Malaysia's DDA Compromise Plan
1 June, 2006
Washington Trade Daily
The Malaysian trade minister 'who has played a leading role in global trade talks since 1996' has suggested a coefficient of '20' for developing countries with stand-alone 'paragraph-eight' flexibilities and '10' for industrialized countries in nonagricultural market access. Malaysia wants industrial goods tariff reductions to be based on the principle of less-than-full-reciprocity. She said a coefficient of '10' for industrialized countries would 'eliminate tariff escalation, high tariffs, tariff peaks.'
For developing countries, the '20' coefficient is needed to narrow the gap between high and low tariffs and voluntary tariff reduction for least developed countries. Minister Aziz said there should be 'no linkage' of flexibilities to higher level of ambition for developing countries in NAMA. Developing countries must have a longer timeframe to implement tariff reduction commitments.
Five-Page Letter
In a five-page letter to counterparts in several countries 'a copy of which was provided to WTD' Minister Aziz said there will be 'immense implications' for the multilateral trading system if the Doha round is not concluded by the end of the year. She urged trade ministers to intensify work in the next six months by showing 'flexibility' in striking agreements in the difficult aspects of market access for farm products and nonagricultural market access. Malaysia is not a member of the G-20.
The G-20 proposal includes four thresholds for industrialized countries - ranging from zero to 20 percent, 20 percent to 50 percent, 50 percent to 75 percent and 75 percent and above. The coalition also proposes tariff cuts of 45 percent, 55 percent, 65 percent and 75 percent respectively in the four thresholds for industrialized countries. Those nations also will have to cap their tariffs at no more than 100 percent.
For developing countries, the G-20 suggests a cut of 25 percent for tariffs between zero and 30 percent, 30-percent cuts in tariffs between 30 percent and 80 percent, 35 percent for tariffs between 80 percent and 130 percent and 40 percent reductions for tariffs above 130 percent. Developing countries will have to cap their tariffs at 150 percent.
On the most difficult areas in the agriculture market access pillar - such as 'sensitive products' for industrialized countries and 'special products' for developing countries - Malaysia wants to see strict criteria applied. Malaysia agrees that 'special products' should be self-designated with specific numbers guided by indicators based on criteria of food security, livelihood security and rural development.
The Malaysian proposal also suggests that tariff-rate quota expansion for 'sensitive products' in industrial nations should 'be based on combination of domestic consumption and import volume with a higher weightage for domestic consumption' and 'compensation for 'sensitive products' by way of tariff-rate quota expansion for deviation from the tariff reduction formula.'
On trade-distorting domestic supports, Malaysia proposes reductions on a 'progressive basis' so that 'there is a final level of reductions with an end date that is mutually acceptable to all members.'
Members also must agree on a specific timetable for elimination of agricultural export subsidies by 2013, the minister stated. However, Ms. Aziz shied away from suggesting how to resolve issues in export credits, food aid and disciplines for exporting state trading enterprises.
'De-Link' Progress in NAMA and Ag
The minister urged her counterparts to 'de-link' progress in NAMA from agriculture, arguing that progress in all areas of the negotiations should be undertaken in concert.
Regarding sectoral initiatives in NAMA, the Malaysian minister said modalities should include 'flexibilities that would encourage participation by developing countries.' Modalities could exclude 'sub-sectors or certain tariff lines in a given sector from tariff elimination.'
On services 'where Malaysia has adopted a strong defensive stance in the negotiations' Minister Aziz said members must focus on coming through with revised offers by July. She said work on domestic regulation disciplines is progressing well. She argued that disciplines in domestic regulations 'should take into account capacity constraints, sensitivities of certain domestic sectors and the importance of domestic regulation to meet developmental objectives.'
The minister called on members to participate actively in the technical discussions on an emergency safeguard provision in the services negotiations. She said agreement on an emergency safeguard mechanism is important as developing countries move towards services liberalization.