NAMA-11 developing countries submit comprehensive proposals for NAMA modalities

With just a few days to go before the draft NAMA modalities are scheduled to be produced by the Chair of the NAMA negotiations, the NAMA-11 group of developing countries on Thursday 15 June presented a comprehensive set of proposals at a NAMA meeting to ensure that their concerns are taken into account.

The NAMA-11 had pointed out in a previous meeting that the Chair of the NAMA negotiating group, Ambassador Don Stephenson of Canada, had not adequately captured their position in his report (TN/MA/18/Rev. 1 dated 28 April 2006) especially on the key issue of the formula to be adopted by the WTO members for making tariff cuts.

The NAMA-11 members are Argentina, Bolivarian Republic of Venezuela, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa and Tunisia.

The NAMA-11 submitted a 6-page "non-paper" (dated 14 June) to the NAMA negotiating group, to "clearly enunciate our position on all aspects of the modalities."

The "non-paper" covers the following issues: formula, paragraph 8 flexibility; treatment of unbound tariffs; implementation period; product coverage; credit for autonomous liberalization; binding in ad valorem terms; and other issues (paragraph 6 countries; sectoral initiatives; LDCs; recently acceded members; non tariff barriers; preference erosion; and environmental goods).

The paper was introduced on behalf of the NAMA-11 on Thursday morning at an informal session of the NAMA group, Faizel Ismail, South Africa's lead negotiator in WTO, said that the proposals were crafted in view of the "the need to build fair, balanced, and pro- development modalities for NAMA, in line with the mandates agreed by our Ministers in Doha and in Hong Kong."

He hoped that the NAMA-11 proposals could serve as a basis for "building multilateral consensus."

On the issue of the formula for making tariff reductions in the draft modalities, the NAMA-11 proposal states that the formula must adhere to the following principles:

• Comparably high level of ambition in NAMA and Agricultural Market Access as mandated in Paragraph 24 of the Hong Kong Ministerial Declaration: the coefficients for the formula in NAMA for developing and developed countries, shall result in average tariff percentage cuts comparable to the cuts in Agriculture.
• Enhanced market access for developing countries: it entails, in particular, that developed countries must reduce or eliminate their national tariff peaks, high tariffs and tariff escalation.
• Less than full reciprocity in reduction commitments: developed countries shall undertake greater average percentage reductions in their bound tariffs as compared to those by the developing countries.
• Reduction commitments from agreed bound rates: the contribution of Members shall be calculated on the basis of the tariff reduction effected on the agreed base rates, i. e. the final bound rates for previously bound tariff lines and the applied rates as on 14 November 2001 with the appropriate mark-up for unbound tariff lines."

Ismail told WTO members that the NAMA-11 felt strongly that these principles required explicit mention and incorporation into the draft modalities, especially in the light of the recent proposal made by six members, including New Zealand, Switzerland, Canada and the United States.

The six-country proposal envisages only a 5 point difference between the coefficients for developing and developing country members when applying a simple Swiss formula for making tariff cuts.

Speaking on behalf of the NAMA-11, Ismail criticised the proposal as moving the "negotiations backwards and [being] conceptually flawed."

"Implicitly, the proposal wrongly asserts that a Simple Swiss formula is neutral, whereas we now know that the Simple Swiss impacts on developing countries by cutting their high tariffs in the most sensitive sectors more dramatically," he explained.

"It is flawed in that it ignores the vast differences in industrial and tariff structures between industrialized and developing countries, and it remains insensitive to the socio-economic adjustment costs, including employment losses, from the impact of drastic tariff reductions.

"Further, the proposal is a thinly disguised attempt to conceal the fact that some developed countries are only willing to reduce their tariffs by a paltry 23 percent, while insisting that developing countries cut theirs by between 65 to 70 percent. The proposal reverses the principle of Less than Full Reciprocity, FTR, and will result in an unfair, imbalanced, anti-development outcome, that is against the mandate."

Ismail, citing the Doha mandate, reiterated that "less than full reciprocity requires that developed countries do more than developing countries in reduction commitments.

"In other words, it requires "proportionality" in developed countries and developing country commitments. Less than full reciprocity should be expressed in percentage term," he emphasized.

On the issue of the flexibilities for developing countries, another critical aspect of the draft modalities, the NAMA-11 proposal states that "the numbers between brackets in paragraph 8 [of Annex B of the July Framework 2004] shall be considered the bare minimum."

"Greater flexibilities in terms of higher number of tariff lines and larger trade coverage may be required by developing country Members to address their specific situations. Such requests will be given due consideration and accommodated appropriately."

Ismail explained to the WTO members that greater flexibilities are needed in order "to effectively manage the social and economic adjustments that are an inevitable outcome of the process."

He pointed out that "some WTO members, including NAMA 11 Members, will require greater flexibility than currently provided for by the numbers in the brackets of paragraph 8. Additional flexibilities may also be required by some developing country members, such as SACU, that are members of a Customs Union."

On the treatment of unbound tariff lines, the NAMA-11 proposal states: "The binding of unbound tariff lines is a concession in itself.

"A constant mark-up of 30 percentage points to the applied tariff rates as on 14 November 2001 will be adopted to appropriately address the sensitivity of both low and high unbound tariffs."

On the issue of the implementation period for developing countries, the NAMA-11 proposal pointed out that "in accordance with paragraph 8 of the July Framework Agreement, "developing-country participants shall have longer implementation periods".

"The implementation period for developing countries shall be at least 10 years, taking account of the implementation period in Agriculture to be agreed. Requests for additional time periods for specific tariff lines by individual developing countries to address particular sensitivities will be considered favourably. " the proposal added.

The NAMA-11 proposal also called for "appropriate credit for autonomous liberalisation by developing country Members who have bound their tariffs on an MFN basis since the conclusion of the Uruguay Round" to be given.

On other key aspects of the draft modalities, Faisel Ismail on behalf of the NAMA. 11 said that:

• On para 6 countries, we recognize the efforts that these countries will be making in binding their tariffs and propose that their binding coverage should be at the level of the developing country average at the end of the Uruguay Round.. [Countries mentioned in para 6 of the July 2004 framework are those that have bound less than 35% of their tariffs].
• On sectoral negotiations (for tariff elimination or accelerated tariff reduction), we underline that participation must be voluntary.
• On LDCs (Least Developed Countries) we express very clear support for the position of this group of countries.
• On RAMs (Recently Acceded Members) we recognise that there are different needs and levels of development amongst this group and that the developing countries in this group of countries should be provided with additional flexibilities in their implementation commitments.
• On NTBs (Non-Tariff Barriers) the NAMA-11 has made a clear proposal for the establishment of a horizontal resolution mechanism. At the same time it underlines that there is no mandate in this round to consider export related policy instruments.
• On preference erosion, the NAMA-11 proposes a longer implementation period (for products affected by the erosion) and additional technical assistance, (to countries affected by the erosion) in the context of a limited universe of tariff lines and affected countries. The disproportionate effect on other developing countries is also recognized.
• On environmental goods, the NAMA-11 has proposed that the discussion in the CTE-SS (Special session of the Committee on Trade and Environment) must be concluded before appropriate modalities can be discussed in NAMA.
• On the problem of Small and Vulnerable Economies, the NAMA-11 proposed a solution via para 8 of Annex B of the July Framework 2004) , with additional flexibilities given to these economies.

According to trade diplomats, the developed country members did not respond to the NAMA-11 proposals at the meeting. However, a discussion on this paper is expected at a future meeting, probably on Friday.