Bridges Weekly Trade News Digest • Volume 10 • Number 14 • 26th April 2006
NAMA: Chair Calls For Non-Stop Negotiations To Bring Modalities Within Reach
WTO Members have acknowledged that they will fail to meet a key end-April deadline for agreeing on Doha Round modalities for cutting industrial tariffs. At the end of an 18-21 April week of non-agricultural market access (NAMA) discussions, they remained profoundly divided on the central issues in the talks — so much so that many were unwilling to even discuss potential values for coefficients to plug into the tariff reduction formula. "We did not have a good week," said Chair Ambassador Don Stephenson (Canada) when summing up the talks on 21 April.
Stephenson told the 24 April informal heads of delegation meeting that there would need to be non-stop negotiations from now on, suggesting that Members needed to develop modalities within six to eight weeks (see related story, this issue).
Members refuse to discuss numbers, turn to non-core issues
The extent of Members’ differences became quickly apparent at the outset of the NAMA week, when several delegations rejected Stephenson’s suggestion that they discuss specific numerical values for the three core aspects of the negotiations: the tariff reduction formula, the flexibility given to developing countries to shield some products from the full force of tariff cuts, and the treatment of unbound tariff lines not currently capped in the WTO. Brazil, the US, Japan, and Switzerland questioned the appropriateness of discussing specific numbers given the state of the talks.
That Members were still suggesting it was too early to discuss specific numbers less than two weeks before the 30 April deadline was described by Stephenson as "striking." Indeed, Canada and the EU suggested that Members, instead of narrowing their differences, seemed to be drifting even further apart. One source told Bridges that prior to Hong Kong, Members had been discussing formula coefficients of 5 to 10 for developed countries, and 15 to 30 for developing countries, but the ranges had now widened to 2 to 10 and 15 to 40, respectively.
With meaningful discussions on the main sticking points in the talks seemingly impossible, Members turned their attention to what the chair described, as ’second-storey’ issues, in particular, non-tariff barriers (NTBs) and sectoral tariff liberalization initiatives.
NTBs: EU calls for new agreement on export taxes
At a session on NTBs on 19 April, the EU tabled a proposal calling for the creation of a new WTO agreement to broadly ban export taxes, with limited exceptions for developing and least-developed countries (LDCs). Sources report that developing countries including Argentina, Brazil, India, Indonesia, Malaysia and Venezuela protested that export taxes were not NTBs, and were not part of the Doha Round negotiating mandate. Some developing countries place taxes on certain goods for export, especially those of primary commodities, to gain revenue and to promote specific kinds of domestic industrial development. WTO rules currently prohibit most quantitative export restrictions.
Arguing that export taxes distort international trade, unfairly privilege domestic industries, and can effectively be as prohibitive as export restrictions, the EU proposed draft disciplines for a potential WTO agreement on export taxes. It would disallow export taxes apart from those permitted under existing exceptions in WTO law. However, developing countries and LDCs would be allowed to maintain "a limited number… at low levels" if necessary to maintain financial stability or to "avoid excessive dependence" on raw commodity exports — so long as they "do not adversely affect international trade." The EU would have Members negotiate ceiling levels for these permissible taxes, with the cap higher for LDCs than for developing countries. Developing countries would have to negotiate which products they could maintain export taxes on through a request-offer process.
The EU also circulated papers identifying NTBs in the electronics, automotive, and textiles, clothing, and footwear sectors. They focused primarily on overly onerous or complicated labeling requirements and standards, and proposed disciplines for how their effects on trade could be reduced, often recommending that Members adopt international standards.
Sectorals: US supports Singapore draft text, Turkey doesn’t
Singapore proposed language on sectoral initiatives for the chair’s report to the TNC that specified that such liberalization would go "over and above" the demands of the overall formula for tariff reduction. This raised the ire of Turkey, which in March called for the sectoral ‘harmonisation’ of textiles and clothing tariffs — a proposal that seeks to subject several kinds of textiles to cuts lower, rather than higher, those demanded by the tariff reduction formula (see BRIDGES Weekly, 29 March 2006). Turkey pointed to the July 2004 Framework stipulation that sectoral tariff initiatives should "aim at elimination or harmonization."
Several other Members countered that harmonization at tariff levels higher than those required by the formula was against the Framework’s mandate to apply the NAMA formula to each and every category of industrial products, i.e., on a ‘line-by-line’ basis. Most WTO Members have expressed opposition to the partial exemption of textiles and clothing from tariff cuts, although El Salvador, Jordan, Mauritius, and Tunisia reiterated their support for the Turkish proposal during the recent NAMA week.
Singapore’s text lists the wide range of sector-specific liberalization initiatives, but deliberately left out the Turkish proposal — because, it said, the harmonization initiative failed to go over and above general reduction commitments. Turkey argued that the chair’s report should include all proposals.
Notably, the US said that it was "extremely supportive" of the Singaporean text — an implicit rejection of the Turkish proposal. The US has been under heavy pressure from domestic textiles manufacturers to push for shallow tariff cuts of the sort envisioned by Turkey.
Developing country flexibilities briefly discussed
Members did manage to agree on the threshold for exemption from tariff cuts granted by the July 2004 Framework to developing countries with a high number of unbound tariff lines. Paragraph 6 of the text’s Annex B said that countries with binding caps for fewer than a certain percentage of tariff lines — a figure of 35 percent was in brackets, indicating that it had not been approved by Members — would be exempt from reduction obligations. However, these countries would be expected, as part of the round, to bind an undefined percentage of tariff lines — 100, also in brackets — "at an average level that does not exceed the overall average of bound tariffs for all developing countries after full implementation of current concessions."
On 19 April delegates achieved consensus on 35 percent as the binding coverage level for ‘Paragraph 6′ countries, and the brackets were duly removed from that figure. Finalising the threshold level allowed several of the eligible countries to be identified: Cameroon, Congo, Cote d’Ivoire, Cuba, Ghana, Kenya, Macao, Mauritius, Nigeria, Sri Lanka, Suriname, and Zimbabwe.
However, Members were unable to agree on the number and level of future bindings. Some delegations had found past proposals to bind 95 percent of lines at an average of 50 percent unacceptable because the average was too high. Kenya’s proposal to bind 70 percent of tariff lines at an average of 28.5 percent was criticized by many countries for exempting too many products from tariff caps.
With regard to the so-called ‘Paragraph 8 flexibilities,’ Mexico proposed that developing countries that elect not to shield any tariff lines from the full force of tariff cuts should be rewarded with five extra points in their tariff reduction formula coefficient. This would mean that applying the formula would cut their tariffs to a maximum level that is five points higher than that of other developing countries. Several developing countries including China, India, and Malaysia found this unsatisfactory — they have maintained that developing countries should not have to exchange flexibilities against leniency in the overall tariff reduction formula.
Stephenson: Members need to intensify the negotiations
At the closing session, the EU described the week’s proceedings as "very, very gloomy." Many other delegations also expressed disappointment with the lack of progress, and echoed the chair’s exhortation to intensify the pace of negotiations in order to make success possible. Brazil deplored the standstill in agriculture as well as NAMA, and urged more Members to simulate the effects of different proposed coefficients on their own tariff structures in order to facilitate effective comparisons.
Sources report that Stephenson told Members that his report to the 1 May session of the TNC will contain very little modalities-like language — primarily on technical issues related to the treatment of unbound tariffs and the flexibilities for developing countries. It would primarily contain his assessment of what issues Members must solve in order to move the negotiations forward. He will present the report to an informal meeting of all delegations on 27 April.
Sources report that Stephenson will convene plurilateral meetings and other consultations next week.
ICTSD reporting.