Ricupero, two LDC ministers debunk US zero-tariff proposal

The US’ zero-tariff plan could jeopardize strategies for development, a senior UN official has warned.

by Chakravarthi Raghavan

GENEVA: The Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Rubens Ricupero, effectively debunked the latest US proposal for ending all tariffs on industrial products, and said that if unequal countries are to be treated alike, it would effectively put trade negotiations in opposition to any development strategy.

Ricupero made these comments, in answer to a specific question directed to him, at an early-December UNCTAD-organized press conference on the Least Developed Countries (LDCs) and Poverty Reduction Strategies, which the ministers of Bangladesh and Uganda addressed.

The Ugandan minister pleaded for level playing fields, while the Bangladeshi minister raised the issue of the effects of zero industrial tariffs on the revenues of the developing countries, in particular the LDCs, which depended heavily on import tariffs. The two also posed the  question of  why  the  tariff  cuts should only be  in the industrial sector.

In some additional comments, the UNCTAD Secretary-General effectively demolished the US proposal as basically pitting trade negotiations against development strategies.

Three basic aspects

Any trade negotiations, Ricupero said, need  “three basic components,” and would have to be guided by the fundamental principle that differences in economic structures of countries have to be reflected in the results.

The first component, Ricupero said, is that the underdeveloped countries, particularly the least developed, should not be expected to give “total reciprocity” in terms of tariff elimination.

“If we accept the idea that all countries be treated equally, it will put trade negotiations opposed to development strategies,” the UNCTAD head said.

“If this round [of WTO trade negotiations] is to deserve its name ‘development round’ -  I myself have refrained from using that description, because I don’t see in any sense that it will be conducive to this result - the first condition of course is that unequal countries should be treated unequally. The weakest and most vulnerable must receive special and more favourable conditions.”

The second component is that one should not merely look at industrial tariffs. Tariffs are only one component of protectionist policies and by far not the most important one.

In 2001, Ricupero said, the average tariff that was effectively applied by the US, taking into account all imports, was 1.5 percent. But the average tariff on goods from Bangladesh was above 12%, while that on goods from France was less than 1.1 percent. Why is that so? The average hides the fact that there are tariff peaks concentrated on such exports as those from Bangladesh, like garments.

Tariffs are not the most important component of protectionist policies. One has to look at not only tariffs but also safeguards, for example. It is a well-known fact that even now the US textile industry has already filed for special safeguards even before the dismantling of quotas. So what would happen to safeguards irrespective of tariffs? What would happen to the preferential arrangements that have been proliferating in terms of bilateral or regional free trade agreements? Is it to be assumed that if everyone accepts zero tariffs, the triple rules of origin in textiles will no longer apply in the North American Free Trade Agreement (NAFTA)? This is not very clear.

“These are the real instruments of protection, not tariffs - the rules of origin, safeguards, technical barriers to trade, we should look at all aspects.”

The third component is: why only industrial tariffs? Why not agricultural tariffs as well? Are the imbalances in the current world trading system, which have more than half of sensitive products excluded in agriculture, to be further aggravated? What would be the rationale, in terms of Ricardo’s theory of comparative advantage, if one were to exclude any sector of production where many developing countries have a natural comparative advantage?

Is it possible to totally eliminate all protection in this area? If one thinks so, one has only to look at the provisions of the US Trade Promotion Authority (TPA) where for more than 520 tariff items considered sensitive agricultural products, the US Trade Representative (USTR) has no authority to negotiate.

If the USTR decides to negotiate, under the TPA he has first to inform five different Congressional bodies: the two agricultural committees (of the House and the Senate), the House Ways and Means Committee, the Senate Finance Committee and the Trade Supervisory Body. He has to inform them and hold consultations with them.

And there is the mandatory provision that he should ask the International Trade Commission to conduct a special study on each product looking into the impact of any reduction on each of the products and on the US economy as a whole. It is only after this process that he can go back to the five bodies to consult again.

These provisions were put into the TPA at the instance of the Florida citrus growers.

This is the current situation, Ricupero added. (SUNS5248)                              

From Third World Economics No. 296 (1-15 January 2002)