TWN Info Service on WTO and Trade Issues (May08/23)
23 May 2008
Third World Network

Trade: New WTO texts issued, basic imbalances remain
Published in SUNS #6478 dated 21 May 2008

New York, 20 May (Martin Khor) -- The two revised texts on agriculture and non-agricultural market access (NAMA) that were issued to WTO members on 19 May night do not bring any basic changes from the earlier February drafts, although there have been additions to several issues in the agriculture paper and some variations around the same theme in the NAMA paper.

The Chair of the agriculture negotiations, Ambassador Crawford Falconer of New Zealand and the Chair of the NAMA negotiations, Ambassador Don Stephenson of Canada, held brief press conferences on Tuesday morning (see separate article). WTO diplomats in Geneva are busy studying the new texts, and some groupings like the G33 have held initial meetings to look at possible responses.

The NAMA paper, as expected, formally introduces the "sliding scale" concept, giving a "trade off" for developing countries in choosing the extent of tariff reduction according to a "Swiss formula", and the extent of flexibilities to deviate from the full formula cuts for a small number of products.

This concept had been discussed at informal small group meetings in the past two months, so its appearance in the text is no surprise.

But its novelty in textual form does not detract from the main point that the core proposal of the Chair remains basically the same. The developed countries will have a coefficient within the range of 7 to 9 (previously 8-9). The developing countries will have a choice to choose between 3 coefficients, with each coefficient associated with a particular set of flexibilities.

Each of the 3 coefficients is also set within a small range. The flexibilities that have been mentioned (in brackets) for a long time (i. e. since the July 2004 package) is associated with the middle coefficient range, which thus can be taken as the centre of gravity.

Taking this, one finds that a developing country would have to choose the middle coefficient of 21-23 in order to make use of the central flexibilities (i. e. 5 percent of NAMA tariff lines can be left unbound or do not have any cut, provided they are limited to 5% of total non agricultural imports; or else 10 per cent of tariff lines can have cuts that are half the normal formula cuts, provided they are limited to 10% of total imports.).

Thus, there is no change in this core modality for developing countries from Stephenson's first controversial proposal in July 2007, that developing countries should have a coefficient within the 19-23 range, and with that particular set of flexibilities.

When Stephenson made his 2007 paper, it was severely criticized by a large number of developing countries, especially for the unfairness and imbalance in his choice of coefficients, which had been 8-9 for developed countries and 19-23 for developing countries.

His 20 May paper has essentially the same set of coefficients, i. e. 7-9 for developed countries and 21-23 for developing countries.

What is new is that developing countries are also given the "trade-off" choice of

(1) a lower coefficient (implying slightly deeper tariff cuts) of 19-21 with slightly more flexibilities of 6-7 per cent of tariff lines left unbound or having no cuts, but limited to 6-9 percent of NAMA import value; or 12-14 per cent of tariff lines having half of the formula cuts, but limited to 12-19 per cent of NAMA import value; or

(2) having a higher coefficient of 23-26 (implying slightly more lenient tariff cuts) while having no recourse to any flexibilities whatsoever.

Thus, the flexibilities are still constrained by the provision that the chosen percentage of products to enjoy the flexibilities shall face a second limitation, that the value of the products chosen for flexibility shall not exceed a very small percentage of the country's total non agricultural imports.

The fundamental problems with the NAMA text remain. Firstly, the coefficients still imply that the major developed countries have to cut their NAMA tariffs by a much lower percentage (20-30 per cent) than the major developing countries applying the formula (50-60 percent or more). This is against the less than full reciprocity principle, and in effect gives S&D treatment to developed countries.

Secondly, there is an imbalance between what the developing countries are asked to do in NAMA and what the developed countries are asked to do in agriculture. Not only are the NAMA tariff cuts very deep for developing countries, but the flexibilities they are allowed are minute and yet constrained further by the limit on import values (which are not present in the flexibilities for sensitive products of developed countries in agriculture).

Thus the two fundamental inequalities remain - between developed and developing countries in NAMA; and between the level of ambition of developed countries in agriculture versus the level of ambition of developing countries in NAMA.

In his new paper, Stephenson provides extra flexibilities for a few of the NAMA 11 countries, including South Africa, Venezuela, and countries in customs unions (which may include SADC and Mercosur). But this does not detract from the maintainence in his paper of the two basic imbalances.

By mentioning the "special case" of some NAMA 11 countries but not others, a new pandora's box may be opened, with those that are not given such "special treatment" feeling targeted or discriminated against (as initial official and industry reactions from India indicate), while those selected as special cases may not necessarily be satisfied with the treatment given them.

In the agriculture paper, an initial reading is that two of the major "headline areas" remain the same - the options and ranges in overall trade distorting domestic support, and the tiered tariff reduction formula. Thus the range for the OTDS for the US (US$13 to 16.4 billion), which is one of the most important figures of the modalities, remains, to be decided on in the forthcoming "horizontal process."

On sensitive products, the main figures of 4-6 per cent of tariff lines for developed countries, and the treatment of these products, are also retained, for future decision. The proposed principles for data for "partial designation" of items in sensitive products regarding the expansion of tariff quotas are placed in an attachment, and await further data and discussion.

The Chair has also retained his previous text on tropical and diversification products, with the explanation in a cover note that it will be amended when on-going talks on these issues are finished. The text on special products and special safeguard mechanism, as noted by the Chair, reflects the wide gaps that still exist, and also some "innovation" by the Chair.

On SPs, he proposes as one option that that a minimum of 8% of tariff lines can be designated as SPs without requiring the justification of indicators, and up to a maximum of 20% of tariff lines (if indicators are used to justify). Another option is that only the minimum 8% is given, without mention of the 20% maximum.

On treatment, one option is that 40% of SPs have no cut, while the remainder have an overall 15% average cut (with 12-20% cut in each line). The other option is that no tariff lines are eligible for zero cut, while the 15% average cut remains. The average cut idea is new in this paper.

The Chair is trying to reflect the G33 position as well as that of the opponents of the G33 in the paper as options.

On SSM, the revised text provides for different options as well in the number of times it can be invoked, the triggers, and the treatment. The technical details of this complex section will have to be studied in greater depth. What is clear is that there will still be a lot of contention on this crucial issue, as there will be on SPs. +