NAMA: MEMBERS STILL DIVIDED ON FORMULA, FLEXIBILITIES

Several WTO Members appear to be waiting to see progress in the contentious farm trade negotiations before committing themselves to any particular method for cutting tariffs on industrial goods, say trade negotiators.

Formal and informal meetings of the Negotiating Group on Non-Agricultural Market Access (NAMA) on 21-22 September indicated that Members remained broadly divided on the structure of the tariff reduction formula and the flexibilities in its application to be accorded to developed countries.

Trade-off between formula, flexibilities disputed

Specifically, they differed significantly on whether developing countries should have to give up flexibilities when applying the tariff reduction formula in exchange for a formula structure that would allow them to make relatively lower cuts than rich countries through the use of different coefficients.

According to Paragraph 4 of the NAMA mandate set out in Annex B of the 2004 July Package (WT/L/579, available online at http://www.wto.org/english/tratop_e/dda_e/draft_text_gc_dg_31july04_e.htm), Members are to develop a tariff reduction formula that accounts for the needs of developing and least-developed countries, "including through less than full reciprocity in reduction commitments." Paragraph 8 provides for flexibilities that would allow developing and least-developed countries to retain some unbound tariffs and apply tariff cuts smaller than those required by the formula to a to-be-determined percentage of items, in addition to longer implementation periods. The relationship between these two forms of favourable treatment for developing countries was the focus of much discussion during the recent NAMA meeting.

Pakistan formally presented its July proposal (TN/MA/W/60, available online at http://docsonline.wto.org), which would have countries use the simple 'Swiss' formula structure espoused by several Members associated with coefficients of 6 and 30 for developed and developing countries, respectively (see BRIDGES Weekly, 20 July 2005, http://www.ictsd.org/weekly/05-07-20/wtoinbrief.htm#4). Several delegations including Canada, New Zealand, and the US complained that 30 was too high, and would not cut developing countries' tariffs as steeply as they would like. Canada and Norway did, however, say that it provided a realistic basis for negotiations. The US has said that differentiated coefficients should replace Paragraph 8 flexibilities, a position rejected by Pakistan, Malaysia, Indonesia, and several other developing countries.

One negotiator told Bridges that the discussions highlighted the need to address the formula and the 'Paragraph 8 flexibilities' in an "integrated fashion," since the tariff cuts resulting from a particular coefficient would vary significantly with flexibilities associated with the formula -- and thus be impossible to evaluate.

Mexico elaborated on its February proposal ((TN/MA/W/50, with Chile and Colombia) to allow developing countries to choose a balance among the extent of tariff reduction required by the formula (through the use of different coefficients), leaving tariff lines unbound, the ability to exempt some products from the tariff reduction formula, and the implementation period for tariff cuts (see BRIDGES Weekly, 16 March 2005, http://www.ictsd.org/weekly/05-03-16/story5.htm). Several developing countries charged that the Mexican proposal, by requiring tradeoffs between the formula and flexibilities, essentially rendered the Paragraph 8 mandate meaningless. Mexico countered that it merely sought to reward countries that opted not to exercise those flexibilities.

It is difficult to assess the relationship between the formula and the flexibilities without specific numbers to plug into both. However, Members are generally wary of putting forward numbers even as part of a number-crunching exercise, lest they turn into starting points for negotiation.

Four new sectoral liberalisation proposals tabled

Japan, Singapore, and Taiwan together called for the complete removal of tariffs on 20 products in the sports equipment sector, pointing to persisting high tariffs and the recent rapid increase in their worldwide trade. The three were joined by Thailand in another proposal, which called for eliminating tariffs on bicycles and related parts.

A third sectoral proposal brought together Hong Kong, Japan, Singapore, Taiwan, Thailand, and the US to call for sectoral tariff elimination on gems and jewelry. The growing trade in the sector accounted for USD 261 billion in 2003.

The 21 members of Asia-Pacific Economic Cooperation (APEC) put forward a proposal for the elimination of tariffs on multi-chip integrated circuits, digital multifunctional machines, and modems, three products not covered by the WTO's existing plurilateral agreement on most information technology products.

Members broadly agree on AVE conversion

In spite of the divisions over the formula, NAMA Chair Ambassador Stefan Johannesson of Iceland said that Members have broadly agreed to follow the model from the agriculture talks for the conversion of 'specific' tariffs based on quantities imported into price-based 'ad valorem' equivalents (AVEs) -- a mathematical exercise necessary in order to apply the reduction formula to such tariffs.

Members are said to be determining their tariffs in percentage terms by using their import volumes and the notified import values they submit to the WTO Integrated Database (IDB). Most WTO Members have fairly few non-ad valorem tariff lines for industrial goods -- fewer than 7 percent -- and have already started making the calculations. Switzerland is one exception to this, and has asked for time beyond the end-September target in order to convert all of its tariffs.

Although non-tariff barriers (NTBs) received more attention than in the past during the two-day session, Members are still unclear on the specific issues they want to address in the talks. The EU and Japan spoke out against taxes and quantitative restrictions placed by countries on their own exports, generally of mineral resources. Argentina, Kenya, and the US argued that such measures were not always unjustified.

A week of intensive NAMA negotiations is scheduled to start from 10 October.

ICTSD reporting.