Major differences remain in NAMA talks

By Tetteh Hormeku (TWN-Africa), Geneva, 8 July

A week of discussions (beginning on 4 July) in the Negotiating Group on Non-Agricultural Market Access (NAMA) ended on the morning of 7 July with indications that the end-July target for coming up with 'first approximations' on the deal to be taken to Hong Kong was not likely to be met.

At the short session which closed the week of discussions, the chairman of thenegotiating group, Ambassador Stefan Johannesson of Iceland, announced that heintended to produce only a progress report on the discussions so far, to be circulatedto members by Friday.

While members were free to engage in bilateral consultations, there would be nomeeting on the report on Friday. A Heads of Delegation meeting was scheduled totake place on Friday to take reflections on the progress of work on all the areas ofnegotiations so far, both in the run-up to next week's China mini-ministerial and theend-of-July General Council meeting.

According to trade officials, in his assessment to the informal Heads of Delegationmeeting Friday, the WTO Director-General Supachai Panitchpakdi said that positionsin NAMA appear to be hardening. 'I fear that the obvious constraint here is still thelack of progress on Agriculture,' he said.

Trade negotiators have attributed the chairman's decision to limit himself to aprogress report to the strength of divisions among members over critical issues in theNAMA negotiations in the course of the week.

New proposals tabled by some members during the first two days of the discussionsbrought to the fore persisting differences which had seemed to have been paperedover at the end of June - particularly over issues such as the tariff reduction formula,treatment of unbound tariffs, and flexibilities for developing countries.

On the question of the tariff reduction formula, Johannesson's suggestion in hissummary at the end-June NAMA meeting of a growing convergence around a 'simple'Swiss formula was seriously undermined on Monday afternoon when a group ofCaribbean countries put forward their own formula for tariff reduction.

That new formula incorporated elements of the ABI (Argentina-Brazil-India)proposal, in particular linking a country's tariff reductions to its average tariff level.At the same time, the formula adds a new factor, in terms of a 'credit' to be added tothe base coefficient of the non-linear formula so far on the table. The higher the creditand the base coefficient, the less steep will be the rates of tariff reduction.

The credit would be only for developing countries, and would be accumulated bythose that are eligible for a number of 'development-related' factors, such as creditfor autonomous liberalization, dependence on tariff revenue, maintenance ofvulnerable industries, policy space for potential industries, and trade openness of theeconomy (see SUNS #5836).

It was widely acknowledged that the Caribbean submission changed the dynamics ofthe discussions over the tariff reduction formula. Prior to this, four of the fiveformulas for tariff reduction favoured the 'simple Swiss' formula. It would have onlyone coefficient (for both developed and developing countries) or two basecoeffeicients ('within sight of each other', in the US proposal).

In the Swiss formula, higher tariffs are subjected to significantly deeper cuts thanlower tariffs. If the coefficient is the same for all countries (or not too dissimilar),then the simple Swiss formula would subject the developing countries to steeper tariffcuts than developed countries, since the former generally have higher tariffs. Thedeveloped countries advocate the simple Swiss formula, with many developingcountries opposing it.

The last of the five formulas, put forward by Argentina, Brazil and India (the ABIformula) is different from the simple Swiss formula, in that while it too also cutshigher tariffs more substantially that lower ones, it links the coefficient for eachcountry to its existing average bound tariff level. Thus, countries with relatively hightariffs would be able to reduce their tariffs less steeply than demanded by the simpleSwiss formula.

At the beginning of this week's talks, there had been suggestions, especially on thepart of the NAMA Chairman, that there was growing convergence among membersaround the simple Swiss formula. This implied not only the marginalization of theABI proposal, but also a closure of the space for exploring other options.

A crack in this view came with a circulation of a paper during the week by the ABIwhich compared the ABI proposal with the 'simple Swiss' formulas, showing that theABI formula was more consistent with the Doha mandate, especially itsdevelopmental dimensions, than the simple Swiss formulas.

However, the major challenge to the view of an emerging consensus around thesimple Swiss formula came from the Caribbean proposal, put forward by Antigua andBarbuda, Barbados, Jamaica and Trinidad and Tobago.

Ambassador Ransford Smith of Jamaica, speaking on behalf of the co-sponsors, saidtheir formula sought to ensure that 'not only the individual tariff levels of memberswill be taken into account, but that other important factors will influence thereduction a developing country will be required to make.'

As many trade negotiators observed, the Caribbean proposal and the rigours ofexchanges that followed, both for and against the proposal, underlined the persistingdepth of difference among members on the issue, which countries like Bolivia urgedthe chairman of the negotiating group to reflect in his report.

One trade negotiator observed: 'It would be that much more difficult for theChairman to report a convergence for the purposes of a July approximation on theissue of reduction formula'.

Another highlight of the week's discussion related to separate proposals by twogroups of countries seeking exemption from further damaging tariff liberalisation.

The first was a proposal, jointly submitted by Congo, Cote d'Ivoire, Cuba, Kenya,Mauritius, and Zimbabwe for the treatment of unbound tariffs in relation to'paragraph 6 countries', i.e. those countries that have so far bound less than 35%(this figure subject to negotiation) of their total tariffs.

Under paragraph 6 of Annex B (on NAMA) in the July 2004 package, these countrieswould not have to apply the tariff-reduction formula, but would have to bind all (oralmost all) their tariffs, and at the end of the exercise their bound tariffs cannot exceedthe average bound rate of developing countries at the end of the Uruguay Round.

The new proposal by the countries (which are all affected by paragraph 6) called formembers with a binding coverage of less than [35]% to be exempt from tariffreduction; to be encouraged to substantially increase their binding; and for thecountries to be allowed to bind their tariff lines at a level 'consistent with theirindividual development, trade and fiscal needs.'

The co-sponsors cited in support of their proposals the experience of 'economichardships due to prior unilateral liberalisation undertaken through structuraladjustment programs'. Their proposal was meant to aid these countries, who weredescribed as dependent upon both a limited number of primary commodities, and ontariffs as an important aid for the further diversification of their economies, 'to meettheir individual development needs.'

Another paper by a number of newly acceding transition economies (Armenia,Georgia, the Kyrgyz Republic, and Moldova) also put forward the proposal that sucheconomies be exempted from tariff reduction. They cited the extensive market accesscommitments they had to make as part of their accession agreements.

Developed countries did not take kindly to the proposals, with some like Norwaysuggesting that the proponents wanted to make even less reduction commitments thanthe LDCs, a charge that was vigorously denied by the proponents.

There was also considerable difference of views among members on another NAMAissue, the treatment of unbound tariffs. There were new submissions from Mexico aswell as from Norway on this issue.

On Thursday, the final day of the week's NAMA negotiations, a final submission wasmade, being a statement of the position of 'small economies'.

Introduced by Barbados during the closing session of the discussions, the statementrecalled the mandate of paragraph 35 of the Doha Ministerial Declaration on smalland vulnerable economies, and which was reaffirmed in the July 2004 Package.

Arguing that tariffs are a primary means of ensuring the 'viability of vulnerabledomestic industries, achieving sustainable levels of development and maintainingrevenues', the statement called for a tariff reduction approach that was 'suited to thedeveloping countries' trade profiles and their ability to offer and sustain concessions'. They also asked for the less than full reciprocity and special and differential treatmentto the foundations of the NAMA modalities.

The statement provided an indicative list of results that small economies would wishto see as an outcome of the negotiations that would address their situation. Thesewould include: 'the reduction of tariffs and elimination of NTBs on products ofexport interest to small economies and the resulting expansion of market accessopportunities'; 'lower level of tariff reduction for small economies'; and 'tariffreductions from bound rates and which in no way impact on the current applied ratesof small economies'.

Others are: 'no tariff reduction on products which have strategic value for theeconomic development of small economies'; 'credit for substantial percentage oftariff binding coverage'; and 'targeted technical assistance, including in the area ofsupply side constraints, in order to facilitate use of market opportunities.'

According to trade officials, some Latin American countries such as Ecuador, Peruand Colombia raised concerns over the proposal in that a new category of countrieswould be created with less reduction commitments than other countries in a similareconomic situation.

The Chairman informed delegates that the next round of NAMA negotiations will beheld on 18-20th July.