1. 1 The State of Play in NAMA

2. 2 Basic framework for negotiating tariff concessions Defining the rules of the game GATT Article XXVIII bis Tariff reduction: which option? Request/Offer? Sectoral? Formula? If so, which one? New bindings: how many? at what level? Implementation period S&D / Flexibility provisions Members prepare and submit offers Multilateral verification Final Schedules of concessions Modalities Post- modalities

3. 3 Previous Rounds RoundDevelopedDeveloping GATT ~ Dillon (1947 ~ 1961) request / offer Kennedy Round (1964-1967) Linear cut formula (50% cut), with exceptions. request/offer Tokyo Round (1973-1979) “Swiss formula” w/ coef. of 14 and 16 was used, with exceptions request/offer Uruguay Round (1986-1994) Targeted simple average reduction (33.3% AVG), plus some sectoral agreements (zero for zero and harmonization) request/offer ceiling bindings

4. 4 GATT/WTO – 60 years of tariff reductions (Estimated MFN tariff reduction of industrial countries for industrial products (excl. petroleum)) Implem. Period Round CoveredWeighted tariff reduction Weights based on MFN imports (year) 1948Geneva (1947)-261939 1959Annecy (1949)-31947 1952Torquay (1959-51)-41949 1956-58Geneva (1955-56)-31954 1962-64Dillon Round (1961-62)-41960 1968-72Kennedy Round (1964-67)-381964 1980-87Tokyo Round (1973-79)-331977 (or 1976) 1995-99Uruguay Round (1986-94)-381988 (or 1989) Source: WTO World Trade Report 2007, Table 5, p. 207 Note: Tariff reductions for the first five rounds refer to the United States only. The calculation of average rates of reductions are weighted by MFN import values.

5. 5 DDA (NAMA): Sequence of main events 2001 -> 2001 -> Doha Ministerial Declaration (Paragraph 16) July 2002 -> July 2002 -> Work program is adopted (deadline for modalities = 31 May 2003) May 2003 -> May 2003 -> Chairman’s Draft Elements for Modalities (TN/MA/W/35 i.e. “Girard Text”) September 2003 -> September 2003 -> Cancun Ministerial fails to adopt a “framework” on NAMA (JOB(03)152/Rev.2) July 2004 -> July 2004 -> “July Package” adopts the NAMA Framework with initial elements (Annex B of WT/L/579) December 2005 -> December 2005 -> Hong Kong Ministerial clarified add. elements 2007 2007 First draft modalities (JOB(07)/126) 2008 2008 Third revision of draft modalities (TN/MA/W/103/Rev.2) July Mini-ministerial (JOB(08)/96) Fourth revision of draft modalities (TN/MA/W/103/Rev.3)

6. 6 The formula Ministers had previously agreed: A Swiss formula Reduce or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in particular on products of interest to developing countries Special & Differential Treatment, including through less than full reciprocity in reduction commitments Fourth revision (TN/MA/W/103/Rev.3) said: Simple Swiss formula with four coefficients Coefficient for developed countries: 8 Coefficient for developing countries: “sliding scale” with 3 options: “X” = 20, “Y” = 22, “Z” = 25 depending on flexibilities chosen

7. 7 Formula 5.The following formula shall apply on a line-by-line basis: {a or (x or y or z)} x t0 t1 =_____________________________ {a or (x or y or z)} + t0 where, t1 = Final bound rate of duty t0 = Base rate of duty a = 8 = Coefficient for developed Members x = 20, y = 22, z = 25 to be determined as provided in paragraph 7 =Coefficients for developing Members.

8. 8 The mark-up for unbound tariffs Ministers have agreed: A non-linear mark-up to establish the base rate for commencing tariff reductions i.e. 2001 MFN applied rate + mark-up = base rate Then apply Swiss formula on that base rate Fourth revision said: A mark-up of 25 percentage points

9. 9 Setting the base rate Bound rates 2001 MFN applied Base rates Formula New Bound rates Unbound rates Mark-up (+25 pts)

10. 10 Formula flexibilities (Paragraph 7) Ministers had previously agreed : Developing countries shall have longer time to implement reductions Half-formula cuts for [10] % of tariff lines, with an import value cap of [10] %, or No-cuts for [5] % tariff lines, with an import value cap of [5] % Fourth revision said: Implementation period of 5 years (6 equal cuts) for developed countries and 10 years (11 equal cuts) for developing countries “Sliding scale”: Set of 3 options for an increased number of tariff lines for flexibilities in exchange of a lower coefficient: Swiss-20 = 14% lines with half-cut and 16% import cap; or 6.5% lines with no-cut and 7.5% import cap Swiss-22 = 10% lines with half-cut and 10% import cap; or 5% lines with no-cut and 5% import cap Swiss-25 = no flexibilities “Anti-concentration”: Formula needs to be applied on a minimum of 20% of lines or 9% of value in each HS Chapter Specific situations: Mercosur, Oman, South Africa (SACU), [Argentina?], [Venezuela?]

11. 11 Formula flexibilities (Paragraph 7) (a)Coefficient x in the formula and either: (i)less than formula cuts for up to 14 percent of non- agricultural national tariff lines provided that the cuts are no less than half the formula cuts and that these tariff lines do not exceed 16 percent of the total value of a Member's non-agricultural imports; or (ii)keeping, as an exception, tariff lines unbound, or not applying formula cuts for up to 6.5 percent of non-agricultural national tariff lines provided they do not exceed 7.5 percent of the total value of a Member's non-agricultural imports[1].[1] [1] It is understood that the options in sub-paragraph 7(a)(ii) (keeping tariff lines unbound or not applying formula cuts) may be combined but cannot together exceed the applicable percent of tariff lines and total value of a Member’s non ‑ agricultural imports. [1]

12. 12 Formula flexibilities (Paragraph 7) (b)Coefficient y in the formula and either: (i)less than formula cuts for up to 10 percent of non- agricultural national tariff lines provided that the cuts are no less than half the formula cuts and that these tariff lines do not exceed 10 percent of the total value of a Member's non- agricultural imports; or (ii)keeping, as an exception, tariff lines unbound, or not applying formula cuts for up to 5 percent of non-agricultural national tariff lines provided they do not exceed 5 percent of the total value of a Member's non-agricultural imports[1].[1] [1] It is understood that the options in sub-paragraph 7(b)(ii) (keeping tariff lines unbound or not applying formula cuts) may be combined but cannot together exceed the applicable percent of tariff lines and total value of a Member’s non ‑ agricultural imports. [1]

13. 13 Formula flexibilities (Paragraph 7) (c) Coefficient z in the formula without recourse to flexibilities. (d)The flexibilities provided under paragraph 7 shall not be used to exclude entire HS Chapters. In order to ensure tariff reduction in every Chapter, without substantially limiting the flexibilities provided to developing Members, this provision shall be understood to mean that full formula tariff reductions shall apply to a minimum of either 20 percent of national tariff lines or 9 percent of the value of imports of the Member in each HS Chapter. (e)As an exception, Botswana, Lesotho, Namibia, South Africa and Swaziland shall include a common list of flexibilities in their schedules and shall have recourse to [.........].[1][1] [1] The attention of Members is called to the loss of tariff revenue by Lesotho, Botswana, Namibia and Swaziland resulting from these tariff reductions, and in particular the LDC status of Lesotho. This loss of revenue may warrant a priority for targeted Aid-for-Trade assistance. [1]

14. 14 Formula flexibilities (Paragraph 7) (f)As an exception, Argentina, Brazil, Paraguay and Uruguay shall include a common list of flexibilities in their schedules and each shall calculate the percentage for the value of trade limitation in paragraph 7 using the total value of Brazil’s non ‑ agricultural imports. (g) As an exception, Oman shall not be required to reduce any bound tariff below 5 per cent after applying modalities under paragraph 7(b)(i). Flexibilities shall be used exclusively to cover tariff lines currently bound at 5 or 5.5 per cent. Oman shall implement its tariff reductions in accordance with paragraph 6(f). [(h) Argentina] [(i) Venezuela].

15. 15 Formula flexibilities (Paragraph 7) Further work required: (2) Consultations with Argentina, South Africa and Venezuela will have to be pursued next week. I would observe that the discussions on South Africa are rather advanced.

16. 16 Members with low binding coverage Ministers had previously agreed: Special flexibilities for countries with less than 35% binding coverage Fourth revision said: 12 developing countries qualify A “tiered approach” based on existing binding coverage for non-agricultural products: BandCurrent binding coverage Share of lines to bind At an average of 8(a)(ii)Higher than 15%80%30% 8(a)(i)At or below 15%75%30%

17. 17 Small, Vulnerable Economies (SVEs) Ministers had previously agreed: Special consideration shall be given to SVEs Fourth revision said: Eligibility is less than 0.1% of world NAMA trade SVEs would not apply the formula, but rather reduce to a target average - 4 bands according to AVG of bound: Special cases: Bolivia, Fiji, Gabon BandIf AVG of bound:Reduce to a new AVG of: 13 (a) (i) At or above 50%30% 13 (a) (ii) +30 – 50%27% 13 (a) (iii) +20 – 30%18% 13 (a) (iv) -20% Min. line-by-line reduction of 5% on 95% of lines, or equivalent

18. 18 Recently Acceded Members (RAMs) Ministers had previously agreed : Special provisions for tariff reductions shall be provided in view of heavy accession commitments Fourth revision said: List of 11 Members (Low Income Economies in Transition; Very Recently Acceded Members) that shall make no tariff reductions RAMs with less than 0.1% of world NAMA trade shall have access to SVE treatment RAMs applying the formula shall have 3 years extended implementation period

19. 19 Least Developed Country Issues Ministers had previously agreed: LDCs not required to cut tariffs, but expected to increase binding coverage DFQF market access on 97% of tariff lines by the start of the implementation period; remaining 3% within no specified time (“Annex F”) Rules of origin should be made simpler, transparent and trade facilitating Fourth revision said: Transparency on products that will be covered by DFQF on a date to be determined “prior to the date of the Special Session of the Ministerial Conference to be held to take decisions regarding the adoption and implementation of the results of the negotiations in all areas of the DDA” Developed Members shall... “p rovide meaningfully enhanced market access for all LDCs.” Monitoring mechanism in the CTD to track future steps to fully implement the Decision. Details remain to be negotiated by the NGMA Technical assistance and capacity building support should be provided through EIF and Aid for Trade.

20. 20 Non-reciprocal preferences Ministers had previously agreed : Preferences will be eroded by MFN liberalization The scope of the problem should be determined Possible solutions to the problem should be identified Fourth revision said: Two principal preference-granting markets (EC and US) granted: 5 years extended implementation period (i.e. 10 years) Of which 2 years should be a “grace period” (i.e. no cut) 57 TLs for the EC; 29 TLs for the USA Preference granting Members urged to increase their assistance through EIF and A4T; simplify ROs “Disproportionately affected” Members should be granted normal implementation period, through a waiver, on a sub-set of lines: In the EC: Pakistan and Sri Lanka. In the USA: Bangladesh, Cambodia, Nepal, Pakistan and Sri Lanka

21. 21 Non-reciprocal preferences ANNEX C, Chair’s report to the TNC Annex 2: 57 tariff lines listed correspond to the tariff structure notified by the EC to the IDB for the year 2005, which is in the HS2002 nomenclature. The product descriptions are indicative only. Annex 3: 29 tariff lines correspond to the tariff structure notified by the US to the IDB for the year 2005, which is in the HS2002 nomenclature. The product descriptions are indicative only. In addition: Bangladesh adds 5 TLs to the US list Cambodia adds 5 TLs to the US list Nepal adds 5 TLs to the US list Pakistan adds 5 TLs to the EC list and 5 TLs to the US list Sri Lanka adds 5TLs to the EC list and 5 TLs to the US list All these additional TLs mentioned above correspond to the tariff structure notified by the EC and the US to the IDB for the year 2005, which is in the HS2002 nomenclature. The product descriptions are indicative only.

22. 22 What is the issue? Example: Cotton trousers in the US Market MFN Suppliers (e.g. Ban., Chn., etc.) Preferential Suppliers (e.g. AGOA, CBI, etc.) 16.6 % 0%0% 5.4 %

23. 23 Non-Tariff Barriers (NTBs) Ministers had previously agreed : Members should make proposals to address NTBs Fourth revision said: Text based negotiations should continue on proposals after modalities are established. Seven of them “merit particular attention” Aim is to finalize discussions on proposals as early as possible for their inclusion in any final package in NAMA Members should pay attention to any systemic or cross-cutting issues, including those relating to the TBT Agreement, that may arise from these proposals Negotiations on bilateral requests should proceed in tandem. Need to multilateralize the outcomes through inter alia incorporating them where appropriate into Part III of the schedules

24. 24 Sectoral negotiations Ministers had previously agreed : Sectorals are another key element of the negotiations Participation should be on a non-mandatory basis Fourth revision said: Participation in sectorals remains on a non-mandatory basis, but there will be an annex with Members who have “agreed to participate... in negotiating the terms of sectoral tariff initiatives, with a view to making them viable” But this participation “shall not prejudge a Member's decision to participate in that sectoral initiative” New proposals on sectors/subsectors may be submitted S&D to be defined sector by sector Chair said ( JOB(08)/133 ): “a very big hurdle to jump” “clever drafting which will do the trick and forge the consensus”

25. 25 Sectoral negotiations (cont’d) Key questions: Scope of product coverage. Implementation period for tariff reduction or elimination. S & D for developing country Members, including: -“zero for x” tariff reductions; -Longer implementation periods; -Partial product coverage or participation in sub-sectors; -Etc.

26. 26 Sectoral negotiations (cont’d) Further work required: (1) Sectorals (paragraphs 9 to 12): Even though the included text is accepted as a basis for further work, we are far from a consensus among Members. The main open questions in sectorals are: An indication by some Members that their ability to finalize NAMA modalities depends on a commitment by those Members who took part in the negotiations on formula and flexibilities in July to negotiate an agreed list of sectors and to participate in the agreements that result from those negotiations. In this context, the language referring to a single undertaking in paragraph 9 meets resistance from the non-proponents. How and when to define the commitment of Members to participate in sectorals without altering the non-mandatory character of these negotiations? Annex 7: option 1 is the preferred option of the proponents, and option 2 the preferred one of the non-proponents.

27. 27 Future work on NAMA The future of the NAMA negotiations – and the Doha Development Agenda more generally – lies in the hands of the Members..