Non-Agricultural Market Access (NAMA) Prepared by Wenguo Cai The Conference Board of Canada Jakarta, Indonesia September 9-10, 2015 1 Presentation Outline History of GATT and NAMA DDA NAMA negotiations Current Status Likely Results and Implications for Indonesia 2
What is NAMA? NAMA stands for non-agricultural market access in the WTO negotiations NAMA refers to all products not covered by the AoA: NAMA coverage: manufactured goods, fuels and mining products, fish and fish products and forestry products Importance of NAMA negotiations: NAMA products account for almost 90% of the world merchandise exports 3 Non-Agricultural Products HS 1992 Nomenclatures Chapter 03 Headings: 05.09;15.04, 16.03-16.05 Sub-headings: 23.01.20 Chapters 25-97 Except for the following: 2905.43 and 2905.44 35.01 to 35.05 3809.10 3823.60 41.01 to 41.03 43.01 50.01 to 50.03 51.01 to 51.03 52.01 to 52.03 53.01 and 53.02 Source: WTO TN/MA/S/14 HS 2002 Nomenclatures Chapter 03 Headings: 05.09;15.04, 16.03-16.05 Sub-headings: 23.01.20 Chapters 25-97 Except for the following: 2905.43, 2905.44 & 2905.45 35.01 to 35.05 3809.10 38.23?? 3824.60 41.01 to 41.03 43.01 50.01 to 50.03 51.01 to 51.03 52.01 to 52.03 53.01 and 53.02 4
GATT, Uruguay Round, and NAMA Industrial tariffs were the focus of the GATT from its very beginning Several rounds of tariff reductions Uruguay Round results: Average tariffs: Developed 6.3%-3.8%; Developing countries: 6.8% - 4.3% Tariff bindings: Developed: 78%-99%; Developing countries: 21%-73% 5 Tariff Bindings: Bound and Applied Tariffs Bound tariff: a ceiling level under the WTO commitments above which a Member is not allowed to apply a tariff or go beyond Applied tariff: the tariff effectively applied at the border. The applied tariff is lower than the bound tariff. The difference is called water or binding overhang Why are bound rate and applied rate different Bound rate provides more predictability of trade for its trade partners Applied rate is set below or equal to the bound rate and provides flexibility to that WTO Member 6
Bound and Applied Rates: Some Examples Simple Average MFN Bound Rates Developed: 12.3% Developing: 29.40% LDCs 45.2% Indonesia: 47.3% China: 9.2% Simple Average MFN Applied Rate: Developed: 5.5% Developing: 11.6% LDCs 12.6% Indonesia: 8.6% China: 8.7% 7 Tariff Negotiations in GATT In the first GATT rounds, tariffs were cut on a selective product-by-product though requests and offers Kennedy round: Linear formula/ Tokyo round: Swiss formula Uruguay round: a variety of methods with a comparable target to that of the Tokyo round (1/3 cut) Reduce tariffs, including tariff peaks, high tariffs, tariff escalation and NTBs 8
NAMA Negotiations in DDA Doha round: a formula approach agreed with different coefficients, plus sectoral approach Advantages of a formula approach: Transparency (every member knows how the other will reduce its tariffs) Efficiency (simpler process than the request/offer productspecific approach) Equity (reduction depends on rules rather than power ) Predictability (easy to foresee the results of the negotiations) 9 NAMA Mandate Doha Ministerial Declaration, 2001 On the basis of modalities to be agreed; Reduce tariffs (tariff peaks, high tariffs and tariff escalation) and NTBs All non-agr products without priori exclusions SDT for developing and LDCs Appropriate studies and capacity building for LDCs 10
NAMA and Developing Countries All products, particularly of export interest to developing countries Addressing tariff peaks, tariff escalation and high tariffs Special and differential treat for, and less than full reciprocity by developing countries LDCs are not required to apply the formula or participate in the sectoral approach increasing their binding coverage only 11 NAMA: Flexibilities Exempt a limited number of tariff lines from the formula: Up to 10 of all tariff lines Not more than 10% of national imports (value) Not an entire HS chapter Not full exemption, but half formula reductions Keep a limited number of tariff lines unbound Up to 5% of all tariff lines Not more than 5% of national imports (value) Not an entire HS chapter 12
NAMA and NTB Negotiations No official definition on NTMs or NTBs Normally NTB refers to any measure other than a tariff which protects domestic industry Many NTMs are legitimate and WTO consistent (SPS, TBT, etc) NAMA: identifying, categorizing and examining various NTBs DDA deals with NTBs through bilateral, sectoral, and trade facilitation negotiations. DDA (para. 31) calls for elimination of tariffs and NTBs to environmental goods 13 Groupings in the NAMA Negotiations Friends of Ambition: 8 members, including Canada, USA, EU, Japan, Korea, NZ, Norway, Switzerland NAMA 11: developing, including Indonesia, Argentina, Venezuela, Brazil, Egypt, India, Namibia, Philippines, South Africa and Tunisia Middle Ground: 10 members: Chile, Colombia, Costa Rica, Hong Kong, Israel, Mexico, Pakistan, Peru, Singapore and Thailand LDCs: 32 WTO members SVEs (small, vulnerable economies): 15 members Developing with low tariff binding: 12 members RAMs (recently acceded members): 19 members ACPs: 79 members (48 from Africa, 16 from the Caribbean, and 15 from the Pacific) African Group: 41 members 14
NAMA State of Play Swiss formula with coefficients Cover both simple Swiss formula and a Swiss-type formula Coefficients excludes a single, common coefficients at least two different values In both formulae, what determines the extent of reduction is the value of the coefficient 15 Simple Swiss Formula Final Tariff = coefficient x initial tariff coefficient +initial tariff Applied on every tariff line (HS) and not on average Non-linear: the higher the initial tariff, the greater the cuts Initial tariff: bound rates or marked-up base rate for unbound tariff lines The coefficient becomes the ceiling, irrespective of the initial rates It results in international harmonization of tariffs Coefficients: 5, 10, 15, 20, 30.. 16
Examples of Simple Swiss Formula Coefficient=10 initial - % final - % 10 5.0 40 8.0 100 9.1 200 9.5 Coefficient=20 initial - % final - % 10 6.7 40 13.3 100 16.7 200 18.2 17 Effects of Formula on QUAD Swiss formula coefficient: 10 Current Bound % Final rate % Reduction % Canada 5.8 3.0 29.8 EU 4.0 2.3 23.4 Japan 3.5 2.0 19.8 USA 4.0 2.1 21.2 Average 23.6 18
Effects of Formula on Developing Countries Swiss formula coefficient: 20 Current Bound % Final rate % Reduction % Argentina 30.6 13.0 56.4 Brazil 29.8 12.8 55.4 Egypt 30.5 12.9 50.4 India 46.6 16.6 61.1 Indonesia 36 13.4 57.1 Malaysia 26.5 12.3 46.8 Venezuela 33.8 13.7 59.2 Pakistan 55.6 17.2 67.1 19 Different Modalities Applied Developed Counties: 9 Members, apply the Swiss formula no flexibility Developing countries: 84 members, some apply Swiss formula and some don t. 36 Members: apply the Swiss formula with higher coefficient and leave some lines unbound SVEs: 23 members, exempt from the Swiss formula, subject to a target approach Low binding members: 12 members: exempt increasing their tariff bindings at a target rate RAMs: overlap with others, some flexibilities apply Exempt from tariff reductions: including some RAMs, SVEs and LDCs 20
Base Rates of NAMA Tariff Negotiations 21 Base Rates of NAMA Tariff Negotiations: Non-linear Mark-up MFN Applied Rate Mark-up Base Rate % increase 0 25 25 Infinite 5 25 30 500% 10 25 35 250% 20 25 45 125% 30 25 55 83.3% 40 25 65 62.5% 50 25 75 50.0% 100 25 125 25.0% 22
Sectoral Negotiations Aim: harmonizing or eliminating tariffs in specific sectors ITA What sectors: 14 sectors have been proposed: automotive/parts, bicycles, chemicals, fish, jewelry, forestry, raw material, textiles, toys Sectoral negotiations non-mandatory Key elements of sectoral negotiations: Critical mass requirement Product coverage Implementation period Special and differential treatment 23 Anti-Concentration Clause Prevent members from using the flexibilities to exclude entire sectors from tariff cuts niche exporters The need to balance out the interests of exporting and importing members Not to use the flexibilities to exclude entire HS chapter a minimum threshold on the number of tariff lines (20%) or the amount of imports (9%) subject to full formula tariff reductions Some developing countries argue that their flexibilities should not be unduly constrained The negotiations are continuing. 24
Indonesia and NAMA Negotiations: Discussions Indonesia has been with three negotiating groups in the NAMA negotiations NAMA 11: Coalition of developing countries seeking flexibilities to limit market opening in industrial goods trade Asian developing members (31): general seeking trade interest for Asian developing countries APEC: General APEC region What strategies and positions of Indonesia in the NAMA negotiations? What implications of the NAMA negotiations for Indonesia, particularly for SMEs? 25 Thank you for your attention For more information, contact: cai@conferenceboard.ca 26