*EPF407 05/01/2003
Transcript: Zoellick Views EU Ag Reform Crucial for WTO Success
(At OECD meeting he presses EU on domestic farm subsidies) (5360)

Reform of the European Union's (EU) massive agricultural domestic subsidies program is crucial for making progress possible in World Trade Organization (WTO) negotiations before a September WTO meeting in Mexico, U.S. Trade Representative Robert Zoellick says.

At an April 30 press conference in Paris during an Organization for Economic Cooperation and Development (OECD) meeting, Zoellick said that he and other ministers sought to narrow their focus on a few WTO issues for now as a way of improving the chances for success at the September meeting in Cancun.

"At this point in the negotiation," Zoellick said, "what is important, however, is to move forward what can be moved forward" in the WTO round, which is called the Doha Development Agenda.

Supporting EU reform of its Common Agricultural Policy (CAP) agriculture subsidies "is vitally important" right now, he added. Once the EU achieves such reform, he indicated, the United States could press other goals in opening agricultural trade, namely eliminating export subsidies and cutting tariffs.

Ministers attending the OECD meeting agreed that they should keep high ambitions for the Doha round, aiming for a balanced package by the 2005 deadline, he said.

Zoellick said he and EU representatives also worked toward agreement on elements of WTO negotiations for reducing tariffs on non-agricultural goods. The U.S. proposal would combine a formula for harmonizing tariffs at a lower level with elimination of tariffs in certain sectors and elimination of all tariffs below a certain level, plus some special and differential treatment for developing countries.

He said also that he perceived no fallout in trade negotiations from the U.S.-French disagreement over the Iraq war.

Following is a transcript of the press conference:

(Note: In the text "billion" equals 1,000 million and "trillion" equals 1,000,000 million.)

(begin transcript)

Press Conference Transcript
U.S. Trade Representative Robert B. Zoellick
Organization for Economic Cooperation and Development
April 30, 2003
Paris, France

Moderator: Thank you all for coming. We appreciate your attendance for our press conference with Ambassador Robert Zoellick. We will be keeping this to 30 minutes, and if you could please identify yourself and the organization you are with when you ask a question. Please speak into the microphone. Ambassador Zoellick will make a few opening remarks, and then we'll open the press conference up to questions. Ambassador Zoellick.

Ambassador Zoellick: Thank you Rich. First, I'd like [to thank] all of you for being here. Our primary purpose has been to try to use this meeting, and the one that will follow later this afternoon, is to try to gain some momentum for the Doha Development Agenda, so that we can increase the likelihood of a successful meeting in Cancun, Mexico, in September. The benefits of a success would be very clear, in terms of strengthening the international economy, first in terms of confidence and then over time in terms of the benefit of market opening, generating growth -- and the best way to help developing countries, as many studies from the World Bank and others have shown. And clearly, we do this in an environment where we have a very interconnected global economy, so trade is the lifeblood. A point that I made, and a number of colleagues also stressed, is that we should see this Doha Agenda as a once-in-a-generation opportunity. It takes a few years to get one of these launched, a few years to negotiate it, and then the implementation often runs over a course of period. So the work that we're doing here will really be the major shot at opening the global trading system over 15-20 years.

And that's the reason why the United States sought to set a strong mark by putting forward bold proposals: in the goods area, where we called for the eventual elimination of all tariffs; in agriculture, where we have proposals to eliminate export subsidies, reduce domestic subsidies by over $100 billion, and drastically reduce tariffs; and also in the services area.

One of the ideas that I and a number of my colleagues talked about today was, given the time we have left to Cancun and given the complexity of the subject matter, the need to make sure that we have a focused agenda on a limited set of issues. I suggested six categories. Commissioner Lamy [EU Trade Commissioner Pascal Lamy], I think, had a similar set, as our New Zealand colleague pointed out, because we need to get ministers involved. And to get ministers involved from key countries around the world, we really have to focus the attention on the core issues. In addition, as a way to try to demonstrate concretely some of the market benefits that could flow from a Doha negotiation, as well as to demonstrate a point of U.S. and EU cooperation, both Commissioner Lamy and I outlined some suggestions for the goods modalities, which there is a committee that will be trying to come up with the framework for the tariff cuts by the end of May.

And we suggested four elements. One is a formula cut, so as to make sure that tariffs of all countries are cut, of a harmonizing nature. Second, to complement that with sectoral negotiations. We refer to these as zero-for-zero, where we try to get a critical mass of countries to support a zero tariff, as we've done in the past, which led to the information technology accord. Third, to eliminate tariffs below a certain level, the United States proposal had suggested 5 percent. I think the EU is at a lower number, but we're continuing to discuss it. If we could eliminate all tariffs below 5 percent, that would eliminate tariffs on about three-quarters of the trade among the United States, Japan and Europe. And clearly that's a good point for our business sector, but clearly it's a good point for the developing world that sells into those markets. And the fourth element is special and differential treatment. And I made some additional suggestions about how we could complement an aggressive approach in goods with special and differential treatment to make it easier for some of the developing countries.

And the United States continues to have the aim of eliminating all tariffs in the industrial goods area because this is the area that the GATT [General Agreement on Tariffs and Trade] system first started to work on in 1947. It's been 50 years; during that time we ended the Cold War; it's time to end the tariffs in this first sector. Now, the discussion also revealed that agriculture will certainly be a key. And this is an area where progress is not what we wished. I understood Commissioner Lamy in his remarks noted the importance of agriculture. Brazil, Egypt, New Zealand -- a lot of other countries stressed this is fundamental for going ahead. So you have a wide range of countries -- the developing world, Cairns Group of exporters, the United States, that are stressing this. Now I'm pleased to note in this context that Franz Fischler, the agriculture commissioner of the European Commission, as well as Commissioner Lamy and their other colleagues, have put forward a proposal to reform the Common Agriculture Policy, and I compliment them for their leadership on this because I think that a lot is at stake. They're doing this foremost because the reform of the Common Agricultural Policy is in Europe's own interest, going through a process of enlargement. Some countries have stressed how they want to decouple payments so they can devote the funds for more environmental and rural purposes.

But one of the messages that I think that the member states will have picked up at this meeting, and I hope that others in Europe will hear during the course of this week, is that the combination of the decoupling and the market reforms that Franz Fischler has put forward have a double benefit, in that they are not only important for Europe restructuring its own agricultural policies as it looks towards the 2006 timeframe, when it was going to be addressing these issues. But it would also give Europe the ability to have much more flexibility in the agriculture negotiations. Now it doesn't do everything that we hoped -- it really focuses most on the subsidies side, not on what we would call the market access, the opening subsidies. But it would certainly be a big shot in the arm. And it was very useful at this meeting that you had the European member states attending because my understanding is that Commissioner Fischler is hoping to pursue this reform by June, which would give us time in advance of the September meeting to try to at least allow the European Commission to have more flexibility in agriculture. So really there are two benefits for one if this can get done. And this is a point that I made with some leaders in the French business community that I met this week. And after a meeting I'm having with Commissioner Lamy on May 1, I'm going to go on to Berlin and Munich where I also hope to talk about this item in the context of Germany's overall trade and agriculture interests.

In addition to these sessions, I just note for you, in case you have an interest, I managed to have a number of bilateral meetings that were very constructive with India, Korea, Egypt, Israel, the United Kingdom. And I had a long session, somewhere between 90 minutes and two hours, with Deputy Prime Minister [Aleksey] Kudrin of Russia. And he's been filling in for Minister Gref [German Gref, economic policy and trade minister], who has been ill. We had a very, I thought, fruitful exchange on Russia's WTO accession. Minister Kudrin chairs the overall WTO committee, and so we talked about some of the problems we've had bilaterally, on agriculture. But we also talked about areas where thought it was necessary to have additional movement, for example, the services topic. And I came away from that meeting with a sense that Russia's very serious about this process, and we want to work with them.

As you know we have a meeting that [Agriculture Minister] Jim Sutton of New Zealand is chairing later this afternoon that will try to follow up on some of these trade issues. But, in summary, I think, for those topics, a point that I think the Prime Minister of New Zealand asked all of us to consider was: first, the level of ambition. And I think the message came back very strongly, we want to keep the level of ambition high. Second, there was a point of emphasis that we're committed to trying to complete this round by the January 2005 deadline. And third, that, of course, you need a balanced outcome. And one of the things the United States has been doing here, as you can tell from my remarks, is to try to suggest movement in different areas and cooperation in different areas, because if we can move the pieces together in a position where Fischler and Lamy and their colleagues are successful with the CAP reform this June, then I think we at least have a much increased likelihood of a very successful Cancun meeting, and that's what we're all about.

I close with a point of emphasis, which is that the United States, and I personally, am 100 percent committed to this Doha process and want to do everything we can to make it succeed and that I'm certainly willing to devote the time and energy, as well as that of my colleagues, to try to use these coming months to have a successful meeting in Cancun. So I'm happy to take your questions.

Question: Warren Giles, from Bloomberg News. Ambassador Zoellick, you mentioned the zero-for-zero initiative. I wonder, that seems to be such an obvious simple and beneficial thing to do for business. I wonder whether that's something you would consider doing with the European Union and Japan outside of the WTO context, and not to be dependent on the Doha round.

Zoellick: Well, since all three of us are members of the WTO, we really can't do it outside because we have MFN [most-favored nation status] obligations. So the point about a zero-for-zero effort is that you need to try to get a critical mass of countries because once you are giving zero tariffs, you're giving it to all 146 members of the WTO. But a point that I want to draw attention to -- that both Commissioner Lamy and I spoke to -- is that the zero-for-zero is not something only for the industrialized world. Indeed, we want to try to explore sectors that could be of particular use for some of the developing countries. But I will also make the point that the zero-for-zero really has to be a complement of a formulaic approach. Because what we need to do is reduce tariffs for all countries across all sectors -- obviously at a different pace, countries start at different levels -- and one reason why is that, if we're serious about making this a development round, it's important to recognize that 70 percent of the tariffs that developing countries pay are to other developing countries. So we believe that something like our tariff elimination proposal would help enormously for Europe, the United States and Japan, also in a sense and be a down payment for many of the developing countries because many of our tariffs are in that 5-percent- and-under range. But at the same time, we want to try to stimulate a broader global openness and trade, including among developing countries.

Q: [unintelligible] from the Australian Financial Review. Could you please clarify ... if the EU successfully makes the CAP reform before Cancun, would that be enough to bring success to the agricultural modalities negotiations or would they need to make further moves on market access?

Zoellick: Well, as you know, Australia and the United States and members of the Cairns Group really want to have an aggressive result, and that was a point that was resonated by a number of people. I think our Brazilian colleague Amorim [Foreign Affairs Minister Celso Amorim] was one of the most vigorous in that. Because many of us felt the Uruguay Round started to apply disciplines to agriculture which hadn't been done before, but the compromise that we concluded really didn't get at a number of the core issues. So we're committed to eliminating export subsidies, substantial reductions in domestic support and bold elimination of tariffs. You probably know our proposal was called a Swiss 25, which means no tariff in agriculture would be higher than 25 percent and it would take our average tariff down from 12 to 5 percent.

Now, having said that, and for the U.S. in particular, market access is vitally important because the more we can open markets through reducing tariff and non-tariff barriers, the easier it is for us to cut subsidies. So for developing countries that would like us to cut subsidies there are really two elements for us: one is we've got to bring European and Japanese levels down. The European cap on what's called the amber box domestic subsidies that distort production is, depending on exchange rates, about $65 billion, and ours is $19.1 billion so we've got to bring that down and harmonize it. But the other side of it is that if we can go down further we can open up more on the market access side. At this point in the negotiation, what is important, however, is to move forward what can be moved forward. And what is vitally important -- this is what I've been trying to do by setting the stage with industrial goods and services and other items -- is to support those in the Commission that are seeking to reform the CAP program for Europe's own reasons. And the timing couldn't be better. So you're right that this leads to market access issues that we're going to need to work on, but this is a road where we need to take steps along the way and this would be a very important step because it should allow Europe to -- if it does the decoupling -- to be able to substantially reduce the domestic subsidies. Much of its export subsidies are derivative -- not all, but some of the proposals that Fischler has in dealing with market reforms deal with some of those other issues. So I'm trying to encourage those that are trying to do the right thing. And I'm trying to convey the message to the business and industrial communities here in Europe that they have a big stake in trying to encourage and support the member states that would back the Commission's program.

Q: [Unintelligible].

Zoellick: I'm sorry, where are you? Ah. Go ahead.

Q: New Zealand has been engaged as chair [unintelligible] in the WTO approach you're taking. Can I just ask you what opportunity New Zealand has in obtaining a free trade agreement directly with the United States?

Zoellick: Well, as you've said, this is a meeting that's been focused on the WTO. And we've worked very well with Minister Sutton. Prime Minister Clark did a very good job in chairing the meeting. And so that's the area where we've been cooperating not only on agriculture, but as you may know New Zealand and the United States have a very similar approach in terms of the goods area. In the bilateral area, as you know, we're proceeding with Australia. I had noted at the time that we proceeded with Australia about testing the waters for other interests, but right now our primary focus is on this and the bilateral agreements we're moving forward.

Q: [Unintelligible] Agence France Presse. Do you think that there will be a disagreement between the U.S. and European countries on trade because of the war in Iraq?

Zoellick: I'm sorry, I didn't hear your question ... an agreement on Iraq? I didn't quite --

Q: A disagreement on Iraq.

Zoellick: Oh, disagreements on Iraq. Well, I've had conversations with French colleagues and members of the French business community here and others about the fact that, you know, there, of course, was significant disappointment in the United States and many quarters even a sense of hurt, that in a time of trial a friend wasn't with us and indeed, worked against us. But I haven't really found that to affect our overall trade negotiations. Part of this perhaps is that the competency rests with the Commission, and Commissioner Lamy and I have both stressed the fact that the U.S.-European trade and investment relationship is one of huge size, mutual interests, about $1.5 trillion in trade, about four million jobs on either side of the Atlantic supported by trade and investments. So we do have differences, but as I've pointed out on other occasions, those differences didn't start with this Gulf War or, frankly, the prior Gulf War or the Cold War. We've been tussling over agriculture for much -- a much longer period than that. So those are the issues that we're trying to resolve and in the fashion that we've talked about here. So I haven't really seen that effect.

More broadly, because your question prompts another point that I get asked a lot. I have no shortage of countries around the world trying to secure free trade agreements or other arrangements with the United States. We're 25 percent of the world's economy, give or take a few percent depending on exchange rates, so even though our growth has been slow, frankly it's been a more important part of growth than much of the rest of the world, and we hope to get that stronger. We had a $503 billion current-account deficit last year, which certainly suggests we're buying from a lot of people. And so, I really haven't encountered that issue. More generally, though, I think Commissioner Lamy and I both want to stress the commonalities of interest, and that's why we're doing some of the things we're doing.

Q: [Name unintelligible] Can you comment on whether French companies will have the right to compete fairly for reconstruction contracts in Iraq?

Zoellick: You know, that would depend on the particular circumstances. There are rules under government procurement. Under the WTO we're a member of the WTO Government Procurement Code, and some of those rules do not apply in the areas of AID [U.S. Agency for International Development] contracts and things like that. So I don't know in a particular case whether they would or wouldn't. I do know that in terms of our overall economic relationship, I had I think the 2001 numbers, we had about $70 billion in trade and current account flow with France alone last year, a very significant number. A lot of French businesses invest in the U.S. so I believe there will remain a very strong and active economic relationship.

On the other hand, and I pointed this out with some of the French government officials and business people, the feelings of hurt at a human level show up in different ways. And I said I don't know how long these will last. Some people may not buy as much French wine. I also see some reports that there are some boycotts of U.S. products here. These are private decisions that are made by private individuals, and, as I mentioned at another occasion, the U.S. has a long history of doing this. In the case of British tea 225 years ago we got quite active and actually put it in the harbor so I haven't seen that happen yet with any wine [laughter]. But I think the fundamental economic relationship between the United States and Europe we hope to put in the direction of growth for all of us because as you look around the world we've had growth that is much too slow, and with the SARS [severe acute respiratory syndrome] epidemic I know there's great concern in Asia. My good friend George Yeo, the Singapore minister, wasn't here this week. We missed him, but he was in the United States, and he relayed a message to me not to underestimate the importance of SARS so we need to get growth from all poles.

Q: [Name unintelligible]. ... the sanctions that have been proposed by the U.S. Congress. Would these not be immediately declared illegal under the WTO?

Zoellick: I don't know what sanctions you are mentioning. There were some proposals that were part of the appropriations bill, I believe, that didn't pass, which the Administration opposed, so I'm afraid I don't know of any current sanctions. And as I said, these can take different forms. In fact, I've seen some people speak a little blithely ... there are and this would probably most come up in the government procurement area, and as I've said in the government procurement area there are some reservations that have been taken in the area of AID funds. But again, I'm not trying to suggest or not suggest. I don't know in particular. What I've said here on Iraq has been the following: I think despite our differences it's very much in our interests to have a success now that a tyrant who tortured his people has been removed from Iraq. And we know this is not going to be easy.

So what are some of the key elements of making that a success? One, removing the sanctions against Iraq because if you look over the past years about 90 percent of the government revenues have come from their oil sales. And so this is not only enabling them to buy food and medicine but it's going to be a key part of getting that government up and running. A second area is debt. And there have been discussions among finance ministers about debt forgiveness and also about using the Paris Club to split out the debt or to restructure the debt over time. Those will be key elements if we're going to create economic opportunity in Iraq, along with things like establishing a currency. There are two different currencies, a number of different exchange rates, trying to get purchasing power back but not so quickly that you trigger inflation, and recognizing that Iraq has much to offer the world economy beyond oil. It has had an agricultural base; it has had a pharmaceutical base -- God knows, it has had a lot of pharmaceutical production, and we'd like to see it used for peaceful uses. So those are some of the items we've discussed about trying to get Iraq on focus. It's not my primary area of responsibility. I have enough dealing with these trade issues, but those are the topics I've discussed with people here.

Zoellick: This gentleman behind is hidden by the camera.

Q: [Unintelligible]. ... From New Zealand. How much progress do you see on agriculture?

Q: [Unintelligible]. The feedback I've had from journalists here is that well, [unintelligible] but that the contribution on agriculture is nothing but hot air. Are you responsible for that? What is your response to that?

Zoellick: Am I responsible for that? [Laughter]. I don't know, I do a lot of hot air, I guess. I try to get some other things done over time, too. But you know, I used to be in a foreign ministry. They really specialize more in the hot air, but in treasury and in trade we actually try to get some practical things done. [Laughter]

Look, this is a negotiation that has a very ambitious mandate. And recall that simply getting it launched in 2001 took a major effort because there was a failure in 1999. The ambitious mandate is a good thing. As I said, it's a once-in-a-generation opportunity. But it also means it's not easy to accomplish. And, frankly, we're trying to move it along on a timeframe that's much faster than the Uruguay Round, which was begun in '86 and finished in '94. So the process moves in different fora. There's a Geneva process, there's the Ministers working on different items, and one can express whatever skepticism one chooses -- that's one's prerogative -- but I think what you see here is a couple of things. One, is you see a key group of Ministers, not all Ministers because there's others around the world, realizing that if we're going to make this Cancun ministerial successful that we have to focus on a certain category of issues and try to get results in those. Second, you see the U.S. and the EU demonstrating concrete cooperation in the goods area, which is very important, and suggesting that we will try to work together on other topics. But third, as I've been very open about, it's not going happen unless one moves forward the CAP reform process. Now the good news is we have European leaders moving that process, but the question mark is we have member states that haven't decided on that yet. So, I can't, sitting here today tell you what's going to happen each step along the way. I can say that the work I've done with Commissioner Lamy and the sense I've had from some of the Ministers around the room, including from developing countries, I might add, give me a sense that I can see a way there. But these negotiations, like other negotiations, are a world of probabilities. And what I'm trying to do is maximize the probabilities and create a pathway and an opportunity. But we're just one country out of 146. Admittedly a significant one, but one.

Moderator: We have time for one more question.

Zoellick: This gentleman's about ready to come out of his chair. And then we'll get you.

Q: [Unintelligible] from BNA. Can you tell us a little bit about your meeting with Commissioner Lamy tomorrow, what's on the agenda? [Unintelligible].

Zoellick: Well, first off, Commissioner Lamy has been very gracious enough to have us out to Normandy, where I haven't been. And he's been particularly gracious as a good Socialist to work on May Day, which I appreciate. I've tried to return the favor by wearing a red shirt, in anticipation of our solidarity [laughter]. And what our agenda includes is both Doha-related issues and bilateral issues. So this is in part a follow-up to an invitation I offered him to visit Gettysburg where we had a planning session. And I think the first thing we'll probably do is compare notes on this meeting and try to move things ahead -- trying to go to this gentlman's question from New Zealand about how to maximize probabilities for action. Unless he's slowed down a lot we'll probably go for a run in the morning as well [laughter]. And I'm sure we'll discuss bilateral issues as well, the full range of them.

Q: [Unintelligible] from Brazil. Last week the Treasury secretary was in Brazil and said [unintelligible]. Could you elaborate on that?

Zoellick: What I believe, seeing some of the news reports, I was pleased Secretary Snow [Treasury Secretary John Snow] had a very successful visit to Brazil. He was in part, obviously, there to discuss with his Finance Ministry colleagues. Minister Palocci and his team have done a superb job, and I saw the markets have responded. I saw there was a good response to a bond offering. But what I talked to Secretary Snow about before he went down is something I also spoke about with Minister Palocci [Finance Minister Antonio Palocci] when he was in Washington, which is when I went down for President Lula's inauguration, since Brazil and the U.S. are co-chairs of the ALCA process -- the Free Trade Area of the Americas process -- that, after the administration got its feet on the ground and people were in place, I suggested that I come down and try to talk with them quietly about what we might hope to accomplish in the FTAA, which is on the same timeframe as this negotiation. And try to work together to see how we could steer this process of 34 countries to a successful conclusion.

Now of course that involves reducing barriers. We are now at the point in that negotiation where we had put forward various market-access offers. My recollection is that our first proposals in goods and agriculture offered immediate elimination of tariffs of about 50-55 percent of the products. Some of these are already covered by our MFN obligations but some are under Generalized System of Preferences. Brazil's initial offer was -- how to say this -- more conservative, and it did not yet come forward with offers in government procurements, services and investment, as I recall. But my goal is, frankly, to understand how the FTAA fits in the growth pattern.

And just to spend a moment more on this, you know, part of the success on the financial side is that Brazil is having to run a rather large budget surplus -- somewhere between 4.25-5 percent -- and it's hard to get much domestic demand if you have that size surplus. So Brazil's going to rely on export-led growth, very considerably. There have been very few success stories of export-led growth that don't also up on the import side. So part of my exploration with them is to get their thinking about how this fits with their growth and development strategy and then to see what sort of outcome in very broad terms we might be able to sketch, recognizing we have many other countries to work with. I actually outlined that to Minister Palocci myself, and I know since Secretary Snow was going down I suggested he also talk about that topic. I think I'm going down somewhere in late May, as I recall.

Moderator: Thank you all.

(end transcript)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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