Export Impact For Good

Countries / Territories

  •     WTO: NAMA

    Draft NAMA Modalities

    The chair of the Non Agricultural Market Access (NAMA) negotiating group, Ambassador Don Stephenson, released the revised draft negotiating text (February 2008) to focus further discussions towards modalities. The new draft replaced the previously released July 2007 text. In the July 2007 (supplement 1-30) issue of the World Trade Net Business Briefing the earlier version of the draft Modalities on Agriculture was briefly reviewed. This paper provides a short brief of the major features of the new text in comparison to the previous text.

    Highlights of the July 2007 text

    Highlights of the February 2008 text

    A. The Formula

    It is an almost unanimous view among WTO members that a Swiss formula with two coefficients should be adopted for tariff reduction. The document proposes coefficients of between 8 and 9 for developed countries and 19 and 23 for developing countries, thus attempting to reduce the gap between the extreme position of 5 and 25 put forward during the course of negotiations.

    A. The Formula

    The chair reported in the new text that while most Members have accepted these ranges as a basis for further negotiations, there has been no convergence on this issue.

    The Chair's proposals would set developed countries' bound tariffs to below 3% on average and tariff peaks to below 10%. The tariffs of more than 90% of two largest developed members would be brought to below 5%, with less than 2% of their tariffs between 7% and 8.5%. For developing countries, the formula would bring bound tariffs to below 12% on average, with only few averages above 15%. "Relatively weaker developing economies" would have higher average tariffs and greater flexibility in how they structure their tariff schedules. They would nevertheless contribute to the outcome in terms of improved market access, with fewer tariffs remaining unbound and bound tariffs in place for the large majority of products.

    B. Flexibilities for Developing Members

    The text provided for allowing developing countries to subject 10 percent of tariff lines to reductions half as steep as those ordinarily required (so long as this does not cover more than a tenth of manufacturing import value). Alternately, they would be allowed to exclude 5 percent of tariff lines from reduction altogether (albeit limited to only 5 percent of total import value). These figures were in square brackets signifying the absence of agreement, but had stayed constant since the July 2004 framework agreement that revived the Doha Round after talks broke down in Cancun the year before.

    B. Flexibilities for Developing Members

    "10" and "5" numbers altogether were removed from the new text, leaving the brackets empty. Empty brackets indicate the negotiations are still wide open on this issue. The text lists various requests for additional flexibilities from different developing countries, both in terms of the number of products and the share of imports covered.

    Flexibilities include a proposal allowing members to elect not to exclude tariff lines from the full application of the formula in exchange for a higher coefficient, i.e. lower cuts, on all tariffs.

    The Chairman finds that the formula and flexibilities are inextricably linked: it is not surprising that governments would be more comfortable with taking on lower coefficients if assured that they would be able to exempt more products from the deeper tariff cuts that these coefficients would imply. Conversely, limiting flexibilities to protect products from tariff reduction would make them push for higher coefficients1. Countries seemed willing to trade the formula coefficients off against the flexibilities. Members are willing to accept a higher coefficient for countries that agree not to use their flexibilities; while other Members can accept a lower coefficient if the flexibilities were increased. Explanations in the new draft acknowledged that the formula and the flexibilities were not likely to be resolved until traded off against agriculture in the horizontal negotiating process.

    For developing members with few bound tariff lines, commonly agreed at 35% or less, the proposal is that 90% of tariff lines be bound in each member's schedule at the start of the implementation period and that by the end tariffs on these lines would average 28.5%.

    In general, the text remains the same: 35% as a benchmark for the application of flexibilities with a stipulation that the average level of bound tariffs will not exceed 28.5 per cent. The difference, however is that the number of tariff lines that should be bound are now mentioned in the square brackets (between 70% and 90%) compared to 90% agreed in the previous text.

    For Small, Vulnerable Economies (SVEs), flexibilities have not yet been agreed due to the lack of understanding on the level of their contribution to the Round. The text proposes a three tier system based on average boundtariffs, and including a minimum line-by-line tariff reduction with target tariff averages of 14, 18 and 22%, together with a minimum line-by-line reduction of 10% on 95% of tariff lines. Using this approach, SVEs would reduce their average tariffs in reasonable proportion to other developing countries but would be permitted greater flexibility in how to structure their tariff schedules.

    Similar to the July text the new draft proposes a three tier system for SVEs based on average bound tariffs with line-by-line tariff reduction. However the target tariff averages became more vague and (in square brackets) stands now at the levels of 22 -32, 18-28, 14-2 (compared to fixed 22, 18 and 14 % in July text) depending on the Members with a bound tariff average with a minimum line-by-line reduction of of 5-10 percent on 90-95 percent of all non-agricultural tariff lines.

    The text also proposes flexibilities for Recently Acceded Members (RAMs). More specifically, Albania, Armenia, Former Yugoslav Republic of Macedonia, Kyrgyz Republic, Moldova, Saudi Arabia, Tonga and Vietnam would be excused from further market access commitments, in view of their very recent accession and the depth of their commitments in their accession agreements

    RAMs, including transition economies, with less than 0.1% of world non-agricultural goods trade market share, would have access to the flexibilities accorded to SVEs, with no extended implementation period since this flexibility is thought to be sufficient.

    As for the four recently acceded Members of the WTO that will have to subject their tariffs to the reduction formula , the text provides for an implementation period two to five years longer than the eight pencilled in for all developing countries and also a grace period of 2-3 years which shall begin as of the date of full implementation of the accession commitments on that tariff line.

    Developing countries RAMs would have access to the flexibilities that normally apply, with an extended implementation period of 2 years.

    There is still no agreement on non-Reciprocal Preferences. Members agree that the underlying problem of preference-receiving countries is their heavy dependence on a limited number of export products and their limited supply-side capacity. Thus they agree that development assistance must play an important role in addressing this and that the impact of such assistance will likely be in the medium or long term.

    On non-reciprocal preferences, a proposal has been made to give additional time for adjustment by increasing the implementation period of tariff reductions by two years by the concerned developed countries. This means that on some types of textiles and clothing the US and the EU would be able to take two extra years to phase in tariff cuts (making for a total of six instead of four, based on the bracketed figures), in order to ease the effects of multilateral tariff liberalisation on countries to which they have long granted unilateral trade preferences.

    Non Tariff Barriers

    Progress has been made in the identification, examination and categorization of NTBs. Discussions have focused on defining the nature of the barriers, the scope of products affected and potential solutions. Negotiating proposals, including some legal texts and bilateral requests, have been submitted on a number of measures. It is agreed that a decision will be taken, at the time modalities are established on which of these horizontal and vertical proposals will proceed to final, text based negotiation. This decision will establish a presumption of an outcome in respect of each proposal without prejudging the exact nature of that outcome.