11

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!