TWN Info Service on WTO and Trade Issues (Feb08/21)

25 February 2008

Below please find the third of 3 articles on the NAMA open-ended meeting on 20-21 Feb 2008.

Best wishes
Martin Khor

NAMA meetings next week, following more attacks on text
Published in SUNS #6421 dated 25 February 2008

By Martin Khor, Geneva, 22 Feb 2008

Negotiations on non-agricultural market access (NAMA) will take place in a small-group format for three days (Monday to Wednesday) next week at the World Trade Organisation in another effort to narrow gaps among WTO members, after two days of talks at the open-ended informal meeting (involving all members) showed that the previous differences had not narrowed.

The chair of the NAMA negotiating group Ambassador Don Stephenson of Canada will convene the so-called "Room E process" to see if any progress can be made.

However, trade diplomats and officials do not believe that any convergence is possible at this stage, and that Stephenson is merely "going through the motions", so that WTO members will have the opportunity to have further discussions on their positions, following this week's exercise.

In the NAMA Room E process, some 20 to 25 WTO members are invited to meet, with the configuration of the invited participants changing depending on the issues being discussed.

On Thursday (21 February), the second and final day of the NAMA open-ended meeting, more developing countries criticized the Chair's revised text.

Argentina said that it had rejected the Chair's former paper as a basis to continue negotiations, and its position remains the same with respect to this revised text since there is no basic change in the new paper.

Therefore, it said, the minimum conditions for the horizontal process involving senior officials or Ministers have not been met. Cuba also said that with so many issues unresolved, a horizontal process should not be started.

China criticized the revised text for being "far from a balanced document", with the proposed coefficients failing to deliver the mandate of "less than full reciprocity."

At the open-ended meeting this week (on 20-21 February), the divisions between the major camps continued to be displayed, as the WTO members gave their reactions to the revised modalities text issued by Stephenson on 8 February.

The developed countries said that they wanted a smaller gap in coefficients between developed and developing countries; the NAMA-11 developing countries criticized the imbalances within NAMA (as developing countries are called to cut their tariffs by a far larger percentage than developed countries) and the imbalances between the obligations in NAMA and agriculture; and the so-called "middle developing countries" basically supporting the Chair's text.

Other developing countries, including the so-called Para 6 countries and the small and vulnerable economies (that do not have to undertake cuts according to the Swiss formula, but which have to reduce tariffs by other specified methods), also called for changes to the Chair's text to better reflect their positions.

Most members that spoke were unhappy with the uncertainty caused by the Chair's removal of figures within brackets regarding the percentage of tariff lines that developing countries can have, to cut their NAMA tariffs by less than the formula cuts (these reduced cuts are termed as "flexibilities" for developing countries).

Stephenson had explained, in reaction to criticisms, that he had "opened" the space between the brackets so that discussions can be held on the relationship between coefficients and the flexibilities. In some proposals, reflected in the Chair's paper, developing countries can trade off their use of flexibilities with the coefficient, i. e. those that do not use the flexibilities can have a higher coefficient.

At the conclusion of the two-day meeting, the Chair noted that many Members had mentioned new areas of discomfort in his text. That was part of the intent, he said, "you need to change something and nobody changes anything when he is comfortable, and you have to change this text".

Stephenson said that he already started gathering small groups of Members in small rooms to discuss matters related to the text and the process. For next week's Room E meetings, he would schedule them watching closely the Agriculture meetings. He said that advance on the open issues is "truly urgent".

Most countries that spoke at the meeting focused on the coefficients, or flexibilities, and on their special conditions.

Another issue raised was the earlier proposal (made by developed countries) to discipline export taxes as a non-tariff barrier (NTB). Saudi Arabia raised this issue by opposing the proposal to include export taxes as a NTB.

It argued that export taxes were not an NTB, but is instead a genuine tool for developing countries and there is no mandate for negotiating its removal. The Saudi Arabian stand was supported by some developing countries, including Argentina.

On the first day (20 February), statements were made by Brazil, India, Venezuela, Jamaica (for the ACP Group), Lesotho (for the LDC Group), Kenya (on the para 6 issue), the US, EC, Japan, and others (see reports in SUNS #6419 and 6420 dated 21 and 22 February 2008).

On the second day, Argentina, China, Costa Rica, Canada, Australia, Hong Kong, New Zealand, and Switzerland were among the speakers.

Ambassador Alberto Juan Dumont of Argentina, a prominent member of the NAMA-11, started by thanking Saudi Arabia for recalling the position of many developing countries regarding the European proposal on export taxes. "There is no mandate on this issue, nor is there the intention to negotiate changes to the WTO rules on the matter," said Argentina.

Argentina also supported Brazil's statement, "in particular, we fully adhere with the political position that we will not sacrifice our industry nor the Mercosur on the altar of this negotiation."

Argentina then recalled that in July 2007 it had, together with other countries, rejected the draft modalities on the grounds that the proposals put forth by a significant number of developing countries had not been taken into account to set the coefficient ranges and flexibilities for the application of the tariff reduction formula in NAMA.

On the other hand, several developing countries, although not rejecting the document, questioned the proposed coefficients and flexibilities since it was their belief that these led to an important imbalance between developed and developing countries' contributions in non-agricultural products, and between the level of ambition in market access in Agriculture and NAMA.

"We therefore stated that the draft tabled could not constitute a basis to continue negotiations and to initiate a horizontal process that would lead to the design of the modalities package of the Round."

Addressing the Chair, Argentina stated: "Your revised version does not include any substantial modifications regarding the core issues under negotiation, that is, coefficients and flexibilities.

"Hence, our position has not changed. We claim that, should you insist on using these elements as a basis, there will be no possibility whatsoever of reaching an agreement in NAMA and, consequently, in the Round.

"Your revised draft text still contrasts sharply with the corresponding version on Agriculture, which does reflect the different positions clearly, even those which are far from the proposals that we, together with the G-20 and the Cairns Group, advocate.

"Any combination of the coefficients proposed in your new draft text would result in greater reduction commitments for developing countries than for developed countries. No matter which parameter is taken, this is contrary to the mandate for less than full reciprocity in reduction commitments.

"It is impossible to approach a legitimate horizontal process if the possibility of complying with one of the most important aspects of the negotiation mandate is ruled out.

"Under these circumstances, we do not have the appropriate options available to initiate the horizontal negotiation process, and therefore, the minimum conditions to gather the senior officials and the ministers are not met."

China, in a statement read on behalf of Ambassador Sun Zhenyu, said that the revised text opens a vast space for serious bargaining over many issues and the task in front of us is enormous.

"On the one hand, we appreciate the improvement in the new text, of the proposed treatments for some developing Members, including low-binding Members, Small and Vulnerable Economies. The implementation process of market access for LDCs has been consolidated. Aid-for-trade measures have been incorporated and the issue of disproportionately affected Members has been handled with sympathy. China welcomes these changes.

"On the other hand, we note with disappointment that the revised text is still far from a balanced document for final consensus. Owing to the ambitious nature of the Swiss formula, the reduction percentage of coefficient [8-9] for developed Members and [19-23] for developing Members fails to deliver the mandate of less than full reciprocity. We strongly suggest the coefficient for developed Members be further adjusted downward."

On flexibilities, China said that it was concerned about the new uncertainty caused by taking out the numbers, leaving the brackets open for paragraph 7.

Added China: "We want to stress here the importance of fairness and balance with regard to the specific mechanism. China supports the proposals by NAMA-11 to have 10+x and 5+x for the developing Members' flexibilities. China also supports the position of LDCs, SVEs, African group, ACP and other developing members. Their legitimate concerns should be properly addressed in this Round."

On sectoral initiatives, China reminded the meeting that participation should be on a non-mandatory basis, and these should focus on products of export interest to developing country Members.

On the issue of non-reciprocal preference, China said the number of tariff lines is expanded and the treatment is too generous. "We are very concerned about the systemic impact on developing Members by granting special and differential treatment to developed Members in this way," it added.

China also raised its concern that "although people are talking about a Development Round, the real beneficiaries will as always be the developed ones." Based on the current texts, Brazil's comments provide enough indications on this point.

China also emphasized its disappointment that the treatment for recently acceded members is not sufficient. "As one of Recently Acceded Members, China's bound and applied tariffs are the same and averaged at less than 9%. According to the Secretariat simulations, China's new average tariffs would be around 6% after this Round, which would be a 30% real cut on applied tariff.

"So it is very obvious that the market access is already there and will continue to improve. The proposed flexible treatments including higher coefficient and greater flexibilities would not affect the openness of Chinese market."

Cuba said that it was worried about the process as there was little time to study the text. There are a large number of questions pending which require time to discuss. According to Cuba, we cannot start a horizontal process if a majority of subjects are not completed.

Cuba also complained about the Room E process (which is restricted to a few members) as all members should be able to participate actively. It added that the items in agriculture have to be completed before NAMA is discussed.

It disputed the claim that there is lowered ambition in NAMA, citing that in agriculture, the developed countries were still maintaining their subsidies while in industrial products, subsidies had been prohibited long ago. Moreover, the coefficients proposed would reduce tariffs in developing countries by a lot.

Costa Rica defended the position of the "middle group" of developing countries (that include Chile, Mexico, Singapore, and Hong Kong), which basically supports the Chair's paper.

It expressed surprise with Brazil's criticism of this group. It claimed that the Chair's 19-23 coefficient range for developing countries represents the middle point and is supported by a big number of important developing countries. It also wanted a coefficient below 8 for developed countries.

Hong Kong also called for a lower coefficient of below 8 for developed countries. It added that there are still too many issues to resolve, and its assessment is that there are still too many outstanding topics (to bring) for a horizontal process or for Ministers.

Switzerland, implicitly responding to developing countries' charges of serious imbalances between the low ambition in agriculture for developed countries and the high ambition in NAMA for developing countries, said that NAMA flexibilities for developing countries "come for free" whereas in agriculture, there are flexibilities (for developed countries) with a price.

Switzerland will pay a high price in Agriculture and "we need results in NAMA. The more you push us in Agriculture the more we'll push you in NAMA."

New Zealand opposed an "a la carte" approach in NAMA. It was worried because of reduced ambition. Canada also said that the revised text is an invitation to lower ambition even further.

At the conclusion of the two-day meeting, the Chair noted that many Members had mentioned new areas of discomfort in his text. That was part of the intent, he said, "you need to change something and nobody changes anything when he is comfortable". "You have to change this text".

He said that he already started gathering small groups of Members in small rooms to discuss matters related to the text and the process.

There is a need to involve more people and he will do that next week with three days of restricted consultations focussing on different subjects from Monday to Wednesday (the so-called Room E process). He would schedule his meetings watching closely the Agriculture meetings. He said that advance on the open issues is "truly urgent". +