WITH TALKS AT IMPASSE, NAMA CHAIR SUGGESTS TRADEOFFS BETWEEN FORMULA, FLEXIBILITIES

In an attempt to help WTO Members find a way out of the impasse in the Doha Round industrial goods talks, the chair of the negotiating committee has outlined some ways in which they might trade deeper tariff cuts off against wider exceptions for some products so as to reach an acceptable compromise.

Canadian Ambassador Don Stephenson, who chairs the talks on non-agricultural market access (NAMA), told a 3 March meeting of the negotiating group that a deal was possible, but that his central fear was that "we don't find it."

Consensus is entirely absent on some of the central issues in the NAMA negotiations. These include the formula that will determine the future tariff levels of developed and many developing countries, and the 'flexibilities' that will determine the extent to which the latter will be able to shield some products from the full force of global competition.

Stephenson has pointed to the "obvious relationship" between the formula and the flexibilities: countries might find lower formula 'coefficients' acceptable if assured greater latitude to protect sensitive sectors from standard tariff cuts, and vice versa.

In February, he suggested that given the lack of consensus, Members in search of a deal could explore tradeoffs between the formula and the flexibilities, such as a 'sliding scale' between the two.

The NAMA chair made this suggestion in a draft deal he circulated to Members to serve as a basis for further discussion. That text, like a predecessor issued last July, called for coefficients of 8 or 9 for developed countries, and 19-23 for developing countries. When fed through the 'Swiss' tariff formula, Members would slash all industrial tariffs to below the level of their respective coefficients, with corresponding cuts across the board.

Reactions to those figures neatly sum up a crucial divide in the Doha negotiations: members of the NAMA-11 group such as Argentina, Brazil, and India say that the text would require developing countries to slash industrial tariffs more deeply than justified by the rich country farm reform on offer in the accompanying agriculture text. The EU says that the agriculture text requires it to do so much, the industrial tariff cuts provided for in the NAMA draft are the very least it can expect in return from developing countries. It is not clear whether these differences on the 'exchange rate' constitute mere jockeying for political position or an irreconcilable difference, say trade diplomats in Geneva.

In a deliberate attempt to nudge Members into further negotiation, Stephenson's February text - unlike his July 2007 text - did not include any potential figures for the number of products, and the proportion of manufacturing imports, that developing countries would be able to shield from the full force of tariff cuts.

The July 2007 text provided for allowing developing countries to subject 10 percent of tariff lines to reductions half as steep as those ordinarily required (so long as this does not cover more than a tenth of manufacturing import value). Alternately, they would be allowed to exclude 5 percent of tariff lines from reduction altogether (albeit limited to only 5 percent of total import value). Both sets of figures were in square brackets signifying the absence of agreement.

However, following few signs that Members were seriously exploring the relationship between the coefficients and the flexibilities, Stephenson last week spelled out a number of approaches for how countries might try to satisfy demands for both ambition and policy space to provide targeted protection.

After participants at the 'room E' meeting of some 40-50 delegations asked for a written explanation of the ideas, some of which are mathematically complex, Stephenson circulated an informal document, stressing that the figures used in it were simply examples that "do not prejudge or prejudice the position of Members."

The approaches Stephenson suggested included the following:

- leaving the coefficients alone, but varying the number of products eligible to be shielded from the formula in accordance with the size of the deviation from standard tariff obligations. For instance, if 5 percent of tariff lines (and manufacturing import volume) were eligible for no cut, then 7.5 percent of tariff lines might be made to face tariff reduction equivalent to only 25 percent of what would be demanded by the formula. Extending this logic, 15 percent of tariff lines could be subject to cuts equal to 95 percent of the standard reduction commitment.

- a 'sliding scale' under which developing countries would trade a higher coefficient for fewer flexibilities, and vice versa. For instance, while a coefficient of 21 would allow them to exclude 5 percent of tariff lines from cuts altogether, a coefficient of 25 would leave only 1 percent of tariff lines eligible for this flexibility.

- a 'combined flexibilities' approach, under which countries might forego subjecting some products to 'half-formula' cuts, in order to purchase the exclusion of a smaller number of goods from tariff reduction altogether.

- relaxing the trade volume cap for a limited number of tariff lines.

- providing developing countries additional flexibilities. For example, allowing them to exempt 5 percent of tariff lines from tariff reduction altogether, subject a similar number to half-formula cuts, and then make cuts worth three-quarters of the standard reduction commitment on an additional 2 percent of tariff lines.

- rewarding developing countries that participate in sector-specific liberalisation initiatives with a higher coefficient.

- combining a relatively high coefficient with varying supplemental tariff cuts on different products to meet an a certain post-reduction average tariff level.

- an approach that combines a tariff ceiling, an average reduction, and a minimum cut on each tariff line.

Most of the approaches were based on ideas that had already been informally brought up by Members, sources said. One trade diplomat said that the suggestions "were just an attempt to kickstart the discussion."

Reactions were for the most part muted, as delegations need more time to work out the ramifications of each option.

India was a notable exception, with commerce secretary and senior trade negotiator Gopal Krishna Pillai quoted in the Financial Express as saying "India outrightly rejects these new ideas. They will not serve India's interest nor the interest of the other developing countries." The ideas had been "cooked up for the purpose of pandering to the demands by developed countries," the newspaper added. A separate report in the Business Standard says that in New Delhi, the move is being seen as an attempt to breakup the NAMA-11, since certain options may appeal to some members of the group.

A negotiator said that Stephenson's joke about overhearing the different options "in the cafeteria" prompted one other delegation to comment that they evidently had not been eating in the same place.

Sources said that some delegations, such as Switzerland and Brazil, were keener on some of the approaches than on others. Taiwan cautioned that some of the options set out by Stephenson could stretch out the negotiations even longer.

When reporting to the negotiating committee on the previous week's consultations, Stephenson said that delegations had started to brainstorm about the different ideas. "What is now required," he said "is work, real engagement, and discussion among yourselves to further articulate these ideas." He regretted the lack of a sense of urgency in the group.

Negotiators are increasingly acknowledging that it will not be possible to strike the hoped-for framework deal on subsidy and tariff cuts by the end of March, although April remains a possibility, at least in theory.

Delegates reported that Stephenson indicated that he would issue some sort of document no later than 17 March. However, they were not clear what this would be - a revised text, a set of potential options, or something else.

In the meantime, more 'room E' consultations are expected next week.

ICTSD reporting; "India rejects WTO market proposals," BUSINESS STANDARD, 5 March 2008; "India rejects new Nama ideas," FINANCIAL EXPRESS, 4 March 2008.