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U.S. Business Group to Seek Steep Cuts in Goods Tariffs in WTO's Doha Round
Monday, March 7, 2005
Armed with a new study touting the benefits of tariff cuts on manufactured goods trade, representatives of a U.S. business group will push for significant reductions in duties by both developed and advanced developing countries during a visit to the World Trade Organization in Geneva the week of March 7. The National Foreign Trade Council (NFTC), which represents more than 300 companies, will warn that deep reductions in manufactured goods tariffs of at least 75 percent will be needed for any real benefits to accrue to U.S. companies. Without such benefits, Congress will be unable to support a WTO agreement that includes any of the developing world's objectives, NFTC representatives said March 4. "It is just going to be ... politically impossible to get a big result of interest to developing countries through the Congress, absent major opening of markets globally, including among the more advanced developing countries," Mary Irace, NFTC vice president for trade and export finance, said March 4 in a roundtable with reporters. Progress at the WTO on so-called nonagricultural market access (NAMA) talks has been slow. WTO members discussed the basic parameters of reducing tariffs on manufactured goods at a WTO "mini-ministerial" meeting in Kenya March 2-4. Approximately 12 members of the NFTC will visit Geneva the week of March 7, Irace said, and will meet with both WTO officials and various country representatives. 75 Percent Cut Needed A key goal of the NFTC in the Doha Round is to eliminate or reduce tariffs on manufactured goods. The NFTC released a study March 4 that found significant tariff cuts will be necessary in order to impact trade flows, because negotiations are focused on so-called "bound" tariff rates, or the maximum rates countries can impose under commitments they have made at the WTO. These bound rates are much higher, in many cases, than the actual "applied" rates.
For example, if a country has a bound tariff rate of 100 percent on a specific product, but it only applies an actual rate of 20 percent, then a cut of at least 80 percent is needed to the bound rate before any reduction in actual tariffs takes place. The NFTC's study looked at exports by its members of 50 key manufactured goods to five leading advanced developing countries: Brazil, Egypt, India, Malaysia, and South Africa. More than 70 percent of those exports face high bound tariff rates of 20 percent or above, the NFTC said. The gap between the bound rates and the applied rates is great enough, the study said, that if the formula for cutting tariffs on manufactured goods leads to reductions of less than 75 percent, "there would likely be no benefit of tariff liberalization on more than 60 percent of the trade" in the selected goods to the five countries. The study underscores the need for an ambitious approach in the NAMA talks, Irace said, and for significant cuts in industrial tariffs by advanced developing countries. Tariffs Discourage Trade In addition, the high applied tariffs on manufactured goods discourage trade between the United States and the five countries in the study, and among the five themselves, the study found. While the NFTC's members exported more than $26.5 billion of the 50 selected products worldwide in 2003, only 3.7 percent of those exports, or $922 million, was to the five advanced developing countries, the group said. The study also considered the five top manufactured exports for each of the five countries, and found that while they exported $36.5 billion of their top goods to the rest of the world in 2003, they only exported $361 million, or less than one percent, to each other. "The NFTC tariff analysis highlights the potential for growth in both U.S. and South-South trade [among developing countries] through ambitious tariff cuts" in the NAMA talks, Irace said. Risks of Dual Coefficients The USTR has proposed a "dual coefficient" approach in the NAMA talks in order to provide greater flexibility for developing countries. The proposal would involve plugging two different numbers into the same tariff reduction formula, one for developed countries and one for developing. The proposal implies that developing countries would make smaller cuts. Bill Reinsch, president of the NFTC, said the proposal could work if the countries making smaller cuts made other concessions. But he also said it reopened the question of which countries should be considered developing countries, a highly sensitive issue at the WTO, particularly for advanced developing countries such as Brazil and India. If the advanced developing countries are allowed to make cuts that are as small as the poorest countries, Reinsch said, "that would really limit the favorable trade effect of the reductions." China Threat Poses Problems Reinsch also said another factor slowing down the Doha talks on manufactured goods is the threat China poses to other developing countries. "That's the new problem," he said. "That's why [tariff cuts have] become a harder sell. They're not worried about our stuff. They're worried about being overwhelmed by the Chinese. And that's a real problem." A copy of the NFTC's tariff study can be found on its Web site, at http://www.nftc.org.
By Christopher S. Rugaber
International Trade Daily
A BNA Monitoring Service
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