1. Workshop on WTO-Related Issues for Government Officials in the SAARC Region 2 May 2006 – New Delhi
Presentation by
MANAB MAJUMDAR
Team Leader – WTO, FTA and Foreign Trade Division
FEDERATION OF INDIAN CHAMBERS OF
COMMERCE AND INDUSTRY

2. DISCLAIMER
Strictly personal views – do NOT necessarily reflect those of FICCI

3. Non-Agricultural Market Access [ NAMA ]

4. Outline of Presentation
Part 1 : Introduction and Basics
Part 2 : From Doha to July Framework via Cancun
Part 3 : Run-up to Hong Kong and Outcome of Hong Kong Ministerial
Part 4 : Select Issues and Implications

5. Introduction and Basics
Part 1
Introduction and Basics

6. An Introduction Negotiations may be directed towards
Reduction of tariffs
Binding of tariffs
Reduction/abolition of NTBs
All member-countries did not participate in the first seven Rounds
Upto the Tokyo Round, main focus on lowering of tariffs – hence, limited progress made in the area of QRs and other NTBs
Uruguay Round marked most comprehensive negotiations, with full participation of all members

7. Techniques of Negotiations
How are negotiations conducted ?
Product-by-Product approach
Formula approach
Sectoral approach
Selective product-by-product approach until the Dillon Round ( )
More comprehensive reduction formulas used in subsequent Rounds
Post-Uruguay Round, two significant sectoral initiatives
Information Technology Agreement (ITA)
Pharmaceuticals

8. Formula Approach for Tariff Reduction
Two types of formulas
Tariff-independent reduction modalities T1 = c (T0)
Tariff-dependent reduction formulas
Non-linear T1 = (B* T0) / (B + T0)
“Swiss Formula” is a function of both T0 and coefficient B
Reduction amount R =
As B R for given T0
As T0 R for given B T0
B + T0

9. Linear Cut vis-à-vis Swiss Formula Cut

10. Tariff Reduction Formulae
B x T0
B + T0
Simple Swiss T1 =
Swiss Type T1= – ABI
Swiss Type T1=
– Caribbean Countries
For Simple Swiss formula, India would end up making more significant tariff cuts (compared to Swiss Type Formula)
B x Ta x T0
(B x Ta) + T0
(B + C) x Ta x T0
[(B + C) x Ta] + T0

11. NAMA – Still an Unfinished Business
Even after eight rounds of negotiations, unfinished business remains in NAMA
Tariffs still constitute an important source of distortions and economic costs
Continued bias in protection against developing country-exports through
Tariff peaks
Tariff escalation
To discipline incidence of tariff peaks and escalation critical for development dimension
Doha Ministerial put this issue on negotiating agenda

12. From Doha to July Framework via Cancun
Part 2
From Doha to July Framework via Cancun

13. Doha Mandate on NAMA
Doha Ministerial mandated negotiations on NAMA by modalities to be agreed
Negotiations shall aim to
Reduce or as appropriate eliminate tariffs
Reduction/elimination of tariff peaks, high tariffs and tariff escalation
Reduction/elimination of non-tariff barriers
…. in particular on products of export interest to developing countries
Product coverage to be comprehensive and without a priori exclusions

14. S & D Provisions in Doha Mandate
Negotiations shall take fully into account special needs and interests of developing and least-developed country participants
including through less than full reciprocity in reduction commitments
in accordance with relevant provisions of Article XXVIII bis of GATT 1994
as per paragraph 50 of the Doha Declaration

15. Doha Timeline for NAMA Start : January 2002
Decision on modalities was to be by 31 May 2003
Target was missed – new deadline set for Hong Kong Ministerial, December 2005
Even that had to be reset to 30 April 2006 – we missed it again
Negotiations to conclude by end-2006 as part of ‘Single Undertaking’

16. July Framework on NAMA
Framework contains initial elements for future work on modalities - additional negotiations required for agreement on specifics
Tariff reduction through a non-linear formula applied on a line-by-line basis
“Less than full reciprocity” for developing countries in tariff reduction commitments
Tariff reductions or elimination from “bound rates”
Flexibility for developing countries (paragraph 8)
Sectoral initiatives may complement the formula cuts
Guidelines provided for addressing NTBs

17. Hong Kong and Outcome of Hong Kong Ministerial
Part 3
Run-up to
Hong Kong and Outcome of Hong Kong Ministerial

18. In the Run-Up to Hong Kong-1
USA suggested a simple Swiss formula with two coefficients “within sight of each other”
USA offered higher coefficient for developing countries as an alternative to paragraph 8 flexibilities
USA also proposed sectoral negotiations based on a “critical mass”

19. In the Run-Up to Hong Kong-2
ABI suggested ‘Swiss Type’ formula based on national average bound duty
Caribbean countries tabled a development oriented tariff reduction formula with an additional parameter of “credits”
APEC endorsement (early June 2005) + Dalian Mini Ministerial (July 2005) growing support for Simple Swiss formula with dual coefficients
Pakistan proposal : compromise formula with two coefficients – 6 for developed and 30 for developing members

20. In the Run-Up to Hong Kong-3
EU proposal put forward the option of higher coefficient for developing countries through less use of paragraph 8 flexibilities
On 28 October 2005, EU sought cuts in applied duties of developed and more competitive developing countries
EU advocated simple Swiss formula with coefficient B=10 for developed members
For advanced developing countries, EU proposed same coefficient along with flexibilities – tariff cap of 15%

21. Why EU Proposal was Unacceptable?
B COEFFICIENT AT 10 IMPLIES
“MORE THAN FULL RECIPROCITY”

22. Outcome of Hong Kong
Reaffirmed commitment to Doha Mandate and elements of the July Framework
Adopted Swiss formula with (multiple ??) coefficients – ABI formula still on table
Provided for reduction/elimination of tariff peaks and tariff escalation
Retained “less than full reciprocity”
Paragraph 8 flexibilities reiterated upfront
Sectoral initiatives made non-mandatory
Resolve to set up modalities by 30 April MISSED

23. Select Issues and Implications
Part 4
Select Issues and Implications

24. Sectoral Approach
HKMC instructed for identifying “sectors” that could garner sufficient participation
Progress made and proposals submitted in a number of sectors
By and large sectoral discussions focused on :
product coverage
critical mass
final target rates
options for S&D
So far no clarity on “multilaterization” of sectorals’ outcome

25. Flexibility and S & D Treatment-1
HKMC reaffirmed importance of
S&D treatment
Less than full reciprocity
Paragraph-8 flexibilities
This was welcome – even though
operationalization of LTFR was not clarified
controversy regarding para-8 flexibilities and coefficients in tariff reduction formula still remains
Some progress attained on flexibilities for developing members with low binding coverage (Paragraph-6 countries)
Flexibilities for small, vulnerable econimies

26. Flexibility and S & D Treatment-2
LDCs are exempted from formula tariff reduction (Paragraph-9 countries)
DF-QF access for at least 97% of all products originating from LDCs by 2008, in developed and perhaps some developing members’ markets
As regards flexibilities for “other” developing members, no progress on deciding the elements of flexibilities e.g. longer implementation period, specific numbers for parameters in Paragraph- 8

27. Preference Erosion
HKMC instructed to intensify work on assessment of scope of the problem of ‘preference erosion’
Positions are extremely polarized – far from any consensus
Growing recognition that number of affected members and products are limited
Strong evidence of under-utilization of preferences
However, the issue poses a serious problem
To seek “solutions” within trade negotiation agenda may be counter-productive
Adjustment mechanism outside WTO perhaps a better approach

28. Conflicting Interests and Positions
Overall, negotiations are more difficult and tough than commonly perceived
Range of conflicting interests further complicates
Developed vs Developing
Developing vs Developing
Developing vs LDCs
LDC vs LDC

29. An Illustration of Conflict
Indian industry position on “sectoral approach to tariff reduction or elimination” is NOT uniform
Some sectors favour such an approach, while several others strongly oppose mandatory ‘zero-for-zero’ or sectorals

30. Zero-for-Zero : Broad Response from Indian Industry

31. Conflict Resolution and Convergence
Key to successful conclusion of negotiations :
CONFLICT RESOLUTION,
CONVERGENCE OF POSITIONS
By no means, easy task
WAY OUT: Regular consultations and accommodation of each other’s concerns and interests

32. Needed : a Problem-Solving Attitude and Approach How could you contribute ?

33. THANK YOU Your comments are most welcome
Please at :
THANK YOU