Bridges Weekly Trade News Digest • Volume 7 • Number 30 • 4th September 2003
Industrial Market Access: North-South Split Persists Leading Into Cancun
During informal meetings at the WTO last week, an annex on industrial market access attached to the 24 August draft Ministerial text continued to elicit reactions from dissatisfied countries. While the Chair of the Negotiating Group on Non-agricultural Market Access (NAMA), Pierre-Louis Girard, had submitted a revised modalities paper on 19 August, persistent lack of agreement led him to develop instead a framework for establishing modalities — without identifying specific numeric tariff liberalisation targets — for ministers to endorse in Cancun (see BRIDGES Weekly, 21 August 2003). The latest text, reworked following further comments from Members, is included as Annex B to the draft Ministerial text.
The Chair’s annex paper has come under fire from both developed and developing countries; the former are seeking a higher level of ambition than the latter. Developed country officials have signalled that while they can live with the Chair’s text, they are unhappy with the language on the tariff liberalisation formula and the sectoral liberalisation, which they feel give developing countries too much leeway. The US and others have also said the text is too vague to lead to an ambitious outcome.
For their part, developing countries argue the Annex text is too specific, saying that it could prejudge an outcome of the negotiations. Indeed, at the last General Council meeting before Cancun (see BRIDGES Weekly, 28 August 2003), Brazil demanded the removal of the few bracketed numbers still present in Annex B. India disagreed with the reference to using a non-linear formula that would harmonise duties by reducing high tariffs more than low tariffs, while others were concerned that the text called for sectoral tariff elimination / harmonisation in such a way that all countries would be required to participate. Developing countries prefer to keep sectoral tariff liberalisation voluntary.
Sources indicate that much of the stalling on the industrial tariff talks is also due to developing country reluctance to agree on deadlines or the extent of tariff cuts without concrete forward movement in agriculture.
The 19 August paper by Chair Girard (TN/MA/W/35/Rev.1, available at http://docsonline.wto.org) does lay out some specific modalities numbers for industrial tariff liberalisation (though it requires greater commitments from developing countries than an earlier text issued in May). Due to the continuing disagreements between developed and developing countries, however, this document is on the backburner until after Cancun. The Annex text notes that Members will use the 19 August paper as a "reference" for future work of the NAMA.
What does the Annex say?
The draft Annex does not specify the exact formula to be used for tariff reduction, but affirms that the Negotiating Group "shall continue its work on a non-linear formula applied on a line-by-line basis which 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." The "non-linear" language is a nod to a contentious proposal submitted in mid-August by the EC, the US and Canada, which indicated a preference for a non-linear tariff reduction formula. This was resisted by most developing countries. A non-linear approach would mean that steeper reductions would be made to higher tariffs, a situation undesirable to many developing countries such as India, Egypt and most African countries, who maintain higher tariffs in general than developed countries.
Reductions would be based on bound rates. For unbound tariff lines, the basis for reductions would be twice the MFN applied rate in 2001.
Participants with a binding coverage of non-agricultural tariff lines of less than [35] percent would be exempt from making tariff reductions through the formula, but they would be expected to bind [100] percent of industrial tariff lines at an average level that does not exceed the overall average of bound tariffs for all developing countries (square brackets indicate un-agreed-upon text).
Sectoral liberalisation resisted by developing countries
Some developing countries have said that they object to ambitious sectoral tariff liberalisation / elimination even more than to a non- linear tariff reduction formula. Previous drafts by the Chair and the US-EU-Canada group had proposed to eliminate tariffs in sectors of particular export interest to developing countries, such as textiles and apparel. Many developing countries — which themselves have high duties on these tariff lines — wanted participation in this endeavour to be voluntary. While Annex B does not specify that sectoral liberalisation will be a mandatory part of the negotiating modalities, it states that sectoral initiatives are a "key element" to achieving the Doha mandate on industrial market access, particularly on products of interest to developing countries, and that "participation by all participants will be important to that effect". The language does allow for flexibilities for developing countries, but it does not specify which sectors are to be addressed.
Special and Differential Treatment
According to the Annex, developing countries are to have longer implementation periods for tariff reductions. In addition, "they would be given the flexibility of keeping tariff lines unbound, as an exception, or not applying formula cuts, for up to [5] percent of tariff lines provided they do not exceed [5] percent of the total value of a Member’s imports". Developing countries are pushing for wider flexibilities in this area. While least-developed countries would not be required to apply the formula or participate in the sectoral approach, the Annex says they are expected to substantially increase their level of binding commitments. The Negotiating Group is also instructed to ‘elaborate on’ special provisions for newly acceded Members "in order to take into account their extensive market access commitments undertaken as part of their accession".
In response to major concerns forwarded by many smaller developing countries, the Annex notes that non-reciprocal preference erosion and high tariff revenue dependency "shall be further considered", though it does not specify how this is to be done.
ICTSD reporting.