Bridges Weekly Trade News Digest • Volume 11 • Number 7 • 28th February 2007
NAMA Talks Blocked Due To Standstill On Agriculture: Chair
The Doha Round negotiations on industrial tariffs are likely to remain at a standstill until there is progress on agriculture, the chair of the negotiating group told WTO Members on 26 February.
Speaking to a meeting of all delegations that kicked off a week of non-agricultural market access (NAMA) negotiations, Chair Ambassador Don Stephenson (Canada) said that many Members insist that they need to see clearer signs about the likely outcome of the still-deadlocked agriculture talks before changing their positions on NAMA. Specifically, they are reluctant to talk about how deeply to cut industrial tariffs until they know how sharply farm subsidies and tariffs will be reduced.
As a result of this reluctance, recent discussions have focused mostly on issues such as the treatment of small and vulnerable economies and recently-acceded Members. They have steered clear of the three central ambition-defining issues in the negotiations: the tariff reduction formula numbers that will determine the depth of cuts; flexibilities for developing countries to shield some products from tariff reduction; and the treatment of unbound tariffs.
Many ‘tensions’ in the negotiations
The chair warned delegates that his various consultations with Members led him to believe that even with progress on agriculture, the NAMA talks will not be easy to resolve. Although he described agriculture as the "central tension" in the negotiations, Stephenson noted that it was far from the only one.
For instance, several developing country Members stress that the Doha mandate prescribes that they should benefit from "less than full reciprocity in reduction commitments." They complain that the US and the EU are seeking to require poor countries to cut bound tariffs far more sharply than their industrialised counterparts, and argue that this violates that stipulation.
The US and the EU have called for a ‘Swiss’ tariff reduction formula with a ‘coefficient’ of 10 for developed countries and 15 for developing ones. The way the formula works is that the coefficient effectively becomes the new tariff ceiling: when fed through the formula, all duties are slashed to below the level of the coefficient, with lower ones reduced more gently. Since developed countries in general have tariffs averaging about 6 percent, while developing countries’ average tariff is closer to 30 percent, the proposed numbers would require substantially deeper cuts by the latter.
Developed countries argue that deep reductions to bound rates are necessary to force down applied tariffs to create "new trade flows" or "real market access." They argue that the "less than full reciprocity" mandate would be fulfilled by allowing developing countries to maintain a somewhat higher coefficient, and thus future tariff ceiling.
Sources report that this tension between ‘less than full reciprocity’ and ‘real market access’ was discussed at a ‘NAMA caucus’ meeting that Stephenson organised for ambassadors from about two dozen countries on 23 February. At that meeting, the chair noted that ‘real market access,’ though not part of the formal mandate, was a central demand of many Members. Argentina, Brazil, and India stressed that the coefficients proposed by the EU and the US were unacceptable to them. The US said that it would be necessary to define the ’spread’ between the two coefficients - while it has sought for the gap to be no higher than 5, the NAMA-11 group has called for it to be no lower than 25 (see BRIDGES Weekly, 3 July 2006).
The same sources suggested that Stephenson may try to use exchanges on ‘less than full reciprocity’ and the desired ’spread’ to move towards a discussion on what the specific values of the coefficients ought to be.
Discussions in the NAMA caucus meetings have focused on NAMA issues alone, despite briefly touching upon the ‘exchange rate’, or links, with the agriculture negotiations.
NTBs, RAMs, sectorals discussed
With the ambition-defining issues likely to languish until there are signs of progress on agriculture, delegates report that the week will see delegations meet informally to discuss sectoral liberalisation initiatives and non-tariff barriers (NTBs).
Supporters of different sectoral initiatives - which would require participating countries to eliminate or harmonise tariffs in a particular sector, such as auto parts, forest products, or medical devices - are meeting with other countries to discuss their proposals. Countries such as Thailand, Singapore, and the US have suggested that sectoral initiatives could contribute to achieving a desired level of liberalisation in the negotiations. Other Members point out that participation in these initiatives is supposed to be voluntary.
On 27 February, several delegations held a session on non-tariff barriers. Many asked questions about the mechanisms that the EU and the NAMA-11 had each proposed setting up in order to rapidly broker compromise in disagreements over NTBs (see BRIDGES Weekly, 17 May 2006, http://www.ictsd.org/weekly/06-05-17/story6.htm). Many exporters complain that NTBs are as much of an obstacle to their products as tariffs. The EU and the NAMA-11 had both called for ‘facilitators’ who could quickly try to resolve problems where goods were blocked in a port of entry without ruling on the NTB’s legality, which is what the WTO’s much slower dispute settlement mechanism would have to do. The US said earlier in the week that it did not see a need for a new mechanism.
At the plenary meeting at the beginning of the week, Croatia, on behalf of a group of 14 recently-acceded Members (RAMs) including China, the Kyrgyz Republic, Moldova, and Taiwan, formally tabled a proposal seeking higher coefficients, greater flexibilities, and longer implementation periods than the norm for developing countries (TN/MA/W/83). These countries, which point to the substantial liberalisation commitments that they had to make in order to join the WTO, met a cold reception last summer when they informally circulated a similar paper (see BRIDGES Weekly, 14 June 2006). Although no one intervened to discuss the proposal at the recent meeting, one delegate summed up the general reluctance to accord favourable treatment to every country in the RAM group: "everybody is thinking of China." The official also noted that Croatia, a transition economy, was asking for better treatment than that accorded to developing countries in general.
The NAMA week will conclude on 2 March, with another meeting open to all delegations.
ICTSD reporting.