Introduction:
Non Agricultural Market Access (NAMA)
relates to trade negotiations on non-agricultural
or industrial products. In the NAMA negotiations,
WTO Members discuss the terms or modalities for
reducing or eliminating customs tariff and non
tariff barriers on trade in industrial products.
The
product coverage
under NAMA includes marine products, chemicals,
rubber products, wood products, textiles and
clothing, leather, ceramics, glassware,
engineering products, electronics, automobiles,
instruments, sports goods and toys.
On tariffs, the negotiations take place on the
bound tariff which are the bindings taken during
the negotiations at the WTO. The bound tariffs are
the upper limit of the applied customs tariff
which are the tariffs actually applied by the
Customs authorities on imports into any country.
In the NAMA negotiations there are tariffs on
which no bindings have been taken and these are
known as the unbound tariff lines. Based on the
commitments taken by India, at the commencement of
the Doha Round in 2001, India has more than 31% of
it NAMA tariff lines as unbound.
Elements
of NAMA Negotiations:
The
main elements of the NAMA negotiations are:
(i)
Coefficient for the tariff reduction formula
(ii)
Flexibilities for protecting sensitive NAMA
products
(iii)
Sectoral initiatives for elimination of customs
tariff in specific sectors
(iv)
Non Tariff Barrier (NTB) textual proposals
Coefficient for the tariff reduction formula
Ministerial Mandates
During the WTO Ministerial Meeting at Doha in
November, 2001; Trade Ministers had agreed on the
reduction or elimination of tariff peaks,
high tariffs and tariff escalation
on NAMA products.
Tariff peaks (also known as national peaks) are
generally defined as those customs tariffs which
are more than three times the national average
customs tariffs of a country. High tariffs (also
known as international peaks) are defined as those
customs tariff above an absolute value of 15%.
Tariff escalation is the difference between the
customs tariffs on finished products,
intermediates and raw materials.
In the Framework Agreement of July, 2004, the
General Council of the WTO agreed to work on a
non linear formula applied on a tariff line by
line basis. A non linear formula on customs
tariffs is essentially a formula where the
percentage reduction varies (or is not uniform)
according to the actual value of the tariff. If
one combines this Decision with the Ministerial
Mandate at Doha, it is clear that the percentage
reduction has to be higher for larger values of
customs tariff and vice versa.
Finally at the WTO Ministerial Meeting at Hong
Kong during December, 2005, the Trade Ministers
adopted a Swiss formula with coefficients
that would reduce or eliminate tariff peaks, high
tariffs and tariff escalation.
The simple Swiss formula with coefficients is as
under:
Tf = (Ti x A)/(Ti
+ A)
where Tf is the final bound customs
tariff , Ti is the initial bound
customs tariff and A is the Swiss coefficient.
The Swiss formula is non linear formula; reduces
tariff peaks, high tariffs and tariff escalation;
and has the following effect in trade
negotiations.
Since most developing countries have higher
average bound customs tariff than developed
countries, the same Swiss coefficient would lead
to higher percentage reductions for
developing countries than developed countries. All
the final bound customs tariffs would be below the
Swiss coefficient “A”.
The mandates also mention the need to take into
account the special needs and interests of
developing countries, including through less than
full reciprocity (LTFR) in reduction commitments.
This is a clear indication that developing
countries would not undertake the same reduction
commitments as developed countries. Therefore, the
issue of two coefficients, a lower for developed
countries and the higher for developing countries
has been proposed in the negotiations.
Current
Status:
During the WTO Mini Ministerial Meeting from 21-29
July, 2008, Mr Pascal Lamy, Director General of
the WTO had brought out an informal text on 25
July, 2008 proposing a coefficient of 8 for
developed countries and a 3 tiered coefficient of
20,22 and 25 linked to flexibilities for
developing countries. These numbers are also
reflected in the NAMA modalities of 6 December,
2009.
Flexibilities for protecting sensitive NAMA
products
Flexibilities under NAMA are intended for
protecting the sensitive industrial products of
the developing countries both from the Swiss
formula cuts and from taking a binding commitment.
In the negotiations, one of the options for the
developing countries is to take at least half the
formula cuts on a specified percentage of tariff
lines subject to a limitation of imports. The
other option is take no formula cuts or binding
commitments on a specific percentage of tariff
lines subject to a limitation on imports.
For India, flexibilities are important for
protecting its infant and vulnerable industries.
These include the micro, small and medium
enterprises (MSME); employment intensive sectors;
industries employing socially and economically
vulnerable sections such as women, traditional
artisans and fishermen; industries in the rural,
semi urban, economically disadvantaged and
geographically inaccessible regions of the
country.
The Ministerial mandate was reflected in
paragraph 8 of the July, 2004 Framework Agreement
where developing countries were given the
flexibility to
apply at least half the formula cuts on up to [10]
percent of the tariff lines provided these tariff
lines did not exceed [10] percent of the total
value of a Member's imports during 1999-2001; or
keep, as an exception, tariff lines unbound, or
not apply formula cuts for up to [5] percent of
tariff lines provided they do not exceed [5]
percent of the total value of a Member's imports
during 1999-2001.
There are 4712 NAMA tariff lines of India under
the HS classification. Therefore, under the
flexibilities proposed above, India could
designate either
471 (10% of total) sensitive tariff lines for
taking at least half the formula cuts subject to
these lines not exceeding 10% of total imports
during 1999-2001 or
235 (5% of total) sensitive tariff lines for
taking no formula cuts or retaining them as
unbound subject to these lines not exceeding 5% of
total imports during 1999-2001.
Anti
Concentration Clause on Flexibilities
The flexibilities provision could be used by
developing countries to concentrate their
sensitive tariff lines under specific NAMA product
groups. With a view to safeguarding against such a
possibility, it was agreed in the Framework
Agreement that flexibilities could not be used to
exclude entire HS Chapters. This clause is also
known as the anti-concentration clause since the
clause prevents a developing country from
concentrating its flexibilities under a specific
HS Chapter.
During the WTO Mini Ministerial Meeting from
21-29 July, 2008, Mr Pascal Lamy, Director General
of the WTO had brought out an informal text on 25
July, 2008 proposing a 3 tiered coefficient linked
to flexibilities for developing countries as
under:
|
Coefficient |
Flexibilities |
|
20 |
apply at least half the formula cuts on 14%
tariff lines subject to not exceeding 16% of
1999-2001imports; or
keep, as an exception, tariff lines unbound,
or not apply formula cuts on 6.5% tariff lines
subject to not exceeding 7.5% of 1999-2001
imports |
|
22 |
apply at least half the formula cuts on 10%
tariff lines subject to not exceeding 10% of
1999-2001imports; or
keep, as an exception, tariff lines unbound,
or not apply formula cuts on 5% tariff lines
subject to not exceeding 5% of 1999-2001
imports |
|
25 |
No flexibilities |
The
anti concentration clause for flexibilities
mandated that a minimum of either 20% NAMA lines
or 9% of the imports within an HS Chapter must
take the full formula cuts.
Subsequently, in the 4th revision of
the draft modalities on 6 December, 2008 which
reflected the Swiss coefficients; flexibilities
and related anti-concentration/ de – minimis
clause as proposed by DG in the July, 2008 Mini
Ministerial.
Therefore, for the tariff lines bound at 40%, the
final bound rates would be in the range of 13.3%
to 14.2% depending on whether the Swiss
coefficient was 20 or 22 respectively.
Sectoral
Initiatives for Elimination of Customs Tariff in
specific NAMA sectors
Doha Round
Sectoral Initiatives are proposals for the
elimination of customs tariffs in specific NAMA
sectors by WTO Members who comprise a specific
percentage of total trade in that sector (also
known as the critical mass). In the initiative,
the participants agree to eliminate customs
tariffs on imports from the sectoral participants
and other WTO Members in that NAMA sector.
Developing
countries can negotiate for better and more
favourable (also known as special and
differential) terms under sectoral initiatives
namely the harmonization of tariffs at a low level
of x% ( zero for x), removal of sensitive NAMA
products from the sectoral initiative, longer
period than developed countries for implementing
the reduction commitments etc.
The
December, 2005 Hong Kong Ministerial Declaration
states that participation in sectoral initiatives
should be on a non mandatory basis. However,
developed countries have highlighted the
importance of large developing countries like
India joining sectoral initiatives.
Last Status
In the NAMA text of 6 December, 2008, 14 sectoral
proposals are annexed to the draft modalities
which includes automotive and related parts;
bicycle and related parts; chemicals; electronics/
electrical products; fish and fish products;
forest products; gems and jewellery; hand tools;
enhanced healthcare; industrial machinery; raw
materials; sports equipment; textiles clothing and
footwear; and toys. In terms of the number of
proponents, the sectoral initiatives on chemicals,
industrial machinery and electrical/ electronics
have the maximum support. The new text spells out
that participation in sectoral initiatives is on a
non mandatory basis without pre-judging the
outcome. Further, specified group of countries are
to agree to participate on a self-identified basis
in negotiating the terms of sectoral tariff
initiatives, with a view to making them viable.
During
the subsequent negotiations, United States and
some other developed countries have been insisting
that large developing countries like Brazil, China
and India participate in sectoral initiatives of
their interest namely
chemicals, industrial machinery, health care
products (medical devices), electrical and
electronics .
Non
Tariff Barrier (NTB) textual proposals
Doha Round
Non Tariff Measures (NTMs) are all measures on
international trade that are not in the
form of a tariff or a tax. These measures include
trade related procedures such as documentation,
certification and inspections; technical
regulations; standards; import related measures
such as restrictions, prohibitions, seasonal
duties, tariff rate quotas ; foreign exchange
controls including artificial exchange rates;
public procurement practices etc. Certain NTMs
such as imposition of anti-dumping and safeguard
duties have the effect of tariffs. On the other
hand, some measures are intended to protect human,
animal and plant, life and health, and are known
as sanitary and phytosanitary (SPS) measures.
Non Tariff Barriers (NTBs) are a sub-set of NTMs
which violate the obligations under the Agreements
of the WTO. Therefore, NTBs are unfair measures
which serve to discriminate against imports.
The NAMA negotiations focussed on the listing of
NTBs by countries. Subsequently, the Negotiating
Group went into text based negotiations on various
proposals.
Last
Status
In the draft NAMA modalities of 6 December, 2008,
there were 13 NTB textual proposals listed in
Annex 5. These could be categorised as
Horizontal proposals (those related across
sectors)
-
Ministerial Decision on Procedures for the
Facilitation of Solutions to Non-Tariff Barriers
(known as the Horizontal Mechanism)
-
Decision on the elimination of Non-Tariff
Barriers imposed as unilateral trade measures
-
Ministerial Decision on Trade in Remanufactured
Goods
Vertical proposals (related to specific sectors)
Export related proposals
-
Revised submission on Export Taxes
-
Protocol on Transparency in Export Licensing to
the General Agreement on Tariffs and Trade 1994
TBT (Technical Barriers to Trade) related
proposals
-
Understanding on the Interpretation of the
Agreement on Technical Barriers to Trade as
Applied to Trade in Fireworks
-
Understanding on the Interpretation of the
Agreement on Technical Barriers to Trade as
Applied to Trade in Lighter Products
-
Understanding on the Interpretation of the
Agreement on Technical Barriers to Trade as
Applied to Trade in Electronics
-
Decision on non-tariff barriers affecting
forestry products used in building construction
-
Agreement on Non-Tariff Barriers Pertaining to
the Electrical Safety and Electromagnetic
Compatibility (EMC) of Electronic Goods
-
Negotiating Proposal on Non-Tariff Barriers in
the Chemical Products and Substances Sector
-
Understanding on the Interpretation of the
Agreement on Technical Barriers to Trade with
respect to the Labelling of Textiles, Clothing,
Footwear, and Travel Goods
-
Agreement on NTBs pertaining to standards,
technical regulations and conformity assessment
procedures for automotive products.
While listing these 13 proposals, the NAMA text
states that 7 of the proposals merit particular
attention which includes the proposals on the
horizontal mechanism; remanufactured goods; TBT
proposals on electronics (2 in number); vertical
proposals on automotives; labelling in textiles,
clothing, footwear and travel goods; and chemical
products. Subsequently, the EC came out with its
proposal on automobiles thereby putting 14 NTB
proposals on the table.
While
most proposals have little support and are
unlikely to achieve consensus, the three key
proposals under discussions are:
“Ministerial Decision on Procedures for the
Facilitation of Solutions to NTBs” known as the
Horizontal Mechanism
This Horizontal Mechanism was originally mooted
by the NAMA 11(of which India is a Member) and
European Communities (EC) with the support of more
than 100 Members namely the African Group, Canada,
LDCs, New Zealand, Norway, Pakistan and
Switzerland. The Mechanism is an informal dispute
resolution mechanism that explores trade solutions
without affecting the rights and obligations under
the WTO Agreements. It operates through the
existing WTO Committee’s, takes the help of an
expert in the respective field and enables faster
and more economical resolution of NTBs especially
those on products of export interest for
developing countries.
The Procedures have the following salient
features:
Ministerial Decision on Trade in Remanufactured
Goods
The salient features of the proposal driven by
the US are that it seeks to enhance market access
opportunities for remanufactured goods, it seeks a
review of the non tariff measures on importation
of remanufactured goods so that they are in
compliance with multilateral obligations and
putting in place an institutional framework for
consultations as well as discussing progress in
reduction or elimination of non tariff barriers on
remanufactured goods.
Some of the concerns on this proposal are:
·
There is no conceptual clarity on remanufacturing
and the suggested definition in the textual NTB
proposal does not capture the concept of
remanufacturing across various sectors.
·
Re-manufactured imports would adversely affect the
domestic manufacturing sector especially the
unorganised sector and SMEs.
·
It could serve as a conduit for dumping of waste
(including e waste) into developing countries due
to stringent standards elsewhere.
·
Without any extended producer liability (EPL) for
re-manufactured products, there could be grave
environmental implications
·
Issues of customs valuation, misclassification and
intellectual property protection on imports of
re-manufactured products would crop up.
·
Remanufacturing cannot generate the same level of
employment or value addition as manufacture of
the like new goods.
·
In the absence of standards, technical regulations
and conformity assessment procedures (both
domestic and global) for remanufactured goods,
there is a possibility of environmental norms
being flouted.
·
One needs to look at a Work Programme wherein all
these issues are discussed and thereby generates
greater clarity.
TBT
related proposals
9 out of the 14 NTB proposals are vertical in
nature relating to specific NAMA sectors. They
would also have a legal relationship with the
Agreement on Technical Barriers to Trade (TBT
Agreement) and would affect some of the provisions
of the latter. It was in this context that India
took a decision to seek a horizontal solution to
specific NTB in NAMA sectors while retaining some
elements of the vertical solutions wherever it was
applicable. This was to ensure that specific carve
outs for sectors did not create a cobweb of
provisions that could otherwise be addressed
through a horizontal treatment. The EC later
joined India and a joint submission on a
“Framework for Industry Specific proposals” was
made in September, 2009. Work is now going on to
convert this into a negotiating text.
Trade
