Proliferating demands for more flexibilities in tariff reductions for industrial goods have brought deep divisions among WTO Members into an even sharper focus.
November negotiations on non-agricultural market access (NAMA) offered chair Don Stephenson little guidance for revising the draft modalities paper he issued in July. The majority of WTO Members has rejected that text as fundamentally imbalanced with regard to the level of tariff cuts proposed for developed and developing countries, as well as the NAMA text’s high level of ambition compared to the draft agriculture modalities (Bridges Year 11 No.6 page1).
The latest industrial market access talks focused on exemptions from the standard tariff reduction formula applicable to developing countries. As the NAMA draft currently stands, about 30 developing countries – including most of the larger emerging markets – would be subject to full formula cuts (the rest will be eligible for gentler tariff reduction, for instance as ‘small and vulnerable’ economies). The July text would allow these countries to subject 10 percent of products to tariff cuts of only half those demanded by the formula (so long as this does not cover more than a tenth of manufacturing import volume), or to exclude 5 percent of tariff lines from reduction altogether (albeit limited to only 5 percent of imports).
Recent Demands
Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) reiterated their request to be allowed to make lower tariff cuts on up to 16 percent of products without any import volume limitations, arguing that this was necessary for them to respond adequately to their different sensitivities without compromising their common external tariff.
The South African Customs Union (SACU) also asked for additional flexibilities. Since none of South Africa’s four neighbours would ordinarily have to apply the formula, they would stand to be disproportionately affected by a WTO-driven cut to the bloc’s shared external tariff (Bridges Year 11 No.6 page 8).
The Philippines called for loosening the import volume constraint, so that the 10 percent of tariff lines slated for ‘half-formula cuts’ could cover as much as 30 percent of manufacturing import value. Venezuela asked to be exempted from the tariff reduction formula, instead offering to bind its tariffs at a to-bedetermined average percentage level. It argued that its heavy dependence on volatile oil export revenues should make it eligible for the special treatment currently foreseen for countries that account for 0.1 percent of global manufacturing trade.
China continued to insist that deal on the table did not accord recently acceded Members (RAMs) sufficiently flexible treatment. It is not entirely clear whether China was seeking a higher tariff ceiling for RAMs, or greater flexibility in shielding products from cuts.
Least-developed countries (LDCs) are not required to cut tariffs as part of the Doha Round negotiations, and thus do not need exemptions. The LDC Group has, however, requested the NAMA chair to strongly urge developed countries to phase out import duties and quotas for all LDC exports instead of just 97 percent of them as agreed in Hong Kong. It has also asked for simplified rules of origin for the remaining 3 percent products during the phaseout. Australia, the EU, New Zealand and the US asserted that their rules of origin were already simple and transparent, and complained that the LDCs demands went beyond what Members had agreed to.
Mixed Reactions to Flexibility Requests
The calls for flexibilities, with the partial exception of the appeal from SACU, met with significant opposition. Canada, the EU, Japan, Norway and the US were among those arguing that existing exceptions were sufficient. A group of developing countries led by Costa Rica, including Colombia, Ecuador, Mexico, Hong Kong, Peru, Singapore and Thailand, also rejected calls for extra flexibilities.
In contrast, South Africa, speaking for the so-called NAMA-11, defended the proposals from Mercosur and the Philippines. The group includes Mercosur members Argentina and Brazil, as well as countries such as Egypt, India, Indonesia, and the Philippines. Venezuela’s proposal only received support from Cuba and Bolivia.
No significant progress was made on proposals to grant ‘small and vulnerable economies’ more extensive flexibilities than those suggested in the July NAMA draft. Nor was consensus achieved on the demand of countries with a low percentage of bound tariff lines to be allowed to bind 70-80 percent of them instead of the 90 percent currently envisaged.
Changes Unvoidable?
Even delegates from countries not among those critical of the July text suggested that Stephenson would likely have to alter its parameters to have a chance of coming up with the basis for an agreement.
“Positions are diverging rather than converging,” said one official, pointing to the dilemma facing the NAMA chair as he prepares the revised draft agreement. “He may now paradoxically have to go backward to go forward,” the source added. “These new proposals for flexibilities will have to be reflected to some extent, but this won’t be easy for others to swallow.”
A revised NAMA text, as well as a draft agreement on agriculture, were initially supposed to be released in mid-November. Due to ongoing intense negotiations in agriculture (see page 5), the modalities papers are now expected in late January at the earliest. Chair Stephenson has suggested that it may not be possible to resolve any issues in the industrial market access negotiations without ministerial involvement.