WTO NAMA NEGOTIATIONS: ILLUSTRATION ON SELECTED ISSUES

1. WTO NAMA NEGOTIATIONS: ILLUSTRATION ON SELECTED ISSUES Saad Belghazi, Economist, consultant Beirut, November, 11, 2009 Email: belghazi@mtds.com

2. Plan • Building on Uruguay Round results • NAMA negotiations process: present situation • Negotiation Agenda • Formula • Some comments from the Arab countries and Morocco point of view

3. I – Building on Uruguay Round results

4. 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

5. 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)

6. 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

7. II - NAMA negotiations process: present situation

8. NAMA Doha Agenda NAMA 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”

9. 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

10. 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

11. 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

12. 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 tariff • Non 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 years • Developing Members : 11 reductions, in equal rates in 10 years

13. Flexibilities on the formula for Developing Countries

14. III - comments from the Arab countries and Morocco point of view

15. 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)

16. Bound Duties for Non-agricultural Productsof Arab countries

17. 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.

18. Simulation

19. preferences: enhanced erosion • The 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.

20. 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