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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
Here are the key elements of the document:
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
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
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
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.
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
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
Modalities for other developing members
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
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
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