TWN Info Service on WTO and Trade Issues (May 07/11)

29 May 2007

Developed countries' demands for industrial tariff cuts rejected

The first meeting on NAMA (non agricultural market access) to discuss the tariff reduction formula, since the resumption of the Doiha negotiations, took place on 7 May at the WTO.

Positions of various countries and groupings remained polarised.

The US, EC and other industrialized countries were sharply criticised by developing countries for continuing to accord themselves leniency in cutting their own industrial tariffs, while pressing the developing countries to drastically cut their industrial tariffs, and that from applied levels.

The NAMA 11 group of developing countries presented a major paper at this meeting.

The report below was published in SUNS on 10 May.

The next issue of TWN Info Service will give another report of that week of NAMA negotiations.

With best wishes
Martin Khor
TWN

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Developed countries' demands for industrial tariff cuts rejected

By Goh Chien Yen (TWN), Geneva, 9 May 2007

Positions of various countries and groupings in the WTO remained polarised as negotiations took place on Monday 7 May for the first time in six months on the tariff reduction formula in non-agricultural market access (NAMA).

The US, EC and other industrialized countries were sharply criticised by developing countries for continuing to accord themselves leeway and leniency in cutting their own industrial tariffs and non-tariff barriers against the developing world, while pressing the latter for drastic cuts in industrial tariffs, and that from applied levels.

The criticisms and sharp comments came at the open-ended informal plenary meeting of the Negotiating Group on Non-Agricultural Market Access, chaired by Canada's Ambassador Don Stephenson. The NAMA group is scheduled to meet through this week, and Stephenson said he would be holding intense consultations over the next few weeks, to be able to receive inputs from the membership -- before putting forward his own NAMA modalities text.

This is the first plenary meeting of the NAMA group, since the suspension and then resumption of the Doha talks, where the tariff reduction formula was discussed.

According to trade officials, the exchanges at the meeting showed continued sharp differences between the developed countries and a large number of key developing countries - with no sign of flexibility on either side.

South Africa, on behalf of the NAMA 11 group of developing countries, made a major presentation, pointing out the double standards in the stance taken by developed countries like the US and EC in agriculture as contrasted to their position in NAMA. The group includes Argentina, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, Tunisia and Venezuela.

The NAMA 11 in particular assailed the attempts of the US, EC and other developed countries, as well as of Stephenson himself, in injecting into the mandate and work of the group the 'ambitions' and 'objectives' of a few developed countries in talking of "real market access", while ignoring the Doha mandate requirement for "less than full reciprocity" by developing countries and the focus for cutting barriers to exports of developing countries.

They underlined that the Doha mandate had been reiterated and reinforced by the 2004 July framework and the 2005 Hong Kong Ministerial Declaration -- and in none of these is any provision for 'real market access'. This was a term being used by the US, EC, Japan and other developed countries to demand that the developing world should cut their existing applied industrial tariffs and bind them, an idea contrary to the Marrakesh agreement and the mandates.

The focus of Monday's discussions was on the "coefficients" to be used in a "Swiss formula" to effect cuts in industrial tariffs. At the meeting, practically all developed country members including the US, EU, Japan, Canada and Australia argued for a coefficient of 10 to be used by them in the formula for making tariff cuts.

Due to the nature of the formula, this coefficient will result in very modest reductions for many developed country members. The US will be cutting its tariffs by 24%; the EU by 28%; Canada by 34%; and Japan by 18%.

On the other hand, the developed country members continue to press for sharp reductions in the industrial tariffs by the developing countries - by their adopting a coefficient value of 15.

In this scenario, the developing countries such as India, Brazil and Indonesia will have to reduce their tariffs by 69%, 66% and 70% respectively.

South Africa, speaking on behalf of NAMA-11, a group of developing countries, reiterated the need for "less than full reciprocity" when developing countries cut their industrial tariffs and make commitments.

The NAMA-11 made clear at the meeting, that a coefficient of 10 and 15 respectively for the developed and developing countries was simply not "doable". These coefficient numbers will lead to "an unfair and imbalanced outcome, and place the principle of less than full reciprocity [as mandated in the Doha Declaration] on its head, shifting the burden of the adjustments to be made in this round from the developed to the developing countries once again," South Africa pointed out.

The Chair of the negotiating group, Amb Don Stephenson of Canada, noted in his fax to members before the meeting, the need to reconcile in the negotiations, the "ambition of many members for real market access" and less than full reciprocity in the mandate.

Responding to this, the NAMA-11 pointed out that the notion of 'real market access' is inconsistent with the Doha mandate as it undermines the principle of less than full reciprocity and denies developing countries their legal right to make tariff cuts from their bound rates.

[Less than full reciprocity is usually taken to mean that the developing countries would undertake less tariff reduction commitments, in percentage terms, compared to developed countries.]

Furthermore, by insisting on real market access or new trade flows in NAMA and at the same time being lenient on themselves in the area of agriculture "developed countries will be injecting an even further bias into the mandate, and creating a disproportionate burden on developing countries", the NAMA-11 argued.

The NAMA-11 pointed out that some developed country members such as "Japan, for example, will still retain some tariff lines above 1000 percent. In sharp contrast, the Swiss 15 formula being demanded for the tariff cuts of developing countries will bring developing country tariffs in NAMA down to below 15 percent on a line by line basis."

Brazil underscored that while less than full reciprocity is in the mandate, "market access [on the other hand] is only the negotiating objective of some countries", and the two issues cannot be equated and seen in the same light. "To square the circle, the only way out is to shift the negotiating objectives," Brazil said.

Brazil added that there should be "parallelism in the NAMA and agriculture market access negotiations for progress to be made. And some countries (referring to the developed country members) should see consistency in ambition in all areas."

Brazil stated that a coefficient of 15 is "out of reach" for the developing countries and "out of proportion" of what is to be achieved in agriculture.

Voicing the views of many delegations, India said that they would first need to know the level of ambition in agriculture before moving on to NAMA. They also observed a lack of coherence in the level of ambition of developed country members in the different areas of negotiations.

On the basis of the principle of less than full reciprocity mandated for the negotiations, "the reduction in bound tariffs for developing countries should not be more than that of the developed countries," India pointed out.

Other non-NAMA-11 developing countries such as Singapore, Thailand, Malaysia and Chile also found the proposal by developed countries of a coefficient of 10 for themselves to be unacceptable.

Singapore urged the developed countries to adopt a single digit as their coefficient "to demonstrate leadership." It was joined by Hong Kong, Pakistan, Chile and Thailand. Pakistan wanted the developed countries' coefficient dropped to 5 or 6.

On the difference or "spread" between the coefficients for developed and developing countries, the NAMA 11 objected to the EU-US proposal of 10 for themselves and 15 for developing countries. The group pointed out this would mean an average percentage cut of 25% for developed countries and an average cut of 65-70% for developing countries.

It proposed a difference between the coefficients of at least 25 points to take into account the principle of less than full reciprocity.

Other developing countries also offered a range of differentials. Thailand wanted to see a spread of 15 and Chile a spread of more than 10. China proposed a difference of 30, with a coefficient of 5 for developed countries and 35 for developing countries. Malaysia pointed out that anything less than 20 as coefficient for developing countries would not be possible.

Responding to the NAMA 11, Canada, EC and the US insisted on the need for them to achieve real market access. Without it, there would not be any benefit for developed countries in this Round, said Canada.

In the view of the EC, this market access had to be achieved through cuts into applied rates, and the US said that in any WTO negotiation there has to be a promotion of trade. The US added that this is the letter and spirit of the mandate, and anything else were theological arguments.

The NAMA meeting opened yesterday will last till end of the week, with the stated objective of the chair that it is for receiving guidance from Members on the preparation of a revised negotiating text. He told members that they would have twelve weeks to agree to full modalities.

However, no negotiating text on NAMA would be tabled "before the same is done in agriculture", he explained. He also informed members that he would not be putting forward his thoughts on where things stand in a paper, as was done by his counterpart in the agriculture negotiations.

The Chair informed members that there will be two more negotiating weeks in June, with a view to issuing a modalities text by the middle of next month. According to a trade diplomat, he also told delegates that the scheduled meeting on 4th June will be the last opportunity for members to provide inputs into his text.