Bridges Weekly Trade News Digest • Volume 6 • Number 41 • 28th November 2002

US Zero-Tariff Proposal Meets With Mixed Reactions

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US Trade Representative Robert Zoellick on 26 November unveiled a US proposal to eliminate tariffs on virtually all consumer and industrial products in all WTO members by 2015. While the proposal was greeted enthusiastically by most US manufacturers, it met with strong resistance from the US textiles and apparel industry. Criticism was also heard from the EU and the head of the WTO.

The US proposal, which will be submitted to the WTO Negotiating Group on Market Access at its next meeting on 2-3 December, envisages a two-phase approach to eliminating tariffs by 2015. By 2010, all tariffs of 5 percent or less and tariffs on highly-trade goods would be eliminated, while remaining duties would be reduced to less than 8 percent. By 2015, remaining tariffs would be cut to zero. These efforts would be complemented by a reduction of non-tariff barriers. The US is planning to put forward a list of such barriers in January 2003. "Our proposal would turn every corner store in America into a duty-free shop for working families," said Zoellick. This move follows an earlier US proposal put forward on 25 July to reduce global tariffs on agricultural goods from 62 to 25 percent or less and to eliminate all export subsidies for agricultural products over five years.

The proposal was welcomed by most US exporters. "Essentially, the United States is proposing to launch a Planet Earth Free Trade Agreement," said Kevin Burke, President of the American Apparel & Footwear Association. Describing the proposal as "visionary and realistic", the National Foreign Trade Council, one of the key proponents of zero tariffs, strongly endorsed the proposal, which they believe will "energise the Doha Development Agenda by setting a bold goal that will provide enormous economic benefits to developing and developed economies and raise the level of ambition in all other areas of the negotiations."

Other US industry groups, however, notably the textile manufacturers, were far less enthusiastic about the proposal. The American Textile Manufacturers Institute, representing the US textile industry, described the proposal as an "outright gift to China" which would "simply ensure China’s takeover of the worldwide textile and apparel trade", according the Van May, chairman of the ATMI. May added the proposal ran counter to the US administration’s promise to minimise the impact of future trade deals on the domestic textile industry as a top priority.

A word of caution was also heard from WTO Director-General Supachai Panitchpakdi who noted that developing countries could suffer under the US proposal as many of them had very high tariffs on goods to protect their fledging industries and could face a disproportionate burden. He added that the WTO’s "main concerns" were rising tariffs and tariff peaks. According to trade sources, the proposal would require most other countries to cut their import taxes more radically and more quickly than the US. Also, US anti-dumping and safeguard taxes, which run up to 30 percent in the case of steel, would unlikely be affected by the plan.

The EU rejected the US proposal as "unrealistic", stressing that "it has to take into account preoccupations of developing countries". For its part, the EU had submitted a proposal on industrial tariffs earlier this month, calling for reducing tariff peaks and the unilateral elimination of tariffs in developed countries on exports from least-developed countries by May 2003. The US proposal is also expected to meet with criticism from high-tariff Latin American and Asian countries, such as Brazil and India, which are likely to argue against the increased competition that their domestic industries would faced while their agricultural products were still subject to steep barriers in the US markets.

"AAFA President Applauds U.S. Government’s New Global market Access Iniative," AAFA PRESS RELEASE, 26 November 2002; "NFTC Strongly Endorses U.S. Market Access Proposal," NFTC PRESS RELESASE, 26 November 2002; "U.S. proposes agreement at WTO to scrap tariffs on all industrial products by 2015," WTO REPORTER, 27 November 2002; "Washington seeks the end of all import taxes," IHT, 27 November 2002; "U.S. Zero-Tariff Proposal meets stiff resistance," WSJ, 26 November 2002; "U.S. Proposes Tariff-Free World," USTR PRESS RELEASE, 26 November 2002.