WTO NAMA NEGOTIATIONS: ILLUSTRATION ON SELECTED ISSUES

Saad Belghazi,Economist, consultant

Beirut, November, 11, 2009

Email: belghazi@mtds.com

1

PLAN1. Building on Uruguay Round results2. NAMA negotiations process: present situation

Negotiation Agenda Formula

3. Some comments from the Arab countries and Morocco point of view

2

I – BUILDING ON URUGUAY ROUND RESULTS

3

REMINDING THE GATT AIMS AND MECHANISMS Aims

raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand,

expanding the production of and trade in goods and services,

allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development

Mechanisms Trade as a way to enhance domestic competition,

improve commodities supply and reduce monopoly inefficiencies

Non discriminatory market access 4

RESULTS OF THE URUGUAY ROUND 1/2 The countries commitments

Elimination of Non Tariff Protection (alleviation of subsidies; adoption of value rules)

Tariffs bound between negotiating partners Tariffs reduction

Adaptations for developing countries Tariff reduction: 24% during 10 years (versus 36%

during 6 years for developed countries) Delaying the custom value rule implementation (5

years – plus 3 years)

5

RESULTS OF THE URUGUAY ROUND 2/2

The NAMA products importance 90 % of the World exports.

Negotiations impacts Developed countries: average tariffs decrease

from 6,3% to 3,8 %. Developing Countries : rise of average bound lines

from 21% to 73 % ; better trade predictability Improvements resulting from the

Uruguay Round appear insufficient Tariffs too high Persistence of tariffs peaks Tariffs escalation 6

II - NAMA NEGOTIATIONS PROCESS: PRESENT SITUATION

7

NAMA DOHA AGENDANAMA negotiation aim

Following the paragraph 16 of the Doha Ministerial Declaration,

“To reduce or as appropriate eliminate tariffs, including the reduction or elimination of high tariffs, tariff peaks and tariff escalation as well as Non-Tariff Barriers, in particular on products of export interest to developing countries”

“The negotiations shall take fully into account the special needs and interests of developing and least-developed Members, including through less than full reciprocity in reduction commitments” 8

THREE CRUCIAL ELEMENTS IN THE NEGOTIATION To cut tariffs according to general formula

based on a coefficient. Overall around 40 countries, which include the world's largest traders, will apply the formula. All the others have different specific provisions. 

Flexibilities for developing countries (that would allow these countries to shelter limited percentages of their most sensitive sectors from the full impact of a reduction in tariffs). 

Special treatment for small, vulnerable economies (31); least-developed countries (LDCs) (32); recently acceded members (RAMs) (13); members with low binding coverage (12); and others

9

ADVANTAGES OF THE FORMULA APPROACH Transparency

Each member will be enabled to know how the other decrease their tariffs

Efficiency Formula approach is more simple than the

bargaining process Equity

The tariffs decreases result from rules and are independent from bargaining power

Predictability

10

FORMULA ADOPTED AFTER THE FOURTH REVISION – REPORT BY DECEMBER, 6, 2008

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 Coefficients

Developed Members: a = 8 Developing Members: x = 20, y = 22, z = 25 11

ELEMENTS REGARDING THE FORMULA

All HS chapters are included Minimum 20% of bounded tariff lines et 9% of 1999-2001

imports Tariffs Reduction base

Bound rates in 2001, after full implementation of current concessions

Calculus of non bound tariffNon bound rates: applied rates plus 25 %

Non-ad valorem duties All shall be converted to ad valorem equivalents and bound

in ad valorem terms. Implementation tariffs reduction calendar

All the first of January, after the entry in force of DDA Developed Members : 6 reductions, in equal rates in 5 yearsDeveloping Members : 11 reductions, in equal rates in 10

years12

FLEXIBILITIES ON THE FORMULA FOR DEVELOPING COUNTRIES

Depending on the chosen coefficient X= 20 Y=22 Z=25

And on the preference on tariff lines binding

total bound

partial bound

total bound

partial bound

total bound

partial bound

A decrease lower than the formula result is allowed

For a percent of tariff lines lower than 14% 6,5% 10% 5% 0% 0%

Which corresponds to a percent of total imports in the

period1999-2001 lower than 16% 7,5% 10% 5% 0% 0%

13

III - COMMENTS FROM THE ARAB COUNTRIES AND MOROCCO POINT OF VIEW

14

IMPACTS ON ARAB COUNTRIES Tariff binding situation

On 10 Arab Countries, members of WTO, participating to NAMA negotiations, 5 have bound 100 % of their tariff lines (Morocco, Djibouti, Oman, Qatar, UAE) and 3 near 100% (Kuwait, Jordan and Egypt)

Tunisia and Bahrain have bound respectively 51,1% and 71 %

Tariffs level 4 countries have average bound tariffs level lower than 30%

(Oman, United Arab Emirates, Qatar, Jordan), 1 country has a tariff close to 30 % (Egypt) 4 countries have average bound tariffs higher than 35%

(Morocco, Djibouti, Tunisia and Kuwait)15

BOUND DUTIES FOR NON-AGRICULTURAL PRODUCTS OF ARAB COUNTRIES

16

ImportMarket

Binding coverage (percent)

Simple average

Standard deviation

Maxi-mum

Last year of implemen-

tation

Duty free

(percent)

Others duties and charges (ODC)

Simple average

Maxi-mum

Bahrain 71 35,1 2 100 1995 0 0 0

Djibouti 100 40 1,6 230 1995 0 100 100

Egypt 98,7 28,3 17,7 160 2004 0 0 0

UAE 100 13,1 3,6 15 2009 1,1 0 0

Jordan 99,9 15,2 9,8 30 2010 6,3 0 0

Kuwait 99,9 100 0 100 1995 0 15 15

Morocco 100 39,2 3,9 45 2004 0 15 15

Oman 100 11,6 5 20 2009 4,1 0 0

Qatar 100 14,5 4,9 30 2009 1,1 3 3

Tunisia 51,1 40,6 15,4 180 2005 0 0,9 30

RESULTS OF THE FORMULA IMPLEMENTATION FOR ARAB COUNTRIES Reduction of overall bound tariffs

the highest tariff is 20% (Kuwait) and the lowest is 7,92% (United Arab Emirates)

For each country, the results for the formula coefficients (20, 22 and 25) are very close

the tariff peaks disappeared Using flexibilities

Only Bahrain and Tunisia may use the flexibility allowed by the choice of the coefficient x or y

The other countries would choose the z coefficient because they had already bound all or almost all their tariff lines. 17

SIMULATION

18

Arab countries

Average bound tariffs

Swiss formula – calculus based on average bound

tariffs

x=20 y=22 z=25

Bahrain 35,1 12,74

13,52

14,60

Egypt 28,3 11,72

12,38

13,27

United Arab Emirates 13,1 7,92

8,21

8,60

Jordan 15,2 8,64

8,99

9,45

Kuwait 100 16,67

18,03

20,00

Morocco 39,2 13,24

14,09

15,26

Oman 11,6 7,34

7,60

7,92

Qatar 14,5 8,41

8,74

9,18

Tunisia 40,6 13,40

14,27

15,47

PREFERENCES: ENHANCED EROSIONThe Turkey and Quad partners did

not introduce in the NAMA negotiation a list of products exception.

The results of the DDA on the NAMA negotiations would substantially reduce the preferential margins on these FTA partners markets.

19

POLICY ISSUES Industrialization objectives: globalized value

chains and local value chains Informal economy, inclusion and

macroeconomic policy package For a new and consistent policy package:

fiscal policy and incentives to local development and new status to VSE in development policy