TWN Info Service on WTO and Trade Issues (Jul15/25)
29 July 2015
Third World Network
 
Major developing countries reject asymmetric tariff cut approaches
Published in SUNS #8069 dated 24 July 2015
 
Geneva, 23 Jul (D. Ravi Kanth) -- Major developing countries - China, India, and Brazil - have rejected a renewed attempt to foist "asymmetrical" approaches for cutting tariffs on agricultural and industrial products, trade officials told the SUNS.
 
The approach was seen as a grotesque stratagem by the developed countries to safeguard their highly protected agriculture sector with subsidies and opaque tariffs, they said.
 
A meeting convened by the World Trade Organization Director-General Roberto Azevedo on Tuesday with trade envoys from the United States, the European Union, China, India, Brazil, Australia, and Japan broke down because of the differing approaches adopted for market access for agricultural products and industrial goods.
 
During the meeting, Azevedo has suggested variations of the average formula cut based on the figures proposed in the 2008 tiered formula for agricultural products and a Swiss formula for industrial products.
 
The two different approaches for market access for agriculture products and industrial goods would deliver differing outcomes. Azevedo is fully aware of the radical differences between the two approaches as he had negotiated them in 2011, said a South American trade envoy.
 
In agriculture, for example, the tiered formula framework offered a progressive scale in which tariffs higher than 75% are subjected to 70% cut, followed by 64% cut for tariffs in the range between 50-75%, 57% cut for tariffs between 20-50%, and 50% cut for tariffs between 0-20%.
 
Even though in reality the average of the cuts in the four tiers came down to 54% for industrialized countries, the tiered framework dealt a body blow to the European Union and the United States which have a high percent of their tariffs well below 20%.
 
Therefore, a 50% cut of tariffs in the low 0-20% would have brought a significant outcome, the official said.
 
But by adopting an average cut of 54%, the industrialized countries, especially the EU, can safely protect its low tariffs.
 
Besides, an average cut involved 54% reduction in agricultural tariffs of industrialized countries and 36% for developing countries but also accorded eleven different types of flexibilities for developing countries.
 
The tiered structure also involved converting the compound and specific tariffs which are referred to as non-ad valorem tariffs in the schedules of the industrialized countries into ad valorem tariffs.
 
Under the average formula framework mooted during Azevedo's meeting with the seven countries, the developing countries are denied the 11 different flexibilities while the developed countries are allowed to continue with their non-ad valorem tariffs, said sources familiar with the meeting.
 
In industrial goods, the average approach involved applying the Swiss harmonizing formula as proposed in the 2008 revised draft modalities with complete binding of tariffs on an ad valorem basis.
 
The Swiss formula would force the developing countries to undertake disproportionately higher reduction commitments of over 65% as compared to a reduction commitment of less than 30% for industrialized countries who have low tariffs with tariff peaks and tariff escalation.
 
Further, the average formula framework for industrial goods failed to address the central problems of trade in industrial goods - tariffs peaks and tariff escalation. The industrialized countries have a range of peak tariffs for textiles and apparels, leather and leather products.
 
During the meeting, it was suggested that the developing countries would need to bind all their unbound tariffs after converting them into the ad valorem equivalents.
 
While the developed countries refused to convert their opaque compound and specific tariffs for agricultural products into ad valorem tariffs, the developing countries are asked to convert their unbound industrial tariffs into ad valorem duties, a developing country official said.
 
Brazil and India flatly rejected the approaches on the ground that they are fundamentally "asymmetrical" as under it, they would undertake higher commitments in industrial goods while the industrialized countries will have substantially lower commitments in agricultural market access.
 
The major industrialized countries - the EU, the US, Japan, and Australia - lent support to these two approaches.
 
In the face of the unbridgeable differences between the two sides, Azevedo was forced to cancel another meeting of the seven countries on Wednesday.
 
Meanwhile, at an informal meeting of the Doha agriculture negotiating body, the European Union and other industrialized countries demanded a simplified average formula approach based on the average figures suggested in the tiered formula of the Rev. 4.
 
But a large majority of developing countries called for adopting the 2008 revised draft modalities as the basis for finalizing the work program.
 
The EU also called for a simple approach for overall trade distorting support, without adhering to the 2008 revised draft modalities.
 
The US spoke of the need to take current realities of subsidy programs across all countries into consideration for arriving at the work program, said a participant familiar with the meeting.
 
Brussels maintained that it can follow the disciplines in the export competition pillar of the 2008 modalities. The EU also threatened that there would be no Doha negotiations after the Nairobi meeting.
 
After the summer break, sources said, Azevedo will make a renewed push for the average formula framework by discarding the previous 2008 revised draft modalities.
 
"The December 2008 draft modalities are the basis for negotiations and represent the end-game in terms of the landing zones of ambition," Azevedo had said, when he was Brazil's ambassador to the WTO in 2011.
 
"Any marginal adjustments in the level of ambition of those texts may be assessed only in the context of the overall balance of trade-offs, bearing in mind that agriculture is the engine of the Round ...
 
"The draft modalities embody a delicate balance achieved after 10 years of negotiations. This equilibrium cannot be ignored or upset, or we will need readjustments of the entire package with horizontal repercussions. Such adjustments cannot entail additional unilateral concessions from developing countries," Azevedo had argued in 2011.
 
In his zeal to somehow conclude the Doha trade negotiations, Azevedo, as Director-General, is now prepared to swallow all his previous pronouncements and set a new record for touching the nadir in global trade negotiations, said an African trade envoy. +