Agriculture & The Doha Round of WTO Negotiations

MR. HAFEMEISTER: All right, great. Good afternoon. Good to see you all. What I thought I'd do here is make a couple of general remarks, then get into a little bit of the specifics as we see them moving forward and then I'd be happy to take your questions.

We see the next couple of weeks as really being critical for the WTO talks. As many of you know, we have had U.S. trade promotion authority for the last couple of years which has allowed the ability to negotiate trade agreements and bring them back home here to our Congress where they can make a simple up or down vote to approve trade deals. That authority will expire at the summer of next year. And that really, for all practical purposes, means we need to conclude a trade agreement by the end of this year in the WTO if we're going to use that existing authority.

And to get a deal done by the end of this year it really means we need a breakthrough this summer, really in the next matter of weeks, if we're going to have enough progress to provide momentum, to get a deal done by the end of the year. So we see the next several weeks as a critical time to achieve the breakthrough and bring home a trade agreement in the WTO, which is a top priority for the United States and it continues to be. This is particularly true because of the situation in agricultural trade.

As many of know, agriculture trade is afflicted by very high tariff barriers. The average allowed tariff on agriculture products is 62 percent. Agriculture's also been highly distorted by the use of export subsidies. The European Union can spend up to $9 billion a year on export subsidies. They spend 2 to 4 billion a year as a matter of course. Agriculture also has a lot of trade distorting domestic support. Over $100 billion a year is allowed globally with the main users -- the EU, the U.S. and Japan -- and so harmonizing these levels, bringing them down, is also a big objective in the WTO.

And finally, we want to see world economic growth live up to its potential. And a trade agreement that opens markets and expands trade and allows the gains for trade can bring that. And that provides more customers, more income, more growth. So this is the backdrop of why we are so committed to concluding this negotiation, why the Administration and the U.S. Trade Representative team has put so much effort in the last weeks and months to brining this home. Ambassador Schwab was just in Geneva and St. Petersburg talking about this issue. And we're sending a team back to Geneva this weekend to continue talks with our key trading partners to see if we can achieve a breakthrough.

The core issues in the negotiation, though -- where the conversation really starts is on market access. It's both an economic question of can we reduce the barriers that allow for expanded trade flows, new trade flows that generate new income, new wealth, new opportunities? That's really the main question that we're facing. We also have tough negotiations in front of us on domestic support, how far are we going to bring down the trade distorting domestic support levels. But again it is our view that these negotiations really are pivoting now on the question of market access: Will we see new proposals to answer the G-8 leaders' command to us to come forward and put concrete proposals that will create a breakthrough that will have the new trade flows that will open markets and deliver growth and opportunity.

So we're headed off this week. We're going to talk to a number of the key trading partners, you know, our group of six countries. We'll be meeting with them. We'll also meet with others in Geneva to talk about where the key issues are headed. And of course the Director General of the WTO, Pascal Lamy, will continue to shepherd this process forward and he will continue to play an important role in this.

Our objectives are the same: to open markets, to have a balanced deal that makes sure that the trade distorting domestic support cuts are commensurate with the market openings through tariff cuts, and to see real contributions from all the key players. You know, we need to see both developed and developing countries alike open their markets if we're all going to reap the benefits of expanded trade. So we look forward to meeting with our trading partners. We know many of them are working very hard, as are we, to make this happen. It's a big task but it's worth the effort because the gains, the opportunities, are so large. So that's where we're headed; a short update for you. Now I'm happy to take any questions or comments from you on any of the specific issues.

MODERATOR: Yes, sir. Please wait for the microphone and identify your organization.

QUESTION: Jim Berger from Washington Trade Daily. Is the level of the team that's going out this weekend, it's Mr. Crowder is that the level? And also how long do you expect them to stay, two weeks or more?

MR. HAFEMEISTER: Well, you know, we'll start with the fact that I'm going, so that's the most important to me. (Laughter.) But of course, my more important bosses will be there as well. Ambassador Crowder will be headed over and I think there's a good chance that we'll see trade ministers there as well. I don't think that's all been finalized, but certainly at the working level we're going to bring our top team.

QUESTION: Is Schwab going?

MR. HAFEMEISTER: Well, we'll have to see. You know, she I think is still on an airplane coming back, so I don't want to over-commit her. But we're going to go and, you know, obviously we're committed to do what it takes to get the deal done but we do have some constraints here. So I don't want to have people over there for weeks and weeks, when this is something that we need to get done really in a matter of a week or two.

MODERATOR: Yes, Goyal.

QUESTION: Raghubir Goyal, India Globe & Asia Today. The Trade Minister of India was here recently, of course, he met with U.S. official, including the Trade Rep. Somehow there was some not very clear trade barriers were removed during his visit here. They are discussing also on trade -- agricultural trade and other trades, because the Indian American community here already feel the difference between -- the talks took place because some of the things are not coming in the U.S. and the U.S. need to come. What took place during their meeting? And somehow that's where the Indian American communities are asking what happened?

MR. HAFEMEISTER: Yeah, good question. You know, we've worked quite closely with Minister Nath and his team in these negotiations. They've got some real strong negotiators, some good colleagues and we've talked to them extensively about -- from our perspective, the barriers that U.S. ag products face when they go to India. You know, under the WTO rules India is allowed an average tariff in agriculture of 114 percent and their applied tariff, what they actually charge at the border, is only averaging 35 percent. And what India's proposed, as part of their G-20 proposal -- this group of 20 countries, they've put a tariff proposal out there -- that would only cut India's average tariff to 70 percent, twice what they're actually charging.

So we said we'd like to see a better offer. We'd like to see tariff cuts that really generate new trade flows, because you know right now we've got a trade deficit in agriculture with India, which is a little disconcerting, U.S. -- a very powerful agriculture exporting country, very efficient, great products. I eat them every day. You know, we want to see them out there globally and we'd like to have access to that Indian market. So we're definitely working on them to open up those markets.

Now India, of course, wants to see some openings in the U.S. There are a number of products that India would like to sell here and we've worked on some of the technical barriers to allow that to happen, so that's an ongoing process. But really in the WTO context, is this question of can we bring those tariffs down so we actually see trade flow. And I was encouraged that Prime Minister Singh talked about the importance of getting this deal done. He did note that there's some sensitive areas for India and we'll work with them on that. But it's really that spirit of finding a way to make the cuts to let the trade happen is where we're headed.

MODERATOR: We have a question from New York. Go ahead.

QUESTION: This is Indira Kannan, CNBC in India. You said recently with specific reference to India that there could be some staple crops, which could be exempted from some of these tariff cuts and also there would be certain circumstances under which India could temporarily close its markets in terms of imports. So just could you elaborate on that, which specific crops that you have in mind and what are those specific circumstances?

MR. HAFEMEISTER: Yeah, sure. It's an important question. What we've recognized in the negotiations, and WTO members have agreed to including the U.S., is to say that in developing countries we recognize there are some special products, some products that are so linked to food security that they can't withstand a large market opening right away. And instead for those products, there's going to be more gradual treatment in terms of market opening. And so they'll take lesser tariff cuts and maybe provide smaller quotas than it would otherwise be required. And this special products is an important point of negotiations. Some countries, led by this group of 33 countries, have said they would like to be able to effectively exempt most of their trade from any reform under the rubric of these special products. That's too much. You know, we can envision a few of the most sensitive products that are most closely linked to subsistence farmers where some gentle treatment would be required. But our idea is for all products we have to see some increased trade for both the exporting and the importing countries to benefit from the gains from trade. So we want to tightly circumscribe a list of those products and we need to see some improved access for them.

Similarly, we've talked about establishing a special safeguard mechanism that would allow developing countries for some of these same sensitive products to raise their tariffs if there's a flood of imports or if prices fall dramatically. But the key thing here is that this is supposed to guard against too much market opening. And our concern is that some of the negotiating partners are saying "no opening at all" and so that's really what we have to work out. We've got to have some opening, but we have to also recognize there's some protections that have to be given to these countries.

MODERATOR: Yes, sir.

QUESTION: Cesar Munoz with EFE News Service. Also in developing countries, specifically in Latin America, countries like Brazil, Argentina, big countries, do you think they have offer enough in these negotiations or what do you expect from them? And if I may ask a second question, after the meeting in Geneva, there were statements by the Europeans saying that it was the United States fault that there was no agreement then. And the United States basically said it was not our fault. I mean, how --

MR. HAFEMEISTER: I agree with that.

QUESTION: Yeah. How are you going to break this impasse? I mean, how -- do you see a way forward? Thank you.

MR. HAFEMEISTER: Okay. On the first question, remember where we're coming from here. This is all about all-market access all the time. How our country is going to commit to open their markets. That's the only way we get the bulk of the gains from trade. It's the only way that we see rising income and new opportunities. And so the question that we posed to the countries around the table is what have you offered to do to open your market to allow more import competition. And some of the key countries in Latin America have joined this group called the G-20. It's got India, China, but also Brazil and Argentina and Uruguay and Chile and Mexico in it. And we've got some concerns about the proposal the countries has put forward in that it really doesn't provide much in the way of market access into their own developing country markets. I gave you the example of India where there's really not much in the way of a tariff. I could make the same case about Brazil.

Under this G-20 proposal for agriculture, Brazil would only cut something like 7 or 9 percent of its agriculture tariffs down to the actual applied level. So for 90 percent of the tariffs, we'd see no improvement in the current tariff we face. So we think Brazil can do more. Certainly we know it's a competitive producer -- Argentina, as well. They don't need that protection. That it's going to benefit their consumers if they do let in some good U.S. products. So we need to see this G-20 and some very important Latin American countries are part of it to raise its game here, put some improved offers on the table.

Now with respect to the last month or so, we have been stuck in the negotiations. And again, our perspective is that it's because the WTO members have not yet delivered on their promise made back in Doha when we started this negotiation to substantially improve market access. We haven't -- the example of the G-20 proposal is a good one. That doesn't substantially improve market access. So we need to see not just the G-20, but the G-10 and others come out there with some more specific proposals that'll help us get through that. And if the market access is there, I am very confident we will find a way to make this round come together. But without market access, the round really loses its meaning. We don’t get the benefits. We don't deliver on the Doha development promises.

So you know, we've been working closely with the Europeans. They’re good negotiating partners. I think their negotiators have a real sincere effort to try and get this done. But what we need to do is work out the specifics at the table of market opening.

Yes, sir.

QUESTION: Jitendra Joshi with AFP. While you’re stressing market access, the Europeans, the G-20, et cetera are stressing that it’s up to the U.S. to come forward with more on domestic farm support. Without wishing you to give the game away, what more can you do in this to unblock the impasse?

MR. HAFEMEISTER: Yeah, thanks. It’s a topical question. I’ll remind you, back to the U.S. proposal of October of last year, and I think we have some information on that that we can provide as well, you know, that proposal had two big elements. It said, as a first step, let’s take a big bite out of tariffs and subsidies. And in fact, for the U.S., we said we’d cut our own average tariff and agriculture by 61 percent, including our import-sensitive sectors, and we’d cut our most trade-distorting subsidies by 60 percent. Our current programs will not fit with those cuts.

On top of that, we said we’re ready to eliminate all of these tariffs, all of these trade-distorting subsidies; let’s go to zero, let’s do it as fast as we can. So really, there’s no limit to our ambition in terms of reform here. But the question is, how can we get other countries to put reform proposals on the table that’ll allow us to have a successful and balanced conclusion.

So you know, if we saw real market access out there, if we saw ambitious proposals that really delivered access for those sensitive products that so many countries are trying to hide, if we saw developing countries step up here and make some real cuts that allowed new trade flows, I’m completely confident that we’d find the right level of domestic support cut that would make this come together. That, to me, is not at all the problem here. And from the Congress and from our private sector, we hear the same message, "Deliver us the market access and we’re ready for reform."

QUESTION: Just to follow my own question, that as far as China and India is concerned, two booming economies in the region, but there’s more – a U.S. deficit with China is more. Almost everything today you buy here is made in China. How do you compare India and China as far as the triangle of U.S., India, and China? And second, when I visit India, I see almost Fortune 500 companies and non Fortune 500 companies are in India and I see more U.S. cars on the Indian roads than the Indian cars, like Ford and Chevrolet and -- that you see here. But I don’t know what is the politics and where the barriers are there, why there is what you said, an access problem and all that. And why – this is the first time I think I saw that minister was here and they could not agree on certain issues.

And finally, when the President was in India, he said Indian mangoes will be here, right? So when the Indian mangoes are coming or Indian mangoes are also tangled in this trade barrier problem?

MR. HAFEMEISTER: Well, just briefly, we think both India and China have to step up here and make contributions to make the round come together, not only to develop new opportunities for exporters, but for their own sake, increased import competition has helped fuel those economies and it will help in the future to develop – to create more growth and development. On agriculture, absolutely, absolutely the case, that the United States has comparative advantages in a number of products, grains and livestock in particular that we want to sell into those markets. India and China should be focusing on the things they do better, which they already sell here to us. That’s the beauty of the gains from trade. The barriers right now that we face in those markets are hampering us both. That’s why we have these big trade deficits with both those countries.

So that’s the challenge in the Doha negotiations. Now bilaterally, we’ve absolutely worked to try and bring those tasty mangoes here into the U.S. and we work on a number of other issues. The Indian Government has also been committed to try and remove some of the unjustified barriers on our exports, so that’s an ongoing challenge and my hope is that we’ll square those all away as soon as we can.

MODERATOR: Yes, sir.

QUESTION: Chris Rugaber, BNA. Just quickly, can you say what has changed in the – either in the overall talks or in the U.S. position after the G-8 meeting? Are there additional flexibilities you can talk about or just any other change in the dynamics after that meeting? Thank you.

MR. HAFEMEISTER: Sure. Well, I’ll tell you, Ambassador Schwab is flying back right now and so I'm going to, obviously, talk with her. And we're having some important consultations this week up on our Hill with the Congress to talk about where we're headed. But I think -- you know, from the U.S. perspective, the flexibility has been that we're ready to go to zero. The question is, when are we going to see meaningful proposals on the table so we can calibrate the level of ambition for these talks, recognizing we've all committed to a big outcome. So we can't go to a very small outcome. It's got to big and it's got to be balanced so we can work in that context. And on the details, we're going to save that for the negotiating table.

QUESTION: Yeah, early on you said that the European Union is being sincere negotiators and the United States is working closely with them. Are you suggesting they're going to make a better offer on the market access or what's the basis for this judgment you made?

MR. HAFEMEISTER: Well, you know, we've been at the table with these guys for a long time and -- you know, you can certainly see when people are making serious efforts to address your concerns and to push their system as far as it goes in terms of opening markets, you know, and I think that at the core of a number of the EU delegation is committed to a real open result in this negotiation. So I think we're taking them on good faith on that. The challenge here is to translate that into the specific proposals on the table that we can work with, so I remain optimistic that with that good faith, we'll be able to get a deal done.

MODERATOR: Any other questions?

(No response.)

MODERATOR: Thank you very much for coming.

MR. HAFEMEISTER: All right. Good to see you all.