Bridges Weekly Trade News Digest • Volume 11 • Number 17 • 16th May 2007

Deep Divisions Persist On NAMA

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WTO Members remain deeply divided on the extent to which they should have to cut tariffs on industrial goods as part of the Doha Round negotiations, at least on the basis of a week of discussions from 8-11 May.

Although delegations turned to the core issue of the tariff reduction formula for the first time since the talks were suspended last July, negotiators reported that the debate in the multilateral sessions remained all too familiar: several developing countries complained that industrialised states were demanding tariff cuts far deeper than those that they were willing to make themselves. One negotiator suggested that things may be different in bilateral meetings, but otherwise, the utter lack of flexibility meant that an agreement "seems really difficult."

Ambassador Don Stephenson (Canada), chair of the non-agricultural market access (NAMA) talks, is currently seeking Members’ views on where a plausible compromise might lie, as he works to draft a new text that could serve as a basis for further negotiations and an ultimate agreement. However, he told delegations last week that a deal seemed unlikely in the face of such wide gaps. "What we need is convergence," he said, pointing out that Members were trying to agree on a framework deal for cutting tariffs and subsidies within less than three months.

Wide gaps on formula

On 8 May, Stephenson urged Members to look at "the central tension" in discussions on the formula: the demand of some primarily developed countries for "real market access," and the response from many developing countries that requiring them to cut bound tariffs by greater percentages than industrialised countries would violate the Doha mandate’s stipulation for "less than full reciprocity in reduction commitments."

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. Roughly similar views have been expressed by Canada, Japan, Norway, New Zealand, Taiwan, and Turkey, particularly with regard to the coefficient for developing countries.

Under the ‘Swiss’ formula, a Member’s coefficient effectively becomes its 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, coefficients of 10 and 15 would require substantially more effort from the latter.

Thus, several developing countries took issue both with the level of the proposed coefficients and the relatively modest ’spread’ between them. Brazil said that 15 was a disproportionately low coefficient for developing countries. Malaysia said that the figure should be no less than 20. Pakistan said that developed countries should have a coefficient of 5 or 6 instead of 10. As for the difference between the coefficients, sources report that Mexico suggested a range of 5 and 25; China, 5 and 35.

The NAMA-11 group of developing countries traded barbs with countries including Canada, the EU, the US, and Korea over the notion of "real market access." The NAMA-11 argued that there was no mandate to require cuts to applied rates, and that the Doha Round was focused primarily on the need for developed countries to expand market access for products from developing ones. WTO reductions - whether to tariffs or farm subsidies - are traditionally based on bound caps. However, the others countered that unless currently-levied duties were lowered, no new trade flows would arise for developed countries from this round - thus defeating the purpose of the exercise.

To draw an example from calculations carried out last year by the WTO Secretariat, a coefficient of 10 would entail a reduction of roughly 23 percent to the EU’s average bound tariff level, while a coefficient of 15 would require India to reduce its bound tariffs by 63 to 70 percent. The cuts to their applied tariff rates would be more comparable, in the neighbourhood of 25 percent, though possibly somewhat higher for India.

Chair: Members not yet ready for text

During the week’s talks, Members also discussed non-tariff barriers (NTBs), voluntary sectoral liberalisation initiatives, and environmental goods. Sources report that in the discussions on NTBs, it is becoming clearer which proposals may be able to garner consensus - one may be a US proposal on standardised labelling requirements for clothing and footwear. Stephenson expressed dissatisfaction with progress on the sectoral initiatives; India suggested that negotiations on voluntary sector-specific liberalisation could take place even after the round is concluded. Many developing countries are still lukewarm to the notion of negotiating a list of specific ‘environmental goods’ to be slated for expedited liberalisation.

In light of the substantial differences of opinion, Stephenson suggested that Members were not yet ready for a text to negotiate on. Instead, he announced that he would continue to meet with Members over the next three weeks, both individually and in small groups, with ‘transparency sessions’ open to all countries at the end of each week. During these meetings, he is hoping for constructive input for his new paper. Delegates expect the chair to present the text some time after the week of 4 June; Stephenson acknowledges that he will wait for a comparable text in the agriculture negotiations before doing so.

ICTSD reporting.