Non-Agricultural Market Access (NAMA): Key Development Benchmarks To Look Out For 1
Prepared for presentation during the retreat for African Ambassadors and Negotiators based in Geneva on Development Benchmarks for the Hong Kong Ministerial
5-6 November 2005, Lausanne, Switzerland
Mustapha Sadni-Jallab
Trade and Regional Integration Division
Discussions on industrial tariff reductions have hardly moved in months due to members awaiting signals from the agriculture negotiations. The 21-22 September session of the Negotiating group on NAMA revealed a continued lack of convergence in Members approaches to the structure of the tariff reduction formula and the flexibilities to be accorded to some "sensitive" products. Various proposals have been submitted (Antigua and Barbuda, Argentina, Barbados, Brazil, India (TN/MA/W/54), Chile, Colombia, Mexico (TN/MA/W/50), European Communities, Jamaica, Norway (TN/MA/W/7/Add.1), Saint Kitts and Nevis, Trinidad and Tobago, and the United States (JOB(05)/36)). The key question in all of the discussions is to what extent the various proposed formulas will deliver on the mandate as set out in paragraph 16 of the Doha Ministerial Declaration.
In September, Pakistan formally presented a simple Swiss formula with coefficients of 6 for developed countries and 30 for developing countries. Several delegations, including Canada, New Zealand and the US, complained that 30 was too high, and would not cut developing country tariffs steeply enough. US have made clear that differentiated coefficients would replace rather than complement paragraph 8 flexibilities. This position was rejected by a large number of developing countries. The EU proposes that developed countries will apply a simple Swiss formula with a coefficient 10, with no flexibilities/ exclusions for any product. The highest duty will be 10%. The EU proposes also the "controversial idea" of differentiation between developing countries. Indeed, the EU proposed that "advanced developing countries" would have to apply the same Swiss formula with a coefficient 10 and flexibilities of paragraph 8 of the Framework agreement (FA)2. Least developed countries remain covered by paragraphs 6 and 9 of the FA. The EU has explicitly conditioned the outcome of all areas in the Doha Round negotiations, including agriculture, on a satisfactory outcome in NAMA.
One major concern of the Swiss formula is that it gives less flexibility than the Girard Formula or other kinds of non-linear formulas. The Norway proposal3, which considers a non-linear formula with two coefficients that includes a simple and transparent of credit will provide Members a certain degree of flexibility. On NAMA negotiation, it is important to establish a methodology, which combines flexibility for developing country members. This brief outlines some NAMA developmental benchmarks that should appear in the Draft outcome document for Hong Kong.
i) The Formula
African countries could derive benefits from MFN tariff reduction provided that their supply-side constraints and market entry barriers were properly addressed.
On the formula, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
A simple and transparent formula approach is key to reducing tariffs, and reducing or eliminating tariff peaks, high tariffs, and tariff escalation.
This formula would allow African countries to undertake industrial policy and diversification objectives.
The principles of non-reciprocity, Special and Differential Treatment and less than full reciprocity should be clearly indicated.
Developing countries could have more flexibilities by applying lighter tariff cuts, through higher a coefficient in a pure Swiss Formula, what is usually called "implicit special and differential treatment".
i) Preference erosion
Preferences are important development instruments for African countries and should be made more effective through simplified rules of origin and administrative processes.
African countries would be adversely affected, as these proposals would result in erosion of their preferences.
On preference erosion, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
Provide for a mechanism for addressing preference erosion within the WTO,
Due to the critical importance of preferences for these vulnerable economies, suitable treatment of products from African countries, currently enjoying non-reciprocal preferential access should be considered in the NAMA negotiations.
Liberalization on products enjoying preferential market access should be given special treatment in the current negotiations.
ii) Binding coverage
On binding coverage, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
Least-developed country participants shall not be required to apply the formula nor participate in the sectorial approach.
Developed countries should bind all tariffs on NAMA merchandise exports at zero by 2015, the due date for the achievement of the Millennium Development Goals.
A significant increase of the binding coverage for LDCs would constitute an important concession and contribution to this round. LDC's have to take care about the increase of their level of binding commitments they will implement. In other words, the outcome document should provide flexibilities for African countries to determine their binding coverage commensurate with their development objectives.
iii) Sectoral initiative
The sectorial tariff component of the negotiations is also being pursued actively by the individual Member or Members interested in seeing such an outcome in a particular sector and who consider this an essential component of the NAMA negotiations to achieve commercially meaningful market access.
African countries, which are not LDC's, should analyzed the consequences of the sectoral initiatives on their economies. Indeed, many sectors quoted by the NAMA Chairman (Electronics/Electrical Equipment, Bicycles and Sporting Goods, Fish, Forest Products, Gems and Jewellery, Raw Materials) are important for many developing countries in terms of diversification and industrialization.
On the sectorial initiative, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
African countries could have the discretionary power to define the sectors they will choose with their development objectives.
Any sectorial negotiations should not be linked to the determination of the appropriate formulae.
iv) Technical Barriers to trade
On technical barriers to trade, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
Negotiations on non-tariff barriers should be conducted in tandem with those on tariff reductions in the negotiating group on non-agricultural market access (NAMA).
African countries are additionally concerned about NTBs imposed by the preference-giving countries and ask that in line with Paragraph 16 of Doha Ministerial Declaration, these NTBs will be reduced or eliminated, in order to meet the development objectives of these negotiations.
African countries need technical assistance in participating in standard setting bodies, as well as in meeting existing standards.
It needs to be clarified how S&D could be applied in an NTB context. Assessments of costs and benefits will vary by issue and also according to the level of development of the country concerned. Therefore, the important consideration is that assessments should be based on sound analysis and not mere political bargaining.
v) Special and differential Treatment
On special and differential treatment, the outcome document should incorporate the following benchmarks to ensure a developmentally positive result:
The flexibilities should not be linked to the level of ambition. The flexibilities should address Africa's development needs and concerns. Developing countries should have more flexibility to determine which products to cut to meet a target.
African countries could obtain more policy space when the "explicit S&D" is larger, meaning that African states get more exempted tariff lines. Reinforcing the tariff-lines exemption is a solution to limit the commitments of the most developed African states and to help them in pursuing their industrial development strategies.
African countries could have more flexibilities when the developing countries apply lighter tariff cuts, through higher a coefficient in a pure Swiss Formula, what is usually called "implicit S&D".
Longer periods for African countries to implement liberalization programmes should be proposed. Reductions should be phased in to facilitate fiscal adjustment.
There have been no specific discussions on the paragraph 10 relating to duty-free and quota-free market access for LDCs. Unrestricted market access for the African exporters to the four countries of the QUAD (European Union, Japan, United States and Canada) could be a way to make the Doha Round useful for Africa. It would correspond to Japan, US and Canada extending to the LDCs the current EU Everything-but-Arms preferences under the same terms.
1 The views expressed are those of the author and do not necessarily reflect those of the United Nations.
2 Developing countries, through the S&D treatment in paragraph 8 will cut their applied tariffs less than developed countries overall: a) applying less than formula cuts to up to [10] percent of the tariff lines provided that the cuts are no less than half the formula cuts and that these tariff lines do not exceed [10] percent of the total value of a Member's imports; or b) keeping, as an exception, tariff lines unbound, or not applying formula cuts for up to [5] percent of tariff lines provided they do not exceed [5] percent of the total value of a Member's imports.