non agriculture market access issues and concerns for india
DESCRIPTION
A key element of the Doha Round of trade negotiations is the liberalisation of trade in industrial products, commonly known as non-agricultural market access (NAMA). Negotiations under NAMA focus on market access for all products that are not covered under the negotiations on agriculture or services and aim to reduce, if not possible to completely eliminate, tariff and non-tariff barriers (NTBs) that restrict trade in these products. The framework adopted for modalities for negotiations under NAMA, known as the ‘July Package’, envisages reduction of industrial tariffs in both developed and developing countries, according to a formula that is yet to be agreed. These negotiations are important for developing countries, as these will determine the market access opportunities available to developing countries through which they can improve their growth prospects.As per the WTO text on NAMA of December 6, 2008, the developing countries have been asked to undertake tariff reductions of 60 - 70 per cent while the developed countries are offering a reduction of only 20 - 30 per cent based on Swiss formula for tariff reduction which gives a coefficient of 8 for developed countries and 22 on an average for developing countries. The insistence on developing countries to cut their bound tariffs in NAMA or agriculture until they go below the applied levels along with the continuation of US practice of having a bound level that is twice its actual spending on agricultural domestic subsidies has been objected by India and China.India desires that the modalities for tariff cuts should reflect the mandate of less than full reciprocity in reduction commitments and comparability in ambition between NAMA and Agriculture.Also, there is a pressure for compulsory participation by select developing countries (including India, China and Brazil) in voluntary sectoral approach (in which tariffs in whole sectors have to be eliminated or brought to very low levels). In particular, the developed countries are pressurising India, China and Brazil to take part in “sectoral initiatives” to open their markets in auto, chemicals, and electrical/electronic sectors. The developed countries are also trying to link these sectoral initiatives with the flexibilities in average bound tariff reduction, but India, among others, has not accepted this and negotiations are still continuing.So far as the tariff reduction is concerned, it may be mentioned that the Swiss formula should not be used for making commitments on tariff reduction as it involves the use of an arbitrary coefficient, a, which can be manipulated by member countries. Even, the simple average formula has its own limitations. For instance, it overlooks the values that are either very high or very low and thus cannot solve the problem of tariff peaks.The simplest way is to reduce the bound levels of developed countries to 5 or 10 per cent for all tariff lines as their industries have already developed. Otherwise, the developed countries can be asked to bring their bound tariff rates to 5 to 8 per cent for those tariff lines that cover at least 98 per cent of the potential exports, and not the actual exports as that may be lower because of existing high import tariff or domestic support in importing country, of developing countries to developed countries. This potential of exports for developing countries can be calculated through revealed comparative advantage or by matching the developing countries exports and developed countries imports at different commodity classification levels.TRANSCRIPT
WTO’s Non-Agriculture Market AccessIssues and Concerns for India
Yogesh Bandhu
Workshop on WTOU.P. Academy of Administration & Management, Lucknow
August 28th , 2012
What are NAMA products? NAMA refers to all products not covered by the
Agreement on Agriculture. In other words, in practice, it includes manufacturing products, fuels and mining products, fish and fish products, and forestry products. They are sometimes referred to as industrial products or manufactured goods.
Why is NAMA so important? Over the past years, NAMA products have
accounted for almost 90% of the world merchandise exports.
Why are there NAMA negotiations in the DDA?
Despite the significant improvements in market access for NAMA products that previous GATT rounds and the Uruguay Round produced, tariffs continue to be an important barrier to world trade, as tariff peaks, high tariffs, and tariff escalation remain.
Why has a formula approach been agreed to in the NAMA negotiations?
Following intensive discussions, participants recognized the advantages of the formula approach. A formula approach provides transparency (every Member will know how the other will reduce its tariffs); efficiency (simpler process than request/offer approach), equity (tariff reduction depends on rules rather then “bargaining power”); predictability (easy to foresee the results of the negotiations).
Background
Reduction in tariffs and non-tariff barriers on industrial goods was at the core of multilateral trade negotiations under the GATT.
Over the past decades, multilateral trade negotiations have achieved significant reductions in tariffs. The process of liberalization has led to: A substantial reduction in overall tariff barriers A commitment to keep tariffs below a given level
(binding tariff lines) Greater transparency of trade impediments
through conversion of quantitative restriction to tariff barriers.
A legal framework to minimize the use of policies and measures to unfairly distort trade, and
A set of measures and safeguards to provide flexibility to developing countries and least developed countries.
Background (cont.)
Given the current extent of protectionism still prevalent in both developed and developing countries, there is still a great deal of room for further trade liberalization.
Therefore, the issue continues to remain central to the negotiations agreed in Doha.
Most countries support this mandate, though many LDCs are concerned about Loss of government revenue Potential weakening of their competitiveness Expected erosion of preferential access margins.
Background (cont.)
From Doha to the “July Package” Modalities
Formula approach based on bound tariffs Binding
Unbound tariffs to be bound at twice the average rate in each country
Sectoral Elimination Complete elimination of tariffs in seven sectors
Electronics and electrical goods; fish and fish products; footwear; leather goods; motor vehicle parts and components; stones, gems and precious metals.
Special and Differential Treatment Longer implementation periods.
Non-tariff Barriers Proposals to identify, categorize and select NTBs that
fall within the NAMA negotiating mandate. Credit for autonomous liberalization
NAMA Negotiations
The objectives of NAMA negotiations include: Reduction or elimination of:
Tariff peaks and high tariffs Tariff escalation Non-tariff barriers
Increased market access on products of export interest for developing countries.
Major Issues of NAMA
Tariff Peaks Tariff Escalation Non-Tariff Barriers Binding Coverage
Figure: Trade Weighted Bound and Applied Average Industrial Tariffs
3.4 3
12.5
8
12.413.5
0
2
4
6
8
10
12
14
Developed Countries Developing Countries Least DevelopedCountries
Weighted Average Bound RatesWeighted Average Applied Rates
Source: UNCTAD and WTO database.
Figure: Simple Bound and Applied Average Industrial Tariffs
12.3
5.5
29.4
11.6
45.2
12.6
05
101520253035404550
Developed Countries Developing Countries Least Developed Countries
Simple Average Bound Rate Simple Average Applied Rate
Source: UNCTAD and WTO database.
Tariff Peaks
Tariff peaks are high tariffs usually defined as tariffs that are three times the national weighted average.
The Problem of tariff peaks occurs largely in the following sectors Food industry Textiles and clothing Footwear, leather and travel goods Automotive sector and a few other
transport and high technology goods.
Tariff Peaks (cont.)
Food Industry The food industry is a major area where
tariff peaks are widespread and high in major developed countries even after the implementation of Uruguay Round concessions.
Tariff peaks and a range of additional measures extend far beyond the initial processing stages in a large variety of industries. The EUs food industry accounts for 30% of all
tariff peaks ranging (with some exceptions) from 12% to 100%.
In the US, the food industry accounts for one-sixth of all tariff peaks and these also fall mainly into 12%-100% range.
Tariff Peaks (cont.)
Textiles and Clothing In the major textile importing
countries like the US, EU and Canada, large proportions of clothing and textiles imports are subject to high tariffs.
Most tariff peaks are in 12-32% range.
These high tariffs are also combined with quantitative restrictions.
Tariff Peaks (cont.)
Footwear, Leather, and Travel Goods.
Footwear of various types is still protected by high tariffs in most developed countries.
Post Uruguay Round MFN rates are close to 160% in Japan, 37.5-58% in the US and 18% in Canada.
MFN duties remain relevant, as General System of Preferences (GSP) benefits are limited in this sector.
Tariff Peaks (cont.)
Automotive, Transport and Electronics With the exception of Japan and the
Republic of South Korea, level of protection for one or the other branch of the transport industry is rather high.
In the developed countries, MFN tariff protection is more selectively applied in the automotive and transport sector.
In addition, various developed countries apply high tariffs on TV receivers, TV picture tubes and some other high technology products.
It is important for developing countries to ensure that a tariff reduction approach addresses not only average tariff rates but also tariff peaks on key sectors of export interest to them.
Figure: Distribution of Tariff Peaks in Applied Tariff Rates
7%
28%
65%
Developed Developing Least Developed
Source: UNCTAD and WTO database.
Tariff Escalation
Tariff escalation occurs when tariff levels increase with the degree of processing
Tariff escalation is clearly observed in all groups of countries as tariffs are higher for intermediate and final products
Among developing countries there is an escalation between raw materials/low technology products and intermediate technology goods, tariff rates diminish between intermediate goods and final products.
Tariff escalation in developed countries may prevent the development of value-added industries in developing countries where they might more suitably be located.
Figure: Tariff Escalation of Weighted Applied Tariff on Industrial Products
0.5
3.3 3.6 3.2
9.48
1.2
17.2
12.3
02
4
6
8
1012
14
16
18
Developed Countries Developing Countries Least Developed Countries
Low Intermediate High
Source: UNCTAD database.
Non-Tariff Barriers
Non-tariff barriers are the set of trade distorting measures and policies other than tariffs. These include: Quantitative restrictions Administrative procedures and unpublished
government regulations and policies Market structure and Political, social, and cultural institutions
There are committees in WTO on technical barriers to trade, sanitary and phyto-sanitary measures and trade facilitation, whose objective is to ensure that the various non-tariff barriers are reduced.
Non-Tariff Barriers (cont.)
The Doha Ministerial Conference rightly calls for removal of all the non-tariff barriers on industrial products as they are least transparent and have major distortionary impact.
Important non-tariff barriers on the export interest to developing countries are: Use of licensing procedures particularly
automatic licensing procedures Technical regulations applicable to such products
as electric machinery, chemicals, and pharmaceutical products
Contingency protection measures such as safeguards and anti-dumping countervailing measures, and
Quantitative restrictions on imports particularly those which apply to Textiles and Clothing sector.
Binding Coverage
Bound tariff lines are lines on which there is a commitment not to increase tariffs above a specified level.
Tariff bindings make trade more predictable The binding coverage (% of tariff lines that are
bound) among developed countries is almost complete
However it is much lower in developing countries, and for some LDCS it is as low as 10%.
Proposals within multilateral trade negotiations have called for increased binding coverage, especially among developing and least developed members.
LDCs are concerned that increasing binding coverage can lead to less flexibility and higher level of obligations in future rounds of tariff reductions.
Guidelines for NAMA Negotiations
Tariff reduction modalities in NAMA negotiations should at least have the following features: Effectiveness Equity Flexibility Simplicity Transparency