WTO: 2008 NEWS ITEMS

DOHA DEVELOPMENT AGENDA: MARKET ACCESS (NAMA) NEGOTIATIONS

Citing some concerns that there was not much progress on agreeing the figures that will have to be included in the structure of his modalities text, the Chairman said that NAMA “desperately needs a Senior Official level discussion before there is one with Ministers”. He also said that an outcome is within reach.

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Use the links below to download audio files or to listen to what he said in the meeting.

 

The February 2008 NAMA modalities text made simple

Whereas the July 2007 text was a Chair's proposal for compromise between member's positions, in search for a balance between competing interests, this text moves towards a “members' text”, reflecting the actual state of play on the various issues and widening the scope for final negotiation. The Chair notes that the “architecture” — or parameters — for modalities is almost agreed and he considers this “real progress” since July 2007.

Here are the key elements of the document:

Formula

Tariff reductions for industrial products would be made using a “simple Swiss” formula with two coefficients, one for developed and another for developing country members. A Swiss formula produces deeper cuts on higher tariffs. A higher coefficient, as envisaged for developing members, means lower reductions in tariffs.

The Chair's draft modalities keeps the previous coefficients in square brackets (which means it is open to negotiation): 8 or 9 for developed members and between 19 and 23 for developing. The Chair notes that most members who will apply the formula have accepted the proposed ranges. But he also recognizes the positions of other members seeking: a) greater reductions by developing members, through the use of a lower coefficient than 19 to 23; b) greater reductions for developed members, also through the application of a coefficient lower than 8 or 9; or c) a smaller tariff reduction for developing members, through the application of a coefficient higher than 19 to 23 and a greater differential between the developed and developing country coefficient.

The proposed coefficients would mean:

  • The maximum tariff in developed countries would be less than 8 or 9 per cent, depending on the coefficient agreed.

  • The maximum tariff for developing country members applying the formula would be less than between 19 to 23 per cent, depending on the coefficient agreed except for those tariffs sheltered by the flexibilities, a subject covered in the next section.

  • The difference between bound rates and those actually applied (referred to as “the water” or “binding overhang” in the jargon of the negotiation) would be substantially reduced.

  • Developed countries would have bound tariffs at an average of below 3 per cent, and tariff peaks below 8 or 9 per cent even on their most sensitive products. In the developing countries applying the formula, bound tariffs would be at an average of between 11 to 12 per cent, and only a limited number of developing countries would have averages above 15 per cent.

However, the Chair notes in his text that members’ positions on the ranges of coefficients and differentials between them differ widely. For example, while some would like a differential of 5 between the developed and developing country coefficient, others would like 25.

The tariff reductions will be implemented gradually over a period of four years for developed members and eight years for developing members (in five or nine equal cuts, respectively), starting 1 January of the year following the entry into force of the Doha results. These figures have not been agreed yet and will also depend on the level of the coefficient.

Overall, the approximately 40 members applying the Swiss formula (the others have special provisions) account for close to 90 per cent of world NAMA trade. Among these members, four are recently acceded members (RAMs).

Flexibilities for developing members applying the formula

In order to allow them to protect tariffs on their most sensitive products, the draft modalities foresee that developing members applying the formula may choose between the following three options:

  • Developing members can “shelter” a given percentage of their most sensitive industrial tariff lines from the full effect of the formula, provided that these tariff lines do not exceed the same given percentage of the total value of their NAMA imports. These tariffs would be subject to cuts equal to half of the agreed formula reduction.

  • As an alternative, these members can keep a given percentage of their tariff lines unbound or exclude them from tariff cuts, provided they do not exceed the same given percentage of the total value of their NAMA imports.

  • Finally, developing members who do not wish to use either of the two aforementioned options have the possibility of applying a higher coefficient than the one normally applicable to the other developing members.

In his latest paper, the Chair did not provide numbers (it will be recalled that they were 10 and 5 in the first and second options, respectively) in these provisions because he wished to open the possibility for members to negotiate flexibilities tailor-made to their needs, taking into account the differences in tariff structures among developing members. In so doing, he has provided more options for a negotiation. The issue of flexibilities is now linked more explicitly to the choice of coefficients. In other words, in this version of the modalities, the Chair opens the possibility for flexibilities to be negotiated in connection with the coefficient: “if the figure applied to the flexibility goes down, the one for the coefficient can go up, and vice versa”, as he put it in his press conference.

Unbound tariffs

Since the base rate for the application of the formula is the bound rate, members with unbound rates can add a mark-up of 20 or 30 percentage points. This mark-up would be added to their applied rate in effect on 14 November 2001 and would form the basis for the formula cuts.

Recently acceded members (RAMs)

Albania, Armenia, the Kyrgyz Republic and Moldova will not be required to apply tariff reductions in this Round. The Former Yugoslav Republic of Macedonia, Saudi Arabia and Viet Nam would be excused from further market access commitments in recognition of their extensive commitments during their accession negotiations. RAMs such as China, Chinese Taipei, Oman and Croatia subject to the formula would have a grace period of two to three years on those lines on which accession commitments are still being implemented, before commencing their Doha cuts. In addition, they would have an extended implementation period on all lines of two to five years to phase in their Doha commitments. The remaining RAMs qualify as small, vulnerable economies (SVEs) and may apply the modality envisaged for such members.

Modalities for other developing members (around 75)

Least-developed countries (LDCs) are exempt from tariff reductions; there are special provisions for SVEs and for developing countries with low levels of binding. As a result, relatively weaker developing economies will retain higher average tariffs and greater flexibility on how they structure their tariff schedules. But they will nevertheless contribute to the market access outcome, significantly reducing “the water” (the difference between bound rates and those actually applied) and binding a high number of their tariffs. There are also proposed solutions for members with preferential access to developed country markets who would see their preferences erode because of the overall tariff reductions. As well, there are provisions for other developing members who would be impacted by such a solution.

Sectors for deeper tariff reduction or elimination

The Chair's text also notes that some members have been engaged in negotiations which would envisage undertaking deeper tariff reductions in some industrial sectors. Through such agreements, tariffs might be reduced to zero in some developed countries, and in some cases with smaller reductions in participating developing countries as “special and differential treatment”. These negotiations are voluntary, and would require a “critical mass” of countries joining the initiative for it to take off. There are 13 sectors currently under negotiation: Automotive and related parts; Bicycles and related parts; Chemicals; Electronics/Electrical products; Fish and Fish products; Forestry products; Gems and Jewellery products; Raw materials; Sports equipment; Healthcare, pharmaceutical and medical devices; Hand tools; Toys; Textiles, clothing and footwear.

Non-tariff barriers (NTBs)

NTBs, restrictive measures unrelated to customs tariffs that governments take (such as technical, sanitary and other grounds), are also part of the negotiation. Proposed legal texts have been submitted on some of these measures, and are compiled in the Chair's text. The Chair noted that a decision on whether these proposals move forward to a text-based negotiation would need to be taken at the time of final modalities. 

THE STORY SO FAR

2001: Doha Development Agenda launched (November). Background.

2002: Industrial goods Negotiating Group (NAMA). created by the TNC (February)

2002: First meeting of the Negotiating Group (July).

2004: “The July Framework”. A package for establishing modalities agreed.

2005: Further agreement  at Hong Kong Ministerial Conference (December)

2007: A draft modalities text, “The July 2007 text”.

2008: A revised draft modalities text, “The February 2008 text”.

  

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