TWN Info Service on WTO and Trade Issues  (May 07/12)

29 May 2007

Week-long NAMA meeting ends with no convergence in sight

Yet another week (7-11 May) of WTO negotiations on industrial tariffs has passed without any clear signs of agreement on several key issues, underscoring the deep differences among members.

However, the Chair of the NAMA group, Don Stephenson of Canada, plans to come up by mid-June with a draft negotiating modalities text of his own.

On the controversial issue of industrial tariff cuts, the week's consultations and meetings clearly brought out that the stance of developed countries to have a tariff formula, with a coefficient value of "10" for themselves and "15" for developing countries, to be used for making tariff reductions, is unacceptable to practically all the developing countries.

The developing countries speaking on 8 May insisted that such a formula will be contrary to the mandated principle of less than full reciprocity, where developed country members are expected to undertake greater percentage reductions in their tariffs.

Below is a report of the week of NAMA talks.   It was published in the SUNS on 15 May.

With best wishes
Martin Khor
TWN

Week-long NAMA meeting ends with no convergence in sight

By Goh Chien Yen (TWN), Geneva, 14 May 2007

Yet another week (7-11 May) of WTO negotiations on NAMA has passed without any clear signs of agreement on several key issues, underscoring the deep differences among members.

However, Ambassador Don Stephenson of Canada, the chairman of the Non-Agricultural Market Access (NAMA) negotiating group where the talks are taking place, remained confident, and plans to come up by the middle of next month with a draft negotiating modalities text of his own.

Stephenson reminded members on Friday (11 May) that the next scheduled week of meetings on 4 June would be the last opportunity for the delegations to give their views before the text is written.

In the meantime, he will continue to hold consultations over the following three weeks with some members on the issues of small and vulnerable economies (SVEs), non-tariff barriers (NTBs), recently acceded members (RAMs), and on the tariff reduction formula - with "transparency" meetings at the end of each week of consultation.

However, it remained uncertain whether these small group meetings will lead to a draft modalities text that bridges or fairly reflects the polarized positions of members that was evident at last week's negotiations.

On the controversial issue of industrial tariff cuts, last week's consultations and the informal open-ended meeting clearly brought out that the stance of developed countries to have a tariff formula, with a coefficient value of "10" for themselves and "15" for developing countries, to be used for making tariff reductions, is unacceptable to practically all the developing countries.

A large number of developing countries or their groupings that spoke on 8 May insisted that such a formula will be contrary to the mandated principle of less than full reciprocity, where developed country members are expected to undertake greater percentage reductions in their tariffs.(See SUNS #6249 dated 10 May 2007.)

In the discussions on non-tariff barriers (NTBs) on 9 May, many developed and developing country members were split on the Japanese and European proposals on export restrictions and taxes.

Several developing countries including Malaysia, Venezuela, India, Saudi Arabia, China, and Thailand fiercely opposed the Japanese proposal for disciplines on export licensing procedures. They insisted that this issue is not part of the negotiating mandate.

Similarly, the EC proposal on export taxes which is supported by some other developed countries, drew strong reactions from the developing country members. Echoing the sentiments of several developing country members, Saudi Arabia in its first major intervention in a WTO debate since accession in 2005, presented a detailed argument in "rejecting" the EC's proposal. Among others, argued Saudi Arabia, Article XI of GATT "expressly permits the use of" such taxes, and the EC proposal would diminish rights of Members, and "strip developing countries of valid and appropriate policy tools to promote economic development and diversification."

Despite the strong opposition from many developing countries, the EC said that the issue of export taxes is a matter of principle for them and that they would continue pressing for their proposal "undeterred".

The Chair noted that the Membership is starkly divided on this issue and it will be a challenge for the countries pushing for these proposals to achieve consensus.

On the issue of "sectorals", which are voluntary negotiations among participating members for total elimination of tariffs or reduction to a rate as close to zero as possible, discussions on 10 May also produced few results.

According to a trade diplomat, while there are several sectoral initiatives on products such as chemicals, pharmaceuticals, toys, electronic products and auto parts, they are only acceptable to a handful of countries.

"There is no support beyond their sponsors," he said.

According to trade officials, at the 10 May meeting, Bangladesh made a statement opposing the negotiations on sectorals - arguing that it should be a bilateral talks between interested members, and not one for multilateral negotiations.

Bangladesh, supported by Cuba, argued that the focus of the discussion has been lost since there was no emphasis on products of export interest to developing countries as provided in the mandate.

This view was however rejected by the Chair, who said that the mandate for sectoral negotiations was contained in the Hong Kong ministerial declaration, and sectorals are another key element of the NAMA negotiations. "Those are my instructions and I'll continue on this basis."

Bangladesh with several other developing country members including Jordan, Dominican Republic, Honduras, and El Salvador supported a contentious proposal by Turkey for special treatment for some textiles products that would keep tariffs above the cuts applied by the formula.

This was strongly rejected by many others on the ground that it went against the mandate since it means the exclusion of a product or group of products from tariff reduction.

The Chair was noticeably disappointed with the outcome of the meeting, complaining that members "did badly" and the result of the meeting was "poor". The proposals were not very well developed and "it's hard to take seriously the idea that we have to finish the negotiations this year".

At the negotiations on 11 May, differences among members surfaced over the issue of environmental goods.

The US reiterated its position for eliminating all tariffs for environmental goods. They were supported by the EC.

The sticking point however has been the continued failure in finding an agreed approach in identifying what these good are in the first place in the Committee on Trade and Environment.

Developing country members fear that the discussion on environmental goods has been used disingenuously to promote the market access interests of the developed countries.

Speaking at the Friday meeting, India pointed out that there is "no potential for convergence on environmental goods right now. There is no agreement on method and approach on identifying these goods."

India was supported by Egypt, Brazil and Argentina, among others, echoing the observation that members are not close at all in finding a solution in the Committee on Trade and Environment.

The Chair reported back to members on 11 May on his consultations with the small and vulnerable economies (SVEs), which are seeking non-application of a tariff reduction formula in making their tariff commitments.

The Chair said that it was discussed that the SVEs should do better in terms of making tariff commitments than the "paragraph 6" countries. These developing countries because of their low level of tariff binding, would bind their tariffs at about 28.5%. This however is still to be agreed upon in the negotiations.

The SVEs would also bind all their tariffs, and as a group achieve an average level of 28.5% for their tariffs. To realize this result, the SVEs would be divided into three bands, and make corresponding cuts to their industrial tariffs.

Some members do not want to exempt the SVEs from applying the formula, and would only favour greater flexibilities for these developing countries. Others want more details on the extent of the tariff cuts that would be undertaken in each band.