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Ministerial Clouds Prospects for Doha Agreement' which was released on 
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Report to the Chairman, Committee on Ways and Means, House of 

April 2006: 

World Trade Organization: 

Limited Progress at Hong Kong Ministerial Clouds Prospects for Doha 


GAO Highlights: 

Highlights of GAO-06-596, a report to the Chairman, House Committee on 
Ways and Means. 

Why GAO Did This Study: 

U.S. officials often call the World Trade Organization’s (WTO) Doha 
Development Agenda or “Round” of global trade talks, launched in Doha, 
Qatar, in November 2001, a “once in a generation opportunity” to expand 
trade. President Bush has identified their success as his 
administration’s top trade priority. Due to various U.S. notification 
and consultation requirements, concluding the negotiations in 2006 is 
essential for a Doha agreement to qualify for congressional 
consideration under U.S. Trade Promotion Authority (TPA), which expires 
July 1, 2007. A ministerial meeting among the WTO’s 149 members was 
held on December 13-18, 2005, in Hong Kong, China, to make decisions 
needed to advance the talks. 

Given the importance of the WTO Doha Round to the United States, GAO 
was asked to provide an update on the status of the negotiations. In 
this report, the latest in a series on the negotiations, we (1) provide 
the status of the Doha negotiations on the eve of the Hong Kong 
ministerial, (2) review the outcome of the Hong Kong ministerial, and 
(3) discuss the prospects for concluding the Doha Round before TPA 
expires in July 2007. 

What GAO Found: 

WTO members made little progress in 2005 toward their goal of 
completing the steps needed to set the stage for finalizing the Doha 
Round of global trade talks. The key milestones for progress through 
July were missed. Despite new proposals on agricultural subsidy and 
tariff cuts submitted in October 2005, it was clear by November that 
key players were too far apart to achieve the major decisions planned 
for the December ministerial. To avoid a failure, members agreed to 
lower expectations for the meeting. 

The Hong Kong ministerial resulted in modest agreements on a narrow 
range of agricultural and development issues. Ministers made little 
progress on the broader Doha negotiating agenda, including two other 
U.S. priorities—services and nonagricultural market access. 
Nevertheless, WTO members renewed their resolve to successfully 
conclude the Doha Round by the end of 2006 and set new interim 
deadlines under a compressed schedule to meet that goal. Critical 
decisions that will determine each member’s cuts in tariffs and other 
barriers were due April 30 and July 31, 2006, but the April 30 deadline 
will be missed. 

WTO members continue to profess commitment to accomplish the ambitious 
agenda set at Doha. However, with nearly all tough decisions put off, 
the tension between members’ original high ambitions and the U.S. TPA 
timeframe has become acute. Since the Hong Kong ministerial, members 
have taken concrete steps to help build consensus. Yet, the ongoing 
impasse on core areas such as agriculture, and the difficult political 
decisions needed to resolve it, cause many experts to be skeptical. As 
illustrated below, numerous time-consuming steps still must be 
completed in the little more than a year left before TPA expires. 
While holding out hope for an agreement that lives up to Doha’s 
promise, experts say outright collapse, substantial delay, or modest 
results are all possible outcomes. 

Figure: Key Selected Deadlines in 2006 for Doha Negotiations. 

[See PDF for Image] 

Source: GAO, based on WTO documents. 

[End of Figure] 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Loren Yager at (202) 512-
4347 or 

[End of Section] 



Results in Brief: 


Limited Progress Since Mid-2004 Causes WTO Members to Recalibrate Goals 
for Hong Kong: 

Hong Kong Resulted in Several Limited New Commitments, but Postponed 
Key Decisions on Cutting Tariffs and Other Barriers: 

Several Factors Make Meeting 2006 Deadlines Challenging, and Have 
Raised Doubts about the Likelihood of an Ambitious Outcome within the 
TPA Time Frame: 

Concluding Observations: 

Agency Comments and Our Evaluation: 


Appendix I: Objectives, Scope, and Methodology: 

Appendix II: GAO Contacts and Staff Acknowledgments: 


Table 1: Major Negotiating Groups in the World Trade Organization: 

Table 2: Agriculture Market Access Proposals Revealed Wide Differences 
among Key Players in Expectations for Developed Countries: 

Table 3: Principal U.S. Government Activities to Conclude Doha Round 


Figure 1: Agenda for Hong Kong Focused on Only 2 of the 16 Doha 
Negotiating Areas: 

Figure 2: Key Milestones and Deadlines Missed in the WTO Negotiations 
in 2005: 

Figure 3: Key Selected Deadlines in 2006 for the Doha Negotiations: 


ACP: African, Caribbean, and Pacific Group of States: 

C-4: Cotton Four countries: 

EU: European Union: 

GATT: General Agreement on Tariffs and Trade: 

G-4: Group of 4: 

G-5: Group of 5: 

G-6: Group of 6: 

G-10: Group of 10: 

G-20: Group of 20: 

G-90: Group of 90: 

ITC: International Trade Commission: 

LDC: Least developed countries: 

NAMA: Nonagricultural market access: 

TPA: Trade Promotion Authority: 

USTR: Office of the United States Trade Representative: 

WTO: World Trade Organization: 

April 26, 2006: 

The Honorable William M. Thomas: 
Committee on Ways and Means: 
House of Representatives: 

Trade ministers from members of the World Trade Organization (WTO) 
gathered in Hong Kong, China, in December 2005, for a meeting that was 
originally expected to yield agreements considered critical for 
concluding the Doha Round negotiations by the end of 2006.[Footnote 1] 
Launched in November 2001 in Doha, Qatar, these negotiations involve 
149 nations and encompass a far-reaching, ambitious agenda for 
liberalizing trade ranging from reducing tariffs and eliminating 
subsidies, to bolstering economic development in poor countries. 
Because the Doha Round is considered a "package deal"--or single 
undertaking in WTO parlance--simultaneous agreement by all members on 
all issues is required to finalize an agreement. U.S. and WTO officials 
acknowledge that concluding the negotiations in 2006 is essential for a 
Doha agreement to qualify for the streamlined congressional approval 
procedures of the U.S. Trade Promotion Authority (TPA), which expires 
July 1, 2007.[Footnote 2] President Bush has identified the success of 
the Doha Round negotiations as his administration's top trade priority. 

Given the importance of the WTO Doha Round to the United States, you 
asked us to provide an update on the status of these negotiations. In 
this report, the latest in a series,[Footnote 3] we (1) provide the 
status of the Doha negotiations on the eve of the Hong Kong 
ministerial, (2) review the outcome of the Hong Kong ministerial, and 
(3) discuss the prospects for concluding the Doha Round before TPA 
expires in July 2007. 

To address these objectives, we met with, and reviewed documents from a 
range of WTO, U.S., and foreign government officials, as well as 
academic experts and private sector groups (including business 
associations, law firms, and civil society groups) in Washington, D.C; 
Geneva, Switzerland; and Brussels, Belgium. We also attended the sixth 
WTO ministerial conference in Hong Kong, China. To assess the prospects 
for success, we relied on the views of selected participants and 
experts representing a range of institutional perspectives (government, 
academia, "think tanks," nongovernmental organizations, business 
groups, and other trade policy observers), as well as our own analysis. 
We conducted our work from May 2005 through March 2006 in accordance 
with generally accepted government auditing standards. 

Results in Brief: 

Between mid-2004 and the eve of the WTO's Hong Kong ministerial 
conference in December 2005, WTO members made little progress toward 
their goal of making the major decisions in six core areas that would 
be needed to set the stage for final negotiations in 2006: (1) 
agriculture, (2) nonagricultural (or industrial) market access, (3) 
services, (4) trade facilitation (simplification of customs 
procedures), (5) development issues, and (6) WTO rules (including 
antidumping and subsidies). During this period, trade facilitation 
negotiations got off to a good start and some progress on technical 
issues was achieved in most other areas of the negotiations, although 
this generally took longer and proved more contentious than expected. 
Key milestones were missed, including the May 2005 deadline for 
submitting new and revised offers in the services negotiations, which 
was not met by most members. Despite significant proposals on cutting 
agricultural subsidies and tariffs submitted in October 2005, it was 
clear to members by November that the negotiating positions of key 
players were too far apart to achieve major agreements at the December 
ministerial. To avoid a potentially disastrous collapse at Hong Kong, 
the new WTO Director-General steered members toward lowered 
expectations for the meeting. As a result, they shifted the focus to 
narrower initiatives primarily intended to lock in progress to date and 
benefit least-developed country members. 

The Hong Kong ministerial resulted in modest agreements on a narrow 
range of agricultural and development issues, but postponed decisions 
on how much to cut tariffs and other barriers. Notably, WTO members 
conditionally agreed to eliminate agricultural export subsidies by 2013 
and to provide least-developed countries duty-free and quota-free 
access to developed-country markets for at least 97 percent of their 
products. However, little progress was made on other core areas of the 
broader Doha negotiating agenda, including two of the United States' 
priorities--services and nonagricultural market access. Despite its 
modest achievements, the Hong Kong ministerial declaration formally 
committed members to conclude an overall agreement on the Doha Round by 
the end of 2006 and set a series of interim deadlines to meet that 
goal. For example, April 30, 2006, was the new date for establishing 
"modalities"--broad guidance on the extent of each country's reductions 
in tariffs, subsidies, and other trade barriers--for agricultural and 
nonagricultural goods. Members' schedules, reflecting how they propose 
to apply these modalities in their national commitments, are due July 
31, 2006, and will be the basis for the final phase of negotiations. 

WTO members and observers recognize that achieving an agreement within 
the time remaining in 2006 will be challenging, given the limited 
progress to date and the scope and difficulty of the work outstanding. 
Members continue to profess high ambitions, however, and most view 
expiration of TPA on July 1, 2007, as a hard deadline that drives the 
need to conclude negotiations in 2006. Since Hong Kong, some steps 
toward achieving their agreed-upon goals have been taken, such as 
gaining agreement among key members to use simulations of the impact of 
proposed cuts in subsidies and tariffs as a basis for discussions. 
Nevertheless, factors such as the failure to meet most prior deadlines, 
the ongoing impasse on core areas such as agriculture, and the 
difficult political decisions needed to resolve them, cause experts to 
be skeptical. In particular, the trade-offs required to finalize the 
agreement will need to be made when political events such as elections 
are taking place, which will constrain key countries. Moreover, even if 
a breakthrough is achieved, many difficult and time-consuming steps 
must be completed before entering an agreement. Thus, the ability to 
meet the 2006 deadlines with an ambitious outcome--one that would 
result in a strengthened and measurably freer global trade environment-
-is in doubt. While holding out some hope for a satisfactory outcome, 
several experts in fact warn that outright collapse, substantial delay, 
or a minimal outcome are possible. 

We solicited comments on a draft of this report from the Office of the 
U.S. Trade Representative (USTR), and the Departments of Agriculture, 
Commerce, and State; these agencies generally agreed with our 
substantive findings and offered a few minor technical corrections, 
which we incorporated. 


The WTO was established as a result of the Uruguay "Round" on January 
1, 1995, as the successor to the General Agreement on Tariffs and Trade 
(GATT). Based in Geneva, Switzerland, the WTO administers agreed-upon 
rules for international trade, provides a mechanism for settling 
disputes, and serves as a forum for conducting trade negotiations. WTO 
membership has increased since 1995, and there are currently 149 WTO 
member nations and customs territories that are diverse in terms of 
economic development; these members negotiate individually or as a 
member of a group of countries (see table 1 for some of the major 
country groupings). While the WTO has no formal definition of a 
"developing country," the World Bank classifies 105 current WTO 
members--or approximately 72 percent--as developing countries; 32 of 
these members are officially designated as "least-developed countries" 
(LDCs).[Footnote 4] USTR negotiates on behalf of the United States in 
WTO negotiations. 

Table 1: Major Negotiating Groups in the World Trade Organization: 

Country group: Groups of 4, 5, and 6; (G-4, G-5, G-6); 
Countries: United States, EU, Brazil, and India (plus Australia in G-5; 
Japan in G-6); 
Interest: The G-5 helped negotiate the July 2004 framework agreement on 
agriculture and variants of this group are now a key negotiating group 
for the Doha Round. 

Country group: European Union (EU); (currently has 25 members); 
Countries: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, 
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, 
Lithuania, Luxembourg, Malta, Netherlands, Portugal, Poland, Slovak 
Republic, Slovenia, Spain, Sweden, and; United Kingdom; 
Interest: Political union that negotiates as a group in the Doha Round. 

Country group: Group of 20 (G-20); (currently has 21 members); 
Countries: Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, 
Guatemala, India, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, 
Philippines, South Africa, Tanzania, Thailand, Uruguay, Venezuela, 
Interest: Developing countries united on agriculture negotiations. 

Country group: Group of 10 (G-10); 
Countries: Bulgaria, Iceland, Israel, Japan, Liechtenstein, Mauritius, 
Norway, South Korea, Switzerland, and Chinese Taipei; 
Interest: Net food importers and subsidizers. 

Country group: Group of 90 (G-90); 
Countries: Members of the African Union; the LDCs; and the African, 
Caribbean, and Pacific (ACP) Group[A]; 
Interest: Coalition of the poorest and least-developed countries in the 

Country group: Cotton Four (C-4); 
Countries: Benin, Burkina Faso, Chad, and Mali; 
Interest: West African cotton-producing countries advocating a WTO 
initiative to assist their cotton farmers. 

Source: GAO analysis of WTO documents. 

[A] The African, Caribbean, and Pacific Group of States (ACP) is an 
organization created in 1975. It is composed of African, Caribbean, and 
Pacific states that are signatories to the partnership agreement 
between the ACP and the EU, now officially called the "Cotonou 

[End of table] 

The WTO ministerial conference held in Hong Kong, China, from December 
13-18, 2005, was the sixth since the establishment of the WTO in 1995. 
These ministerial conferences, convened at least every 2 years, bring 
together trade ministers from all WTO members. The outcome of a 
ministerial conference is reflected in a fully agreed-upon ministerial 
declaration. The substance of these declarations guides future work by 
outlining an agenda and deadlines for the WTO until the next 
ministerial conference. Decisions in the WTO are made by consensus--or 
absence of dissent--among all members, rather than by a simple 
majority. Periodic "mini-ministerials," or informal meetings among 
small groups of selected WTO members, are often used to advance 
dialogue on issues. 

At the Hong Kong conference, ministers sought to make progress in the 
ongoing multilateral trade negotiations, officially known as the Doha 
Development Agenda. Formally launched at the fourth WTO ministerial 
conference in Doha, Qatar, in November 2001, the negotiations are the 
latest in a series of global trade talks (negotiating rounds) dating 
back nearly six decades.[Footnote 5] They are intended to reduce trade 
barriers and facilitate the free flow of commerce throughout the world. 
A major objective of the Doha negotiations is development--that is, to 
help developing countries realize the economic benefits of trade and 
enable them to take advantage of trading opportunities. 

The Doha ministerial declaration established a work program with a 
number of negotiating areas and set the goal for concluding the 
negotiations by January 1, 2005.[Footnote 6] Of the 16 current 
negotiating areas, market access in agriculture, services, and 
nonagricultural (industrial) products (NAMA) are the three U.S. 
priorities. WTO members set specific goals for each area and set up 
various negotiating groups to achieve them. In agriculture, the Doha 
work program commits countries to lower barriers in world agricultural 
markets and sets forth three pillars for agricultural trade reform: 
export competition (subsidies), domestic support (subsidies and other 
assistance to farmers), and market access (tariffs). Agriculture 
remains the top issue for many participants and has been described as 
the lynchpin of the Doha negotiations. Lack of progress in liberalizing 
agriculture is partly due to the fact that it was first added to the 
trading system in the last (Uruguay) round, which left high subsidies 
and tariff barriers in place. Doha negotiations in services aim to 
ensure increased transparency and predictability of rules and 
regulations governing services and to promote liberalization of service 
markets. The goal of the NAMA negotiations is to reduce or eliminate 
tariffs and non-tariff barriers. The agriculture and NAMA negotiations 
involve first reaching agreement on "modalities"--the formulas, 
thresholds, dates, and other numerical benchmarks that members will 
commit to meet when they revise their WTO schedules of subsidy and 
tariff commitments. This guidance then is translated into national 
tariff schedules specifying what tariff will be charged on each 
product. Members are then "bound" not to exceed these. 

Concluding the round will require simultaneous agreement on all issues, 
because WTO members have agreed it will be a package deal (or "single 
undertaking" in WTO parlance). As a result, trade-offs are expected to 
occur among issues to accomplish an overall balance satisfactory to all 
members. When it is final, the trade agreement will impose legally 
binding international obligations on WTO members governing the trade 
barriers they are allowed to maintain (such as tariffs) and the trade 
rules by which they must abide. Failure to comply is subject to binding 
dispute settlement and possible trade retaliation. 

To date, the negotiations have progressed fitfully. Our January 2004 
report explained the factors that caused the September 2003 Cancún 
ministerial to collapse in acrimony and confusion, including sharp 
North-South (developed-developing country) divisions on key issues. For 
example, developing countries rejected the proposed U.S. and EU 
reductions in agricultural subsidies as inadequate, but the United 
States and the EU felt developing countries were not contributing to 
reform by agreeing to open their markets. Moreover, many developing 
countries remained dissatisfied with proposed responses to their 
demands for special treatment and for relief from difficulties they 
were still experiencing in implementing existing WTO obligations. In 
2004, the Doha Round negotiations started again on an uncertain note; 
however, political leadership, intensified dialogue, and a series of 
conciliatory gestures resulted in WTO members adopting an agreement on 
key issues in the negotiations known as the "July framework agreement," 
which is credited with achieving sufficient progress on agriculture to 
put the global trade talks back on track and reopen discussion of other 
issues. The main features of the framework agreement were to establish 
key principles for each aspect of global agricultural trade reform; 
identify the key elements of negotiations to improve nonagricultural 
market access; stress the importance of liberalizing access to services 
markets and addressing outstanding development concerns; and launch 
negotiations to clarify and improve WTO rules on customs procedures 
(trade facilitation).[Footnote 7] WTO members also agreed to hold their 
next ministerial in Hong Kong in December 2005. However, our last 
report[Footnote 8] noted that, despite the improved negotiating 
atmosphere, the negotiations were effectively 2 years behind schedule 
and considerable work remained on the numerous issues that would 
constitute a final agreement. Pursuant to the Trade Act of 2002, in 
March 2005, the president requested a 2-year extension of TPA, and the 
extension went into effect. 

Limited Progress Since Mid-2004 Causes WTO Members to Recalibrate Goals 
for Hong Kong: 

Despite the impetus provided by the framework agreement, the Doha 
negotiations moved slowly throughout 2005. As we reported last year, 
WTO negotiators began 2005 with a resolve to complete the round in 2006 
and set the stage by agreeing to make progress in 6 of the 16 Doha 
negotiating areas by the end of 2005--agriculture, NAMA, services, 
trade facilitation, development issues, and WTO rules. However, limited 
progress was made before the Hong Kong ministerial, as the talks 
stalled in fall 2005 amid stalemate over fundamental issues on 
agriculture and NAMA. To avoid another failed meeting, such as at the 
last ministerial in Cancún, Mexico, expectations for the Hong Kong 
ministerial were lowered. The agenda for the meeting shifted from 
making key decisions on the six core areas to focusing on narrower 
initiatives, particularly in agriculture and development, that could 
help the talks move forward, if only marginally (see fig. 1). 

Figure 1: Agenda for Hong Kong Focused on Only 2 of the 16 Doha 
Negotiating Areas: 

[See PDF for image] 

Source: GAO, based on WTO information. 

[End of figure] 

Some Technical Progress Achieved but Key Milestones Missed: 

In early 2005, at a mini-ministerial meeting in Davos, Switzerland, and 
subsequently at a February meeting among all WTO members, WTO members 
agreed that the goal of the Hong Kong ministerial was to set the stage 
for the final phase of the Doha negotiations, which would enable the 
round to conclude in 2006. To that end, they agreed to seek to finalize 
modalities for both the agriculture and NAMA negotiations at Hong Kong, 
and to make significant progress in four other core areas--services, 
trade facilitation, development issues, and WTO rules (which covers 
subjects such as subsidies, antidumping measures, and regional trade 
agreements). Deliverables in these six areas are critical in 
determining how ambitious the Doha Round will be in terms of cuts in 
tariffs, subsidies, and other barriers to trade, as well as the 
ultimate balance across member interests and issues. 

Despite these ambitious goals, the overall pace of the negotiations was 
slow throughout most of 2005, and even progress on technical issues was 
difficult to achieve. For example, in the agriculture and NAMA talks, 
negotiators were able to agree on a preliminary basis to methodologies 
for converting specific tariffs into ad valorem equivalents (tariffs 
based on a percentage of value), a necessary step before potential 
tariff reductions could be calculated and considered.[Footnote 9] 
However, reaching this agreement for agriculture proved to be 
contentious and occupied the negotiators' time through early May, 
delaying the discussion of more central issues such as how to make 
tariff and subsidy cuts. On many issues, negotiators made incremental 
progress by narrowing the number of options under consideration or 
fleshing out principles or methods without coming to full agreement. On 
NAMA, for example, a list of products to be covered by the negotiations 
was compiled, but there was disagreement about including some items, 
and no agreement on whether the list should be considered definitive or 
just a guideline. 

In 2005, WTO members missed the key milestones they had set to keep the 
talks on schedule for completion at the end of 2006 (see fig. 2). In 
the services negotiations, many WTO members failed to submit offers for 
opening their markets to foreign services-providers by a May 2005 
deadline. Just before the ministerial, the services negotiating group 
chair reported having 69 initial and 30 revised offers, but 23 members 
had not yet submitted any offer.[Footnote 10] In addition, the chair 
described many of the offers as disappointing, because they did not 
provide new market access or bind access at existing levels. In 
development, the negotiating group made little progress toward a July 
2005 deadline to prepare recommendations to improve special and 
differential treatment.[Footnote 11] WTO members also missed an 
informal but important milestone to reach agreement in July 2005 on a 
"first approximation" of the modalities for agriculture, NAMA, and 
other issues, which negotiators had hoped to finalize at the Hong Kong 
ministerial. As deadlines were missed during the spring and summer of 
2005, WTO's then-Director-General warned negotiators that the talks 
were not moving fast enough to reach this goal. In early July, the 
Director-General stated flatly that "these negotiations are in 
trouble," adding that WTO members faced "a crisis of immobility" that 
threatened their ability to deliver decisions at the Hong Kong 

Figure 2: Key Milestones and Deadlines Missed in the WTO Negotiations 
in 2005: 

[See PDF for image] 

Source: GAO, based on WTO, USTR, and other information. 

[End of figure] 

We noted in our last report that U.S. and EU leadership has been 
essential to making progress in the WTO trade negotiations and that 
relations between their newly appointed trade principals could 
influence success at Hong Kong. However, a number of events made the 
leadership transition and U.S.-EU relations more difficult in 2005. A 
gap of several months occurred between the time when then-current U.S. 
Trade Representative Robert Zoellick was nominated Deputy Secretary of 
State in early January 2005 and when his replacement, Rob Portman, was 
confirmed in late April by the Senate as the new Trade Representative. 
At that time, a U.S.-EU aircraft dispute was flaring, and influential 
U.S. congressmen took umbrage at comments by the new EU Trade 
Commissioner, Peter Mandelson, directed at U.S. policies on cotton 
subsidies. In addition, some U.S. negotiators were also occupied with 
finalizing the Dominican Republic-Central America-United States Free 
Trade Agreement and ensuring its approval by Congress, which was 
finally secured on July 28, 2005. 

Countries Still Divided over Toughest Issues in Fall 2005: 

Fundamental divisions among WTO members became very clear in the fall 
of 2005 when members found themselves deadlocked over conflicting 
market access goals. In October, key members and country coalitions put 
forth detailed agriculture proposals that were intended to re-energize 
the negotiations and resolve key issues before the Hong Kong 
ministerial. The United States; the EU; the Group of 20 (G-20) 
coalition of developing countries; and the Group of 10 (G-10)--a 
coalition of primarily developed countries that import most of their 
food--laid out their positions on cutting agricultural subsidies and 
tariffs and what they expected in return from trading 
partners.[Footnote 12] The differences among these parties' positions 
were particularly evident in their approaches to market access (see 
table 2). The U.S. proposal centered on an offer to cut U.S. domestic 
farm subsidies substantially, along with aggressive tariff cuts ranging 
from 55 to 90 percent for all developed countries. However, the offer 
was contingent on higher subsidy cuts and "ambitious" market access 
improvements by other countries, particularly the EU and the G-20. Many 
WTO members received the proposal as a significant effort to unblock 
the negotiation, but some countries were doubtful that the proposed 
subsidy cuts were as substantial as billed. The EU proposed smaller 
agricultural tariff cuts, with more exemptions for protecting 
"sensitive" products from competition from imports. This offer was 
contingent on certain concessions from other members, notably 
substantial market opening in NAMA and services from the more advanced 
developing countries of the G-20, especially Brazil and India. The G-20 
proposal on agricultural market access, submitted earlier in the year, 
was presented as a middle ground, as the suggested tariff cuts for 
developed countries fell between the U.S. and EU proposals.[Footnote 13] 

Table 2: Agriculture Market Access Proposals Revealed Wide Differences 
among Key Players in Expectations for Developed Countries: 

Tariff rate reduction goals; 
U.S.: 55-90%; 
G-20: 45-75%; 
EU[A]: 20-60%; 
G-10[B]: 27-45%. 

Maximum tariff rate (cap); 
U.S.: 75%; 
G-20: 100%; 
EU[A]: 100% (no cap on sensitive products); 
G-10[B]: None. 

Sensitive products, as a percentage of all agricultural products; 
U.S.: 1%; 
G-20: 1%; 
EU[A]: Up to 8%; 
G-10[B]: 15%. 

Sources: U.S., G-20, EU, and G-10 proposals. 

[A] These terms are from the EU's second proposal of Oct. 28, 2005; the 
20% tariff reduction minimum takes into account the "pivot" concept. 

[B] The G-10 proposal included two approaches to tariff reductions-- 
"linear" and "flexible." This table presents the G-10's linear approach 
to facilitate comparison with the other members' proposals that are 
also based on the linear approach. 

[End of table] 

The EU's market access offer became the focus of criticism before the 
ministerial, as neither the United States nor the G-20 considered it 
acceptable. They demanded that the EU cut its tariffs further and 
reduce the number of sensitive products that would be exempted from the 
standard tariff cuts. USTR noted that the EU's proposal would allow for 
tariff cuts of as little as 20 percent on about four-fifths of EU 
tariff lines.[Footnote 14] Also, according to USTR, the EU could 
effectively limit competition from imports, due to the large number of 
sensitive products it had proposed to shield from liberalization (about 
142 tariff lines). Although the EU revised its offer at the end of 
October 2005, it was again quickly rejected as insufficient. 

The EU held the stance in the Doha Round that its chief gains were to 
be found in the industrial and services sectors underpinning its 
economy. Specifically, the EU wanted countries such as India and Brazil 
to offer real improvements in access to their industrial and services 
markets.[Footnote 15] EU members had already agreed to reform the EU's 
domestic support programs and to eliminate export subsidies as part of 
the framework agreement and believed they had gotten little in return. 
In internal consultations in late October, France warned the EU 
negotiating team that it should not overstep its mandate, which in its 
view was strictly tied to existing agricultural subsidy spending and 
the 2003 reform of the EU's Common Agricultural Policy, by making 
concessions in the negotiations that would not be acceptable to EU 
member states. 

The stand-off continued, as Brazil and India refused to make improved 
NAMA or services offers until the EU made a better agricultural market 
access offer. As leaders of the G-20, Brazil and India complained that 
the EU wanted developing countries to accept much lower tariffs in NAMA 
than it was willing to offer in agriculture-an export area where many 
developing countries have a competitive advantage. They insisted that 
developed countries' market access offers in agriculture be 
proportional to the market access demanded of developing countries in 
NAMA and services. However, the EU said its offer was not only final, 
but conditional, and would be withdrawn if demanders persisted in 
seeking "something for nothing"-or in the EU Trade Commissioner's 
words, "real cuts by Europe, paper cuts by others." 

Despite the intense focus on agriculture, negotiations continued on 
industrial goods and services trade, but the knotty conflicts we 
reported last year continued to impede their progress. On NAMA, 
negotiators circled around the problem of what tariff reduction formula 
to use, with signs of potential agreement on a "Swiss" formula that 
would even out tariff levels by cutting higher tariffs more than lower 
ones.[Footnote 16] However, negotiators could not agree on the type of 
Swiss formula to use and the selection of coefficients that would 
determine the reductions for developed and developing countries. In 
addition, the treatment of unbound tariffs[Footnote 17] was not 
settled, and the degree to which developing countries would have the 
flexibility to deviate or exempt products from the formula was 
controversial. On services, negotiators were stalled over proposals to 
alter the bilateral negotiating format, speed the pace of the 
negotiations, and encourage greater participation and better market 
access offers by more countries. Suggestions included the use of 
numerical targets, with members covering a certain percentage of 
service sectors in their offers, and a plurilateral negotiating 
approach whereby groups of countries collectively present "requests" to 
other groups of countries for market access improvements and then the 
recipient countries reply with market access "offers" to the demanding 
countries. However, developing countries criticized these suggestions 
as overly prescriptive, and a constraint on their freedom to opt out of 
services liberalization or selectively liberalize sectors. 

The trade facilitation negotiations made good progress throughout the 
year, as did the negotiations on rules, but remained at the stage of 
exploring proposals versus bridging gaps in positions.[Footnote 18] 
Trade facilitation negotiators put forward a large number of proposals 
for expediting the movement of traded goods, and developing countries 
participated actively. Negotiations on various trade "rules" 
intensified, with the debate focusing on the divide between the 
traditional and new users of trade remedy laws (measures used to 
counter unfairly priced and subsidized imports)-including the United 
States--and non-users that have called for significant change in users' 
antidumping and countervailing duty regimes. Rules negotiators 
conducted in-depth discussions of such proposed changes and narrowed 
the list of issues somewhat, according to U.S. officials. While 
proposals aimed at U.S. practice remain a concern, U.S. officials 
report that proponents had difficulty justifying or gaining consensus 
for their more radical proposals. Rules negotiators also considered 
U.S. proposals to improve transparency and due process in trade remedy 
proceedings and made progress on developing new disciplines on 
subsidies (including fish subsidies) and transparency for regional 
trade agreements.[Footnote 19] 

Goals Lowered for December 2005 Hong Kong Ministerial: 

The flurry of activity in October gave way to the realization in 
November that the gaps between key negotiating positions were still too 
wide for negotiators to reach any major decisions by December, and the 
agenda for Hong Kong was scaled back. New WTO Director-General Pascal 
Lamy, whom members had installed that fall with hopes that his 
energetic style might bring negotiators to decisions more quickly, had 
begun his term by declaring that his goal for Hong Kong was to take the 
Doha negotiations "two thirds of the way" to conclusion. By early 
November 2005, Lamy concluded that members had not bridged their 
differences enough to draft texts with specifics on modalities in the 
core negotiating areas and urged members to "recalibrate" their 
expectations for the ministerial. He suggested that members focus on 
what could reasonably be achieved, rather than risk a failure 
reminiscent of previous ministerials in Cancún and Seattle. The text 
for a Hong Kong ministerial declaration should thus try to capture 
progress or any decisions made since the framework agreement and 
provide a range of numbers (or "outer parameters") to indicate how 
other decisions had been clarified, if not narrowed down. Members 
recognized that no one would be served by presenting the ministers with 
an overly full and unresolved agenda. They agreed to focus on what was 
achievable, while stressing they remained committed to an ambitious 
outcome for the round. 

The agenda for Hong Kong quickly changed to reflect these scaled-back 
expectations and focus on several development issues. Lamy called for 
the ministerial to deliver on several narrow measures to benefit the 32 
LDCs that are WTO members. In addition, the EU and certain developing 
countries voiced the view that an "early harvest" on development issues 
was important symbolically. Immediately before the ministerial, the 
Group of 90 (G-90)-a coalition of the African Union; the LDCs; and the 
African, Caribbean, and Pacific Group--issued a statement reminding WTO 
members that the Doha ministerial declaration had placed the needs and 
interests of developing countries at the heart of the Doha Round and 
that they expected concrete benefits from Hong Kong. India and other 
developing-country coalitions made similar statements. The EU Trade 
Commissioner emphasized the importance of making a "down payment" on 
the trade agreement to the poorest countries at Hong Kong. He stated 
that the Doha negotiations were a development round and "not an 
agricultural exporters' round," leading the U.S. Trade Representative 
and key members of Congress to question whether the EU's efforts to 
shift the focus to development were somewhat self-serving. 

The draft declaration text, as transmitted in early December for 
consideration at the ministerial, contained few provisions for new 
agreements to be made at Hong Kong. The provisions included calling on 
ministers to adopt decisions on five LDC proposals and to set new 
deadlines for completing modalities and other aspects of the 
negotiations. Annexes to the draft text on the six core negotiating 
areas represented full agreement by WTO members in only one area-trade 
facilitation. The annexes on the five other core areas simply 
summarized the members' positions at that point in time, and postponed 
key decisions that would be necessary before member-to-member 
bargaining over each nation's schedules of commitments could begin. 

Hong Kong Resulted in Several Limited New Commitments, but Postponed 
Key Decisions on Cutting Tariffs and Other Barriers: 

WTO members arrived in Hong Kong intent on avoiding a stalemate and 
ensuring continued progress in the negotiations. The ministerial 
declaration that was adopted reflects commitment to complete the Doha 
negotiations in 2006 and agreement on a narrow set of issues. 
Agriculture, of critical concern for many members, continued to occupy 
much of the negotiators' attention at the ministerial. Economic 
development issues also were featured prominently at Hong Kong, with 
nearly round-the-clock negotiations finally yielding several concrete 
steps to alleviate some concerns of the WTO's poorest members. Other 
U.S. priorities, however--notably services and NAMA--made little 
progress at the ministerial. 

Members Formally Commit to Conclude Negotiations by 2006: 

Negotiators at Hong Kong succeeded in avoiding deadlock and meeting--or 
even exceeding--the lowered expectations for the ministerial. Having 
failed to meet many of the important milestones they had set for 
themselves in 2005, and aware of the difficult ground still to be 
bridged, in Hong Kong members reaffirmed their commitment to a 
successful and timely completion of the round. In doing so, they agreed 
to a new deadline for completing the round by the end of 2006 and 
interim deadlines under a compressed schedule by which to reach 
agreement on the difficult issues that had eluded them thus far. For 
example, they set April 30, 2006, as the deadline for WTO members to 
agree on modalities for cutting tariffs and subsidies for agricultural 
and nonagricultural goods. The next key deadline is July 31, 2006, when 
countries will be expected to submit national schedules of commitments 
embodying the modalities for agriculture and NAMA, and to present 
revised offers for liberalizing trade in services. 

Ministers Focused on Export Competition Issues and Cotton, but Made 
Little Progress on Other Aspects of Agricultural Negotiations: 

In Hong Kong, negotiators focused primarily on three agricultural 
issues: elimination of export subsidies, in-kind food aid, and the 
demands of a group of African countries on cotton. However, they did 
not address the underlying differences on agricultural market access 
and made little progress on other areas in the agriculture negotiations. 

First and most significantly, members agreed to eliminate all forms of 
agricultural export subsidies on a parallel basis by 2013. Reaching 
consensus on this deadline proved to be difficult, however. The EU, the 
largest user of agricultural export subsidies, insisted on progress in 
developing parallel disciplines on export credit programs, state 
trading enterprises, and other aspects of export competition before 
agreeing on a deadline to end export subsidies. On the other hand, the 
G-20 and other major agricultural exporters, including the United 
States, wanted a 2010 deadline for abolishing agricultural export 
subsidies before turning to other export competition issues. Heated 
debate on an export subsidies deadline continued throughout the 
ministerial, with Brazil reportedly threatening to pull out of the 
talks at one point. The compromise adopted involved a commitment to 
eliminate a substantial part of the export subsidies in phases by the 
end of 2010 if an agreement enters into force in January 2008. 

Second, negotiators devoted considerable time to discussing whether in- 
kind food aid distorts international commodities markets, but they 
failed to reach consensus on this issue. The EU maintains that in-kind 
food aid is trade-distorting and represents a form of export subsidy. 
At Hong Kong, EU negotiators sought a commitment from other members to 
phase out in-kind food aid and to move toward an international system 
of cash-only assistance that would allow countries in need to purchase 
food from the most convenient and commercially viable sources. The 
United States, however, as the main provider of in-kind food aid, 
resisted this move, arguing that in-kind food is often critical in 
emergencies such as famines and natural disasters. The ministerial 
declaration deferred setting disciplines on food aid until April 30, 
2006, in conjunction with the adoption of overall modalities for 
agriculture. The ministers did agree to certain principles, including a 
guarantee that such disciplines would include a mechanism, called a 
"safe box," to ensure the availability of food for needy populations in 
emergency situations. 

Third, negotiators in Hong Kong also addressed the demands raised by a 
group of four African countries,[Footnote 20] known collectively as the 
Cotton Four (C-4). Since the Cancún ministerial, the C-4 countries have 
sought to bring attention to the plight of African farmers, who face 
falling international prices for cotton and diminishing opportunities 
in overseas markets. At Hong Kong, the C-4 countries, supported by 
others, obtained a commitment by developed countries to eliminate all 
forms of export subsidies for cotton in 2006. This provision, aimed 
primarily at the United States, coincides with existing U.S. plans to 
eliminate cotton export subsidies by that time.[Footnote 21] The C-4 
also obtained a commitment from developed countries to provide duty- 
free, quota-free access for cotton exports from least-developed 
countries when the agreements resulting from the Doha negotiations are 
implemented. Moreover, the C-4 secured a new commitment that the 
overall Doha agreement on agriculture would entail deeper and faster 
cuts in domestic cotton subsidies relative to cuts in domestic support 
for agricultural commodities in general. 

The Hong Kong ministerial declaration reflects more limited progress on 
several other agricultural issues. On the domestic support pillar, the 
declaration contained a new commitment to ensure that the total of all 
trade-distorting domestic support to farmers must be reduced, possibly 
involving cuts beyond those agreed to for specific categories of farm 
payments--known as "boxes" in WTO parlance. The declaration also 
adopted a framework with three levels or "bands" for reducing domestic 
farm subsidies, which were based on the amount of financial support 
provided by members. The United States would fall in the middle of 
these bands, along with Japan, while the EU would be in the top band, 
and other countries that provided domestic support to farmers would be 
in the lowest band. Members in the higher bands would be expected to 
make deeper cuts. Similarly, in the market access pillar, the 
declaration reflects convergence on an arrangement calling for four 
bands for tariff reductions, with higher cuts for higher tariffs. 
Finally, the Hong Kong declaration noted that developing countries will 
be granted additional flexibility to protect their domestic 
agricultural production by self-designating special products and having 
access to a volume-and price-based special safeguard mechanism to 
protect against import surges. 

Several Proposals on Development Issues Were also Adopted at Hong Kong: 

The Hong Kong ministerial conference also devoted substantial attention 
to certain development issues. The prominence of these issues may have 
contributed to a public show of unity among some 110 developing 
countries at Hong Kong. Nevertheless, a number of developing-country 
officials expressed concerns about their different needs and priorities 
at the ministerial, and in private meetings in the weeks just before 
the conference.[Footnote 22] 

Formal adoption of five proposals made by LDCs was among the most 
significant agreements related to development at the ministerial. Among 
these proposals was a controversial initiative to secure duty-free, 
quota-free access to developed countries' markets. LDCs, supported by 
the EU, had sought complete duty-free, quota-free access for all of 
their products. However, the United States opposed this initiative for 
various reasons, including the fact that, as proposed, the initiative 
exceeded the current U.S. statutory authority, which sets conditions on 
preferential market access to protect U.S. commercial interests and to 
advance certain U.S. policy goals. U.S. Trade Representative Portman 
also indicated that numerous developing countries that do not qualify 
for LDC status had raised concerns about being disadvantaged in the 
U.S. market. In the end, the compromise called for duty-free and quota- 
free access for at least 97 percent of tariff lines of developed 
countries' imports from LDCs, and for steps to be taken to achieve 
complete coverage thereafter.[Footnote 23] The declaration also urged 
developing countries to take on the same commitment to LDCs if they 
were able. 

Moreover, following up on 2005 work,[Footnote 24] the declaration 
invited the creation of a WTO task force to recommend how "aid for 
trade" can contribute to Doha development goals by helping developing 
countries take advantage of new trade opportunities. The declaration 
also called for members to increase their financial commitments for 
technical assistance and capacity building to help developing countries 
participate in trade negotiations and implement the WTO agreements. At 
Hong Kong, the United States and others made new commitments outside 
the WTO declaration. Notably, the United States pledged it would double 
its "aid for trade" to developing countries to $2.7 billion a year by 
2010; the EU announced it would raise its commitment to 2 billion euros 
per year by 2010; Japan offered to provide $10 billion from 2006 
through 2008. 

Little Progress Made in Other Important Areas: 

Little progress was made in two other areas of the Doha negotiations 
critical to U.S. interests--NAMA and services. 

In NAMA, negotiators decided to: 

* postpone reaching agreement on modalities until April 30, 2006; 

* call for comparable levels of ambition[Footnote 25] in market access 
for agriculture and NAMA; and: 

* reaffirm the goal of reducing or eliminating tariffs in various ways, 
notably by adopting a Swiss formula approach that cuts high tariffs 
more than lower tariffs to achieve these reductions. 

However, negotiators did not agree on specific numbers (coefficients) 
for the Swiss formula, which would determine the depth of cuts and 
final tariff ceilings for members. The range of cuts proposed by 
members prior to Hong Kong is wide. Moreover, they left unresolved the 
controversy over how much flexibility developing countries will retain 
to deviate or exempt products completely from the formula. 

In services, members agreed to: 

* accelerate negotiations by adopting a plurilateral approach, whereby 
groups of countries jointly present offers to other groups; and: 

* clarify that participation in plurilateral negotiations would be 
voluntary, as members would be able to decide whether or not to respond 
to the requests presented to them. 

The Hong Kong declaration addressed numerous other issues, ranging from 
trade facilitation to rules, but they received minimal attention at the 
conference. On trade facilitation, for example, the declaration 
categorized previous proposals and endorsed drafting a text of new 
commitments. On rules, WTO members reaffirmed their commitment to 
substantial results, set several new goals, and authorized the chair of 
the Committee on Rules to produce a draft text embodying proposed 
changes to existing WTO agreements on antidumping and subsidies to 
serve as the basis for final negotiations. 

Several Factors Make Meeting 2006 Deadlines Challenging, and Have 
Raised Doubts about the Likelihood of an Ambitious Outcome within the 
TPA Time Frame: 

WTO members and observers recognize that achieving a balanced and 
ambitious outcome for global trade talks within the TPA time frame will 
be challenging, and the window of opportunity is quickly closing. 
Efforts to make progress are under way. However, a mix of motivating 
and constraining factors creates tension between the feasibility of 
meeting the 2006 deadlines and members' ambition for a far-reaching 
agreement. Motivating factors include a desire to reap the economic 
benefits that some experts forecast would result from further trade 
liberalization and the fact that the outlines of a "grand bargain"--or 
key trade-offs involved in any deal--are becoming clearer. On the other 
hand, factors constraining progress include the difficulty of breaking 
the ongoing impasse over agriculture, political constraints in key WTO 
member states, and the significant amount of work to be done in the 
time remaining. Some officials maintain that success remains possible, 
but emphasize that members need a greater sense of urgency and the 
political will to cut trade barriers from current levels. Other 
officials and many experts are skeptical that success is possible 
within the TPA timeframe. In the event that an ambitious agreement 
cannot be reached within the TPA timeframe, members may be forced to 
consider extending the talks or concluding them with more modest 

Expiration of TPA Is Seen as a Hard Deadline: 

Generally seen by the United States and other WTO members as a hard 
deadline, the expiration of TPA on July 1, 2007, is a motivating factor 
to concluding the negotiations. Failure to meet that deadline would 
risk expiration of TPA and make U.S. approval of an agreement more 
difficult. The Doha Round agreement would be eligible for approval 
under TPA, provided it was signed by the president before July 1, 2007, 
when the authority lapses.[Footnote 26] Continuing negotiations without 
TPA is possible but would jeopardize the president's ability to present 
a final Doha agreement to Congress for an "up or down" vote within a 
fixed period of time. Congress would then be in a position to avoid 
acting on the legislation or to demand that certain parts of the 
agreement be renegotiated. According to USTR, the WTO agreement would 
need to reach Congress by the spring of 2007 to meet the TPA deadline. 
As discussed later, renewing TPA is not presently contemplated. (When 
TPA was renewed in 2002, after an 8-year lapse, the legislation passed 
the House of Representatives by only three votes.) 

Most Members Continue to Profess High Ambition and Work Has Resumed in 

Most WTO members maintain that they are committed to the goal of 
achieving an ambitious Doha agreement. The concept of ambition refers 
to the scope and level of trade liberalization to which WTO members are 
willing to commit. A high level of ambition, for example, would result 
in a comprehensive agreement in which members commit to significant 
reductions in tariffs, subsidies, and other trade barriers across most, 
if not all, core issues under negotiation. Such a robust agreement 
should result in a strengthened and measurably freer global trade 
environment and added impetus for economic growth and development. An 
outcome with a low level of ambition, on the other hand, would result 
in little actual trade liberalization and create few new opportunities 
for growth. 

WTO members and the Director-General continue to work on ways to 
facilitate the successful conclusion of the negotiations. Since the 
talks resumed in late January 2006, negotiators have been engaged in a 
flurry of activities designed to speed up the process and find 
practical ways to narrow their differences. These include holding a 
series of mini-ministerials among small groups of WTO members and 
intensified bilateral consultations, setting more interim deadlines, 
developing questionnaires and reference papers to advance dialogue, and 
conducting simulations on the effects of tariff cuts under various 
scenarios. In February, Director-General Lamy indicated that these 
activities represented a needed shift from general principles to 
discussion of concrete numbers and text, and were resulting in a 
heightened awareness of the need for movement by all players, in 
concert, toward a middle ground. At that time, he stated that he had no 
indication that agreeing on modalities would not be possible by April 
30, 2006. Shortly thereafter, U.S. Trade Representative Portman 
reported that the United States and the EU were making progress in 
narrowing some differences on agriculture. In addition, the first 
deadline since the Hong Kong ministerial was successfully met, as 
members submitted plurilateral requests in the services negotiations by 
the agreed-to deadline of February 28, 2006. Over 14 requests for 
market access in sectors such as financial and express delivery 
services were submitted, with the United States participating in 10; 
more are expected. 

Members Further Motivated by Risks of Forfeiting Potential Economic 

Also motivating the negotiations is the risk of foregoing the expected 
benefits from a successful Doha agreement. The economic benefits from 
trade liberalization occurring as a result of the Doha Round could be 
significant. The Organization for Economic Cooperation and Development 
and trade experts in general agree that only a comprehensive 
multilateral process of negotiation, in which political and economic 
trade-offs are maximized, can realize all the benefits of market 
opening and rules strengthening. Agricultural reform in particular has 
largely been kept out of regional agreements and would need to involve 
the present WTO protagonists to be meaningful. Some estimates, as 
reported in a Congressional Research Service report,[Footnote 27] 
indicate that economic gains could be as high as $574 billion globally 
and $144 billion in the United States.[Footnote 28] Other estimates are 
more modest. For example, a 2005 World Bank study projects global gains 
ranging from $84 billion to $287 billion annually by the year 
2015,[Footnote 29] while a Carnegie Endowment study predicts income 
gains of $40 to $60 billion from what it deems plausible outcomes of 
the Doha Round.[Footnote 30] Although this represents a small share of 
global and U.S. income, some economists and development advocates argue 
that global trade liberalization--particularly of agricultural products 
and other products of interest to developing countries--could still 
play a role in promoting economic opportunity and alleviating poverty. 
For example, the additional income would equal or surpass aid flows to 
developing countries, and leading developing country exporters such as 
Brazil, India, China, Thailand, and Argentina would stand to capture 
sizeable gains. Nevertheless, such projected overall gains can mask 
important differences, and several authoritative studies suggest that 
some groups and nations face potential losses and near-term adjustment 
costs that merit particular consideration in the negotiations. 

Clearer Outlines of a Grand Bargain Enable Concerted Effort: 

Another factor that could facilitate reaching agreement in the 
negotiations relates to the outlines of a "grand bargain" (the 
necessary trade-offs, or benefits and concessions, among the players) 
that, according to some observers, are becoming more apparent. 
According to WTO Director-General Lamy, each country or group now knows 
what it needs to do. The United States, for example, is expected to 
make further reductions to its domestic agricultural subsidies and 
clarify how it will handle countercyclical payments to compensate 
farmers for low commodity prices,[Footnote 31] and the EU is expected 
to reduce its domestic agricultural subsidies and cut agricultural 
tariffs. In return, large developing countries such as Brazil, India, 
and China are expected to lower barriers to agriculture, industrial 
goods, and services sufficiently to create new market opportunities. In 
general, other developing countries would be asked to liberalize as 
their capacity allows and would benefit from special treatment and 
trade capacity building assistance. The clarity of the trade-offs 
necessary for a deal--although requiring difficult reforms--could 
result in a concerted effort among key nations to bridge their 
differences and address areas of importance to their trading partners. 

Impasse on Agriculture Continues to Constrain Progress: 

Despite indications of an outline for a "grand bargain," the 
negotiations to date have centered on agriculture and remain deadlocked 
on this issue. In mid-February, and again in late March, U.S. Trade 
Representative Portman remarked that the negotiations have largely lost 
the momentum generated by the United States' October 2005 proposal on 
agriculture. According to WTO Director-General Lamy, the United States, 
the G-20, and the Cairns Group regard the EU's market access offer as 
inadequate. Since Hong Kong, the EU has held firmly to its position 
that its October 2005 offer is serious and that others must first make 
concrete and commercially meaningful proposals in areas of interest to 
the EU before it would even contemplate improvements in its offer. 
According to the EU, these would restore needed "balance" among the key 
players' market access interests. However, it remains unclear whether 
the European Commission has the flexibility to improve its October 
offer.[Footnote 32] In fact, a March 2006 memo to the European 
Commission signed by 13 of its 25 member nations stated that the EU's 
October 2005 offer "exhausted and may have exceeded" all the room for 
maneuver they had on domestic support and market access, and that even 
improved offers on NAMA and services would not justify an improvement. 
The United States also faces pressure from many WTO members to improve 
and clarify its agricultural offer, particularly on domestic support. 
Brazil and India, negotiating on behalf of the G-20, maintain that 
until there is more movement on agriculture, they will not negotiate 
reciprocal concessions on the other core issues--namely NAMA and 
services. They also insist that any cuts in NAMA and services must be 
proportional to those by developed countries on agriculture and that, 
in general, developed countries should cut their tariffs more than 
developing countries. As a result, they argue, developed-country 
demands for across-the-board cuts that harmonize tariff levels across 
countries and bring developing-country tariffs below presently applied 
rates are excessive. A group of 11 developing countries that includes 
Brazil and India recently stressed that they need flexibility to shield 
products from liberalization so that they can pursue industrial 
policies and manage structural adjustment. A March mini-ministerial 
among six key players--the EU, the United States, Japan, Australia, 
Brazil, and India--failed to yield breakthroughs. Rather than moving in 
concert, as they had pledged in January, players signaled little or no 
flexibility, according to reports. Since the meeting, U.S. Trade 
Representative Portman and Secretary of Agriculture Mike Johanns have 
said publicly they are increasingly doubtful that sufficient "political 
will" exists to conclude a deal in 2006. 

"Political Will" to Break Deadlock Still Absent and Timing for Making 
Hard Political Choices Is Not Propitious: 

Breaking the impasse over agriculture remains key to reaching agreement 
on the whole of the Doha agenda. However, the political will to 
liberalize and make the quality of offers and concessions necessary to 
break the impasse is not yet evident. In addition, the political timing 
of elections scheduled for 2006 in several countries, including the 
United States, the EU, and Brazil, could make concessions at this time 
even more difficult. 

In the United States, 2006 is a congressional election year, and 
Congress already seems to be divided on support for further trade 
liberalization. Faced with increasing trade deficits, heightened 
competition from China, and workers' displacement as jobs move 
overseas, the approval of free trade agreements has become a difficult 
proposition. Congressional deliberations on the Dominican Republic- 
Central America Free Trade Agreement in 2005 were extremely 
contentious, and it passed Congress by only two votes. U.S. Trade 
Representative Portman has attempted to rebuild bipartisan consensus on 
U.S. trade policy. However, some leaders in Congress have publicly 
stated that unless the United States gains significant market access on 
agriculture, NAMA, and services--particularly in the large developed 
and developing nations that U.S. business groups have identified as 
liberalization priorities--they will not agree to a deal. 

Timing is sensitive for other reasons as well. For example, most 
provisions of the present U.S. farm bill expire in September 2007, and 
Congress will begin work on the legislation to reauthorize U.S. farm 
programs in 2006. Congressional leaders want to take into account the 
framework likely to emerge from the WTO negotiations when drafting a 
bill, in part to avoid exposing farmers to the uncertainty associated 
with WTO challenges to U.S. programs. However, some are skeptical that 
a WTO agreement will be completed in time and urge the drafting of 
legislation independent of WTO negotiations. Other congressional 
members and some farm organizations advocate the extension of the 
current farm bill until the outcome of the Doha negotiations is clear. 
In the meantime, certain members of Congress have urged the 
administration not to "tie their hands" in drafting a new farm bill and 
have asked executive branch agencies to coordinate closely with 
congressional committees to ensure that they can work with any result 
being negotiated at the WTO. 

Other key players also face political constraints. The EU's current 
political problems range from member states' rejection of the EU 
constitution to violent protests by disaffected immigrants and youths. 
One expert recently noted that EU budget negotiations in December did 
not deliver an agreement to cut back on the EU's agricultural support 
spending, as some EU members such as the United Kingdom had 
hoped.[Footnote 33] Instead, only agreement to review spending in 2008- 
2009 was achieved. France, in particular, has been adamant in its 
opposition to any further EU concessions on agriculture in the WTO 
negotiations, but it is not alone. EU Commissioner Mandelson has 
recently affirmed that the EU member states are united in insisting 
that all main parties to the talks should be prepared to offer more to 
get more in the talks, while stressing that others need to offer more 
in areas of interest to the EU. Brazil will hold presidential elections 
in the fall of 2006; however, its negotiating strategy is not expected 
to change. In its powerful role as leader of the G-20 and as one of the 
nations with the most to gain from the negotiations, Brazil is likely 
to hold fast to its position that any movement on NAMA and services 
will be proportional to (and dependent on) what it achieves in 
agriculture. India's new government has kept its markets open to 
certain imports, but remains reticent about commitments to liberalize 
its agriculture and industrial markets further; the government's stance 
is attributed to the perceived benefits of retaining "policy space" for 
development, and concerns that its many small domestic producers would 
be unable to withstand heightened competition from China and other 
foreign nations. Several officials stated that they believe China's 
rise as a manufacturing and export power has made many nations wary of 
committing to cut tariffs at the WTO. China, in turn, has not played a 
visible role in pressing for liberalization in the Doha negotiations. 

These political constraints have led some observers and stakeholders to 
propose high-level political intervention to break the impasse. 
Notably, some trade experts and at least two heads of state have 
suggested a "trade summit" at which national leaders from key countries 
such as the EU, the United States, Brazil, and India could meet to make 
the commitments necessary in the core negotiating areas and break the 
impasse. In early March, British Prime Minister Tony Blair and 
Brazilian President Luiz Inacio Lula da Silva issued a public call for 
such a WTO summit. On the one hand, they recognize that this action 
would require commitment to strengthening the world's economy and 
global trading system at a time when protectionist tendencies may be on 
the rise. Yet, they argue that the risks of letting the Doha talks fail 
or languish in uncertainty would be contrary to members' and the 
institution's best interests. U.S. officials offer mixed reactions to 
the idea of a "trade summit" some think a leaders' meeting may be 
desirable if the ministers' efforts fail, and others question its 
usefulness. U.S. Trade Representative Portman, for example, recently 
stated that summits between the leaders of Britain and France within 
the EU, rather than broader international summits, may be more 

Against Looming Deadlines, Many Difficult and Time-Consuming Steps 

Shortly after the Hong Kong ministerial, the Director-General estimated 
that 40 percent of the work necessary for completing the negotiations 
remained; he noted that the most recent 5 percent of the work had taken 
nearly 17 months to complete. However, just over a year remains before 
the president would have to enter into a final WTO agreement to qualify 
for TPA consideration by Congress. Keeping to the deadlines is critical 
if the major issues are to be dealt with and necessary steps completed, 
according to U.S. and WTO officials. However, the track record for 
meeting deadlines in these negotiations is not promising. We noted in 
our last report that the talks were unlikely to conclude before 
December 2006, which would be 2 years after the originally established 
deadline of January 2005. Indeed, most interim deadlines in the 
negotiations have been repeatedly deferred. 

Even if a political breakthrough on agriculture were to be achieved, 
U.S. and WTO officials agree that finalizing each country's schedule of 
WTO commitments on agriculture, NAMA, and services would be time- 
consuming, with little margin for missed deadlines (see fig. 3 for a 
timeline of negotiation deadlines in 2006). First, members must make up 
for lost time after missing the critical deadline of April 30, 2006, 
for agreeing to modalities in agriculture and NAMA. This means they 
must agree on the formulas, thresholds, dates, and other numerical 
benchmarks that members will be committed to meet when they revise 
their current WTO commitments. However, to finalize these commitments, 
a host of technical issues fraught with political and practical 
implications must be addressed. In February 2006, for example, the 
chairman of the negotiating group on agriculture presented a list of 70 
questions that he believed would need to be addressed to complete 
modalities.[Footnote 34] In mid-March, a U.S. official told us that WTO 
members had been focusing on about 15 modalities issues but had not 
come close to compromise on any. In NAMA, meanwhile, the negotiating 
chair identified 14 issues in his March 27 report that still need work 
to finalize modalities--particularly the tariff reduction formula, 
treatment of unbound tariffs, and flexibilities for developing 
countries. The list did not include how to interpret the linkage 
between ambition in agriculture and NAMA established at Hong Kong, 
which has since been the topic of heated debate. 

Figure 3: Key Selected Deadlines in 2006 for the Doha Negotiations: 

[See PDF for image] 

Source: GAO, based on WTO documents. 

[End of figure] 

Second, once modalities are agreed to, the United States and other 
members must take a series of important and time-consuming steps to 
reach a final agreement. For example, members must draft revisions of 
their national tariff schedules to indicate how they intend to meet 
their modalities commitments for each product or tariff line. The draft 
commitment schedules in agriculture and NAMA are to be completed by 
July 31, 2006. A U.S. official told us that only when the draft 
schedules are submitted will other members see which products will be 
liberalized. Then, a process of verifying schedules, finalizing 
sectoral agreements, and bargaining among individual members (known as 
"request-offer") begins. According to U.S. officials, verification is 
critical because the modalities text will allow different 
interpretations of commitments, and only countries' national schedules 
are legally binding. They said that most experienced observers agree 
that this process is vital to achieving intended results and may 
require 6 to 8 months to complete. Even if the current schedule for 
submitting schedules is met, little time would remain in 2006 to do 
this work. 

Third, as indicated in table 3, before and after an agreement is 
finally entered into, the United States must take certain steps to 
comply with TPA. The president must notify and solicit input from 
Congress and ask the International Trade Commission (ITC) for an 
assessment of the agreement's likely impact on the U.S. economy and 
specific industries before signing an agreement. The agreement itself 
must be entered into before July 1, 2007. Once an agreement is entered 
into, the U.S. administration would have to draw up an implementing 
package that would include implementing legislation and a plan, known 
as a statement of administrative action, to carry out the agreement 
under existing law; this is likely to be a laborious effort, according 
to U.S. officials. The implementation package for the Uruguay Round, 
for example, filled hundreds of pages. U.S. officials said the plan 
must specify how existing U.S. programs, regulations, and legislation 
will be adjusted to comply with WTO commitments. The implementing 
package, one official noted, must also contain a series of reports 
(e.g., an analysis of how the agreement serves U.S. commercial 
interests) and a description of how the agreement meets TPA-mandated 
negotiating objectives. 

Table 3: Principal U.S. Government Activities to Conclude Doha Round 

U.S. Government activities: TPA requires USTR to consult closely with 
congressional revenue committees (i.e., the House Ways and Means and 
Senate Finance Committees), the Congressional Oversight Group, and 
other congressional committees with jurisdiction over areas affected by 
the WTO Doha agreement. 
Time frames: Throughout negotiations. 

U.S. Government activities: Negotiate agriculture and NAMA modalities. 
Time frames: January-April 2006. 

U.S. Government activities: Develop national tariff schedules and other 
binding commitments based on modalities for agriculture and NAMA. 
Prepare and submit revised services offers.
Time frames: May- July 2006. 

U.S. Government activities: Verify schedules, finalize sectoral and non-
tariff barrier agreements, and engage in "request-offer" negotiations 
with individual WTO members or groups. 
Time frames: August-December 2006. 

U.S. Government activities: TPA requires that at least 180 days before 
entering into a trade agreement, the president must report to 
congressional revenue committees on the range of proposals being 
negotiated that could require amendments to U.S. trade remedy laws, and 
how the proposals relate to the principal U.S. negotiating objectives 
concerning those laws. 
Time frames: December 31, 2006. 

U.S. Government activities: TPA requires that at least 90 days before 
entering into an agreement, the president must notify Congress of his 
intent to enter into the agreement; 
Time frames: April 1, 2007. 

U.S. Government activities: TPA requires that at least 90 days before 
entering into agreement, the president must provide the ITC with 
details of the agreement "as it exists at that time" and request ITC to 
prepare and present to the president and Congress an assessment of the 
agreement's likely impact on the U.S. economy and specific industry 
sectors. Between the time of the president's request and the ITC's 
submission of the assessment, the president must "keep ITC current with 
respect to details of the agreement." 
Time frames: April 1, 2007. 

U.S. Government activities: TPA requires that no later than 30 days 
after the president notifies Congress of intent to enter into an 
agreement, private sector advisory committees must submit reports on 
the agreement to Congress, the president, and USTR. 
Time frames: May 1, 2007. 

U.S. Government activities: The president must enter into an agreement 
before this date for the agreement to qualify for approval under TPA's 
expedited procedures. 
Time frames: July 1, 2007. 

U.S. Government activities: TPA requires that within 60 days after 
entering into an agreement, the president must submit to Congress a 
description of the changes to existing law he believes would be 
required to bring the United States into compliance with the agreement. 
Time frames: August 31, 2007. 

U.S. Government activities: TPA requires that no later than 90 days 
after the president enters into the agreement, the ITC must submit its 
impact report to the president and Congress. 
Time frames: September 30, 2007. 

U.S. Government activities: The president is required by TPA to submit 
to Congress the final text of the agreement, together with a draft of 
the implementing bill, a statement of administrative action, and 
supporting information. 
Time frames: No date specified, but both houses of Congress must be in 

Source: GAO analysis of WTO milestones and TPA requirements. 

[End of table] 

Fourth, a series of other complex and difficult issues that are crucial 
to some members may need to be resolved before a final WTO agreement is 
possible; however, WTO members have largely postponed dealing with them 
until after the core issues are resolved. This sequential approach-- 
putting off some issues until other issues are decided--puts further 
stress on the time available to conclude an agreement. For example, a 
variety of developing-country concerns and calls for changes to WTO 
rules in areas such as antidumping, trade facilitation (customs 
reform), and services are on the agenda; several of these issues may 
prove intractable. The cross-cutting issue of erosion of preferences 
illustrates the complexities. A number of WTO members are small 
developing countries with economies dependent on one or two commodity 
exports. Currently, some of them rely heavily on the preferential 
tariff treatment they receive for their exports in the EU, the United 
States, and other developed countries. As a result, they regard 
reducing worldwide tariffs as a clear threat to their economic well- 
being. Yet foregoing or delaying the benefits of multilateral 
liberalization so these countries can retain their preferred access is 
not acceptable to many other WTO nations. A seminar to explore options 
for dealing with this issue was held in April 2006. 

Difficulty Foreseen in Meeting Deadline with an Ambitious Outcome Leads 
Experts to Float Other Options: 

WTO member states still say that they remain committed to the goal of 
concluding the Doha Round with robust results by the end of 2006. The 
fact that all members continue to be engaged in efforts to accomplish 
this task is a positive sign; if the political will can be found to 
accommodate each others' ambitions and produce an acceptable "grand 
bargain," then it would be difficult but not impossible to conclude the 
Doha Round successfully within the TPA timeframe. However, the limited 
progress to date and the significant amount of work remaining has 
raised questions about the feasibility of an ambitious outcome by the 
2006 deadline, particularly without more active leadership from the 
highest levels. A January poll of negotiators, policy makers, and 
experts located in Geneva and key country capitals revealed that none 
of the Geneva respondents believe WTO members will meet their goal for 
completing the negotiations in 2006 and only 2 percent of all 
respondents believed they would meet the April 30 modalities 
deadline.[Footnote 35] Moreover, the officials and experts we consulted 
believe that by July 2006, it will be clear whether the goal of 
completing an agreement within the TPA timeframe can be met. 
Backloading modalities on agriculture and NAMA to July would, however, 
"guarantee failure," according to WTO Director-General Lamy. These 
concerns have led numerous experts and observers to suggest that there 
may be different outcomes, including (1) no results in the round, (2) 
negotiations continuing beyond mid-2007 with uncertain results, or (3) 
conclusion of the round with modest results within the TPA 
timeframe.[Footnote 36] Each involves trade-offs. 

1. No results in the round. At Davos in late January, the EU Trade 
Commissioner was quoted as stating that so little was being offered by 
other countries that the EU would stand to lose next to nothing if the 
Doha negotiations failed. (His official remarks since then, however, 
emphasize the EU's commitment to Doha's success, while stressing the 
need for reciprocity.) In February, WTO Director-General Lamy indicated 
that without sufficiently ambitious results, there will be no Doha 
outcome. U.S. Trade Representative Portman has said the United States 
is committed to doing everything it can to bring an agreement together. 
Yet he added that if the Doha negotiations are not concluded by the end 
of 2006, "there is a real danger the Doha Round could drift into a 
long, unpredictable period of stagnation." Some analysts and business 
groups also warn the round has gone off course for lack of political 
will, and accepting various premises for avoiding liberalization; they 
say that a pause or collapse would be better than reaching a "bad 
deal." Yet a complete collapse of the Doha Round is generally seen as 
the least desirable outcome by observers, who believe that members will 
try to avoid total failure because so much is at stake. In addition to 
forfeiting the economic and welfare gains expected from Doha's 
successful conclusion, WTO Director-General Lamy and numerous observers 
warn that failure to achieve agreement may pose risks to the 
credibility of the WTO as an effective or even relevant institution. 
Although the WTO itself--with its extensive set of binding commitments 
and vast coverage in terms of country membership and world trade 
volume--would no doubt continue, experts caution that Doha's failure 
could strain the global trading system. For example, Director-General 
Lamy has expressed the view that developing countries, particularly the 
smallest and weakest, would be among the biggest losers. Others say one 
potential outcome of a failed round could be the proliferation of 
regional and bilateral trade agreements, further weakening the "most 
favored nation" principle--the concept of equal treatment for all 
members that is a pillar of the multilateral trading system. The United 
States has already announced its intention to move vigorously in 2006 
to negotiate new bilateral and regional agreements. In fact, some in 
Congress have encouraged the United States to pursue bilateral free 
trade agreements with countries such as Korea, in part to encourage 
countries that are resisting liberalization at the WTO to take notice. 
Other WTO functions, such as the legitimacy of the dispute settlement 
system, also could be weakened. 

2. Negotiations continue beyond mid-2007 with uncertain results. 
Another possible outcome would be to continue the talks in the hope of 
a more robust outcome at a later date. Experts note that past rounds 
have taken longer than originally planned, and the last round--which 
involved fewer countries--took 7.5 years to complete. However, because 
of the importance of TPA for U.S. ratification, it is unclear whether 
countries would choose to continue negotiations without TPA or let the 
negotiations pause until TPA is extended or renewed. One scenario would 
be to continue the negotiations without TPA, with the hope that TPA is 
eventually renewed, although congressional observers believe that 
extension or renewal of TPA is an uncertain and difficult proposition 
in the near term. A second scenario would be to put the negotiations on 
hold for an indefinite time until TPA is extended or renewed. Some 
experts think that renewal or extension of TPA would probably have a 
better chance if it were linked to an extension of the U.S. farm bill 
or if the Doha negotiations showed potential of concluding with an 
ambitious result. Because of these uncertainties, the difference 
between outright failure of the round and continuing or suspending the 
negotiations may only be clear after some years have passed. 

3. Concluding the round with modest results within TPA's timeframe. 
This scenario would avoid the risks of outright failure and the 
uncertainty inherent in continuing the talks beyond mid-2007. However, 
a modest outcome may not be acceptable to many WTO members as it may 
not include sufficient gains to offset the costs; or--in trade 
negotiators' language--the agreement would not result in a "balanced 
package." EU Trade Commissioner Mandelson stated publicly early in 2006 
that the EU would "reluctantly settle" for a minimalist outcome, but 
WTO Director-General Lamy said a "cheap round is not an option," and 
U.S. Trade Representative Portman quickly rejected "Doha-lite" as 
falling short of success and being difficult to promote domestically. 
In addition, a more modest package would leave countries with more 
ambitious goals little alternative but to pursue other avenues for 
liberalization, such as bilateral agreements. 

Concluding Observations: 

WTO members undertook an ambitious set of goals when they launched the 
Doha Development Agenda more than 4 years ago. Our May 2005 report 
ended by noting that some of the experts we had consulted were 
confident that an ambitious, balanced outcome of the round could be 
attained--if 2005 resulted in sufficient progress. Other experts warned 
that hard decisions were necessary and time was short if an outcome 
living up to Doha's promises were to be achieved. Progress in 2005 
through the Hong Kong ministerial, however, was considerably less than 
WTO members hoped. With nearly all tough decisions put off until 2006, 
the tension between members' original high ambitions and the TPA time 
frame has become acute. This is evident in the increasing divide 
between the official statements of WTO members and the expectations of 
experts on whether the round can be completed before TPA's expiration 
on July 1, 2007. U.S. officials often call the Doha Round a "once in a 
generation opportunity" because the last global trade round took a 
decade to launch and complete and another decade to implement. WTO 
Director-General Lamy recently stressed that WTO members will soon face 
the "moment of truth" for the Doha Round. In part for this reason, some 
observers expressed dismay at the timing of the president's 
announcement that he was nominating U.S. Trade Representative Portman 
to be Director of the Office of Management and Budget. At press time, 
WTO Director-General Lamy had just announced the April 30 modalities 
deadline would be missed, necessitating a shift to continuous text- 
based negotiations in the coming weeks. He urged members to deal coolly 
and constructively with the situation, avoiding recrimination and 
showing fresh determination to accelerate progress. With just over a 
year left to produce an agreement that qualifies for TPA, it remains 
unclear whether the WTO can create an environment where members 
perceive it is in their interest to make the significant changes in 
their current positions, and other decisions, that cumulatively would 
fulfill the vision of the Doha Development Agenda. 

Agency Comments and Our Evaluation: 

We requested comments on a draft of this report from the U.S. Trade 
Representative, the Secretary of Agriculture, the Secretary of 
Commerce, and the Secretary of State, or their designees. The Assistant 
U.S. Trade Representative for WTO and Multilateral Affairs indicated 
general agreement with the report's conclusion that the WTO Doha 
negotiations are not where they should be and provided us with several 
technical comments, which we incorporated as appropriate. The 
Department of Commerce's Deputy Assistant Secretary for Agreements 
Compliance indicated that, overall, the report fairly portrays the 
state of the negotiations and the key problems U.S. negotiators are 
facing; they provided several technical comments on rules negotiations, 
which we incorporated. The Department of Agriculture's Director, 
Multilateral Trade Negotiations Division, International Trade Policy, 
Foreign Agricultural Service, raised a minor point about the state of 
discussions on ad valorem equivalents, which we incorporated. The 
Department of State's Director of Multilateral Trade, Bureau of 
Economic and Business Affairs, did not raise any substantive concerns 
with the report. 

We are sending copies of this report to interested congressional 
committees, the U.S. Trade Representative, the Secretary of 
Agriculture, the Secretary of Commerce, and the Secretary of State. We 
will also make copies available to others upon request. In addition, 
this report will be available at no charge on the GAO Web site at 

If you or your staff have any questions about this report, please 
contact me at (202) 512-4347 or Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this reported are listed in appendix II. 

Signed By: 

Loren Yager: 
Director, International Affairs and Trade: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

In this report, we (1) provide the status of the Doha negotiations on 
the eve of the Hong Kong ministerial, (2) review the outcome of the 
Hong Kong ministerial, and (3) discuss the prospects for concluding the 
Doha Round before U.S. Trade Promotion Authority (TPA) expires in July 

We followed the same overall methodology to complete all three of our 
objectives. We obtained, reviewed, and analyzed documents from a 
variety of sources. From the World Trade Organization (WTO), we 
analyzed the 2001 Doha ministerial declaration; the Doha work program 
decision adopted by the General Council on August 1, 2004, known as the 
"July framework agreement"; the final and earlier versions of the 
December Hong Kong ministerial conference declaration; reports by the 
Director-General and negotiating chairs; and negotiating proposals and 
other documents from WTO member countries. From U.S. government 
agencies and foreign country officials, we obtained background 
information regarding negotiating proposals and positions. We also 
obtained information on day-to-day developments from trade publications. 

To assess the status of the Doha negotiations before Hong Kong, we met 
with a variety of U.S. government agencies, including the Office of the 
U.S. Trade Representative (USTR) and the Departments of Agriculture, 
Commerce, and State, to obtain information on progress on the 
negotiations and on the issue areas and factors affecting the 
negotiations. We also met with representatives from Brazil in 
Washington, D.C. Further, we met with officials from the Mauritius 
Sugar Syndicate, the Food Trade Alliance, the National Farmers Union, 
and the National Cotton Council. In addition, we attended conferences 
and seminars, such as those sponsored by the American Bar Association 
in partnership with the Washington International Trade Association, and 
the Global Business Dialogue. 

With the assistance of USTR and the State Department, in October 2005 
we traveled to WTO headquarters in Geneva and European Union (EU) 
headquarters in Brussels. We met with WTO member country officials at 
each location, including those from the EU, Japan, Mauritius, 
Australia, Benin, Burkina Faso, Chad, Mali, and members of the African, 
Caribbean, and Pacific group. We also met with WTO officials, including 
the industrial (nonagricultural) market access, services, and trade 
facilitation negotiating group chairs. Upon returning from our trip, in 
November 2005, we briefed your staff on the status of the Doha 
negotiations prior to the Hong Kong ministerial conference. 

To assess the outcome of the Hong Kong ministerial conference, we 
attended the Hong Kong conference in December 2005. In Hong Kong, we 
attended USTR congressional briefings and went to press conferences and 
meetings open to country delegates. We also collected the views of 
experts, relying primarily on (1) published articles in reputable 
sources such as Foreign Affairs and Foreign Policy; (2) publications 
put out by a range of organizations following the ministerial and Doha 
talks, such as the Institute for International Economics, the 
International Food and Agricultural Trade Policy Council, the Center 
for Economic Policy Research, the International Centre for Trade and 
Sustainable Development, the Center for Global Development, Bryan Cave, 
the American Society of International Law, Oxfam, and the South Centre, 
as well as officials at the World Bank, the Organization for Economic 
Cooperation and Development, the EU, and the Congressional Research 
Service; and (3) seminars and conferences sponsored by the Department 
of Agriculture and groups such as the Georgetown Law School and the 
American Bar Association, the Cordell Hull Institute, the American 
Enterprise Institute, Women in International Trade, the Washington 
International Trade Association, the Woodrow Wilson Center for 
International Scholars, the Center for Strategic and International 
Studies, and the Carnegie Endowment for International Peace. Though 
many of these seminars and conferences we attended occurred in 
Washington, D.C., collectively they represent a range of perspectives 
from "think tanks," government, academia, business, nongovernmental 
organizations, and former trade officials in the United States and 
elsewhere. Also, we reviewed news media reports, news releases on the 
developments at the ministerial conference, and statements about the 
outcome of the ministerial conference from the WTO, U.S. and foreign 
governments, and other international organizations. 

To assess prospects for success, we relied on the perspectives of 
participants and experts, as well as our own analysis. We defined 
success with an "ambitious outcome" as meeting WTO members' originally 
agreed goals and U.S. objectives as set forth in TPA legislation and 
associated requirements. 

We performed our work from May 2005 through March 2006 in accordance 
with generally accepted government auditing standards. 

[End of section] 

Appendix II: GAO Contacts and Staff Acknowledgments: 

GAO Contact: 

Loren Yager, Director (202) 512-4347 or 

Staff Acknowledgments: 

In addition to the individual named above, Kim Frankena, Assistant 
Director, Ann Baker, Lynn Cothern, Juan Gobel, Ernie Jackson, Venecia 
Rojas Kenah, and Marisela Perez made key contributions to this report. 



[1] The negotiations are formally called the Doha Development Agenda 
but are commonly referred to as the "Doha Round." 

[2] Title XXI of the Trade Promotion Authority (TPA) Act of 2002 (P.L. 
107-210) gives the president the authority to conclude trade deals 
around the world and to submit legislation approving and implementing 
the agreement subject to an up or down vote by Congress using expedited 
procedures within a set time period. To qualify, any agreement 
resulting from the Doha negotiations must be entered into by the 
president before July 1, 2007. Expedited consideration is also 
contingent on the president's compliance with requirements for 
consultations with and notices and reports to Congress before, during, 
and after negotiation of the agreement. In negotiating the Doha Round 
on behalf of the United States, the Office of the United States Trade 
Representative is guided by the goals outlined by TPA, including 
overall and principal objectives and promotion of certain priorities. 

[3] GAO, World Trade Organization: Global Trade Talks Back on Track, 
but Considerable Work Needed to Fulfill Ambitious Objectives, GAO-05- 
538 (Washington, D.C.: May 31, 2005); GAO, World Trade Organization: 
Cancún Ministerial Fails to Move Global Trade Negotiations Forward; 
Next Steps Uncertain, GAO-04-250 (Washington, D.C.: Jan. 15, 2004); 
GAO, World Trade Organization: Early Decisions Are Vital to Progress in 
Ongoing Negotiations, GAO-02-879 (Washington, D.C.: Sept. 4, 2002). 

[4] The WTO recognizes as least-developed countries those countries 
that have been designated as such by the United Nations. Since 1971, 
the United Nations has denominated LDCs "a category of States that are 
deemed highly disadvantaged in their development process. facing more 
than other countries the risk of failing to come out of poverty." In 
its 2003 review of LDCs, the United Nations identified LDCs as 
countries with a 3-year average estimate of gross national income per 
capita under $900, among other criteria. 

[5] The Doha Round is the ninth round of trade liberalizing 
negotiations under the auspices of the GATT/WTO since 1947. For 
additional information on the fourth ministerial conference and the 
Doha Development Agenda, see GAO-02-879. 

[6] There are currently 16 negotiating areas in the Doha work program. 
These 16 areas are implementation-related issues and concerns; 
agriculture; services; market access for nonagricultural products; 
trade-related aspects of intellectual property rights; trade 
facilitation; WTO rules; dispute settlement understanding; trade and 
environment; electronic commerce; small economies; trade, debt, and 
finance; trade and transfer of technology; technical cooperation and 
capacity building; least-developed countries; and special and 
differential treatment. Originally, the Doha declaration set forth 
three other negotiating areas: transparency of government procurement, 
interaction between trade and competition policy, and relationship 
between trade and investment. Members agreed to drop these three areas 
in the July 2004 framework agreement. 

[7] The full framework (WTO, "Doha Work Program: Decision Adopted by 
the General Council on 1 August 2004," WT/L/579, Aug. 2, 2004) is 
available at [Hyperlink,
m ](downloaded April 19, 2006). 

[8] GAO-05-538. 

[9] The Department of Agriculture reports that agreement on ad valorem 
equivalents has not yet been fully completed. Isolated products remain 
to be confirmed, some WTO members have only recently responded to 
questions in discussions on this point, and members are not fully 
agreed on the process for verification. 

[10] This number excludes least-developed countries, which were not 
required to prepare services offers. 

[11] "Special and differential treatment" refers to specific provisions 
that provide more time or leniency, greater market access, or other 
more favorable terms to developing and least-developed countries in 
implementing WTO agreements. 

[12] For a detailed comparison of the agriculture proposals by the 
United States, the Group of 20, the EU, and the Group of 10, see 
Charles Hanrahan and Randy Schnepf, WTO Doha Round: The Agricultural 
Negotiations, Congressional Research Service, RL33144 (Washington, 
D.C.: Jan. 12, 2006). 

[13] Although this debate centered on the extent of market access in 
the EU and other developed countries, the proposals also offered 
schemes for reducing developing countries' agriculture tariffs, though 
to a lesser extent than in developed countries. 

[14] A tariff line is a single item or product in a country's schedule 
or list of tariffs, associated with a particular tariff rate. 

[15] The EU has stated that real improvements on market access would 
require reductions in their applied, as opposed to bound, tariff rates. 
An applied tariff is the actual tariff rate levied for a product, while 
a bound tariff is the maximum allowed tariff rate for a product, which 
a country has agreed at the WTO not to go above. Many developing 
countries' bound tariff rates are considerably higher than the tariffs 
they currently apply. For example, Brazil had an average bound tariff 
of 31 percent and a 12 percent average applied rate in 2004, according 
to WTO country statistics. 

[16] The Swiss formula is a nonlinear mathematical formula that (1) 
produces a narrow range of final tariff rates from a wider set of 
initial tariffs and (2) specifies a maximum final rate, no matter how 
high the original tariff. A key feature is a number (the coefficient) 
that is negotiated and plugged into the formula to determine the 
maximum final tariff rate. This formula was first proposed by 
Switzerland in the 1970s in the Tokyo Round of trade negotiations. 

[17] An unbound tariff is one that a country can raise to any level 
because it has made no commitment to keep the tariff rate below a 
maximum allowed (bound) level. 

[18] The WTO rules negotiations address provisions concerning 
antidumping measures, subsidies and countervailing measures (including 
fishery subsidies), and regional trade agreements. 

[19] On antidumping, the negotiating group's chair reported in November 
2005 that in-depth debate over proposals had progressed to the point 
that work was being carried out almost exclusively on the basis of 
specific legal texts. The chair also indicated he sensed a broad 
agreement on three principles: (1) avoiding unwarranted use of 
antidumping measures, while preserving the basic concepts, principles, 
and effectiveness of the instrument and its objectives where such 
measures are warranted; (2) limiting the costs and complexity of 
proceedings for interested parties and the investigating authorities; 
and (3) strengthening the transparency and predictability of 

[20] The four countries are Benin, Burkina Faso, Chad, and Mali. 

[21] The United States planned to eliminate its export subsidies for 
cotton producers during 2006 to come into conformity with an adverse 
ruling from the WTO on a cotton case filed by Brazil. 

[22] For example, representatives of several African, Caribbean, and 
Pacific nations have raised questions about whether large developing 
countries such as Brazil and India could effectively represent the 
interests of small, less developed countries. At the ministerial, 
differences among developing countries were also evident in the 
opposing positions taken by Latin American and Caribbean negotiators on 
the EU banana import regime. 

[23] The exemption of up to 3 percent of tariff lines, insisted upon by 
developed countries, would allow these countries to shield certain 
sensitive products such as sugar and textiles. This provision is to 
take effect by 2008, or by the start of implementation of Doha 

[24] Recently, the World Bank, the International Monetary Fund, WTO, 
and other researchers have issued papers exploring the benefits and 
costs of trade liberalization for developing countries and how 
international institutions could help them adjust. See, for example, 
Joint Note by the Staffs of the IMF and the World Bank, "Aid for Trade: 
Competitiveness and Adjustment" (Washington, D.C.: Apr. 11, 2005); WTO 
Committee on Trade and Development, "Developmental Aspects of the Doha 
Round of Negotiations" (Geneva, Switzerland: revised Nov. 22, 2005). 

[25] "Comparable ambition" was not defined in the ministerial 
declaration. Members are debating how it should be defined. 

[26] The president, however, must fulfill a number of procedural 
requirements and meet certain time frames established by TPA. As a 
result, we concluded in our last report that the Doha negotiations need 
to conclude by the end of 2006 to meet TPA's statutory requirements. 

[27] Congressional Research Service, The World Trade Organization: The 
Hong Kong Ministerial, RL32060, (Washington, D.C.: Jan. 20, 2006). 

[28] 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, 
Dec. 12, 2002. Available at http:/ 
workingpapers/wp.html (downloaded April 19, 2006). 

[29] 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 and the Doha 
Development Agenda (Washington, D.C.: World Bank, 2005); and Kym 
Anderson, Will Martin, and Dominique van der Mensbrugghe, "Doha 
Merchandise Trade Reform: What's at Stake for Developing Countries," 
July 2005, available at [Hyperlink,] 
(downloaded April 19, 2006). Results vary depending on the type of 
model (static vs. dynamic), key assumptions in the model, and the 
ambition of the liberalization scenario. The World Bank studies, for 
example, do not attempt to quantify services liberalization. 

[30] Sandra Polanski, Winners and Losers: Impact of the Doha Round on 
Developing Countries (Washington, D.C.: Carnegie Endowment for 
International Peace, 2006). 

[31] U.S. countercyclical payments compensate farmers for low commodity 
prices. Specifically, U.S. producers of wheat, feed grains, rice, 
upland cotton, oilseeds, and peanuts are eligible to receive 
countercyclical payments whenever the effective (market) price for 
these commodities falls below the target price set by federal 

[32] For example, on March 21, 2006, EU Trade Commissioner Mandelson 
stated that "certain WTO members continue to expect more from us on 
agricultural market access…we are ready to play a constructive role, 
including on agriculture… but we need to see real cuts in industrial 
tariffs." On March 22, Mandelson said "the members of the WTO realize 
that a new offer on agriculture is not on the agenda," and Commissioner 
for Agriculture Mariann Fischer Boel "confirmed that the EU had no 
intention of making new proposals." 

[33] Simon Evenett, "The WTO Ministerial Conference in Hong Kong: What 
Next?" (University of St. Gallen and the Centre for Economic Policy 
Research, Jan. 18, 2006). 

[34] These questions from the agriculture chair include, among others, 
(1) the range of cuts for domestic support expected in each of the 
three bands set in the Hong Kong ministerial declaration, (2) the 
number of tariff lines that developing countries will be able to 
designate as special products, and (3) the definition of an "emergency 
situation" that would qualify for in-kind food aid. 

[35] Institute for International Business, Economics and Law, Global 
Trade Opinion Poll, Survey No. 12, Jan. 2006 (Adelaide, Australia: The 
University of Adelaide). 

[36] See, for example, Gary Clyde Hufbauer and Jeffrey J. Schott, "The 
Doha Round After Hong Kong," Policy Briefs in International Economics 
(Washington, D.C; Institute for International Economics, Feb. 2006). 

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