REPORT ON NON-ARGRICULTURAL MARKET ACCESS

UNCLAS GENEVA 002668

SIPDIS


PASS USTR FOR BROADBENT/BOVIM
DOC PASS ITA/JACOBS, SJONES AND JJANICKE

E.O. 12958: N/A
TAGS: ETRD WTRO USTR
SUBJECT: REPORT ON NON-ARGRICULTURAL MARKET ACCESS
NEGOTATIONS October 10-14, 2005

SUMMARY
__________


1. The WTO Negotiating Group on Market Access (NAMA) met in
Geneva from October 10-14, 2005, to continue work on the
modalities for the reduction and/or elimination of tariff
and non-tariff barriers (NTBs) affecting industrial goods,
with the goal of determining the formula for tariff
reductions and other key approaches to liberalization by no
later than the Hong Kong Ministerial Meeting in December

2005. Participants emphasized the short period of time
available in order to reach a successful result in all the
negotiating groups, including NAMA.


2. Members focused discussions on formula and sectoral
tariff cuts as well as NTBs. New Zealand presented a
detailed analysis of different formula scenarios, seeking to
inform the discussion on how a Swiss formula would operate
with different coefficients and flexibilities for Developing
Country Members

NAMA Plenary - October 11, 2005
____________________________


3. Chair Stefan Johannesson opened the plenary noting that
Members need to make considerable progress on NAMA and that
negotiators need to be prepared for a "NAMA month". He
thanked all delegations for good bilateral consultations
thus far on treatment of unbound, tariffs, formula, and
flexibilities. He noted that there are a number of
outstanding issues where Members are still divided, and need
to build bridges. He sees a need for delegations to engage
on numbers now.


4. New Zealand then made a presentation on hypothetical
formula options that tested the results of using a single
coefficient of 25 for all countries (with flexibility for
developing) against a scenario using a coefficient of five
for developed countries and a coefficient of 10 for
developing countries with no flexibility. These simulations
showed that the use of a single high coefficient for all
countries yielded only modest improvements in market access
for all countries and that gain from formula cuts were
reduced, further by the use of paragraph 8 flexibility.
Further, the proportion of tariff peaks is only slightly
reduced under this scenario and the level of contribution
from developing countries varies widely. New Zealand
demonstrated that the use of dual low coefficients (5 and
10) yields greater gains in market access for all and can
still deliver less than full reciprocity in reduction
commitments while more effectively addressing tariff peaks.


5. Delegations then proceeded to ask technical questions
and make interventions on New Zealand's presentation.
Several countries- including those supporting the Argentina,
Brazil and India (ABI) proposal- asserted that the first New
Zealand simulation ignores less than full reciprocity while
the second took away paragraph 8 flexibilities while
utilizing a coefficient that is too low. Many countries
repeated that a simple Swiss formula with a single
coefficient ignores the development dimension of the Round
and that the New Zealand scenarios favor developed countries
on the issue of less than full reciprocity.


6. The United States intervened to support New Zealand's
presentation and noted the importance of the choices Members
must make with regard to delivering modest versus real
market access results. The U.S. representative also
welcomed the variety of indices of contributions used by New
Zealand in its presentation and highlighted the conclusion
that a high coefficient will not eliminate peaks.


7. The representative from India stated that harmonization
of tariff schedules is not included in the mandate and the
percentage cut to bound rates is much higher for developing
countries. India asserted that New Zealand's conclusions
are misleading and that the only appropriate measurement of
contributions is the percentage cut to bound rates. Brazil
called New Zealand's presentation misdirected and reiterated
India's statement that the percentage cut to average bound
tariffs is much higher for developing countries. The
representative from Brazil also criticized New Zealand's
measurement of some benchmarks by cuts to applied rates.


8. Norway spoke out in support of New Zealand's
presentation, saying that it focused on gains to all
exporters and that offensive interests in the negotiation
need to be evaluated as much as defensive, particularly for
niche exporters, where paragraph 8 flexibilities could
exclude entire sectors of importance to some Members.

Barbados stated that New Zealand's scenarios demonstrate
benefits only to those pursuing aggressive market access
opportunities and reminded the group that Annex B notes the
needs of revenue-dependent countries.


9. The EC then intervened to remind the group that a
package will be necessary by the end of the month with real
numbers and that rehashing old arguments is not productive
at this stage. The EC representative went on to say that a
percentage cut in applied rates in developed countries, when
multiplied by trade volume, will be a significant
contribution and that the negotiation needs to be focused on
end rates, not the average cut to bound rates.


10. The U.S. representative followed with a report on
Zurich meetings held earlier in the week, noting that the
focus had been on a new U.S. offer on agriculture that were
tabled in an attempt to break the deadlock in those
negotiations and spur additional progress in other areas of
the negotiation. The United States then notified all
Members about meetings on non-tariff barriers in the autos
sector to be attended by industry representatives from the
Global Auto Industry Dialogue, as well as a meeting on
remanufactured goods and a session with the least-developed
countries on non-tariff barriers. The U.S. delegation also
reported on sectoral meetings, adding specific details on
the chemicals meeting it hosted on Monday, October 10. The
EC, Korea, New Zealand, Canada, Japan, and Thailand all
reported on informal discussions on sectoral meetings on
tariffs and non-tariff barriers held during the week.

Small Recently-Acceded Members (RAMs) Meeting
__________________________________________


11. Participants in this meeting included Croatia, Jordan,
and Moldova. The United States emphasized its efforts to
find a small RAMs solution and floated the concept of trade
shares criteria (treating those Members with very small
shares of World Trade differently) in general terms.
Croatia said they did not think China would accept any RAMs
differentiation, especially based on their meeting with the
Chair last week. China cites GDP per capita as an indicator
of their low development status. Moldova is very concerned
about how they will be treated but has not received much
feedback on their small economies in transition proposal.
Several RAMS are concerned that they are not considered
developing (Croatia) and thus may not have access to
paragraph eight, flexibilities Moldova, and Georgia, also
are concerned that as "transitional" versus developing
economics, they need to do more liberalizing in the round
than other poor members. Jordan is interested in the
erosion of textile preference margins under the FTA.

Pakistan Bilateral
______________


12. The bilateral focused on discrepancies between U.S. and
Pakistani simulations of Pakistan's dual coefficient
proposal, which calls for a Swiss 6 coefficient for
developed countries, and a Swiss 30 for developing. U.S.
representatives noted that the Pakistani simulations
measured the share of total lines cut, rather than the share
of dutiable lines. This skewed results so it appeared that
countries with significant bound and or applied lines at
zero (i.e., the U.S.) were offering less market access. By
including U.S. tariff lines that are already bound at zero
(and thus cannot be cut),the Pakistani simulations
significantly understated the impact on U.S. tariff lines.
In fact, a Swiss 6 co-efficient would cut 99.9% of U.S.
tariff lines, rather than two-thirds as suggested by the
Pakistani analysis. U.S. representatives also noted that
Pakistani simulations did not include treatment of currently
unbound tariff lines, which are significant for some
members, and paragraph eight flexibility impact. This
overstates the impact on same developing country schedules.
Pakistani representatives agreed to recheck calculations
based on dutiable lines, but were not prepared to adjust
simulations to unbound lines and paragraph 8 due to
uncertainties in assumptions.


13. Pakistan noted that it was difficult for developing
countries to accept a low coefficient, especially with
competition from China. Even a Swiss 30 represents a big
cut for many. U.S. countered that Swiss 30 was the same as
the ABI proposal, would not result in much new market access
in our key target markets, retains peak tariffs, and would
waste a once-in-a-generation opportunity. Pakistan thought
it not surprising that New Zealand's analysis showed that
low coefficients reduce duties paid on developing country
exports by more than on developed country exports since
developing country exports face higher duties in both

developed and developing country markets.


14. Pakistan is still looking for ambitious multilateral
results, since FTAs and preferences are not an option. It
recognizes that preference countries need help, but not at
Pakistan's expense (where 80% of its exports were apparel
and leather). Pakistan did not have a problem with unbound
approaches under consideration, but noted that it was
primarily Japanese investors in Pakistani unbound sectors
that were raising the most concerns.

China Bilateral
____________


15. The United States met with China to discuss sectors,
paragraph 8 sensitivities, and the formula coefficient. The
United States shared data with China on growth in trade for
products covered by the Uruguay Round sectoral initiatives
in the past nine years, noting that trade has grown
significantly in that time period. The U.S. explained the
different ways Members could interpret paragraph 8 less than
formula cuts and the impact of using twice the coefficient
versus half the cut for export interests in developing
country markets. China said it had sensitivities in the
following areas: processed oil, some chemicals, plastics,
rubber, filaments, fibers (some in HS chapters 54-55),
scientific equipment, and seats in chapter 94. China
finished by asking about treatment for newly acceded members
and said it feels nothing has been done on this issue.

Mexico Bilateral
______________


16. At the meeting U.S. representatives emphasized to
Mexico that Members would need to engage in a discussion
over numbers to balance flexibilities with unbound. Mexico
responded that a first order problem was to fix the type of
formula rather than the numbers. The United States pointed
out that the level at which the coefficient stops delivering
is important, especially with binding overhang In addition
to these unresolved issues, the ACP countries and others
with preference erosion concerns could be obstacles at Hong
Kong. On ABI, the Mexicans hoped to see some movement away
from the consensus by Brazil, but were less optimistic
regarding India.

Sectorals
________


17. Members continued their work in informal meetings on
nine sectors, detailed below. Developing countries continue
to be involved in the discussions, with the most active
participation coming from developing ASEAN members and
Chinese Taipei.

Forest Products: Canada hosted the meeting, Mexico, South
Africa, Norway, Hong Kong, Singapore, Indonesia, Thailand,
EC, Australia, Peru, Switzerland, Malaysia, the United
States and Chinese Taipei attended. The meeting focused on
Canada's proposal for tariff liberalization in the forest
products sector. Co-sponsors will be Hong Kong, New
Zealand, the United States, and Thailand. Participants in
the meeting discussed the inclusion of wood furniture in the
product coverage of the sector as well as special and
differential treatment options for developing countries.
Canada plans to submit its paper to the negotiating group as
soon as possible.


18. Autos: Japan hosted the meeting, Switzerland, Mexico,
Malaysia, Korea, Norway, Canada, Chinese Taipei, Hong Kong,
Singapore, Australia, Indonesia, Brazil, the United States,
and Turkey attended. The United States attended the meeting
but remained silent. The meeting was co-hosted by the
Japanese government and its automotive industry association
(JAMA). After a short presentation by the industry
representative on the benefits of the sector to both the
global economy and developing countries in particular,
participants discussed critical mass, potential product
exclusions under paragraph 8, and participation in this type
of sector. The JAMA representative confirmed that the
Global Auto Industry Dialogue Members have agreed to focus
on NTBs in NAMA.


19. Chemicals: United States hosted, Japan, South Africa,
Turkey, Switzerland, Singapore, Hong Kong, EC, Canada,
Korea, Norway, Australia, Thailand, and Mexico attended.
The United States announced the November fly-in for the ICCA
and reviewed product coverage at the 4-digit level. Japan
then presented a list of additional rubber products it would
like to include as part of product coverage for this
sectoral. Participants discussed how to increase


NEGOTATIONS October 10-14, 2005


participation in a potential sectoral initiative as well as
potential product exclusions. A number of participants
commented on the ICCA proposal, which noted the importance
of end rates of zero in this sector due to large investment
flows from developed to developing countries. India
attended the meeting apparently by mistake; it thought it
was attending a NTB meeting on chemicals.


20. Bicycles and Sporting Goods: Chinese Taipei hosted,
Korea, Hong Kong, Japan, Canada, Thailand, Mexico, the
United States, and Norway participated. This meeting focused
on product coverage, specifically Switzerland's additions to
both the sporting goods and bicycle/bike parts initiatives,
which were specific products, related to sporting goods and
bicycles. Current co-sponsors for the bicycles initiative
include Chinese Taipei, Hong Kong, Japan, Singapore,
Thailand, Norway and Switzerland. Co-sponsors for the
sporting goods initiative include Chinese Taipei, Thailand,
Japan, Norway, Switzerland, and possibly the United States,
pending industry clearance. Participants discussed
potential sensitivities in both sectors and the United
States expressed its interest in including bowling balls and
equipment.


21. Environmental Goods: The United States hosted, Canada,
New Zealand, Norway, EC, Chinese Taipei, Thailand, Korea,
and Switzerland participated. In preparation for the Hong
Kong Ministerial, the United States pitched the idea of
treating environmental goods as one of the sectoral
initiatives in the NAMA negotiations. Environmental goods,
like other sectorals, seek better than formula treatment on
final tariff rates and are undergoing detailed discussions
on product coverage. A number of delegations expressed
concern with using the concept of critical mass for this
sector. Some delegations also expressed hesitations that
including the environmental goods as a sector in the NAMA
negotiations at this point could undermine the environmental
benefits and the participation of developing countries.
However, many participants agreed that some sort of
reference to environmental goods should be included in the
NAMA Hong Kong text.


22. Fish Market Access: New Zealand convened a meeting on
fish tariffs and NTBs attended by South Africa, Norway,
Australia, Switzerland, Canada, Thailand, Taiwan, Singapore,
Hong Kong, Peru, and Indonesia. Participants discussed the
importance of ensuring that fish tariffs are not excluded
from NAMA treatment. Norway presented its draft paper on
tariff liberalization and NTBs in this sector, Canada has
indicated that it will co-sponsor the paper. A number of
delegations noted an interest in inviting other delegations
to achieve a higher level of critical mass if key traders do
not participate. Participants agreed to keep the product
coverage broad at this point.


23. Electronics/Electrical Goods: Japan convened the
meeting, which was attended by Switzerland, Korea, Malaysia,
the EC, Chinese Taipei, Canada, Thailand, Indonesia, Peru,
Hong Kong, Japan, South Africa, Singapore, Philippines,
Mexico, and Australia. Japan welcomed Thailand as a new co-
sponsor of the paper and will re-submit the paper to the
negotiating group. Japan proposed the inclusion of
industrial machinery to the product coverage for the sector
since many of the electrical machinery HS categories overlap
with these products. Several delegations said that they
will consult on the inclusion of industrial machinery with
capital and domestic industry. Delegations agreed to focus
further discussions on 4-digit product coverage that Japan
will circulate intercessionally. Members also discussed a
range of flexibility options, including zero for "x", longer
implementation, and product exclusions.


24. Gems and Jewelry: Thailand convened the meeting, which
was attended by Canada, Switzerland, South Africa, the U.S.,
Norway, the EC, Hong Kong, Japan, Korea, and Chinese Taipei.
Switzerland announced that it will co-sponsor the paper,
joining Thailand, the U.S., Hong Kong, Japan, and Singapore
in this initiative. Members discussed product coverage to
include Chapter 71. Participants also discussed potential
product exclusions and how to expand participation in the
sector, including Middle Eastern countries, India,
Australia, and China. Members also discussed preparations
for Hong Kong, and what might be necessary and participants
in general noted an interest in some sort of reference to
sectors in the Hong Kong text.


25. Drugs and Devices: A small meeting was held between
the United States, Switzerland, and Singapore to discuss
putting together a proposal on tariff liberalization in the
pharmaceutical and medical equipment sectors for submission
to the larger NAMA negotiating group (as has been done for

chemicals, electronics, etc). The Swiss agreed to circulate
a first draft in the next couple of weeks.

Non-Tariff Barriers
_______________


26. As in September, meetings on NTBs continue to improve
in terms of substance and attendance. The U.S. team
continues to lead the negotiating process and make slow but
steady progress on moving beyond identifying NTBs of common
concern and towards laying out specific proposals for
solutions. The U.S. held a second successful meeting with
least-developed countries and small economies to see how we
can assist their efforts in identifying NTBs. Discussions
at this meeting revolved around the difficulty that
developing countries are having in identifying NTBs and,
after having identified them, in negotiating a solution.
The WTO Secretariat gave a helpful presentation on how it
can help developing countries in this regard.


27. On sectoral NTB discussions, New Zealand and the United
States also hosted an informal meeting on forest products
NTBs, while Korea hosted a meeting on electronics NTBs. NTB
discussions relating to autos and remanufacturing benefited
at this meeting from the presence of industry. Auto industry
representatives from the United States, the EC, Brazil,
India, Japan, and Canada, also known as the Global Auto
Industry Dialogue (GAID),made two presentations on autos
NTBs which, for the first time, identified in some detail
NTBs of common concern and articulated possible remedies.
(Note: The Korean auto industry - KAMA - is also a part of
the GAID, but was not able to attend this meeting, although
KAMA is apparently on board with the overall GAID
positions.) India and Brazil (industries and governments)
both seem very interested in pursuing an autos NTB
initiative, as does the EC. Japan is also interested in the
initiative, and has, along with its industry, circulated a
non-paper on auto issues in the customs areas. The next
step will be to build on these common areas and figure out
what solutions might be possible. [Note: China, which
maintains many of the NTBs that the GAID would like
eliminate, was in the room for the first time during the
second presentation, though it remained silent.]


28. The U.S. remanufacturing industry (represented by the
earthmoving, auto parts, and medical equipment sectors) also
for the first time made presentations to WTO Members that
detailed specific solutions to their NTB issues. While
discussions related to auto parts remanufacturing, in
particular, were quite passionate, an intensive discussion
is needed in order to fully understand what type of solution
might be acceptable.

Next Steps
________



29. Both the NAMA Chair and WTO DG Lamy (during an October
13 TNC meeting) emphasized the compressed time schedule for
movement on all parts of the Doha Round negotiations. Lamy
stated that in NAMA there is an emerging consensus over a
Swiss formula with a limited number of coefficients.
Members needed to ascertain by mid-November a range of
numbers for the formula, comparable detail on flexibilities,
and a way to fix the base rate for unbound tariffs. This is
the minimum before addressing issues such as preference
erosion, sectorals, and NTBs. The Chair emphasized to
delegations that with the Ministerial fast approaching, they
should be prepared for continuous negotiations.


ALLGEIER