News and Analysis • Volume 12 • Number 2 • March 2008
NAMA Talks Budge at Last, but Major Differences Persist
While some flexibility has appeared in WTO talks on how developing country interests could be accommodated in the long-stalled negotiations on industrial market access, the larger question of balance between developed and developing country commitments remains unresolved.
Despite their deep-seated differences with regard to the February 2008 negotiating draft on industrial market access (NAMA), WTO Members engaged in serious discussions in March on the parameters for tariffs reductions on manufactured products in developing countries.
At issue were the coefficient in the tariff-cutting formula the latter would have to apply (the higher the coefficient, the higher will be the post-Doha bound tariff ) and the derogations from this formula available to them (‘flexibilities’ in NAMA-speak). The relationship between these elements has been the main bone of contention throughout the negotiations.
Sliding Scale Explored
In his February 2008 draft negotiating text, NAMA chair Don Stephenson had suggested that WTO Members could consider a ‘sliding scale’ between the formula coefficient and the flexibilities. He based the proposal on the perception that some Members could accept a higher coefficient for countries that agree not to use their flexibilities, while others could accept a lower coefficient if the flexibilities were increased, and a third group was ready to consider increased flexibilities if the coefficient was low enough (Bridges Year 12 No.1 page 5).
Of the various options the chair had proposed to solve this conundrum, Members seemed most willing to discuss a limited ‘sliding scale’, with three separate options for the coefficient and flexibilities. Ambassador Stephenson’s examples for this option – he strongly stressed that these did not prejudice the position of Members – had a ‘pivot’ coefficient of 21. That coefficient would correspond to the tentative flexibility figures on the table since July 2004: the possibility to either subject 10 percent of tariff lines to just half the cut required by the general tariff reduction formula, or to exclude 5 percent of tariff lines from cuts altogether. The acceptance of a lower coefficient would increase the percentage of tariff lines eligible for the flexibilities, while a higher one would entail fewer ‘flexibility products’ (see table below).
One delegate noted that to move the discussion forward, Members need to agree on the ‘pivot’ – the value of the coefficient that corresponds to the base flexibility numbers of 10 and 5 percent. Brazil also said that the ‘exchange rate’ between the tariff reduction formula and the flexibilities would have to be negotiated in order to reframe the equation in a way that would maximise ministers’ chances of success.
Other Options Considered
Members also showed considerable interest in an alternative option that would have left the coefficients alone, but varied the number of products eligible for flexibilities in accordance with the size of the deviation from standard tariff obligations.
Canada, Iceland, Japan, Norway, Switzerland and the US proposed a ‘formula-plus’ approach, in which those developing countries that elect to participate in sector-specific liberalisation initiatives would be rewarded with ‘credit’ in the form of a higher coefficient. The credit could vary depending on the number of tariff lines and the share of world manufacturing trade covered by the sector in question. The paper stressed that participation in sectoral initiatives – which have been proposed for a wide range of products, from fish and forestry products to chemicals and toys – remained voluntary.
Hong Kong, Singapore and Thailand expressed support for these ideas, but Chile, India and Mexico said they were not interested.
No Agreement on Numbers
Some statements made at the March meeting pointed to the very real divisions that persist. For instance, the US insisted that it could not accept a developing country coefficient higher than 23 – a figure that the NAMA-11 coalition of developing countries has rejected in the past (Bridges Year 12 No.1 page 5). And when Norway and several developing nations said that the coefficient for rich countries should be below 8 – the lowest figure suggested in the February draft, the US and the EU refused.
The NAMA-11 called for the next revision of the negotiating text – expected in April or May – to include the possibility of a higher percentage of tariff lines to be eligible for half-formula cuts or zero reduction. In contrast, many developed countries think that the 10 and 5 percent limits currently pencilled in are already too high, particularly if they are associated with a high formula coefficient.
Furthermore, agreement on NAMA modalities will require more than just numbers for the formula and flexibilities. Other outstanding questions include special tariff treatment for small and vulnerable economies and for the dozen-odd developing countries with a low proportion of bound tariffs. A deal will also have to pass muster with the group of least-developed countries, which has asked for greater clarity on how other countries will go about granting dutyand quota-free access to its members’ exports (see page 3).