TWN Info Service on WTO and Trade Issues (June 07/07)

15 June 2007

NAMA week begins with discussion on several outstanding issues

A series of meetings on NAMA took place in the week beginning on 4 June.

Below is a report of the 4 June meeting.

Best wishes
Martin khor

NAMA week begins with discussion on several outstanding issues

By Goh Chien Yen (TWN) Geneva, 6 June 2007

The Chair of the World Trade Organisation's negotiating group on non-agricultural market access (NAMA), Ambassador Don Stephenson of Canada has formally started the process of putting together a draft negotiating modalities text.

A week-long series of meetings which started on Monday (4 June) is intended to throw more light on how several outstanding aspects of the negotiations could be captured in the draft modalities.

At the first meeting, held on Monday, and open to all members, the Chair urged members to help him "close gaps and build bridges" between their divergent positions.

He told members that he will begin drafting the text after this week, although he is less sure when it would be released. He had not decided whether to issue the paper before or after the G4 ministers' meeting on 19-21 June. The G4 members are United States , European Union , Brazil and India.

The Chair also informed members that once the text is out, he intends to meet with Members in open-ended sessions to listen to their views and decide whether and when to issue a revised text on the basis of the comments of Members.

The Chair has grouped the various NAMA issues into ten topics for discussions: (i) elements pertaining to the formula; (ii) treatment of paragraph 6 countries; (iii) small, vulnerable economics (SVEs); (iv) recently acceded members (RAMs); (v) least developed countries (LDCs); (vi) sectorals and non-tariff barriers (NTBs); (vii) preference erosion; (viii) environmental goods; (ix) the issues of supplementary modalities, elimination of low tariffs and appropriate studies and capacity building; and (x) tariff reduction formula.

Members rapidly went through the first nine topics on the first day of the meeting, leaving the most contentious issue of tariff reduction formula to be dealt with on Friday.

However, it is doubtful whether the meetings will produce concrete results during the week. There is still the view that the NAMA negotiations are awaiting the outcome elsewhere, especially in the agriculture talks.

According to a trade diplomat, "Delegates didn't feel like repeating their positions as they have already done so in the small group consultations. They are also waiting for the G4 outcomes and movements in the agriculture negotiations. Members are not prepared to engage and signify change in their positions on the various NAMA issues at this stage."

In addition to the wide divides on the tariff reduction formula, the positions of members (especially between the developed and developing countries) remain polarized on many aspects.

For instance, there are divergent positions on the extent to which unbound tariff lines are to be marked up. Many developing countries such as India, the Philippines, Tunisia, Thailand , Brazil and Argentina prefer to add around 30 percentage points to the current applied tariff rates, according to a trade official.

Developed members such as the US, EU and Japan on the other hand favour a far smaller figure of five.

The developing country members have repeatedly pointed out that applying a minimal percentage point mark up to already low applied rates has the effect of punishing members for their unilateral liberalization efforts.

Tariff lines which are currently unbound in the WTO would first have to be marked up to a base level, and then the tariff reduction formula is used to apply cuts to them, and they are then bound at the new levels.

On the treatment of developing countries falling under paragraph 6 (of the NAMA framework of July 2004), developed country members such as the US and EU have opposed the proposals of these countries.

According to paragraph 6, countries that have less than 35% of their industrial tariffs bound are to substantially increase their level of binding in this round of negotiations. It is understood that these countries are to bind their tariff lines at a national average rate of 28.5%.

The incidence of tariff binding is the main issue here. Kenya, speaking on behalf of these countries, pointed out that the binding of tariffs constitutes an important commitment. In addition, because these countries would require policy space in order to achieve their developmental goals, Kenya argued that they should bind up to 70% of their tariff lines.

The developed countries such as Canada and the US were opposed to this position, and wanted to see the level of binding close to or at 100%.

The Chair pointed out that binding has to be considered an important contribution to the Round because certainty for exporters is a very good thing.

On the issue of non-agriculture "environmental goods", a heated argument ensued during the Monday open ended session between the developed and developing country members.

Developing countries generally were of the opinion that it was premature at this stage to discuss modalities on these goods when there has been no agreement on what these goods are in the special session of the committee on trade and environment. The special session of the committee is responsible for identifying environmental goods.

Brazil questioned why environmental goods should even be limited to non-agricultural products. India pointed out that there is no agreement on the approach for identifying environmental goods.

In contrast, developed members wanted a discussion already in NAMA about the modalities for these products. The EU and US said that this was important and an outcome was necessary.

On the preference erosion issue, the Chair said that "Aid for Trade" (trade-related development assistance) must play a central role in addressing the central problems behind preference erosion, according to trade officials.

Some countries, such as Kenya, Bangladesh and Mauritius did not agree, saying that trade solutions were required to deal with the problem of preference erosion such as longer implementation period for products receiving preferences and simplified rules of origin.

However, some other developing countries such as Ecuador and Costa Rica were opposed to this; in their view, their exports will continue to be affected if preferences remain.

On the issue of small, vulnerable economies (SVEs), it is generally accepted that developing country members with less than 0.1% of world trade in industrial products would be considered as SVEs. This group of countries has proposed that they be exempted from the tariff reduction formula and that they would instead use an alternative approach in making tariff commitments in this round.

At the meeting, the Chair pointed out that the SVEs and members have so far avoided using numbers in their proposal for an alternative approach. However, numbers will ultimately decide the acceptability of the proposed approach.

On the issue of how to treat recently acceded members (RAMs), Croatia (on behalf of the RAMs) made an intervention reminding Members of the "extensive level of commitments" that the RAMs had made during the negotiations for accession to the WTO.

Croatia said that having a longer implementation period for RAMs is not enough. The group wants a higher coefficient for the formula plus other special provisions. While no other delegation responded, some members are known to be reluctant to provide additional flexibilities to these countries.

There will be more open-ended NAMA meetings on Wednesday, Thursday and Friday this week. +