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HEI, Summer Programme on the WTO, International Trade and Development
16 July 2008
Trade in Manufactures Trade in Manufactures and the NAMA and the NAMA NegotiationsNegotiations
Roy SantanaRoy Santana
Market Access DivisionMarket Access Division
World Trade OrganizationWorld Trade Organization
WORLD TRADE ORGANIZATION
22
Structure of this presentationStructure of this presentation
I.I. Market Access in the GATT/WTO: Market Access in the GATT/WTO: Basic elements and definitionsBasic elements and definitions
II.II. Tariff negotiations: Tariff negotiations: brief overview of previous brief overview of previous roundsrounds
III.III. What are the rules of the game What are the rules of the game for tariff negotiations?for tariff negotiations?
IV.IV. Current status of market access Current status of market access for non-agricultural productsfor non-agricultural products
V.V. The NAMA negotiationsThe NAMA negotiations
33
I.I. MARKET ACCESS IN MARKET ACCESS IN THE GATT/WTO: THE GATT/WTO:
BASIC ELEMENTS AND BASIC ELEMENTS AND DEFINITIONSDEFINITIONS
44
1. What is Market Access?1. What is Market Access?
In the WTO framework, the term In the WTO framework, the term stands for the totality of stands for the totality of government-imposedgovernment-imposed conditions conditions (regulations/measures)(regulations/measures) under which under which a product from one country maya product from one country may enter another country under non-enter another country under non-discriminatory conditionsdiscriminatory conditions..
Market access in the WTO sense is Market access in the WTO sense is regulated most of the time through regulated most of the time through border measuresborder measures including, inter including, inter alia, tariffs, tariff rate quotas, alia, tariffs, tariff rate quotas, quantitative restrictions and other quantitative restrictions and other non-tariff measures. non-tariff measures.
55
Predictable and growing access to Predictable and growing access to markets for goods and services is markets for goods and services is one of the goals of the WTOone of the goals of the WTO
Basic Principles:Basic Principles: Non discrimination Non discrimination (NT/MFN) and transparency(NT/MFN) and transparency
Predictable:Predictable: binding commitments binding commitments Growing accessGrowing access: periodic “rounds” : periodic “rounds”
of negotiationsof negotiations
2. GATT/WTO: ensuring MA2. GATT/WTO: ensuring MA
66
Who wants a legal Who wants a legal framework?framework?
What market What market access could an access could an exporter from exporter from territory Aterritory A expect expect to have in territory to have in territory B?B?
How can How can territory Bterritory B regulate the access regulate the access of foreign goods of foreign goods into its territory?into its territory?
AABB
77
3. Types of MA barriers in trade in 3. Types of MA barriers in trade in goodsgoods
In the GATT/WTO In the GATT/WTO framework there framework there are 2 types of are 2 types of barriers to trade barriers to trade in goods:in goods:
1.1. TariffsTariffs
2.2. Non-Tariff Non-Tariff BarriersBarriers
88
4. Basic GATT/WTO framework4. Basic GATT/WTO framework
– Tariffs should normally be the only Tariffs should normally be the only instrument used to protect domestic instrument used to protect domestic industries industries
– Quantitative restrictionsQuantitative restrictions (bans/restrictions) are generally (bans/restrictions) are generally prohibitedprohibited (GATT Art. XI)... (but are (GATT Art. XI)... (but are sometimes allowed)sometimes allowed)
– Tariffs should be Tariffs should be transparent, predictable transparent, predictable and stable and stable
– Members’ commitments on tariffs are Members’ commitments on tariffs are included in included in “Schedules of concessions”“Schedules of concessions”
99
5. Tariff: definition5. Tariff: definition
Duty levied at the Duty levied at the borderborder on goods on goods going from one going from one customs territory to customs territory to another (GATT Art. another (GATT Art. I)I)
1010
5. Tariff: definition5. Tariff: definition
Although “Although “import tariffsimport tariffs” are the most ” are the most common, “common, “export tariffsexport tariffs” or “” or “export taxesexport taxes” ” are also applied by some WTO Membersare also applied by some WTO Members
Main interest of GATT/WTO has historically Main interest of GATT/WTO has historically been on import tariffsbeen on import tariffs
Tariffs are not anTariffs are not an “internal tax”, “internal tax”, e.g. VAT e.g. VAT (Para. 2 of GATT Art. III)(Para. 2 of GATT Art. III)
Tariffs are not aTariffs are not a “fee” “fee” or or “charge”“charge” for an for an import service (GATT Art. VIII)import service (GATT Art. VIII)
1111
6. Tariffs and the GATT6. Tariffs and the GATT
Security and Security and predictabilitypredictability in trade in trade in goods are achieved in goods are achieved through the through the commitments commitments embodied in the embodied in the ""bindingbinding”” of tariffs. of tariffs.
A A ""boundbound"" tariff is a tariff is a tariff in respect of tariff in respect of which there is a which there is a legal legal commitment not to commitment not to raise it beyond a raise it beyond a certain levelcertain level
A binding isA binding is a “ceiling”,a “ceiling”, not a “floor”not a “floor”
1212
7. Article II of the GATT7. Article II of the GATT
““a. Each contracting party a. Each contracting party shall shall accord to accord to the commerce of the commerce of the other contracting the other contracting partiesparties treatment treatment no less favourableno less favourable than than that provided for that provided for in the appropriate Part of in the appropriate Part of the appropriate Schedulethe appropriate Schedule annexed to this annexed to this agreement.”agreement.”
Treatment Treatment cancan be more favourable: be more favourable:
bound tariffsbound tariffs vs. vs. applied tariffsapplied tariffs
Other Other more favourablemore favourable tariff treatments tariff treatments are also possible due to, are also possible due to, inter aliainter alia, RTAs, CUs , RTAs, CUs and non-reciprocal arrangements (i.e. and non-reciprocal arrangements (i.e. “enabling clause”)“enabling clause”)
1313
Bound vs. Applied ratesBound vs. Applied ratesAverage of non-agricultural tariff linesAverage of non-agricultural tariff lines
Source: WTO Secretariat based on CTS for the bound rates and IDB and UNCTAD for the MFN applied rates.
(*) Binding coverage could be overestimated due to partial bindings. See TN/MA/S/14.
0
5
10
15
20
25
30
35
40
Can
ada
EC
-15
Japa
n
USA
Chi
na, P
R
Hon
g K
ong
(*)
Indo
nesi
a
Kor
ea
Mal
aysi
a (*
)
Phi
lippi
nes
Sing
apor
e
Tha
iland
Arg
enti
na
Bra
zil
Chi
le
Indi
a
Mex
ico
Sout
h A
fric
a
AV
G (
%)
AVG Final Bound
AVG MFN Applied
1414
Example:Example: Tariffs of St. Bucks for Tariffs of St. Bucks for coffeecoffee
HS HS itemitem
Product Product descriptiondescription
WTOWTO
BounBoundd
DutyDuty
Non-Non-WTOWTO
ApplieAppliedd
MFNMFN
FTA FTA with with
PaporPapore e (*)(*)
Unilateral Unilateral preferencpreference to DCs e to DCs
(*)(*)
11 22 33 44 55 66 77
09010901 CoffeeCoffee
0901.10901.1 Not roastedNot roasted
0901.10901.111
Not Not decaffeinatedecaffeinatedd
25%25% 20%20% 10%10% 2%2% 0%0%
0901.10901.122
DecaffeinateDecaffeinatedd
0%0% 5%5% 0%0% 0%0% 0%0%
(*) To benefit from the preference, the originating product must fulfil the appropriate “preferential rule
of origin”
1515
7. Article II of the GATT7. Article II of the GATT
““(b) The products described in Part I of (b) The products described in Part I of the the ScheduleSchedule relating to any contracting relating to any contracting party, which are the products of party, which are the products of territories of other contracting parties, territories of other contracting parties, shall, on their importation into the shall, on their importation into the territory to which the Schedule relates, territory to which the Schedule relates, and subject to the terms, conditions or and subject to the terms, conditions or qualifications set forth in that Schedule, qualifications set forth in that Schedule, be exempt from ordinary customs duties be exempt from ordinary customs duties in excess of those set forth and provided in excess of those set forth and provided thereintherein. ...”. ...”
1616
8. “Schedules” of concessions8. “Schedules” of concessions Tariff bindings and other concessions are Tariff bindings and other concessions are
contained in the contained in the “Schedules of “Schedules of concessions”concessions” (GATT Article II). (GATT Article II).
Each MemberEach Member of the WTO has its own of the WTO has its own Schedule, identified by a roman numberSchedule, identified by a roman number
ExceptExcept customs unions customs unions where two or more where two or more Members have one single schedule (i.e. Members have one single schedule (i.e. Benelux, European Communities)Benelux, European Communities)
Schedules are Schedules are ““annexedannexed”” to the GATT and to the GATT and are considered an are considered an ““integral part of Part Iintegral part of Part I””. . Thus, Thus, amendments require acceptance by amendments require acceptance by all Membersall Members (See GATT Art. XXX and Art. (See GATT Art. XXX and Art. X of Marrakesh Agreement)X of Marrakesh Agreement)
1717
Examples of Schedule Examples of Schedule Numbers:Numbers:
Bangladesh – Bangladesh – LXXLXX Brunei Darussalam - Brunei Darussalam - CIICII Cambodia – Cambodia – CLVICLVI ChinaChina PR –PR – CLIICLII Fiji – Fiji – CIXCIX Hong Kong, China - Hong Kong, China -
LXXXIILXXXII India – India – XIIXII Indonesia – Indonesia – XXIXXI Korea – Korea – LXLX Macao, China – Macao, China – LXXXIXLXXXIX
Malaysia – Malaysia – XXXIXXXXIX Maldives – Maldives – CXVICXVI Nepal – Nepal – CLVIICLVII Pakistan – Pakistan – XVXV Papua New GuineaPapua New Guinea – –
CXXXVIIICXXXVIII Philippines - Philippines - LXXVLXXV Singapore -Singapore - LXXIIILXXIII Sri Lanka - Sri Lanka - VIVI Chinese Taipei – Chinese Taipei – CLIIICLIII Thailand –Thailand – LXXIXLXXIX More to come with More to come with
accessionsaccessions
1818G
ATT 1
99
4G
ATT 1
99
4
9. Structure of a Member's Schedule9. Structure of a Member's ScheduleS
chedu
le
Sch
edu
le
of
Con
cess
ion
sof
Con
cess
ion
s
Membe
r x
Part I
Part II
Part III
Part IV
Section I
I.A
I.B
Section II
Preferential ratesPreferential rates
Non-tariff ConcessionsNon-tariff Concessions
Agricultural SubsidiesAgricultural Subsidies
MFN RatesMFN Rates
MFN Duties (Tariffs and ODCsMFN Duties (Tariffs and ODCs)
MFN Tariff Rate Quotas (TRQs)MFN Tariff Rate Quotas (TRQs)
Agricultural Products
Other Products (MFN Tariffs and ODCs)
191910. What’s an “10. What’s an “agricultural”agricultural” product? product? Why Why “non-agricultural”“non-agricultural” products?products? Agricultural Agricultural
products are products are defined in Annex 1 defined in Annex 1 of the Agreement of the Agreement on Agricultureon Agriculture
Non-Agricultural Non-Agricultural products are all products are all the “other the “other products”products”
2020
Schedule M – St. Bucks Schedule M – St. Bucks This Schedule is authentic only in the English languageThis Schedule is authentic only in the English language
PART I – MOST-FAVOURED NATION TARIFFPART I – MOST-FAVOURED NATION TARIFFSECTION II – SECTION II – Other ProductsOther Products
Tariff item number
Description of products
Base rate of duty (U/B)
Bound rate of duty
Implem. period
INR ODCs
1 2 6 4 5 6 7
0301 LIVE FISH
030110 - ornamental fish 10$ /Tonne (U)
$5 / Tonne 1995/2004 5%
030191 -- trout (salmo trutta, salmo gairdneri, salmo clarki, salmo agua bonita, salmo gilae)
100% 50% 1995
030192 -- eels (anguilla spp.) 66% (U) 50% or $90, w.i.t.h.
1995/2004 $5 per Kg.
030193 -- carp 66% (U) 50% 1995/2004
030199 -- other: 66% (U) (U) 2000
3
2121
II. TARIFF II. TARIFF NEGOTIATIONS IN NEGOTIATIONS IN
PREVIOUS ROUNDS:PREVIOUS ROUNDS:HISTORY HISTORY MATTERSMATTERS!!!!
2222
Year Place/Name Topics covered
"Parties"
1947 Geneva Tariffs 23
1949 Annecy Tariffs 13
1951 Torquay Tariffs 38
1956 Geneva Tariffs 26
1960-61
Geneva (Dillon Round)
Tariffs
26
1. GATT - Rounds of Negotiations (1)1. GATT - Rounds of Negotiations (1)
2323
Year Place/Name Topics covered
"Parties"/Members
1964-67 Geneva (Kennedy Round)
Tariffs & Antidumping
First attempt on Agric. (not successful)
62
1973-79 Geneva (Tokyo Round)
Tariffs, NTBs & "framework agreements"
102
1986-94 Geneva (Uruguay Round)
Tariffs, Agric. Serv., many more
123
1. GATT - Rounds of Negotiations (2)1. GATT - Rounds of Negotiations (2)
2001- ?2001- ???
Doha Doha Development Development Agenda (DDA)Agenda (DDA)
Agric., Agric., Tariffs, Tariffs, Servic., other Servic., other issuesissues
153153(2008)(2008)
2424
Most ambitious round since the Most ambitious round since the beginning of the GATT (both in beginning of the GATT (both in terms of coverage and objectives) terms of coverage and objectives)
Several new fields covered (besides Several new fields covered (besides tariffs: NTMs, Services, Intellectual tariffs: NTMs, Services, Intellectual Property, Textiles, Agriculture, Property, Textiles, Agriculture, Dispute Settlement, etc.)Dispute Settlement, etc.)
Establishment of the WTO!Establishment of the WTO!
2. The Uruguay Round 2. The Uruguay Round
2525
Agriculture - Tariffs:Agriculture - Tariffs:– ““Tariffication” of some NTMsTariffication” of some NTMs– Then average cut Then average cut
(36% for Developed - 24% for Developing)(36% for Developed - 24% for Developing)
– Minimum cut per product Minimum cut per product (15% for Developed / 10% for Developing)(15% for Developed / 10% for Developing)
– If product tariffied, then authorized to:If product tariffied, then authorized to: Tariff rate quotas (TRQs)Tariff rate quotas (TRQs) Special Safeguards (Article 5 of the AoA)Special Safeguards (Article 5 of the AoA)
– 6 years for DCs and 10 years for Dvlping6 years for DCs and 10 years for Dvlping– No obligations for LDCsNo obligations for LDCs
3. WTO - UR Results (1)3. WTO - UR Results (1)
2626
Agriculture - Non Tariff:Agriculture - Non Tariff:– Total Domestic Support cut:Total Domestic Support cut:
-20% for Developed-20% for Developed -13% for Developing Countries-13% for Developing Countries
– Export subsidies cut:Export subsidies cut: Value of subsidiesValue of subsidies
o -36% for Developed-36% for Developedo -24% for Developing Countries-24% for Developing Countries
Subsidized quantitiesSubsidized quantitieso -21% for Developed-21% for Developedo -14% for Developing Countries-14% for Developing Countries
– No obligations for LDCsNo obligations for LDCs
3. WTO - UR Results (2)3. WTO - UR Results (2)
2727
Non-agricultural products:Non-agricultural products:– General objectiveGeneral objective was a reduction of the was a reduction of the
general level of the tariffs bygeneral level of the tariffs by 33.3%33.3% (plus (plus several sectorals)several sectorals)
– Final resultFinal result was a trade weighted cut of was a trade weighted cut of 40%40%
– Reductions to be implemented, in general, Reductions to be implemented, in general, in five steps over a four years periodin five steps over a four years period
3. WTO - UR Results (3)3. WTO - UR Results (3)
2828
4. Sectoral Agreements in 4. Sectoral Agreements in the Uruguay Roundthe Uruguay Round
Zero for zeroZero for zero HarmonizationHarmonizationAgricultural equipmentAgricultural equipment ChemicalsChemicals
BeerBeer
Construction equipmentConstruction equipment
Distilled spiritsDistilled spirits
FurnitureFurniture
Medical equipmentMedical equipment
PaperPaper
PharmaceuticalsPharmaceuticals
SteelSteel
ToysToys
Note: results were “multilateralized” and
included in the Schedules of concessions of the
participantsSome Members negotiated
the Information Technology Agreement (ITA) in 1996.
Results were multilateralized by including the commitments
in the Schedules.
See TN /MA /S /13
2929
III. What are the rules for tariff III. What are the rules for tariff negotiations?negotiations?
3030
Basic framework for Basic framework for negotiating tariff negotiating tariff concessionsconcessions
Define the rules of the gameDefine the rules of the game Tariff reduction, how to do it?Tariff reduction, how to do it?
Product-by-product?Product-by-product? Sectoral?Sectoral? Formula? If so, which one?Formula? If so, which one?
New bindingsNew bindings Implementation periodImplementation period S&D and LFR provisions S&D and LFR provisions Tabling of offers and multilateral Tabling of offers and multilateral
verification of new commitmentsverification of new commitments
3131
1. The contracting parties recognize that customs 1. The contracting parties recognize that customs duties often constitute serious obstacles to trade; duties often constitute serious obstacles to trade; thus negotiations on athus negotiations on a reciprocal and mutually reciprocal and mutually advantageous basisadvantageous basis, directed to the, directed to the substantial substantial reduction of the general level of tariffs and other reduction of the general level of tariffs and other charges on imports and exportscharges on imports and exports and in particular and in particular to the reduction of such high tariffs as discourage to the reduction of such high tariffs as discourage the importation even of minimum quantities, and the importation even of minimum quantities, and conducted with due regard to the objectives of conducted with due regard to the objectives of this Agreement and the varying needs of this Agreement and the varying needs of individual contracting partiesindividual contracting parties, are of great , are of great importance to the expansion of international importance to the expansion of international trade. The CONTRACTING PARTIES may therefore trade. The CONTRACTING PARTIES may therefore sponsor such negotiations from time to time.sponsor such negotiations from time to time.
GATT Art. XXVIII bisGATT Art. XXVIII bis
3232
2. (2. (aa) Negotiations under this Article may be ) Negotiations under this Article may be carried out on a selectivecarried out on a selective product-by-productproduct-by-product basis basis or by the application of such multilateral or by the application of such multilateral procedures as may be accepted by the procedures as may be accepted by the contracting parties concernedcontracting parties concerned. Such negotiations . Such negotiations may be directed towards the may be directed towards the reduction of dutiesreduction of duties, , the binding of duties at then existing levelsthe binding of duties at then existing levels or or undertakings that individual duties or the undertakings that individual duties or the average duties on specified categories of average duties on specified categories of products shall not exceed specified levelsproducts shall not exceed specified levels. The . The binding against increase of low duties or of duty-binding against increase of low duties or of duty-free treatment shall, in principle, be recognized free treatment shall, in principle, be recognized as a concession equivalent in value to the as a concession equivalent in value to the reduction of high duties. reduction of high duties.
GATT Art. XXVIII bis (cont.)GATT Art. XXVIII bis (cont.)
3333
Negotiation historyNegotiation history
RoundRound DevelopedDeveloped DevelopingDeveloping
GATT ~ GATT ~ Dillon Dillon (1947 ~ (1947 ~
1961)1961)
request / offerrequest / offer
KennedyKennedy(1964-1967)(1964-1967)
Linear cut formula Linear cut formula (50% cut),(50% cut), but allowed but allowed less than formula cuts less than formula cuts for a few prod.for a few prod.
request/offerrequest/offer
TokyoTokyo(1973-1979)(1973-1979)
““Swiss formula” Swiss formula” w/w/ coef. of 14 and 16 was coef. of 14 and 16 was used, some exceptions used, some exceptions
allowedallowed (peaks generally (peaks generally reduced) reduced)
request/offerrequest/offer
UruguayUruguay(1986-1994)(1986-1994)
Targeted simple average Targeted simple average reduction (33.3% AVG) reduction (33.3% AVG)
plus some sectorial plus some sectorial agreements (zero for agreements (zero for
zero and harmonization)zero and harmonization)
MixedMixed
request/offerrequest/offer
ceiling ceiling bindingsbindings
3434
3. Negotiations shall be conducted on a basis 3. Negotiations shall be conducted on a basis which affords which affords adequate opportunityadequate opportunity to take into to take into account: account:
((aa) the needs of individual contracting parties ) the needs of individual contracting parties and individual industries; and individual industries;
((bb) the needs of ) the needs of less-developed countriesless-developed countries for a for a more flexible use of tariff protection to assist more flexible use of tariff protection to assist their economic development and the special their economic development and the special needs of these countries to maintain tariffs for needs of these countries to maintain tariffs for revenue purposes; and revenue purposes; and
((cc) ) all other relevant circumstancesall other relevant circumstances, including , including the fiscal, developmental, strategic and other the fiscal, developmental, strategic and other needs of the contracting parties concerned. needs of the contracting parties concerned.
GATT Art. XXVIII bis (cont.)GATT Art. XXVIII bis (cont.)
3535
Special and Differential Special and Differential TreatmentTreatment
Developed:Developed: reduce/eliminate barriers reduce/eliminate barriers Developing:Developing: lesser reductions than lesser reductions than
developed countries/longer developed countries/longer implementationimplementation
Special treatment for Special treatment for least developed least developed countries (LDCs)countries (LDCs)
GATT Part IVGATT Part IVEnabling ClauseEnabling Clause
3636
IV. CURRENT STATUS OF IV. CURRENT STATUS OF MARKET ACCESS MARKET ACCESS FOR FOR
NON-AGRICULTURAL NON-AGRICULTURAL PRODUCTS:PRODUCTS:
Existing Rules and tariff Existing Rules and tariff commitments commitments
3737
A. RULESA. RULES
3838
2005
Trade in goodsTrade in goods before and after before and after the Uruguay Roundthe Uruguay Round
GATT AoAAgriculture
ATCTextiles
01.01.200
5
3939
B. TARIFF COMMITMENTSB. TARIFF COMMITMENTS
4040
Other issues on tariffs:Other issues on tariffs:
Very disperse Very disperse binding coveragebinding coverage across the membershipacross the membership
Very diverse Very diverse tariff concessionstariff concessions Residual protection in developed Residual protection in developed
country markets (“tariff peaks”)country markets (“tariff peaks”) Absolute high protection in Absolute high protection in
developing country markets (high developing country markets (high bindings and/or unbound items) i.e. bindings and/or unbound items) i.e. lots of “water”lots of “water”
4141
Where are the higher Where are the higher tariffs ?tariffs ?
Textiles and clothingTextiles and clothing
Leather, rubber, footwear and Leather, rubber, footwear and travel goodstravel goods
Transport equipmentTransport equipment
Fish and fish productsFish and fish products
4242
What is happening What is happening outside of the WTO?outside of the WTO?
4343
FTAs and Customs UnionsFTAs and Customs Unions
Several FTAs and Several FTAs and Custom Unions Custom Unions have been formed have been formed during the past during the past decadedecade
Additional FTAs are Additional FTAs are being negotiated being negotiated as we speakas we speak
Duty-free trade is Duty-free trade is increasingincreasing
Examples?Examples?
4444
V. THE NAMA V. THE NAMA NEGOTIATIONS: NEGOTIATIONS:
Main issues and current Main issues and current statusstatus
4545
Paragraph 16 of the Doha Min Paragraph 16 of the Doha Min Dec.Dec.
““116. 6. We agree to negotiations which We agree to negotiations which shall aim, shall aim, by modalities to be agreed,by modalities to be agreed, to reduce or as appropriate eliminate to reduce or as appropriate eliminate tariffs, including the reduction or tariffs, including the reduction or elimination of tariff peaks, high elimination of tariff peaks, high tariffs, and tariff escalation, as well tariffs, and tariff escalation, as well as non-tariff barriers, in particular on as non-tariff barriers, in particular on products of export interest to products of export interest to developing countries.” developing countries.”
““Product coverage shall be Product coverage shall be comprehensive and without a priori comprehensive and without a priori exclusions.”exclusions.”
4646
Tariff peaks and high tariffsTariff peaks and high tariffs
Working definitions Working definitions generally used by generally used by International Organizations:International Organizations:– National peaks:National peaks: 3 times 3 times
the national averagethe national average– International peaks:International peaks:
>15%>15%
BUT, THERE IS NO AGREED BUT, THERE IS NO AGREED WTO DEFINITION!WTO DEFINITION!
4747
0
5
10
15
20
25
30
35
40
45
Raw material Semi-manufactured Finished product
Tariff(%)
Tariff escalation: Tariff escalation: Example of textiles and clothingExample of textiles and clothing
4848
““ The negotiations shall take fully The negotiations shall take fully into account the into account the special needs special needs and interests of developing and and interests of developing and least-developed country least-developed country participantsparticipants, including through , including through less than full reciprocity in less than full reciprocity in reduction commitmentsreduction commitments, in , in accordance with the relevant accordance with the relevant provisions of Article XXVIII bis of provisions of Article XXVIII bis of GATT 1994 and the provisions GATT 1994 and the provisions cited in paragraph 50 below.” cited in paragraph 50 below.”
Paragraph 16 of DMD Paragraph 16 of DMD (cont.)(cont.)
4949
Sequence of main eventsSequence of main events
2001 2001 ->-> Doha Ministerial DeclarationDoha Ministerial DeclarationJuly 2002July 2002 -> -> Work programme is adopted Work programme is adopted
(deadline for modalities = 31 May 2003)(deadline for modalities = 31 May 2003)May 2003 May 2003 ->-> Chairman’s Draft Elements for Modalities Chairman’s Draft Elements for Modalities
(TN/MA/W/35 i.e. “Girard Text”)(TN/MA/W/35 i.e. “Girard Text”)
September 2003 September 2003 ->-> Ministerial fails to adopt a Ministerial fails to adopt a “framework” on NAMA (or anything else) at Cancún“framework” on NAMA (or anything else) at Cancún
July 2004 July 2004 ->-> “July Package” adopts a NAMA Framework “July Package” adopts a NAMA Framework with initial elements for modalities with initial elements for modalities ((WT/L/579)WT/L/579)
December 2005 December 2005 ->-> Hong Kong Ministerial refined Hong Kong Ministerial refined some elements and gave new instructions on otherssome elements and gave new instructions on others
2007 2007 ->-> Chairs’ draft modalitiesChairs’ draft modalitiesJuly 2008 July 2008 ->-> will there (finally) be modalities?will there (finally) be modalities?
What is next?What is next?
5050
1. What is the main 1. What is the main tariff cutting tariff cutting modality? modality?
5151
The Swiss Formula:The Swiss Formula:
Originally proposed by Originally proposed by Switzerland during the Tokyo Switzerland during the Tokyo RoundRound
Results in higher percentage Results in higher percentage cuts for relatively higher tariffscuts for relatively higher tariffs
Can only be applied on Can only be applied on ad valoremad valorem duties. duties.
An An ad valorem equivalentad valorem equivalent (AVE) (AVE) is required for NAV dutiesis required for NAV duties
The lower the “A” coefficient, The lower the “A” coefficient, the higher the cutthe higher the cut
0
01 tA
tAt
5252
Swiss Formula: Swiss Formula: Some Mathematical PropertiesSome Mathematical Properties
Cut high rates more than low rates. Cut high rates more than low rates. => reduce tariff peaks and tariff => reduce tariff peaks and tariff escalation escalation
The coefficient sets a “ceiling”. The coefficient sets a “ceiling”. => no final rate (T => no final rate (T11) above the ) above the coefficient (A)coefficient (A)
The levels The levels aboveabove the coefficient (A) are the coefficient (A) are cut by cut by moremore than 50% than 50%
The levels The levels belowbelow the coefficient (A) are the coefficient (A) are cut by cut by lessless than 50% than 50%
5353
Swiss Formula:Swiss Formula: Some examples Some examples
Duty level (t0) in ad
valorem form
Swiss-10 Swiss-20 Swiss-30
New duty (t1)
Perc. Reduct.
(%)
New duty (t1)
Perc. Reduct.
(%)
New duty (t1)
Perc. Reduct.
(%)
0 0.0 0.0 0.0 0.0 0.0 0.0
5 3.3 -33.3 4.0 -20.0 4.3 -14.3
10 5.0 -50.0 6.7 -33.3 7.5 -25.0
15 6.0 -60.0 8.6 -42.9 10.0 -33.3
20 6.7 -66.7 10.0 -50.0 12.0 -40.0
30 7.5 -75.0 12.0 -60.0 15.0 -50.0
50 8.3 -83.3 14.3 -71.4 18.8 -62.5
100 9.1 -90.9 16.7 -83.3 23.1 -76.9
5454
Swiss formula (cont.)Swiss formula (cont.)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 10 20 30 40 50 60 70 80
To = Base rate (ad valorem)
(%)
Red
ucti
on
Flat cut (50%)A=5A=10A=20A=100
5555
Example at the tariff line level: Example at the tariff line level: Swiss-5 and Swiss-10 in the USA Swiss-5 and Swiss-10 in the USA (selected tariff lines)(selected tariff lines)
Tariff Line
HS 6 digit Description Current Bound duty
Swiss - 5 Swiss - 10New
bound duty
% Bound
cut
New bound duty
% Bound
cut
1 2 3 4 5 6 7
03011000
Live ornamental fish
0.0 0.0 0.0 0.0 0.0
61099010
T-shirts, singlets and other vests of textile materials, knitted or crocheted, of man-made fibers
32.0 4.3 86.5 7.6 76.2
61099015
T-shirts, singlets and other vests of textile materials, knitted or crocheted, of man-made fibers
5.6 2.6 52.8 3.6 35.9
61151940
Panty hose and tights of textile materials, knitted or crocheted (excl. of synthetic fibres and hosiery for babies)
2.6 1.7 34.2 2.1 20.6
5656
What is the current status?What is the current status?
Ministers have agreed:Ministers have agreed:– A Swiss formulaA Swiss formula– Reduce or as appropriate eliminate tariffs, Reduce or as appropriate eliminate tariffs,
including the reduction or elimination of tariff including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in peaks, high tariffs and tariff escalation, in particular on products of interest to developing particular on products of interest to developing countriescountries
– Special & Differential Treatment, including through Special & Differential Treatment, including through less than full reciprocity in reduction commitmentsless than full reciprocity in reduction commitments
Comments by the Chairman: Comments by the Chairman: – There is no consensus on the coefficients, but the There is no consensus on the coefficients, but the
vast majority of Members have indicated they can vast majority of Members have indicated they can accept the structure of the “sliding scale” and can accept the structure of the “sliding scale” and can negotiate within these rangesnegotiate within these ranges
– How to measure How to measure “less than full reciprocity in “less than full reciprocity in reduction commitments”?reduction commitments”?
5757
2. What about the 2. What about the unbound tariff lines?unbound tariff lines?
5858
Binding coverage:Binding coverage: Overview of current situationOverview of current situation
* EC-27 members counted individually
Binding coverage
(%)
Number of
Members
Developing
LDCs
100% 83* 45 9
+95 < 100%
24 15 4
+35 < 95% 17 14 2
+5 < 35% 16 8 8
< 5% 13 4 9
Total 153 86 32Note: All Members bound 100% of their agricultural tariff lines in the UR
5959
Binding Coverage Binding Coverage Share of non-agricultural tariff lines boundShare of non-agricultural tariff lines bound
Source: WTO Secretariat.
(*) Binding coverage could be overestimated due to partial bindings. See TN/MA/S/14.
0
10
20
30
40
50
60
70
80
90
100
Can
ada
EC
-15
Jap
an
US
A
Ch
ina,
PR
Hon
g K
ong
(*)
Ind
ones
ia
Kor
ea
Mal
aysi
a (*
)
Ph
ilip
pin
es
Sin
gap
ore
Th
aila
nd
Arg
enti
na
Bra
zil
Ch
ile
Ind
ia
Mex
ico
Sou
th A
fric
a
(%)
6060
0
10
20
30
40
50
60
70
80
90
100
Gam
bia
Les
oth
o
Mal
awi
Moz
amb
iqu
e
Sie
rra
Leo
ne
Tan
zan
ia
Uga
nd
a
Zam
bia
Gh
ana
Ken
ya
Mau
riti
us
Nig
eria
Zim
bab
we
Bot
swan
a
Egy
pt
Nam
ibia
Sou
th A
fric
a
Sw
azila
nd
(%)
Binding Coverage Binding Coverage Share of non-agricultural tariff lines boundShare of non-agricultural tariff lines bound
6161
The Tariff Cutting ProcessThe Tariff Cutting Process
Bound ratesBound rates
Applied ratesApplied rates
Base rates (tBase rates (t00))
Swiss FormulaSwiss Formula
New Bound rates (tNew Bound rates (t11))
Unbound ratesUnbound rates
6262
What is the current status?What is the current status?
A single non-linear mark-up of A single non-linear mark-up of 25 points25 points
6363
3. Sectoral 3. Sectoral negotiationsnegotiations
6464
Examples of sectorals proposedExamples of sectorals proposed
ApparelApparel
Autos and partsAutos and parts
Bicycles and partsBicycles and parts
Chemicals Chemicals
Electronics/electrical Electronics/electrical equipmentequipment
FishFish
FootwearFootwear
Forest products Forest products
Gems & jewelleryGems & jewellery
Pharmaceuticals and Pharmaceuticals and medical devicesmedical devices
Raw materials Raw materials
Sports equipment Sports equipment
Hand ToolsHand Tools
6565
Participation is on a non-mandatory Participation is on a non-mandatory basis basis
Member-driven Member-driven Over and above the formulaOver and above the formula
– Turkish proposal on Textiles and Turkish proposal on Textiles and ClothingClothing
Is there a relationship with the Is there a relationship with the formula? formula?
Sectoral negotiationsSectoral negotiations
6666
4. “Flexibilities” summary4. “Flexibilities” summary
6767
GroupingGrouping FlexibilityFlexibility
LDCsLDCs 32 Members.32 Members. No commitments on formula No commitments on formula and sectorals, but expected to substantially and sectorals, but expected to substantially increase their level of bindings.increase their level of bindings.
““Paragraph Paragraph 6”6”
12 Members.12 Members. Defined as those DCs with less Defined as those DCs with less than 35% binding coveragethan 35% binding coverage
Small, Small, Vulnerable Vulnerable EconomiesEconomies
(SVEs)(SVEs)
Aprox. 32 Members.Aprox. 32 Members. Those with less than Those with less than 0.1% of NAMA trade (i.e. exports and 0.1% of NAMA trade (i.e. exports and imports). imports).
Recently Recently Acceded Acceded Members Members (RAMs)(RAMs)
Aprox 16 Members (and growing...). Aprox 16 Members (and growing...).
Only 4 RAMs would have to apply the Only 4 RAMs would have to apply the formula, because most of them would formula, because most of them would qualify as SVEs or would be fully exempted.qualify as SVEs or would be fully exempted.
Exempted Exempted from from reductionsreductions
6 Members.6 Members. Exempted from tariff cuts due to Exempted from tariff cuts due to extensive market access commitments and extensive market access commitments and very recent accessions: very recent accessions: Armenia, FYROM, Armenia, FYROM, Kyrgyz Rep., Moldova, Saudi Arabia and Viet Kyrgyz Rep., Moldova, Saudi Arabia and Viet Nam.Nam.
6868Flexibilities for developing Flexibilities for developing countries applying the formula countries applying the formula (Paragraph 7)(Paragraph 7)
Ministers have agreed:Ministers have agreed:– No less than 50% of formula cut for “X” [10] % of tariff lines, No less than 50% of formula cut for “X” [10] % of tariff lines,
with an import value cap of “X” [10] %, orwith an import value cap of “X” [10] %, or– No cut for “Y” [5] % tariff lines, with an import value cap of No cut for “Y” [5] % tariff lines, with an import value cap of
“Y”%“Y”%– Developing countries shall have longer to implement Developing countries shall have longer to implement
reductionsreductions Chairman’s text said:Chairman’s text said:
– Implementation period of 5 years for developed countries and Implementation period of 5 years for developed countries and 10 for developing countries10 for developing countries
– ““Sliding scale”:Sliding scale”: option for a lower coefficient in exchange of option for a lower coefficient in exchange of an increased number an increased number of tariff lines for of tariff lines for flexibilities: flexibilities:
““X” = [12 – 14%] of tariff lines, with [12 – 19%] import X” = [12 – 14%] of tariff lines, with [12 – 19%] import value cap; value cap;
““Y” = [10]% or [5]%; Y” = [10]% or [5]%; ““Z” = 0 flexibilitiesZ” = 0 flexibilities
6969
Formula flexibilities (Paragraph Formula flexibilities (Paragraph 7)7) Aprox. 32 developing MembersAprox. 32 developing Members Specific situationsSpecific situations::
South Africa / SACUSouth Africa / SACU VenezuelaVenezuela MERCOSUR – calculation of trade MERCOSUR – calculation of trade
volume for import value cap / volume for import value cap / reference periodreference period
““Anti-concentration” clauseAnti-concentration” clause Relationship between the formula Relationship between the formula
and sectorals agreements and sectorals agreements
7070
5. “Non-Reciprocal” 5. “Non-Reciprocal” Preference ErosionPreference Erosion
7171
Non-reciprocal preferencesNon-reciprocal preferences Ministers have agreed:Ministers have agreed:
– Preferences will be eroded by MFN liberalizationPreferences will be eroded by MFN liberalization– The scope of the problem should be determined The scope of the problem should be determined – Possible solutions to the problem should be identifiedPossible solutions to the problem should be identified
Chairman’s text said:Chairman’s text said:– Two principal preference-granting markets (EC and Two principal preference-granting markets (EC and
US) should be granted:US) should be granted: [5 years] [5 years] extended implementation period extended implementation period Of which [2 years] should be a “gOf which [2 years] should be a “grace period”race period”
– [40] TLs for the EC; [25] TLs for the USA[40] TLs for the EC; [25] TLs for the USA– Preference granting Members urged to increase their Preference granting Members urged to increase their
assistance through mechanisms IF and Aid-for-Trade assistance through mechanisms IF and Aid-for-Trade and to simplify rules of originand to simplify rules of origin
– ““Disproportionately affected” Members should be Disproportionately affected” Members should be granted market access after normal implementation granted market access after normal implementation period: period: [Pakistan and Sri Lanka][Pakistan and Sri Lanka]
7272
5. Non Tariff Barriers5. Non Tariff Barriers
7373
What is a Non-Tariff Barrier?What is a Non-Tariff Barrier?
There is no agreedThere is no agreed definitiondefinition Non-tariff barriers include, in Non-tariff barriers include, in
principle, all measures other than principle, all measures other than tariffs used to protect a domestic tariffs used to protect a domestic industry industry
They normally refer to “government They normally refer to “government imposed” or “government imposed” or “government sponsored” measuressponsored” measures..
7474
Many of the non-tariff measures imposed are based Many of the non-tariff measures imposed are based on a legitimate goal and on a legitimate goal and cancan be introduced in a be introduced in a WTO consistent manner. (i.e. measures to protect WTO consistent manner. (i.e. measures to protect the environment, SPS, TBT, national security, etc.)the environment, SPS, TBT, national security, etc.)
The Member needs to follow specific provisions to The Member needs to follow specific provisions to ensure WTO compatibility. ensure WTO compatibility.
Some measures are not compatible with the Some measures are not compatible with the multilateral trading rules nor based on a legitimate multilateral trading rules nor based on a legitimate goal (Protectionism!).goal (Protectionism!).
Existence of “grey areas”.Existence of “grey areas”.
What is a Non-Tariff Barrier?What is a Non-Tariff Barrier?
Legitimate goalProtectionism
7575
““Barriers” vs. “Measures”Barriers” vs. “Measures” New NTBs and variations of existing New NTBs and variations of existing
ones tend to develop over timeones tend to develop over time
What is a Non-Tariff What is a Non-Tariff Barrier?Barrier?
7676
How will the NTBs be How will the NTBs be “reduced” or “eliminated” “reduced” or “eliminated” in the DDA?in the DDA?
Some will be raised in other WTO bodiesSome will be raised in other WTO bodies Some will be raised in other Negotiating Some will be raised in other Negotiating
Groups (e.g. NG TF and NG Rules)Groups (e.g. NG TF and NG Rules) Some will be dealt in sectoral discussionsSome will be dealt in sectoral discussions Some will be discussed in the NGMA contextSome will be discussed in the NGMA context Some could be subject to disputeSome could be subject to dispute Proposed “horizontal mechanism”Proposed “horizontal mechanism”
7777
Non-tariff barriersNon-tariff barriers Ministers have agreed:Ministers have agreed:
– Members should make proposals to address Members should make proposals to address NTBsNTBs
Chairman’s text said:Chairman’s text said:– Text based negotiations should continue on Text based negotiations should continue on
some proposals after modalities are some proposals after modalities are establishedestablished
– List of proposals to be agreed by MinistersList of proposals to be agreed by Ministers– Aim is to finalize them as early as possible for Aim is to finalize them as early as possible for
their inclusion in any final package in NAMA their inclusion in any final package in NAMA
7878
Thank you!Thank you!