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the
modalities phase
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modalities
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Here are the key elements of the
document:
Formula and flexibilities back to top
Tariff reductions for industrial
products would be made using a “simple Swiss” formula with
separate coefficients for developed or for developing country
members. But whereas the coefficient for developed members
will be the same applicable to all of them, there will be
three different coefficient options for developing members
that will apply according to the scale of the flexibilities
they choose to use. The lower the coefficient the higher the
flexibilities and vice versa. 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, still
in square brackets (which means they are open to negotiation),
contain these coefficients: 7 to 9 for developed members and
between 19 and 26 for developing. But not all developing
countries applying the formula would apply the same
coefficient. The new modalities text proposes three different
ranges: 1921, 2123 and 2326. The use of the different
ranges would depend on three new options:

A member choosing to apply the most
ambitious coefficient (the lowest in the range) would be
entitled to "shelter" up to 12 to 14 percent of its most
sensitive industrial tariff lines from the full effect of the
formula, provided that these tariff lines do not exceed 12 to
19 percent the total value of its NAMA imports. These tariffs
would be subject to cuts equal to half of the agreed formula
reduction. As an alternative, the member can keep 6 or 7
percent of its tariff lines unbound or exclude them from
tariff cuts, provided they do not exceed 6 to 9 percent of the
total value of its NAMA imports

A member choosing to apply a higher
coefficient (the middle of the ranges of coefficients) would
be entitled to "shelter" less products: up to 10 percent of
its most sensitive industrial tariff lines from the full
effect of the formula, provided that these tariff lines do not
exceed 10 percent of the total value of its NAMA imports.
These tariffs would be subject to cuts equal to half of the
agreed formula reduction. As an alternative, the member can
keep 5 percent of its tariff lines unbound or exclude them
from tariff cuts, provided they do not exceed 5 percent of the
total value of its NAMA imports.

A member choosing to apply the
highest coefficient will not have recourse to any of these
flexibilities to partially or totally exclude tariff lines
from the application of the formula.
The text introduces precisions for the possible treatment of:

South Africa, to mitigate the impact of the formula, given
the important commitments it took during the Uruguay Round (as
a developed country).

The Bolivarian Republic of Venezuela, who argued to be
treated as a special case because of the very special
concentrated structure of the country's exports.

Customs Unions submitting a single list of flexibilities,
concerning the calculation of the value of trade limitation
affected by the flexibilities. Inter custom union trade would
be excluded.
The text also contains the following:

And anticoncentration mechanism, restricting the
concentration of flexibilities that would shelter entire
sectors from cuts.

A new proposal to give additional points in the coefficient
as a "credit" for developing countries participating in sectoral agreements.
The proposed coefficients would mean:

The maximum tariff in developed countries would be less than
7 or 9 per cent, depending on the coefficient agreed. This
would mean that developed countries would have bound tariffs
at an average of well below 3 per cent, and tariff peaks below
7 to 9 per cent even on their most sensitive products.

The majority of tariff lines for developing country members
applying the formula would be less than 12 or 14 per cent,
depending on the coefficient agreed and the flexibilities
used. 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.

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.
The tariff reductions will be implemented gradually over a
period of four to five years for developed members and eight
to ten years for developing members, starting 1 January of the
year following the entry into force of the Doha results.
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).
Unbound tariffs back to top
Since the base rate for the application of the formula is the
bound rate, members with unbound rates can add a markup of 20
or 30 percentage points. This markup 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) back to top
Albania, Armenia, The Former Yugoslav Republic of Macedonia,
the Kyrgyz Republic Moldova, Saudi Arabia, Tonga, Viet Nam and
Ukraine shall not be required to undertake tariff reductions
beyond their accession commitments.
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) back to top
The 32 poorest countries (Leastdeveloped countries or LDCs)
are exempt from tariff reductions; there are special
provisions for 31 SVEs and for 12 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 increasing the number of
bindings and reducing "the water" (the difference between
bound rates and those actually applied) and binding a high
number of their tariffs. Bolivia and Fiji are singled out as a
special case. 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 back to top
The Chair's text also notes that some members have been
engaged in negotiations which would envisage undertaking
deeper tariff reductions in some nonagricultural 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.
Nontariff barriers (NTBs) back to top
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 by members 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 textbased negotiation would need to be taken at
the time of final modalities.

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