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TWN Info Service on WTO and Trade Issues (Feb08/19)

25 February 2008


Please see below the 2nd of 3 articles on the WTO's NAMA meeting held on 20-21 Feb 2008 to hear responses to the Chair's Feb 8 text.

Reproduction of this article requires permission of SUNS (sunstwn@bluewin.ch).

Best wishes
Martin Khor
TWN


WTO NAMA meeting reveals deep divisions, grievances
Published in SUNS #6420dated 22 February 2008

By Martin Khor, Geneva, 21 Feb 2008

The first day of the informal meeting on non-agricultural market access on Wednesday (20 February) saw many WTO members criticizing the revised draft modalities issued on 8 February by the Chair of the NAMA negotiating group, Ambassador Don Stephenson of Canada.

"It cannot be said that the members like this paper better than the earlier one," said a trade official, after the day's proceedings.

There were still many countries wanting to speak, so the NAMA "informal open-ended meeting" will be extended into a second afternoon on Thursday.

Stephenson told the members at the end of Wednesday's meeting that he would hold small-group consultations this Thursday and Friday, to prepare for "Room E" meetings that will cover essentially all NAMA issues, to be held next Monday to Wednesday. "Room E" meetings involve a small group of delegations, chosen by the Chair.

At the start of the Wednesday meeting, Stephenson said that he knew the delegations would express disappointment with his text, that he was himself disappointed as so many issues remain open, but this is a reflection of the negotiations.

On the formula and flexibilities, he thought the text accurately reflects the state of discussions. It was a challenge for the diplomats to fill in the empty spaces, and "we need to be serious once and for all", he said. He complained that nobody had changed their position for the past months, and there has been nothing new in the negotiations.

On comments he had heard that the new text is a "step backwards", Stephenson asked, a step back from where? In the earlier (July 2007) text, he said, he had portrayed what he called the "central reality". Now is this text representing a new uncertainty, he asked, adding another question, what has been certain up to now?

Regarding the withdrawal of figures in the brackets in the paragraphs on flexibilities, Stephenson said the figures had always been in brackets. He said he was giving the members a chance to reflect on the link between coefficients and flexibilities, that's why the space between the brackets is empty. Some delegations said we should consult on these issues, that is why the figures are open, he added.

From the statements from members, it was clear that developing countries affected by the formula, most of them in the NAMA-11 group, are upset with the Stephenson paper for retaining the coefficients (8-9 for developed countries and 19-23 for developing countries) in the Swiss formula to cut NAMA tariffs.

The NAMA-11 statement attacked the paper for imbalances within NAMA (as between developed and developing countries) and imbalances between the level of ambition in agriculture and NAMA. (See report on NAMA-11 in SUNS #6419 dated 21 February 2008).

One of the highlights of the day was a lengthy statement by the Vice Minister of Brazil, who gave facts and figures on why there is so much imbalance in the treatment of agriculture and NAMA (see below for details). The Brazilian statement provided an important sense of how Brazil, a key player in the Doha negotiations, sees the current state of play.

Developed countries, however, were still insisting on the opposite - that the numbers in the coefficients of developed and developing countries should show a narrower gap, and that the text is "pulling backwards" because of the removal of numbers on the flexibilities.

The US said that there is too wide a gap between the coefficients, as a 10-point gap is very big. It did not envisage an outcome higher than a coefficient of 23 for developing countries. It was concerned about the removal of numbers in the flexibilities.

The EC complained that the agriculture and NAMA texts were going in opposite directions. The NAMA text has opened more gaps and is a step backwards as the figures inside brackets on flexibilities had evaporated. The coefficients still provides a fundamental imbalance. The EC would not accept results that mean only binding present tariffs for developing countries.

The EC was also disappointed with the proposed longer implementation period for recently acceded countries, as it does not agree that major beneficiaries of this Round can have 15 years to implement tariff reduction.

The EC also responded to the Brazilian statement by saying that there was not a single exception in NAMA for developed countries, while developing countries have many exceptions and country-specific provisions in NAMA. "This negotiation is giving so many exceptions that we are having Swiss cheese and not Swiss formula," remarked the EC.

Japan said the NAMA text is not ambitious, but it was fair and balanced, and it provides for more alternatives than before. However, Japan did not think it would move the talks forwards as it is pulling backwards. It expressed exasperation with the lack of urgency, and it was concerned about the future of the horizontal process.

Venezuela criticized the Chair for leaving out the positions of the NAMA-11 and for forcing on to the members one particular view of the coefficients while also causing uncertainties and confusion by cancelling the numbers on flexibilities.

There can be no advance when there is an attempt to decide through decree. Progress must be based on a text that covers all expectations and sensitivities, in line with the 2001 mandate, said Venezuela, adding that with this text, progress is not possible.

Venezuela doubted the future of the negotiations, and whether the imbalances in the NAMA text can be corrected in time. It said that it would await the results of the horizontal process and evaluate the documents to see if the country can consider them acceptable. It was also giving advance warning of the risks ahead.

India was also disappointed with the unravelling of the paragraph on flexibilities, and wanted the numbers to be restored. It also expressed a lack of confidence in the future of the progress of the talks.

Jamaica, speaking for the ACP Group, said that the implementation period was not enough, as the ACP countries were undergoing painful reform and require at least 10 years to implement.

Brazil, represented by its Vice Minister Roberto Azevedo, gave a detailed critique of the NAMA text, especially in relation to the agriculture negotiations, and thus provided an important Brazilian view of the state of play of the core of the Doha negotiations.

"We have often heard, over the past 18 months, that this Round is at a crucial stage," said Brazil. "We managed to keep it alive before, largely by protracting painful decisions. That won't work anymore. Tough decisions will have to be made in the next few days or weeks.

"I could sit here and repeat a number of the arguments you already heard:

-- How this is a development Round and that developing countries should contribute with less than full reciprocity.

-- How we need to have balanced texts that will allow for a fair bargaining process.

-- How the developing countries are being called to make contributions in this Round that far surpass what was ever demanded from developed countries in the past.

-- How developed countries in previous Rounds cut their tariffs by just 30 to 35%, reaching a maximum of 40% in the Uruguay Round.

-- How the Swiss formula is a major concession by developing countries, a methodology never before used in the history of the GATT/WTO system.

-- How developing countries that apply the formula will, not only offer new market access, but also erase all policy space they have left.

-- How the numbers of the paragraph 8 flexibilities were first discussed long before the range of coefficients of the current text came up.

-- How developing countries in this Round (at least Brazil) will be creating more NAMA trade than developed countries (using the "revenue foregone" methodology or other methodologies employing the same elasticities for developed and developing countries).

"However, I guess I would be hearing the same counter-arguments, essentially indicating the need for new market access that is meaningful enough to sell the Round to the respective constituencies. This is all very understandable, but it will not get the Round done.

"We must come to grips with what we can and cannot do. The only way forward is to find a balance between ambition and feasibility. And this balance must exist in all areas of the negotiation.

"In agriculture, we are trying hard to achieve this balance. The texts of the Chair have adopted a progressive approach. That approach allowed for successive approximations, in a way that permitted the safeguarding of particular sensitivities Members had.

"Brazil could be very ambitious in all pillars of the agriculture negotiations. Nonetheless, we constructively engaged in the search of creative solutions to accommodate difficulties that some Members had."

Brazil then provided some examples of how in agriculture the developed countries' interests are being accommodated:

-- In the domestic support pillar - leaving aside the fact that policy space is the rationale for all discussions - we have at least one paragraph that gives one Member (explicitly mentioned in the text) the possibility to use a different base period for the calculation of its product-specific caps.

-- In market access, the layers of protection are so numerous, with some examples below:

* The general formula for tariff cuts is linear.

* There are no tariff caps; some Members that are quite aggressive in NAMA, want to keep, after this Round, tariffs that will be as high as 1,720% or 728%. There will also be a very significant number of lines that will be kept above 400%
- against a peak of just over 20% for Brazil in NAMA.

* The flexibilities in agriculture have no value of trade limitation. In the case of just one Member, those flexibilities may cover almost one half of Brazil's agricultural exports. On the other hand, in NAMA, some seek to limit the flexibilities to a maximum of 10% of the import volume.

* The agriculture text now envisages three different deviations from the general formula: 1/3, 1/2, and 2/3.

* TRQs maintain intra-quota tariffs.

* Members want to self-designate and create new quotas in this Round, further distorting trade in agricultural goods.

* We are moving in the direction of quota allocation with "partial-designation", aggravated with multiple quotas.

* A large portion of tariff lines will continue to be protected by specific duties, complex and compound tariffs. Some NAMA demandeurs actually want to keep this anomaly for no less than 50% of their agricultural tariffs.

* Fruits and vegetables will keep entry prices.

* To top it all, some Members want to keep the special safeguards, which allow the control of commerce with both volume and price triggers that date as far back as the 1980's.

Brazil then provided more examples of imbalances between the agriculture and NAMA negotiations.

It said: "In the agriculture negotiations, we are told that we must show flexibility and compromise for two compelling reasons: (a) one size does not fit all; and (b) there are limits beyond which delegations cannot go (these are the famous "red lights").

"In NAMA, however, the same delegations that seek flexibility and understanding in agriculture utterly ignore those two principles. In NAMA, one size must fit all and limitations are characterized as 'lack of ambition'.

"We will not accept this double standard any longer.

"On limitations - 'the red lights' - let me state that under no circumstances will Brazil compromise its industry or the Mercosur Customs Union. There is simply no price for that.

"The level of ambition of this Round in NAMA is unprecedented under any standard, so let's not talk about 'lack of ambition'. The problem, let's face it, is that some governments raised domestic expectations far too high."

Brazil added that "new market access" is not just a set of empty words. Those words mean restructuring of the productive capacity in developing countries; countries that face economic instabilities and that need room for adjustment in times of crisis (not always brought about by them).

"There is no 'water' in applied tariff levels. Here, we are at the limit already. Unlike in agriculture, we won't be able to manage trade with TRQs, SSGs, exorbitant applied tariffs, and subsidization.

"On the 'one size fits all' approach, it is disingenuous to argue that because some developing countries are ready to accept the ranges and flexibilities in the current text that others must as well."

Brazil said that this argument should be looked at more closely. It then implicitly criticized the NAMA proposal by another group of 8 developing countries (often termed the "middle-ground countries") that had suggested coefficients for the formula which seems to have been drawn on by Stephenson for his proposed ranges of coefficients.

Said Brazil: "Out of the eight developing country Members that originally suggested that the current text strikes a fair balance, 3 would not cut any - not a single one - applied tariff with any coefficient in the proposed range.

"One of the remaining five would experience an average cut of just 1.3% with a coefficient 20 and 0% - therefore no cuts - with a coefficient 23. For one of the remaining four, that cut would reach no more than 4.8% for a coefficient 20. Of the remaining three, one does not apply tariffs on more than half of its imports. Of the remaining two, one has 29% of its tariffs unbound.

"Together, these eight Members would have an average cut on applied tariffs of 5.8% with a coefficient 20. Two other Members later joined that group. One has 63% of its tariffs unbound - nearly 2/3 therefore of all tariffs. The other has 27% of its tariffs unbound, with an average cut on applied tariffs of just 4.5% with a coefficient 20."

Brazil then compared the above with the undertakings being requested of the NAMA-11 countries.

"On the other hand, the average cut on applied tariffs for the group of NAMA-11 countries would be three times higher (17.6%)," said Brazil.

"In the Uruguay Round, Brazil has gone further than most and bound 100% of its tariff lines (by the way, of all developed Members in this Organization, only the EU and Norway, could claim the same). For the extremely sensitive automotive and textile sectors, the cuts on applied tariffs would be over 30% even with the highest coefficient in the proposed range; and this is after the use of the 50% deviation.

"Had Brazil 60% or even 30% of its tariffs unbound, had Brazil an average cut on applied tariffs of just 5% or less, we could be a lot more ambitious with the coefficients and flexibilities. In fact, we could probably join that group if, of course, Brazil simply chose to disregard the sensitivities of the other developing countries. That clearly would not be our choice.

"It is perfectly clear, I believe, that one size does not fit all in the NAMA negotiations either. Contributions cannot be this disproportionate. If some developing countries have lower applied tariffs, there are certainly reasons for that.

"What is important is that we have different economies and realities. What is important is that our reality also has to be taken into account. A reality that includes the existence of a Custom Union, facing very similar challenges to those described by South Africa about SACU.

"The current NAMA text has one undeniable characteristic: it fixes the outcome of negotiations. It has just two moving parts: the coefficients and the flexibilities. The coefficients' range is limited and the effort required by any number in that range is excessive. The flexibilities could offer some comfort, but the numbers of the first draft modalities were not revised up for this iteration, they were simply removed. This does offer room for negotiations, but it does not help convergence.

"South Africa, on behalf of the NAMA-11, has suggested changes to the text that would help convergence and that we fully endorse. Brazil will continue, in agriculture, to seek a balance between ambition and feasibility. If the same approach is not followed by others in NAMA, I'm afraid we will not reach the horizontal process."

Brazil concluded by calling on the Chair, in his upcoming revised text, to offer a margin for negotiations similar to that found in the agriculture text. "A NAMA text that pre-determines the outcome of the bargaining process will not bring Ministers to the negotiating table." +

 


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