TWN Info Service on WTO and Trade Issues  (Nov07/19)

13 November 2007

China and EU clash over RAMs at NAMA meeting

On 7 November at a NAMA at WTO, the treatment of small vulnerable economies (SVEs) and recently acceded members (RAMs) were discussed.

China and the EU clashed over the issue of RAMS and especially about China's insistence that it not be discriminated against when special treatment is given to RAMs.

Below is a report on the meeting which was published in the SUNS on 9 Nov.  It is reproduced here with permission of the SUNS.  Any reproduction requires permission of the SUNS (sunstwn@bluewin.ch).

With best wishes
Martin Khor
TWN

Trade: China and EU clash over RAMs at NAMA meeting
Published in SUNS #6362 dated 9 November 2007 
By Martin Khor Geneva, 8 Nov 2007

A meeting on non-agricultural market access (NAMA) on 7 November saw a sharp exchange between China and the European Union on the issue of special treatment for recently acceded members (RAMs).

The Chinese delegate told the informal open-ended meeting of the NAMA negotiating group that China would reject a revised draft on modalities if it did not fulfill China's requirements and if it was discriminated against and not given the same flexibilities as other RAMs.

China said that it would have to veto the Chair's revised NAMA text if it was given "least flexibility". China supported the proposal of the RAMs to provide more flexibility to the RAMs than is contained in the July text of the NAMA Group chair, Ambassador Don Stephenson of Canada.

Stephenson will be issuing a revised text at the end of November, and is holding meetings and consultations to help him prepare his revised draft.

China stressed at the meeting that it should not be left out of the special treatment for RAMs and the revised text should reflect China's interests or else 1.3 billion Chinese would oppose the text.

To this, the European Union delegate said that the concept of a RAM category was out of date, that everyone should contribute to the Round, and China should not even use the word "veto" as this could spark off political reactions.

The EU also said that what was in the Chair's July text was the outer limit of what the EU could accept regarding flexibilities for RAMs. It would not agree to more than what was in the text.

A Chinese diplomat later told the SUNS that a major concern of China was that the major developed countries such as the US, EU and Japan have been trying to influence other members as well as the Chair that China should not be given the same treatment as other RAMs.

Thus, China was giving prior notice that if the Chair's next draft discriminates against China, then it would have no choice but to block or reject the text.

The meeting discussed the treatment to be provided to RAMs as well as the treatment for small and vulnerable economies (SVEs).

According to a trade official, at the end of the meeting, the Chair concluded that there had not been any movement, and he was left where he was before.

On the treatment of SVEs, the SVE Group has criticized the Chair's July text. In a paper in October, the SVEs said that the current modalities do not conform to the less than full reciprocity (LTFR) principle as these modalities require higher levels of contributions from SVEs compared to other developing countries and even some developed countries.

The group is willing to work within the Chair's bands for SVEs provided the bands adhere to the LTFR principle and there are more flexibilities to SVEs including that the maximum average reductions are less than those of developed countries and are consistent with the needs of SVEs.

The Chair had proposed in his text that SVEs be allowed not to follow the formula cut, but to have the following three-band approach: SVEs with average bound NAMA tariffs at or above 50% shall bind all their tariffs at an average level of at least 22%; those with average tariffs of 30-50% shall bind their tariffs at an average of at least 18%; and those with average tariffs below 30% shall bind their tariffs at an average of at least 14%.

In addition, 95% of all tariffs are to be cut by at least 10%.

The SVE group in its October paper accepted the Chair's architecture of bands and targets for average tariff levels. But they did not agree to the Chair's targets for the average tariffs; they proposed having a maximum level of percentage reduction for SVEs, and asked for extra flexibilities.

The SVE proposal counter-proposed that there be two bands: SVEs with 50% or higher average bound tariff shall bind their tariffs at an average of 32%; but they shall reduce their tariffs by a maximum of 40% (and thus can apply lesser reductions if needed); SVEs with 30-50% average tariff shall bind their tariffs at an average of 28%; but subject to a maximum average reduction of 30%.

In addition, the SVEs asked that 90% of tariff lines be subject to a maximum cut of 5%; and SVEs with binding coverage of 50% or less can maintain 10% of tariff lines unbound; and the SVE implementation period shall be 2 years longer than other developing countries.

There are 18 Members that are SVE proponents in NAMA: Antigua & Barbuda, Barbados, Bolivia, Dominica, Dominican Republic, El Salvador, Fiji, Grenada, Guatemala, Honduras, Mongolia, Nicaragua, Papua New Guinea, Paraguay, St. Kitts & Nevis, St. Lucia, St. Vincent & the Grenadines and Trinidad & Tobago.

Bolivia, although part of the Group, does not support the SVEs' October proposal. Its position is that this is not enough and it wants further flexibility, given the country's level of poverty.

To be eligible for SVE treatment, countries must have less than 0.1% of world trade in NAMA products.

At the meeting, several members expressed that they found difficulty with the proposals of the SVEs, i. e. the cap (the maximum average tariff reduction of 40% and 30%); that 10% of tariff lines be left unbound for certain Members; and the longer period of implementation.

Members expressing difficulties were New Zealand, US, EC, Japan, Norway, Uruguay, Costa Rica, Chile, Switzerland, Korea, Pakistan, Canada and Mexico. The text was endorsed, apart from SVEs, by India, Argentina, Venezuela, Chinese Taipei, South Africa and Brazil.

On the treatment of RAMs, the Chair's July text proposed that there be three categories of RAMS: those that come under the formula cut, those that are SVEs and thus are eligible for SVE treatment, while some RAMs need not undertake tariff reductions beyond their accession commitments.

RAMs applying the formula shall be given: (a) a grace period of 2 years on a line-by-line starting from the date of full implementation of the accession commitment on that tariff line; (b) an extended implementation period of 2 equal rate reductions to implement their Doha commitments.

There are 16 RAMs: Ecuador, Mongolia, Panama, Kyrgyz Republic, Jordan, Georgia, Albania, Oman, Croatia, Moldova, China, Chinese Taipei, Armenia, FYR of Macedonia, Saudi Arabia and Vietnam.

Only four (China, Chinese Taipei, Croatia and Oman) are to apply the formula. Some of the others are considered SVEs. Moldova, Kyrgyz Republic, Armenia, FYR of Macedonia, Saudi Arabia and Vietnam are exempted from Doha reduction commitments (the first three on account of their economic circumstances, the last three in view of the depth of their market access commitments made in their very recent accession process).

It is also reportedly now agreed that Albania is exempted and Tongo (being very recently acceded) is also exempted.

The RAMs recently submitted a new version of their proposal for a "menu approach". They have dropped their request for a higher coefficient in the formula, reduced the demands for grace period for implementation and given more concrete figures for other flexibilities.

The RAM proposal now includes: flexibility in terms of timetable for implementation, and an increased flexibility in "paragraph 8", that is:

(1) that RAMs apply less than full formula cuts (i. e. at least half) to 15% of NAMA tariff lines (compared to 10% for other developing countries), provided that the tariff lines do not exceed 15% of the total value of imports (10% for other developing countries), or

(2) that RAMs can exclude 10% of tariff lines from the application of the formula (5% for other developing countries), provided they do not exceed 10% of total value of imports (5% for the other developing countries); or have an alternative option of leaving 10% of tariff lines unbound.

The RAMs' proposal for increased flexibilities in "paragraph 8" met with some opposition from many developed countries as well as a few developing countries.

According to a trade official, Japan, the US, New Zealand, the EC, Norway, Costa Rica, Mexico, Turkey and Switzerland showed different degrees of discomfort with the idea, preferring the proposals in the Chair's July text based on longer implementation periods for some tariff lines.

Chinese Taipei, Croatia and Panama defended a special provision for NAMAs given the extensive commitments undertaken during the negotiation process and the fact that these commitments are still being implemented, said the trade official.

China said that it did not support the Chair's current proposal on the treatment of RAMs. It would keep its options open, depending on the final coefficient adopted for developed and for developing countries.

China said that the present chair's text was insufficient and the delegation had instructions from capital that if the revised chair's text did propose flexibilities that failed to meet China's minimum requests, it would veto the text.

Responding strongly to this, the EU "cautioned" China against using the veto language since this could spark off political reactions. The EC mentioned the importance of China's world trade and said that the chair's text was the outer limits of what the EC could accept for RAMs. The EU added that the RAMs category of countries was an outdated concept that made no sense now.

In a further statement, the Chinese delegate added that China would not accept a provision in the new text that would be discriminatory and would contain provisions for China less favourable than for other RAMs.

China said that China would have to block the revised text if it had flexibilities that would fail to address China's concerns. The Chinese delegate said that this position was fair, reasonable and rational.

The US said that the demand made by the RAMs would create too much uncertainty since they provide for a significant extension of flexibilities to countries that will benefit extensively from this Round.

At the end of the meeting, Stephenson said that he did not see movement in the position of the members and he was left where he was before. +