NAMA modalities paper criticised by NAMA-11

The NAMA-11 group of developing countries has strongly criticised the paper relating to modalities for non-agricultural market access
(NAMA) for its unhelpful structure, for omitting the views of members or not reflecting their views accurately in some areas, and for creating confusion as to whether the textual language provided on specific issues was supposed to enjoy agreement or were merely put forward by the Chair under his own responsibility.

The critical comments of the NAMA-11 were made at an informal meeting convened on Friday (24 June) by the Chair of the NAMA negotiating group, Canadian Ambassador Don Stephenson.

Stephenson had issued his paper "Towards NAMA modalities" on 22 June, stating that he had adhered to the "bottom-up" principle and had reflected the degree of convergence between Members on the issues. The meeting was held for members to react to the paper.

The document is mainly in the form of a table with a listing of negotiating issues and with three columns: the first contains the mandate on the specific issues; the second contains "possible modalities language" made up of (i) language existing in the mandate (July 2004 framework and Hong Kong Declaration); or (ii) language on issues where the Chair feels "the issue has matured and language is agreed" or
(iii) language proposed by the Chair "on my own responsibility" (where he feels the divergence could be bridged); and the third column contains the Chairman's commentary on the issues, in some cases providing "some guidance for future discussions."

The paper also contains an Annex on selected proposals on issues where broad divergences remain.

At the meeting on 24 June, the NAMA-11 was highly critical of the paper, and many of its points were supported by China. Other members, including Uruguay, Mexico and Sri Lanka were supportive of the paper. The US and the EU wanted their views in some areas to be better included, and Turkey spoke on its proposal on textiles.

The NAMA-11 is a grouping of developing countries comprising Argentina, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, Tunisia and Venezuela.

In a statement presented by South Africa's head of delegation, Faizal Ismail, the NAMA-11 said it was equally disappointed that there has not been much progress since the Chair presented his earlier paper to the Trade Negotiations Committee on 28 April.

The group said it was "unfortunate" that the Chair had retained the structure (i. e. the three columns) of the April paper in his latest paper.
The structure has now become a constraint and has resulted in difficulties in interpreting his report.

Commenting on the Chair's second column, the NAMA-11 used the section on sectoral initiatives to ask whether the language in the table is "a mere transposition of the July Framework, or language that is "agreed", or language you have risked inserting in on your own responsibility?"

The NAMA-11 said that, for example, it did not agree with the language in paragraph 2 of the section on Sectoral Negotiations ("We recognise the progress made in a variety of sectors, where discussions... have focused on...").

"If this is language inserted on your own responsibility, then it should be clearly delineated as such, or put in the third column perhaps. However, keeping the language in the middle column is misleading," said the NAMA-11.

It added that the report's structure "is not helpful for the purpose of building modalities at this stage." It said there is a similar confusion in the section on non-tariff barriers (NTBs) where clearly the second and third paragraph in the middle column is misleading, if left in the middle column.
These paragraphs may be better placed in the third column.

"There are some greater dangers of this approach exhibited by the inclusion of the language on supplementary modalities in the middle column," said NAMA-11. [The text says: "We agree that Members may use the request & offer approach as a supplementary modality following agreement on core modalities.]

"This language has not been discussed. It may be a simple transposition from the July Framework but in view of the current stage of the negotiations, we will need to discuss this first before its insertion here, as this appears to be agreed language. Thus, the framework of your report is a limiting factor in the current process and would have to reflect these complexities and nuances of the discussions thus far."

NAMA-11 also made critical remarks on the third column containing the Chair's commentary. The group said that it is the prerogative of the Chair to provide some guidance for future discussions. "However, there are instances where we believe, you have not been able to provide the full spectrum of views and positions of the members and your comments do bias the search for future solutions," it said.

Illustrating this point, the NAMA-11 said that on the issue of paragraph 8 flexibilities, "whilst you correctly point out that "there is no consensus on the percentage of tariff lines", you then advise that the numbers in brackets should be treated "as a working hypothesis".

Said the group: "The NAMA 11 has clearly stated its view that the numbers in the brackets are a bare minimum and some of its members may require greater flexibility. This will need to be captured by the modalities negotiation and your commentary will need to reflect this.

"In some cases Mr Chairman, your commentary may not have correctly expressed the views of our members. For example, on non-agricultural environmental goods, the NAMA 11 did propose that the work of the Committee on Trade and Environment (Special Session) to define an approach must be completed, but the NAMA 11 does not support a list approach, and this needs to be made clearer."

On the formula, the NAMA-11 said it was "puzzled" by one of the three "key questions" listed by the Chair, i. e. "the extent to which 'real market access' must also be achieved". NAMA-11 said that "this consideration has no place in the mandate.

"If you raise this issue you will need to clarify that the bases of the modalities for tariff reduction must be bound rates. Thus, the simple reference to 'real market access' is inappropriate."

NAMA-11 said it appreciated the Chair's comments that he did not believe that the discussions provide a basis on which to establish the coefficients, or even to propose a range of numbers within which to focus the discussion.

"However, in the Annex where you list specific textual proposals, you have omitted the views of members that have expressed an interest in coefficients that may be wider than the range contained in these proposals.

"For example, some NAMA 11 members have expressed the view that the developing country coefficient should be larger than 30 (the Argentinian proposal on paragraph 24) and others have also called for developed country coefficients that are lower than 10."

[The annex only contains two proposals: the Pakistani proposal of a coefficient of 6 for developed countries and of 30 for developing countries; and a six-country proposal by the US, New Zealand, Switzerland etc that the coefficient for developing countries should be at most five points less than the developed country proposal.]

NAMA-11 said it was aware of the Chair's dilemma. "You have tried to avoid presenting a draft text on modalities with a litany of brackets," remarked NAMA-11. "However, you have attempted to suggest language in Column 2 which shows possible modalities language.

"We recognize that the constraints imposed by the framework of your report, the paper made it difficult to capture the nuances and complexities of the current stage of the discussions in the NAMA negotiations. We will provide you with more detailed comments after further studying the paper."

NAMA-11 assured the Chair that its members are committed to strive for fair, balanced and development friendly modalities. It had submitted a comprehensive set of proposals on all aspects of the NAMA modalities and set out the principles that "we believe should guide us in building these modalities."

It agreed with the Chair that much will depend on what happens in the Agriculture talks. "You have correctly recognized this factor by putting your whole text within an agriculture bracket."

China subscribed to many comments of this NAMA-11 reaction and considered "dangerous" the decision by the chair to express views on his own responsibility.

Venezuela said that the paper should indicate which of the texts in the second column are being made by the Chair under his own responsibility, and which are not. If the indications cannot be given, it is better not to have the second column.

Other developing countries supported the Chair's paper. Uruguay said it was objective, factual and balanced. It added that the level of ambition obtained in NAMA can be the catalyst for other areas. Mexico supported Uruguay's comments. Singapore said the chair's text was "not biased"; Sri Lanka said it was very balanced, while Ecuador said it offered a balanced and objective vision.

The United States said the success of the Round depends on the creation of new market access opportunities (it was thus implying that developing countries had to make cuts so that the new bound tariffs cut into the applied rates). It also expressed its "unease" about the Chair's text not mentioning the gap between coefficients as a measure of the ambition, and the US thinks this gap should be minimum (5 points).

The European Communities as well as Switzerland did not like the idea that the entire NAMA paper is in itself a bracket in the agricultural text. The EC said the text on NTBs was problematic since it does not reflect a calendar. It also disagreed with the paper's view that many members are opposed to export taxes being included as an NTB, as only a few were so opposed. The EC also had problems with the text on small vulnerable economies (SVEs) and on the environment.

Turkey proposed new language to be added to the text in the sections on modalities and sectoral negotiation. The Turkish proposal is for the textile and clothing sectors to be treated outside of the formula approach, thus the tariff reduction would be lower than the formula. China said it would never accept language of this kind in the modalities. The EC said it never liked the Turkish proposal and it is not close to liking the new language.

Japan said it had not a negative view of the document and did not have complaints. It asked members to have a positive thinking and be forward looking.

At the end of the meeting, the Chair said he would look at the text over the weekend to consider factual corrections or additions. He added that what is important is that we have a text that, with adjustments, would provide a reasonable basis for the process in the coming week.

Earlier, in opening the meeting, Stephenson said he was disappointed not to be able to produce a better paper but this one reflects "where we are". He said it was for members to decide whether or not it was fair, and the door remains open to any proposal.

He said on RAMs (Recently Acceded Members), the possibility remains to additional flexibilities. On NTBs (Non-Tariff Barriers) and the "sectoral"
approach, his comment was that this is not the time to make final decisions.

(Note: A slightly revised draft of the NAMA paper relating to modalities has been circulated on 26 June.)