TWN Info Service on WTO and Trade Issues (Aug12/01)
3 August 2012
Third World Network

Outgoing NAMA Chair submits his final report
Published in SUNS #7415 dated 20 July 2012

Geneva, 19 Jul (Kanaga Raja) -- There has been "little enthusiasm" among Members to follow a reform agenda, Ambassador Luzius Wasescha of Switzerland, the outgoing Chair of the Negotiating Group on Market Access for Non-agricultural Products (NAMA), has said in his last report to the Group on 18 July.

He said that this is either because people believe markets will solve issues or because the forces opposed to any change are too strong for supporting reform policies of governments.

This is especially true for predictable market opening through bound tariff reductions, he said. Since he became Chair of the Negotiating Group (in October 2008), he added, tariffs have not been discussed in detail in the group.

"Over the last three years, the Negotiating Group has been mainly spending its time furthering its understanding of the various non-tariff barrier (NTB) proposals and conducting a text-based negotiation on some of them," he further said.

According to trade officials, Ambassador Wasescha told Members that several attempts have been made to break the stalemate in the tariff negotiations but to no avail.

In spite of his very best efforts to prod Members into thinking of new negotiating approaches, it was clear that for some Members the draft modalities in the present shape are not a suitable basis to move forward.

According to trade officials, the Chair offered some ideas on how the new chairman of the Group (still to be appointed) could move the negotiation forward and asked Members to keep an open mind and try to bridge the "big gap" among them.

In tariff negotiations, an area that has been dormant in the negotiation for most of his chairmanship, the Chair said that Members could combine the three main elements, adjusting the "level of ambition" in tariff reductions, with the flexibility and the implementation period. This would provide a "safety valve" so Members could be more receptive to bound tariff reductions.

According to trade officials, he said that the Safeguard Agreement or the Special Safeguard Mechanism used for the agriculture negotiations in the Uruguay Round also provides a "safety valve". He added that a pragmatic approach might be to shift to a traditional request/offer negotiation limited in duration.

On Non-Tariff Barriers (NTBs), the Chair said there was plenty of "low-lying fruit" that could be harvested if Members reflected on the advantages, not only on the risks.

He said these areas were the Horizontal Mechanism for solving NTB disputes, textile labelling, transparency in technical regulations and standards, re-manufactured goods and the idea to further promote the use of international standards. In some situations, he said, the draft modalities for the NAMA negotiations show great flexibility.

According to trade officials, the Chair insisted that "traditional mechanics" used in the GATT trade negotiations only work if governments are committed to an economic reform process. "While this mood existed until 2006, this avenue appears to be blocked at this stage", he said.

In his final report (TN/MA/23 of 18 July), the NAMA Chair addressed the issue of tariffs, saying that "we are facing a logjam" in the tariff negotiations. "Several attempts have been made by Members to break the stalemate but to no avail."

The Chair noted that at MC8 (eighth Ministerial Conference held last December), Ministers recognised "that Members need to more fully explore different negotiating approaches while respecting the principles of transparency and inclusiveness."

In this context, they committed "to advance negotiations, where progress can be achieved, including focusing on the elements of the Doha Declaration that allow Members to reach provisional or definitive agreements based on consensus earlier than the full conclusion of the single undertaking." They also stressed that they would "intensify their efforts to look into ways that may allow Members to overcome the most critical and fundamental stalemates in the areas where multilateral convergence has proven to be especially challenging."

Finally, said the Chair, they maintained that in their negotiations, they would "continue their work based on the progress already made."

"In spite of my very best efforts to prod Members into thinking of new negotiating approaches including by putting forward my own ideas such as scheduling offers without waiting for any formal adoption of modalities, it is clear to me that for some Members the draft modalities in their present shape are not a suitable basis to move forward on. At the same time, it is equally clear that it is not possible for other Members at this stage to discard a text which they have spent ten years negotiating and which reflect their interests. So, how do we move forward?," the Chair said.

One option might be the use of safety valves, said Ambassador Wasescha, adding that a safety valve allows Members to be more receptive to bound tariff reductions or - put another way - to an increase in the level of ambition because they have the possibility of respite in difficult times. It affords a degree of comfort to Members that in case difficulties arise because of such tariff concessions, they have access to the requisite breathing space, especially accompanying the implementation phase.

"A tool which serves this dual purpose might go some way in breaking the logjam we are facing in the NAMA tariff negotiations. Clearly such a mechanism cannot be invoked in an indiscriminate fashion; neither can its conditions of use be too strict. So, devising such a tool as well as the conditions of its use will be a challenge. Members could look at existing safety valves such as the Safeguard Agreement or the special safeguard mechanism which was used in the Uruguay Round agricultural negotiations for some guidance."

The other tool that Members might wish to consider is the time-frame for tariff cuts. Rather than having a blanket time-frame which is what is currently provided for in the draft modalities text, retaining the possibility to extend or shorten the time-frame of cuts on individual items might assist in reaching the necessary balance between ambition and flexibility.

"If Members are ready to look beyond the modalities, then at this stage a pragmatic approach might be to shift to a traditional request/offer negotiation limited in duration, for example, six months, and which may or may not be subject to any objectives or benchmarks. My inclination would be to go with the latter (i. e. no objectives), because Members might take another 5 years to decide on such objectives. Such a process might pave the way for some kind of a result, albeit minimum."

On Non-Tariff Barriers (NTBs), the NAMA Chair said that since January 2009, the Negotiating Group has done substantive amount of work on NTBs, more precisely NTB proposals which he has labelled Wagon 1 proposals.

"A question and answer phase followed by a text-based negotiation has got the Negotiating Group to three draft working texts which I would stress have a fair number of square brackets."

With respect to the Horizontal Mechanism under the Wagon 1 NTB proposals, Ambassador Wasescha said that while a substantive amount of work took place in the small-group in the lead up to April 2011, which is reflected in the working document attached to his 2011 report, not much has been done on the Horizontal Mechanism (HM) since then.

"It will be recalled that this proposal has broad support, at the same time opposition to it is quite stiff. If one considers that it is a pure additional tool to prevent NTBs one might wonder whether this opposition is proportionate. I encourage the opponents to reflect whether they could not adopt a more constructive attitude in the light of the conclusions of MC8. This remark also applies to other Members in other areas of the NAMA negotiations."

According to the NAMA Chair's report, the main issues of concern to the opponents appear to be the:

(1) linkage of the HM with the DSU (Dispute Settlement Understanding); a paragraph has been proposed by a delegation on the DSU link, or more appropriately the absence of such a link, which needs to be discussed further. What remains is to find adequate wording.

(2) dilution of the role of Committees; there is a fear that the HM will diminish the role of the Committee as a forum for raising and addressing specific trade concerns. The current paragraph 3, which was a compromise, is not sufficient for those Members who believe that Members must take an issue first to the relevant Committee before bringing it before the HM. The balance has to be found between the present role of the Committee and the informality and the rapidity of the HM.

(3) scope of the mechanism; at issue is whether measures regulated by the Agreement on Sanitary and Phytosanitary Measures ("SPS Agreement") and whether agricultural goods would be covered by this mechanism.

"I believe that with the exception of the third issue (which in my view requires political guidance to be resolved), the other two issues as well as the subject of special and differential treatment, the review versus the sunset clause and timeframes among others can be addressed through further technical discussions, which could lead to an early outcome," the Chair suggested.

On textile labelling, the Chair said that the proposal on this issue is where he believes the most progress was made. "In terms of specifics, we advanced on the question of scope insofar as there was an understanding reached among the Members of the small group that intermediate products would be covered by the Understanding. Subsequently, the discussion revolved around the differentiated treatment to which these products would be subject."

He highlighted, amongst others, that country of origin in paragraph 2 is still a problem for some Members. In spite of language which was proposed to address some of the concerns, more discussion and work would be required on this subject. Paragraph 4 of the working text was also an area of concern and Members in the small group were trying to find a way forward. Language which was proposed by one delegation seemed to have gone some way towards accommodating those concerns but more debate is required. Other paragraphs which would need to be reverted to are paragraphs 6.1, 6.2 and 6.5.

The Chair said that the Group made significant progress in the area of transparency, adding that in his view, this work is important because the trade effects of technical regulations and standards are particularly difficult to predict or assess.

While clearly the TBT (Technical Barriers to Trade) Agreement already contains detailed disciplines in the area of transparency that have been further elaborated by the Committee, "progress needs to be made and we started some of this work in the NAMA context, and indeed we got quite far."

"In particular, I would draw attention to the work which was started by delegations to find ways to improve the availability of information on the regulatory lifecycle of measures. We considered, among other things, the benefits of early notification of regulatory work (referred to by some as "Regulatory Agenda"), the importance of providing access to the full texts of notified draft documents, including translated versions - even if only unofficial; we also looked at the other end of the cycle, i. e., the benefits of communicating and making available the final, adopted versions of regulations; the feasibility of the Secretariat setting up a repository of this information was also discussed."

Some Members also stressed the importance of increasing transparency in the setting of (voluntary) standards - as, in some cases, these are precursors to technical regulations (mandatory).

"I could only encourage continued technical work in this area, building on the progress already made - both in the NAMA context as well as in the context of regular work. Here again an early outcome might be within reach."

As to re-manufactured goods, the Chair said that this was a relatively unexplored area at the start of the discussions in early 2009.

"I believe that through workshops and other means the proponents of this proposal have tried and succeeded in enhancing the understanding of the membership of this industry. In this connection, for some Members further educational activities should be the substantive content of any outcome on re-manufactured goods."

For the proponents, this is not sufficient and a "soft" commitment which would see the enhancement of market access on such products would be a necessary outcome.

The Chair believed that further acquainting Members with this industry through workshops would be useful. As well, beginning a preliminary discussion on the definition of such products might stimulate further thinking on what is possible in this area. Here, a parallel member-driven activity is desirable.

As to the issue of international standards, Ambassador Wasescha's report said that Members are positive about the need to further promote the use of relevant international standards. On this there is general agreement.

"Indeed, in my view, appropriate standard-setting procedures and a sound scientific basis will significantly contribute to making international standards ‘globally' relevant - and the use of such standards then becomes a form of technology transfer, as recognized by the TBT Agreement itself."

Of course, it remains essential to ensure opportunities for meaningful participation by all Members in the standard-setting process, including - and in particular - developing country Members. Nevertheless, even where participation is assured, and even when the process is "right" - achieving "global" relevance (of international standards) remains a challenge.

On the specifics, the Chair noted that Members do not always agree on the "relevance" of a particular standard or standardizing body, and said that this creates uncertainty - and uncertainty is never good for trade.

Hence, in moving forward, ways and means of improving the relevance of international standards to the WTO membership needs to be stressed. The idea of strengthening the TBT Committee's principles on the development of international standards to better facilitate cooperation between standardizing bodies and the TBT Committee has been generally well received.

"One place to start may be in exploring to what extent these principles have been used, what lessons can be drawn from this experience, and what further role the WTO can take upon itself to contribute to the promotion and use of standards that are relevant to the membership as a whole. As standards are not only tools that impact on rule making but also products with a market value, it might be a challenge to devise a long term strategy with standard setting bodies. Such a common strategy, however, would facilitate a cooperative approach among Members and would help to prevent fragmentation of the global market."

Turning to the Wagon 2 NTB proposals, Ambassador Wasescha explained that he had labelled a number of proposals "Wagon 2" proposals as the intention had been to discuss them after addressing the proposals he had labelled "Wagon 1".

"There has been yet no discussion of the former as focus has been on the latter. I would note that the proposal on Forestry Products was withdrawn by the sponsor. This was the only progress here."

The Chair noted that a certain number of delegations have tried to push their proposals by winning support from other Members and attempted to push them in Wagon 1 without success at this stage.

"So in general on NTBs, since the beginning of 2012, while some Members have shown willingness to continue technical work, a view has been expressed that such work cannot take place in isolation from the tariff negotiation. This has put us in a difficult situation given that tariff negotiations remain blocked. As a result, we have been at a standstill for much of 2012."

In his personal considerations and conclusions, Ambassador Wasescha said that the traditional mechanics on which the success of GATT tariff negotiations is built does not work in the Doha Round. After accepting a package of tariff reductions, Members used to implement these cuts, which led to some structural adjustments. These adjustments allowed Members to commit themselves to further cuts in the next negotiation. This well experienced mechanism only works if governments are committed to an economic reform process.

"While this mood still existed until 2006, this avenue appears to be blocked at this stage. The active participation of developed countries in tariff negotiations since 1947 has allowed medium tariff rates to be brought down to levels where NAMA tariffs can no longer be considered as barriers to trade. Tariff peaks remain however. Their elimination remains an objective of the negotiations."

To establish an adequate balance of commitments for those developing countries which are economically in a situation to do so is another objective. This should be achieved without creating specific groupings.

According to the Chair, Members do group themselves in categories according to their trade interests. In addition to the UN recognized group of LDCs, the group of SVEs (Small and Vulnerable Economies) and others have emerged in the Doha Round.

"The draft modalities for the NAMA negotiations show a great flexibility for all these situations. The hesitation to engage in the binding of autonomous tariff liberalization creates a perception that these Members are refraining from engaging. The system acknowledges the difference between bound and applied tariffs. This is the systemic understanding of a policy space. I doubt that this concept has to be further expanded."

Another imbalance has arisen from the fact that newly acceded Members have had to cut their tariffs and bind them in a more extensive way than founding Members of the GATT and/or the WTO. To correct this imbalance should be another objective, even if it may conflict with the recognized approach of less than full reciprocity.

If Members wish to engage on the present basis, they may wish to review: the dimension of the cuts (coefficients); the flexibilities; and the implementation periods.

According to the Chair, one technical aspect which is open since the conclusion of the Uruguay Round (UR) is the treatment of Initial Negotiating Rights. This subject is not relevant for large exporters, but it might be crucial for many smaller and medium-sized exporters, allowing for a negotiating right in situations where concessions are withdrawn. One could imagine a simplification by taking the outcome of the UR as a starting point and building upon it. Such technical work could be addressed immediately.

"The global market through global value chains demonstrates every day in a more significant way that market access issues may need new approaches, when the origin and the value of a product become global. WTO should become a bridge builder between the global markets and national trade policies. The Uruguay Round has allowed the establishment of parallelism between goods, services and intellectual property rights. The next logical step would be to extend this parallelism to investment and competition policy. A further step would then be to integrate all these areas in a broader more coherent multilateral system," Ambassador Wasescha concluded.

[Trade observers noted that at the Hong Kong Ministerial Conference in 2005, at the insistence of Argentina, a parallelism in progress was decided as between NAMA and Agriculture. In the latter, there is a treaty commitment to proceed towards further reforms of the agriculture sector to eliminate subsidies.

[The very same countries pushing for a "reform agenda" in NAMA (including forcing developing countries to reduce from applied tariff levels and bind them, for "real market access") have not only been blocking the Marrakesh treaty commitments, but also engaging in backsliding by shifting their subsidies through box shifting, and in some sectors increasing them. Those backsliding on agriculture reform include Ambassador Wasescha's own country, as also the US, Europe, Japan etc, trade observers said.] +