TWN Info Service on Trade and WTO Issues (July08/16)
18 July 2008
Third World Network

Trade: Deep divisions still in NAMA on mini-Ministerial eve
Published in SUNS #6519 dated 17 July 2008

Geneva, 16 July (Martin Khor) -- Many developing countries at the World Trade Organisation expressed their dissatisfaction with the new text on non-agricultural market access (NAMA) at an informal open-ended NAMA meeting today.

The meeting was the first opportunity for the WTO members as a group to express their views on the third revised draft modalities for NAMA which was issued on 10 July by the Chair of the NAMA negotiating group, Canadian Ambassador Don Stephenson. It was also the final NAMA group meeting before the series of meetings linked to the WTO mini-Ministerial starting 21 July.

At the meeting, the NAMA 11 group of developing countries, and also individual countries including Argentina, India, China and Brazil expressed their concerns over key aspects of the text. These include the coefficients in the tariff-reduction formula, the anti-concentration clause, and the issue of sectoral initiatives linked to flexibilities.

Several developing countries called for a change in the set of two coefficient ranges (for developing and developed countries), arguing that with the present ranges in the text the developing countries are being asked to cut their tariffs too steeply while the developed countries are being asked to do less, thus violating the less than full reciprocity principle that is mandated for the NAMA negotiations.

The NAMA 11 however also expressed appreciation that there was some improvement in some issues, such as the concerns of developing countries that are members of customs unions, the treatment of unbound tariffs and non tariff barriers.

Major developed countries expressed greater satisfaction with the Chair's text, and wanted the numbers (especially those on the formula) to be the basis of an agreement. The United States said it was "disturbed" by the NAMA 11 statement and that while it also did not like the Chair's proposed coefficients, these must be the basis for the agreement.

At the start of the meeting, Stephenson said he had tried to help clarify the options. The difficult issues remain open but he would continue with discussions on some issues in the next few days.

The NAMA 11 group, represented by South Africa, told the Chair that he had chosen to leave the ranges and the coefficients in paragraph 5 (on the formula) of his text in brackets.

On these issues there has been no consensus and it has always been understood that they will be the subject of negotiations in the final stages with Ministerial participation, said NAMA 11. The group complained that "once again your text has maintained a narrow range of coefficients for developing countries that predetermines the level of ambition in NAMA and ignores the stated positions of the NAMA 11 on the issue of the range."

The NAMA 11 comprises Argentina, Venezuela, Brazil, Egypt, India, Indonesia, Namibia, Philippines, South Africa, and Tunisia.

The NAMA 11 added: "In addition the level of ambition set for developing countries subject to the formula remains too onerous, and the spread of the coefficients still fails to meet the requirement of the mandate for less than full reciprocity in reduction commitments. The spread of the coefficients between developed and developing countries is still too narrow and needs to be widened."

The NAMA 11 also recalled that the majority of members that are to undertake formula cuts called for a coefficient of 5 for developed countries. However, this proposal is not reflected in the text, said NAMA 11. (The text proposed a coefficient within the 7-9 range for developed countries).

Added the NAMA 11: "Paragraph 24 of the Hong Kong Declaration requires that there shall be a comparable level of ambition between Agriculture and NAMA. The level of ambition in the third revision of the agriculture text is still uncertain. The chair of Agriculture has provided different options and ranges in several key areas of interest to developing countries. Not all the alternatives would fulfil the Mandate for substantial improvements in market access."

The group said it was pleased that the text had recorded the progress made in the negotiations in several other important areas, such as the mark-up for unbound tariffs, implementation periods, and non tariff barriers. It also noted the efforts made on some architectural issues, reflected in paragraph 7 a, b and c (which linked the degree of flexibilities from full tariff cuts to the ranges of coefficients to be chosen).

In addition, the more complex issues of how to provide for the disproportionate impact of the formula on some members have been addressed, after many months of intensive negotiations on the flexibilities in paragraph 7e (relating to SACU members) and 7f (relating to Mercosur members).

The group however emphasised that in both these provisions and in the more flexible architecture provided in 7 a, b and c, the text has not provided any additional flexibilities.

NAMA 11 said it also appreciated the attempts made in the text to address the special needs of Venezuela. It urged that an equitable outcome be achieved that takes into account the particular development situation of Venezuela.

On the issue of the anti-concentration clause, the NAMA 11 said: "The negotiation preceding the text clearly failed to arrive at any consensus on the need for such a clause in the NAMA modalities. The NAMA 11 objects to any further attempts to constrain the flexibilities provided for in paragraph 8 of the July framework agreement and re-affirmed in Hong Kong. The flexibilities are integral to the agreement to use the Swiss formula."

On the issue of the linkage between the sectorals and the coefficients and flexibilities, NAMA 11 said there was wide support for the view that there was no such linkage that was envisaged by the mandate and that the Chair's previous draft text that called for a system of credits had no mandate behind it, and that the proposed system of credits in the previous text's paragraph 7(I) created some significant systemic concerns.

"In your current draft text you have removed the so called hard linkage in the text by removing paragraph 7(I) but you have chosen to insert a so-called soft linkage between the sectorals and the coefficients and flexibilities in paragraph 9 of your third revised text.

"This linkage that attempts to create a link between the sectorals and the ambitions of some members to "balance the overall results of the negotiation on non-agricultural market access, which includes the coefficient in paragraph 5 and the levels of flexibilities and related provisions of paragraph 7" is clearly not mandated.

"The sectorals are clearly non-mandatory as recorded in paragraph 9. The ambitions of some members to seek more market access recorded in paragraph 9 cannot be given greater legitimacy when it is in contradiction to this mandate."

NAMA 11 also spoke on issues that relate to other developing countries in the text, such as those with low binding averages (so called Para 6 members); SVEs, RAMs and the special needs of LDCs.

"However, the revised draft text suffers from similar attempts to raise the level of ambition for these groups that is beyond their development capacity," said NAMA 11, adding it fully supports the efforts of these groups to secure a more balanced and fair outcome in the NAMA negotiations."

Argentina, represented by its senior official Nestor Stancanelli, said we are far away from convergence, because there are many aspects missing. Flexibilities that are now linked to the coefficients should not be so linked as they should stand on their own.

It is also not possible to negotiate on the basis of the coefficient ranges given by the Chair, said Argentina. The coefficient for developing countries should be higher, and it would be impossible to achieve the principle of less than full reciprocity with the figures that are on the table.

Stancanelli told journalists that in the agriculture text, developed countries were asked to reduce their average tariff by 54% and developing countries by up to 36% (which is two thirds of the level of developed countries). However, in NAMA there was an opposite relationship, as the coefficients mean that developing countries have to cut their tariffs by 53-58 per cent whereas developed countries have to cut by less, i. e. 43-49 per cent.

This, said Stancanelli, is the reverse of less than full reciprocity and is unacceptable. Without changes to the figures, there is no possibility to assist the Ministerial (to succeed). Changes have to be made to the text for the Ministers to reach agreement. He reiterated the NAMA 11 proposal that the coefficient for developing countries should be at least 25 points higher than the coefficient for developed countries.

China said that the level of ambition must be fair and balanced, and it regretted that this element (of fairness and balance) is not there in the two balances, i. e. the balance between agriculture and NAMA and the balance in NAMA itself (between developed and developing countries).

China said that too many flexibilities had been reduced. The formula and flexibilities for the developing countries need more consideration because the ranges of coefficients (in the Chair's text) failed to meet the mandate of less than full reciprocity and thus there was a lack of balance.

China proposed that the coefficient for the developed countries, which now stands at 7-9 needs to go to 4-6. It also characterized the anti-concentration clause as being equivalent to an "anti-flexibility clause".

On the sectoral approach, China said the non mandatory nature of this must be observed, and we should focus on export interest of the developing countries. It should not become a tool for additional market access. China was totally disappointed to find that the linkage is still there and it strongly requested that the language be deleted.

On recently acceded members (RAMs), China, which is a RAM, said that it needed the flexibility for RAMs. It said that the language deviates from what is required by its needs. It insisted on an extension of the implementation period by 3 or 4 more years.

On preference erosion, China said that the text is exceedingly generous, and the preference giving countries would be able to shelter around $100 billion of products which are of export interest for the developing countries, and it asked for adequate compensation. It asked the Chair to further revise and improve the text.

Brazil, represented by Roberto Azevedo of the Foreign Ministry, said it supported the paragraph on Mercosur (7f) which had no brackets, and solutions should be found for Venezuela and Bolivia. The anti-concentration problem must be resolved or it could be a deal breaker, said Brazil. Participation in sectoral initiatives should be seen as a "top up" and not as a remedy for shortcomings of the formula.

Brazil re-emphasised that agriculture is still the locomotive of the Round, and it would be looking at the negotiations and results in agriculture before making considerations in NAMA. Brazil added that in the agriculture negotiations, certain (developed) countries were complaining about the effects of liberalization on their producers of strawberries, diary products, poultry, beef and so on, and we have to make exceptions for them, but in NAMA the same countries want to impose a one-size-fits-all approach on developing countries.

India, supporting the NAMA 11 statement, said that gaps still remain in the text. It stressed that this is a Development Round, yet the developing countries are asked to make a reduction commitment double than that of the developed countries. The mandate for less than full reciprocity LTFR has been ignored and this is a very serious concern to us, said India.

It added that the coefficients needs to be altered. The flexibilities for developing countries cannot be violated. On the anti-concentration clause, this is not acceptable to India. It added that the linking of sectoral initiatives to flexibilities is also not in the mandate.

The United States said it had come optimistic to this meeting because it sensed that members were ready to see compromises, but now listening to a couple of interventions, it feel disturbed. One of these interventions was by NAMA 11, it said. On the numbers in the brackets, we don't like them either, but the agreement must be on the basis of the numbers that are in those brackets, said the US.

It supported flexibility, but within the ranges, and also tied to the ranges of the coefficients as it stands now. It referred to some members that mentioned that the gap between the coefficients between the developed and developing countries goes against the less than full reciprocity principle, but for the US it exceeds the principle because there is too wide a gap between the coefficients.

On the anti-concentration clause, the US said it was important. On the linkage of the sectoral approach to the formula, given the precarious state of ambition, the sectoral initiatives are necessary to achieve meaningful market access.

On erosion of preferences, the US said it was absolutely not prepared to pay any compensation. This is a poison pill. And it is a sad comment that certain countries are not ready to take a modest delay in the liberalization of certain products affected by preference erosion.

The EU said there was clearly an improvement in the text, which now had less brackets. It is good that the coefficients are unchanged but the link between coefficients and flexibilities means a watering down of ambition, added the EU. It said the anti-concentration clause is key for the EU because we want to have meaningful market access in all sectors. On RAMs, it was concerned about the footnote in the paragraph related to RAMs, as it raised the possibility of further negotiation to the flexibilities, and this is unacceptable, said the EU.

Japan said that the new text was more manageable due to the reduction of brackets. The worry is that there is no convergence in a number of important issues. The gap in the coefficient ranges is still high and the flexibilities for developing countries had been expanded substantially. On the anti-concentration clause, Japan said the absence of a number is a problem. On sectoral initiatives, it wanted more indication on participation by interested members.

After the meeting, Stephenson told the media that following the issuing of his new text, there had been discussions on the issue of products affected by preference erosion, with a line by line discussion on tariff lines.

There was also discussion with representatives of "Para 6 countries" (those with low tariff bindings), and a consensus may be possible before Monday.

He added that the whole text is not a consensus text but still a Chairman's text. On issues like anti-concentration and the link between sectorals and the formula, and on the overall ambition level, there are still deep divisions.

"I think that members today spent most of their time signaling each other about the positions they will take next week in the TNC process," he said. +