BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER

TWN Info Service on WTO and Trade Issues (Jul05/3)

6 July 2005
 

Caribbean countries propose new formula at NAMA meeting

Negotiations on NAMA (non agricultural market access) are taking place this week in the WTO. On Monday (4 July), a group of Caribbean countries proposed a new tariff-reduction formula which they said is aimed at taking into account development concerns.

The proposal received broad support from several developing countries, but was received more coolly by some developed countries.

According to the co-sponsors of the paper, Antigua and Barbuda, Barbados, Jamaica and Trinidad and Tobago, their proposed formula is aimed at addressing the development-related requirements of the Doha mandate on NAMA

They explained that they were motivated by the fact that their oft-stated developmental needs and interests have not been adequately assimilated into the various proposals that have been tabled so far, in particular the simple Swiss formula.

Speaking on behalf of the countries, Ambassador Smith of Jamaica characterised the proposed formula as "non-linear formula and a la carte system of credits". He said that this version of the non-linear formula incorporates the variable of average bound tariff rate of member countries as contained in the ABI proposal.

To this is added a further variable, in terms of a credit given for certain characteristics of developing countries. This credit is used to supplement a base coefficient for developing countries, and which will be agreed on by members.

"The more credit a member accumulates on the basis of the criteria underpinning the credit system, the larger the larger the sum of the base coefficient plus credit in numerical terms and thus the more pronounced will be the modulating effect on the level of the tariff reduction a member must undertake" added Amb. Smith.

Below is a report by Tetteh Hormeku (Third World Network-Africa and Africa Trade Network) on the Caribbean proposal and the response to it at the NAMA meeting.

With best wishes
Martin Khor
TWN

__________________________

Caribbean countries propose new formula at NAMA meeting
By Tetteh Hormeku (TWN-Africa and Africa Trade Network)
Geneva, 5 July 2005

A group of Caribbean countries have proposed a new tariff-reduction formula to take into account development concerns during the WTO negotiations now taking place on on non-agricultural market access.

The proposal was presented Monday afternoon at an informal meeting of the NAMA Negotiating Group, which is meeting this week in Geneva.  The proposal received broad support from several developing countries, but more coolly by some developed countries.   

According to the co-sponsors of the paper, Antigua and Barbuda, Barbados, Jamaica and Trinidad and Tobago, their proposed formula is aimed at addressing the development-related requirements of the Doha mandate on NAMA.

They explained that they were motivated by the fact that their oft-stated developmental needs and interests have not been adequately assimilated into the various proposals that have been tabled so far, in particular the simple Swiss formula.  

In order to remedy this, the Caribbean proposal builds on what it sees as the positive elements of some of the earlier proposals and adds  new elements that would enable the specific features of developing countries to be taken into account. 

Speaking on behalf of the countries, Ambassador Smith of Jamaica characterised the proposed formula as "non-linear formula and a la carte system of credits".  He said that this version of the non-linear formula incorporates the variable of average bound tariff rate of member countries as contained in the ABI proposal. 

To this is added a further variable, in terms of a  credit given for certain characteristics of developing countries.  This credit is used to supplement a base coefficient for developing countries, and which will be agreed on by members. 

"The more credit a member accumulates on the basis of the criteria underpinning the credit system, the larger the larger the sum of the base coefficient plus credit in numerical terms and thus the more pronounced will be the modulating effect on the level of the tariff reduction a member must undertake" added Amb. Smith.

In their paper, the proponents argued that the eventual modalities for making tariff reductions commitments must at the end of the day be consistent with the negotiating mandate provided to members in paragraph 16 of the Doha Ministerial Declaration, where it is unequivocally stated that "the negotiations shall take fully into account the special needs and interests of developing and least developed country participants including through less than full reciprocity in tariff reduction commitments...".

These principles are reaffirmed and reiterated in Annex B of the General Council decision of 2 August 2004.

The Caribbean members added that in the course of the negotiations, they had repeatedly underscored their developmental needs and interests, but that these concerns had not been adequately and appropriately assimilated into the various formula proposals, in particular the simple Swiss formula.

"We wish to reiterate that our preference would be for an overall average tariff-reduction approach along the lines used in the Uruguay Round.   Nonetheless, we are presently prepared to engage with other members in a search for an appropriate non-linear formula approach that responds to development concerns.

"This is without prejudice to our support for a linear formula approach as the best means to achieve these development concerns, nor does this derogate from our view that a key to meeting development concerns is differentiated coefficients at a sufficient distance to lead to significantly different outcomes for developed and developing countries. Thus, we reserve the right to propose other approaches if this search is unable to yield appropriate results that satisfy the Doha mandate."

The paper said that many proposals on the table envisage more than one coefficient to be used in the non-linear formula either through the idea of a system of credits or taking into account the tariff profiles of members. "We would like to make use of the concept of multiple coefficients in order to fulfil the mandate of paragraph 16 of the Doha Ministerial Declaration by taking more fully into consideration the special needs and interests of developing countries.," said the paper.

"The "Swiss-type" proposal by Argentina, Brazil and India is a positive attempt to take into account one important variable that has implications for developing countries, namely the present average bound tariff rate of the country. To some extent this is a useful reflection of a member's tariff structure and hence its concomitant sensitivities and domestic economic priorities.

"However, the national average bound tariff is only one useful variable. Other relevant factors that are important for development and for developing countries should also be incorporated in order to ascertain the appropriate rates of reduction, consistent with developing country members' circumstances and development needs."

The paper said that other relevant factors that need to be taken into account, including:  

*  Developing country Members which have bound a substantial percentage of their tariff lines.

* Developing country Members that have undertaken autonomous liberalization. The incorporation of this factor in the formula is one meaningful way to provide such credit.

*  Members dependent on customs and other border taxes which constitute an important portion of government revenue;

*  Developing country members with incipient industries will require the continued use of tariffs to ensure the continued and increased viability of local industrial enterprises and to significantly increase or least maintain industrial jobs and employment;

*  Developing country members need to be able to maintain or expand their national policy space so as to be able to adopt measures that lead to successful industrial development. There should thus be flexibility in the use of tariffs to enable potential industries to develop. 

*  Developing countries also need to have the flexibility and policy space to vary their tariff levels in line with developments and needs such as changes in economic priorities or circumstances;

*  Developing countries facing the challenge of preference erosion should also be accorded  additional policy space to help address the adjustment costs resulting from this new trading environment;

*  The degree of openness of the economy of developing country member to trade, which is an important measure of both liberalization as well as of vulnerability of the economy to external shocks. 

*  The economic vulnerabilities of developing countries, including small economies

The paper said that the above list above is not exclusive and that   it is crucial that these and other developmental factors (together with the already proposed variable of national average bound tariff) are effectively incorporated into the eventual formula that would be adopted.

"The challenge is to find a formula which can incorporate these factors.  We are proposing for consideration a possible development-oriented approach which could be one way in which these factors are effectively taken into account when determining the modalities for making tariff reduction commitments."

The proposed formula is expressed as follows, with the final bound rate T1 being equal to a top line of variables divided by a bottom line.  The top line comprises (B  + C ) x Ta x T0,   while the bottom line comprises  [(B + C) x Ta] + T0.

The paper explains that T1 is the final rate, to be bound in ad valorem terms;
T is the bound base rate;  Ta is the average of the current  bound rates;
B is a coefficient, its value(s) to be determined by the participants; and C is the credit to be accorded to developing country members.

The value of C will be the sum of the values (to be determined) of relevant factors (other factors may be identified) for each developing country member. 

The factors listed by the paper include:  (1) Substantial tariff binding coverage; (2) Autonomous liberalization;  (3) Revenue dependence;  (4) To maintain and strengthen incipient domestic industries and address their vulnerability;  (5) Policy space for development of potential industries and for industrial development generally;  (6) To address adjustment costs for the loss of preferential market access as a result of multilateral liberalization; (7)  The existing degree of openness of an economy to trade, which is a measure of liberalization as well as vulnerability to external shocks.  This can be measured by relevant variables such as import-to-GDP or trade-to-GDP ratios;  (8) Economic vulnerability

The paper requested members to consider the points made above and the proposed formula to assess whether it will adequately and appropriately fulfil the development objectives, parameters and principles of paragraph 16 of the Doha Declaration.

It also clarified that the flexibilities in paragraph 8 of Annex B of the General Council decision of 2 August 2005 are not affected by the application of the proposed formula.

While several countries welcomed the proposal as a positive contribution to the discussions for a way forward in the NAMA, others were cautious in their response.   A few countries expressed opposition. 

Among the countries which welcomed the proposal were, India,  Kenya, Egypt, Tunisia, Cuba, Bolivia, Argentina.  

In welcoming the proposal, Kenya stated that the paper responds to the special needs and interests of developing countries through the notion of credits, and that the proposal was  consistent with measures to promote industrialisation.

Egypt said it supported the proposal and would work closely with the proponents on the coefficient.  Tunisia believed that the proposal would strengthen the discussion.

India described the proposal as supportive of the development dimension of the discussion. 

Cuba stated that the proposal was important because it addressed the development concerns of member states, adding that the Swiss formula did not satisfy everyone.  On its part, Bolivia, in welcoming the proposal, urged the Chairman to reflect the diversity of views of members.

Among the members which expressed misgivings about the proposal, EC stated that the use of the average tariff was not acceptable, and was contrary to the Doha mandate relating to market access.  It added that it believed that the proposal will provide a stumbling block to the negotiations.  However, the EC said that it understood the concerns behind the proposal and heard the cry of the Caribbean

In the view of Japan, the proposal was  no different from the ABI (Argentina, Brazil and India) proposal and it suffered from the same limitations.  Chile had significant reservations with the formula, both in terms of principle and practicality, stating that it was impossible to objectively value the credits

The US expressed concern with the growing number of countries trying to opt out of  significant liberalisation.  While it agreed that one-size does not fit all, it believed that this concern can be addressed though para 6, 8 and 9 of Annex B of the July package.

Australia sought clarification as to specificities of the credit element of the formula, adding that it would be an insurmountable task to add value to the credit.

Turkey opposed the proposal on the basis that it did not meet the requirements of  the Doha mandate; while Costa Rica objected, among other things, to the preference erosion element of the proposal.

In response to the reactions, Amb. Smith of Jamaica observed that the  rigour of the debate showed the importance of the issue.  He also stated that one did not need to quantify the credits down to the last decimal point, and he disagreed with the suggestion that the proposal was counter to the Doha mandate.

 


BACK TO MAIN  |  ONLINE BOOKSTORE  |  HOW TO ORDER