Bridges Weekly Trade News Digest • Volume 10 • Number 11 • 29th March 2006
NAMA Negotiations Remain Deadlocked
WTO talks on liberalising trade in industrial goods remain deadlocked, concluded the chair of the Negotiating Group on Non-agricultural Market Access (NAMA) on 24 March following a week’s discussions. Two days earlier, Chair Ambassador Don Stephenson (Canada) had told a meeting of all delegations that his consultations with small groups of Members on the overall tariff reduction formula, the flexibilities to be accorded to developing countries to shield some products from the full force of tariff cuts, and the treatment of unbound tariff lines had yielded no progress whatsoever.
Telling delegates that his consultations saw little more than the same themes repeated over and over, Stephenson urged them not to wait for breakthroughs elsewhere in the negotiations, such as on agriculture, before moving actively to seek compromise on NAMA — for such moves, he warned, may come too late.
Sources report that the chair also said that Members appeared to have coalesced into two opposing groups, the "less than full reciprocity camp" and the "real market access camp." The assessment met with disagreement from some delegations, which argued that the two were not mutually exclusive.
The NAMA mandate set out in the July 2004 Framework stipulates that the tariff reduction formula "shall take fully into account the special needs and interests of developing and least-developed country participants, including through less than full reciprocity in reduction commitments." In the negotiations, delegates have used the phrase ‘real market access’ to refer to cuts that will force reductions in the tariffs that countries actually apply, as opposed to their bound ceiling levels, which can often be much higher.
NAMA-11 calls for ‘fair, balanced, and development-friendly modalities’
An informal paper circulated on 20 March by the ‘NAMA-11,’ a group of ten developing country Members staunchly insistent on the need for ‘less than full reciprocity,’ argued that for the products that developing countries export to actually gain enhanced access to developed country markets, the latter would have to eliminate tariff peaks, high tariffs, and tariff escalation (when tariffs on raw materials are low, but those on intermediate or final products are higher). Furthermore, it continued, none of the tariff cuts that developed countries were proposing for themselves would accomplish this.
The paper notes that past rounds of GATT/WTO liberalisation have discriminated against the precise products in which developing countries had an export interest. For instance, as a result of the 1973-79 Tokyo Round, the effective reduction made by rich countries to tariffs on developing country exports was 25 percent, compared to the overall trade-weighted cut of 33 percent. The Uruguay Round’s 40 percent cut by developed countries saw them lower tariffs on developing country exports by 37 percent, and those on least-developed country (LDC) exports by only 25 percent. This trend must be reversed in the Doha Round, according to the NAMA-11.
South Africa, speaking on behalf of Argentina, Brazil, Egypt, India, Indonesia, Namibia, the Philippines, Tunisia, and Venezuela, contended that developed country demands that are disproportionate to what they are willing to offer on farm subsidies or NAMA were inverting the basic principle of the Doha Round, i.e., that developing countries’ interests must be at the centre of the negotiations. In its submission, the group explicitly stated that "’less than full reciprocity’ means that developing countries should undertake lesser percentage reductions in their tariffs as compared to that by the developed countries."
The NAMA-11 paper also claimed that because developing countries have higher tariff levels, even relatively lower percentage cuts would provide a greater stimulus to exports than modestly higher reductions by industrialised countries to their generally low tariffs. In support of this, it quoted a 1994 GATT Secretariat study that said "a 50 percent reduction in a 3 percent tariff will, in principle, cause the tariff inclusive price to decline by 1.5 percentage points, whereas a 25 percent cut in a 36 percent tariff would result in a 6.6 percentage point reduction in the tariff inclusive price." As a result, the NAMA-11 argues, final bound levels for developed and developing countries resulting from the application of the tariff reduction formula are an unsatisfactory basis for assessing ‘less than full reciprocity.’ The US and the EU, in contrast, believe that capping developed country tariffs at 10 percent and those for developing countries at 15 percent would be sufficient.
Once again, the group stressed the importance to developing countries of being able to partially or completely shield some products from tariff cuts, in order to help them "manage the adjustment of sensitive sectors and prevent the social disruption caused by job losses and closure of enterprises that would result from further liberalisation." They also rejected the notion of using applied tariff rates instead of bound ones as a basis for tariff cuts, arguing that this would serve as a perverse incentive against further autonomous liberalisation and economic reform by developing countries. The group also called for the extent of tariff cuts on NAMA to be comparable to that on agriculture, referring to a recent paper by Argentina that outlined how the two might be compared (see BRIDGES Weekly, 22 March 2006).
Process-related concerns surface
With the continuing impasse in the negotiations, trade diplomats are increasingly pessimistic about their chances of reaching a comprehensive framework agreement on NAMA by the end-April deadline set out in the Hong Kong Ministerial Declaration.
Process-related concerns are also being voiced more loudly. Some smaller developing countries, including Cuba, are complaining that they have been left out of the consultative processes that are at least theoretically supposed to be driving the negotiations forward. They argue that at this juncture in the negotiations, every Member must be present to express its own perspective. Stephenson said that he would take these concerns into account. He also reminded delegations that regardless of what was discussed in small-group meetings, it was the overall Membership that took all decisions in the WTO.
ICTSD reporting.