NAMA TALKS BUDGE SLIGHTLY, AS WTO MEMBERS LOOK FORWARD

After months of near-complete deadlock, some hints of flexibility have emerged in the Doha round talks on trade in industrial goods, officials say.

Although it remains unclear whether governments will be able to bridge their differences, many countries have reportedly demonstrated willingness to consider some potential ideas circulated by the chair of the WTO negotiating committee on how developing countries might trade deeper tariff cuts off against wider exceptions for some products, so as to reach an acceptable compromise.

At the very least, said one delegate, countries were showing an "increased level of engagement." At a session of the non-agricultural market access (NAMA) negotiating committee on 14 March, Chair Ambassador Don Stephenson (Canada) sounded less frustrated than he had in recent meetings, another source added.

Members have long been divided on two of the most crucial parameters in the NAMA talks: 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. Progress on the two issues is critical for Members' efforts to strike a framework deal on agriculture and manufacturing trade in the upcoming month or two.

In a draft agreement he circulated to Members on 8 February, the chair, Canadian Ambassador Don Stephenson, pointed to the complete absence of consensus. He suggested that they explore tradeoffs between the formula and the flexibilities, such as a 'sliding scale' between the two, in search of a deal. When, by the end of the month, there were few signs that Members were doing so, Stephenson came forward with some ideas for what they might consider (see BRIDGES Weekly, 5 March 2008).

The link between the formula and the flexibilities is straightforward: countries might accept lower formula 'coefficients' (which become future tariff ceilings) if assured greater latitude to protect sensitive sectors from those very tariff reduction obligations, and vice versa.

Stephenson's February text, like an earlier version issued last July, called for coefficients of 8 or 9 for developed countries, and 19-23 for developing countries.

These figures have been sharply criticised by members of the NAMA-11 group such as Argentina, Brazil, and India, which argue that they demand far more of developing nations than of industrialised countries, and are disproportionate to the farm reforms on offer in the agriculture negotiations.

The February text - unlike the one from July 2007 - did not include any potential figures for developing country flexibilities. The earlier text had 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). Alternatively, they would be allowed to exclude 5 percent of tariff lines from reduction altogether (albeit limited to only 5 percent of manufacturing imports). These '10/5' figures were in square brackets signifying the absence of agreement.

Sliding scale

Of the various options that Stephenson set out for trying to satisfy demands for deeper tariff cuts and targeted protection, sources said that Members seemed most willing to discuss a limited 'sliding scale', with three separate options for the coefficient and flexibilities. Although he had specified that the numbers in the informal document "do not prejudge or prejudice the position of Members," Stephenson's examples for this option had a 'pivot' coefficient of 21, for which developing countries would have the '10/5' flexibilities present in the July 2007 text. As one alternative, countries could accept a coefficient of 19, and in return, be allowed to designate up to 14 percent of tariff lines for a 'half-formula' cut, or exempt 7 percent of lines from cuts altogether. At the opposite end of the scale, governments could choose to not use the flexibilities at all - and would get a coefficient of 24 instead.

Stephenson will have to produce another draft text before Members can start a 'horizontal' negotiating process involving trade-offs against agriculture, in an attempt to enable ministers to strike a deal on agriculture and NAMA by April or May. In discussions last week on what this potential text should contain, sources said that the NAMA-11 called for the text to include the possibility of higher coefficients than the '10/5' figures. For instance, the number of products eligible for half-formula cuts could be "10+x" percent of tariff lines; the proportion eligible for complete exclusion could be "5+y" percent.

Several countries, including the US, acknowledge that ministers alone can agree on the small set of numbers that will ultimately determine countries' pain and gain in industrial trade. This stands in contrast to the agriculture negotiations, where officials still need to resolve a number of underlying matters in order to present ministers with a manageable number of issues to resolve at a still-theoretical meeting.

New text must reframe formula, flexibilities

One delegate said that Members need to agree on the 'pivot' - the value of the coefficient at the point in the sliding scale corresponding to the 10/5 flexibility numbers. Brazil said at the committee meeting that the 'exchange rate' between the formula and flexibilities would also have to be negotiated. The objective for the new NAMA text would be to reframe the terms for the formula and the flexibilities in a way that would maximise ministers' chances of success, the official added.

Sources said that the increased willingness among Members to discuss the sliding scale might have been facilitated by NAMA talks in London last week among officials from the EU, the US, and Brazil.

Among Stephenson's other suggestions that garnered significant interest was an option that would have left the coefficients alone, but varied 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 were eligible for no cut, and 10 percent for a 'half-formula' cut, then countries could be allowed to subject 7.5 percent of tariff lines to tariff reduction equal to only one-fourth of what would be demanded by the formula (or 12.5 percent of lines to tariff cuts equivalent to three-quarters those required by the formula). Another option would allow countries to use part of their entitlement for 'half-formula' cuts to exclude a lower number of tariff lines from reduction altogether.

Canada, Iceland, Japan, Norway, Switzerland, and the US collaborated on an informal paper setting out a "formula plus sectors" approach, in which those developing countries that elect to participate in sector-specific liberalisation initiatives would be rewarded with "credit" in the form of a higher coefficient. The value of credit would be negotiated, potentially varying based on the number of tariff lines and share of world manufacturing trade covered by the sector in question, and be granted to all developing countries that participate in the initiative.

"Formula plus sectorals" was one of the options that Stephenson had presented to Members for balancing ambition with flexibility. The new paper stressed that participation in sectoral initiatives - which have been proposed for a wide range of products, from fish and forestry products to chemicals and toys - remained non-mandatory.

Sources say that Members including Hong Kong, Singapore, and Thailand expressed support for the ideas in the new paper, while Mexico, Chile, and India were among those that said they were uninterested.

The percentage of manufacturing trade volume that the flexibilities will be allowed to cover was not directly addressed, although sources report that Stephenson said that there was "some support" for increasing it beyond the 10/5 numbers, although this would be a "sweetener". Argentina and other members of the NAMA-11 have unfavourably contrasted the trade volume cap on NAMA flexibilities to the absence of similar limits on the share of farm trade that industrialised countries will be able to shelter from the full force of tariff cuts.

Real divisions persist

Despite the increased willingness to discuss potential tradeoffs within the NAMA negotiations, some statements at the recent meeting pointed to the very real divisions that persist. For instance, the US reportedly insisted that it could not accept a developing country coefficient higher than 23 - a figure that some developing countries have rejected in the past. And when Norway and several developing nations said that the coefficient for rich countries should be below 8, the US and the EU refused.

Furthermore, agreeing on NAMA 'modalities' will require more than just numbers for the formula and flexibilities. It will require agreement on special tariff treatment for small and vulnerable economies, and for the dozen-odd developing countries with a low proportion of bound tariffs. A deal will also have to pass muster with the group of least-developed countries, which though not required to cut tariffs as part of the Doha Round, have asked for greater clarity on how other countries will go about granting duty- and quota-free access to LDC exports, as well as on a mechanism for reviewing Members' implementation of their commitments to do so.

'Green room' looks at scope of talks

As the agriculture and NAMA negotiating committees work towards new texts - possibly to be issued by the chairs in the first week of April, or even the last week of March - WTO Director-General Pascal Lamy has been holding a series of invitation-only 'green room' meetings with some 30-odd delegations in an attempt to determine the scope of a potential ministerial decision to be taken in April or May.

Such a decision would have to be centred on modalities for agriculture and NAMA. However, different countries want a range of different issues to be addressed, ranging from services to protection for regional food names to anti-dumping rules, prompting fears that the agenda might become so crowded that it would become impossible to strike a deal (see BRIDGES Weekly, 20 February 2008).

The first 'green room' meeting, on 13 March, agreed that new texts would be necessary on both agriculture and NAMA before horizontal negotiations could begin.

The second, on 18 March, looked at how a 'signalling' conference on services trade might function. Such a conference, where major target markets would indicate how much they were willing to open up their services sectors to foreign competition, has been a major demand of the US and the EU. Sources suggest that a signalling conference could be chaired by Lamy, held back-to-back with a ministerial-level meeting, and that the outcome should be communicated to all Members, not just the participants.

Exactly which countries might participate in a signalling conference remains undetermined, beyond the major economies that have either sponsored or been the target of requests for market access. The group of least-developed countries is pushing for a signalling conference to address its own priorities, including a collective request for allowing LDC service-sector workers to go to other countries on temporary work visas ('mode 4'). Sources say that several developing countries expressed support for the LDCs' demands.

Geographical indication protections for foods such as Parma ham remains the subject of disagreement. The chair of the negotiating group on rules, Uruguayan Ambassador Guillermo Valles Games, has indicated that he would issue a new draft text for the horizontal process, in an attempt to assuage some countries' concerns about agreeing to concessions on agriculture trade with no idea about what they might obtain on reforms to WTO anti-dumping rules.

At this week's 'green room' session, sources say Lamy warned once more that overloading the agenda for a ministerial-level meeting could lead to a "train wreck."

A third 'green room' meeting is expected next week.

ICTSD reporting.