Briefing note: Market access for non-agricultural products

At the Doha Ministerial Conference, ministers agreed to start negotiations to further liberalize trade in non-agricultural goods. To this end, the Negotiating Group on Non-Agricultural Market Access was created at the first meeting of the Trade Negotiations Committee in early 2002. The NAMA negotiations cover trade in manufactured goods and trade in fish products.

The ministers agreed to launch tariff-cutting negotiations on all non-agricultural products. The aim has been “to reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries”. According to the mandate, the product coverage shall be comprehensive and without a priori exclusions.

As explained in the mandate, these negotiations shall take fully into account the special needs and interests of developing and least-developed countries, and recognize that these countries do not need to match or reciprocate in full tariff-reduction commitments by other participants.

While eight rounds of GATT (General Agreement on Tariffs and Trade) negotiations have sharply reduced customs duties, certain tariffs continue to restrict trade, especially on exports from developing countries. These include so-called tariff peaks, which are  relatively high tariffs usually applied to imports of politically sensitive products. Another example is “tariff escalation”, whereby higher import duties are applied to semi-processed products than to raw materials, and higher still duties to finished products. This practice protects domestic processing industries and discourages the development of job-creating processing activity in the countries where raw materials originate. 

One of the most contentious issues of the negotiations has been the use and characteristics of the so-called Swiss Formula (under which, higher tariffs are submitted to deeper cuts) as the central tariff-cutting mechanism for NAMA negotiations. Under the Swiss Formula, a lower co-efficient means deeper cuts in tariffs for the country applying  that co-efficient. Developing countries would be expected to use a less ambitious co-efficient which would result in smaller tariff cuts. In the July 2004 agreement on the framework for establishing modalities for the negotiations, members recognized that a sectorial tariff component aimed at the elimination or harmonization of tariffs in certain sectors was another key element in achieving the objectives of the mandate.

This “sectorial approach” would aim at products of export interest to developing countries. Participation in any sectorial initiative is voluntary but intensive work was carried out in the following sectors: electronics/electrical equipment, bicycles and sporting goods, chemicals, fish, footwear, forest products, gems and jewellery, pharmaceuticals and medical devices and raw materials.

There have also been intensive discussions on provisions for special and differential treatment for developing countries and their relationship with the formula. Most of the points raised were about flexibility for developing countries — allowing them longer implementation periods for tariff reductions, allowing them to keep some tariff lines “unbound” (i.e. not legally inscribed in WTO rules) and providing additional flexibilities for recently acceded members, for small, vulnerable economies and others.

Least-developed country participants would not be required to undertake reduction commitments. But as part of their contribution to this round of negotiations, they are expected to substantially increase the number of products whose maximum tariff rates are legally bound in the WTO.

Non-tariff barriers (NTBs) have been an integral and important part of these negotiations, and work on this component of the negotiating group’s mandate has also been intense. A considerable amount of time has been spent identifying and categorizing the NTBs notified by WTO members.

Other elements regarding the Swiss Formula that have been discussed in the negotiating group are product coverage, treatment of unbound tariff lines, conversion to ad valorem equivalents, elimination of low duties, non-reciprocal preferences and tariff revenue dependency, environmental goods etc.

At the Hong Kong Ministerial Conference, ministers instructed negotiators to ensure that there was a “comparable high level of ambition” in market access as there was for agriculture and to ensure the right balance between two important areas of the Doha Development Agenda.

The future of these negotiations will depend on the final decision at the Nairobi Ministerial Conference.