Industrial tariff issue runs into opposition

by Chakravarthi Raghavan

Geneva, 29 Sep 99 -- The moves of Europe, US and Japan to put on the agenda of the next round of trade negotiations, issue of reduction of industrial tariffs under the rubric of market access for "non-agricultural products" saw outright opposition, sharp objections, serious reservations and doubts in the informal General Council discussions on Tuesday and Wednesday.

In opening the discussions, the General Council chair, Amb. Ali Mchumo, said that a large number of proposals have been put forward suggesting negotiations on this, that there was considerable support for this, but that other countries had expressed serious reservations.

India said there was no legal basis or mandate to include this on the negotiating agenda. For developing countries, tariffs was not the issue, but the non-tariff barriers facing their exports in the developed countries were important.

Australia claimed that the launching of tariff negotiations was covered by Art.XXVIII bis and para 9 of the Geneva Ministerial Declaration.

[Art XXVIII bis of GATT 1994, speaks of customs duties and others being obstacles to trade, and envisages that the CONTRACTING PARTIES "may therefore sponsor such negotiations from time to time", and such negotiations being carried out on a selective product-by-product basis and on multilateral procedures.

[In the run-up to the Geneva ministerial, the EC and others had flagged 'industrial tariffs' and had sought specific mention. Finally emerged Para 9 (d) which did not identify any subject, but mentions, in the mandate of the General Council for Seattle preparations, "recommendations arising from consideration of other matters proposed and agreed to by Members concerning their multilateral trade relations".

[Both Art XXVIII bis for tariff negotiations, without including or excluding any specific sectors, appears to be a permissive one needing Consensus; and para 9 (d) of GMD also contains a permissive wording for including items not covered specifically, but to which other members agree.]

Egypt said that tariffs were necessary to protect industries in developing countries and generate national revenues. Egypt shared the same views as India, and had strong reservations over including industrial tariffs in negotiations.

Korea said for a balanced outcome, there should be industrial tariffs, a view that New Zealand too supported, adding that non- tariff measures should also be dealt with.

The EC said that credible market access negotiations on "non- agricultural market access" should include negotiations on non- tariffs.

South Africa was willing to go along with tariff negotiations, subject to inclusion of all non-tariff issues and tariff quotas, as well tariff-free access to LDCs.

Colombia said that this was a new issue being raised for the Seattle agenda, and it had considerable reservations on it.

Chile felt that the subject could be included on a consensus.

The United States thought everyone had to be "reasonable" on what could be included, while Japan insisted it was necessary to include these.

Czechoslovakia wanted harmonisation of tariff structures.

Brazil said that tariffs was the only means of protection. But they would still be receptive to the idea of tariff negotiations. "But the idea of harmonisation of tariffs was a non-starter". Any negotiations should be based on bound tariffs.

[Though it has not been specifically mentioned in the proposals, the then EC Commissioner Sir Leon Brittan in raising this question had said that the basis for negotiations should be the applied tariffs in developing countries, and the negotiated outcome in industrial tariffs should be in three ranges, with a maximum of about 15 percent].

Any negotiations on tariffs to be on the basis of bound tariffs was widely echoed by a large number of developing countries - many of whom have higher bound tariffs, but have lower levels of applied tariffs, depending on the state of their domestic industries, and giving themselves leeway for raising tariffs in future, either as a revenue-raising or infant industry protection, if new industries are set up.

Indonesia raised the problem of high tariffs and tariff peaks and tariff escalation facing exports of developing countries. It also agreed with India that non-tariff barriers were much more of a major problem. Any negotiations on tariffs had to be on the bound tariff rates.

Argentina was entirely open to suggestions on tariffs, but said this was a "global issue" and not merely one relating to industrial tariffs.

It was not clear whether Argentina's reference was to the different way some of the developed countries, including EC, Japan and US, were approaching the issue of tariff cuts in their very high rates (under the AoA), while calling for cuts in 'non- agricultural tariffs'.

In Argentina's view, tariff peaks and tariff escalations also need to be tackled.

For Hong Kong China industrial tariff negotiations under "non- agricultural market access" was an integral part of any future negotiations. These should be comprehensive and ambitious, with targets set above those in the Uruguay Round.

Pakistan said that "in case there is a consensus" for including the industrial tariffs for negotiations, tariff peaks, tariff escalation and products of export interest to developing countries must figure, as also the problems of non-tariff barriers.

For Sri Lanka, non-tariff measures were more of a problem to their exports. It saw also no need for Sri Lanka to cut tariffs further. Rather industrial countries should cut high tariffs facing developing country exports.

Cuba said that Art.XXVIII bis of GATT cited by Australia and Singapore to suggest that no mandate was needed to start industrial tariff negotiations, was not a mandatory provision, but merely a "declaratory" one.

Malaysia said that any such negotiations should be contingent on action on non-tariff barriers, provide credit in an operational sense for autonomous liberalisation. The idea of harmonising tariff regimes was full of problems and like Brazil, Malaysia felt it would be a "non-starter". Tariff peaks and tariff escalation had to be the focus, as also the discriminatory tariffs faced in some markets on certain wood products.

Turkey said that its authorities had not yet decided if there should be negotiations on industrial tariffs.

Honduras for its part agreed with India that there was no mandate to the General Council, for the Seattle preparatory process, to include this item. (SUNS4519)