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TWN Info Service on WTO Issues (Aug03/5)

14 August 2003

Third World Network

US, EC, CANADA PROPOSAL TO PRESS DOWN DEVELOPING COUNTRIES’ INDUSTRIAL TARIFFS DRAWS PROTESTS

On 12 August, the US, EC and Canada was allowed to present a joint paper at the WTO proposing that the Cancun Ministerial adopt modalities on liberalisation of industrial products aimed at steeply reducing the developing countries’ import duties on industrial goods.

This paper was even more punishing than the already onerous demands on the developing countries contained in two papers produced by the Chairman of the Negotiating Group on Non Agriculture Market Access.

The joint paper came in for severe criticism from more than 30 developing countries that spoke up, many of them in angry tones.

It left developing countries as a whole feeling bitter and frustrated at the way the major developed countries are discarding any notions of development not only from the NAMA negotiations, but the whole post-Doha agenda.

Below is a report of the joint paper and the response to it at the WTO heads-of-delegations meeting of 12 August.

With best wishes

Martin Khor

TWN

 

Check our website www.twnside.org.sg for previous reports in the TWN Info series.

US-EC-CANADA PROPOSAL ON NON AGRICULTURAL MARKET ACCESS DRAWS ANGRY RESPONSE FROM DEVELOPING COUNTRIES

TWN Report by Martin Khor, Geneva 12 August 2003

 

Many developing countries reacted with barely concealed anger and even outrage at a joint paper by the European Communities, the United States and Canada on non-agriculture market access (NAMA) presented at the Heads of Delegation (HOD) informal meeting at the WTO this morning.

More than the twenty developing countries severely criticised the joint paper for demanding steep cuts in developing countries’ industrial tariffs, without enabling them to have recourse to any meaningful special and differential treatment nor “less than full reciprocity”, as mandated by the Doha Declaration.

The joint paper places even more onerous obligations on developing countries than the “draft elements of modalities” that had been presented in May by the Chairman of the NAMA Negotiating Group, Swiss Ambassador Pierre-Louis Girard.

A new paper by Amb.Girard’s entitled “Possible Options”, carrying various possibilities for revising his original May draft elements of modalities, was distributed to Missions late yesterday evening.

It could have been expected that today’s HOD meeting would have been preoccupied with recation to the new Girard paper.

But not was not to be.  The General Council Chairman, Carlos Perez del Castillo instead invited the co-sponsors to present their new joint paper.  The EC proceeded to orally present the paper, followed by the US and Canada.

It was a move that created discontent from several developing countries, including Malaysia and India, which questioned why a paper by two members deserved such prime time, when the HOD discussion on NAMA should center on the Girard text, which after all is the agreed basis for starting negotiation.

Nevertheless, the General Council Chair allowed the discussion on the joint paper to proceed.  It prompted some diplomats to comment, privately at least, that the major countries had been allowed to “hijack” the agenda.

Although these proponents used the rhetoric of taking account of developing countries’ needs, in reality their joint paper places great pressures on developing countries’ to reduce their tariffs at steep rates, with less concessions than contained in the Girard May draft, according to several developing-country diplomats.

The joint paper starts by stating that the Girard draft elements is an acceptable framework for negotiations.  However, a senior said that in the oral presentation the proponents indicated they would like a “more aggressive”  formula to apply, in which developing countries (which generally have higher tariffs than developed countries) would have to commit to far deeper cuts.

Indeed the joint paper advocates a “simople, ambitious, harmonising formula applied on a line-by-line basis (e.g. Swiss Formula) with a single coefficient.

The paper’s S and D treatment component is confined to a ‘system of credits’.  The formula cut can be reduced on the basis of credits given for countries with bindings greater than 95 percent, and countries that narrow the margins between bound and applied rates. 

Other proposed “flexibilities” include less than formula cuts for a limited numbetr of tariff lines or trade value but subject to a minimum required, and lonmger staging of commitments.

“Less than comprehensive bindings of all tariff lines” are proposed for LDCs and IDA-only Members.  This contrasts with the Girard draft in which LDCs are exempted from reduction commitments.

The joint paper also proposes sectoral initiatives, for instance harmonisation or elimination for textiles and apparel and elimination of environmental goods and other sectors to be defined.  Product coverage of and participation in such initiatives will need to be defined.

On non-tariff barriers, the paper simply states the Chair’s paper is a useful framework. And on preference erosion, a major area of concern to many developing countries, the paper passes the responsibility to the Bretton Woods institutions to address “adjustment needs” of Members whose exports are significantly affected by erosion of preferences.

The response from developing countries to this paper was overwhelmingly negative.  Many expressed anger and frustrtaion that the “less than full reciprocity” and S and D principles were not operationalised and that instead they would have to endure steep tariff reductions, according to trade officials.  Many also advocated that the HOD discussion today should have focused not on the new joint paper but on the Girard draft.

Pakistan said the joint paper’s formula was against the aspirations of developing countries.  It was inequitable as developing countries would have to bring their higher tariffs down drastically whereas the developed countries would reduce their tariffs only marginally.  He remarked that the S and D treatment would be for developed and not developing countries.

India said the SDT component was not clear in the paper and it doubted whethetr there were benefits for developing countries, and a cost-benefit analysis should be done.

Brazil said it would not make any formal response to the joint paper unless there was firstly concrete results in the agriculture negotiations.  South Africa also indiacted that little would come out of NAMA unless there is progress in agriculture. 

Taking up this theme further, several countries contrasted the “high level of ambition” that the EC had on liberalisation in industrial products, whilst dragging its foot on agriculture liberalisation.

Mexico said, in ironic tone, that since the EU was part of the joint paper, it hoped that this was a signal that it would also be similarly ambitious in the agriculture modalities.  How could the EC expect developing countries to open up their markets in induatrial products when it was itself not ready to remove its agricultural subsidies, asked Mexico.  Since the EC is very concerned about development, it cannot be that they mean to open developing countries’ markets when it was itself unwilling to open its own market, added Mexico in the same ironic vein.

Chile also said it was ironical that the developed countries had come up with a highly ambitious paper on NAMA when everyone else had been expecting from them an ambitious paper on agriculture. 

Kenya took note of the joint paper but said that this should be seen alongside the proposals by other countries, and not be the basis for discussion.  In particular, attention should be paid to the 18 February paper by Kenya and other African countries.

Kenya added the orally expressed concerns for development by the proponents were not matched by the substance of their paper.  It was not convinced by the claims of flexibility for developing countries in the paper.  The modalities should be based on S and SD with objective criteria, instead of ambiguous language.  The sectoral approach must be voluntary, and not the mandatory approach advocated.  S and D should be based on the level of industrial development and the ability of countries to export.

“This attempt by the developed countries to pressurise the developing countries through such a paper is a fiasco,” commented a developing country diplomat after the session.  “the paper has distracted us from serious negotiation which could have been based on the Girard draft which could have been considered together with the existing proposals.”

There was a widely held feeling among developing countries that the NAMA discussion at HOD level had pulled developing and developed countries further apart on the road to Cancun.   “This kind of pressure put on developing countries has resulted in bad feelings, and it is puzzling why their proposal was given pride of place in the HOD process and allowed to take place,” was another typical comment heard in the corridors when the meeting was taking place.

In Wednesday to Friday, there will be a a formal session of the Negotiating Group on Market Access during which the debate will continue.

 


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