NAMA TALKS REMAIN DIVIDED, WITH TIME RUNNING OUT

WTO Members are showing few signs of narrowing their differences on manufacturing tariff cuts, the chair of the contentious talks said on 22 October, warning that the Doha Round would fail if they could not reach an agreement by the end of the year.

Canadian Ambassador Don Stephenson, who chairs the negotiations on non-agricultural market access, told a meeting of all Member delegations that his recent consultations with them had yielded little input for how he might revise the terms for a potential agreement he had set out in July.

He nevertheless intends to issue a revised text in mid-November, in conjunction with a revised agriculture draft agreement from the chair of that negotiating committee. This leaves negotiators only a few weeks to try to influence its contents.

One trade diplomat observed that Stephenson was in a difficult position. His July text was criticised by several developing countries including Brazil, India, and South Africa, which charged it was too demanding of developing countries, too easy on industrialised nations, and out of all proportion to the farm subsidy reform provided for in the related draft agriculture deal. Yet, since then, no one had clearly given ground.

The official explained that unlike the agriculture negotiations, in which dozens of 'blanks' still had to be filled in before countries could assess how they would be affected by the draft deal, the NAMA talks had far fewer moving parts. "Nothing is missing" in the text, the source said, "the problem is that what is there isn't conducive to consensus."

"What is there" in Stephenson's July text is a 'Swiss formula' coefficient of 8-9 for industrialised countries and one between 19 and 23 for developing countries. Coefficients essentially become Members' future ceiling duty, and serve as the basis for across-the-board tariff cuts.

Earlier this month, however, developing countries accounting for over half of the WTO's Membership, including Argentina, Brazil, India, and South Africa, formally argued that they should not be required to cut their bound manufacturing tariff rates more deeply than industrialised nations. This demand sits uneasily with the terms of Stephenson's text, which at their very strictest would cut dutiable bound rates in the EU and the US by an average of roughly 40 percent, but slash Brazil and India's (substantially higher) bound tariffs by at least 50 to 60 percent.

Sources say that while some of the countries resisting deeper industrial tariff cuts might be offering what they deem is fair in return for the farm reforms proffered by the US and the EU, others have real constraints in their manufacturing sectors that may be constraining them from going further.

Stephenson told delegations that in his consultations, developing countries were seeking a coefficient below 8 or 9 for industrialised nations. He said that Canada had suggested that it could accept a coefficient of 5.

A coefficient of 5 would begin to slash the US and the EU's bound tariffs by margins comparable to those set out for Brazil and India in Stephenson's paper. It would make a relatively minor difference to the low duties that the industrialised giants currently levy on most manufactures: a 2 percent duty, for instance, would be cut to 1.4 percent, representing a 60-cent difference on a $100 product. However, a coefficient of 5 would entail sharp - and thus unpopular - cuts to the 'tariff peaks' on the handful of industrial goods on which rich countries still maintain a high level of protection. Several of these protected industries are politically influential, and manufacture the same products, such as textiles and t-shirts, that developing countries export efficiently.

Stephenson told Members that some developing countries were seeking additional 'flexibilities' to shield manufacturing products from the full force of tariff reduction. For instance, Brazil and Argentina recently surprised many countries by arguing that they needed extra flexibilities in order to preserve the integrity of the Mercosur customs union (see BRIDGES Weekly, 17 October 2007). Some other developing countries, the chair said, appeared content to accept the terms set out in the July text, under which they would be allowed to subject 10 percent of tariff lines to only half of the reduction demanded by the formula (albeit limited to a tenth of total manufacturing imports), or to exclude 5 percent of tariff from cuts altogether (but restricted to only 5 percent of imports).

Stephenson warned delegations of potentially dire consequences if they sent too many unresolved issues to a 'green room' meeting of selected ministers and senior officials convened to examine the revised texts. High-pressure ministerial meetings in the Doha Round talks have collapsed before, notably in Potsdam in June this year, and in Geneva in July 2006. Stephenson said that he would continue to meet with delegations bilaterally, since they seemed to be more forthcoming about their bottom lines in these 'confessionals'.

As things stand right now, the NAMA chair will be obliged to guess where consensus might lie on core issues in the talks when preparing his revised text - including the potentially explosive figures for coefficients and flexibilities.

Negotiators expect to receive the NAMA text at the same time as a revised agriculture deal, some time in mid-November. New draft documents on rules and services are also expected to provide guidelines for further talks at some point around then. Negotiators say that the potential content of a services text remains to be determined - for instance, whether it would have a date for revised offers, or call for a 'signalling conference' at which significant players in the negotiations would provide an indication of future market opening. However, countries seem to appreciate more broadly that certain Members need to show vocal domestic services industries some sort of tangible progress, delegates indicated.

One source reported that agriculture Chair Ambassador Crawford Falconer said that a services text might be inappropriate at the same time as draft deals on farm and manufactures trade. The official suggested that the different negotiating group chairs would likely coordinate with each other about the order in which to present Members with their respective sections of a potential basis for finalising the Doha Round.

ICTSD reporting.