Divergences between developed and developing countries on NAMA

WTO members remain sharply divided on the industrial tariff negotiations, as the NAMA consultations stretched late into Wednesday 1 March evening. One of the main areas of contention appears to be over the special and differential treatment (S&D) to be accorded to developing countries, as stipulated in paragraph 8 of Annex B to the July 2004 Framework.

During the consultations, the group of developing countries known as the NAMA-11 reiterated their position that the "flexibilities" found in para 8 are "stand-alone provisions."

Referring to their formal submission last year entitled "Flexibilities for developing countries" (TN/M/W/65), the NAMA-11 made clear that these provisions are an integral part of the special and differential treatment mandate and cannot be traded off with other issues in the NAMA negotiations.

The group includes Argentina, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, and Venezuela.

The developed countries such as the US, EU, Canada and New Zealand disagreed with the position of the NAMA-11, and supported the idea of an integrated approach towards the issue of flexibilities.

The EU made clear that from their point of view, the para 8 flexibilities are not stand-alone provisions. They want to consider the scope of the flexibilities in relation to the formula for making tariff reductions so as to maintain their aggressive level of ambition.

In this vein, New Zealand said that some technical issues with regards to the para 8 flexibilities need to be worked out before it can be used. First, are the numbers in the square brackets in para 8; Second, the structure of the formula for making tariff reductions; Third, treatment of unbound tariffs; Fourth, ascertaining the total value of imports for the purposes of para 8. This was supported by Switzerland, Australia, Hong Kong, Canada and others.

The EU, supported by other developed countries, was emphatic that they would need to know how the developing country members would be using the flexibilities contained in para 8, by which they mean the specific tariff lines that would be exempted from the formula.

To dissuade developing country members from using the flexibilities contained in para 8, Mexico proposed that a system of additional credits could be given to members that do not use paragraph 8. This was supported by Chile, and with Switzerland indicating its interest in exploring this idea further.

Several other developing countries such as the Philippines, Brazil, China and Pakistan pointed out that the existing flexibilities of exempting either 5% of tariff lines from the formula or 10% of tariff lines to a reduction rate no less than half of that required by the formula, as being the absolute minimum. The "numbers in the square bracket should be strengthened and not lessened," the Philippines said.

However, many developed country members pointed out that the para 8 flexibilities "should not be tempered with."

During the consultations on para 24 of the Hong Kong Ministerial Declaration, South Africa, speaking on behalf of the NAMA-11 developing countries, pointed out "three distinct but integrated elements of [this] paragraph."

Firstly, according to the NAMA-11, "the Ministers recognized in Hong Kong that promoting the development of developing countries through enhanced market access is an essential impetus to sustained global growth from which all can benefit." This is premised on the first sentence of paragraph 24 which states that "we recognize that it is important to advance the development objectives of this Round through enhanced Market Access for developing countries in both agriculture and NAMA", South Africa explained.

Thus, "the strategic goal for these negotiations must be for industrial countries to reduce the protection they grant to their inefficient sectors that frustrate the growth potential of the developing countries. The modalities in NAMA must thus ensure that the existing tariff peaks, tariff escalation and high tariffs in developed countries are eliminated," according to the NAMA-11's joint presentation.

Secondly, South Africa reminded members that "Ministers have spoken very clearly on the relationship between the level of ambition in NAMA and agriculture. They have instructed us to ensure that there is a comparably high level of ambition in market access in both agriculture and NAMA."

Thus, South Africa continued, "if this injunction of Ministers is to be faithfully followed, we will need to ensure that real opportunities are created for developing countries. The level of ambition in NAMA and Agriculture must be commensurate."

"The Ministers in paragraph 24 require that in comparing the level of ambition between Agriculture and NAMA, developing countries would evaluate the 'enhanced market access' that has been achieved in both," South Africa said.

Thirdly, the NAMA-11 developing countries pointed out that paragraph 24 goes on to state that this ambition "is to be achieved in a balanced and proportionate manner consistent with the principle of special and differential treatment".

"Thus, Ministers were reconfirming the need to ensure that the different levels of development and differences of the structure of the economies of developed and developing countries were considered in setting the level of market access commitments of developing countries in NAMA and agriculture."

For the negotiations in NAMA, "this means that the balance within the NAMA negotiations must take into account the different levels of development and capacity to adjust between developed and developing countries" the NAMA-11 group elaborated.

It is for this reason, the NAMA-11 pointed out, "that the DDA (Doha Development Agenda) provided for the principles of special and differential treatment and less than full reciprocity (LTFR) to be applied in the modalities for NAMA."

"The Ministers in Hong Kong through the third sentence of paragraph 24 also called for the level of commitments undertaken by developing countries to be balanced and proportionate, consistent with S&D."

The NAMA-11 said that it was therefore "the Ministers' intention to ensure that the commitments undertaken by developing countries in market access were a measurable proportion of the commitments of developed countries."

"We therefore need to ensure that within the NAMA negotiations, the percentage reduction in the formula for developing countries should be a proportion of that provided for developed countries," the NAMA-11 said.

"Fulfilling these three mandates of paragraph 24 would give real meaning to the development content of the Doha Round," they emphasized.

The developed country members reacted strongly against this. New Zealand said that market access in NAMA is not to be confined to access to developed county markets only but to all members. New Zealand also said that it could not agree with the concept that "less than full reciprocity" in tariff reduction commitments be just about lesser cuts. It argued that it is necessary to look at a number of measures to determine reciprocity and less than full reciprocity.

Venezuela pointed out that with a coefficient of 10 in a Swiss formula, the developed countries such as the US, EU and Japan would cut their NAMA tariffs by only about 24%. The developing countries would be required to cut their tariffs by a far greater percentage with the various offers on the coefficients on the table so far, and this is contrary to the principle of less-than-full-reciprocity in reduction commitments as reaffirmed in para 14 of the Hong Kong Ministerial Declaration, Venezuela said.

The US however argued that the paragraph should not be interpreted as literally as these countries have done, in numerical terms. A simple numerical comparison between NAMA and agriculture cannot be made like that, the US said. Other measures are to be taken into consideration, it added.

However, Venezuela and others reiterated the importance of looking at numbers. "We have to look at figures and cannot be abstract. This is not a theoretical discussion."