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> Negotiations gateway
> 2004 agreed framework
> 2005 Hong Kong Ministerial Declaration
> More on
the
modalities phase
> Agriculture draft
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, Botswana, Lesotho, Namibia and Swaziland. They
would have additional flexibilities.
• 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 imports and its
development needs.
• Argentina, Brazil, Paraguay and Uruguay, concerning the
calculation of the value of trade limitation affected by the
flexibilities. The total value of Brazil's nonagricultural
imports would apply.
The text also contains the following:

An anticoncentration mechanism,
restricting the concentration of flexibilities that would
shelter entire sectors from cuts. A minimum percentage, to be
negotiated, of tariff lines or value of imports in each
chapter would be subject to the full formula tariff reductions
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 five years for
developed members and 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 25 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 an extended
implementation period on all lines of three to four 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). 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 14 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;
and Industrial machinery.
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.

