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WTOs Non-Agriculture Market Access Issues and Concerns for India

U.P. Academy of Administration & Management, Lucknow August 28th , 2012

Workshop on WTO

Yogesh Bandhu

What are NAMA products?


NAMA refers to all products not covered by the Agreement on Agriculture. In other words, in pr actice, it includes manufacturing products, fuels and mining products, fish and fish products, an d forestry products. They are sometimes referre d to as industrial products or manufactured goo ds. Why is NAMA so important? Over the past years, NAMA products have accounted for almost 90% of the world mercha ndise exports.

Why are there NAMA negotiations in the DDA?

Despite the significant improvements in market access for NAMA products that previous GATT r ounds and the Uruguay Round prod uced, tariffs continue to be an impor tant barrier to world trade, as tariff peaks, high tariffs, and tariff escalat ion 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 ta riff 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 develo ped countries.

Background (cont.)

Given the current extent of protectionism still prevalent in both developed and develo ping countries, there is still a great deal of r oom 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

Binding

Formula approach based on bound tariffs Unbound tariffs to be bound at twice the average rate in each country 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.

Sectoral Elimination

Special and Differential Treatment

Non-tariff Barriers

Longer implementation periods.

Credit for autonomous liberalization

Proposals to identify, categorize and select NTBs that fall within the NAMA negotiating mandate.

NAMA Negotiations

The objectives of NAMA negotiations include:


Reduction

Tariff peaks and high tariffs Tariff escalation Non-tariff barriers

or elimination of:

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


14 12 10 8 6 4 2 0 Developed Countries Developing Countries Least Developed Countries
3.4 3 13.5 12.5 12.4

Weighted Average Bound Rates Weighted Average Applied Rates

Source: UNCTAD and WTO database.

Figure: Simple Bound and Applied Average Industrial Tariffs


50 45 40 35 30 25 20 15 10 5 0
45.2

29.4

12.3 5.5

11.6

12.6

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 th e 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 countrie s even after the implementation of Uruguay Round co ncessions. Tariff peaks and a range of additional measures extend far beyond the initial processing stages in a la rge 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 proporti ons of clothing and textiles imports are su bject 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 devel oped 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 t he 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 tarif f rates but also tariff peaks on key sectors of export inter est 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 develo ping countries where they might more suitably be lo cated.

Figure: Tariff Escalation of Weighted Applied Tariff on Industrial Products


18 16 14 12 10 8 6 4 2 0
17.2

12.3
9.4

3.3 0.5

3.6

3.2 1.2

Developed Countries

Developing Countries

Least Developed Countries

Low
Source: UNCTAD database.

Intermediate

High

Non-Tariff Barriers

Non-tariff barriers are the set of trade distorting measures and policies other than tar iffs. 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 objecti ve is to ensure that the various non-tariff barri ers are reduced.

Non-Tariff Barriers (cont.)

The Doha Ministerial Conference rightly calls for removal of all the non-tariff barriers on industrial pr oducts 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 comple te 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