MEETING OF THE WTO NEGOTIATING GROUP ON NON-

UNCLAS SECTION 01 OF 05 GENEVA 001211

SIPDIS

PASS USTR FOR BROADBENT/BOVIM
DOC PASS ITS/JACOBS, SJONES AND CMORROW

E.O. 12958: N/A
TAGS: ETRD WTRO USTR
SUBJECT: MEETING OF THE WTO NEGOTIATING GROUP ON NON-
AGRICULTURAL MARKET ACCESS (NAMA) ON APRIL 25-29, 2005

Ref: Geneva 1115


1. SUMMARY. The WTO Negotiating Group on Market Access (NAMA)
met in Geneva on April 25-29, 2005 to continue discussions on
tariff formula options, treatment of unbound tariffs, sector
tariff liberalization, issues of concern to developing countries,
and non-tariff barriers. The meeting moved the NAMA process
from clear preparatory work into the more structured negotiating
phase of work, as efforts intensify in the lead up to the July
initial deadline and the Hong Kong Ministerial in December, where
the means to reducing and eliminating tariffs are to
be finalized. END Summary.

FORMULA


2. A recent proposal from Argentina, Brazil, and India (ABI) was
the initial focus of discussion, as four other proposals from the
US, EC, Norway and Mexico/Chile/Colombia (all based on a simple
Swiss formula model) were discussed in detail at the last
meeting. The ABI proposal did not generate the groundswell of
support that the ABI countries hoped for. While reactions to the
proposal were generally negative, the proposal received support
from some members, particularly those with a purely defensive
stance. The treatment of unbound lines repelled many Members from
Latin America and south east Asia due to the self-serving
character of the ABI proposal's approach to unbound rates which
is design to meet the needs of India). Educational efforts and
analysis sharing by the US delegation also dampened the Africa
Group's enthusiasm for the proposal due to the formula's inherent
inequities among developing countries and the severe erosion of
Africa's preferential access to developed country markets. In
defending the proposal, the authors emphasized that, unlike
proposals from the US and EC, it provided both special and
differential treatment and less than full reciprocity; that
average bound tariffs may not reflect levels of development but
they do reflect economic reality; and that the inherent
sensitivity of unbound lines suggests binding levels should be
near the average target.


3. Support for the ABI proposal came from Caribbeans (Jamaica,
Trinidad and Tobago, and Barbados),North Africans (Egypt,
Tunisia),the Dominican Republic, and China. Members in a middle
ground included Bolivia, El Salvador, and Thailand. Friends of
Ambition, (most developed countries plus Chile, Costa Rica, Hong
Kong and Singapore),Turkey, Chinese Taipei, and many Latin
American countries such as Colombia, Ecuador, and Peru
universally suggested the proposal did not meet the objectives of
the July Framework of cutting tariff peaks in all the major
traders, was based on previously discarded formula options, and
had too many unclear components (e.g. treatment of unbound and
link to other market access negotiations). Malaysia and Uruguay
privately told us they did not support the proposal, and it was
reported to us that Indonesia did not support the ABI proposal
although they found it "interesting."


4. In informal consultations the chair pressed Members to get
specific on what they are prepared to give and what they want to
get out of the formula, i.e. tariff liberalization. The US,
Canada and EC indicated they expected to virtually eliminate
their tariffs in this round if real new access can be achieved in
the markets of key developing countries in exchange. Brazil and
India were non-committal but noted that their goal was to ensure
that this round did not widen the gap on market access between
agriculture, where they perceive relatively high barriers, and
NAMA where there is better market access. When pressed on
whether they were prepared to make cuts in applied rates given
their much higher bound tariffs, Costa Rica said they were
prepared to make real cuts in order to achieve reciprocal market
access in other developing country markets. Jamaica admitted
they did not have sufficient instructions to advance
negotiations, in particular with respect to their actual goals.
In the closing plenary the chair noted that while there seems
to be agreement on a Swiss-type formula, Members need political
guidance on the level of ambition in the formula and in
particular the number, level, and criteria for determining the
coefficients. (Note: The term "Swiss-type" formula embraces
both a pure Swiss formula (on which the US, EC, Norway and the
Chile, Colombia, Mexico proposals are based) and the significant
variation of the Swiss formula proposal by the ABI proposal.)


5. Members are grappling with what type of analysis might help
Members better understand the effects of the formula proposals on
the table. In an informal session with the Chairman, the
Secretariat indicated it intended to update previous data runs

SIPDIS
showing the effects of different Swiss formula coefficients
against Member's average tariffs. The United States offered to
provide some illustrative examples or country tariff profiles
demonstrating the effects of various Swiss formulae and the
"Girard formula" (using average tariffs as a coefficient) on a
product line-by-line basis. The Secretariat welcomed this
contribution and suggested it would be helpful for the June
meeting.
UNBOUND LINES


6. On currently unbound lines with low applied rates (which
approximately 27 countries subject to the formula maintain),
discussions have centered around a proposal from Canada, Hong
Kong, Norway, Costa Rica, Norway and Peru, a longstanding
proposal from Malaysia and the unbound element of the ABI
proposal. The United States has been endeavoring to understand
better the particular problem several ASEAN countries
(Philippines, Thailand and Malaysia) have on this issue in order
to determine what solution might be appropriate that would not
significantly undermine liberalization. Unfortunately, during
NAMA week, the United States was unable to make much progress
with Malaysia regarding its numerous unbound tariffs, since no
technical experts from Kuala Lumpur attended the meeting. The
United States will work to set up a subsequent technical meeting
as well as share with Malaysia analysis of how this issue affects
their export interests in other developing country markets.
Switzerland told us that they had a productive meeting on this
issue with Thailand. In the Chair's informal session Thailand
and the Philippines said that in the end it is the level at which
these tariffs are bound rather than the methodology to get to
that level, but Malaysia still focused on binding as a concession
and the inequity between their own Uruguay Round commitments at
low rates and that of Latin American countries which bound all
lines but at high levels. This will remain a contentious issue as
the July Framework is clear that treatment of unbound tariff
lines is for purposes of establishing the base rate for
application of the formula. The chair flagged this as a key issue
for political guidance.

OTHER TARIFF-RELATED ISSUES


7. Discussions on a Canada/Hong Kong proposal to eliminate low
duties after the application of the tariff formula drew out
several camps. Recently acceded members (Croatia, Moldova) don't
want this provision to apply to them since most of their tariffs
are already low even before application of the formula. Many
developing countries (Cuba, Jamaica, and Brazil) claimed that low
duties are important source of revenue, although the Philippines
noted that this was mainly a concern with low applied rates (most
of their bound rates do not fall in the category of low
duties.)Hong Kong, Singapore, and Costa Rica pointed out that
agreeing to eliminate low duties this would be a significant
concession from developed countries which have extensive low
duties already. Switzerland said that it was too much of a
concession from developed countries to consider at this stage.
The United States suggested that such a contribution would need
to be looked at in the context of progress in reducing high
tariffs and peaks in key developed and developing country
markets. In his closing remarks the chair stated that he did not
think this issue was ripe for negotiations at this point. It is
likely it will be revived at a later stage of the negotiations.
Canada does not plan to press the proposal at this time.


8. There was a short discussion of technical issues. On
availability of data for the tariff negotiations, , the chair
instructed the Secretariat to begin creating trade negotiating
files with best available data from other sources for countries
that have not submitted data to the WTO's Integrated Data Base.
Discussions on some technical and policy questions related to
product coverage for the NAMA negotiations will take place when
there are more submissions from Members, and discussions on ad
valorem equivalents for specific rates applied on industrial
goods will occur when there is more progress on this issue in the
agriculture negotiations.

NON-RECIPROCAL PREFERENCES


9. The Room D (each delegation is limited to three participants)
discussion of preferences revealed that the Africa Group wants an
explicit reduction of the formula's impact on their key
preference products, and the Africa-Caribbean-Pacific (ACP)
countries have yet to finalize a list of such products for NAMA
scrutiny. To describe the "correction coefficient" suggested in
their proposal, Kenya's specific example noted that the formula
could reduce a developed country applied rate from 10% to 4%, but
if such a tariff-line cut harmed a preference country, the final
tariff could be bumped up to 6% to recapture some of the
preference margin.


10. The Kenyan explanation reinvigorated the preference erosion
debate, which again separated developing countries into
preference beneficiaries (Mauritius, Kenya, Jamaica, Antigua &
Barbuda, Lesotho, Tunisia, Zambia, Zimbabwe, and Bangladesh on
behalf of the LDCs) versus those favoring ambitious cuts in
developed country markets (Colombia, Sri Lanka, Costa Rica,
Ecuador, and Pakistan). In presenting the Argentina-Brazil-India
(ABI) proposal, Brazil side-stepped the issue, stating that it
was premature until the formula becomes clear. Mauritius, Kenya,
and Zambia also objected to the preference erosion impacts of
sectoral initiatives, in particular in sectoral initiatives that
might target final tariff rates at zero. The USDel, Norway, and
Chinese Taipei noted that preference beneficiaries could join
sectoral discussions and participate in discussions to air their
concerns and highlight sensitivities. Sri Lanka highlighted the
potential of sectorals to address almost all key preference areas
(textiles and apparel, footwear, and fish).


11. The USDel and others again emphasized the need for a
concrete list of preference products to define the scope of the
issue. The USDel had also raised concerns in March that the ACP
Index of Vulnerability resulted in an artificially long list of
key preference products and that key factors (such as product
export share and preference margin) had been omitted from the
Index. In Room D, Mauritius signaled its willingness to consider
these factors as additional filters to fine-tune a product list.
Privately, Mauritius promised to discuss the product list with
the United States prior to distributing it to NAMA, and Kenya
seemed willing to unblock a "notional" product list, if it could
change depending on a final NAMA formula. The Chairman noted
that an ACP listing of products of concern, using additional
filters, would be useful and if such products were limited to a
few sectors a more targeted approach might be warranted.


12. U.S. engagement on preference erosion also focused on
educating preference beneficiary countries that the ABI Girard-
like formula (1) caused greater preference erosion than dual
coefficient proposals and (2) failed to offset preference erosion
with new access to major developing country markets. USDel made
some headway in discrediting the ABI proposal during a
plurilateral with the LDC Group, bilaterals with Mauritius,
Kenya, Rwanda, Barbados, Antigua and Barbuda, Guyana, and Sri
Lanka, and to a lesser extent in bilaterals with Antigua &
Barbuda and Barbados. The Caribbean group, in particular
Jamaica, remains attracted to the ABI proposal because it
effectively shields them from any cuts in applied tariffs.

SECTORALS


13. In the NAMA plenary the US presentation on critical mass
served to answer some questions about how this mechanism worked
and drove home the point that sectors will take time to negotiate
and will not appear out of thin air. During the course of the
week informal sectoral discussions were held on footwear, forest
products, raw materials, drugs and devices, and chemicals. The
informal meetings were generally well attended, with developing
country Members asking questions rather than remaining silent. A
US presentation on critical mass initiatives would be developed
(which contains potential flexibilities for developing countries)
clarified the concept for many developing countries.


14. Chemicals: Switzerland hosted a meeting on chemicals in
which a number of developing countries (Malaysia, Singapore, and
Thailand) participated. This meeting focused on discussion of
possible product coverage to augment the existing Chemicals
agreement and the means to assess the merits of different
potential approaches to product coverage. The group will meet
again during the next NAMA week to advance discussions further.


15. Drugs and Devices: Switzerland also hosted a meeting to
advance quiet discussions on whether there could be a tariff
component to the access to medicines issue and whether the NAMA
negotiations could be a means to deliver additional
liberalization that would help reduce the costs of drugs and
medical devices in developing countries (developed countries have
generally eliminated duties already under the Uruguay Round
Pharmaceutical Zero for Zero Agreement). This effort would
parallel efforts by existing Members of the Pharmaceutical
agreement to expand product coverage of the UR agreement among
them and grant these further tariff reductions on an MFN basis
within the next few months.) The goal of the drugs and devices
initiative would be to entice other developing countries to
reduce their applied and bound tariffs as a contribution to the
Round that would also reduce the costs of medicines internally.
At the Swiss meeting, delegations discussed how this might be
accomplished and reviewed several recent studies that had been
done by academics and NGOs highlighting the issue of tariffs as a
barrier to access to medicines.


16. Footwear: The US hosted an initial meeting to ascertain
potential interest in a sectoral initiative on footwear.
Participants included Canada, China, Chinese Taipei, Hong Kong,
Mexico, New Zealand, Pakistan, Switzerland, and Thailand. While
discussion highlighted a range of perspectives on the merits of a
footwear initiative, there was not yet much enthusiasm
demonstrated for the idea.


17. Forest Products: Canada hosted a meeting following up on
discussions during the last session. Australia, Chile, Croatia,
Malaysia, Mexico, Norway, the Philippines, Thailand, and the
United Stated attended. Participants discussed possible sector
coverage, target end rates and possible accommodations for
developing countries. Although most participants were not
prepared to get specific, Canada and Norway indicated they would
like to see the inclusion of pre-fabricated buildings and New
Zealand indicated they would like to see pulp and paper along
with wood furniture included. On end rates New Zealand indicated
it could go to zero, however others either couldn't comment until
they spoke with capitals (Malaysia and Chile) while others
indicated particular lines were sensitive and going to zero would
be difficult (Canada and Chinese Taipei).

18. Raw Materials: The United Arab Emirates hosted the meeting.
Australia, Egypt, Hong Kong, Japan, Jordan, Kuwait, Norway, Oman,
Qatar, Switzerland, Trinidad and Tobago, and the United States
attended. Also in attendance was the acceding Saudi Arabia.
Participants reviewed the list of potential products submitted by
the UAE as possible candidates for tariff reduction or
elimination. The U.S. indicated it would like to add energy
equipment which was supported by Canada, while Australia
distributed its own list of products to include. The UAE said it
was attempting to focus on a simple definition for the sector,
and reported that it still had not received a clear signal from
the Gulf States on various positions.

NON-TARIFF BARRIERS (NTBs)


19. The plenary discussion of the Secretariat's compilation of
all NTBs tabled by Members did not elicit any new information on
how Members plan to pursue notified NTBs. Kenya continued to
throw up procedural hurdles and appears to be setting the stage
to justify pulling the plug on the NTB negotiations. For
example, although unsuccessful in its initial attempt to have all
NTBs addressed in NAMA (even those clearly under the purview of
other negotiating groups),Kenya is now requesting transparency
on progress Members are making in resolving all NTBs on the list,
including those Members are pursuing in other fora (i.e.,
existing Committees or other negotiating groups),which could be
such a cumbersome process as to make the negotiations
unmanageable. While transparency is a fundamental principle of
the WTO, the Chairman also noted that Members were traditionally
free to negotiate bilateral problems without making all
information available to other members. A second Kenyan
suggestion to schedule joint sessions where NAMA can meet with
other Committee to review progress on addressing NTBs was met
with reservation by several Members since the standing Committees
do not have a negotiating mandate and meet less frequently.


20. The informal meetings on wood products, autos, and
electronics were more successful, with the United States, New
Zealand, and Korea taking leadership roles. The EU participated
constructively in both the autos and electronics NTB meetings and
hosted its own meeting to promote a horizontal agreement on
export duties. The presence of industry representatives in the
wood products meeting was useful in answering technical questions
and speaking authoritatively on issues faced by regulators.
Whereas the wood products group (hosted by the U.S. and New
Zealand) is focusing on a particular set of NTBs, the autos and
electronics groups (hosted by the United States and Korea
respectively) are continuing to exchange information on a broad
scope of NTBs and seeking to determine the extent of shared
concerns. At this point, although all participants have been
invited to share detailed information on NTBs they wish to
pursue, only the United States and Korea have done so. The
United States has circulated five papers in autos and three in
electronics, and Korea has circulated three papers in autos and
four papers in electronics. All participants have been invited
to continue the discussion of these papers "virtually" between
now and the June NAMA meeting.


21. The Chair convened a "Room F" process (consultations with a
limited number of delegations that have expressed
concerns/interests in the subject, chosen by the Chairman) to
consult with a few delegations on NTBs to discuss his concern
that NAMA may be headed toward "meager" results on NTBs.
Participating were Australia, Bangladesh, the EU, India, Japan,
Kenya, Korea, New Zealand, Norway, Philippines, Trinidad &
Tobago, and the United States. In a good brainstorming session,
delegates seemed to share the view that results on NTBs are
important, NTBs are complex, and it will not be possible to reach
any results on NTBs by July so we should use July to clarify how
work will proceed. The developed and advanced developing
participants also agreed that NTB negotiations are a Member-
driven process, and on the difficulty in resolving NTBs because
they keep "popping up" in other forms. Kenya continued to
express concern that many NTBs would not be addressed in NAMA.
The Kenyan rep stated that he had "thought NAMA would come up
with resolutions, but now you (the Chair) are saying that Members
have to resolve." The Chair observed that "NAMA is not a divine
being; the onus is on Members to come forward with proposals."
As a way to respond to the Kenyan (and other African) concerns,
the group discussed ways to guarantee transparency of efforts to
address NTBs bilaterally or plurilaterally, for example through
more detailed reporting and consideration of written reports of
bilateral or plurilateral meetings to plenary, through sharing
information on how NTBs have been resolved, and ultimately
through scheduling NTB commitments. Given the complexities of
NTBs, there was an initial discussion of the possible need to
have a framework post-DDA, possibly like the Information
Technology Agreement Committee, to monitor and ensure
implementation of NTB commitments as well as to provide for a
continuing forum to address NTBs.

22. As next steps, Members are encouraged to circulate papers to
the plenary with details of NTBs they wish to pursue through
NAMA, and include ideas on possible solutions. The Secretariat
will update the latest JOB62 document with any updated materials
from Members, and will also create a separate distilled version
of the document that lists only NTBs Members have indicated they
plan to pursue in NAMA. Members are encouraged to submit any
updates for either notification to the Secretariat by May 15.


23. NAMA NEXT STEPS: Chair Johannesson said the June meeting
would follow essentially the same format as this meeting, with
plenty of time for Room D and small group consultations with the
Chair. The Chair noted that although Members have done a
considerable amount of work, there is still a lot of work to do
and only 35 working days until the end of July when the first
draft of the Hong Kong Ministerial text is due. Deily