[WPRT 108-9]
[From the U.S. Government Publishing Office]



 
 1st Session                COMMITTEE PRINT                       WMCP:
                                                                  108-9
_______________________________________________________________________

                                     


                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                               __________

                              R E P O R T

                                   ON

         TRADE MISSION TO THE WTO MINISTERIAL MEETING IN CANCUN

                               __________

                               [GRAPHIC] [TIFF OMITTED] TONGRESS.#13
                               

                             SEPTEMBER 2003

 Prepared for the use of Members of the Committee on Ways and Means by 
members of its staff. This document has not been officially approved by 
       the Committee and may not reflect the views of its Members






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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
                    Allison H. Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel
                       MEMBERS OF THE DELEGATION
              Members of the U.S. House of Representatives

Hon. Bill Thomas, Chairman, Committee on Ways and Means
Hon. Jim Kolbe, Chairman, Subcommittee on Foreign Operations, Export 
        Financing, and Related Programs, Committee on Appropriations
Hon. Sander M. Levin, Ranking Member, Subcommittee on Trade
Hon. E. Clay Shaw, Jr.
Hon. Wally Herger
Hon. Dave Camp
Hon. William J. Jefferson
Hon. Sam Johnson
Hon. Earl Pomeroy
Hon. Phil English
Hon. Mark Foley
Hon. Kenny C. Hulshof
Hon. Kevin Brady

                      Committee on Ways and Means

Angela Ellard, Staff Director
David Kavanaugh, Professional Staff
Stephanie Henning, Professional Staff
Julie Hasler, Committee Administrator
Tim Reif, Minority Chief Trade Counsel
Viji Rangaswami, Minority Trade Counsel




                            C O N T E N T S

                              ----------                              
                                                                   Page
Members of the Delegation........................................   III
Overview of the Mission..........................................     1
Discussion of Trip Meetings......................................     2
    September 11, 2003...........................................     2
    September 12, 2003...........................................     3
    September 13, 2003...........................................    10
                        OVERVIEW OF THE MISSION

    From September 10 through 13, 2003, a delegation of the 
House Ways and Means Committee visited Cancun, Mexico, to 
conduct a fact-finding mission. The primary purpose of the trip 
was to participate in the Ministerial Meeting of the World 
Trade Organization (WTO), to oversee U.S. trade officials 
during negotiations, to explore issues related to international 
trade, and to discuss trade positions with WTO delegates from 
other countries. The Congressional delegation had the 
opportunity to discuss WTO issues with delegations from other 
WTO members, including Australia, New Zealand, the European 
Union, Ecuador, Africa, and Brazil.
    The Ministerial Meeting began cautiously because there had 
been little progress in negotiations in the year leading up to 
the Ministerial as many countries had refused to yield from 
their initial positions. Consequently, several negotiating 
deadlines in 2003 had not been met, most notably the deadline 
to determine modalities for negotiations of agricultural trade 
liberalization. The United States made efforts to contribute to 
the trade negotiations in advance of the Cancun meeting, 
including reaching agreement on a text providing access to 
medicines for the least developed countries, which was an 
important goal of the Doha agenda, and showing a willingness to 
make concessions on agriculture.
    Ultimately, the negotiations at Cancun collapsed on 
September 14, 2003, for various reasons. Ostensibly, failure of 
the negotiations was the result of an impasse on whether to 
include one or more of the so-called ``Singapore Issues'' 
(trade facilitation, investment, competition, and government 
procurement) in the Round's negotiating mandate. Deeper 
problems existed, and several other factors contributed to the 
collapse:
     The inability, or unwillingness, of the European 
Union, Japan, and Korea to negotiate ambitious liberalization 
in agricultural tariffs and cuts in domestic supports and 
export subsidies;
     Efforts by some countries to stall, delay, and 
obstruct further trade liberalization in general;
     Refusal of the newly created G-21, a group of 
approximately 21 (the numbers fluctuated as countries joined or 
left the group) developing countries,\1\ to consider market 
access liberalization in addition to its otherwise liberal 
position on cutting agricultural subsidies and domestic 
supports. Many of these countries were frustrated that the 
joint U.S.-EU paper on agriculture, developed after the 
Montreal mini-ministerial, did not go nearly far enough in 
liberalizing agriculture trade;
---------------------------------------------------------------------------
    \1\ At the end of the Cancun Ministerial, the following countries 
were G-21 members: Argentina, Bolivia, Brazil, Chile, China, Colombia, 
Costa Rica, Cuba, Ecuador, Egypt, Guatemala, India, Indonesia, Mexico, 
Nigeria, Pakistan, Paraguay, Peru, the Philippines, South Africa, 
Thailand, and Venezuela.
---------------------------------------------------------------------------
     Reluctance of some developing countries to embrace 
trade liberalization because of the resulting erosion of their 
trade advantages created by preference programs granted by 
developed countries. Some developing countries proposed 
``compensation'' for loss of their preferential advantage, an 
unacceptable option for developed countries; and
     Insistence by several western African nations on 
the immediate elimination of supports and subsidies on cotton 
plus compensation as opposed to dealing with the cotton sector 
in a broader context.

                      DISCUSSION OF TRIP MEETINGS

                      Thursday, September 11, 2003

Briefing by Adriana Velasquez, Director of the Mexican National 
        Institute of Archaeology (INAH) at the Tulum archaeological 
        site
    Ms. Velasquez provided the delegation with a briefing on 
Mayan culture, Mexico's efforts to preserve and study Mayan 
archaeology, and trade issues related to antiquities. She also 
provided a brief tour of the Tulum archaeological site, which 
is located 81 miles south of Cancun. Tulum was a Mayan city 
that flourished even during the early period of the Spanish 
conquests. Tulum was an important trading city, and although it 
was never conquered by the Spanish, the city eventually died 
out and was abandoned because the Spanish prevented the Mayan 
traders from using ships.
    INAH is the Mexican government bureau established in 1939 
to research, preserve, protect, and promote the historical 
heritage of Mexico. Mexican law prohibits the export of 
archaeological monuments without the authorization of the INAH. 
Violators are subject to a maximum fine of 50,000 pesos 
(approximately $5,500) and 12 years imprisonment. The United 
States and Mexico entered into a bilateral treaty for the 
recovery of stolen archaeological, historical, and cultural 
properties in 1971. President Nixon issued a Presidential 
Proclamation in 1971 implementing the treaty. Among other 
obligations, the United States agreed to help recover and 
return cultural property taken from Mexico.
Briefing by Jim Grueff, member of the U.S. Foreign Agriculture Service
    Because of the importance of trade in agriculture to 
Members of the delegation and its key position in the WTO 
negotiations, Mr. Grueff of the U.S. Foreign Agriculture 
Service gave the first briefing to Members of the various 
Congressional delegations about the status of agricultural 
negotiations leading up to Cancun. He focused his comments on 
the draft Ministerial Declaration prepared by WTO General 
Council Chairman Carlos Perez del Castillo. The Declaration 
drew partially from a framework paper proposed jointly by the 
United States and the European Union but had many important 
changes that Mr. Grueff noted.
    Mr. Grueff remarked that modalities for market access and 
the expansion of tariff rate quotas would be focal points for 
the agriculture negotiations. U.S. trade officials have said 
many times that the United States wants to be aggressive and 
ambitious in cutting domestic supports and export subsidies but 
only if substantial market access occurs at the same time. 
Developing countries were expected to oppose opening their 
markets and will instead concentrate on demands for developed 
countries toeliminate supports and subsidies.
    Overall, Chairman Castillo did a good job according to Mr. 
Grueff, but Castillo dropped many important provisions that 
were either in the U.S.-EU framework or were in the detailed 
March draft text proposed by Stuart Harbinson, chair of the 
agriculture negotiations. For example, the Castillo text 
relegated many important issues such as treatment of state 
trading agencies to a vague paragraph in the text that simply 
noted ``other'' issues that Members were interested in. Other 
omitted provisions included those related to food aid, export 
credits, and expansion of tariff rate quotas. The Castillo text 
also dropped language proposed by the United States and EU to 
distinguish between developing countries that are competitive 
in the world market versus those that are not. The United 
States proposes to provide less or no special and differential 
treatment for developing countries that are net food exporters. 
In the U.S. view, relatively developed countries such as 
Argentina, Korea, and Brazil should not receive the same 
special and differential treatment as the poorest African least 
developed countries.

                       Friday, September 12, 2003


Briefing by Ann Veneman, U.S. Secretary of Agriculture

    Secretary Veneman provided an update on the status of 
agriculture negotiations. The WTO Ministerial Conference 
Chairperson, Mexican Foreign Minister Luis Ernesto Derbez, had 
announced the day before that he invited five ministers to act 
as ``facilitators'' to help him with negotiations on various 
subjects. The facilitator for the agriculture negotiations was 
George Yeo, Singapore's Trade and Industry Minister.
    Secretary Veneman noted that the U.S. priorities for the 
negotiations remained harmonization for domestic support levels 
and significant market access for U.S. agricultural products. 
Minister Yeo was in the process of meeting with various 
delegations individually and in groups to see where the 
flexibilities were in order to prepare a revised draft 
agriculture text, which was scheduled for release on Saturday, 
September 13.
    The most significant issue in the agriculture negotiations 
was the emergence of the G-21. This group was pushing strongly 
for the elimination of export subsidies, limitations on 
domestic support that went beyond the draft ministerial text, 
and the elimination of any requirements for developing 
countries to increase market access. Leaders of the group 
included South Africa and Brazil, and it was unclear at that 
time whether these countries would play a constructive or 
destructive role in the process. A group of 32 Asian developing 
countries had also formed in an attempt to exert increased 
influence on the agriculture negotiations. Secretary Veneman 
emphasized that the Cairns Group had not joined with the G-21.

Briefing by Linnet Deily, Deputy U.S. Trade Representative

    Ambassador Deily provided an overview of the negotiations 
and U.S. activities to date. The Ministerial meeting began 
unofficially on Monday, September 8, with a series of bilateral 
meetings and group sessions. By Friday, September 12, the 
United States had met with all of the regional groups and 
topical groups such as the Cairns Group.
    Minister Derbez had announced the day before that he had 
invited five ministers to act as ``facilitators'' to help him 
with negotiations on various subjects. These groups and 
chairmen were: (1) Agriculture: George Yeo, Singapore's Trade 
and Industry Minister; (2) Non-agricultural market access 
(NAMA): Henry Tang Ying-yen, Hong Kong's Financial Secretary; 
(3) Development issues: Mukhisa Kituyi, Kenya's Trade and 
Industry Minister; (4) Singapore issues: Pierre Pettigrew, 
Canada's International Trade Minister; and (5) Other issues: 
Clement Rohee, Guyana's Foreign Trade and International 
Cooperation Minister.
    The United States assigned one U.S. negotiator to have 
primary responsibility for each topic: (1) Agriculture, Chief 
U.S. agricultural negotiator Allen Johnson; (2) Non-
agricultural market access, Deputy U.S. Trade Representative 
Peter Allgeier; (3) Development issues, Deputy U.S. Trade 
Representative Linnet Deily; (4) Singapore issues, Commerce 
Undersecretary Grant Aldonas; and (5) Other issues, State 
Department Undersecretary Alan Larson.
    The key action was in agriculture, with work in the other 
groups somewhat on hold until progress was made in agriculture. 
In the non-agricultural market access group, the two main 
issues were the nature of the formula for tariff reduction and 
whether there would be sectoral initiatives. The United States, 
EU, and Canada met with the chair as a group to push for their 
joint proposal, which advocates the use of a simple, ambitious 
formula for cutting tariffs and the use of sectoral 
initiatives.
    On the Singapore issues, the negotiating dynamic from 
Geneva had carried through to Cancun. The issues were bundled, 
but the only connection among the four issues was that all were 
originally raised in the Singapore Ministerial in 1996. 
Delegates from many countries expressed a greater desire to 
unbundle the issues. Many strong voices opposed moving forward 
on any of the four issues. Seventeen countries led by Malaysia 
held a press conference opposing negotiations on the issues, 
and they were supported by the African Group, although it was 
difficult to tell if this opposition was tactical or 
substantive. The U.S. role in the negotiations was to act as a 
bridge between developing countries that opposed moving forward 
and the EU and Japan, which strongly favored initiating 
negotiations.
    In the group on other issues, three issues were initially 
discussed. On trade and the environment, the United States was 
satisfied with the draft text, but the EU pushed for more 
discussion of environmental issues. On the issue of the wine 
registry, delegates focused more on establishing the next 
deadline in the process than debating the substantive issue. On 
the TRIPs (Trade in Intellectual Property Rights) non-violation 
clause, the most likely outcome was to push action on this 
issue to the next ministerial meeting.
    In the development group, it appeared that members would 
probably agree to accept a package of 25 items to provide 
special and differential treatment to developing countries. 
These itemshad been discussed prior to Cancun and were of such 
a technical nature that it was unlikely they would be changed at the 
ministerial.
    Ambassador Deily and the congressional delegation discussed 
the need for constructive engagement from Brazil and for all 
sides to practice the art of compromise.

Meeting with Mark Vaile, Australian Minister for Trade

    Minister Vaile began the meeting by expressing his optimism 
that an acceptable framework would be agreed to. He also gave 
the delegation his analysis of the structure and negotiating 
positions of certain key country blocs. For example, Australia 
is the leader of the Cairns group,\2\ and Vaile stated his 
belief that Cairns would remain an important negotiating bloc 
because of the discipline of its membership to act in a unified 
manner. Nevertheless, he noted that 11 Cairns members were also 
in the newly formed G-21 led by Brazil, and how the G-21 would 
function in the negotiations was subject to much speculation by 
all delegations. In comparing the two groups, Minister Vaile 
explained that the G-21 and Cairns group are both very 
ambitious regarding agriculture reform and the elimination of 
subsidies, but the G-21 is defensive on opening market access 
on agriculture because the G-21's membership is broad and has 
several protectionist-oriented members that are less interested 
in opening their markets. Minister Vaile expressed the concern 
that when negotiations occur, the divisions among these G-21 
members will be apparent and might lead to fractures in the 
group.
---------------------------------------------------------------------------
    \2\ The Cairns group is comprised of agriculture exporting 
countries that favor elimination of all support to agriculture trade 
and are often aligned with the United States. The members include 
Argentina, Australia, Bolivia, Brazil, Canada, Chile, Columbia, Costa 
Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, 
Philippines, South Africa, Thailand, and Uruguay.
---------------------------------------------------------------------------
    Minister Vaile ended the meeting by hoping that Minister 
Yeo's draft text on agriculture would be the text from which 
Ministers would negotiate. He agreed with Chairman Thomas' 
parting remark that the formation and position of the G-21 
could be a constructive ``opening gambit,'' but much remained 
to be seen on how the group would participate in complex 
negotiations.
    Minister Vaile also mentioned his government's appreciation 
of the high level of engagement by the U.S. government, 
including Congress, in the bilateral free trade agreement 
negotiation.

Lunch Meeting with Parliamentarians from the European Union

    Steve Pfister, Senior Vice President, Government Relations 
of the National Retail Federation, hosted an informal lunch for 
Members of Congress and Members of the EU Parliament. He made 
brief remarks about his hope that the continuing barriers to 
trade would be addressed in the WTO. Chairman Thomas thanked 
members of the business community for hosting the event.
    Yim van Welzen, the Vice President of the European 
Parliamentarian delegation, mentioned his focus on small and 
medium-sized enterprises. He then argued that U.S. Members of 
Congress need to do more to be involved in inter-parliamentary 
organizations like the Inter-Parliamentary Union. He noted that 
his delegation had meetings scheduled with parliamentary 
delegations from Canada, Australia, and New Zealand, but not 
with the U.S. delegation. He also stressed the need for 
everyone to make concessions on agriculture in particular and 
noted that trade is particularly important now given that many 
countries are experiencing recessions.
    Chairman Goodlatte expressed that the U.S. delegation was 
happy to participate in any way that it could. He shared the 
concern that discussions must move forward and stressed the 
importance of addressing all three pillars in the agriculture 
negotiations. He noted that the United States has a trade 
deficit with the EU overall and in the agriculture sector and 
that the United States has the most open market in the world.

Meeting with Group of African Ministers

    The delegation met with ministers from Madagascar, 
Mozambique, Lesotho, Sierra Leone, Nigeria, Chad, Uganda, 
Mauritius, Cote d'Ivoire, Namibia, and Senegal. Representatives 
of each country expressed the importance of extending the 
African Growth and Opportunity Act (AGOA) beyond the current 
expiration of 2008. They noted that a longer period of time is 
needed to attract investment. The delegations differed on the 
issue of extending the third country fabric provisions. 
Lesotho, Sierra Leone, Uganda, Mauritius, and Senegal expressed 
support for extending the third country fabric provisions, but 
Nigeria opposed on the ground that the African fabric sector 
must become integrated.
    Minister Razafimihary of Madagascar noted that his country 
has taken steps to encourage investment through tax holidays 
providing investors with the ability to purchase land. Minister 
Morgado of Mozambique stated that his country has not benefited 
much from AGOA and that AGOA has not encouraged U.S. investment 
in Africa, which is much needed. Minister Malie of Lesotho 
argued that loans from the World Bank and the African 
Development Bank should be expedited with respect to 
infrastructure. Under the current procedures, the loan 
processing takes too long and investors pull out. He also noted 
that Lesotho needs more investment from the United States and 
Asia but does not expect much investment from the EU.
    Minister Sesay of Sierra Leone discussed the need for 
assistance in meeting sanitary and phytosanitary standards and 
extending the opportunity to use third country fabric. He noted 
that the other problems Sierra Leone faces include supply-side 
constraints and the lack of capital. The country also has 
infrastructure and electricity problems. The government has 
held workshops to train exporters but needs to send groups of 
businessmen to the United States. He also noted that it would 
be helpful to attract investment if the U.S. government did not 
provide warnings that travel to Sierra Leone is dangerous and 
instead put more positive content on government websites. 
Chairman Thomas noted that the other countries at the table had 
significant experience with AGOA and had faced some of these 
problems, so Sierra Leone should seek advice from these 
successful users of AGOA to try to avoid their early mistakes.
    Minister Waziri of Nigeria said that AGOA is a priority. 
Although the country is not currently eligible to take 
advantage of any of the textile and apparel provisions, it has 
passed the necessary laws and still needs to make a few 
technical changes. The minister also noted the importance of 
addressing the treatment of folkloric items.
    Minister Mahamadi of Chad noted that the country is not 
eligible to use third-country fabric, but it has passed the 
necessary legislation and is moving forward on the 
administrative level. The most important thing for Chad is 
investment. Although it is a big country, it is an enclave. The 
minister argued in favor of the cotton initiative that Chad had 
proposed with three other Western African nations. He noted 
that the U.S. proposals are helpful in the long-term, but in 
the meantime, Chad's farmers cannot maintain their livelihoods 
and will end up leaving the farming sector. He requested 
special consideration for the humanitarian concerns in the 
short-term.
    Minister Rugumayo of Uganda expressed the need for more 
U.S. investment and the need for more visas for Ugandan 
businessmen to visit the United States. He noted that the 
process for getting visas is very involved.
    The representative from Mauritius noted that Mauritius is 
currently Chairman of the African Union. He stated that the 
textile industry in his country faces difficult times and that 
Mauritius is seeking to be allowed to use third-country fabric. 
He also discussed the importance of Africa's tariff preferences 
and concern about preference erosion. He believes that products 
from Africa or products of interest to Africa should be 
excluded from any sectoral initiatives in the non-agricultural 
market access negotiations.
    Minister Soumahoro of Cote d'Ivoire expressed the need for 
more trade capacity building assistance and the need for 
training on enhancing the business environment to attract 
American investors. Minister Nyamu of Namibia expressed the 
need for more U.S. investment and the country's desire to 
expand exports beyond textiles to items like grapes and dates. 
Minister Agne Pouye of Senegal said that the current AGOA rules 
are difficult for small and medium-sized enterprises, which are 
experiencing difficulties in getting products into the United 
States. She also noted that they need assistance in connecting 
with U.S. buyers.
    Chairman Thomas noted that small and medium-sized 
enterprises in the United States also find it difficult to 
obtain investment and that electricity, infrastructure, and 
financing are universal problems. He said that before 
investing, U.S. companies closely examine a country's laws on 
investment and repatriation; if a company can bring money back 
to the United States, it will invest. He also noted that many 
barriers exist between developing countries and that it is 
important to lower those barriers for regional integration. 
Developing countries could get a double benefit with freer 
trade among themselves.
    Congressman Kolbe discussed the importance of rule of law, 
transparency, and anti-corruption measures and said that the 
Millennium Challenge program would provide funding for these 
purposes.

Meeting with Ivonne A-Baki, Trade Minister of Ecuador

    Ambassador A-Baki defended Ecuador's role in the G-21 group 
of developing countries. She argued that ``things are stuck'' 
in agriculture. She claimed that it was beneficial for the 
United States and the WTO process that Latin American countries 
are part of the G-21 because they could work within the G-21 
and would change language to moderate what the G-21 was doing. 
She also noted that the goals of the G-21 are primarily focused 
on the EU position and the fact that the EU did not want to 
move off of that position. She said that it would be up to the 
G-21 to determine whether the draft ministerial text produced 
by agriculture group facilitator George Yeo is something the 
group could accept. She said that Ecuador would leave the G-21 
group if it proved to be unhelpful in moving the process 
forward.
    Congressman Kolbe expressed doubts that Brazil, which is 
leading the G-21, wanted to move the process forward, noting 
that nothing Brazil had done thus far indicated such a goal. He 
also said that he had not seen the G-21 pushing the EU. 
Ambassador A-Baki responded that the United States had told 
Brazil in the context of the Free Trade Area of the Americas 
(FTAA) negotiations that the issue of agriculture would be 
dealt with in the WTO, and the Brazilians are prepared to deal 
on it.
    Congressman Levin asked the Ambassador what Ecuador wanted 
that differed from the demands of Brazil, India, and China. 
Ambassador A-Baki responded that Ecuador had scaled down 
demands on export subsidies and domestic support and that 
Ecuador was willing to offer something on market access.
    At the conclusion of the Cancun Ministerial Meeting, the G-
21 did not accept the Yeo text and instead produced its own 
revised text. Ecuador remains a member of the G-21, and 
Ambassador A-Baki was quoted as saying, ``We have won a lot. 
It's not the end; it's the beginning of a better future for 
everyone.''

Meeting with Tim Groser, New Zealand Ambassador to the WTO and Chairman 
        of WTO Rules negotiations

    Ambassador Groser is the Chairman of the WTO Rules 
negotiations group, which has purview over trade remedies. He 
began the discussion by putting the current negotiations into 
perspective, saying that the Doha Round is actually much easier 
than the Uruguay Round in many ways because the WTO now has 
various standing agreements covering such topics as agriculture 
and services. Such agreements provide a framework for the first 
time for the WTO's current work on these subjects. This 
framework itself, just created in the Uruguay Round, was much 
more difficult to negotiate. Ambassador Groser then quickly 
reiterated the positions of several negotiating Members and 
blocs in relation to the current negotiations. He noted that 
New Zealand, as a Cairns member, is staunchly free-market 
oriented.
    Ambassador Groser commented on the mandate for the trade 
remedies' negotiations from the Doha Declaration, which says 
the Members ``agree to negotiations aimed at clarifying and 
improvingdisciplines under the Agreements . . . , while 
preserving the basic concepts.'' Ambassador Groser candidly commented 
that the United States is under considerable pressure from many 
countries because of its use of antidumping laws. The few countries 
that might have an interest in defending the current antidumping rules 
are less engaged than the United States because they are internally 
divided by groups that rely upon trade remedies and those that oppose 
them. He noted that certain industries, such as steel and chemicals, 
suffered from fundamental economic problems that could not be solved 
through antidumping rules alone, and he raised the issue of whether the 
final agreement related to steel might become a WTO obligation subject 
to the WTO dispute settlement system.
    In response to questions from Members about recent U.S. 
losses of WTO dispute resolutions in the trade remedy area, 
Ambassador Groser noted that the United States has won the 
overall majority of cases litigated. In the cases it has lost, 
the United States often wins the majority of issues in the case 
but loses on one or a few points, often technical and 
correctable. Thus, the losses seldom have policy consequences 
for the United States. Ambassador Groser referred to reports by 
the U.S. General Accounting Office and the Department of 
Commerce to support his points.
    Chairman Thomas commented that improvements in transparency 
might be appropriate and advantageous to all members and might 
fall within the Doha Declaration's mandate of clarifying while 
preserving basic concepts in the current Agreement. Congressman 
Levin expressed support for improvements in the antidumping 
rules to increase transparency. Congressman English stated that 
the United States wants a rules-based regime, so it is critical 
to overhaul the dispute settlement mechanism, especially in 
order to make it more transparent. In particular, he expressed 
concern that the United States had gone through a very careful 
and protracted process on steel, implemented a ``compromise'' 
solution, and still lost the dispute settlement proceeding at 
the WTO. He concluded that there must be a sound antidumping 
regime in place in order for Americans to feel comfortable 
participating in the world trading system.

Briefing by Ambassador Zoellick, U.S. Trade Representative

    At the end of the day, Ambassador Zoellick briefed the 
delegation on the day's developments. He emphasized that he is 
ambitious and keen on an aggressive schedule. He said that his 
strategy is to tell countries that he is flexible if they are 
and that he will move if others do. He continues to be focused 
on agriculture, services, and goods, and he noted that the 
United States is the only country that is ambitious on all 
three issues.
    He stated that several weeks ago, the WTO ``broke the 
back'' of the pharmaceutical issue due to U.S. flexibility. He 
emphasized that WTO members need to improve health care systems 
in order to implement the new policy well.
    Ambassador Zoellick reiterated that WTO members are in the 
difficult phase of moving from negotiating proposals to a 
negotiating framework, and they must do so by consensus. 
Members are working off texts that are generally agreed, with 
the exception of agriculture. He noted that the EU had to get 
through its Common Agriculture Policy reform this summer, and 
then the EU had to translate that reform into a WTO position. 
In the Montreal mini-ministerial in late summer, he said that 
the United States and the EU were asked to come together with a 
framework agreement, which they were able to do. A number of 
the developing countries, known as the G-21, were not satisfied 
with that framework.
    He said that the United States and the EU have been meeting 
with the G-21. He noted that the EU is in a defensive posture, 
while the United States can take an offensive position. 
Specifically, he has asked the G-21 where they are willing to 
make concessions in return for the concessions they are 
demanding.
    He discussed with Members a strategy for dealing with the 
G-21. His primary concern is that the G-21 demands concessions 
in export subsidies and domestic supports but has not shown 
sufficient willingness to open developing country markets. Such 
market access should be especially valuable to developing 
countries because 70 percent of duties paid by developing 
countries are to other developing countries. He also said that 
some developing countries, particularly Brazil, realize they 
need to make concessions in order to open their own economies 
and move towards development. Ambassador Zoellick noted that he 
is willing to be flexible and to consider the sensitivities of 
developing countries.
    With respect to non-agriculture market access, Ambassador 
Zoellick noted that the United States hopes for an ambitious 
formula with reference to sectoral liberalization. With respect 
to the EU demand for expanded protection for geographical 
indications, Ambassador Zoellick stated that that the EU 
continues to press and the United States does not intend to 
concede. He seemed optimistic.
    Ambassador Zoellick then discussed the demand by four West 
African countries (Chad, Mali, Benin, and Burkina Faso) that 
cotton subsidies and supports be eliminated immediately and 
that they be provided with payment to compensate for prior 
subsidies. He noted that the United States does not want to 
deal with cotton in isolation but wants to consider the sector 
as a whole by examining cotton tariffs as well as trade in 
manmade fibers and apparel. He emphasized the need to deal with 
the demand side by having apparel manufacturing countries lower 
tariffs on cotton.
    Ambassador Zoellick and Congressmen Kolbe and Levin then 
discussed the so-called ``Mode 4'' issue, relating to the 
movement of persons.
    Additionally, Congressman English stated that he is glad 
that the Administration is resisting pressure to change the 
antidumping laws. Ambassador Zoellick responded that if there 
is no movement on the entire Round, he will certainly not move 
on antidumping issues.
    Finally, Congressman Shaw and Ambassador Zoellick discussed 
orange juice tariffs and the threat posed by Brazil.

                      Saturday, September 13, 2003


Meeting with Josette Shiner, Deputy USTR

    Ambassador Shiner briefly commented on the status of 
negotiations in Cancun. She noted that some countries were 
showing more interest in the Singapore issues. She added that 
the EU was on the defensive on many fronts. Most countries were 
firmly against the EU's positions on geographical indications, 
ecological labeling, and most of the Singapore issues. 
Moreover, developing countries were taking a stronger stance 
against the EU's farm support programs.
    Regarding the African cotton proposal, she reiterated the 
U.S. position that compensation was out of the question but 
that the United States could address this issue in a larger 
negotiating context. Low cotton prices are caused by many 
factors, including subsidies in the manmade fiber industry, 
recent poor weather, and textile industry market distortions. 
While U.S. subsidies may exacerbate the problems, they are by 
no means the primary cause. The African countries that made 
this proposal are heavily dependent upon cotton in their 
economies, and only Mali is eligible for benefits under AGOA. 
She noted that these countries should recognize that their 
interests would be better served by getting the global economy 
moving than by focusing on U.S. subsidies.

Meeting with Celso Amorim, Foreign Minister of Brazil

    Chairman Thomas opened the meeting by asking the Minister 
for the views of the new Brazilian government as to its role in 
Cancun, on agriculture, and in the FTAA.
    Minister Amorim said that Brazil has an interest in a 
successful conclusion of the Doha Round. Brazil has evenly 
distributed trade relations: the United States accounts for 
about 25 percent of Brazilian trade, the EU also accounts for 
about 25 percent, Asia accounts for about 18 percent, and other 
Latin American countries account for about 10 percent. He 
emphasized that the WTO is very important to Brazil; in fact, 
Brazil pushed for its creation.
    With regard to agriculture, Minister Amorim said that 
Brazil's ambitions would not be met by the Geneva text. Brazil 
seeks the elimination of export subsidies and further 
reductions in domestic support. He believes that for the Round 
to make progress, there must be an understanding between the EU 
and the United States. He also noted that the United States has 
two interests: to keep its internal support in proportion to 
the EU and to force supports and subsidies down because the 
United States is more competitive than the EU.
    Chairman Thomas noted that the Cairns Group has 
traditionally pushed for more liberalization. The Chairman 
questioned how the actions of the G-21 had moved negotiations 
forward. He also asked whether Brazil was prepared to 
liberalize with respect to agriculture tariffs.
    Minister Amorim said that reducing tariffs was not a 
problem for Brazil so long as it was not forced to import 
subsidized production. If the United States and EU are able to 
significantly reduce domestic support and eliminate export 
subsidies, reducing tariffs would not be a problem for Brazil. 
He also stated that the Cairns Group has always been 
ineffective because the EU discredited it by arguing that 
liberalization would hurt poor farmers in developing countries. 
The G-21 group puts more pressure on the EU by taking away 
those arguments. Chairman Thomas said that he was encouraged to 
hear that Brazil could move on tariffs and noted that this 
willingness to move would make it easier to make progress on 
the FTAA.
    Minister Amorim noted that Brazil approaches the FTAA with 
some caution. Just as the United States does not want to 
discuss antidumping in those negotiations, Brazil does not want 
to discuss intellectual property. Brazil does not want to 
change trade rules in the FTAA, just negotiate market access.
    Chairman Thomas asked whether the Minister meant that 
Brazil did not want an agreement like the U.S. agreement with 
Chile or what was under negotiation with Central American 
countries. In response, Minister Amorim argued that Brazil 
could not have one rule on intellectual property with the 
United States and another with the EU. Chairman Thomas 
countered that in fact, it could, if the United States and 
Brazil had a better, closer working relationship.
    Minister Amorim contended that the United States could not 
exclude issues that are sensitive in the United States from the 
negotiations and not allow Brazil to exclude the issues that 
are sensitive to Brazil. Chairman Thomas asked if Brazil would 
be willing to negotiate on these issues if the United States 
put everything on the table. Minister Amorim said it would not 
then be realistic to finish the agreement by the end of 2004.
    Senator Hatch asked what Brazil would gain if it left 
Cancun without a deal. Minister Amorim said that Brazil would 
gain nothing, but Brazil would lose if a final deal is not a 
good deal so that Brazil has to wait 20 years for real action. 
Brazil would prefer to maintain ambition even if it takes 
longer to reach agreement.

Meeting with Pascal Lamy, European Union Trade Commissioner

    Commissioner Lamy opened by commenting optimistically on 
the recent movement of the negotiations towards a text that 
built upon the agricultural framework paper proposed by the EU 
and the United States in August. That framework proposal was 
largely adopted in Chairman Castillo's draft ministerial 
declaration and, at the time of this meeting, was anticipated 
to remain in any final declaration. Commissioner Lamy 
emphasized that the negotiations are at a mid-point and that 
continued U.S.-EU synergy is crucial in order to continue the 
momentum of the Round. He then proceeded to describe various 
WTO issues and the positions of the EU.
    Regarding industrial tariffs and services, he believes the 
EU and the United States have similar objectives, namely 
ambitious and aggressive liberalization. He emphasized that 
these two trade components constitute 90 percent of worldwide 
trade, and with cooperation there should be a successful 
outcome in framing text for this Ministerial and in the 
eventual final agreement of the Doha Round. Nevertheless, he 
noted, these two issues are never mentioned in the press and 
receive far less notice despite their importance. Instead, 
agriculture remains the focus and dominates the agenda, and it 
is an issue on which the EU and United States now have 
agreement within a common framework.
    Commissioner Lamy remarked that the African proposal 
related to cotton had wide political appeal, but there is 
concern within the EU that it could be applied to other 
products such as sugar and tropical fruits. Regarding the newly 
formed G-21, he commented that the G-21 countries will have to 
compromise once negotiations begin.
    Referring to aspects of the Minister Yeo text expected 
later that day, Commissioner Lamy mentioned that the text might 
go beyond his ``red line'' if it included provisions to cap 
green box subsidies, eliminate blue box subsidies, and did not 
preserve the EU-U.S. agriculture framework.
    Responding to critical comments from the Members of the 
delegation about the EU's farm support system, Commissioner 
Lamy defended the system. He said the EU's different 
agricultural policy is the result of such factors as the 
relative smaller farm size in Europe, European culture, eating 
and product preferences, and its export mix. For all of these 
complex reasons, he said, Europeans have created a unique 
agriculture system that meets their objectives. Moreover, the 
United States has less need for a support system because it has 
three times as much arable land as in Europe while Europe has 
three times as many farmers. According to Lamy, these 
circumstances justify the greater expenditure by the EU on 
farmers. He said that Americans have great difficulty in 
understanding how and why European farms may be only a few 
hectares in size. Europeans seek to maintain a traditional and 
rural population and one that has the incentive to protect the 
land and provide humane treatment for farm animals.\3\
---------------------------------------------------------------------------
    \3\ The delegation met with representatives from other delegations 
on the trip, who were critical of the EU's farm policy and its refusal 
to cut agriculture subsidies further than it had in the recent CAP 
reform; indeed, the formation of the G-21 with its aggressive stance on 
eliminating agricultural export subsidies and domestic support was due 
in part to developing countries' frustrations with EU intransigence. 
European attempts to garner credit for the recent CAP reform were 
soundly rejected by other WTO members with some developing countries 
maintaining that developed countries should unilaterally drop all their 
domestic supports and export subsidies because they are morally wrong. 
Developing countries argue that they should not have to ``pay for'' 
developed countries to stop causing this harm. Regarding Commissioner 
Lamy's comments about the special needs and tastes of Europeans as a 
justification for Europe's unique system, for many countries none of 
these reasons justifies the harm caused to farmers around the world by 
these trade distorting supports and subsidies.
---------------------------------------------------------------------------
    Congressman Hulshof raised concerns about the issue of 
market access for American agriculture into the EU, including 
beef and biotech products. Commissioner Lamy responded that the 
United States has access to the European market although ``not 
as much as you want.'' On biotech goods, he said that the EU 
will be authorizing more agricultural products, and GMO maize 
has been authorized. European concerns are not trade but health 
and safety related, and Europeans insist on being allowed to 
control those risks related to their food.
    Congressman English asked whether the EU would be active in 
opposing the reopening of the antidumping agreement. 
Commissioner Lamy said that some member states of the EU were 
supportive of stronger disciplines on use of antidumping cases 
while others wanted more flexibility. He characterized the EU 
system as already more restrictive than required by the WTO 
agreement (``WTO ++'') while the U.S. law was on par with the 
WTO agreement, which is why the United States had not been 
required to make many changes to its antidumping laws in past 
negotiating rounds.

Meeting with Grant Aldonas, Undersecretary of Commerce for 
        International Trade

    Undersecretary Aldonas, who attended the meeting with 
Commissioner Lamy, responded afterwards to Lamy's claims that 
the EU's rules system is WTO++, by saying that nothing about 
the EU system is WTO++. What the EU would like to see required 
by WTO rules is the system the EU currently has, which involves 
a high level of discretion and arbitrariness. The U.S. system, 
Undersecretary Aldonas said, is more legalistic, and the EU is 
concerned when the United States talks about transparency that 
it will decrease the ability of the EU to be arbitrary and 
flexible.
    Congressman Shaw asked whether seasonal antidumping rules 
are on the table. Undersecretary Aldonas said that they are. 
Congressman English asked whether existing WTO disciplines 
already allow for the consideration of seasonality. 
Undersecretary Aldonas replied that they do, although they do 
not provide the flexibility that the United States wants.
    Chairman Thomas asked Undersecretary Aldonas to comment on 
the G-21 and whether the emergence of this group was a 
surprise. He also asked whether the group could be a positive 
force if it ended up pushing the EU towards greater 
liberalization. Undersecretary Aldonas said that the group 
could be positive. He added that part of the reason that the 
Brazilians have been unclear about their goals is that they 
lacked clear signals from the leadership at home.
    Chairman Thomas asked what kind of progress would be made 
in Cancun. Undersecretary Aldonas replied that the progress 
would be based on assuring that nothing the United States wants 
to negotiate is taken off the table for the future, as opposed 
to assuring gains now.
    Undersecretary Aldonas summarized the state of play on the 
Singapore issues. With respect to trade facilitation, the WTO 
already has three articles that cover this area, so developing 
countries cannot legitimately argue that they lack the capacity 
to negotiate this new area. Government procurement is 
essentially an anti-bribery provision, so no nongovernmental 
organizations should oppose negotiations in this area, but it 
is hard to make it a priority when no one wants to pay for good 
government as a trade concession. With respect to competition, 
there is no support for moving forward. More work must be done 
to make people comfortable, and it does not necessarily benefit 
the United States to have the restrictions being proposed. With 
respect to investment, Aldonas said that he has not seen any 
interest from U.S. domestic industries. He added that the EU 
has not seen such interest either, so it is hard to understand 
why the EU insists it must have it.

Meeting with Rufus Yerxa, WTO Deputy Director-General, and Bruce 
        Wilson, Director, WTO Legal Affairs Division

    Deputy Director-General Yerxa outlined the process for the 
negotiations in Cancun including the Heads of Delegation 
meetings, Minister Derbez's proposed text, and the various 
large and smallgroup meetings that would follow. He emphasized, 
as others had done, that the goal is to agree to a framework for 
further negotiations, not modalities and certainly not specific 
quantitative cuts in tariffs or subsidies. Given that so many earlier 
deadlines were missed, it would be very difficult to meet the future 
negotiations deadlines. The scope and proposal on the Singapore issues 
will be an important discussion among the ministers. Even if there is 
agreement this weekend, a framework on even some of these issues will 
require a lot of time and commitment.
    Congressman Levin mentioned that the dispute settlement 
system is ``opaque'' and requires reforming. Yerxa responded 
that this is largely a developing versus developed country 
issue. Many developing countries view the WTO as a government-
to-government venue; private entities have no place and instead 
should approach their own governments, not the WTO. 
Nonetheless, there is pressure to make the system more 
transparent, and some WTO Members already put their briefs on 
websites.
    Congressman Hulshof noted that the period of compliance is 
vague and lengthy. Mr. Wilson responded that the dispute 
settlement understanding provides for six to nine months for 
compliance, which compares favorably to domestic U.S. law. He 
noted that the United States has been the primary advocate for 
the rules-based, legalistic system and in shaping the WTO 
dispute settlement rules like U.S. law.

Meeting with George Yeo, Trade Minister of Singapore

    Minister Yeo noted that the mood in Cancun was not good 
when the delegates arrived, although reaching agreement on 
access to medicine and TRIPS defused an important issue.
    Minister Yeo was given the task of revising the draft text 
on agriculture. To that end, he held intensive consultations 
with delegations to determine the flexibilities. He urged 
delegations to show him where they are flexible--without such 
intelligence he would be forced to guess. He described that 
there was a succession of encounters among the United States, 
the EU, and the G-21, but Friday morning was the first time 
that there was any real attempt to understand each other's 
political needs.
    Minister Yeo briefly described the draft text he produced, 
which had just been made available. He said that the text was 
ambitious and that the G-21 would benefit greatly from what he 
had produced.

Meeting with Supachai Panitchpakdi, WTO Director-General

    The Congressional delegation met with Director-General 
Supachai shortly after the new Yeo text was circulated among 
Members. Director-General Supachai described the new text as 
balancing the many interests of the Members. He noted that the 
text contains a high level of ambition with a non-linear 
formula to address countries with high tariffs. At the same 
time, the text has strong special and differential components 
throughout. He expressed concerns about the provisions related 
to the Singapore issues because some developing countries 
maintain they are not ready to move on these issues.
    Senator Craig Thomas asked whether the text contains a 
definition of least developed country, alluding to the issue of 
the scope of application of certain special and differential 
treatment provisions. Director-General Supachai said that the 
WTO relies upon the internationally accepted definition of 
least developed country, but he noted that applying this 
definition is different because of the wide spectrum of 
economies involved; classifying countries has almost become 
taboo.

Visit to Isla Contoy Wildlife Preserve and National Park (Spouse 
        Program)

    A tour of Isla Contoy was provided to spouses by the U.S. 
Agency for International Development (USAID), Mexico. Isla 
Contoy is a tropical biodiversity project in partnership with 
the Mexican National Commission for Protected Areas (CONANP) 
and Amigos de Sian Kaan, a Mexican non-governmental 
organization (NGO).
    The site visit was conducted by USAID Daniel Evans, Team 
Leader for Environment Programs; John Beed, Deputy Director; 
Omar Ortiz, Director of Isla Contoy National Park; and the 
Fundo Mexican's Conservation Director Jorge Rickards. Jorge 
Rickards provided a brief overview of the operations of the 
Fund and activities throughout Mexico, as well as more in depth 
discussion of the efforts to promote conservation and eco-
friendly economic opportunities in Cancun and the Yucatan 
Peninsula. The brief was conducted in conjunction with a site 
visit to Isla Contoy for the purpose of viewing the protected 
habitat and learning firsthand about the educational programs 
and facilities created to preserve the habitat for over 70 
species of birds, six species of sea turtles, and a host of 
marine and animal life.
    Access to the island is limited by requiring passes and 
group tours only. The revenue raised through access and 
visitation passes directly supports the fund for the National 
Park. By preserving the habitat, marine and animal life is able 
to thrive while ecotourism is promoted. Ecotourism has created 
a commercially viable program for boat tours from the Yucatan 
Peninsula to Isla Contoy, Isla Mujeres and other sites as well.

                               BACKGROUND

    Following the enactment of the North American Free Trade 
Agreement (NAFTA) P.L. 103-182, the United States and Mexican 
governments pledged $10 million and $20 million respectively to 
capitalize an endowment fund for environmental conservation in 
Mexico, resulting in the Fundo Mexicano Para la Conservacion de 
la Naturaleza (FMCN). USAID provided the $20 million in capital 
to honor the U.S. commitment and was instrumental in working 
with other organizations to generate ideas and additional 
financial and technical support for the fund.
    As of today, the Fundo Mexicano is the largest conservation 
fund in Latin America, having a total endowment of greater than 

$80 million. It is playing a leading role nationally in 
conserving endangered species, encouraging sustainable economic 
opportunities in ecotourism and agroforestry, protecting 
threatened biodiversity areas and sensitive eco-systems, and 
promoting restoration and erosion control activities in highly-
degraded areas of Mexico. The idea to form a Mexican 
environmental conservation fund was identified by the United 
States and Mexican governments to support NAFTA and to address 
environmental issues that arise from enhanced regional 
development.
    USAID undertook the project in support of the idea to 
create an endowment fund. The fund was designed by a 
consultative committee comprised of Mexican business people, 
academics and conservationists. The objective of the Fund is to 
provide long-term, sustained financing to strengthen the 
capacity of Mexico's agencies and become self-sustaining by 
attracting private donors in the international community to 
contribute to the fund. The Mexican Conservation Fund ``Fundo'' 
was incorporated in 1994 as a non-profit civil organization. 
Following the contributions of the U.S. and Mexican 
governments, the World Bank Global Environment Facility and 
private foundations, the fund has raised $80 million in 
endowment funds with a goal to reach a total endowment of $100 
million.

USAID Development Cooperation with Mexico

    USAID manages a $30 million annual program of development 
cooperation in Mexico. For 2003-2008, USAID's program is 
supporting Mexican Development and reform initiatives in the 
following key areas:
     Improved governance and a strengthened rule of 
law;
     Strengthened higher education partnerships in 
support of bilateral U.S. and Mexico development priorities, 
particularly trade and commerce;
     Improved management of natural resources, 
including energy efficiency and promotion of renewable energy 
sources;
     Broadening access to finance, particularly for 
Mexican micro-enterprises; and
     Prevention and control of infectious diseases such 
as Tuberculosis (TB) and HIV/AIDS.
    USAID works with a wide range of Mexican and U.S. partner 
organizations to implement these programs, including Mexican 
Federal, state and local governments, universities, NGOs and 
the private sector.

                                
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