TWN Info Service on WTO and Trade Issues (Mar08/15)
18 March 2008
Third World Network

Developing-country unions oppose NAMA Chair's proposals
Published in SUNS #6435 dated 14 March 2008

By Kanaga Raja, Geneva, 13 March 2008

Major groupings of trade unions from developing countries have voiced opposition to the current proposals of the Chair of the non-agricultural market access (NAMA) negotiations at the WTO, saying that they are seriously concerned about the potential impact of these proposals on employment and industrial development in their countries.

Two leading trade union groupings - one from the NAMA-11 developing countries and the other, a regional alliance of trade unions from Latin America - are currently in Geneva to voice their concerns and to defend industrial development and employment in their countries.

They also met with the Chair of the NAMA negotiations, Ambassador Don Stephenson of Canada, on Wednesday morning to voice their views and proposals.

At a press briefing later on Wednesday, Ariel Castro of the Trade Union Congress of the Philippines, part of the NAMA-11 trade union group, said that the trade unions are saying that the current proposals being tabled (by the NAMA Chair) for the NAMA negotiations at the WTO are unacceptable because these have not taken into account the employment impact and competitiveness concerns of workers.

He added that the current range of coefficients in the Swiss formula (for developing countries of 19-23, proposed by the NAMA Chair) are too low and are unacceptable because the cuts in the applied rates would result in more unemployment.

There has to be a balance in the current NAMA negotiations which should not result in further unemployment and social disruption and the capacity of developing countries to industrialize and diversify their industries.

Rudi Dicks from the Congress of South African Trade Unions (COSATU), referring to the revised NAMA modalities issued by the NAMA Chair early February, said that the NAMA Chair has not taken into consideration many of the proposals of the NAMA-11 developing countries.

According to Dicks, Stephenson continues to say that the majority of countries in the NAMA negotiating group are happy with the parameters - coefficient of 8-9 for developed countries and 19-23 for developing countries.

Dicks maintained that the NAMA Chair generally has consistently ignored the NAMA-11 group of countries and the views that they have espoused over the past few years. "This continues to be a great concern for us."

Recalling that many at the WTO have been arguing that the cuts in NAMA tariffs would be in the bound rates only, Dicks said that in actual fact, simulations and calculations show that there will be substantial cuts not only in the bound rates but also in the applied rates. For South Africa, there would be as high as a 40% cut in applied tariffs.

Dicks noted that South Africa has just come out of apartheid and that its legacy has left a large level of development required by the State. South Africa has one of the highest unemployment rates in the world - as high as 40%.

Alexandre de Freitas Barbosa of the Social Observatory Institute in Brazil - and is linked to the Central Unica dos Trabalhodores (CUT) - observed that two-thirds of global trade is composed of manufacturing.

Barbosa dismissed arguments that are being made that in exchange for agricultural market access, developing countries should give up their industry and services. He said that developing countries do not only have the majority of jobs in the agricultural sector, they also have the majority of jobs in the industrial sector - 60% of industrial jobs globally is based in developing countries.

Referring to the levels of ambition in the agriculture and NAMA negotiations, Barbosa said that there should be an "unbalance" in favour of developing countries, mentioning in this context the principle of less than full reciprocity.

According to Barbosa, in reality, however, the developed countries are proposing "more than full reciprocity" - in which developing countries are offering more market access than the developed countries.

Furthermore, developed countries do not allow developing countries to have the same policy space that they had in the past to develop their own industries, he said.

He pointed out that developed countries are using the Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Trade-Related Investment Measures (TRIMs) agreements at the WTO, and other ways of trying to prevent developing countries from developing their industries.

He explained that in the TRIMs agreement, developing countries do not have the ability to have local content requirements (in manufacturing), while intellectual property rights are protected in the TRIPS agreement.

The NAMA-11 group holds together developing countries that have huge internal markets, and developed countries want to get into these markets, he said, adding that "we are in the present case really giving market access to them that would harm our production and our employment levels."

Barbosa stressed that developing countries only have tariffs to try to protect and diversify their industries. Tariffs are an important instrument for development policy.

Asked about WTO Director-General Pascal Lamy's recent visit to South Africa where he had raised the issue of South Africa's already low tariffs, Dicks of COSATU said that the issue is not about tariffs alone, but the difference between the bound and applied rates - the so-called "water".

When South Africa joined the GATT and subsequently the WTO, it went onto a tariff liberalization program that was more than was required. For South Africa, when a coefficient of 20 is used, it will result not only in a significant cut in the bound rates but also a significant cut in the applied rates.

Dicks elaborated that for South Africa, where there is very little "water" (difference in bound and applied rates) in the clothing and textiles sector, it was looking at a cut in applied rates of about 62% of tariff lines. In the motor industry, it was looking at 30-40% of applied tariff lines being affected.

Dicks said that when bound rates and applied rates are close to one another, it actually impacts on applied rates too. "We would have severe cuts in our applied rates and severe impact on our own industrial development."

He added that labour-intensive sectors such as rubber, furniture, textiles and clothing, motor industry manufacturing, and chemical products would be severely affected by a coefficient of 19-23. Huge amounts of applied tariff lines would be cut.

Generally, this issue was raised with Lamy, said Dicks.

"I think there is just a general lack of recognition for the NAMA-11," including by Stephenson and Lamy, the COSATU representative said.

Even in his meetings with the unions, Dicks said, Ambassador Don Stephenson refers to the majority of members in NAMA being satisfied with the paper. However, Dicks added, the NAMA-11 group of developing countries represent approximately 2.7 billion people.

According to the South African trade unionist, Lamy came to South Africa to see if it would agree to some of the proposals on the NAMA coefficients and flexibilities. "I think South Africa has been fairly strong and have rejected this outrightly."

Asked what the impact would be on employment from the use of the present NAMA coefficients, Dicks said that the clothing and textiles sector in South Africa has been hit since 1995.

The clothing and textiles sector currently employs about 200,000 workers - both in formal and informal employment. Seventy percent of the workers are women. As a result of tariff reductions and the commitments that South Africa had made in 1995, approximately 126,000 jobs were lost (with tariffs dropping by 60% over a nine-year period), said Dicks. The same thing has happened in the electronics sector.

Castro of the trade union in the Philippines said that in his country, there were 250 companies in the early 1990s in the textiles and clothing sector, but this has gone down to about five companies. He also pointed to garments, cement, foodstuff, pulp and paper, gems and electric appliances as industries in crisis in the Philippines.

Barbosa said that for Brazil, using a coefficient of 15, there would be a reduction in applied rates of 39% in textiles and clothing, 47% in footwear, and 46% in the automobile sector.

Asked about the trade unions' meeting with the NAMA Chair on Wednesday morning, Dicks said that Stephenson was of the view that the majority of countries in the NAMA negotiations are fairly happy with the parameters, both for the coefficients and the flexibilities.

The NAMA Chair felt that his new text for flexibilities has opened up a greater debate. According to the Chair, the majority of countries are happy with options 1, 2 and possibly 3 (out of eight options on formula/flexibilities recently outlined by Stephenson in his new proposal), but option 2 seems to be the favourite.

(Option 1 in Stephenson's proposal on the formula and flexibilities refers to increasing the flexibilities options while maintaining the level of ambition. Option 2 refers to the sliding-scale approach of coefficients and flexibilities, and Option 3 relates to combining flexibilities.)

Referring to option 8 (using a Uruguay Round-like approach combining an average cut with a tariff ceiling and a minimum line-by-line cut), Dicks said that the NAMA Chair was of the view that this has not created a lot of interest among members.

But this has clearly raised a lot of interest among the trade unions, according to Dicks, who said that the present Swiss formula is a problematic one. +