TWN Info Service on WTO and Trade Issues (Oct07/16)

22 October 2007

Developing countries assert concerns in NAMA proposal

The modalities for NAMA have to respect development principles including lower percentage reductions of tariffs for developing countries, as well as flexibilities that suit the diverse needs of different developing countries.

This is the essential message in a formal proposal by four developing-country groupings presented to the WTO's General Council on 9 October. They are the ACP Group; the African Group; the NAMA 11 Group of Developing Countries; and Small, Vulnerable Economies (SVEs).

Although the proposal did not reject the draft modalities paper of the chair of the NAMA negotiations (Ambassador Don Stephenson of Canada), the paper has major points of divergence from the Chair's modalities.

The differences are most obvious in the areas of the tariff-reduction formula (and the coefficients that determine how deep the cuts will be for developed and developing countries), the flexibilities to be given to developing countries affected by the formula cuts, and the special treatment to be given to categories of developing countries (small and vulnerable economies, "paragraph 6" countries, and recently acceded members).

In its most explicit criticism of the Stephenson draft, the paper states: "Proposals that seek to impose reduction commitments on developing countries, including the SVEs, which are higher than that for developed countries, cannot be accepted." 

Below is a report on  the NAMA proposal, which was published in the South North Development Monitor (SUNS) on 11 Oct 2007.  It is reproduced here with the permission of the SUNS.  Any reproduction or re-circulation requires the prior permission of the SUNS (sunstwn@bluewin.ch).

Best wishes
Martin Khor
TWN

Developing countries assert concerns in NAMA proposal
Published in SUNS #6342 dated 11 October 2007 
By Martin Khor, Geneva, 10 Oct 2007

The modalities for non-agricultural market access (NAMA) in the WTO's Doha agenda have to respect development principles including lower percentage reductions of tariffs for developing countries, as well as flexibilities that suit the diverse needs of different developing countries.

This is the essential message in a new formal proposal by four developing-country groupings presented to the WTO's General Council on 9 October. They are the ACP Group; the African Group; the NAMA 11 Group of Developing Countries; and Small, Vulnerable Economies (SVEs).

The NAMA 11 comprises Argentina, Venezuela, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa and Tunisia.

The proposal was introduced at the General Council by the presentation of a statement by South Africa's Ambassador, Faizel Ismail. South Africa coordinates the NAMA 11.

Although the proposal did not reject the draft modalities paper of the chair of the NAMA negotiations (Ambassador Don Stephenson of Canada), the paper has major points of divergence from the Chair's modalities.

The differences are most obvious in the areas of the tariff-reduction formula (and the coefficients that determine how deep the cuts will be for developed and developing countries), the flexibilities to be given to developing countries affected by the formula cuts, and the special treatment to be given to categories of developing countries (small and vulnerable economies, "paragraph 6" countries, and recently acceded members).

In its most explicit criticism of the Stephenson draft, the paper states: "Proposals that seek to impose reduction commitments on developing countries, including the SVEs, which are higher than that for developed countries, cannot be accepted."

In the Stephenson draft, the developed countries are to take on a coefficient of 8-9 (implying a cut in average bound industrial tariffs of 21-27 per cent for members like the US, EU and Japan) while developing countries are to use a coefficient in the range of 19-23 (implying average cuts of 52-65 per cent for countries like Brazil, India, Indonesia, Argentina and Venezuela).

The developing countries have argued that this is opposite to the principle of less than full reciprocity in which developing countries undertake lesser reduction obligations.

The proposal also re-affirms that the Doha Round is to be centered on agriculture, and thus the outcome in NAMA should be determined by what can be achieved in agriculture, a point that is disputed by the European Union.

Responses to the paper were negative and aggressively so from major developed countries. Inside the General Council, the United States said that it was very disappointed because it had made an effort but the developing country groupings were going backwards.

In Washington, Sean Spicer, a spokesman for the US Trade Representative, told AP news agency: "This could be the beginning of the end of the Round. This is a gigantic step backward. Are they trying to find a successful outcome or light a fuse to blow up this round?"

The EU's trade spokesman in Brussels said that "alternative papers are not needed" because Stephenson had issued a "draft compromise." At the WTO, the EU also rejected the view that agriculture determines the overall level of ambition of the Round.

The developing-country proposal says that the co-sponsors offer an array of positions which represent their interests in a broad way and respect the letter and the spirit of the Doha Mandate, the July Framework and the Hong Kong Declaration.

Regarding ambition of commitments in the Round, the countries say that the Doha Round is about development of developing countries. The centrality of agriculture in the Doha Ministerial Declaration cannot be wished away. Agriculture is the unfinished agenda of the Uruguay Round and significant progress in this area is critical.

"Agriculture determines the ambition of the Round. NAMA modalities have to be built around and lead to a result comparable to what is achievable in agriculture," says the paper.

Regarding the Formula and Tariff Reduction Modalities, the paper says that it is crucial that it must require from developing countries "less than full reciprocity in reduction commitments". This creates a hierarchy in the reduction commitments to be undertaken by Members.

"Developed country Members should offer greater reductions than developing countries. Amongst developing countries, the small, vulnerable economies are to undertake lesser reduction commitments," it says.

"The reduction commitments are to be measured from the agreed base rates. Responding to the principle of less than full reciprocity, the reduction commitments shall be in percentage terms and shall be higher for developed countries than for developing countries.

"The reduction commitments when effected using Swiss formula with coefficients, i. e., one coefficient for developed countries and higher coefficients for developing countries shall fully comply with the principle of "less than full reciprocity in reduction commitments".

The paper adds that target binding averages have been proposed for certain other developing country members, such as the SVEs and the paragraph 6 countries (those that have presently bound less than 35% of their tariff lines).

"Following from the above, proposals that seek to impose reduction commitments on developing countries, including the SVEs, which are higher than that for developed countries, cannot be accepted," says the paper.

Regarding Flexibilities for Developing Members, the proposal states that flexibility is a crucial element addressing the development dimension of this Round. Developing countries have demonstrated their diverse need for flexibilities, for both tariff lines and trade covered.

"Some have suggested that there should not be limits to the trade covered as is the case in agriculture; some have submitted that there is the need for additional flexibilities to preserve the common external tariff in customs unions; some to address social economic and labour concerns; and others to address concerns arising from a large number of low applied and unbound tariffs," it says.

"The final outcome of this development round must capture this diversity in development needs by making available the flexibility provisions to the appropriate and adequate extent."

On the Mark-up for Unbound Tariffs, the paper says that binding of tariff lines is a concession in itself, and that a mark-up of 30 for the presently unbound tariffs is appropriate.

On the Implementation Period, the paper proposes 5 years for developed countries and at least 10 years for developing countries. For SVEs and RAMs (recently acceded members), a longer implementation period shall be considered.

The paper also says that on the voluntary Supplementary Modalities, adequate time has to be factored into the timelines. The process needs to be sensitive to the significant adverse impact that these negotiations could have on some sectors in non-signatory preference-dependent countries.

The proposal also has specific points on categories of developing countries:

* On Small, Vulnerable Economies (SVEs): the modalities should impose lower reduction obligations on them than those on developed and other developing country Members. The co-sponsors support the SVEs' approach for a banded solution outside the formula.

* On LDCs, the paper says that the LDCs may undertake tariff binding commitments that they are comfortable with. Time-bound, full and faithful implementation of the Decision on Measures in Favour of Least-Developed Countries contained in Annex F - Proposal 36 of the Hong Kong Ministerial Declaration with information on the schedule for providing duty free and quota free treatment must be provided. Simplification and transparency of applicable rules of origin and commitments on capacity building and technical assistance must be included in the modality package.

* On Paragraph 6 countries, the paper supports the proposal of the Paragraph 6' countries that they be required to increase their binding coverage to up to 70% at an overall average tariff of 28.5%.

* On Recently Acceded Members, considering the extensive commitments undertaken by the RAMs during the accession process, they be provided more flexible treatment in the modalities applicable to them.

On non-tariff barriers, the paper reiterates that the mandate on NTBs is to remove them, particularly those that affect the export interest of developing countries. All those proposals that have gathered support and consensus should be mentioned in the revised text for further discussions.

Immediate initiation of text-based negotiations on the "Proposal on Procedures for the Facilitation of Solutions to NTBs" contained in document TN/MA/W/88 is necessary to ensure inclusion of the procedures in the final Doha Package. The text-based negotiations should retain the structure and character of the above mentioned proposal in its entirety.

On Preference Erosion, the paper recognizes that the core issue is to ensure that preference dependant industries in certain long term preference receiving countries retain their competitiveness after the MFN liberalization of tariffs, and that the main concern is to have preference erosion effectively managed to smooth the transition.

The paper stresses a longer implementation period of at least 10 years for the reductions affecting such tariff lines. It calls for the inclusion of commitments from the preference giving developed countries to simplify the applicable rules of origin and provide aid, including technical assistance. There must be a comprehensive package of measures to address the concerns expressed in addition to longer implementation periods.

On Non-Agricultural Environmental Goods, the paper says that it is for the WTO's trade and environment committee to decide on the mandate under Paragraph 31(iii) of the Doha Ministerial Declaration in its entirety. In case that negotiating body requires any assistance from the NAMA negotiating group, the group can provide assistance.