State of NAMA negotiations 'bad and confusing', according to chairman

The state of negotiations in the WTO on non-agricultural market access (NAMA) is "bad" and the picture is becoming more confused, according to the chairperson of the NAMA negotiating group.

Ambassador Stefan Johannesson of Iceland was reporting to members at an informal meeting of the group on 8 November on the consultations that he had held in the past few days on various aspects.

Johannesson concluded by stating that his overall impression about the state of affairs of the NAMA negotiations is bad, according to information from trade officials. "We are not in good shape, and the picture was becoming more confused," said the NAMA chair. "We are entering the end game, and this was not an encouraging start. I have doubts about how far we can take the Geneva process. In fact, I believe that we are in dire need of political input."

Concerning a possible text for Hong Kong, the Chairperson said that he was not producing texts on elements on which he did not see some convergence. He said that this is truly a bottom-up approach. The members needed to give him something to work on, "otherwise the process is doomed to fail", he added.

On the consultations he held on product coverage (some, in particular fish and fish related products, are classified as Agricultural products), he reported no progress and inconclusive discussions. On other areas, he said Members are signalling willingness to go further if satisfactory results are obtained in other areas of the negotiations.

Another informal NAMA meeting is expected to be convened on Friday.

During the meeting, two significant new papers were presented by groups of developing countries. One was a paper by 11 countries stating their understanding and views on the flexibilities for developing countries. They stressed that "paragraph 8 flexibilities" were a stand-alone provision and cannot be used to "trade off" other items such as the tariff reduction formula; they also reaffirmed the right to propose increases to the percentage numbers in brackets, which should be taken as the minimum levels.

The other was a proposal by 22 countries, which proposed that small, vulnerable economies (those with share of world exports below 0.1%) should not be subjected to the tariff reduction formula but agree to reduce their individual tariff lines by 10-15%.

South Africa introduced the paper (TN/MA/W/65) on flexibilities for developing countries. The paper was sponsored by Argentina, Venezuela, Brazil, China, Egypt, India, Indonesia, Namibia, Pakistan, Philippines and South Africa.

The paper said that in the run-up to the Hong Kong Ministerial conference, Members have been discussing three elements of the NAMA package together due to the perceived inter-linkage between them. These are the formula, flexibilities and the treatment of unbound tariff lines. Resolution of these three issues is essential for ending the current stalemate.

With regard to flexibilities, the countries said that paragraph 8 of the July framework on NAMA was agreed to, to operationalize the special and differential treatment in the NAMA negotiations by taking fully into account the special needs and interests of developing-country participants in accordance with Article XXVIII bis and Part IV of GATT 1994.

The Doha Mandate reiterates the principle of less than full reciprocity and makes a specific reference to these provisions so as to provide policy space to the developing-country Members to address their developmental concerns.

"We regard the provision of paragraph 8 flexibilities for developing countries as an essential element of the flexibilities required by developing countries to manage their adjustment processes," said the paper.

"We therefore oppose attempts being made to reinterpret this agreement by establishing further conditionalities on the use of paragraph 8 and thus change the balance of the agreement that was reached by all WTO members in the July 2004 Framework Agreement.

"We view the numbers currently contained within the brackets of paragraph 8 as constituting the minimum percentages required by developing countries. We retain the right to adjust these numbers upwards to enable some of our economies to manage the adjustment of sensitive sectors and prevent the social disruption caused by job losses and closure of enterprises that would result from further liberalization.

"In addition, we emphasize that paragraph 8 is a 'stand-alone' provision in the agreed NAMA framework and its position as such must be recognized if negotiations are to move ahead. Any move to link it, or use it as a trade-off with the tariff reduction formula will create unnecessary difficulties in the negotiations. The two issues are separate and should be treated as such."

The other paper on "Treatment of Small, Vulnerable Economies in the NAMA Negotiations" was presented by Barbados on behalf of "Small, Vulnerable Economies".

In the operational part, the paper proposes that instead of being subjected to the formula reduction, small economies make tariff reductions of 10 to 15 percent in individual tariff lines. Unbound tariffs should all be bound but not be subjected to formula cuts.

The paper stated that as their contribution to the NAMA negotiating process, small economies propose that developing countries, not covered in paragraph
6 and paragraph 9 of Annex B, and whose average share in total world merchandise exports does not exceed 0.10% over the period 1995-2004, will be expected to:

* Make tariff reductions not exceeding 15%, but with minimum cuts of 10% on individual lines and with no more than half the cuts at the lowest level of this range. This contribution will ensure a significant reduction of small economies' tariff averages as well as a reduction in individual tariff lines.

* On the treatment of unbound tariffs, small economies whose binding coverage is more than 90% commit themselves to the objective of full tariff binding as an outcome of the NAMA negotiations. However, newly bound tariff lines will not be subject to reductions through the formula during these negotiations. Small economies are open to discuss a possible target rate at which these tariffs should be bound or a maximum rate at which to bind these lines.

The paper added that small, vulnerable economies "firmly believe that only tariff reductions compatible with their capacity to sustain trade reforms, as spelt out in this paper, are likely to efficiently discharge the Doha mandate. In this context, small economies will continue to have access to flexibilities such as those outlined in paragraph 8 of Annex B."

Explaining the rationale for their proposal, the paper said that small, vulnerable economies remain fully committed to the liberalisation process, but "the pace and level of tariff reduction must be such that small economies are able to sustain such reduction in a way that is compatible with their specific needs and concerns.

"Tariffs serve multiple purposes in small, vulnerable economies, the most important of which are to ensure the viability of vulnerable domestic industries, to foster the development of industrial capacity in new sectors and to generate fiscal resources for government revenue.

"Moreover, small economies represent an insignificant share of world trade, including non-agricultural exports, and can therefore only expect limited benefits from the outcome of the NAMA negotiations."

An Annex to the paper contained a table showing that the share of small economies in world merchandise exports has been consistently and persistently low over the past decade.

"Indeed, the vulnerability of small economies stems from the aggregate effects of a combination of characteristics and problems, which, in addition to an insignificant participation to the multilateral system, includes minimal or no export diversification, low competitiveness, dependency on a very small number of markets, economic openness and high adjustment costs," stated the paper.

"Given the relative importance of tariffs as a policy instrument and the lack of resilience that prevails in their economies, small economies believe that a simple Swiss formula, as being currently discussed in the Negotiating Group, will place an unreasonable burden on developing countries in their situation. Therefore, an alternative approach to tariff reduction as well as access to adequate flexibilities are both critical to ensure a NAMA outcome which is compatible with small economies' development objectives.

"The flexibilities as currently crafted in paragraph 8 are of very limited scope for small economies since the bulk of these economies have already bound 100% or close to 100% of their tariff lines. In addition, the thresholds and conditionalities contained in paragraph 8 further limit the usefulness of that paragraph for most small economies.

"As a matter of fact, one single sector, which may be deemed sensitive for industrial or fiscal reasons, may already fill the thresholds of paragraph 8 and hence impair the benefits of that paragraph for small economies.

"Finally, small economies also have an interest in the modalities for the treatment of unbound duties. Despite the very high level of tariff bindings of small economies, unbound tariff lines most often represent sectors and products of strategic importance, either because of the sensitive nature of such industries or because of their contribution to government revenue.

"Small economies that have already made large efforts to bind all or most of their tariff lines should receive recognition for such efforts, and not be penalised through modalities that affect them detrimentally."