News and Analysis • Volume 12 • Number 1 • February 2008
Revised NAMA Draft: Nemo Tenetur ad Impossibile
The most significant change in the February draft modalities on industrial market access compared to its July predecessor is that it reflects much more accurately the profound lack of consensus among WTO Members on nearly all key issues.
The July draft on non-agricultural market access (NAMA) was denounced as unacceptably imbalanced by a coalition of developing countries known as the NAMA-11 as soon as it was issued. The group argued that it was far more ambitious than the agriculture text released at the same time, as well as placed disproportionate liberalisation demands on developing countries. In October, around 60 developing WTO Members issued a counterproposal seeking substantial changes to the text (Bridges Year 11 No.6, page 1).
No perceptible progress has occurred since then. The NAMA-11, supported by many other developing countries, has stood firm in its rejection of the July text as a basis for negotiations. In contrast, most developed countries view that document as a barely adequate starting point for discussions on more robust market access commitments from major developing economies.
Faced with this impasse, NAMA chair Don Stephenson issued a revision that is “more of a record of where we actually stand in the negotiations” than a draft legal text. Most elements of the proposed modalities are accompanied by comments that make plain the continued divergence among Members, often along with suggestions for possible ways toward consensus.
There are two main points of contention. The first pertains to the coefficients in the formula that will determine new maximum tariffs. According to the 2001 Doha ministerial declaration, ‘less than full reciprocity in reduction commitments’ will be required from developing countries. The second hotly disputed element concerns additional flexibilities available to developing countries under ‘special and differential treatment’ (see page 1 for reactions).
Tariff Formula Coefficients
The February text retains the coefficients proposed in July: 8 or 9 for developed countries (resulting in a new maximum tariff of less than ten percent) and 19-23 for developing countries (capping their tariffs somewhere in that range). About 30 developing countries will be required to make formula cuts, although limited exceptions remain to be negotiated.
The chair acknowledged that there was no consensus on the coefficients. Without mentioning any Members by name, Mr Stephenson noted that some countries (i.e. the EU and the US) seek coefficients of 10 for rich countries and 15 for developing nations, while others (i.e. the NAMA-11) want a difference of at least 25 points between developed and developing country coefficients. Chair Stephenson also referred to the so-called ‘middle ground’ proposal from ten developing countries, which have suggested figures similar to those in the July draft.
Flexibilities Most Likely to Determine Acceptable Coefficients
Where the new draft breaks with the July 2007 text is on the ‘flexibilities’ that will determine how many products, and what proportion of manufacturing imports, developing countries will be able to shield from the full force of tariff cuts.
The July text would have allowed developing countries to subject 10 percent of tariff lines to reductions half as steep as those ordinarily required. Alternatively, they could have excluded 5 percent of tariff lines from reduction altogether. The figures, still in square brackets denoting lack of agreement, were based on those suggested in the July 2004 framework agreement, which serves as a starting point for the current negotiations.
The only real surprise in the text was the removal of numbers altogether from the flexibility options. Chair Stephenson has come under considerable criticism for this move, with both developed and developing countries complaining that leaving the brackets empty is a step backward. Mr Stephenson explained that his decision arose from the realisation that Members would need to resolve the flexibilities “before they are going to be able to resolve the coefficients.”
Explore ‘Sliding Scale’
Chair Stephenson noted that his consultations had revealed that many countries were willing to consider a trade off between the flexibilities and the coefficient. This, he concluded, “strongly suggests a ‘sliding scale’ approach to achieve consensus, especially as it might provide a basis upon which to agree different outcomes for different developing countries.”
“I make the [sliding scale] proposal because some Members tell me they could accept a higher coefficient for countries that agree not to use their flexibilities; some Members tell me that they could accept a lower coefficient if the flexibilities were increased; some Members tell me that they could consider increased flexibilities if the coefficient was low enough,” Mr Stephenson said.
The chair urged negotiators to make the tradeoffs between the coefficient and the flexibilities more explicit. This would clarify the options before senior officials and ultimately ministers, increasing their chances of striking a compromise, he said.
Additional Flexibilities
The February text suggests that recently acceded WTO Members (RAMs) could have an implementation period two to five years longer than the eight pencilled in for all developing countries. Products for which accession-related tariff cuts are still being implemented would benefit from a two to three year grace period before Doha tariff cuts start phasing in. These provisions apply to the four RAMs – China, Taiwan, Croatia and Oman – that will have to subject their tariffs to the reduction formula.
The new text also proposes less stringent liberalisation requirements for small and vulnerable economies and countries with binding caps on fewer than 35 percent of all tariff lines than those suggested in the July 2007 draft.
The chair noted that there was no consensus on any of Members’ proposals seeking extra flexibility on tariff cuts for customs unions.