Order Code RL32645

CRS Report for Congress

Received through the CRS Web

The Doha Development Agenda:

The WTO Framework Agreement

Updated February 10, 2005

Ian F. Fergusson, Coordinator

Foreign Affairs, Defense, and Trade Division

Charles E. Hanrahan
Resources, Science, and Industry Division

William H. Cooper and Danielle J. Langton

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

The Doha Development Agenda: The WTO Framework
Agreement

Summary
On July 31, 2004, the 147 members of the World Trade Organization (WTO)
reached a Framework Agreement for conducting future Doha Round trade
negotiations. The Framework Agreement is the latest step in the Doha Development
Agenda (DDA) round of trade negotiations at the WTO, which was launched at the
4th Ministerial of the WTO at Doha, Qatar in November 2001. This report provides
analysis of the framework agreement and its significant results (agriculture, industrial
market access, services, and trade facilitation) in the context of U.S. objectives.

The Framework addresses the three “pillars” of agricultural trade liberalization

identified in the 2001 Doha Ministerial Declaration: substantial reductions in trade-
distorting domestic support; the phase-out, with a view to total elimination, of all
export subsidies; and substantial improvements in market access. A crucial trade-off
for the negotiations is the extent to which developed countries reduce their trade-
distorting domestic support in return for additional market access from large
developing countries.

Non-agricultural market access (NAMA) received less scrutiny. The agreement

provides general guidance for future negotiations on the modality for reducing tariffs,
the binding of developing country tariffs, sectoral tariff elimination, and special and
differential treatment (SDT) for developing countries. The NAMA talks may benefit
from the new impetus in the agricultural negotiations.

The parameters of the services negotiations were established as part of the pre-
Doha “built-in agenda” and in the Doha Ministerial Declaration that launched the
new round. The framework reaffirms the commitments made at Doha and charges
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 in sectors and
modes of supply that are of interest to developing countries. Services involving the
temporary movement of natural persons will remain contentious for both developed
and developing countries.

The Framework sets forth modalities for negotiations on trade facilitation,

including assessing the needs and priorities of member countries; providing technical
assistance to developing countries; and addressing trade facilitation language in the
GATT agreement. An early matter for clarification is whether the negotiations will
yield enforceable rules, or merely guidelines, for trade facilitation.

While the Framework Agreement resolved several contentious issues regarding

the negotiation of a future agriculture agreement, other issues were addressed in a
cursory fashion, if at all. Much work remains to be done to flesh out the Framework
to achieve an actual agreement on trade liberalization. The manner in which these
issues are resolved may influence the level of Congressional support for any resulting
agreement. The agreement also abandons the January 1, 2005, deadline for the
negotiations, but instead sets December 2005 as the date for the 6th Ministerial to be
held in Hong Kong. This report will be updated as appropriate.
Contents

Background and Overview of the Framework Agreement . . . . . . . . . . . . . . . . . . 1

From Cancún to Geneva . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Agriculture Framework Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Trade-Distorting Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Export Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Issues Addressed in the Framework . . . . . . . . . . . . . . . . . . . . . . . 6
Implications for U.S. Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The DDA and the Next Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Non-Agricultural Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Tariff Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Tariff Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Non-Tariff Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Sectoral Tariff Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Special and Differential Treatment for Developing Countries . . . . . . 11

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Doha Round Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Framework Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Trade Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
U.S. Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Issues for Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Looking Ahead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The Doha Development Agenda: The WTO
Framework Agreement

On July 31, 2004, the 147 members of the World Trade Organization (WTO)
reached a framework agreement for conducting future Doha Round trade
negotiations. The agreement provides instructions on the manner in which talks are
to proceed in agriculture, non-agricultural market access (NAMA), services, trade
facilitation, and other issues. The success of these framework negotiations was seen
as critical to the survival of the Doha Round after the failure at the 2003 Cancún
Ministerial to reach agreement on these issues. While the framework reached
agreement on difficult issues in the agriculture negotiations, much of the rest of the
agreement restates decisions that still need to be made, accord on which remains
elusive.

While this agreement provides only a framework for future negotiations, it has
several implications for future Congressional activity. Any agreement reached
resulting from this framework will require the passage by Congress of implementing
legislation. In addition, progress on the Doha Round negotiations may influence
possible Congressional action in 2005 concerning the potential extension of trade
promotion authority and continued U.S. participation in the World Trade
Organization. In addition, the next farm bill may be influenced by the negotiations
or a potential agreement. This report provides analysis of the framework agreement
in its significant results — agriculture, industrial market access, services, and trade
facilitation — in the context of U.S. objectives.

Background and Overview of the Framework

Agreement
The Framework Agreement is the latest achievement in the Doha Development
Agenda (DDA) round of trade negotiations at the WTO. This round of trade
negotiations was launched at the 4th Ministerial of the WTO at Doha, Qatar in
November 2001. Trade ministers set an ambitious agenda to negotiate an accord by
January 1, 2005. The 5th Ministerial Conference, to take place in 2003, would serve
as a mid-term review for the negotiations.

The work program devised at Doha folded in continuing talks (the built-in
agenda) on agriculture and services and launched negotiations on the reduction or
elimination of non-agricultural (industrial) tariffs, clarification and improvement of
disciplines for existing WTO agreements on antidumping and subsidies, and topics
relating to special and differential (S&D) treatment for developing countries and
assistance to developing countries with the implementation of existing WTO
commitments. Trade ministers at Doha agreed to continue discussions on the
 CRS-2

“Singapore issues” (government procurement, trade facilitation, investment, and

competition policy) and to launch negotiations if an “explicit consensus” was reached
on these issues at the 5th Ministerial Conference in 2003. The Doha Ministerial
Declaration also directed negotiators to resolve a dispute related to the ability of least
developing countries to access generic medicines for HIV/AIDS and other epidemics.

The Doha Ministerial documents paid special attention to the concerns of

developing countries, and the round was formally entitled the Doha Development
Agenda. This emphasis was partly in order to get the developing countries — a
majority of the WTO’s membership — to agree to the commencement of the round.
However, some developing countries had difficulty in implementing their Uruguay
Round commitments, and many developing countries have expressed concern about
undertaking new obligations. At Doha, negotiators agreed to resolve issues related
to their implementation of the Uruguay Round agreements, to negotiate special and
differential treatment for developing countries in the new round, and to provide
technical assistance in the negotiations and implementation of the agreements.

Negotiations proceeded at a slow pace. Several deadlines for agreement on

negotiating modalities — i.e. methodologies by which negotiations are conducted —
were missed in the agriculture, industrial market access, and other negotiating
groups. In addition, deadlines for submitting requests and offers in the services
negotiations were also missed by many participants. Negotiators looked toward the
5th Ministerial — which took place September 10-14, 2003 in Cancún, Mexico —
to resolve the modalities. In the weeks before Cancún, negotiating documents to
achieve this resolution were criticized by all sides, and expectations for the
Ministerial were reduced from agreeing on modalities to achieving an agreement on
the framework for negotiating the modalities to be used in future negotiations.

From Cancún to Geneva. The Cancún Ministerial, however, failed to

achieve even these expectations. Trade ministers at Cancún became embroiled in
disputes over agriculture and the Singapore issues. The G-20, an informal group of
developing countries led by Brazil, India, China, and South Africa, demanded
substantial concessions from developed countries in the agriculture negotiations in
response to perceived United States-European Union (EU) collaboration. Some
developing countries also refused to support the beginning of negotiations over the
Singapore issues, which had been pushed by the EU, because of sovereignty issues
or capacity constraints. In the end, deadlock over the Singapore issues broke up the
talks before agriculture issues were even formally discussed.

Subsequent to the collapse of the talks, U.S. and EU negotiators criticized both
the substance and tactics of the G-20 group. Developing countries defended their
actions as representing their paramount interest in breaking down the agricultural
barriers and subsidies in the United States and the EU. Initially, U.S. reaction in the
aftermath of the Ministerial was to give increased emphasis to the negotiation of
bilateral and regional free trade agreements (FTA). The European Union undertook
a review of its policy towards the WTO and multilateral trade negotiations.

However, signs of movement in the negotiations could be detected by the

beginning of 2004. In January, U.S. Trade Representative Robert B. Zoellick sent
a letter to the 147 WTO trade ministers expressing the hope that 2004 would not be
 CRS-3

“a lost year for the WTO negotiations.” While eschewing concrete proposals, the
letter signaled U.S. reengagement with the process. The EU’s acceptance,
meanwhile, of the elimination of agricultural export subsidies “by date certain” also
moved the negotiations along. Compromise was also achieved over the negotiation
of the Singapore issues as the EU and others decided that the inclusion of
competition policy, investment, and government procurement in the round had to be
abandoned if the negotiations were to move forward in the face of developing-
country resistance. Developing countries too played an active part in negotiations
this year, first by India and Brazil negotiating directly with the developed countries
(as the so-called “non-party of five”) on agriculture, and second by working toward
acceptance of trade facilitation as a subject for negotiation.

After intense negotiations in late July 2004, WTO members reached what has
become known as the Framework Agreement (or the July package) which provides
broad guidelines for completing the Doha round negotiations. The agreement
contains a 4-page declaration, with four annexes (A-D) covering agriculture, non-
agricultural market access, services, and trade facilitation, respectively. In addition,
the agreement acknowledges the activities of other negotiating groups (such as those
on rules, dispute settlement, and intellectual property) and exhorts them to fulfill their
Doha round negotiating objectives. The agreement also abandons the January 1,
2005 deadline for the negotiations, but instead sets December 2005 as the date for the
6th Ministerial to be held in Hong Kong.

U.S. Priorities. Throughout the Doha Round, increased market access for
U.S. agriculture, industrial goods, and services has been the primary goal for U.S.
negotiators. In the agricultural negotiations, the United States has sought improved
market access, especially from developing countries, and the end of all export
subsidies. The United States has also sought expansive tariff liberalization in the non-
agricultural market access talks, including support for an early proposal for a “tariff-
free world” by the year 2015 and for sectoral tariff elimination. The United States has
also made cross-border trade in services a priority, reportedly seeking to have
services make up one of the pillars of the Framework Agreement.1 The United States
has been less concerned with the disposition of the Singapore issues, with USTR
Zoellick at one point reportedly referring to them as a “distraction.”2 The United
States has also sought to limit the scope of negotiations on disciplines to WTO rules,
especially in light of Congressional support for maintaining current U.S. trade
remedy practices.

Previous rounds of trade liberalization were successful in reducing tariffs in the

manufactured goods sector. That negotiated liberalization has proceeded further in
this area perhaps is reflected in the distribution of world trade. Of the $7.6 trillion
exchanged in world trade in 2002, industrial goods comprised 71.9%, agriculture
7.6%, and services 20.5%. Trade in services was only brought under world trade
rules by the Uruguay Round’s General Agreement on Trade in Services in 1995.

1
“New WTO Framework Shows Little Progress on Services, NAMA,” Inside U.S. Trade,
August 6, 2004.
2
“Zoellick, Lamy Clash Over Inclusion of Singapore Issues in Doha Round,” Inside U.S.
Trade, February 27, 2004.
 CRS-4

Agriculture, though previously negotiated, remains a thorny issue for both producer
and consumer, and developed and developing countries. The liberalization of these
sectors potentially offers the greatest boost to world trade, but also potentially the
most wrenching changes to the societies that undertake them.

The Agriculture Framework Agreement3

Introduction. The agreement on a framework for completing the agriculture
negotiations in the DDA is contained in Annex A of the “July package.” The
Framework Agreement addresses the three “pillars” of agricultural trade
liberalization identified in the 2001 Doha Ministerial Declaration: substantial
reductions in trade-distorting domestic support; the phase-out, with a view to total
elimination, of all export subsidies; and substantial improvements in market access.4
Failure to agree on a framework for the agriculture negotiations would have
contributed to uncertainty about prospects for concluding the DDA and about the
viability of the WTO as a global forum for negotiating further farm trade
liberalization. The Framework now becomes the basis for establishing specific
formulas, schedules, end dates and other parameters (referred to as “modalities”) for
achieving DDA objectives for agriculture during the next phase of negotiations which
seem likely to continue into 2006.

U.S. aims for the DDA negotiations include substantial market opening for
agricultural products by all WTO members, especially, the developing countries. The
United States wants all agricultural export subsidies eliminated. The United States
has consistently maintained that trade-distorting domestic support should be reduced
substantially, but also wants to preserve “safety-net” farm income programs enacted
in the 2002 farm bill.5 The European Union (EU), while willing to eliminate export
subsidies over time, wants an end to export credit guarantees and some food aid
programs that it claims are export subsidies. The EU also wants to maintain direct
decoupled payments to farmers (along with payments linked to production)
established under recently enacted reforms of its Common Agricultural Policy
(CAP). The developing countries, a large and diverse group that constitutes a
majority of WTO members, want special and differential treatment with respect to
tariff or subsidy reduction. The poorest or least developed countries (LDCs) among
them want to maintain the trade preferences they currently enjoy.

Many U.S. agricultural interest groups support multilateral agricultural trade

liberalization. These groups believe that trade-offs possible in a comprehensive

3
Prepared by Charles E. Hanrahan, Senior Specialist in agricultural Policy, Resources,
Science and Industry Division.
4
The objectives for agricultural trade liberalization in the DDA are contained in paragraph
13 of the Doha Ministerial Declaration which is available at
[http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm ]
5
U.S. and other WTO member countries’ negotiating positions (as well as other background
information on the DDA agriculture negotiations) are available at
[http://www.wto.org/english/tratop_e/agric_e/negoti_e.htm.]
 CRS-5

negotiation would result in improved market prospects for U.S. agricultural exports.
For most U.S. farm groups, the trade-off of most interest is substantial market
opening by developing countries in exchange for substantial reductions in domestic
support by developed countries. U.S. producers of import-sensitive crops (e.g.,
citrus, dairy, sugar, some fruits and vegetables), who feel disadvantaged by previous
trade agreements (e.g., NAFTA) or threatened by possible new agreements, are less
supportive of agricultural trade liberalization.

Key provisions in the agriculture framework address trade-distorting domestic

support, export competition, market access, cotton subsidies, and other issues.

Trade-Distorting Domestic Support. Overall, trade-distorting support of

agriculture will be reduced by means of a “tiered” or “banded” approach applied to
achieve “harmonization” in the levels of support.6 Harmonization in this case means
that WTO member countries having higher levels of trade-distorting domestic
support will make greater overall reductions. Developed subsidizing countries will
make a “down payment” on the overall cut by reducing trade-distorting domestic
support 20% from bound (maximum permitted) levels of support in the first year
after negotiations are completed. WTO member countries will make separate
reduction commitments in the components of trade-distorting support, i.e., amber box
(most trade-distorting), de minimis (a category of spending now exempted from cuts
if it accounts for less than 5% of the value of production), and blue box (currently
defined as payments based on fixed areas and yields; a fixed level of production or
a fixed number of livestock).

Product specific amber box support will be capped at average levels according
to a methodology to be negotiated; and the definition of the blue box will be
modified to include direct payments that do not require production (e.g., U.S.
counter-cyclical support)7, and capped at 5% of a member country’s average total
value of agricultural production during an historical period. De minimis spending
also will be reduced according to a formula to be negotiated. Non-trade distorting
measures (green box) will be reviewed to ensure that they have no, or at most
minimal, trade distorting effects or effects on production. Developing countries will
receive special and differential treatment for all types of trade-distorting support in
the form of longer implementation periods and lower reduction commitments; least
developed countries (LDCs) will not be required to make any cuts in domestic
support.

Export Competition. By “the end date” to be negotiated, WTO member

countries will eliminate: export subsidies, and export credits, credit guarantees or
insurance programs with repayment periods beyond 180 days. By the same end date,
WTO member countries will eliminate trade-distorting practices of exporting State

6
WTO categories of domestic support are explained in CRS Report RL32053, Agriculture
in WTO Negotiations, September 30, 2003, p. 5; the report can be viewed at
[http://www.congress.gov/erp/rl/html/RL32053.pdf]
7
For information on this program, see What is Counter-Cyclical Assistance? in the CRS
Agriculture Policy electronic briefing book at [http://www.congress.gov/brbk/
html/ebagr21.html.]
 CRS-6

Trading Enterprises (STEs) and the provision of food aid not in conformity with
disciplines to be agreed, including disciplines to prevent commercial displacement.
Developing country WTO members will benefit from longer implementation periods
for phasing out export subsidies. Furthermore, WTO member countries will ensure
that export credit programs appropriately provide for differential treatment in favor
of least-developed and net food-importing countries. STEs in developing countries
which enjoy special privileges to preserve domestic price stability and ensure food
security will receive special consideration for maintaining monopoly status.

Market Access. All WTO member countries (except the least developed
countries — LDCs) will reduce import tariffs using a tiered formula. Harmonization
of tariff levels will be achieved through deeper cuts in higher tariffs. Tariff
reductions will be made from bound, not applied, rates; higher tariffs will be subject
to deeper cuts with some flexibility for “import-sensitive” products. The number of
tiers (bands) and the tariff reduction for each band remain to be negotiated. WTO
countries may designate a number (to be negotiated) of sensitive products for which
“substantial improvement” in market access must be achieved through a combination
of tariff quota increases and tariff reductions applied to each product. Developing
countries will be able to designate a number of products as “special products,” based
on criteria of “food security, livelihood security, and rural development needs.”
These special products will be eligible for more flexible treatment as regards market
access. A Special Safeguard Mechanism (SSM) will be established for developing
countries, while a Special Agricultural Safeguard (SSG) for developed countries (as
currently provided for in the Uruguay Round Agreement) remains under negotiation.
(Safeguards permit reversion to previous tariff levels if imports surge.)

Cotton. Cotton was not mentioned in the 2001 Doha Ministerial Declaration.
However, a number of African cotton producing and exporting countries proposed
a sectoral initiative on cotton that called for eliminating all trade-distorting cotton
subsidies and providing compensation for economic losses of African cotton
producers while subsidies were phased out.8 The United States, while not agreeing
with the African proposal, worked with the African countries on a formulation in the
Framework to address the cotton initiative. The “July package” stresses the
importance of the sectoral initiative on cotton (the decision) , while the agriculture
Framework (Annex A) provides that work on cotton will be carried out under all
three pillars and that the DDA will work to achieve “ambitious results
expeditiously.”

Other Issues Addressed in the Framework. The agriculture Framework

states that “particular concerns of recently acceded countries will be effectively
addressed through specific flexibility provisions.” This provision is viewed as a
concession to China who argued that it had already made substantial commitments
in all three pillars in its accession negotiations. Sectoral initiatives (e.g., a proposal
for zero-for-zero tariffs in oilseeds advanced earlier by the United States), differential

8
Background information on the African cotton initiative can be viewed at
[http://www.wto.org/english/tratop_e/agric_e/negs_bkgrnd20_cotton_e.htm;] see also CRS
Report RS21712, The African Cotton Initiative and WTO Agriculture Negotiations, January
16, 2004.
 CRS-7

export taxes (as employed by Argentina), and geographical indications (GIs,

protection for products with geographical names9, an important issue for the EU and
some other countries) remain “issues of interest but not agreed.” Disciplines on
export prohibitions and restrictions will be strengthened. Rules on agricultural trade
policy monitoring and surveillance will be enhanced so as to ensure transparency,
including “through timely and complete notifications” with respect to commitments
in the three pillars.

Implications for U.S. Agriculture. An eventual agreement on agricultural

trade liberalization in the DDA round would have both market effects for the U.S.
agricultural sector as well as effects on U.S. agricultural policies and programs.

Market Effects. Market effects of global agricultural trade liberalization are

difficult to estimate at this point in the negotiations because such specifics as the
extent of tariff reduction, the timing for the elimination of export subsidies, or the
percentage reductions in trade-distorting support remain to be negotiated. In general,
however, substantial tariff reductions (or increased market access quotas) could result
in expanded exports of many U.S. commodities including grains, oilseeds, cotton,
and fruits and vegetables. Other U.S. commodity sectors such as dairy or sugar could
experience more intense competition from foreign suppliers, but those effects would
be mitigated by designating such products as import-sensitive (as provided in the
Framework Agreement) and therefore subjecting them to longer phased reductions
in tariffs and/or increases in quotas. Export subsidy elimination could also benefit
a number of U.S. commodity sectors, e.g., dairy, meat and livestock products, and
cereals by improving competitive conditions in third-country markets, but tightening
of disciplines on U.S. export credit programs could penalize producers of
commodities that have benefitted from such programs, e.g., grains and cotton. Market
effects of reducing trade-distorting domestic support should be to increase prices for
commodities that have benefitted from payments that encourage excess production
and downward pressure on prices.

Policy and Program Effects. The harmonizing approach in the agriculture

Framework suggests that others, notably the European Union (EU), would have to
cut trade-distorting support more than would the United States. In the EU case, its
bound level of amber box support is currently (depending on exchange rates) around
$80 billion while the U.S. bound level is $19 billion. According to U.S. trade
negotiators, the United States likely should have no difficulty in meeting the aim of
cutting the sum of trade-distorting support levels by 20% in the first year as
reductions would be made from “bound”, or permitted, rather than “applied”, or
actual, levels. The U.S. Dept. of Agriculture (USDA) estimates that the U.S. bound
level of domestic support under a new WTO agreement could be as high as $39
billion (the current U.S. bound level of support for amber box spending plus
estimates of the future bound levels of de minimis and blue box spending), while
actual spending could be considerably less, rendering the 20% cut in the first year
meaningless for the United States. However, depending on the outcome of the
negotiations, future cuts could be higher, provided that other countries also

9
See CRS Report RS21569, Geographical Indications and WTO Negotiations, July 14,
2003.
 CRS-8

substantially reduce their trade-distorting support and tariffs. Some in Congress have
expressed opposition to cuts in “safety-net programs” put in place by the 2002 farm
bill, as would be required by the agriculture Framework agreement. Cotton is the
only agricultural commodity mentioned by name in the agriculture Framework. U.S.
cotton producers object to this singling out of cotton for special attention.10

The elimination of EU export subsidies has been a longstanding objective of

U.S. agricultural trade policy as has requiring greater transparency by STEs such as
the Canadian Wheat Board. Pressure from U.S. and developing country WTO
members in the DDA round plus successive reforms of the EU’s Common
Agricultural Policy (CAP), which has reduced its reliance on export subsidies, led the
EU to offer to eliminate them by a date certain. In exchange, however, the EU
countered that all forms of export subsidies, including U.S. export credit guarantees
and food aid, should be eliminated. This trade-off between export subsidies and
export credit and food aid programs is reflected in the Framework Agreement.
USDA’s export credit guarantee programs, which have provided guarantees for about
$4 billion of agricultural exports annually in recent years, apparently would be
substantially altered by the agreement. Current U.S. export credit programs can
guarantee financing of from 180 days to 10 years.11

U.S. food aid programs (e.g., P.L. 480 Title II commodity donations for
humanitarian purposes) which meet the criterion of not displacing commercial sales
appear to be unaffected by the Framework Agreement.12 Although earlier versions
of the Framework implied that commodity food aid would be eliminated in favor of
cash grants, the agreed-upon framework states that “...(t)he question of providing
food aid exclusively in fully grant form” will be addressed in the negotiations. The
role of international organizations vis-a-vis WTO member countries’ food aid
programs will also be addressed in the negotiations.

The DDA and the Next Farm Bill. DDA negotiations seem likely to be
concluding just as Congress would be taking up a new farm bill to succeed the six-
year Food Security and Rural Investment Act of 2002 (P.L. 107-171). While
implementing legislation, as called for in the Trade Act of 2002 (Title XXI of P.L.
107-210), would be a vehicle for conforming U.S. law to a DDA trade agreement,
farm bill changes may be needed to meet U.S. commitments in a final DDA
agreement on agriculture. Farm bill programs that most likely would be candidates
for change would include commodity price and farm income support (Title I of P.L.
107-171) and export and food aid programs (Title III of P.L. 107-171). Members and
committees will be monitoring the continuing agriculture negotiations with attention
to the economic benefits anticipated from further global agricultural trade
liberalization and to the adjustments that could accompany a new multilateral
agricultural trade agreement.

10
The response of the U.S. Cotton Council, a producer groups, is available at
[http://www.cotton.org/news/2004/WTORESPONSE.cfm.]
11
Details on current U.S. agricultural export credit guarantee programs is available at
[http://www.fas.usda.gov/excredits/]
12
Details on current U.S. food aid programs are available at
[http://www.fas.usda.gov/food-aid.html]
 CRS-9

Non-Agricultural Market Access13

Non-agricultural market access (NAMA) received less scrutiny than agriculture
in negotiations for the Framework Agreement. The Framework integrated draft
language on NAMA prepared for the Cancún Ministerial in September 2003; a text
that was neither approved nor considered at Cancún. In the Geneva deliberations,
developed nations sought to include the Cancún language wholesale, yet developing
countries resisted. They insisted on a paragraph, included in the first paragraph of the
text, indicating that “additional negotiations are required to reach agreement on the
specifics of some of these elements,” the elements being the formula, treatment of
unbound tariffs, flexibilities for developing countries, participation in sectoral tariff
modalities, and preferential tariff beneficiaries. USTR Zoellick reportedly minimized
the importance of this language, emphasizing that it was about “specifics” of already
agreed upon “elements.”14 However, the insistence of developing countries to the
incorporation of this language in the text, and not as a preamble or chairman’s
statement- implying a lesser legal status, indicates that developing countries place a
different significance on this paragraph. Depending on the interpretation accorded it,
this paragraph could reopen many of the issues worked-out in the Framework text.
It also reflects the continued lack of consensus on many of the basic components of
the market access negotiations.

Future progress in the market access negotiations rests on the resolution of

several issues, on which the Framework Agreement often provides only general
guidance. These include the modality for reducing tariffs, the binding of developing
country tariffs, the issue of sectoral tariff elimination, and special and differential
treatment (SDT) for developing countries. As indicated by the opening paragraph,
inserted at the insistence of developing countries, none of these issues have been
settled.

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 $5.5 trillion in
manufactures and primary products were traded worldwide in 2002, accounting for
72% of world trade activity.15 In the United States, industrial and primary products
accounted for 65% of exports and 79% of imports in 2003.16 Hence, the outcome of
these negotiations could have a substantial impact on U.S. trade patterns and on the
world economy.

13
Prepared by Ian F. Fergusson, Analyst in International Trade and Finance, Foreign
Affairs, Defense, and Trade Division.
14
“New WTO Framework Shows Little Progress on NAMA, Services,” Inside U.S. Trade,
August 6, 2004.
15
World Trade Organization, International Trade Statistics 2003, pp. 103-4.
16
Bureau of Economic Analysis, “ International Trade in Goods and Services, 2003 Annual
Revision,” June 14 2004.
 CRS-10

Tariff Reduction. The Framework Agreement endorsed the use of a non-

linear formula applied on a line-by-line basis as a modality to conduct tariff reduction
negotiations. A non-linear formula can work to even out or harmonize tariff levels
between participants. This type of formula could 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. By contrast, an example of a linear formula
would be one that reduced tariffs by a certain percentage across the board.
Consequently, this formula would not change the relative tariff rates between
members. A country with relatively high tariffs before undergoing the formula would
still have high tariffs relative to other countries afterwards. This approach is
generally favored by countries with high tariffs or certain tariff peaks that the country
seeks to preserve. Certain non-linear formulas, such as an harmonization formula,
seek to even out or harmonize the tariff rates among nations.

An harmonization formula would also work to reduce tariff peaks and tariff
escalations, another stated goal of the declaration. Tariff peaks are considered to be
tariff rates of above 15% and 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 becoming increasingly costly to the consumer in developed
countries.17 The Framework does not specify implementation period for tariff cuts,
but developing countries are to be afforded longer implementation periods.

Tariff Binding. The Framework encourages the continued binding of tariffs.

Tariffs are bound when a country commits 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 tariff levels that are actually applied, which has led
to questions as to the usefulness of reductions from bound rather than applied rates.

The United States supports reduction from applied rates, which would result in
greater cuts to actually levied tariffs. Some contend that the use of the applied rate
may serve as a disincentive for countries to undertake unilateral liberalization.
Countries would likely hesitate to undertake unilateral tariff reductions if they know
that multilateral liberalization efforts would use such rates as a starting point. It may
also increase the incentive to raise applied rates prior to negotiation.18

Under the Framework Agreement, tariff reductions would be calculated from

the bound, rather than the applied, level. Reductions in unbound tariff lines would
be calculated from twice the currently applied rate. Participants (i.e., developing
countries) who have bound less than 35% of their tariff lines would be exempt from

17
World Bank, Global Economic Prospects, 2004, p. 91.
18
Joseph Francois and Will Martin, “Formula Approaches for Market Access Negotiations,”
The World Economy, January 2003, p.17.
 CRS-11

tariff reduction commitments in the Round provided that they bind the remainder of
their non-agricultural tariff lines.

In addition, all tariffs would be bound in ad valorem terms; all remaining non
ad valorem tariffs would be converted and bound by a methodology to be determined
by negotiation. An ad valorem tariff is set as a percentage of the value of an imported
good, while a non-ad valorem tariff uses some other measurement such as a fixed
rate per unit or weight of goods. While non-ad valorem tariffs are more prevalent in
agriculture, they continue to be employed for non-agricultural tariffs and are not
solely a developing country phenomenon. A recent study calculated that 4.2% of
lines in the United States tariff schedule remained non ad-valorem and for
Switzerland the figure was 82.8 percent.19

Non-Tariff Barriers. The industrial market access talks also encompass

negotiations on the reduction of non-tariff barriers (NTBs). NTBs include such
activities as import licensing, quotas and other quantitative import restrictions,
conformity assessment procedures, and technical barriers to trade. The Framework
instructs members to submit notification of NTBs by October 31, 2004 for
negotiators to identify, examine, categorize and, ultimately, negotiate. The
Framework “takes note” of several modalities by which negotiations on NTBs could
proceed.

Sectoral Tariff Reductions. The Framework also identifies sectoral tariff

elimination as a modality for NAMA negotiations. The Framework instructs
negotiators to define issues of product coverage and participation. This represents a
retreat from previous draft texts that specifically proposed sectors (electronics, fish
and fish products, footwear, leather goods, motor vehicle parts and components,
stones, gems and precious metals, and textiles and clothing) for sectoral tariff
elimination.20 While the text anticipates flexibility for developing country members,
it also stresses the importance of involvement “by all participants,” thus discouraging
the possibility that developing countries could opt out of these negotiations.

Special and Differential Treatment for Developing Countries. The

text affords several flexibilities to developing country members. The Framework
permits developing countries longer periods to implement tariff reductions.
Developing countries may also avail themselves of either of the following
flexibilities: (1) applying 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 imports; or (2) keeping tariff lines unbound, or not
applying formula cuts for 5% of tariff lines provided they do not exceed 5% of a
member’s imports. 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 not specified.

19
Marc Bacchetta and Bigit Bora, “Industrial Tariff Liberalization and the Doha
Development Agenda,” WTO Working Paper, 2003, p. 15.
20
Draft Elements for Modalities for Negotiations on Non-Agricultural Products, Revision,
WTO Document TN/MA/W/35/Rev.1, September 1, 2003.
 CRS-12

Newly- acceded countries would also be given flexibilities based on the market
access commitments of their accessions. The Framework also acknowledges the
challenge of designing tariff reductions for countries that are already beneficiaries to
various preference programs such as the U.S. African Growth and Opportunity Act
or the European Union’s Everything But Arms Initiative. In devising the formula,
credit is to be given for autonomous liberalization in developing countries.

Services21
Background. Trade in services is only mentioned briefly in the WTO
negotiating framework and was given its own annex in the Framework Agreement
only after proponents strongly argued for such treatment. Authors of initial drafts of
the Framework had lumped services trade in with “other issues.” “Services” refers
to a broad range of economic activities, essentially any economic activity that is not
a tangible good, for example financial services, tourism, transportation, and legal
services.

Services account for a major and growing portion of the U.S. economy and for
a good portion of the rest of the world economies.22 In 2003, services accounted for
about 58% of U.S. Gross Domestic Product (GDP), a sharp increase from 42% of
GDP in 1965. In 2003, services industries employed 83% of the U.S. workforce, a
substantial rise from 66% in 1965. 23 The World Bank estimates that in 2002,
services accounted for 68% of total world GDP.24

Services, while important, play a smaller role in U.S. trade than they do in the
U.S. economy as a whole. In 2003, services accounted for 30.1% of U.S. exports of
goods and services and 14.1% of U.S. imports of goods and services.25 Several
factors may account for the smaller figure: most services must be bought and sold
through direct contact between the buyer and seller and are not conducive to cross-
border trade; while nations have reduced or eliminated tariffs and other barriers to
trade in goods, they have been more reluctant to liberalize trade in services; and data
limitations have resulted in under-reporting of trade in services.

Services are bought and sold via four means or “modes”: (1) cross-border trade;
(2) consumption abroad where the consumer physically travels to another country to
buy the service; (3) commercial presence where the service is provided by a firm in
one country via its branch, agency, or wholly-owned subsidiary located in the country
of the buyer; and (4) the temporary presence of natural persons where an individual

21
This section was written by William Cooper, Specialist in International Trade and
Finance; Foreign Affairs, Defense, and Trade Division
22
CRS calculations based on data in White House. Council of Economic Advisers.
Economic Report of the President. February 2004. p. 296.
23
Ibid. p. 338.
24
World Bank. World Development Indicators. 2004. p.188.
25
U.S. Department of Commerce. Bureau of Economic Analysis.
 CRS-13

supplier travels temporarily to another country to supply services (so-called mode 4

services). Negotiations in bilateral, regional or multilateral fora, to liberalize trade
in services, focus on reducing barriers in one or more of these four modes.

Multilateral rules on trade in services are very new and were established under
the General Agreement on Trade in Services (GATS) as part of the set of agreements
reached during the Uruguay Round negotiations. They are administered by the World
Trade Organization(WTO) which was established on January 1, 1995 also as part of
the Uruguay Round. The GATS contains basic principles and rules on trade in
services, some of which, for example, national treatment and most-favored-nation
treatment, are parallel to long-established rules for trade in goods under the General
Agreement on Tariffs and Trade. Article XIX of the GATS required WTO members
to begin a new set of negotiations on services in 2000 as part of the so-called WTO
“built-in agenda.” It was agreed before the Doha Ministerial that services
negotiations would operate in a request-offer format. The new set of GATS
negotiations began in February 2000, and during the remainder of that year, the
members reviewed the status of commitments already made and developed a set of
guidelines.26

Doha Round Negotiations. The negotiations on services were folded into

the agenda of the new round at the November 2001 WTO Ministerial in Doha, Qatar.
In their declaration establishing the agenda for the new round, the ministers affirmed
their support for the work that had already been accomplished in the services
negotiations. Each WTO member first indicates what general concessions they
request from the other members and then, separately, each member indicates what
concessions it is willing to offer. Members stipulated on the Doha documents that
by June 30, 2002, GATS members should have submitted their requests for
commitments from other members to liberalize trade in services and, by March 31,
2003, should submit their offerings of what their initial commitments would be
toward liberalizing trade in services in their economies.

The United States had completed its requests for commitments from other
member countries on July 1, 2002. The U.S. requests call for many of the countries
to improve transparency in regulations of services to boost efficiency across all
services industries. In addition, U.S. requests centered on reduction of trade
restrictions in 12 service industries: telecommunications; finance; express delivery;
energy; environment; distribution services; education and training; lodging and other
tourism services; professional services; computer and related services; advertising
services; and audiovisual services.27

Other countries, including the 15 members of the EU, submitted their own
requests, including requests made of the United States to reduce trade barriers in
services. Of note, is a request by the EU, Japan, South Korea, and Norway that the

26
U.S. proposed negotiation guidelines are summarized in documents located at
[http://www.ustr.gov/sectors/services/docsvcs.shtml.]
27
Office of the United States Trade Representative. U.S. Proposals for Liberalizing trade
in Services: Executive Summary. July 1, 2002. [http://www.ustr.gov/sectors/services/
docsvcs.shtml.]
 CRS-14

United States provide greater access to its markets for foreign maritime services
providers. Japan, for example, points to the Jones Act of 1920, which limits shipping
within the United States to vessels manufactured, owned, and operated by U.S.
companies. The EU has also focused some of its requests on the U.S. financial
sector, particularly restrictions on the foreign establishment of state-chartered
subsidiaries, branches, or representative offices.28

On March 31, 2003, the United States submitted its offer on reducing trade
barriers in services to meet the deadline established in the Doha Ministerial
statement. The U.S. offer covers 15 areas: accounting services; advertising and
related services; audiovisual and related services; distribution services; education and
training services; energy services; environmental services; express delivery services;
financial services; legal services; movement of natural persons (mode 4); small and
medium-sized services enterprises; telecommunications, value-added network, and
complementary services; and transparency in domestic regulation.29

The negotiations on services have gone slowly since the Doha Development
Agenda was launched. Besides the United States, 43 other WTO members (the EU
is counted as one member) have made offers on reducing their trade barriers. Some
negotiators and other observers have argued that not much progress would be made
until the WTO negotiators resolved how agricultural issues would be addressed.30
Developing countries were reluctant to make offers on services until they saw how
far some of the developed countries were willing to go on agriculture. Because the
Framework Agreement addressed many agricultural trade issues, supporters of
liberalized trade in services are anticipating that the services negotiations will gain
momentum.

Framework Issues. The Framework itself mentions services only briefly

because they were not the focus of the negotiations over the framework and the
parameters of the negotiations had already been established as part of the “built-in
agenda” and in the Doha Ministerial Declaration that launched the new round. The
Framework reaffirms the commitments made in the Doha Ministerial Declaration and
charges 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 Framework also charges the negotiators to bear in mind when making their
offers the sectors and modes of supply that are of interest to developing countries.

The negotiating Framework notes the particular interest that developing

countries have in issues pertaining to mode-4 supply of services. A number of
developing countries, including African countries and India, have complained that
developed countries’ offers to date have been largely deficient in the area of mode-4.
They assert that the developed countries often require a commercial presence by the

28
Washington Trade Daily. July 5 and July 6, 2002.
29
For more information on the U.S. offer, see CRS Report RS21492, Services Negotiations
in the WTO: An Overview of the U.S. Offer.
30
Coalition of Services Industries. US Services Industry Association Welcomes WTO
Agreement to Move Ahead with Doha Round Trade Talks. Press release. July 31, 2004.
 CRS-15

foreign supplier and/or employ strict requirements, such as pre-employment

conditions, economic needs tests, and quota restrictions on visas before permitting
temporary entry of foreign professionals.31 Because developing country concerns run
head-on into U.S. and EU heightened post-9/11 concerns about entry of foreigners,
this issue could be difficult as the services negotiations progress.

In many member countries, services are a large portion of economic activity.

Yet, services account for only a small portion of total trade, indicating many
untapped opportunities for trade in services if barriers are eliminated. However, for
many countries, especially developing countries, liberalization in services trade is a
very sensitive issue that may make achieving the opportunities difficult if not elusive.

Trade Facilitation32
Background. The WTO negotiating Framework sets forth modalities for
negotiations on trade facilitation. As one of the Singapore issues, trade facilitation
was pushed by the EU and other countries but met resistance from some developing
countries. Developing country members were not necessarily opposed to the goals
of trade facilitation, but they were reluctant to negotiate new commitments in the
WTO for many reasons, mainly because they wanted the Doha round to focus on
settling implementation issues from previous agreements. They were also concerned
about their capacity to implement potentially costly trade facilitation agreements.
However, developed country members (including the United States) insisted that
trade facilitation would benefit all members by creating a more efficient global
trading system, and they agreed to include provisions on technical assistance and
special and differential treatment in the negotiating Framework to ensure that
developing country needs were met. This may have influenced the developing
countries to agree to the inclusion of trade facilitation in the negotiating Framework.

Previous WTO rules have addressed trade facilitation, but it was first introduced
as a separate topic in the WTO at the Singapore Ministerial in 1996. The Doha
Ministerial statement agreed to continue discussions on trade facilitation and to begin
negotiations after setting modalities at the Cancun Ministerial. The trade facilitation
discussions in the WTO since Doha have concentrated on three core areas: improving
the relevant articles of the GATT 1994; individual country needs and priorities
regarding trade facilitation, especially those of developing countries; and technical
assistance to developing countries in the area of trade facilitation.

Trade facilitation aims to improve the efficiency of international trade through

strengthening trade rules concerning customs procedures. It has become a more
important issue in recent years as trade has been liberalized and trade flows have
increased. Because of these trends, the costs of complying with administrative trade

31
Developing Nations Again Criticize Lack of Mode 4 Offers in WTO Services Talks.
International Trade Reporter. April 8, 2004. p. 600.
32
This section was written by Danielle Langton, Analyst in International Trade and
Finance; Foreign Affairs, Defense, and Trade Division.
 CRS-16

procedures comprise a greater portion of the total costs of trade than before.33 These
costs can come from overly cumbersome and redundant documentation requirements,
delays in processing goods through customs, and nontransparent or unequally
enforced importation rules and requirements. In the modern “just in time” economy,
where traders rely on quick turnaround and shipping to meet orders, this poses a
significant problem. According to the United Nations Conference on Trade and
Development (UNCTAD), the average customs transaction involves 20-30 different
parties, 40 documents, 200 data elements (30 of which are repeated 30 times), and
the re-keying of 60-70% of all data at least once.34

WTO negotiations on trade facilitation seek to improve trade procedures by

utilizing technology more effectively, enhancing cooperation among customs and
other officials, reducing documentation requirements and other administrative
burdens, and ensuring a fair and transparent system of administering trade. Trade
facilitation has the potential to reduce the cost of trade, increase opportunities for
trade, diminish corruption associated with customs procedures, increase compliance
with customs rules, and reduce the cost of goods to consumers for both developed
and developing countries. Trade facilitation may have the most visible impact on
small and medium enterprises (SMEs), because they are often priced out of
international trade due to the relatively high costs of administrative barriers for small
volumes of goods. Since SMEs are said to contribute significantly to job creation
and economic growth in both developed and developing countries, increasing their
ability to benefit from trade may positively affect world economic growth.

U.S. Position. The United States has the potential to benefit from trade
facilitation in the same way as other countries. Certain U.S. industries in particular
rely on the ability to quickly clear goods through customs, such as agricultural
importers and exporters, and the express delivery industry. U.S. trade with
developing countries may also benefit. Such trade has been increasing; total U.S.
trade with LDCs nearly doubled from 1996 to 2003, from $7.6 billion to $14.1
billion, and U.S. trade with its Generalized System of Preferences (GSP)
beneficiaries increased by 73%, from $193 billion in 1996 to $261 billion in 2003.35
This trade has traditionally been hindered by several factors, including the fact that
developing countries tend to have the least efficient administrative trade procedures.
Now that other barriers to trade with developing countries, such as protective tariff
regimes, are being dismantled, trade facilitation may help both the United States and
developing countries further realize gains from trade with each other. Reducing the
costs of trade with developing countries could help U.S. businesses establish new
export markets and lower-cost suppliers in developing countries. The United States
may also become more involved in providing technical assistance as part of a
negotiated agreement in trade facilitation.

33
Swedish Trade Procedures Council (SWEPRO), Trade Facilitation: Impact and
Potential Gains. August 2002.
34
UNCTAD cited in Doha WTO Ministerial 2001: Briefing notes. Trade Facilitation:
Cutting Red Tape at the Border. Available at:
[http://www.wto.org/english/thewto_e/minist_e/min01_e/brief_e/brief15_e.htm].
35
United States International Trade Commission, Interactive Tariff and Trade Data Web.
[http://dataweb.usitc.gov].
 CRS-17

The United States has worked with other WTO members toward launching trade
facilitation negotiations, through its membership in the so-called “Colorado Group.”
This group comprises a diverse group of entities, including the United States,
Australia, Canada, Chile, Columbia, Costa Rica, the European Union, Hong Kong
China, Hungary, Japan, Korea, Morocco, New Zealand, Norway, Paraguay,
Singapore, and Switzerland. The current controversy in trade facilitation is that many
of the developing countries are opposed to new WTO disciplines, and they would
prefer optional guidelines. However, many other countries agree with the U.S.
position that a rules-based system is essential for establishing accountability and
implementing concrete changes to facilitate trade. They also agree that developing
country concerns can be adequately addressed through attention to technical
assistance and special and differential treatment.

Issues for Negotiation. The negotiating Framework modalities cover the

three core issues of trade facilitation that member countries have been discussing
since Doha: clarifying and improving aspects of certain existing WTO rules
concerning trade facilitation; providing technical assistance to developing countries;
and identifying and considering the needs and priorities of all countries, especially
developing countries, including special and differential treatment. It does not
specifically state whether the negotiations will result in guidelines or new rules, yet
it provides for assistance to developing countries in implementing whatever rules
may be negotiated.

The existing WTO rules singled out for attention are Articles V, VIII, and X of
the General Agreement on Tariffs and Trade (GATT).36 Each of these articles
concern different aspects of trade facilitation, and they were initially agreed on prior
to the formation of the WTO. Trade facilitation was seen as less important than
market access and other areas negotiated under the GATT during this time, and thus
the GATT does not provide specific rules for customs procedures. Article V deals
with Freedom of Transit, the rights of goods passing through a territory between
countries. Article VIII deals with Fees and Formalities Connected with Importation
and Exportation, requiring efficient and fair fees for moving goods in and out of
countries. Article X deals with the Publication and Administration of Trade
Regulations, requiring transparent trade regulations and the equal enforcement of
these regulations, including a judicial review process. In order to carry out its task,
the Framework further directs the Trade Negotiations Committee to establish a
Negotiating Group on Trade Facilitation, and appoint its chair.

The negotiations are to consider the principle of special and differential

treatment for developing countries. Special and differential treatment has
traditionally meant granting longer transition periods for developing countries, but
the Framework states that the extent and timing of entering into commitments shall
be related to the implementation capabilities of developing country members. Also,
the members agreed that developing countries will not be required to undertake

36
These articles are found in the GATT 1947, the original GATT agreement that preceded
the formation of the WTO in 1995. The GATT 1994 includes the GATT 1947 plus some
additional agreements and understandings. Both of these agreements may be informally
referred to as the GATT.
 CRS-18

infrastructure investments beyond their means. The Framework encourages

developed country members to provide technical assistance to developing countries
within the area of trade facilitation.

Through the negotiations, members agree to identify their own trade facilitation
needs and priorities, and consider the concerns of developing countries regarding the
potential costs of proposed measures. Technical assistance and capacity building for
developing country participation in the negotiations is emphasized, and developed
member countries are expected to provide this assistance. Developed country
members are also expected to provide support in implementing the commitments that
arise from the negotiations, whether that be in building human and institutional
capacity or physical infrastructure. The Framework recognizes that a negotiated
agreement may require some members to further develop their infrastructure, and this
may be burdensome for some developing countries. In this case, developed countries
are expected to make every effort to ensure support and assistance for implementing
the commitments. However, a developing country will not be required to implement
a commitment with costs beyond its means if it does not receive adequate support
from developed member countries. That stipulation is necessary because the
Framework points out that developed countries cannot commit to open-ended
support. The members also agree to review the support and assistance provided, and
assess whether it supports implementing the negotiated agreements.

Looking Ahead
The Framework Agreement resolved several contentious issues regarding the
negotiation of a future agriculture agreement. For other issues, the Framework was
less clear or the issue was left unaddressed. Much work remains to be done to flesh
out the Framework to an actual agreement on trade liberalization. For the Doha
negotiations to succeed, however, these issues must be addressed and resolved. In
turn, the manner by which these issues are resolved may influence the level of
Congressional support for any resulting agreement.

! Agriculture. Agreement to reduce domestic support according to

a harmonizing formula (WTO members with higher levels of trade-
distorting support must cut more) represents substantial progress, but
difficult negotiations are expected over specifics such as the
percentage cuts in overall support and in specific categories of trade
distorting support (amber box, newly-defined blue box, and de
minimis).

! Similarly, the EU’s concession on eliminating export subsidies is

supposed to be matched with U.S. cuts in export credit guarantees
and food aid programs. Just how parallel reductions in these
programs might be achieved as well as the schedule and end date for
eliminating export subsidies likely will be difficult negotiating
issues. The market access provisions of the agricultural Framework
Agreement are less precise than those for domestic support or export
competition.
 CRS-19

! A critical trade-off to be resolved is the extent of market opening by

mid-level developing countries such as Brazil or India versus the
extent of reduction in trade-distorting domestic support that
developed countries will make. Resolving this trade-off is critical to
both realizing market benefits from further agricultural trade
liberalization as well as gaining eventual support in Congress for a
WTO trade agreement.

! Services. Regarding the services negotiations, mode-4 delivery of

services (temporary entry of foreign personnel) will likely be an
issue of critical interest to some members of Congress. Provisions
pertaining to temporary entry of personnel were included in the free
trade agreements that the United States entered into with Chile and
Singapore. Members were strongly critical of trade agreements that
included provisions affecting U.S. immigration policy, and vowed
to oppose future agreements that did so.37 Mode-4 is the most
critical issue for a number of large developing countries, including
India and China who have criticized the offers made by developed
countries, including the United States, that have restricted Mode-4
liberalization to foreigners who are executives and highly skilled
employees of foreign firms that have an established presence in the
local economy.

! Non-Agricultural Market Access. Although the NAMA language

was replicated from the 2003 Cancún text, language inserted at the
insistence of the developing countries casts doubt on the finality of
these decisions. The first activity of negotiators is to determine the
tariff formula, or whether to use or whether to use a different tariff
reduction modality. The success of the NAMA negotiations may also
depend on cooperation of developing countries, some of which are
withholding active participation awaiting progress in the agriculture
negotiations.

! Trade Facilitation. In establishing talks on trade facilitation,

member countries may first reach an agreement on whether to
negotiate new rules, or merely guidelines, for trade facilitation. This
may be accomplished by first reaching agreement on concrete steps
for the provision of technical assistance, and the application of
special and differential treatment. Developing countries may prove
more likely to engage in the talks if they are confident that they will
not be forced to take measures beyond their capacity, and it may be
possible to agree to negotiate new rules.

37
See also, Senate Judiciary Committee Members Criticize USTR on Temporary Entry
Provision. International Trade Reporter. July 17, 2003. p. 1216. In addition, on July 31,
2003, the Senate passed S. Res.211, expressing the sense of the Senate that future trade
agreements to which the United States is a party should not contain immigration-related
provisions.