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TWN Info Service on WTO and Trade Issues (Nov05/15)

23 Nov 2005


NAMA report biased against developing countries


The progress report by the Chair of the WTO's negotiating group on non agricultural market access (NAMA) appears to be biased against developing countries that have defensive interests and that have tried to avoid having to commit to sharp decreases to their industrial tariffs.

The report has highlighted the positions of the advocates of "high ambition" in having developing countries cut their tariffs as much as possible, while downplaying or neglecting the views of countries that have been arguing against approaches that result in sharp tariff cuts for developing countries.

This was the view of several trade diplomats and experts who had a first reading of the NAMA report while attending a African Union preparatory meeting ahead of the Conference of African Trade Ministers being held in Arusha, Tanzania on 22-24 November.

The article below highlights concerns over the skewed approach taken in the report.

It was published in the South-North Development Monitor (SUNS) on 23 November.


With best wishes,
Martin Khor
TWN

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NAMA report biased against developing countries

By Martin Khor, Arusha, 22 November 2005


The progress report by the Chair of the WTO's negotiating group on non agricultural market access (NAMA) appears to be biased against developing countries that have defensive interests and that have tried to avoid having to commit to sharp decreases to their industrial tariffs.

The report has highlighted the positions of the advocates of "high ambition" in having developing countries cut their tariffs as much as possible, while downplaying or neglecting the views of countries that have been arguing against approaches that result in sharp tariff cuts for developing countries.

This was the view of several trade diplomats and experts who had a first reading of the NAMA report while attending a African Union preparatory meeting ahead of the Conference of African Trade Ministers being held here 22-24 November.

"Although it is a progress report, it does not fairly represent the views expressed by many developing countries," said a senior African diplomat. Although the group's Chairman, Stefan Johannesson, purports to give a status report, he has shown bias in over-emphasising the views of developed countries that are aggressively advocating very steep cuts in the developing countries' tariffs, sometimes in subtle as well as not so subtle ways, according to an African trade expert.

Several example of bias are in the critical section on the formula. The report states members have focused on a Swiss formula, with basically two variations on the table: a formula with a limited number of coefficients and a formula where each country's coefficient is based essentially on the average bound tariff rate.

It fails to even mention the proposal by many Caribbean countries that proposed a formula in which the existence of several development factors in a developing country can be taken as credits that are incorporated as a variable (together with the average bound tariff) in the formula, enabling the country to have higher coefficients and thus lower reduction rates.

In the same section on formula, the report mentions that the coefficients mentioned (by members) are in the range of 5 to 10 for developed countries and in the range of 15 to 30 for developing countries.

This is a misrepresentation. In the Argentina-Brazil-India proposal, the total coefficient of a country will be a B coefficient multiplied by the average bound tariff. Some developing countries have an average bound tariff of more than 30%, and at the same time the proponents have not yet proclaimed what the value of B would be, letting it be known that the choice of this value may be influenced by the level of ambition achieved in agriculture. The implications is that in this proposal, the coefficient could be well above 30 at least for several developing countries.

Moreover, the "development-oriented formula" proposed by the Caribbean countries implies that the total coefficients for developing countries (that can make use of development factors as credits to enlarge the sub-coefficient B) could be well above 30.

In the same section, the "less than full reciprocity" principle, which is prominent in the Doha Declaration mandate on NAMA, is mentioned merely as "one benchmark" which has attracted differences on how it should be measured.

The report further says that some developing countries view this as their undertaking "less than average percentage cuts" than those undertaken by developed countries, but that developed countries measure it differently, with factors such as comparing the final rates in developed and developing countries after the formula cut, as well as the use of flexibilities by developing countries and the fact that some developing countries and LDCs are exempt from the formula cuts.

The less than full reciprocity (LTFR) principle in terms of lower tariff reduction rates for developing countries is well established as a minimum definition, and many developing countries have made references to articles in GATT (which are mentioned in the Doha Declaration paragraph on NAMA) to the effect that developing countries are not expected to make commitments that are not in line with their trade, development and financial needs as part of the general principle of LTFR.

This more general definition of LTFR (which is referred to in GATT provisions) is not mentioned in the Chair's report, which instead gives a lot of space and prominence to the views of developed countries, which are clearly out of line with the usual way in which LTFR is understood. This is an example of bias, since the LTFR principle has been so evidently important and used by developing countries during the negotiations.

Another major flaw in the report is the continuing insistence of the Chair to treat three critical issues - the formula, para 8 flexibilities and unbound tariffs - in an interlinked manner. Para 5 of the report states that members recognize these three elements are a matter of priority and "that there is a need to address them in an interlinked fashion."

But it is dangerous to do so, and many developing countries have persistently voiced their disagreement that they be linked. Most importantly, they have stressed that the flexibilities in para 8 are stand-alone rights linked to special and differential treatment, and they should not be used to trade off with other areas like the tariff formula. On 8 November, a group of developing countries issued a joint paper reaffirming this position.

Despite the clear views of developing countries on this, the report states that there is a linkage, and proceeds to discuss each issue as if this linkage exists and is acceptable to the WTO membership. An example of this is in para 10 which mentions the view that para 8 flexibilities are equivalent to 4-5 additional points to the formula coefficient, and thatg this should be taken account of in the developing country coefficient. It does mention that many developing countries argue that the flexibilities are a stand alone provision. Yet this does not stop the report from putting forward the principle that the three issues of formula, flexibilities and unbound tariffs need to be addressed in an interlinked fashion.

The sectoral approach, which has been controversial, is given prominence and sympathetic treatment in paras 21-22 of the report. The report is evidently very supportive of the sectorals and their progress, and also proposes time lines to finalise the work. However, it fails to mention that developing countries in general have demanded a clarification that the participation in such sectorals is on a voluntary basis, and any member can choose not to take part.

A fuller analysis and response to the NAMA report is expected to be made by the participants of the Arusha meeting later.

Meanwhile the draft report of the chair of the agriculture negotiations also reached the participants in Arusha on Tuesday evening. A response to this report could also feature in the Ministerial Declaration arising from the meeting.

At the opening session of the meeting on Tuesday morning, the Commissioner for Trade and Industry of the African Union, Mrs. Elizabeth Tankeu, said the WTO negotiations since June shows "how far we are from realising the high ambitions set in Doha" and that "this lack of progress on development issues must be a source of disappointment to all of us since development was expected to be at the centre of the Doha agenda."

She added that the crucial question is whether the recalibration and lowering of ambitions are consistent with commitments made at Doha to put development at the centre of the current round of negotiations.

On Wednesday afternoon, WTO Director General Pascal Lamy, EU Trade Commissioner Peter Mandelson and Brazilian Foreign Minister Celso Amorim, are expected to address the meeting.

 


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