, ongoing U.S. changes in its
export credit guarantee program, made in response to a WTO dispute settlement

12 See CRS Report RS22187, U.S. Agricultural Policy Response to the WTO Cotton
Decision, by Randy Schnepf.

ruling against certain features of the U.S. cotton program,13 are likely to bring them
into compliance with Doha reform proposals, thereby necessitating little if any
further change. Since most of U.S. food aid is in the form of commodity donations
rather than cash, U.S. food aid donations would likely be reduced to the extent that
reforms to food aid limit or restrict the donation of actual commodities.14
The various components of U.S. domestic support for farmers also could require
some redesign in order to meet lower overall and individual component spending
ceilings. Although there are many ways that such changes could be achieved, a likely
approach would include shifting away from market-distorting programs such as loan
deficiency payments (LDP) or marketing loan gains (MLG) and towards greater use
of non-trade distorting (or green box) programs such as decoupled direct payments,
conservation payments, or rural infrastructure development.
A Doha Round agreement to reduce tariff levels is unlikely to produce
significant increases in imports for most U.S. agricultural commodities since U.S.
agricultural tariffs are already very low relative to most other nations and relatively
few commodities receive tariff-rate quota (TRQ) protection. However, dairy
products, beef, and sugar are three of the major U.S. beneficiaries of TRQ protection.
Each of these products is likely to continue to receive protection as “sensitive”
products under a new DDA agreement, Expanded quota levels for each of these
commodities would result in some increase in imports, but would not likely require
substantial modification in TRQ administration.
Geographical Indications (GIs)
GIs are place names (or words associated with a place) used to identify products
(for example, “Champagne”, “Tequila” or “Roquefort”) which have a particular
quality, reputation or other characteristic because they come from that place.15 The
EU maintains a register of more than 700 protected GIs. France has the largest
number of protected GI’s on the register — 141 — of any other EU member country.
For the EU, guaranteeing protection to GIs is a critical component of a strategy of
developing EU agriculture as a source of high-value products that include both foods
as well as wines and spirits.16 The EU considers that GIs, because they affect trade
in agricultural products, should be considered an issue in the agricultural market
access pillar. Its position is that the protection accorded GIs for food products should
be at the high level accorded GIs for wine and spirits under the WTO Trade Related
Aspects of Intellectual Property (TRIPS) Agreement. The U.S. view has been that

13 For more information, see CRS Report RL32014, WTO Dispute Settlement: Status of U.S.
Compliance in Pending Cases; and CRS Report RS22187, U.S. Agricultural Policy
Response to WTO Cotton Decision, by Randy Schnepf.
14 For more information, see CRS Issue Brief IB98006, Agricultural Export and Food Aid
Programs, by Charles E. Hanrahan.
15 For a detailed discussion of GI’s, see CRS Report RS21569, Geographical Indications
and WTO Negotiations, by Charles E. Hanrahan.
16 John Baize, “EU’s New Farm Policy Signals the Way on Quality,” World Perspectives,
pp. 4-5, July 2, 2003.

GIs should be negotiated as an intellectual property, not an agricultural, issue and that
the existing protection for GIs for food and agricultural products provided in WTO
agreements is adequate. Complicating the U.S. position is the EU’s insistence on
linking expanding protection for GIs to reaching agreement on the three pillars:
market access, export competition, and domestic support.
The Doha Declaration called for completing work started in the Council for
Trade-Related Aspects of Intellectual Property Rights (TRIPS) on the establishment
of a multilateral system of notification and registration of GIs for wines and spirts
and for addressing the issues related to extending the protection of GIs to products
other than wines and spirts.17 The July Framework agreement noted that issues
related to the extension of the protection of geographical indications provided for in
Article 23 of the TRIPS Agreement to products other than wines and spirits remained
unresolved. Although under negotiation in the TRIPS council, the EU has made GIs
an agricultural trade issue by conditioning its market access offer on progress with
In its agricultural modalities proposal, the EU proposed extending Article 23
protection to all products; establishing a multilateral register of protected GIs, with
legal effect in all WTO member countries; and prohibiting use of well-known GIs on
a short list. The EU notes that all of these proposals would need to take into account
existing trademark rights. The U.S. agriculture modalities proposal does not address
the issue of GIs, but the U.S. position has been that existing trademark laws provide
adequate legal protection for GIs.
Little progress was made in Hong Kong on either of the GI issues: establishing
a multilateral system of notification and registration for wines and spirits or
extending a higher level of protection to GIs other than wines and spirits. The Hong
Kong declaration states only that WTO member countries agree to intensify
negotiations so as to complete them within the overall time-frame for the conclusion
of the negotiations foreseen in the Doha declaration.
“Services” covers a wide-range of economic activities. Services also account
for more than 80% of U.S. private-sector non-agricultural employment and close to
60% of U.S. GDP (as of 2004). Advancements in information technology are making
more types of services, such as accounting consulting services, tradeable across
national borders. Yet, multilateral rules on trade in services, in the form of the
General Agreement on Trade in Services (GATS) under the WTO, are in their
infancy, having been in force only since 1995, with the implementation of the

17 Paragraph 18 of the Doha Declaration addresses the issue of geographical indications
[ h t t p : / / www.wt o.or g/ engl i s h/ t h ewt o_e/ mi n i s t _ e/ mi n01_e/ mi ndecl m# t r i p s] .
18 This section was written by William Cooper, Specialist in International Trade and
Finance, Foreign Affairs, Defense, and Trade Division.

Uruguay Round Agreements. The current negotiations are designed to refine and
expand on the rules in the GATS.19
Evolution of the Negotiations
WTO members acknowledged that the GATS was rudimentary and that for it
to develop into an effective system of rules they would have to do more work.
Therefore, they mandated, in Article XIX of the General Agreement on Trade in
Services (GATS), that new negotiations on services commence no later than five
years after the Uruguay Round agreements entered into force, that is by the year of
2000. Thus, the services negotiations became, along with the agricultural
negotiations, part of the so-called built-in agenda. The negotiations did begin in

2000, but the early start has not ensured early progress.

By March 2001, the negotiators had established the guidelines for the
negotiations but not much else: negotiations would proceed using the “request-offer”
format in establishing commitments for market access; all services sectors and
subsectors would be subject to negotiation; and negotiators would seek progressive
trade liberalization in services, while recognizing the sovereign right of member
states to regulate their national services sectors. The Doha Ministerial Declaration
of November 2001, folded the services negotiations into the agenda of the DDA
round. The Ministerial Declaration reaffirmed the guidelines but mandated deadlines
to spur the negotiators: WTO members were to submit their initial requests for
market access and national treatment commitments from each member by June 30,
2002 and their initial offers of commitments they would be willing to make by March

31, 2003.

Any momentum (which was modest at best) that had been attained in the
services negotiations was halted, along with the other aspects of the DDA
negotiations, with the failure of the September 2003 Cancun Ministerial. By that
time, only a few WTO members, including the European Union (EU) and the United
States, had submitted their requests and made initial offerings per the deadlines set
down in the Doha Ministerial Declaration.
The July 2004 Framework, in an effort to recharge the negotiations, reaffirmed
the mandates contained in the Doha Ministerial Declaration. The July Framework
specifically charged the negotiators to complete and submit their initial offers as soon
as possible, to submit revised offers by May 2005 and to ensure that the offers are of
“high quality.” The presence of the services negotiations in the Framework is
considered important to the U.S. business community. It had been concerned that
the WTO negotiators’ commitment to services might be lost in the midst of concerns
about agriculture. The Framework places services on par with the negotiations on
agriculture and on market access for non-agricultural goods.20

19 For more information on the services negotiations, see CRS Report RL33085, Trade in
Services: The Doha Development Agenda Negotiations and Goals, by William H. Cooper.
20 One business representative stated that the services industry had to fight to have services
given this level of importance. Meeting with John Goyer, Vice-President for International

Major Issues and Status of Negotiations
The negotiations on trade in services, by consensus, are proceeding very slowly,
lagging behind even the troubled negotiations on agriculture and NAMA. WTO
officials and others, including representatives of the U.S. business community, have
cited lapsed deadlines and the low quality and quantity of offers made by participants
to date as indicators of problems with the negotiations. All members (except the 55
members classified as the least -developed countries (LDCs)) were to have submitted
their initial offers by March 31, 2003. The July 2004 framework stipulated that all

127 non-LDC members were to have submitted revised offers by March 31, 2005,

but as of November 2005 only 28 had done so. The United States and the European
Union (which represents 25 members) met the deadlines. In his July 11, 2005 report
to the WTO on the status of the negotiations, Alexandro Jara, Chilean Ambassador
to the WTO and the then-chair of the Council for Trade in Services, noted that the
average member-country offer covered only 51-57 service subsectors out of a total
of more than 160.21
The complexity of the negotiations may go a long way in explaining the retarded
pace. However, negotiators and other observers have suggested several other
underlying causes rooted in process and substance.
Negotiating Format.Some negotiators and other observers have suggested
that the “request-offer” negotiating format might be stalling the process, because it
is time-consuming and tedious. At the suggestion of WTO officials, some members
have suggested ways to alter the format to accelerate the process. The United States
and the EU, among other WTO members, separately have proposed formats that
would include numerical targets, for example, that WTO members agree to liberalize
trade in a certain percentage of core sectors. Some have proposed plurilateral
negotiations whereby subgroups of countries jointly present offers to other
subgroups. Some developing countries, such as Brazil that are highly protective of
their services industries, have criticized these proposals as deviating from the
“request-offer” format that is mandated by the Doha Ministerial Declaration and
subsequent decisions. They are wary of losing the flexibility implicit in the “request-
offer” format.
Mode-4.22 Mode-4 delivery, temporary entry of supply personnel, has become
one of the most controversial issues at this stage of the negotiations in services. It
has divided many developed countries and developing countries, although differing
positions have emerged among members of each category. Much of developing

20 (...continued)
Trade Negotiations and Investment, U.S. Coalition of Services Industry. August 9, 2005.
21 World Trade Organization. Council for Trade in Services. Report by the Chairman to the
Trade Negotiations Committee. 11 July 2005. TN/S/20 available at [].
22 The GATS defines four modes of supply of services: across borders (mode 1); temporary
movement of service buyer to country of supplier (mode 2); long-term commercial presence
of supplier in country of buyer (mode 3); and temporary movement of supplier to country
of buyer (mode 4).

country criticism of the United States has been regarding mode-4. It has also created
some tension between the U.S. business community and the U.S. government. All
of this criticism is despite the fact that mode-4 accounts for less that 1% of world
trade in services.23
The controversy arises in part because the issue of mode-4 delivery is closely
related to immigration policy in the United States and some other countries, and
comes at a time when the United States has tightened restrictions in response to the
attacks of September 11, 2001. In addition, some Members of Congress have warned
that changes in U.S. immigration laws that might be implied under mode 4 must be
handled via the normal legislative process and not within trade agreements.
Negotiations on Rules. Not much has been accomplished regarding
establishing rules on subsidies and emergency safeguard measures for services.
Developing countries, especially East Asian developing countries, consider these
issues a high priority. However, the negotiators have not been able to resolve basic
questions, such as, what would constitute a countervailable subsidy, how would it be
measured and how to measure import surges to which a WTO member could apply
safeguard measures. Negotiations on government procurement have also proceeded
Delays in Other DDA Negotiations. Some observers have suggested that
the time and attention devoted to the agriculture negotiations has diverted interest
from the services negotiations. Furthermore, a number of developing countries, for
example India and Brazil, have directly linked progress in the services negotiations
with progress in the agricultural negotiations. Specifically, they have demanded that
the EU and the United States be more aggressive in reducing or eliminating subsidies
and tariffs on agriculture before they will either make initial offers or improve on
their initial offers.
Results from Hong Kong
In the Hong Kong Ministerial Declaration, WTO members reaffirmed their
commitment to complete the services negotiations with special consideration given
to the needs of developing and the least developed countries. Annex C to the
Declaration provides modalities and parameters for completing the negotiations.
Annex C requires members to pursue enhanced service liberalization across
sectors and modes of supply, with special attention given to reducing restrictions on
modes 3 and 4. It requires that any outstanding initial offers are to made as soon as

23 World Trade Organization. Trade Directorate. Trade Committee. Working Party of the
Trade Committee. Service Providers on the Move: Economic Impact of Mode 4.
TD/TC/WP(2002)12/Final. Available at []. p. 12.
24 World Trade Organization. Council for Trade in Services. Report by the Chairman to
the Trade Negotiations Committee. July 11, 2005. TN/S/20 available at
[] Also information was obtained in a meeting with John Goyer, Vice-
President for International Trade Negotiations and Investment, U.S. Coalition of Services

possible. A second round of revised offers are to be submitted by July 31, 2006, and
final schedule of commitments to be submitted by October 31, 2006. In order to
expedite the negotiating process, Annex C states that plurilateral negotiations should
be pursued with plurilateral requests to other members to be completed by February
28, 2006, or soon thereafter. During the negotiations, some developing countries
raised objections to mandating the plurilateral format but retreated after assurances
from Brazil, India, the United States, and the EU, that the plurilateral would not force
them to make commitments they did not intend to make.
Non-Agricultural Market Access25
Talks on Non-Agricultural Market Access (NAMA) refer to the cutting of tariff
and non-tariff barriers (NTB) on industrial and primary products, basically all trade
in goods which are not foodstuffs. While other areas of WTO negotiations have
received greater scrutiny in the Doha round, trade of industrial and primary products,
the subject of the NAMA negotiations, continue to make up the bulk of world trade.
Nearly $8.9 trillion in manufactures and primary products were traded worldwide in

2004, accounting for 81% of world trade activity.26 In the United States, industrial27

and primary products accounted for 70% of exports and 83% of imports in 2004.
Hence, the outcome of these negotiations could have a substantial impact on the U.S.
trade pictures and on the overall U.S. economy.
Previous to the Doha Round, industrial tariff negotiations were the mainstay of
GATT negotiations. These rounds led to the reduction of developed country average
tariffs from 40% at the end of World War II to 6% today. However, average tariff
figures mask higher tariffs for many labor intensive or value-added goods that are
especially of interest to the developing world. Seen from the developed world
perspective, gains from the NAMA talks in this round are to be had from the
reduction of high tariffs in the developing world, particularly from such countries as
Brazil, India, and China. In previous rounds, developing countries were not big
players in the market access talks, which has helped to perpetrate the heavy tariff
structure in those countries. Developing countries are leery of opening up their
markets to competition, often making the argument that protectionist policies have
been employed in the development of many successful economies, from theth
European and North American economies in the 19 century, to the rise of the East
Asian tigers in the 20th . However, as negotiating positions have made clear,
developed economies will demand more access for their industrial products as a price
for opening up their agricultural sectors, where many developing countries have a
comparative advantage.

25 This section was written by Ian F. Fergusson, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
26 World Trade Organization, International Trade Statistics 2005, p. 3.
27 Bureau of Economic Analysis, “ International Trade in Goods and Services, 2004 Annual
Revision,” June 10, 2005.

As in other sectors, negotiations on NAMA have been conducted on the basis
of the July 2004 Framework Agreement, which provided the basis on which to
conduct negotiations on modalities. Although many useful discussions have taken
place, final agreement on NAMA modalities was not reached in time for the Hong
Kong Ministerial. At the Ministerial, WTO members agreed on a new deadline of
April 30, 2006, to achieve final negotiating modalities and to establish draft
schedules based on these modalities by July 31, 2006.
Major Negotiating Issues
Tariff Reduction. The Hong Kong Ministerial declaration endorsed the use
of a non-linear, “Swiss” style, tariff reduction formula. This builds on July 2004
Framework Agreement’s endorsement of a non-linear formula applied on a line-by-
line basis as a modality to conduct tariff reduction negotiations. A non-linear formula
works to even out or harmonize tariff levels between participants. This type of
formula would result in a greater percentage reduction of higher tariffs than lower
ones, resulting in a greater equalization of tariffs at a lower level than before. The
Swiss formula is
T= at/(a+t)
where T, the resulting tariff rate, is obtained by dividing the product of the coefficient
(a) and the initial tariff rate (t) by the sum of the coefficient (a) and the initial tariff
(t). Selection of the coefficient is key, where a lower coefficient results in a lower
resulting tariff (T).
The Swiss formula also works to reduce tariff peaks and tariff escalation,
another stated goal of the declaration. Tariff peaks are considered to be tariff rates
above 15% that often protect sensitive products from competition. Tariff escalation
is the practice of increasing tariffs as value is added to a commodity. As an example
of tariff escalation, cotton would come in with a low tariff, fabric would face a higher
tariff, and a finished shirt would face the highest tariff. Tariff escalation is often
employed to protect import-competing, value-adding industry. The emphasis on
tariff peaks and escalation results from findings that the use of peak tariffs and
escalations are particularly levied against the products of developing countries, as
well as adding to the costs of consumers in developed countries. The Framework
does not specify an implementation period for tariff cuts, but developing countries
are to be afforded longer implementation periods.
Although, the Ministerial agreed to a Swiss formula, it did not agree on the
coefficients that would finalize the negotiating modalities. Currently two Swiss
formula proposals are on the table in Geneva. The first option proposed by developed
countries is the simple Swiss formula with the coefficient taking one value for
developed and another, higher, value for developing countries. For example, Pakistan
proposed that the developed countries have a coefficient of 6 and developing

countries a coefficient of 30.28 The EU in its cross-cutting proposal of October 2005
proposed a coefficient of 10 for developed countries and advanced developing
countries and 15 for LDCs. This proposal has been criticized in the developing world
for differentiating between developing countries, which runs counter to current WTO
Distinct from the simple Swiss formula proposal with multiple coefficients is
the proposal put forth by Argentina, Brazil, and India, known as the ABI proposal.29
ABI also uses the Swiss formula, but it proposes the coefficient to be the tariff
average of each country, thus each country would have its own coefficient. ABI
would not result in tariff harmonization between countries because there would not
be a common coefficient, however, it would result in a certain harmonization within
each country’s tariff schedule.30
Tariff Binding. The framework encourages the continued binding of tariffs
and uses bound tariffs as the baseline for the reduction formula. Tariffs are bound
when a country commits to not to raise them beyond a certain level. Therefore,
binding has been seen as the first step in tariff reduction. Bound tariffs are often
significantly higher than applied tariff levels, which has led to questions as to the
usefulness of reductions from bound rather than applied rates. For its part, the EU
still seeks cuts from applied rates. Reductions from applied rates would result in
greater cuts to actually applied tariffs. However, the use of the applied rate may
serve as a disincentive for countries to undertake unilateral liberalization. Under this
reasoning, countries would hesitate to undertake unilateral tariff reductions if they
knew that multilateral liberalization efforts would use the applied rate that the
country had already unilaterally lowered as a starting point. It may also increase the31
incentive to raise applied rates prior to negotiation.
Under the Framework, tariff reductions would be calculated from the bound,
rather than the applied, level. Under the 2004 Framework Agreement, reductions in
unbound tariff lines would be calculated from twice the currently applied rate.
However, the Ministerial Declaration adopts a ‘non-linear mark-up approach,’ but
did not adopt any particular formula. Generally, such an approach would add a
certain number of percentage points to the applied rate of the unbound tariff line in
order to establish the base rate on which the tariff reduction formula would be
applied. Discussions have ranged from 5-30 percentage points as an addition, which
would generally result in lesser bound rates than under the Framework Agreement.
The Framework also provided flexibility for developing countries who have bound
less than 35% of their tariff lines. They would be exempt from tariff reduction

28 “The Way Forward, Communication from Pakistan, (TN/MA/W/60), July 21, 2005.
29 “Market Access for Non Agricultural Products,” (TN/MA/W/54), April 15, 2005.
30 Sam Laird, “Economic Implications of WTO Negotiations on Non-Agricultural Market
Access.,” [
31 Joseph Francois and Will Martin, “Formula Approaches for Market Access Negotiations,”
The World Economy, January 2003, p. 17.

commitments in the Round provided that they bound the remainder of their non-
agricultural tariff lines at the average tariff for all developing countries.
Special and Differential Treatment for Developing Countries. The
Framework provides several flexibilities (known as Paragraph 8 flexibilities) to
developing country members. It permits developing countries longer periods to
implement tariff reductions. Under the Framework, developing countries may also
choose one of the following flexibilities: (1) apply less than formula cuts for up to
10% of tariff lines provided that the cuts applied are no less than half the formula
cuts and that the tariff lines do not exceed 10% of the value of all imports, or (2) keep
tariff lines unbound or not applying formula cuts for 5% of tariff lines provided they
do not exceed 5% of the value of a member’s imports. Least developed countries
(LDCs) would not be required to apply formula cuts, nor participate in the sectoral
cuts, but would undertake to “substantially” increase the level of bound tariffs.
Developed-country participants and others are encouraged to grant LDCs duty free
and quota free access to their markets by a date to be negotiated.
In the negotiations since the July Framework, the relationship between the
Paragraph 8 flexibilities and the formula negotiations have proved controversial.
Certain developed country proposals have linked the flexibilities to the value of the
coefficient of the tariff reduction formula. Thus, according to this proposal, if
developing countries want a differentiated coefficient, they would have to give up
certain of the Paragraph 8 flexibilities. However, the Ministerial Declaration
reaffirmed the Paragraph 8 flexibilities “as an integral part of the modalities.”
Non-Tariff Barriers. The industrial market access talks also encompass
negotiations on the reduction of non-tariff barriers. Non-tariff barriers include such
activities as import licensing, quotas and other quantitative import restrictions,
conformity assessment procedures, and technical barriers to trade. In the negotiations
in Geneva, members have submitted notifications of NTBs in order to “identify,
examine, and categorize” them, in order to proceed with negotiations. The
Ministerial Annex B noted that members were holding bilateral discussions on
NTBs, and groups of members were discussing NTBs by product sectors, and by
specific NTBs. However, the Ministerial reached no agreement on the reduction of
NTBs or on the procedures to negotiate such reductions.
Sectoral Approaches. WTO members have agreed to consider the use of
sectoral tariff elimination as a supplementary modality for the NAMA negotiations.
Sectoral initiatives, such as tariff elimination or harmonization, permit a critical mass
of countries representing the preponderance of world trade in an item to agree to
eliminate tariffs in that good. Such an arrangement requires the participation of the
major players, however, because under most-favored-nation principles those tariffs
would be eliminated for all countries, even those not reciprocating. The 1996
Information Technology Agreement is one such sectoral tariff elimination agreement.
Sectoral negotiations have been proposed for bicycles, chemicals,
electronics/electrical equipment, fish, footwear, forest products, gems and jewelry,

pharmaceuticals and medical equipment, raw materials and sporting goods.32
Textiles, apparel, and auto parts have also been mentioned for sectoral negotiations.
While some developing countries have participated in these discussions, and have
proposed some sectors, other developing countries have questioned engagement in
sectoral negotiations prior to settling on a formula for negotiations. The Ministerial
Declaration took note of these sectoral negotiation and instructed negotiators to
determine which sectors “could garner sufficient support to be realized.”
Trade Remedies and Related Matters33
The United States and many of its trading partners use antidumping (AD) and
countervailing duty (CVD) laws to remedy the adverse impact of alleged unfair trade
practices on domestic producers. These statutes are permitted by the WTO as long
as they conform to the Agreement on Implementation of Article VI (Antidumping
Agreement, ADA) and the Agreement on Subsidies and Countervailing Measures
(SCM), as adopted in the Uruguay Round of trade negotiations.
Under pressure from trading partners (including Japan, Korea, Brazil, Chile,
Colombia, Costa Rica, Thailand, Switzerland, and Turkey) which had become
concerned with a perceived general increase in the use of trade remedy measures,
U.S. negotiators agreed to a Doha round negotiating objective which called for
“clarifying and improving the disciplines” under the ADA and SCM.
This objective has been criticized by many in Congress who are concerned that
future U.S. concessions on trade remedies could lead to a weakening of U.S. laws
that are seen to ameliorate the adverse impact of unfair trade practices on domestic
producers and workers. Other Members, who have expressed concern about the
economic inefficiencies caused by AD and CVD actions, especially as they relate to
higher prices to U.S. consumers and consuming industries, have expressed some
openness to considering changes to the WTO agreements.
U.S. Legislation
Support for U.S. trade remedy laws is especially strong in the Senate, where,
following an adverse WTO panel decision on a controversial trade remedy law, 70
senators wrote a letter to President Bush arguing strongly for retaining the law.34 S.
Con Res. 55 (Craig, introduced September 29, 2005) seeks to express the sense of
Congress that the United States should not be a signatory to any Doha Round
agreement that would “lessen the effectiveness of domestic and international
disciplines” or “lessen in any manner the ability of the United States to enforce
rigorously our trade laws.”

32 “Draft Ministerial Text,” (Job(05)/298, Annex B) p. B-4.
33 This section was written by Vivian C. Jones, Specialist in International Trade and
Finance, Foreign Affairs, Defense, and Trade Division.
34 Letter to President George W. Bush, signed by seventy Senators, including Robert C.
Byrd, Max Baucus, and Mike DeWine, February 4, 2003.

On the other side of the debate, legislation has also been introduced that would
give consuming industries standing in trade remedy cases (H.R. 4217, Knollenberg,
introduced November 3, 2005), or to comply with certain WTO rulings on trade
Progress of Negotiations
According to a report by the Chairman of the Negotiating Group on Rules, work
on trade remedies has taken place in three overlapping phases. First, negotiators
presented formal written papers indicating the general areas in which the participants
would like to see changes in the agreements. A compilation of the 141 proposals was
published by the Chairman in August 2003, just prior to the Cancun Ministerial.35
Second, after Cancun (and ongoing), negotiators began discussing their positions in
more detail, sometimes proposing legal drafts of suggested changes.36 This phase
helped negotiators develop a clearer idea of what proponents of specific changes are
seeking, and helped proponents develop “a realistic view of what may and may not
attract broader support in the group.”37 The third phase consists of bilateral and
plurilateral meetings for technical consultations, partly aimed at developing a
possible standardized questionnaire which administering officials could use in AD
investigations in order to reduce costs and increase transparency.38
Many observers believe that any consensus on changing the ADA, SCM, or
other trade remedy agreements is likely to involve perceived successes in other areas
being discussed in the Doha Round, such as improved agricultural market access or
services trade. Therefore, any accord involving changes in trade remedies is not
likely to take place until the end of the round.
In Appendix D of the Hong Kong Ministerial Declaration issued on December
18, 2005, WTO members “acknowledged that achievement of substantial results on
all aspects of the Rules mandate, in the form of amendments to the Anti-Dumping
(AD) and Subsidies and Countervailing Measures (SCM) Agreements is important
to the development of the rules-based multilateral trading system and to the overall
balance of results in the DDA.”39 The document further recognizes that negotiations,
especially on antidumping, have intensified and deepened and that participants are
demonstrating “a high level of constructive engagement.”40 These assertions are

35 WTO Negotiating Group on Rules. Note by the Chairman. “Compilation of Issues and
Proposal Identified by Participants in the Negotiating Group on Rules. TN/RL/W/143,
August 22, 2003, p. 1
36 See WTO Negotiating Group on Rules. Report by the Chairman to the Trade Negotiations
Committee. TN/RL/13, July 19, 2005, p. 2.
37 Ibid., pp. 1-2.
38 Ibid.
39 World Trade Organization, Hong Kong Ministerial Declaration, December 18, 2005,
(WT/MIN(05)/DEC), Annex D, p. D-1. [].
40 Ibid.

controversial given the substantial opposition in Congress to any concessions that
may weaken U.S. trade remedy laws.
With regard to trade in fisheries, the Declaration acknowledges that WTO
members recalled their commitment to “enhancing the mutual supportiveness of trade
and the environment, [WTO members] note that there is broad agreement that the
Group should strengthen disciplines on subsidies in the fisheries sector” through
prohibiting subsidies that lead to over-fishing and overcapacity.41 In this context, the
Declaration directs the Negotiating Group on Rules to intensify and accelerate the
negotiating process.42
A coalition of developed and developing countries, known as the “Friends of
Antidumping,” — including Brazil, Chile, Colombia, Costa Rica, the European
Union, Hong Kong, India, Israel, Japan, Korea, Mexico, Norway, Singapore,
Switzerland, Taiwan, Thailand, and Turkey — were largely responsible for pressing
the inclusion of trade remedy talks in the Doha Development Agenda, and have
advanced discussions in several areas that seem to be generating interest. U.S.
negotiators, pledging to push an “offensive agenda” in trade remedy discussions,43
have submitted papers addressing measures to improve transparency in the
investigative process, prevent circumvention of AD and CV duties, and clarify the
“standard of review” provisions in dispute settlement deliberations. Canada,
Australia, the European Union (on its own behalf) and New Zealand — who with the
United States are considered “traditional” users of antidumping actions, have also put
forward several proposals.
Major Developments and Issues
Most of the action in the WTO Negotiating Group on Rules has been focused
on the Antidumping Agreement, largely because AD actions make up the largest
share of trade remedy actions worldwide. Since the present texts of the trade remedy
agreements are highly detailed, and were “painstakingly negotiated” over at least44
three multilateral trade rounds, the issues that negotiators are attempting to “clarify
and improve” tend to be quite specific in nature. However, much of the discussion
seems to be based around a few central themes, such as refining methodology for
determining injury and existence/extent of dumping or subsidies, giving more
specific guidance on conduct of reviews, and providing “special and differential
treatment” for developing countries. Broadly characterized, many of the “clarification
and improvements” offered could tend to limit or proscribe the ability of countries
to grant relief to domestic manufacturers.

41 Ibid., p. D-2.
42 Ibid.
43 “USTR Zoellick Says World Has Chosen Path of Hope, Openness, Development, and
Growth.” Office of the U.S. Trade Representative. Press Release, November 14, 2001
44 Ibid.

Determination of Injury. Proposals that would affect injury determinations
include requiring administrative authorities to clarify that there is a direct correlation
between the injury to domestic producers and dumping of the targeted merchandise.
Another proposal affecting injury determinations seeks to establish an “economic
interest test’ or “public interest test” to determine whether or not the domestic
economy or domestic consuming industries might be injured to a greater extent than
the domestic producer.
Determination of Dumping. Proposed changes in methodology for
calculating dumping and subsidies margins could affect both dumping/subsidies
determinations and the level of duties assessed if an affirmative determination is
made. First, a prohibition on “zeroing” is being pushed by the Friends of
Antidumping. “Zeroing” is the process in which, when calculating dumping margins
for targeted merchandise, administrative authorities factor in a zero (rather than a
negative amount) if a subgroup of the merchandise is found to have a negative
dumping margin. The Friends of Antidumping group alleges this practice leads to
erroneous findings of dumping as well as inflated dumping margins. U.S. use of
“zeroing” is being challenged in WTO dispute settlement proceedings on a number
of fronts.45
Second, the Friends of Antidumping, India, and the European Union have
submitted papers advocating the establishment of a mandatory “lesser duty rule.”
This proposal would require investigating authorities to impose an AD or CV duty
lower than the full dumping margin if it is determined that the lesser amount is
sufficient to offset the injury or threat thereof suffered by the domestic industry.
Third, the Friends of Antidumping recommend that the Antidumping Agreement
require increased use of “price undertakings” or alternative measures negotiated with
the exporting country in which the price of the targeted merchandise is increased to
eliminate the dumping, or the product is no longer exported to the United States.
Some developing countries favor mandatory use of such actions by developed
countries in AD investigations involving developing countries. U.S. antidumping
law already allows such negotiated agreements (called “suspension agreements” in
U.S. law), but they are not used very often.46
Reviews. The current ADA and SCM specify that each AD or CVD order
must be terminated after five years unless authorities determine in a review that its
expiration would be likely to lead to a recurrence of dumping or subsidization, and
subsequent injury to the domestic producer. Some WTO Members claim that
authorities base review determinations inordinately on submissions by the domestic
industry, and that, therefore, AD or CVD orders are likely to remain in place as long

45 These disputes are (1) DS294, United States — Laws, Regulations, and Methodology for
Calculating Dumping Margins (brought by European Communities, panel report distributed
October 31, 2005); (2) DS322, United States — Measures Relating to Zeroing and Sunset
Reviews (brought by Japan, panel established April 15, 2005; and (3) DS325, United States
— Antidumping Determinations Regarding Stainless Steel from Mexico (brought by
Mexico, request for consultations January 10, 2005, no panel established as yet).
46 19 U.S.C. 1671c (countervailing), 19 U.S.C. 1673c (antidumping).

as the domestic industry opposes their removal. On this basis, some favor a
mandatory termination of AD or CVD orders within five years. Others favor a more
moderate approach that would list specific circumstances or definitive factors that
authorities must consider before extending the orders. Others criticize the length of
time that sunset review procedures take to complete and favor a mandatory twelve-
month time limit.47
Special and Differential Treatment. Because developing countries are
regarded by some to be especially vulnerable to trade remedy action, developing
countries have been negotiating for special treatment. One proposal advanced by
these countries would make a lesser duty rule and/or price undertakings mandatory
in AD actions involving developing countries. Other recommendations include an
increase in the dumping margin that is considered de minimis, and consequently not
actionable under the AD and SCM. Some Members also favor a type of standardized
questionnaire that administrative officials could fill out when conducting trade
remedy investigations. Proponents of this methodology say that it would increase
predictability, cut costs, and increase the transparency of investigations.
Other Negotiations. In the Negotiating Group on Rules, other negotiations,
including rules governing fisheries subsidies and regional trade agreements, are also
ongoing. Topics being discussed on fisheries subsidies include which subsides should
or should not be prohibited, and how they should be implemented. Talks on regional
trade negotiations are aimed largely at increasing the transparency of these
Results in Hong Kong
While the Ministerial Declaration and the rules annex did not report consensus
on any negotiating issue, it did mandate the Rules Committee Chairman to prepare
“early enough to assure at timely outcome,” revised texts of the Antidumping and
Subsidies Agreements intended to be “the basis for the final stage of the48
negotiations.” This directive seems to indicate that sufficient progress was reached
in the text-based negotiating phase during and prior to the ministerial.
Intellectual Property Issues49
The Doha Ministerial Declaration called for discussions on implementation of
certain aspects of the TRIPS agreement, including the relationship between TRIPS
and public health (access to medicines), on the creation of a multilateral registration
system for geographical indications of wines and spirits, and on the relationship of

47 See World Trade Organization. Negotiating Group on Rules. Compilation of Issues and
Proposals Identified by the Participants in the Negotiating Group on Rules. Note by the
Chairman. August 22, 2003, TN/RL/W/143, pp. 58, 143 [].
48 Ministerial Declaration, Annex D, D-2.
49 This section was written by Ian F. Fergusson, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.

TRIPS to the Convention on Biological Diversity50 and to traditional knowledge and
folklore. The Ministerial Declaration for Hong Kong notes the progress made in these
discussions, but announces no new decisions on them. However, just prior to the
Ministerial, the WTO members announced an agreement on the TRIPS and public
health issue. For a discussion of geographical indications, including the issue of
extending the protection accorded to wines and spirits to other agricultural products,
see the agriculture section (p.9, above).
Access to Medicines
The ability of developing and least developed countries (LDCs) to access
medicines to fight public health epidemics such as HIV/AIDS, tuberculosis, malaria,
and other infectious diseases within the context of the TRIPS Agreement has been
an issue that has bedeviled the Doha Round since its inception. The dispute pits the
needs of developing countries in obtaining access to medicines to fight public health
epidemics against developed country patent holders, who maintain that patent
protection provides financial incentives to innovate new drugs. The negotiations
have taken on a symbolic significance as some developing countries considered
these negotiations as a gauge of the commitment of developed countries to take their
concerns seriously in the negotiations.
In agreeing to launch a new round of trade negotiations at Doha, trade ministers
adopted a “Declaration on the TRIPS Agreement and Public Health” on November
14, 2001. This declaration recognized certain “flexibilities” in the TRIPS agreement
to allow each member to grant compulsory licenses for pharmaceuticals and to allow
each member to determine what constitutes a national emergency, expressly
including public health emergencies. Compulsory licenses are issued by governments
to domestic manufacturers to produce a product without the authorization of the
rights-holder, and within certain disciplines, are consistent with the TRIPS
agreement. Paragraph 6 of the Declaration directed the WTO Council on TRIPS to
formulate a solution to a corollary concern, the use of compulsory licensing by
countries with insufficient or inadequate manufacturing capability.
The “Paragraph 6” solution was reached on August 30, 2003. It consisted of a
Decision and a Chairman’s statement as a clarification. The Decision is in the form
of a waiver from current TRIPS rules with negotiations to follow on a permanent
amendment to the treaty. The Chairman’s statement, which does not have the status
of a binding legal document, reflects what it terms “several key shared
understandings” of Members concerning the interpretation and implementation of the
Decision including a pledge by 11 developing countries not to use the waiver
provision except under “extreme urgency,” and that the Decision’s provision should
not be used for commercial or industrial policy objectives.

50 The U.N. Convention on Biological Diversity entered into force in 1992 and was signed
by the United States in 1993. However, it has never been ratified by the U.S. Senate. Its
main objectives are the conservation of the world’s biodiversity, the sustainable use of such
diversity, and the equitable distribution of proceeds from the exploitation of such diversity.

The Decision permits the use of compulsory licenses by LDCs and by
developing countries with insufficient manufacturing capabilities to authorize the
manufacture of generic pharmaceuticals to treat “HIV/AIDS, malaria, tuberculosis
and other epidemics” by third-country producers. Compulsory licenses have always
been authorized by the TRIPS agreement for domestic purposes, however, the
agreement did not account for countries without domestic manufacturing capacity.
The Decision will allow such a country to source certain generic pharmaceuticals
from a country with manufacturing capacity by issuing a compulsory license to that
manufacturer, although it may be necessary to do so through the host government.
On the eve of the Hong Kong Ministerial, WTO members agreed on a method
to amend the TRIPS agreement to incorporate the 2003 Decision. Soon after the
2003 Decision, negotiations bogged down over how to incorporate it into the
agreement: either to amend the actual text of TRIPS, or to incorporate it as an Annex,
and also how to treat the accompanying Chairman’s statement. The United States
had sought a footnote to the TRIPS agreement incorporating both documents, and
had rejected positions that ignore or downplay the Chairman’s statement. The EU
tabled a proposal to include the Decision as an Annex, but without the Chairman’s
statement. Several developing countries such as Argentina, Brazil, India, and South
Africa sought to amend TRIPS itself based on the Decision also without including
the Chairman’s statement. The Decision worked out by the General Council and
approved on December 6, 2005, provided for the TRIPS agreement to be amended
with the inclusion of an annex and an appendix to TRIPS. The Chairman’s statement
was reread at the time of General Council approval without debate; however, it does
not constitute part of the written Decision.51
Traditional Knowledge
A second issue that is subject to Doha round negotiations is the relationship of
the TRIPS agreements to the Convention on Biological Diversity and the protection
of traditional knowledge and folklore. This negotiation was meant to address
concerns by certain developing countries that traditional remedies or genetic
materials that are the basics for pharmaceuticals are being patented by companies in
developed countries without compensation. India, together with Brazil and other
developing countries, proposed language for the draft Ministerial Declaration that
would commit members to start negotiations to provide greater protection and
compensation for genetic materials and traditional knowledge originating in
developing countries. The language would amend TRIPS to require that patent
applicants disclose the country of origin of biological materials and traditional
knowledge, obtain consent from the country of origin, and share the proceeds with
the country of origin.52 The United States and other developed countries generally
have opposed commencing negotiations to amend TRIPS to address this issue and
the Ministerial Declaration did not address this issue.

51 “Implementation of Paragraph 11 of the General Council Decision of 30 August 2003 on
the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
Public Health,” (IP/C/41), December 6, 2005.
52 “India, Brazil, Call for Changes to TRIPS Agreement at Hong Kong,” Inside U.S. Trade,
October 4, 2005.

Trade Facilitation53
There is no standard definition of trade facilitation in public policy discussions,
but it can be broadly defined as “the simplification, harmonization and automation
of international trade procedures and information flows.”54 Within the context of
trade negotiations, trade facilitation has focused on customs procedures such as fees
and documentation requirements, but it may also involve the environment in which
transactions take place, including the transparency and professionalism of customs
and regulatory environments. Trade facilitation aims to increase the speed and
reduce the cost of trade through more efficient policies and management. Estimates
of potential savings from trade facilitation vary, but studies tend to agree that trade
facilitation becomes more important in reducing overall costs as trade is further
liberalized. As international trade flows increase, national administrations must cope
with increased traffic, straining national budgets. Trade facilitation, by increasing
efficiency, could mitigate this problem. Small and medium enterprises may benefit
from trade facilitation in greater proportion, because they are often priced out of
international trade due to relatively high administrative costs for transporting small
volumes. Developing countries have a particular interest in trade facilitation
discussions because they will have to significantly reform their policies and
procedures to implement an agreement. These reforms are expected to be costly, and
will require financial and technical assistance from developed countries.
Trade Facilitation Negotiations
There has been ongoing multilateral work on trade facilitation for more than
fifty years, including in the context of the GATT. However, trade facilitation did not
enter multilateral trade discussions as a separate policy issue for negotiation until the
Singapore WTO ministerial in 1996, when it was introduced as one of the so-called
Singapore issues. The other Singapore issues, including government procurement,
competition, and investment policy, were dropped from the Doha Development
Agenda (DDA) in the July 2004 Framework Agreement. Developing countries
initially opposed including any of the Singapore issues in the Doha round, but
accepted trade facilitation because of its potential benefits to development if
combined with technical assistance. The modalities for trade facilitation include
special and differential treatment (S&D) provisions that reach beyond those of other
The Doha Ministerial Declaration established that negotiations on trade
facilitation would take place after members reached a decision to begin such
negotiations, by “explicit consensus,” at the Fifth Session of the Ministerial
Conference in 2003, in Cancun, Mexico. According to the Doha Ministerial
Declaration, the Council on Trade in Goods was to review and clarify relevant

53 This section was written by Danielle Langton, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.
54 Carol Cosgrove-Sacks, “How to Achieve Efficient and Open Collaboration for Trade
Facilitation?,” Trade Facilitation: The Challenges for Growth and Development, United
Nations Economic Commission for Europe. (New York and Geneva: 2003).

aspects of Articles V, VIII and X of GATT 1994, and identify the trade facilitation
needs and priorities of members, particularly developing country members. The July
Framework Agreement includes modalities, but certain key negotiating issues are yet
to be resolved. Since 2004, trade facilitation negotiations have reportedly been
among the smoothest of the WTO negotiating areas. Members began to submit
proposals to revise the relevant GATT articles in early 2005, and the trade facilitation
negotiating group has compiled these proposals to facilitate text-based negotiations,
which have yet to begin. Developed countries and multilateral institutions have
continued to provide technical assistance to developing countries on an ad hoc basis.
The modalities described in the July 2004 Framework Agreement cover three
core negotiating issues of trade facilitation: improving the relevant GATT articles;
providing technical assistance to developing countries; and identifying and
considering the needs and priorities of all countries, including special and differential
treatment (S&D) for developing countries. S&D has traditionally meant longer
implementation periods for developing countries, but the framework goes further to
state that the extent and timing of entering into commitments shall be directly related
to the capabilities of developing country members. Also, the members agreed in the
framework that developing countries will not be required to undertake infrastructure
investments beyond their means. The Framework encourages developed country
members to provide technical assistance to developing countries, but does not
provide specifics on how much to spend or specific areas of assistance. It also does
not specifically state whether negotiations will result in guidelines or binding rules
in trade facilitation.
Reviewing and clarifying the GATT 1994 Articles V, VIII, and X is a major
focus of the negotiations. Each of these articles concern different aspects of trade
facilitation, and they were initially agreed to prior to the formation of the WTO.
Article V describes the rights of goods passing through a territory between countries.
Article VIII requires efficient and fair fees for moving goods in and out of countries.
Article X requires transparent trade regulations and the equal enforcement of these
regulations, including a judicial review process. WTO members have submitted
proposals for strengthening these articles, and their proposals will form the basis for
text-based negotiations to take place sometime after the Hong Kong Ministerial.
Negotiating Issues in Trade Facilitation. An agreement on trade
facilitation may not be as straightforward as it appears from the modalities in the July

2004 Framework Agreement. Trade facilitation may include “behind the border”

measures to tackle corruption and other administrative issues, and these measures are
interrelated with other efficiency-enhancing measures beyond trade facilitation. In
developing countries, agreeing on reforms for trade facilitation may require
discussions that go beyond the traditional realm of trade negotiations. Trade
facilitation measures may require passing new legislation, amending existing laws,
or establishing new domestic institutions. It may be difficult for trade negotiators to
agree to such measures, which will have significant costs and may not be possible
without technical assistance from developed countries.
The potential cost of trade facilitation measures is daunting for many developing
countries. Costs vary by country depending on the degree of change needed, and are
difficult to estimate. The poorest countries may require the greatest change to

implement trade facilitation measures, and are the least able to afford the costs of
such change. It is also not known how much must be spent on trade facilitation to
begin to realize its benefits, and this amount is likely to vary by country. Trade
facilitation may entail costs in the following areas: new regulation, institutional
changes, training, equipment, and infrastructure. The question of who will pay the
potentially high costs of trade facilitation has not yet been fully answered. The July
2004 Framework Agreement states that developed countries should provide support
to developing countries to implement trade facilitation measures, and that developing
countries will not be required to implement trade facilitation measures that they do
not have the means to implement. The Agreement explicitly discusses the costs
relating to infrastructure investments, but is not as explicit about other significant
costs of trade facilitation measures.
Unlike in other negotiating areas, technical assistance is an integral component
of the trade facilitation negotiations. Technical assistance is important to trade
facilitation negotiations because of the potentially high costs and capacity
requirements for implementation. One of the main sticking points in technical
assistance for trade facilitation is a “chicken and egg” problem: before committing
to any binding agreement, developing countries would like developed countries to
provide detailed technical assistance plans. Conversely, many developed countries
insist on seeing more concrete commitments from developing countries before they
will provide details about plans for technical assistance. There are other issues that
may arise within the discussions on technical assistance. There are concerns about
coordination of technical assistance activities, and integration into general
development strategies. Developing countries would prefer a more comprehensive,
integrated approach, but it is easier for developed countries to provide “one-off”
activities without significant coordination. There is also concern about how a
country’s capacity to implement trade facilitation measures will be determined.
Allowing countries to assess their own capabilities could present problems, if they
argue a lack of sufficient capacity in order to avoid trade facilitation obligations.
Meanwhile, many countries would likely balk at delegating that authority to a
committee or other entity.
Finally, there is no consensus on whether an agreement on trade facilitation
would result in rules subject to WTO dispute resolution, or whether an agreement
would merely comprise guidelines for best practices. Annex E of the Hong Kong
Ministerial Declaration has language that intimates negotiated commitments are a
final goal of trade facilitation negotiations, but there is no outright agreement on this.
Developing countries prefer not to be subject to binding trade facilitation rules, but
the United States and other developed countries believe that a rules-based agreement
would be most effective to ensure that measures are implemented. However, some
experts observe that outside pressure from binding obligations will have no tangible
impact if developing countries lack the capacity implement the obligations. Insofar
as technical assistance provided during the negotiations may increase the capacity of
developing countries to take on trade facilitation obligations, it may also have a
positive effect on the willingness of developing countries to consider binding
commitments. Technical assistance has already had an impact on developing country
attitudes toward trade facilitation, because as developing countries implement trade
facilitation measures they become more aware of the potential benefits of a trade
facilitation agreement.

Outcome of Hong Kong
After the Hong Kong ministerial, trade facilitation is still considered a
negotiating area that is progressing relatively smoothly, although it appears that the
main work of the Negotiating Group on Trade Facilitation, reviewing proposals
submitted on improving the relevant GATT articles, is moving slowly. No major
breakthroughs in trade facilitation were announced in Hong Kong. The ministerial
served as a review of progress and a discussion of plans for future work, including
further review of proposals to improve the relevant GATT articles, provision of
technical assistance, and consideration of individual country trade facilitation needs.
The negotiators did not agree on a date for beginning text-based negotiations, but the
trade facilitation negotiating group’s report discusses the need to “move into focused
drafting mode” soon after the ministerial in order to conclude the negotiations in
time. The Report by the Negotiating Group on Trade Facilitation to the Trade
Negotiating Committee summarizes the work accomplished thus far and what
remains to be done, and it includes a list of the proposals that have been tabled. The
Report is included as Annex E to the Ministerial Text.
Special and Differential Treatment55
Through Special and Differential Treatment (S&D), developing countries are
allowed favorable treatment in the negotiations and flexibility in implementing WTO
agreements. This flexibility usually takes the form of longer implementation periods,
but may also include partial implementation, such as reducing tariffs to a lesser
degree than developed countries. Special treatment may include preferential market
access and technical assistance for negotiating and implementing agreements. S&D
is negotiated within each of the specific negotiating areas, such as agriculture and
services, but also within a Special Session of the Committee on Trade &
Development (CTD).
S&D is based upon two main premises: first, to assist developing countries’
transition into the global trading system; and second, to allow developing countries
to maintain trade policies supportive of their development strategies. Some experts
question whether S&D is beneficial for development at all. Economists point out
that developing countries gain the most from trade negotiations in liberalizing their
own markets, and S&D is often used to avoid liberalization. On the other hand, trade
liberalization is known to redistribute income among different sectors in a country,
and while the net effect may be positive for economic growth some segments of the
population may suffer significant hardship. S&D may help reduce the hardship
resulting from trade liberalization in developing countries, and thus promote
development friendly outcomes.
There is no official list of developing countries that are eligible for S&D, with
the exception of least developed countries (LDCs). LDC status is based upon income
and determined by the United Nations, and LDCs may receive further preferential

55 This section was written by Danielle Langton, Analyst in International Trade and Finance,
Foreign Affairs, Defense, and Trade Division.

treatment in WTO agreements. Aside from LDCs, developing countries in the WTO
are self-identified, and they are all eligible for the same S&D provisions. Most
developed country WTO members favor differentiating developing countries into
multiple tiers, because developing countries vary widely in their income and
development levels. As an example, Brazil and South Africa are currently eligible
for the same S&D provisions as lower income developing countries such as
Nicaragua and Ghana. Developed countries argue that they could make S&D
provisions deeper and more meaningful for developing countries if there were
multiple tiers of S&D provisions. Developing countries, however, are reluctant to
consider that option. The lower income developing countries reportedly do not want
to lose the negotiating leverage gained from being grouped with the higher income
countries, and the higher income countries do not want to risk losing eligibility for
S&D provisions.
S&D Negotiations in the Doha Round
Prior to the Doha Ministerial, WTO member countries criticized the overly
general and ineffective application of S&D provisions contained in the Uruguay
round. In response, the Doha Ministerial Declaration mandated that all S&D
provisions should be “reviewed with a view to strengthening them and making them
more precise, effective and operational.” The CTD was tasked with fulfilling the
Doha mandate on S&D. As the discussions progressed, significant divisions between
developing and developed countries on S&D became clear. One important point of
divergence has been whether to negotiate the cross-cutting issue of establishing
multiple tiers of S&D provisions for countries at different development levels. The
developing countries have held that S&D discussions should focus entirely on
agreement-specific S&D proposals, while developed countries maintain that the
cross-cutting issues are important. The July 2004 Framework Agreement dealt with
this divide by instructing the CTD to complete the review of all outstanding
agreement-specific proposals mandated by the Doha declaration, and to address all
other outstanding work, including on the cross-cutting issues. It further instructed
the CTD to issue a report to the General Council with recommendations for a
decision by July 2005, a deadline that was not met.
In order to move beyond the deadlock on S&D, members agreed to prioritize the
five agreement-specific proposals pertaining specifically to LDCs in preparation for
Hong Kong. Of these proposals, the most controversial became a key
accomplishment of the Hong Kong Ministerial: developed country members agreed
to provide duty free and quota free market access for products originating from
LDCs. This agreement is detailed in Annex F of the Hong Kong Ministerial
Declaration. Duty- and quota-free access is to be granted by all developed countries
for all products originating from all LDCs beginning in 2008, or at the start of the
implementation period of a completed Doha round agreement. Member developed
countries with sensitivities may designate at most three percent of tariff lines to be
excluded from this duty- and quota-free access initially, but they agree to take steps
to expand the list of eligible products over time to 100%. Developing country
members “in a position to do so” are also expected to allow duty- and quota- free
access to products originating from LDCs. Some observers have commented that the
language on exclusions may lead to conflict between U.S. industries over which
goods would be excluded. Three percent of tariff lines is equal to about 300 tariff

lines to be excluded from the initiative, which must be allocated between all sensitive
products. 56
In addition to the proposal to allow duty-free and quota-free access to products
from LDCs, four other LDC proposals were agreed upon in Hong Kong. The other
four proposals were: (1) to require the General Council to respond within 60 days
to requests from non-LDCs for waivers to implement measures in favor of LDCs; (2)
to exempt LDCs from certain obligations under the Agreement on Trade-Related
Investment Measures (TRIMs); (3) to link LDC obligations generally with their
capacity to implement the obligations; and (4) to urge bilateral and multilateral
donors to ensure that conditions for assistance to LDCs are consistent with their
rights and obligations under the WTO.
Implementation Issues. Developing countries also have concerns about the
implementation of commitments made during the Uruguay round of WTO
negotiations. Some of these issues were resolved at the Doha Ministerial, but many
issues remain outstanding. Developing countries have sought implementation of
agreements in a way that is beneficial to them and does not cause them undue
hardship. In many cases, the agreement language does not specify the treatment of
developing countries, and the actual implementation of the agreement has been
contrary to developing country expectations. Implementation issues are found within
a wide variety of negotiating areas and are dealt with primarily by the committee
responsible for the relevant negotiating area. Outstanding implementation issues are
found in the area of market access, investment measures, safeguards, rules of origin,
and subsidies and countervailing measures, among others. The Hong Kong
Ministerial Declaration reiterates previous instructions adopted in August 2004, and
instructs the negotiating bodies and others to “redouble” their efforts to find solutions
to implementation issues. A deadline of July 31, 2006, was given for the General
Council to review progress on implementation issues, and take appropriate action.
Technical Assistance. Trade capacity building (TCB) and technical
assistance (TA) are discussed within the individual negotiating areas as well as
within the CTD. TCB is provided to developing countries to strengthen their
institutional capacity to participate in WTO negotiations, meet WTO obligations, and
integrate more fully into the global economy. TCB is provided from donors on both
a bilateral and a multilateral basis. The WTO provides workshops on various WTO
topics, maintains a global TCB database, and manages four major funds for financing
TCB activities (the Global Trust Fund; the Doha Development Agenda Trust Fund;
the JITAP Common Trust Fund; and the Integrated Framework Trust Fund). Critics
have commented that TCB lacks coordination in the WTO, and despite the variety
of funding sources the centralized sources of TCB funds are inadequate. In 2003,
total contributions to the TCB trust funds totaled $45 million. In that same year, total
bilateral TCB commitments equaled approximately $1.46 billion. Multilateral
commitments to TCB equaled approximately $1.29 billion in the same year.57

56 “U.S. Accepts Duty-Free, Quota-Free Initiative for LDCs After Changes,” Inside US
Trade, December 27, 2005.
57 2004 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity

Another area of controversy is whether donors should commit to providing TCB as
part of a WTO agreement, or whether TCB should simply be encouraged in the
Dispute Settlement58
The WTO Understanding on Rules and Procedures for the Settlement of
Disputes (Dispute Settlement Understanding or DSU), which entered into force
January 1, 1995, with the Uruguay Round package of agreements, provides the legal
basis for dispute resolution under virtually all WTO agreements and is the primary
means of enforcing WTO obligations. The DSU introduced significant new elements
into existing GATT dispute settlement practice intended to strengthen the system and
facilitate compliance with dispute settlement results. In particular, the DSU makes
the establishment of a panel, the adoption of panel and appellate reports, and the
authorization of requests to retaliate virtually automatic, and adds a right to appellate
review of panel reports on issues of law and legal interpretation. Its system of
deadlines and timelines expedites proceedings at various stages of the process, seeks
to ensure that compliance with adverse panel reports is achieved, if not immediately,
within “a reasonable period of time,” and allows disputing parties to exercise their
rights under the DSU by defined dates. Certain unilateral actions in trade disputes
involving WTO agreements, such as suspending WTO concessions or other
obligations without multilateral authorization, are prohibited. The system has been
heavily used, the WTO Secretariat reporting 335 complaints filed between January
1, 1995 and November 21, 2005; roughly half involve the United States either as a
complainant or defendant.
Current dispute settlement negotiations, which are taking place in the Special
Session of the WTO Dispute Settlement Body (DSB/SS), are an extension of talks
begun under a Uruguay Round Ministerial Declaration that called on WTO Members
to complete a full review of dispute settlement rules and procedures within four years
after the WTO Agreement entered into force, and to decide at the first WTO
ministerial meeting held after completion (in effect, the 3rd Ministerial Conference
held in Seattle in late 1998) whether to continue, modify or terminate them. While
there was much discussion of possible revisions and a draft text containing
amendments to the DSU was circulated at the Seattle Ministerial, consensus could
not be reached at that time. No decisions on reforms were taken by WTO Members
subsequent to the Seattle meeting and the future of the review remained unclear until
WTO Members agreed at the Doha Ministerial Meeting in November 2001 to
continue negotiations on “improvements and clarifications” of the DSU, with the aim
of reaching agreement by the end of May 2003 and bringing the results into force “as
soon as possible thereafter.” Further, dispute settlement negotiations would not be

57 (...continued)
Building. December 2004.
58 This section was written by Jeanne J. Grimmett, Legislative Attorney, American Law

conducted, concluded, or their results brought into force as part of the single
undertaking planned for Doha negotiations as a whole.
In the absence of probable consensus by the May 2003 deadline, the outgoing
Chairman of the SS/DSB, Peter Balás (Hungary), drafted a Chairman’s Text of
proposed amendments to the DSU dated May 28, 2003, in which he incorporated
numerous proposals, including those involving consultation procedures, third-party
rights, procedures for terminating panels before they complete their work, remand
authority for the Appellate Body, sequencing of requests for authorization to retaliate
with requests for compliance panels, procedures for terminating retaliatory measures,
awards for litigation costs, and special provisions for developing countries. No
action was taken on the document and in July 2003, the WTO General Council
extended the talks until May 31, 2004. With additional proposals submitted but little
progress by the new date, the WTO General Council agreed in the August 2004
Doha Work Program that work in the dispute settlement negotiations would continue
on the basis set out by the new DSB/SS Chairman David Spencer (Australia), in his
June 2004 report to the WTO Trade Negotiations Committee. The report stated that
there was “agreement among Members that the Special Session needs more time to
complete its work, on the understanding that all existing proposals would remain
under consideration and bearing in mind that these negotiations are outside the single
undertaking.” In addition, the Chairman did not recommend a specific target date for
completion, noting, however, that one might be considered later.
Among specific concerns under the DSU is the issue of “sequencing,” originally
identified during the implementation phase of the U.S.-European Communities (EC)
banana dispute. The problem results from the gap caused by the failure of the DSU
to integrate Article 21.5, which provides that disagreements over the existence or
adequacy of compliance measures are to be decided by recourse to DSU procedures,
with the processes and deadlines of Article 22, which permits the prevailing party in
a dispute to request authorization to retaliate within 30 days after the compliance
period ends if the defending party has not complied with its obligations by that time.
The EC argued that a full compliance proceeding (including consultations) was called
for; the United States argued that, given the 30-day deadline for retaliation requests,
it would lose its right to request authorization to retaliate if it waited for a compliance
panel to complete its work. While sequencing remains an issue in the negotiations,
parties to disputes have resolved existing difficulties by entering into ad hoc bilateral
agreements in specific disputes under which, for example, the complaining party
requests both the establishment of a compliance panel and authorization to retaliate,
the defending party objects to the level of retaliation proposed — an action that
automatically sends the request to arbitration — and the arbitration is suspended
pending completion of the compliance panel process (including any appeal). Another
case-based problem arose with the enactment of U.S. “carousel” legislation in May
2000, under which the USTR is required periodically to rotate lists of items subject
to authorized trade retaliation unless certain exceptions apply, the legislation in large
part a reaction to the EC’s failure to comply with the WTO decision faulting the EC’s
prohibition on hormone-treated beef. The EC argued that changing a list would be
a unilateral action not authorized under the DSU.
Along with the issues just described, the negotiations have taken up a broad
range of other topics, with over 50 working documents publicly circulated by

Members and other informal proposals and compilations made during the course of
the talks. The United States has generally sought increased transparency and access
to the process through open meetings, timely access to submissions and final reports,
and guidelines for amicus briefs. It has also proposed shorter time frames (in tandem
with clarifying the sequencing issue), and has called for steps that would give
Members more control over the process, such as requiring the WTO Appellate Body
to issue interim reports for comment by disputing parties; allowing the deletion from
an appellate report, upon agreement by the disputing parties, of findings that they
view as not necessary or helpful to resolving the dispute; and giving parties the right
to mutually suspend panel and appellate proceedings to allow them to work on a
solution to the case. In October 2005, the United States also suggested draft
parameters concerning both the use of public international law in WTO dispute
settlement and the proper interpretive approach for use in disputes. Its proposed
interpretive guidelines are aimed at ensuring that WTO adjudicative bodies neither
supplement nor reduce the rights and obligations of WTO Members under WTO
agreements and, among other things, describe types of “gap-filling” that should only
be addressed through negotiations, including a panel’s reading a right or obligation
into the text of an agreement by, for example, extrapolating from a different
agreement provision.
The EC has proposed, among other things, permanent panelists, remand
authority for the Appellate Body, a prohibition on carousel retaliation, enhancing the
availability of compensation before resort to retaliation, and a formalized way to
terminate multilateral authorization to retaliate. Japan has sought, inter alia, greater
enforcement options and a larger Appellate Body membership. Canada has proposed
procedures to protect business confidential information and the creation of a panel
roster. The EC, Japan, and Canada have also proposed varying degrees of
transparency in dispute proceedings. Proposals by developing country Members
generally reflect Members’ lower level of capacity and a desire to have developing
country interests reflected to a greater degree in panel and appellate reports and
dispute proceedings as a whole. These Members have proposed, among other things,
extended timelines in cases in which they are involved, including extensions for
consultations, brief filing, and the implementation of adverse results; provisions to
ensure that a developing country panelist is included in all panels in which a
developing country is a disputant; and the possible authorization of collective WTO
retaliation where a developing or less-developed country (LDC) Member is a
successful complainant. They have also proposed ways of dealing with financial and
human resource limitations in disputes, including increased technical resources for
developing countries and the awarding of litigation costs to a developing country
Member that has prevailed in a case. Developing countries have been critical of
some transparency proposals, such as allowing non-Members to submit amicus briefs
to panels, on the ground that non-Member participation in disputes would undermine
the intergovernmental character of the dispute settlement process and that added
requirements that might be placed on Members, such as responding to amicus briefs
within prescribed timeframes, would be particularly burdensome to developing
countries. While developed country Members submitted revised proposals, generally
on an informal basis, during recent dispute settlement negotiations, no revised
developing country proposal was put forward during this time.

Hong Kong and Beyond
In his November 25, 2005, report to the Trade Negotiations Committee,
Chairman Spencer communicated that over the past 18 months of negotiations there
had not been consensus of the sort needed to establish a foundation for an agreement.
Instead, he noted, “the work of the Special Session has been based primarily on
initiatives by Members to work among themselves in an effort to develop areas of
convergence to present to the Special Session as a whole.” The report stated that
during this period contributions and discussions had taken place on topics such as
“remand, sequencing, post-retaliation, third-party rights, flexibility and Member
control, panel composition, time-savings and transparency.” For the future, he
continued, “the onus will remain on participants in the negotiations to continue to
develop areas of convergence so as to lay the basis for a final agreement to improve
and clarify the DSU.” Reflecting language originally suggested by the Special
Session Chairman, the Hong Kong Ministerial Declaration “takes note of the
progress made” in the dispute settlement talks so far and directs the DSB/SS “to work
towards a rapid conclusion of the negotiations.” Because the Hong Kong Declaration
reaffirms the Decisions and Declarations adopted at Doha and takes into account the
General Council Decision of August 2004, dispute settlement negotiations will
continue on their separate track, with results to be adopted separately from any Doha
single act.
Environment and Trade59
In general, environmental issues were not a major focus at the Hong Kong
ministerial meeting, given the predominance of other priority issues. However, the
elements of the environmental paragraphs in the Doha Declaration were discussed
in the Ministerial Declaration, which recognized work undertaken in the Committee
on Trade and Environment, and urged continued work on the environmental issues
identified in the Doha document.
When the WTO was established in the 1994 Marrakech Agreement,
environment was a prominent and often controversial issue. Issues related to
environment and trade were closely linked in 1994 to the somewhat amorphous need
for “sustainable development.” And in April 1994 a “Decision on Trade and
Environment” accompanied the Marrakech accords, stating: “There should not be,
nor need be, any policy contradiction between upholding and safeguarding an open,
non-discriminatory and equitable multilateral trading system on the one hand, and
acting for the protection of the environment, and the promotion of sustainable
development on the other.” The issue was resolved in 1994 with the establishment
of the Committee on Trade and Environment (CTE), which has been meeting ever
since on a regular basis to identify the relevant issues.

59 This section was written by Susan R. Fletcher, Specialist in Environmental Policy,
Resources, Science and Industry Division, and Jeanne J. Grimmett, Legislative Attorney,
American Law Division.

The Doha Ministerial Declaration in 2001 included environmental elements in
Paragraphs 31 and 32. Paragraph 31 states agreement for negotiations “with a view
to enhancing the mutual supportiveness of trade and environment...” and identified
three issues: (i) the relationships between WTO rules and trade obligations in
multilateral environmental agreements (MEAs), limiting the scope of the discussion
to the relationships only among those nations that are parties to the MEAs; (ii)
procedures for regular information exchange between MEA Secretariats and the
relevant WTO committees; and (iii) the reduction and/or elimination of tariff and
non-tariff barriers to environmental goods and services. This paragraph also states,
“We note that fisheries subsidies form part of the negotiations provided for in
Paragraph 28,” i.e., negotiations on WTO rules, a mandate covering anti-dumping,
subsidies, and countervailing measures.60
The CTE has held extensive discussions of the relationship between MEAs and
WTO rules. It has been noted in these discussions that there has not yet been a
dispute involving an MEA and WTO rules, and there appears to be wide agreement
that when all parties are parties to an MEA, the MEA rules should apply.
Complications develop when a possible dispute might arise between parties and non-
parties to an MEA; discussions continue on this and other technical legal points.
The Ministerial Declaration issued after the Hong Kong meeting reaffirms the
Paragraph 31 Doha mandate “aimed at enhancing the mutual supportiveness of trade
and environment” and calls upon Members to intensify negotiations on all matters
listed in the paragraph. It recognizes the progress that has been made in the CTE on
the relationship of WTO rules to MEA trade obligations and the work undertaken
toward inter-organization information exchange. It also recognizes recent work
undertaken under paragraph 31(iii) through numerous submissions by Members and
discussions in special sessions of the CTE and in technical discussions, and instructs
Members to complete work expeditiously under that paragraph.
In addition, the Declaration in Annex D as it addresses rules negotiations, notes
that broad agreement exists that the Negotiating Group on Rules should strengthen
disciplines on subsidies in the fisheries sector, including prohibiting certain forms of
subsidies that contribute to overcapacity and over-fishing. It calls on participants “to
undertake further detailed work to, inter alia, establish the nature and extent of those
disciplines, including transparency and enforceability.” The Declaration also states
that “appropriate and effective” special and differential treatment of developed and
less-developed country Members “should be an integral part” of these negotiations,
“taking into account the importance of this sector to development priorities, poverty
reduction, and livelihood and food security concerns.”
Finally, the Declaration, in addressing negotiations on Non-Agricultural Market
Access (NAMA), notes that limited discussion has been held in the NAMA
Negotiating Group regarding environmental goods since July 2004, but that the CTE

60 Paragraph 32 outlines instructions for discussions in the CTE — not negotiating items —
and includes the effect of environmental measures on market access; relevant provisions of
the Agreement on Trade-Related Aspects of Intellectual Property Rights; and labeling
requirements for environmental purposes.

has undertaken substantial work on the issue during this period. It further states that
close coordination between the two negotiating groups would be needed in the future
and that “a stock taking” of the CTE’s work by the NAMA Negotiating Group would
be required at the appropriate time.