TWN Info Service on WTO and Trade Issues (Mar08/04)
5 March 2008
Third World Network

More confusion in NAMA as Chair gives new proposals

Published in SUNS #6424 Thursday 28 February 2008

By Martin Khor, Geneva, 27  Feb 2008

The WTO negotiations on non-agricultural market access (NAMA) was thrown into additional confusion on Wednesday when the Chair of the NAMA negotiating group presented six or seven new proposals on how the flexibilities for developing countries affected by the tariff-reduction formula could be structured and used.

Canadian Ambassador Don Stephenson made his presentation of the options and possibilities for flexibilities orally, saying that these were not his own ideas but what he had "heard at the cafeteria."

Pressed by several delegations, which had difficulty in taking down, let alone understanding, his proposals and options, Stephenson said he would later circulate his ideas in writing.

These developments took place in a NAMA meeting in Room E, involving about 50 delegations, which was convened on Wednesday morning to discuss the coefficients and flexibilities linked to the Swiss formula to cut tariffs.

The Wednesday meeting followed two previous days of Room E meetings on NAMA, which had covered other issues - the treatment of preference erosion products, paragraph 6 countries, small, vulnerable economies (SVEs) and recently acceded members (RAMs).

The Chair announced that more NAMA meetings will be held next week, with an open-ended meeting (involving all members) on Monday morning, followed by Room E meetings on non tariff barriers (Monday afternoon, Tuesday morning) and LDCs (Tuesday afternoon). The issues raised today (on flexibilities and coefficients) will also be discussed in another Room E meeting, presumably also next week.

Diplomats and trade observers remarked, after today's meeting, that the new ideas from the Chair would complicate the negotiations as they added new options that require time to understand and then to assess, including from the viewpoint of the affected countries' national position and interests.

This complication will create additional pressures on negotiators who are racing against a very tight deadline, since there is corridor talk (though not confirmation) of the start in mid-March of a so-called "horizontal process" (that will include agriculture and NAMA and possibly other issues) involving senior officials. This is seen as leading up to a mini- Ministerial meeting to conclude a deal on modalities by mid-April.

According to several diplomats, these deadlines are being advocated by the WTO Director General Pascal Lamy, but they have not been agreed to by WTO membership. Many delegations believe it is too early to begin the "horizontal process", since there are still so many important issues in agriculture and NAMA for which large differences still exist.

Some countries, such as China, reportedly said at the end of the Wednesday meeting that they would request the WTO Secretariat to do simulations on how the different proposed flexibility options would affect the tariffs of different countries, so that the countries could understand the implications of each option.

"I don't see how we can wrap up the NAMA negotiations satisfactorily in a week or two, especially with these new proposals entering the scene," said one developing-country diplomat who specializes in NAMA.

The issue of "flexibilities for developing countries" has already become more contentious following the removal of numbers in the Chair's text of 8 February on the percentage of tariff lines that developing countries can exclude from the full formula cut.

The relevant Para 7 of the text states as follows:

(a) Developing members subject to the formula shall be given the following flexibility:

(i) applying less than the formula cuts for up to [ ] percent of non-agricultural national tariff lines provided that the cuts are no less than half the formula cuts and these tariff lines do not exceed [ ] percent of the total value of a Members's non-agricultural imports, or

(ii) keeping, as an exception, tariff lines unbound, or not applying formula cuts for up to [ ] percent of non-agricultural national tariff lines provided they do not exceed [ ] percent of the total value of a Members's non-agricultural imports.

(b) [Developing Members subject to the formula who do not use the flexibility in paragraph 7 (a) above shall apply a coefficient of (b+[3-5] in the formula].

In his previous July 2007 draft, the Chair had placed the figure 10 between the two sets of brackets in para 7 (a) (i) above, and the figure 5 between the two sets of brackets in para 7 (a) (ii). These were the same figures, also between brackets, in the July 2004 framework agreement on NAMA.

The main topics in today's Room E meeting were the coefficients, the flexibilities, and the link (if any) between the flexibilities and coefficients.

South Africa, representing the NAMA-11 made available the statement the group had made at the open-ended NAMA meeting on 20-21 February (see report on this statement in SUNS #6419 dated 21 February 2008).

South Africa presented the main points of this statement, including that the NAMA-11 wanted the Chair to include its positions in various parts of a new text, as these positions were not included even as options in the 8 February text.

NAMA 11 also felt that the discussions had concentrated on the coefficients for developing countries, while it wanted to stress that the coefficient for developed countries should be lower than the 8-9 mentioned in the draft.

On flexibilities, the NAMA 11 wanted the empty space between the brackets to be filled up, and it wanted the numbers in line with the NAMA 11 positions and statements. NAMA-11 added that the level of ambition in NAMA should be comparable with the ambition level in agriculture.

According to a trade official, the US stressed that it wanted to make it crystal clear that it would not agree to a coefficient for developed countries that was lower than 8.

The Chair orally presented new proposals on flexibilities, prefacing this with a statement that these were not his own proposals but what he had heard in the cafeteria.

He then laid out 6 or 7 options of what the approach to flexibilities could be. According to a trade diplomat, all the options seemed to link a country's use or non-use of flexibilities to the coefficient that the country would finally have.

One option, which diplomats said was the "easiest to understand," was that a country that took part in liberalisation through the "sectoral approach" could enjoy having an extra point to its coefficient.

Another option apparently was to allow a country to vary the degree of "flexibility" cuts around the "50% of formula cut" limit, so that a country could cut some lines by less (e. g 25%) or by more (e. g 75%) than the 50% stipulated.

One trade diplomat also understood the Chair to propose that a country could choose to have some combination of the flexibilities in para 7 sub-para (a) and sub-para (b).

Another diplomat said that in all the options he heard the Chair put forward, there was a clear linkage between the extent of the use of flexibilities and the coefficient number the country would end up with. If a country chooses to use more flexibilities, it would have less points in its coefficient, compared to another country that chooses not to use flexibilities or to use less of the flexibilities, in which case this country would have points added for its coefficient.

According to trade sources, most developing-country delegations present were uncomfortable with the Chair's oral presentation of his new menu of options.

Most developing countries that spoke said they could not comment on each of the options presented, but could only make general comments, as the individual options were too technical and complicated to understand, from the oral presentation.

South Africa, which coordinates NAMA-11, said that the flexibilities provided for developing countries are "stand-alone" and should not be linked to the coefficients.

India did not agree with the idea that participation in "sectorals" would allow a country to have a higher coefficient, as the participation in sectorals was supposed to be on a voluntary basis. Brazil reportedly commented on some of the individual options linking flexibilities to coefficients.

Some NAMA-11 delegations, referring to the Chair's remark that his options were not his own but picked up from the cafeteria, apparently remarked that they did not see the Chair in the cafeteria, and that in any case the NAMA 11 had brought so many proposals to the table but the Chair had not considered them but instead seemed to take more seriously what he heard in the cafeteria.

The US reportedly expressed unhappiness with the NAMA-11 countries, saying that the group did not want to accept the coefficient range proposed in the text for developing countries, that it wanted lower coefficients for developed countries (than what was in the text) and that it did not want to consider options of the Chair which were designed to help the developing countries. On this basis, there would not be an agreement, the US reportedly complained.

The EU reportedly said that it could consider some of the Chair's options. However, whatever combination was accepted, it should not result in the lowering of ambition.

Several delegations asked the Chair to put his ideas on paper so that they could understand and assess them, and send the paper to capitals. The Chair agreed to circulate a paper on his options.

Speaking after a meeting, a developing-country delegate said: "I think the situation is getting worse. There are now more complications. It will involve more work just to understand, and then to assess and to respond. How can this be finished before the deadline for the horizontal process?"

On other issues discussed in the Room E process on Monday and Tuesday, there was also little progress, according to trade diplomats and officials.

On Monday (25 Feb), the issues of preference erosion and paragraph 6 countries were discussed.

On preference erosion, the outstanding issues include the list of products affected by preference-erosion; the trade-related solutions proposed (a longer period of implementation and a possible grace period) and general or non-trade solutions, and developing countries that would be adversely affected by the trade measures.

According to trade sources, some developing countries (that do not receive preferences) did not like additional products placed on the list and also objected to the proposed trade solution of giving developed countries (such as the EU and US that provide preferences to some developing countries) a longer implementation period (7 years instead of the normal 5 years) for products affected by preference erosion, saying this was a special and differential treatment for developed countries in reverse.

On the treatment for "Para 6 countries" (i. e. developing counties that currently have bound less than 35% of their tariffs), the Chair's revised text proposes that these countries not be subject to the formula but shall bind [70-90] percent of their NAMA tariff lines at an average level of up to 28.5%. The para 6 countries had proposed that they bind up to 70% of their tariffs at an average of 28.5%.

At the Room E meeting, Kenya proposed that there should not be a single level of tariff binding coverage for all para 6 countries, since different countries have different levels of binding coverage at present. It implied that countries with a lower present binding coverage would increase their coverage to a lower level of binding coverage. This suggestion was sympathetically received and Kenya was asked to present a more concrete proposal.

On Tuesday (26 Feb), the Room E meeting discussed RAMs and SVEs.

On the treatment of RAMs, the Chair's revised text proposed that the 4 RAMs affected by the formula (China, Chinese Taipeh, Oman, Croatia) be allowed an extra [2-5] years for implementation, as well as a grace period of [2-3] years on a line-by-line basis that will begin as of the date of full implementation of accession commitments on that tariff line.

China said that the Chair's text did not address its concern. It wanted a new text to contain its proposal (within brackets if necessary) that RAMs would have a higher coefficient than the normal level.

The US reportedly rejected any additional implementation period, or a higher coefficient for RAMs. The EU also strongly objected.

On the treatment of SVEs, the Chair's revised text had proposed a three-tier treatment: (1) SVEs with a bound NAMA tariff average at or above 50% would bind all tariffs at an overall average level of up to [22-32] per cent; (2) SVEs with 30-50% tariff average would bind tariffs at an overall average of [18-28] per cent; and (3) SVEs with below 30% tariff average would bind all tariffs at [14-20] per cent while also applying a minimum line-by-line reduction of [5-10] percent on [90-95] percent of all NAMA lines.

The lower end of the first three ranges above had been in the Chair's earlier draft (July 2007), which led to objections from the SVEs; the figures proposed by the SVEs have now been added to the upper end of these three ranges in the new text.

At the Room E meeting, Barbados (speaking for itself and not for the SVEs in general) reportedly proposed narrower ranges than the ones in the text; however, several other SVE countries did not agree, saying this narrowing of ranges had not yet been discussed by the SVE group.

The case of Bolivia was also discussed. Although part of the SVE group, Bolivia had at the end of last year stated that it would not join in the SVE proposal, and argued in a statement in January that it wanted a special treatment for itself.

In the Chair's revised text, under the column Chairman's Comments, it was noted that "an informal proposal was submitted by Bolivia arguing that, in view of their exceptional circumstances, they should be granted the flexibility to substantially preserve (not specified) their current bound tariff rates."

Although presented at previous meetings, the Bolivian case had not yet been discussed by members before. At the Room E meeting on Tuesday, Bolivia re-stated its case for special treatment, pointing to the poverty in the country and its low level of production and trade in manufactured products.

According to a trade official, Bolivia's presentation received widespread support from many other developing countries, including Ecuador, Argentina, Venezuela, Brazil, India, South Africa, China. Developed countries were reported to be not as sympathetic, but there was no rejection by any party to the Bolivian proposal. Bolivia was invited to be more specific in its proposal. +