Bridges Weekly Trade News Digest • Volume 9 • Number 15 • 4th May 2005
NAMA: Divisions Among Members Endanger July ‘Approximations’
At the close of a week of WTO negotiations on non-agricultural market access (NAMA) from 25-29 April, NAMA Negotiating Group Chair Ambassador Stefan Johannesson of Iceland warned that Members were in danger of being unable to agree on even "an outline of a formula" for reducing tariffs on industrial goods by the end of July.
Members remain divided on both the tariff reduction formula and the treatment of so-called ‘unbound’ tariff lines, i.e., items for which countries have not yet established an upper limit for tariffs. Johannesson appealed for an "urgent meeting of minds to arrive at "first approximations" of a NAMA package by July, which Members could then finalise and adopt at the WTO’s December Ministerial Conference in Hong Kong.
Members agree formula will be non-linear, but divided on unbound tariffs
Johannesson did say that Members have broadly "accepted the use of a non-linear formula," according to which all tariffs would not be cut by the same proportion. He also said that countries generally agree that it will be a "Swiss or Swiss-type" formula that would cut higher tariffs more steeply than lower ones, though they differ significantly on various aspects of it. Indeed, the five proposals currently on the table — from Norway (TN/MA/W/7/Add.1); the US; the EU; Mexico, Chile, and Colombia; and Argentina, Brazil, and India (TN/MA/W/54) — all incorporate non-linear formulae for tariff reduction. (For more information on these proposals, see BRIDGES Weekly, 16 March 2005; and BRIDGES Weekly, 20 April 2005)
With regard to unbound tariffs, however, Johannesson conceded that he did not see "any light at the end of the tunnel." Members are divided on whether they should be required to bind all of their tariff lines. They also disagree on if and how newly bound tariff lines should be subject to reduction as per the tariff reduction formula.
Differences repeated in informal consultations
These differences came to the fore repeatedly during the first half of the NAMA week, particularly during discussions of a joint paper from Argentina, Brazil, and India (TN/MA/W/54, available online at http://docsonline.wto.org) that proposed both a formula and a way to deal with unbound tariffs while according special and differential treatment to developing countries. Several Members, including the EU, the US, Chile, and Costa Rica criticised the proposal for being unlikely to result in meaningful levels of liberalisation. Others argued that only a small number of developing countries would be able to take advantage of the flexibilities it proposed to allow countries to maintain high levels of protection for sensitive unbound tariff lines. However, a number of developing countries did express support for the proposal’s suggestion that a country’s average tariff level should factor into its reduction commitments, even if they stopped short of endorsing the three-country paper. (For more on the first half of the NAMA week, see BRIDGES Weekly, 27 April 2005)
Delegates report that Members by and large stuck to their positions during the Chair’s informal consultations — so-called ‘Room F’ meetings of 12 to 20 selected Members — on 28-29 April. At the 28 April session to discuss the tariff reduction formula, attended by 14 Members including the EU, the US, Brazil, India, and China, Johannesson pressed the sponsors of the different papers to suggest values for the coefficients associated with the formulae that they are proposing. However, all of them were reluctant to do so, fearing that any numbers put forward would be perceived by other Members as a starting point for negotiation. The extent of tariff reduction under a formula depends heavily on the value of the coefficients associated with it. The Argentina-Brazil-India proposal explicitly links the value of the coefficients with progress in other areas of the Doha Round negotiations, agriculture trade liberalisation implicitly among them. Sources suggest that the EU and the US also asked Brazil to provide values for the coefficients, though they have not yet done so for their own proposals.
The Chair’s consultations on unbound tariffs also mirrored previous discussions. Members need to agree on how to mark up the rate that countries are applying to unbound tariff lines in order to establish a base rate for subsequent reduction. Responding to the Argentina-Brazil-India paper’s proposal for unbound tariff lines, developed countries insisted that all tariffs should be bound as a matter of principle; some developing countries that have bound all of their tariffs said that it would be unfair to allow other developing countries to retain several unbound tariff lines. Malaysia, which applies a relatively low tariff rate to its unbound lines, is said to prefer its own informal March 2005 proposal to bind unbound tariff lines at an average level of 25 percent with a maximum of 40 percent. It also believes that newly-bound tariffs should not be subject to the tariff reduction formula.
Pointing out that the much-criticised Argentina-Brazil-India proposal actually represented the first time India had signed on to a document committing it to bind 100 percent of its tariffs, a developing country source argued that the paper would have received "much more support" had it not been for the complicated issue of unbound tariffs. However, rules on unbound tariffs that were acceptable to the proposal’s sponsors were unpalatable to Members with different interests and circumstances, such as Indonesia, the Philippines, Malaysia, and some Latin American countries.
Johannesson urges Members to concentrate on formula, unbound tariffs
Members also held small group meetings on ’sectorals’ (accelerated tariff reduction or elimination for particular sectors) and non-tariff barriers. Canada and the US formally submitted an informal paper (TN/MA/W/55) that they had tabled at an earlier NAMA meeting. The proposal’s ‘critical mass’ approach to sectoral liberalisation would have participating countries reduce tariffs in the particular sector to a target level as soon as the Members participating in the initiative account for an agreed proportion — such as 80 to 90 percent — of global trade in it. The United Arab Emirates put forward a list (TN/MA/W/37/Add.2) of raw materials for possible sectoral liberalisation.
In his concluding remarks, Johannesson asked Members to focus on the formula and unbound tariffs, reminding them that only 35 working days remain before the July ‘first approximations’ are due.
The next meeting of the NAMA Negotiating Group is scheduled for 6-8 June.
ICTSD reporting; "NAMA hits snag as North attacks Argentina-Brazil-India proposal," SOUTH-NORTH DEVELOPMENT MONITOR (SUNS), 3 May 2005; "EC And Malaysia Proposals On NAMA," THIRD WORLD NETWORK, 20 March 2005; "’Urgent Meeting of Minds’ Needed On Formula, Says WTO NAMA Group Chair," WTO REPORTER, 2 May 2005.