Brazil s Trade Policy in the Doha Round: A Discussion with H.E. Clodoaldo Hugueney, Ambassador of Brazil to the World Trade Organization

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1 Brazil s Trade Policy in the Doha Round: A Discussion with H.E. Clodoaldo Hugueney, Ambassador of Brazil to the World Trade Organization Moderator: Sherman Katz February 23, 2006 The following summary was prepared by Kate Vyborny, Junior Fellow, and Matt Ocheltree, Intern Carnegie Endowment for International Peace Agriculture Ambassador Hugueney emphasized the importance of agriculture to the Doha Round, both because of the importance of agriculture to developing countries and in making the round a development round, but also because of the high levels of protection in agriculture, analagous to the subsidies in industry before the Tokyo Round of negotiations. The Ambassador emphasized the importance of Brazil's leadership of the G20 group of developing nations organized around offensive agricultural interests. He pointed out that the positions of this group are developed among members, rather than through a rigid formal process, and attributed the success of the G20 in achieving a substantial voice in the Doha Round in part to its ability to represent the interests of a broad range of developing countries, including some which also have defensive agricultural interests in addition to their offensive interests. He discussed the key issues for Brazil and the G20: export competition, domestic supports, and market access. In the area of export competition, Ambassador Hugueney pointed out that Brazil, the US and others had wanted to phase subsidies out by 2010, but the EU had finally agreed to the deadline of He briefly mentioned the issues of US food aid and export credits, and the issue of state trading enterprises in Australia, New Zealand, and Canada, but overall concluded that the negotiations are on track in the issue of export competition. On the other hand, he warned that negotiations in the other two key issues, market access and domestic support, are not yet on track. He pointed out that while market access issues could be addressed in bilateral or regional negotiations, subsidies would only be addressed in the World Trade Organization, and thus should remain a high priority for the round. In market access, Ambassador Hugueney identified three sets of issues: the formula to be used for determining tariff cuts, the issue of sensitive products, and the treatment of developing countries. On the issue of the formula, he refuted the argument that the formula is less important because of the

2 exclusion of special products, reiterating Brazil's desire for ambitious cuts across the board in agricultural market access to create real market growth for agriculture in the developing word. The current US proposals would result in an average applied tariff reduction of 75%; the current EU proposals would result in a reduction of 39%, and the G20 proposal a 54% reduction, which the Ambassador said would be a fair middle ground but yet one representing a real improvement. He called on the EU and the G10 to make progress on this issue. On the issue of sensitive products, Ambassador Hugueney discussed the differences of position both on the number of products and how they would be treated. Proposals anywhere between 1% and 10% of tariff lines are on the table, a very wide range, but a World Bank study has shown that a two percent sensitive products exclusion would eliminate most of the gains from agricultural liberalization, so Brazil's proposal of 1% is not an unreasonable one. The EU proposal of 8%, and the G10 proposal of 15%, seem excessive in this light: They don't need eight percent at all, the Ambassador said. On treatment of special products, he said that differences remained over whether to treat special products as a temporary transitional mechanism, as Brazil advocates, or to allow long-term protection of these products, maintaining existing production levels. Ambassador Hugueney discussed the diversity of interests among developing countries, pointing out that the agricultural interests of Brazil or Chile are very different from those of India or Indonesia; he asserted that the G20's strength and value springs from its ability to reach a compromise position among members, which addresses both the offensive agricultural interests around which the grouping was formed, but also takes into account the defensive interests of members such as India. For example, if Brazil took an individual position, it would push for 80% reduction in applied tariffs, at the level of ambition of the US and the Cairns group. However, because of the importance of the defensive agricultural interests of G20 members, particularly those with large numbers of people in subsistence agriculture in uncompetitive sectors, it is important to come to a mutually acceptable position. He highlighted the close cooperation between the G20 and the G33, a grouping organized around defensive agricultural interests, for this reason. The Ambassador highlighted the progress made in Hong Kong on the defensive agricultural interests issue in both the decision that developing countries could self-designate products as special products for exclusion based on their food security and livelihood interests, and in the decision that the agreed Special Safeguard Mechanism would be applied on both a quantity and a price basis. In the area of domestic support, Ambassador Hugueney called for significant cuts not only in the individual boxes of subsidies, but also in the total level of subsidies, a position key to the G20. He pointed out that a great deal of the cuts to date have eliminated water in the subsidies, or the room between what countries are allowed by their WTO commitments to spend on subsidies and what they actually spend. While this is important, it is not sufficient. He also asserted the need for disciplines on the subsidy categories to prevent box-shifting to the point where the categories are meaningless: product specific caps, reform of price ranges and target prices, and close attention to ensure subsidies categorized in the green box truly are minimally distorting. He also called for more transparency in notification of spending on these subsidies, pointing out that the US is now in the process of notifying the WTO of its subsidies spending from 2001, and that spending practices are not transparent in Europe. He called for data to be made available in a more timely manner, and for surveillance of this spending. Ambassador Hugueney concluded his overview of the agriculture negotiations by contrasting the progress of the GATT and WTO in agriculture and non-agricultural market access, which has

3 progressed much faster. He said that many of these liberalization measures should have been done fifty years ago, but instead de facto policies of reverse special and differential treatment favoring developed country agriculture have been in place over the last fifty years. Agriculture is the area in which the most important development gains can be made, and so progress in this area is particularly important. Discussion session. Sherman Katz of the Carnegie Endowment, the moderator, asked the Ambassador about the possible classification of countercyclical payments into the blue box. Ambassador Hugueney pointed out that the US has already made progress by its proposal to cap the blue box at 2.5% of the value of production, rather than 5%, as in the July Framework. This, however, is still a high level of support. He also pointed out that if the target price is set too high for countercyclical payments, the level of compensation will be very high; there could be a concentration of blue box support in a few commodities. The G20 advocates that the EU move to introduce product specific caps in the blue box, which the EU has already stated that it is ready to accept. The G20 also wants to reform the old blue box box in order to stop the concentration of resources there. He said that the issue of price targeting, particularly through target prices, is more difficult to address. While movement from amber to blue and green box subsidies is a positive step because they are less distorting, the Ambassador reiterated the importance of limiting overall subsidy levels and ensuring that the criteria for the boxes remain strong, in order to avoid box shifting and the mere pretense of reform. Sherman Katz mentioned the recent comment of Senator Saxby Chambliss, chair of the agriculture committee, that the 2007 farm bill would attempt to move as many programs from the amber to the blue and green boxes; he also said that the farm bill should anticipate the general framework of the Doha agreement, which it is possible to predict at this point. He also pointed out the Farm Bureau's recent statement discouraging such a move, and urging Congress instead to wait for progress in the WTO before drafting the farm bill. Ambassador Hugueney put this into the context that over the course of the round, significant reform has been made in a number of countries, such as Japan's reforms to its rice subsidies, which have now left it with more water in its amber box, and the EU's movement away from the amber box and even from the blue box, to categorize the single farm payment progrma as a green box subsidy. For this reason, an indication from the US of its movement away from the amber box is important, as is a clear signal of the general direction of its agricultural policy. Because of the EU's CAP reform, it can commit to low levels of trade distorting support, so it is therefore now up to the US to reform its subsidies, otherwise the Europeans have a reason not to move further in negotiations in other areas. This kind of balance is necessary to achieve agreement, and requires the proactive stance of the US in moving the round forward. John Swanson of Inside US Trade asked about the feasibility of meeting the negotiation deadline of the end of 2006, given that Peter Mandelson of the EU is still calling on Brazil and India to move on NAMA, while Brazil is calling on the EU to move on agriculture. He asked when members would actually move in concert, as agreed in the World Economic Forum in Davos, and if they would not make large moves simultaneously, when could movement on smaller aspects be expected? Ambassador Hugueney reaffirmed the need for all the countries to move in concert, and said Brazil is willing to make concessions in NAMA and services, which he would discuss in the second section of the talk; the EU needed to move on market access. He also pointed out the numerous smaller negotiating groups now working in smaller discussions to find areas for progress. However, he emphasized that there is still room for work in agriculture, because while members already have clear

4 positions, agriculture is both key for the success of the round, and also much more complicated because of the range of protection mechanisms from subsidies to specific tariffs and tariff rate quotas, and quantitative restrictions, many of which mechanisms are no longer an issue in NAMA. The Ambassador said that it would be feasible to have substantive results by April, although perhaps not full modalities. He said he thought that cuts in agriculture would not be very difficult, and that thresholds had already been agreed. He predicted a linear cut, which is simpler. However, in some ways imposing disciplines on subsidies would be more difficult. Finally, Ambassador Hugueney predicted that if there is substantive progress by April, completing negotiations by May or June will not be a problem. Jeff Schott of the Institute for International Economics pointed out that the protections in agriculture are greater than what ever existed in NAMA, so in fact full liberalization in agriculture would be more ambitious than liberalization of trade in manufactures could ever have been. He asked why the data used to do studies for the purpose of evaluating potential WTO agreements is not more recent, given that developed countries' internal studies are using more recent data. Ambassador Hugueney clarified that these data are used for studies internally, but that for negotiation purposes the only data accepted are those which are officially submitted to the WTO, which are the less recent data. Jean-François Boittin of the Embassy of France asked why Brazil is calling for the reduction of subsidies by the US when World Bank studies show that market access has the greatest effect on gains from agricultural liberalization; he also asked whether the Ambassador's mention of the differences between the interests of Brazil and Chile compared to India and Indonesia is the beginning of a recognition of a need for differentiation. Ambassador Hugueney responded that the pressure to reduce subsidies is principally a recognition of European effort in this area, and a response in order to ensure not all the pressure is put on Europe in agricultural liberalization. He also pointed out the importance placed by the Doha mandate on achieving substantial progress on both areas, and the fact that the WTO is the only arena within which subsidy reduction can be pursued, because of the US position of harmonization of subsidy levels, while regional negotiations such as the FTAA could address the market access issue between Brazil and the US. To the second question, the Ambassador responded that many predicted the G20 would not survive because of the disparate interests with in it, but because the group has a permanent dialogue between members, it has been possible to harmonize their position to present to the WTO: because they acknowledge and address the differences, rather than setting the policy according to the interests of one or two members and attempt to ignore them, it is possible to maintain a cohesive group. Jim Grueff, a former US agriculture negotiator, asked about the Ambassador s consideration of the political implications of the recent WTO judgment in Brazil s favor on a dispute over cotton. Although Brazil won the case, it now faces a U.S. partner with less enthusiasm for the Doha round. He also asked for any comment the Ambassador had regarding US compliance with the ruling. Ambassador Hugueney responded that while both negotiation and litigation are a part of the WTO framework and are not completely distinct tools, Brazil has learned from the US cotton case, the EU sugar case, and EU poultry cases that while Brazil has the right to pursue litigation, negotiation is also important as a tool to address these problems. We have doubts about compliance on the cotton case, a case which is important not only for Brazil, but also for many African countries, and for the future of the round as a whole. A representative of Friends of the Earth US thanked the Ambassador for his comments about the blue box, which also concerns his organization. He also asked about the Ambassador s response to the

5 stances of the G33 and the ACP (African, Caribbean and Pacific countries). Ambassador Hugueney responded that the Brazilians had run economic simulations of both the G10 and the ACP proposals, which represent opposite extremes. The ACP proposal, while it requests lesser tariff cuts, also includes a number of other devices, including many more sensitive products for developing countries, more leeway in how the developing countries may treat their sensitive products, special products for developing countries, and the special safeguard mechanism with a price and quantity trigger. It is hard to see why so many mechanisms of special treatment are necessary: if tariff cuts are relatively modest, why are so many exceptions needed to protect developing country markets? In addition, many of the ACP countries are LDCs, which will be excluded from liberalization measures in any case. Some degree of engagement is needed, rather than asking for everything. The Ambassador called the G20 proposal a more reasonable alternative to the extremes on either side. Sherman Katz asked the Ambassador about the possibility of reverse engineering to reach a framework in other words, starting with targets of trade volumes, then using economic models to determine what kind of cuts would be necessary to achieve those. Perhaps, suggested Katz, this alternative manner of approaching the problem would help break the deadlock. Ambassador Hugueney responded with a number of objections to this approach. It relies on economic models which include many assumptions about elasticity. It also would be likely to result in much more ambition in reducing subsidies than in market access, simply because of the concentration of agricultural trade in about fifty tariff lines, unlike in agricultural goods. Also, the resulting system of administered trade rather than free trade is inconsistent with the WTO approach in other areas, in which reform is the building block of liberalization. Rather, what is needed is market access on a level of ambition similar to the other pillars of negotiation, market access to other developing countries, and proportionality between developed and developing countries, which will not be achieved through reverse engineering. Bilateral meetings can certainly be useful, but a broader, more general framework is needed to develop modalities. The Ambassador also pointed out that developing a framework through reverse engineering would necessarily be driven by smaller deals determining what will be the gains of the major players in particular products. For this reason, it does not involve the interests of the broader range of developing countries, and would not be acceptable to the G20; the WTO should operate in a more transparent, rules-based, and truly multilateral approach than the old GATT. Jim Bergin, of the Washington Trade Daily, asked whether the G20 position is that the simulation exercises in agriculture are premature because more substance was needed in the formula before evaluating it in this way, or that it could contribute to actually developing the modalities. The Ambassador responded that the G20 had agreed to the simulation exercises, but with the recognition that it is very difficult to simulate agriculture agreements accurately because of the complex mechanisms of protection involved in agriculture. Non-agricultural market access Ambassador Hugueney explained that Brazil has worked with India and Argentina to put a formula on the table for NAMA cuts. There is no common G20 position on a NAMA formula, although some of the G20 countries have similar positions on other NAMA issues. He recalled the Doha mandate to eliminate high tariffs, tariff peaks, and tariff escalation; the agreement to less than full reciprocity between developed and developing, and special and differential treatment for developing countries. As was always the case in the GATT, bound rates are under consideration, rather than applied rates. Brazil has significant offensive interests in reducing tariff peaks and escalation, for example in instant

6 coffee, porcelain, and steel. For this reason, Brazil hopes for a coefficient that will achieve significant tariff harmonization and eliminate tariff peaks. In addition, Brazil has an offensive interest in the binding of unbound tariff rates by countries such as India and Malaysia, since 100% of Brazil s tariff rates are bound. Ambassador Hugueney pointed out that in the domestic context of many countries, there is significant concern about the value for development of liberalization of industry; he suggested that economists should devote more attention to showing the potential gains from NAMA liberalization. The Ambassador addressed the issue of proportionality between agriculture and NAMA, and argued that Brazil s position is reasonable because it would address offensive interests, achieve a comparably high level of ambition between the two sectors, and achieve balance and proportionality between developed and developing countries. He called Peter Mandelson s proposal of a 75% cut in NAMA for India and other countries absurd and recalled the mandate for harmonization within the structure of tariffs, rather than between countries. The Ambassador also responded to criticisms of Brazil s emphasis on cutting its bound tariff rates, emphasizing that bound rates have always been the focus of negotiations in the GATT and the WTO. He drew an analogy to domestic support in agriculture, in which there is a great deal of water which is reduced only by further cuts to bound rates. Ambassador Hugueney said that Brazil is prepared to reduce or eliminate the amount of water in NAMA tariffs and cut the applied level of tariffs. The Ambassador discussed the formulas under discussion: a Swiss formula approach or the approach of Argentina, Brazil and India (called the ABI approach). The ABI approach includes a Swiss-type formula to be applied line-by-line to bound tariffs, and unbound tariffs would be reduced from base values on the average tariffs, rather than line-by-line through a formula. If the Swiss formula were applied with a coefficient of 1, it would result in the highest bound tariff being 30%, and an average of 10%. He argued that Brazil s approach would generate significant gains, while remaining compatible with what Brazil is able to do and the industrial protections that developing countries need to become more competitive. It would result in an average 50% cut in NAMA, which he asserted is proportional to the average 54% cut in agriculture which Brazil seeks from the EU. The Ambassador mentioned other elements which Brazil has tried to raise in the negotiations, such as sectoral negotiations, which have received limited interest so far. However, Brazil will join several of the sectoral groups which have begun meeting. He also discussed the issue of preference erosion for small economies in NAMA as in agriculture. Studies indicate that a small number of countries and products will be negatively impacted by multilateral liberalization. He suggested that the special session Pascal Lamy is coordinating on this issue will address a broad approach to preference erosion, to ensure a sufficient response. Finally, the Ambassador addressed the question of when movement could be anticipated in NAMA simply by calling for members to maintain their attention on the mandate of proportionality; if other negotiating partners hope to achieve disproportionate results, they will not achieve progress. Discussion session.

7 Sherman Katz asked about which sectors might be candidates for sectoral discussions. Ambassador Hugueney responded that jewelry and steel, in which China has an important interest, are clear candidates; other possible sectors such as auto parts and chemicals are also potential subjects for sectorals, but might be more difficult. Sherman Katz asked about whether Brazil intended to take advantage of the principle of less than full reciprocity. The Ambassador responded that Brazil certainly would; non reciprocity in NAMA is in fact most relevant to Brazil, rather than to the smallest and least developed countries, which do not have an industrial sector which is likely to suffer in the first place. In addition, the flexibilities provided are still quite limited, taking into account the value of imports, unlike the sensitive products in agriculture, which are determined only by the number of tariff lines. Simulations of the impact of the inclusion of flexibilities on the average cut result in an impact of approximately two or three percentage points, which is not very significant; this will be apparent in simulations which are currently underway. Sam Gilston of the Washington Trade and Tariff Letter asked about the March 10 meeting of the G6, and asked whether some movement in concert might be a result of that meeting or in the two to three weeks following it, because it would be moving closer to the April ministerial. Ambassador Hugueney responded that the G6 is working on that goal, with the purpose of discussing agriculture in the March 10 meeting, while the April ministerial would cover all areas. He said that he hoped it would be possible to give the ministers choices for that meeting. He said that the choices are generally clear in agriculture, with ranges and formulas already explored. However, in the area of disciplines, the issues are more complex and would require more political decisions; senior officials have started to focus more on disciplines now. If it is possible to surpass the central problems with these choices, then the basic decision is in how to balance market access and domestic support that meets the mandate of a substantial reduction and is balanced with NAMA market access. He said it would be possible to achieve these decisions, but whether it would happen in fact would be determined by the level of ambition of negotiators. Mary Irace of the National Foreign Trade Council commented that negotiations would likely move forward more generally if there were more ambition in NAMA, particularly in eliminating the water in the tariffs. She asked whether Brazil would contemplate a two-coefficient formula as proposed by the EU, which could energize the agriculture negotiations enormously. Ambassador Hugueney responded that this is proposing the impossible, and it is unjustifiable to Brazil. He pointed out that all the water would be cut from NAMA tariffs under Brazil s proposal. He also asserted that trade distorting policies such as subsidies should be cut as a matter of playing by the rules of the game, and tariffs, which are a legitimate instrument of protection, should not have to be cut in payment for subsidy cuts. This proposal would increase the distance between market access improvements in agriculture and NAMA. Because of the European interest in maintaining protection for the CAP reform, there is no possibility of achieving a 70% or 80% cut of agricultural tariffs. So, a 75% cut in NAMA tariffs as would be the case with a Swiss formula coefficient of 15 should be out of the question. A more apt analogy would be that Brazil s concessions in agriculture are allowing the binding of CAP reforms, so therefore the binding of Brazil s NAMA tariffs should count as an equal response to that. Ms. Irace asked a followup question regarding the US proposal of a two stage approach. Ambassador Hugueney responded that Brazil has tried to explore such a two-stage approach, and staging could help in some of the challenges such as agricultural reform, but up until now there has been no positive EU reaction. The EU has a mandate to commit no more than the current CAP reform, and so the

8 expectation is to wait until the next round (if we reach a next round) for further reform. However, it is not feasible to conclude the round by lowering expectations; rather, only a high level of ambition can achieve balance. Gawain Kripke of Oxfam America asked whether Brazil s expectations for movement in concert implied an expectation of new US domestic support proposal, or just refinement of the existing proposal? Ambassador Hugueney responded that Brazil expected an improvement on the US proposal on domestic support, noting that the US negotiators, including Johanns and Portman, have never reached a point where they have said clearly that they cannot make any further movement, unlike the EU. The US has been more open to consider further movement. Similarly, Brazil expects movement by the EU in parallel to US progress on domestic support. In addition, Mr. Kripke asked about the negotiation of the energy sector, particularly with growing focus in the US on new forms of bio energy. The Ambassador responded that several possible approaches could be taken, including potentially addressing this through a sectoral, or including biofuel in the currently undefined environmental goods category. The EU and Japan have also started moving towards greater use of bioenergy, and the price of sugar in the US has risen due to bioenergy demand. In Brazil, the government actually had to intervene and mix petroleum with ethanol to contain the price of ethanol. The US and Brazil share a large interest in the area of biofuel, and should move from opposition to a strategic market to develop the world market for bioenergy. Jean-François Boittin of the Embassy of France commented that he had seen a study showing that a Swiss formula with a coefficient less than 15 would have no effect on the Brazilian economy. He said that the French position is not just driven by the political importance of farmers, but also by the rise of the share of processed products in the share of world trade, and the corresponding decline of agriculture in world trade. This is why movements in NAMA and services are so important to the French. Ambassador Hugueney responded that 50% and 54% cuts are reasonable, without including the treatment of sensitive products; he said it is impossible to maintain the attitude of expecting increased ambition in NAMA without any progress on agriculture. For example, some G10 members have refused a tariff cap of 100 as outrageous, but then turned around and asked for a 75% cut in NAMA. He called this attitude not feasible at all totally absurd. In addition, the level of protection is not transparent in agriculture because of the complex mechanisms used for protection. Members refused the proposal to convert protection to ad valorem tariffs and then bind them, which would have made the process more transparent. A question was asked about the Ambassador s statement that Brazil is prepared to take a cut in applied rates in NAMA, and whether the G20 dynamics play into this area. Ambassador Hugueney responded that NAMA negotiations have become more complex because they now involve developing and developed countries in the negotiations, unlike in the past when developed countries negotiated these among themselves. In addition, countries with significant free trade agreements such as Chile and Mexico have no defensive interests in NAMA, and want higher ambition. Many Asian economies have unbound tariffs, so there is the challenge of how to bind these tariffs and then cut the newly bound tariffs, particularly since some unbound tariffs in countries like Malaysia are already low, while in India they are higher but result from its unilateral liberalization. This results in a very diverse coalition. NAMA generally interests around twenty countries, unlike agriculture, which is important to almost all the members, yet NAMA is still complex due to the diversity of interests. The parallel coalition on NAMA does not have a common position or formula, but has agreed to focus on the development dimension, particularly Paragraph 8 flexibilities. NAMA will depend a great deal on bilateral discussions, and on internal decisions on what each country is able to offer. For that reason,

9 Brazil is working on simulations of the economic effects of NAMA liberalization, and is working with industry and other stakeholders as well to explore the possibilities. Services Ambassador Hugueney called services both simpler and more complex than the other areas of negotiations. Services negotiations are simpler because it is not necessary to draft multilateral modalities, despite an EU effort to change this process. Rather, it is a bilateral request and offer process. Hong Kong added an element of exploring a plurilateral approach, but it is not yet clear exactly how it will work, even in the minds of those who promoted it. It may or may not replace bilateral discussions effectively, but Brazil will participate in both formats of discussion. However, the areas which Brazil has already excluded from the negotiations, that is the public sector such as education, and areas important to cultural diversity, will continue to be off the table; liberalization of these sectors faces strong opposition in Brazil. Though not as competitive as India, Brazil does have some offensive interests in the liberalization of some technology sectors, such as computers and IT. Ambassador Hugueney pointed out that 50 sectors had been addressed during the Uruguay Round, and that Brazil is willing to put another 31 on the table one of the boldest commitments to come from the developing countries. He suggested that India s willingness to further open many of its markets stems from the fact that it undercommitted in Uruguay. Brazil s service sector is already relatively liberalized, with opportunities for US banks to operate and a privatized telecommunications industry. Some of the major concerns expressed by the developing countries, Brazil included, relate to the regulation of service markets in addition to their accessibility. Compared to developed nations, services are relatively unregulated in developing and emerging economies, which worry about the constraints imposed on their abilities to develop effective regulatory environments by the binding restrictions that accompany multilateral liberalization. The interaction between such multilateral rules and behind-the-border regulatory issues, as is the case with services, is extremely complex. For example, Brazil had to change its previously negotiated position on the financial sector after implementing legislation which would have privatized the reinsurance sector was defeated in Congress. In response to these difficulties, Malaysia has proposed some kind of safeguard mechanism for services that Ambassador Hugueney intimated might be worthy of consideration. Overall, Ambassador Hugueney indicated that he did not foresee the round succeeding or failing because of progress or lack thereof in the services sector. The negotiations on agriculture, NAMA, and rules (e.g. antidumping) are far more likely to be determining factors. Discussion session. Jeff Schott of the Institute for International Economics commented that although services might not make or break the round in negotiation, they certainly have an impact at the stage of legislative approval in the US and other members. He also brought up the proposal of a type of peace clause to preclude litigation for a specified period of time, as was implemented with agricultural subsidies. This would allow developing countries the time to develop a regulatory structure, while still encouraging investment within that structure. Ambassador Hugueney took Dr. Schott s first point, and responded that Brazil is pursuing ambitious liberalization in services, and he felt that the services package will be

10 significant enough to gain legislative support in members, rather than being a minimal package. On the peace clause proposal, he responded that this is an interesting proposal that should be considered, and might be a better option than a safeguard mechanism. A representative of the Embassy of Norway asked if the Ambassador could comment on the rules negotiations, which are important to Norway s interests. The Ambassador responded that the key areas are fisheries, subsidies, and dumping, and that Brazil shares an interest in all three areas and hopes to achieve progress balanced between the three. There is now a proposal on fisheries on the table, whose outcome will be important for the progress of that area of the rules negotiations. He also emphasized the importance of negotiating changes to the antidumping rules, and expressed hope that a substantial antidumping package would be a component of the round.