Info Service on Trade and WTO Issues (July08/09)
Divisive issues throw shadow over NAMA state of play
Geneva, 8 July (Martin Khor) -- The negotiations on non-agricultural market access have been hampered by sharp disagreements between developed and developing countries on the eve of the issuing of a new Chair's text on modalities and in the preparation of a WTO mini-Ministerial meeting in a fortnight's time.
Among the acute differences is the nature and degree of flexibilities that developing countries can have when applying tariff cuts according to a "Swiss formula". The differences, which have characterized informal small-group discussions in the last few weeks, surfaced at an open-ended NAMA meeting (to which all countries were invited) held on Tuesday (8 July) at the WTO.
The developed countries, led by the United States, European Union, Japan and Canada, are insisting that when developing countries affected by the formula choose the tariff lines that they can shield from full formula cuts (allowed by the flexibilities), they must not exclude from the full formula cuts a whole sector or a portion of the tariff lines in the sector beyond a certain percentage.
This so-called "anti-concentration" condition is insisted on so that significant parts of sectors such as motor vehicles and garments will not be shielded from the full force of the formula cuts.
Developing countries, including India, China, Malaysia, Brazil and South Africa are against the anti-concentration proposal because it would substantially take away from the policy space they have in the flexibilities which they consider to be already very limited.
Another major issue is the linkage that developed countries seek between the participation of developing countries in "sectoral initiatives" (in which countries agree to reduce their tariffs to zero or near zero in selected sectors) and the extra flexibilities (from full formula cuts) that those countries that choose to take part can have.
This sectoral-flexibilities linkage is opposed by many developing countries because their participation in the sectoral initiatives is mandated to be voluntary. By linking "rewards" in the form of extra flexibilities to sectorals, those developing countries that do not want to take part in the sectorals are being punished, and this goes against the principle of voluntary participation, according to the opposing countries.
anti-concentration and sectoral proposals had been given a boost through
their prominent inclusion in the 18 May draft modalities text of the
Chair of the NAMA negotiations, Ambassador Don Stephenson of
NAMA talks in a group of 12 convened by the
They were also at the core of the evident divisions at Tuesday's NAMA meeting. Delegates from several developing countries are indignant that the US and EU are now insisting that unless they get their way on these two issues, they will not confirm their agreement on other issues on which significant progress had already been made.
The tussle is also focused on how Stephenson will treat these two issues in his revised draft, which he announced would be ready in two days (i. e. Thursday). Diplomats expect that he will be in sympathy with the developed countries' positions, and will mainly keep to his present text, with possibly some minor changes.
At the start of the Tuesday meeting, Stephenson indicated that unless there was "convergence" on an issue in the meeting, he would keep to his May text on that issue.
demands made by the developed countries carry a "huge systemic
risk" that may threaten the prospects of the mini-Ministerial,
outside the meeting room where the NAMA meeting was taking place on
Tuesday morning, Faizel said that the demands of the
Faizel said that he had told the consultations and today's meeting that the proposals on the two issues negate the mandate and raises the question, in whose interests the Round is being held.
According to him, the proposal envisages that developing countries can select only up to 50% of the tariff lines in a sector (i. e. a HS or harmonized system chapter) or 40% of the volume in a sector in order to apply the flexibilities from the full formula cuts.
He also said that linkage of participation in sectorals to flexibilities is "totally unacceptable."
The two issues had not been in the previous Chair's text and had made their entrance in the May text, and were thus "new issues" brought in at a late stage.
He was particularly indignant that the US and EU had made clear in the meetings that they would not "open the brackets" on issues even in areas where there had been progress in the talks (such as extra flexibilities for South Africa in the context of SACU, and Mercosur countries, non-tariff barriers, and treatment of unbound tariffs) unless developing countries agree to their anti-concentration and sectoral linkage proposals.
By insisting on this and saying that they have to cater to their constituency, the developed countries are failing to recognize that developing countries too have constituencies, such as workers who are afraid that they will lose their jobs, and the public which require a sound industrial policy for development, said Faizel.
"By insisting that they don't want the brackets to be opened unless we agree to their demands, they are creating a huge systemic risk," commented Faizel.
the meeting, many other developing countries including
In the view of the developing countries, the July 2004 framework agreement on agriculture had already affirmed that flexibilities (for developing countries) would not be used to exclude entire HS chapters from the formula cuts, and there was no need to go beyond this in the form of new modalities.
However, developed countries want further detailed disciplines to be agreed to, such as that the formula must apply to at least 20 to 50 per cent of the tariff lines in a HS chapter (with the actual number within the range to be negotiated).
At the 8 July meeting, both the US and EU said that the flexibilities for developing countries had expanded a lot in recent months, and thus they needed their proposed anti-concentration measure to offset the resulting reduction of market access in some products.
the anti-concentration proposal, it said that the effect might be "brutal"
as developing countries do not know what flexibilities they would have
and now there are demands for portions of these flexibilities to be
taken away. Referring to para 7 (f) of the Chair's May text (that deals
Cuba also compared the flexibilities for developing countries in NAMA, where for 10% of tariff lines, they have to cut tariffs by 50% or more of the formula cut, whereas in agriculture, developed countries can have up to a two-thirds deviation, i. e. they can cut their tariffs by only one-third of the formula cut. The developed countries thus enjoy greater flexibility.
added that the
major issue at the 8 July meeting was the extra flexibilities suggested
The US, referring to the suggested flexibility for South Africa, said that it did not know South Africa's intent regarding the coefficient and flexibilities and thus it did not want to remove the bracket in para 7 (d) in the May text [which proposes an additional 1 to 6 percentage points in flexibility to South Africa].
also said that
also said that it was disturbed to hear some countries wanting to expand
the numbers in flexibilities (making a reference to
At the start of the meeting, Stephenson said that the recent weeks' informal meetings had seen progress in some areas, but "we have too many issues still unresolved." He proposed to use the meeting to discuss issues by the paragraphs of his May text.
If there is convergence, it will be reflected in his new text and if not, he indicated that his old text would be repeated.
He commented that the most problematic area was anti-concentration in para (f). He said that proponents of anti-concentration wanted further disciplines (beyond the July 2004 framework), but there was disagreement on how much elaboration should be accepted. If a number is to be fixed, how much should it be? He said that the ideas for a number ranged from 1 to 50 percent (of tariff lines in a HS chapter that shall not be excluded from a full formula cut because of flexibilities).
On Tuesday afternoon, the NAMA meeting continued, with discussions focusing on issues including the treatment to be given to small economies, LDCs and recently acceded members. +