14th December 2005

Hong Kong Trade and Development Symposium Session 3.4: NAMA: Matching Industrial Development and the Interests of Large Corporations

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In 2002, the US proposed a complete elimination of all industrial tariffs (tariff-free world proposal) by 2015. Although some say that the proposal was only a strategic move, the depth and scope of the cuts being discussed in the WTO Negotiating Group on Market Access are truly unprecedented. Reductions concern all non-agricultural products (which includes all industrial products but also fish, wood, forest and mining products) and will be applied to each individual tariff line (on a line by line basis); and modalities could reduce rates by as much as 95%.

For instance, in its recent “conditional proposal”, the European Communities advocated for a overall maximum tariff rate of 10 or 15% for all developing countries that will apply the formula for tariff cuts (includes African, Latin American, Caribbean and Asian countries). This would mean bringing developing countries’ bound average rates from 15, 20, 50 or even 70% down to 15%.

In addition to tariff reductions through the formula for tariff cuts, negotiations are also heading towards tariff elimination in specific sectors (sectoral initiatives), more than formula cuts in ‘environmental goods’, and elimination or reduction of non-tariff barriers.

The scope of this market access requests advanced by developed and some developing countries reflects quite a clear agenda, push forward by large multinational corporations and private sector pressure groups. Many of these groups know that the current Round of negotiations is a unique, and probably once in a life time opportunity, to open new markets for their products.

Several of these groups have in fact been participating very actively in the NAMA negotiations in Geneva and making pressure both on developed and developing countries for an ‘ambitious’ NAMA outcome. Such lobby groups have provided both technical and political inputs to the NAMA process. They have been particularly active in providing background research and data for the negotiations on sectoral tariff elimination and on elimination of non-tariff barriers. The names and constituencies of several of these groups are becoming increasingly well-known.

The agenda of these groups builds on the assumption that tariff reductions are necessarily positive for all countries and contrasts with the argument that tariff elimination would trigger loss of industrial output and employment in of several poor countries, having a de-industrializing effect.

While the causal relationship between low tariffs and growth has still not been undisputedly established, certain studies show that the benefits of NAMA will not accrue to all countries. On the contrary, only countries where industrial capacity is already installed and has reached a level of global competitiveness will be able to adjust successfully to and benefit from tariff liberalization. Some studies actually point to possible losses of industrial output and jobs in many regions of the developing world.

In this context, and bearing in mind that there could indeed be welfare gains from tariff liberalization, how can NAMA modalities match the interests of global industries and those of poor countries wishing to use tariffs as an instrument to foster the development of incipient industries?

This session on NAMA during this Symposium serves multiple purposes, among which the most important are:

(1) To raise the political profile of NAMA: Despite the political visibility that NAMA has now acquired because of an increase in the divergences in the Negotiating Group on Market Access, discussions on NAMA are tightly linked and, for some, subordinated to progress in the Agricultural negotiations. For that reason, some fear that an agreement in Agriculture will automatically trigger the settling of differences in NAMA. Several reasons, intrinsic to the concepts involved in NAMA, justify a deeper reflection of the implications that NAMA will have for developing countries.

(2) To draw attention towards the developmental impact of NAMA: both delegates and the civil society need to have a better understanding about the implications of NAMA for the industrial development of developing countries. The session could provide technical and political arguments to be used both in the negotiations and campaigning.

(3) To unveil the interests behind the NAMA negotiations: particularly the pressure for greater market access exerted by large corporations on developed and also developing country delegations. While market access is historically one of the core objectives of the GATT/WTO, it is legitimate to question how the potential benefits, if any, would be distributed among countries participating in NAMA.

(4) To understand the interests of businesses: both in developed and developing countries. The session will provide participants an opportunity to understand how corporations and business representatives have been involved in the negotiations, both at the political and technical levels. This could lead to discussions on the broader issue of corporate involvement in the WTO negations.

Agenda

The following representatives of the industries have been invited to speak during this session:

Mr. F. Vargo, Vice President for International Economic Affairs, of the USA National Association of Manufacturers (NAM) will explain how all countries could gain from extensive tariff reductions in NAMA.

Mr. R.V. Kanoria, Chairman of the CII-WTO Committee of the Confederation of Indian Industries will present the interests of firms in developing countries, including their offensive interests where they exist.

Action Aid will comment generally on the involvement of corporations in the current WTO negotiations.