Financial Daily from THE HINDU group of publications
Tuesday, Aug 23, 2005
Will Hong Kong deliver on NAMA?
Anil K. Kanungo
Negotiations on NAMA, chiefly on tariff reductions, are underway at the WTO. The objective is to finalise the modalities for tariff reductions early so as to realise gains accruing from the non-farm sector.
The stakes are high and both the developed and developing countries regard the approaching summit with a mixture of aggression and caution. At various meetings of negotiating groups on NAMA since the July Framework of 2004, different sets of tariff reductions such as undertaking obligations by developing countries for nearly 100 per cent binding coverage and drastic reduction of their industrial tariffs are being pushed aggressively by developed countries as a part of the modalities. This is putting pressure on the developing nations to lower their industrial tariffs.
A majority of the proposals brought forward at the WTO negotiations to settle the modalities of tariff reductions, so far, satisfy the needs and interests of the developed countries.
Formulae tabled till now are those that apply on a tariff-by-tariff (line-by-line) basis, sector-by-sector, zero-for-zero and the Swiss formula, with different coefficients.
The Swiss formula, vigorously pushed by the United States and the European Union would result in steeper reduction of tariffs with the objective of harmonising the tariffs of all WTO member countries.
According to developing nations, harmonising tariffs through this linear, or pure Swiss, formula will fail to bring parity in tariff levels on different products across the countries.
They further argue that when the Doha Development Agenda (DDA) has detailed the imperatives (reduction or elimination of tariff peaks, high tariffs and tariff escalation as well as non-tariff barriers in particular on products of export interest to developing countries, special and differential treatment to developing countries and showing less than full reciprocity in reduction commitments) that need to be consulted in NAMA, and which had found some kind of a tacit understanding with the developed countries, it is important to abide by such a stance in the run-up to the Hong Kong Ministerial.
Keeping the DDA in view, the proposal jointly initiated by Argentina, Brazil and India (ABI) in April to arrive at a tariff reduction formula in the ongoing NAMA negotiations highlighted the concerns of developing countries.
Provisions such as `less than full reciprocity in reduction commitments' and `special and differential treatment' for developing countries already endorsed in the July Framework are the guiding principles of this proposal.
This initiative has come at a time when the need for clarity on potential gains from NAMA assumes significance.
The issues that require immediate attention are increased market access for developing countries and the challenges they will face in adjusting to faster and greater trade liberalisation.
To this effect, the July Framework's Annexe-B dealing with NAMA specifies that "developing country members shall have longer implementation periods for tariff reductions" as well as flexibilities in tariff cuts and in keeping a share of tariff lines unbound.
But the developed countries' persuasion to accept a simple Swiss formulais fraught with dangers, feel the developing countries.
Developed countries, on the other hand, claim a small differential would be adequate to address the principles of `less than full reciprocity' and `special and differential treatment' for developing countries.
However, developing countries argue that harmonisation of tariffs is not an objective of the Doha Round nor will it deliver the development objective of the Round.
Besides, it has not been envisaged as part of the mandate and was not included in the July Framework as one of the necessary features of the formula. Therefore, the developing countries insist that a new modified formula may endorse the principles of `less than full reciprocity' and `special and differential treatment' for themselves as well as ensure the reduction and elimination of Non-Tariff Barriers.
They also stress that the developed countries, while trying to negotiate in the days ahead the reduction of tariffs, must essentially bring down the tariffs on the products of export interest to developing countries.
What happens at the Hong Kong Ministerial is difficult to say. However, tariff negotiations should be futuristic and not based on past or current losses and gains. Only then will such an exercise be mutually beneficial.
(The author is with Indian Institute of Foreign Trade. The views are personal.)
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