TWN Info Service on WTO and Trade Issues (Mar08/20)
21 March 2008
Third World Network

Different responses to issue of Chair's NAMA options
Published in SUNS #6438 dated 19 March 2008

By Martin Khor, Geneva, 18 Mar 2008

The WTO talks on non-agriculture market access (NAMA) have seen diverse responses from several WTO members to the eight options for approaching the formula and flexibilities (and possible relationships between the two) in reducing industrial tariffs in the Doha negotiations.

When the Chair of the NAMA group, Ambassador Don Stephenson of Canada, put forward his "possible ideas on formula/flexibilities", it was met with significant skepticism, with many developing countries finding it technically confusing, or objectionable in principle, and questioning the Chair's objective in introducing such a complex paper at such a late stage of the negotiations.

For example, India's Commerce Secretary Mr. Pillai had criticized the Chair's options approach as unacceptable, and as an attempt to divide the developing countries, according to news reports from Delhi.

The confusion and skepticism remain with several developing country diplomats. The Chair held a Room E small-group meeting last Friday (14 March) to discuss his options paper, and the responses showed significant disagreements.

The options revolve around two main issues - the coefficients (to be applied to developed and developing countries in the tariff-reduction Swiss formula), and the flexibilities (the percentage of tariff lines that are allowed to deviate from the full extent of the formula cuts, or to be exempt from these). (See explanatory Note at end of article).

The Chair's 28 February paper, often dubbed the "cafeteria options" because Stephenson said that he picked up the ideas from the cafeteria, has 8 options. They seem to be of 5 categories: those that introduce more options within an existing flexibility (Proposal 1, 4, 5); those that link the extent of use of flexibility with having additional or lesser points in the coefficient (Proposals 2, 6); those that allow a country to choose a combination of existing flexibilities (Proposal 3); a proposal that puts additional cuts on top of the formula cuts (Proposal 7) and a proposal that does away with the Swiss formula and replaces it with a Uruguay Round-like approach (Proposal 8). (See SUNS #6428 dated 5 March 2008 for article detailing the 8 options).

At the 14 March meeting, the US and EU expressed strong support for Option 6 (which the coefficient with the extent of participation of a developing country in sectoral commitments), according to a trade official. They also expressed preference for Option 1 (flexibilities within flexibilities), and Option 2 (the sliding scale approach in which acceptance of a lower coefficient allows a developing country to have a higher degree of flexibilities).

The NAMA-11 group (which includes many of the developing countries that are the main market-access targets of developed countries, such as India, Brazil, South Africa, Indonesia), represented by its coordinator South Africa, provided a more fundamental perspective of the negotiations, and not just on the specifics of the Chair's options.

South Africa, for NAMA-11, made three points. First, the objective of the Chair's consultative process should be to develop a negotiating architecture to enable countries to negotiate the level of ambition, and it should not be to decide on the level of ambition.

Members need adequate space to negotiate, but if the Chair constrains this negotiating space in coefficients and flexibilities, and there is no architecture to facilitate this, the situation would be very difficult and it can defeat the aim of the exercise, said South Africa.

Second, commenting on the "cafeteria options", NAMA-11 was of the view that to properly discuss the options, the discussion must first start with the coefficients and not the flexibilities. The coefficients set the ambition level, and the NAMA-11 took issue with the Chair as he had "frozen" the numbers in the ranges.

The Chair had said that the figures had been chosen by himself in his first draft, and this had been rejected by NAMA-11, but he had retained the same figures in his revised draft, said South Africa.

[The Chair's two papers proposed a coefficient of 8-9 for developed countries and 19-23 for developing countries. Many developing countries criticized these ranges for being against the less than full reciprocity principle, as many developing countries affected by the formula would have to cut bound rates far deeper than developed countries].

South Africa added that the NAMA-11 comprises a very significant group of countries, without whose agreement there cannot be a deal. But the group's positions are not reflected in the Chair's ranges of coefficients. It is essential that the Chair corrects this before the group could consider his options.

Third, on the flexibilities, while NAMA-11 welcomed his attempt to introduce suggestions, the Chair must first bring back the numbers (which were in the first draft, placed within brackets) of 5% and 10%, and then he should reflect the NAMA-11 view that the numbers must be increased. i. e. [5 plus x] and [10 plus y].

On the specifics, South Africa said that there has been a good discussion on the options. The NAMA-11 are of the view of not taking a one-size-fits-all approach, and recognizes we may need different types of flexibilities.

It said the Chair should thus try to reflect different flexibilities for different members. Thus, there should be various different options made available, for countries to choose from on the basis of need.

Speaking for itself, South Africa said that none of the 8 options are suitable for it.

According to a trade official, Brazil indicated it could explore the "second variant" of Option 2, i. e. Option 2 (ii). Diplomats were of the impression that Brazil's interest was on exploring the "architecture" of the option, and it did not indicate support for the numbers.

In this variant of the "sliding scale approach", the Chair's 27 February paper has a table with three columns on coefficient, percentage of tariff lines under para 7(a) (i) and percentage of tariff lines under para 7(a)(ii). The table also has three rows, containing coefficients (for developing countries) of 19, 21 and 24.

For the middle coefficient of 21, the corresponding flexibilities under paragraph 7(a) (i) and (ii) are 10% and 5%, respectively. For a coefficient of 19, the flexibilities are 14% and 7%. For a coefficient of 24, the flexibilities are 0% and 0%.

It should be noted that in this variant, the Chair is setting coefficient 21 as the level that corresponds to the figures of 10% and 5% [for paras 7a (i) and 7a (ii)] which are the numbers (in brackets) in the July 2004 framework agreement and in the Chair's July 2007 first modalities draft. This implies that the Chair is settling on 21 as the main coefficient for developing countries, with the two deviations on either side.

According to media reports, at a meeting of Brazil, United States and European Commission in London early last week, Brazil had indicated a willingness to consider Option 2 (ii) in terms of its structure, although not the numbers in the Chair's "cafeteria paper."

At the 14 March meeting, Brazil also said that the level of ambition in NAMA could be set only at the talks at the horizontal level. The NAMA ambition level must also be compatible with agriculture, and balance between ambition and flexibility is needed.

Also speaking at the 14 March meeting, another NAMA-11 member, Venezuela, recalled that it had put forward a proposal for a special case for Venezuela at a previous meeting, and said that this was in line with Option 8 of the Chair's paper. It added that it could accept a similar average reduction as in agriculture for developing countries, and it could not accept a deal which was different from what it had indicated.

According to a trade official, Argentina, another NAMA-11 country, said that Option 8 could be contemplated.

[Option 8 replaces the Swiss formula with what the Chair calls a "Uruguay Round-like agriculture modality" (in which the developing countries "combine an average cut with a tariff ceiling and a minimum line-by-line cut.").]

Asked after the meeting about different NAMA-11 countries indicating preference for different options, South African Ambassador Faisal Ismail said there was no inconsistency. It was in line with the group's general approach, that particular conditions for countries must be considered, and the appropriate flexibilities should be made available to them.

NAMA-11 members subscribed to the three principles he had laid out. Also, they agreed that the discussion on flexibilities must come after the negotiation on coefficients, said Faisal.

According to trade officials, the Chair had said at the opening of the meeting that he was encouraged that in consultations he held there was engagement and some countries were more open to options for flexibilities and to provide limited increase in flexibilities in exchange for lower coefficients.

Stephenson added that the options that had more support were options 1, 2 and 3. There was some support to increase the figures on trade volume, and also some support to link flexibilities to sectoral participation. The second variant of option 2 also has more support, said the Chair.

However, during the meeting, many developing countries rejected option 6 (linking sectorals with flexibilities). Also, in response to the call by some developing countries for a lower coefficient (for example, 5) for developed countries (instead of 8-9 proposed by the Chair), the US said this was out of the question, according to a trade official.

The Chair indicated that there would be another Room E meeting this week to continue discussion on coefficients and flexibilities.

NOTE: The relevant Para 7 (on flexibilities) of the Chair's 8 February modalities text states as follows:

(a) Developing members subject to the formula shall be given the following flexibility:

(i) applying less than the formula cuts for up to [ ] percent of non-agricultural national tariff lines provided that the cuts are no less than half the formula cuts and these tariff lines do not exceed [ ] percent of the total value of a Members's non-agricultural imports, or

(ii) keeping, as an exception, tariff lines unbound, or not applying formula cuts for up to [ ] percent of non-agricultural national tariff lines provided they do not exceed [ ] percent of the total value of a Member's non-agricultural imports.

(b) [Developing Members subject to the formula who do not use the flexibility in paragraph 7 (a) above shall apply a coefficient of (b+[3-5] in the formula].

In his previous July 2007 draft, the Chair had placed the figure 10 between the two sets of brackets in para 7 (a) (i) above, and the figure 5 between the two sets of brackets in para 7 (a) (ii). These were the same figures, also between brackets, in the July 2004 framework agreement on NAMA. +