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TWN Info Service on WTO and Trade Issues (Feb08/19) 25 February 2008
Reproduction of this article requires permission of SUNS (sunstwn@bluewin.ch). Best
wishes
By
Martin Khor, The
first day of the informal meeting on non-agricultural market access
on Wednesday (20 February) saw many WTO members criticizing the revised
draft modalities issued on 8 February by the Chair of the NAMA negotiating
group, Ambassador Don Stephenson of "It cannot be said that the members like this paper better than the earlier one," said a trade official, after the day's proceedings. There were still many countries wanting to speak, so the NAMA "informal open-ended meeting" will be extended into a second afternoon on Thursday. Stephenson told the members at the end of Wednesday's meeting that he would hold small-group consultations this Thursday and Friday, to prepare for "Room E" meetings that will cover essentially all NAMA issues, to be held next Monday to Wednesday. "Room E" meetings involve a small group of delegations, chosen by the Chair. At the start of the Wednesday meeting, Stephenson said that he knew the delegations would express disappointment with his text, that he was himself disappointed as so many issues remain open, but this is a reflection of the negotiations. On the formula and flexibilities, he thought the text accurately reflects the state of discussions. It was a challenge for the diplomats to fill in the empty spaces, and "we need to be serious once and for all", he said. He complained that nobody had changed their position for the past months, and there has been nothing new in the negotiations. On comments he had heard that the new text is a "step backwards", Stephenson asked, a step back from where? In the earlier (July 2007) text, he said, he had portrayed what he called the "central reality". Now is this text representing a new uncertainty, he asked, adding another question, what has been certain up to now? Regarding the withdrawal of figures in the brackets in the paragraphs on flexibilities, Stephenson said the figures had always been in brackets. He said he was giving the members a chance to reflect on the link between coefficients and flexibilities, that's why the space between the brackets is empty. Some delegations said we should consult on these issues, that is why the figures are open, he added. From the statements from members, it was clear that developing countries affected by the formula, most of them in the NAMA-11 group, are upset with the Stephenson paper for retaining the coefficients (8-9 for developed countries and 19-23 for developing countries) in the Swiss formula to cut NAMA tariffs. The NAMA-11 statement attacked the paper for imbalances within NAMA (as between developed and developing countries) and imbalances between the level of ambition in agriculture and NAMA. (See report on NAMA-11 in SUNS #6419 dated 21 February 2008). One
of the highlights of the day was a lengthy statement by the Vice Minister
of Brazil, who gave facts and figures on why there is so much imbalance
in the treatment of agriculture and NAMA (see below for details). The
Brazilian statement provided an important sense of how Developed countries, however, were still insisting on the opposite - that the numbers in the coefficients of developed and developing countries should show a narrower gap, and that the text is "pulling backwards" because of the removal of numbers on the flexibilities. The
The EC complained that the agriculture and NAMA texts were going in opposite directions. The NAMA text has opened more gaps and is a step backwards as the figures inside brackets on flexibilities had evaporated. The coefficients still provides a fundamental imbalance. The EC would not accept results that mean only binding present tariffs for developing countries. The EC was also disappointed with the proposed longer implementation period for recently acceded countries, as it does not agree that major beneficiaries of this Round can have 15 years to implement tariff reduction. The EC also responded to the Brazilian statement by saying that there was not a single exception in NAMA for developed countries, while developing countries have many exceptions and country-specific provisions in NAMA. "This negotiation is giving so many exceptions that we are having Swiss cheese and not Swiss formula," remarked the EC. There
can be no advance when there is an attempt to decide through decree.
Progress must be based on a text that covers all expectations and sensitivities,
in line with the 2001 mandate, said "We
have often heard, over the past 18 months, that this Round is at a crucial
stage," said "I could sit here and repeat a number of the arguments you already heard: -- How this is a development Round and that developing countries should contribute with less than full reciprocity. -- How we need to have balanced texts that will allow for a fair bargaining process. -- How the developing countries are being called to make contributions in this Round that far surpass what was ever demanded from developed countries in the past. -- How developed countries in previous Rounds cut their tariffs by just 30 to 35%, reaching a maximum of 40% in the Uruguay Round. -- How the Swiss formula is a major concession by developing countries, a methodology never before used in the history of the GATT/WTO system. -- How developing countries that apply the formula will, not only offer new market access, but also erase all policy space they have left. -- How the numbers of the paragraph 8 flexibilities were first discussed long before the range of coefficients of the current text came up. --
How developing countries in this Round (at least "However, I guess I would be hearing the same counter-arguments, essentially indicating the need for new market access that is meaningful enough to sell the Round to the respective constituencies. This is all very understandable, but it will not get the Round done. "We must come to grips with what we can and cannot do. The only way forward is to find a balance between ambition and feasibility. And this balance must exist in all areas of the negotiation. "In agriculture, we are trying hard to achieve this balance. The texts of the Chair have adopted a progressive approach. That approach allowed for successive approximations, in a way that permitted the safeguarding of particular sensitivities Members had. " -- In the domestic support pillar - leaving aside the fact that policy space is the rationale for all discussions - we have at least one paragraph that gives one Member (explicitly mentioned in the text) the possibility to use a different base period for the calculation of its product-specific caps. -- In market access, the layers of protection are so numerous, with some examples below: * The general formula for tariff cuts is linear. *
There are no tariff caps; some Members that are quite aggressive in
NAMA, want to keep, after this Round, tariffs that will be as high as
1,720% or 728%. There will also be a very significant number of lines
that will be kept above 400% *
The flexibilities in agriculture have no value of trade limitation.
In the case of just one Member, those flexibilities may cover almost
one half of * The agriculture text now envisages three different deviations from the general formula: 1/3, 1/2, and 2/3. * TRQs maintain intra-quota tariffs. * Members want to self-designate and create new quotas in this Round, further distorting trade in agricultural goods. * We are moving in the direction of quota allocation with "partial-designation", aggravated with multiple quotas. * A large portion of tariff lines will continue to be protected by specific duties, complex and compound tariffs. Some NAMA demandeurs actually want to keep this anomaly for no less than 50% of their agricultural tariffs. * Fruits and vegetables will keep entry prices. * To top it all, some Members want to keep the special safeguards, which allow the control of commerce with both volume and price triggers that date as far back as the 1980's. It said: "In the agriculture negotiations, we are told that we must show flexibility and compromise for two compelling reasons: (a) one size does not fit all; and (b) there are limits beyond which delegations cannot go (these are the famous "red lights"). "In NAMA, however, the same delegations that seek flexibility and understanding in agriculture utterly ignore those two principles. In NAMA, one size must fit all and limitations are characterized as 'lack of ambition'. "We will not accept this double standard any longer. "On
limitations - 'the red lights' - let me state that under no circumstances
will "The level of ambition of this Round in NAMA is unprecedented under any standard, so let's not talk about 'lack of ambition'. The problem, let's face it, is that some governments raised domestic expectations far too high." "There is no 'water' in applied tariff levels. Here, we are at the limit already. Unlike in agriculture, we won't be able to manage trade with TRQs, SSGs, exorbitant applied tariffs, and subsidization. "On the 'one size fits all' approach, it is disingenuous to argue that because some developing countries are ready to accept the ranges and flexibilities in the current text that others must as well." Said
"One of the remaining five would experience an average cut of just 1.3% with a coefficient 20 and 0% - therefore no cuts - with a coefficient 23. For one of the remaining four, that cut would reach no more than 4.8% for a coefficient 20. Of the remaining three, one does not apply tariffs on more than half of its imports. Of the remaining two, one has 29% of its tariffs unbound. "Together, these eight Members would have an average cut on applied tariffs of 5.8% with a coefficient 20. Two other Members later joined that group. One has 63% of its tariffs unbound - nearly 2/3 therefore of all tariffs. The other has 27% of its tariffs unbound, with an average cut on applied tariffs of just 4.5% with a coefficient 20." "On
the other hand, the average cut on applied tariffs for the group of
NAMA-11 countries would be three times higher (17.6%)," said "In the Uruguay Round, Brazil has gone further than most and bound 100% of its tariff lines (by the way, of all developed Members in this Organization, only the EU and Norway, could claim the same). For the extremely sensitive automotive and textile sectors, the cuts on applied tariffs would be over 30% even with the highest coefficient in the proposed range; and this is after the use of the 50% deviation. "Had
Brazil 60% or even 30% of its tariffs unbound, had Brazil an average
cut on applied tariffs of just 5% or less, we could be a lot more ambitious
with the coefficients and flexibilities. In fact, we could probably
join that group if, of course, "It is perfectly clear, I believe, that one size does not fit all in the NAMA negotiations either. Contributions cannot be this disproportionate. If some developing countries have lower applied tariffs, there are certainly reasons for that. "What is important is that we have different economies and realities. What is important is that our reality also has to be taken into account. A reality that includes the existence of a Custom Union, facing very similar challenges to those described by South Africa about SACU. "The current NAMA text has one undeniable characteristic: it fixes the outcome of negotiations. It has just two moving parts: the coefficients and the flexibilities. The coefficients' range is limited and the effort required by any number in that range is excessive. The flexibilities could offer some comfort, but the numbers of the first draft modalities were not revised up for this iteration, they were simply removed. This does offer room for negotiations, but it does not help convergence. "
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