Negotiations on Non-Agriculture Market Access (NAMA) before and after Nairobi: Opportunities and Challenges for Indonesia Jully P. Tambunan Directorate of Multilateral Cooperation Directorate General of International Trade Cooperation
Key Presentation Points Introduction to NAMA in the WTO NAMA negotiations in DDA: key Issues Progress made in NAMA negotiations prior to Nairobi Key Positions and Differences on NAMA of major WTO members/groups What happened in Nairobi on NAMA Opportunities and Challenges for Indonesia
(1) Introduction to NAMA in the WTO
INTERNATIONAL TRADE AND GROWTH Trade becomes an engine of economic growth for any countries For Indonesia, trade is also very important as an engine of economic growth. In the 1980 s, Indonesia issued its export development policies (Tambunan 2005). International trade supports countries to focus on special production that has comparative advantages 4
History of the WTO During the multilateral trade negotiations of the Uruguay Round, It was agreed to set up the World Trade Organization (WTO) on 1 January 1995. Since 1 January 1995, multilateral trade negotiations were organized by the WTO. The scope of the negotiations cover goods, services and IPR. Indonesia was an original member of the WTO (now total 164 members); Indonesia has ratified the agreement of WTO in the Law number (UU) No. 7/1994 (2 November 1994) re Ratification of the WTO. Main task of WTO is to support free trade, to eliminate and erase the trade barrier (tariff and non tariff); provide international negotiation forum; solve trade disputes and conduct trade policy reviews among member countries.
Three Pillar of the world economy Based on the three pillars of the Bretton Woods system: IMF (International Monetary Fund) the year 1946; IBRD (International Bank for Reconstruction and Development)/World Bank the year 1945; ITO (International Trade Organization) failed due to the rejection of the US Congress but GATT survived. GATT (General Agreement on Tariff and Trade) in 1947 World Trade Organization/ WTO in 1995.
ORGANIZATIONAL STRUCTURE OF THE WTO
Base Principal of the MULTILATERAL TRADING SYSTIM Non-discrimination MFN Most Favoured Nation : non discrimantion among WTO member countries National Treatment: non discrimination among imported products and domestic product. Transparency: TPRM: Review on trade policies of the WTO member coutries on a regular basis Notifications: submit rules and policies of the trade of WTO member countries. 8
The basic principles of multilateral trading system Reduce trade barriers (tariff and non-tariff) To create trade with more open and predictable Special and Differential Treatment Allowing the members of developing countries to adjust, the flexibility and other treatments Tariff Protection mechanism only; Reciprocity to protect with tariff Apart from the above, trade policy issues that are developed can create more competitive because it eliminates unfair trade practices. Furthermore, trade systems which are developed by WTO can be more competitive becaus it reduces tariffs. More competitive because it reduces unfair trade practices such as dumping and subsidy 9
NAMA negotiations in DDA: key Issues
Doha Mandate on NAMA: reduce or as appropriate eliminate tariffs, including reduction or elimination of tariff peaks, high tariffs & tariff escalation, as well as NTBs, in particular on products of export interest to developing countries take fully into account the special needs & interests of developing & least-developed country participants, including through less than full reciprocity in reduction commitments the overarching principle remains: development 11
Progress Made in NAMA Negotiations prior to Nairobi
Selected Members Binding Coverage Average Applied Tariff Average Bound Tariff Swiss Ave. Bound Tariff Coe 8 Coe 20 Coe 22 Coe 25 US 100 3.1 3.3 2.34 EU 100 4.2 3.9 2.62 Brazil 100 14.1 30.8 12.13 12.83 13.80 China 100 9.1 9.0 6.21 6.39 6.62 Costa Rica 100 4.6 43.1 13.66 14.57 15.82 Egypt 99.2 9.3 27.5 11.58 12.22 13.10 India 70.5 10.2 34.6 12.67 13.45 14.51 Malaysia 81.9 5.5 14.9 8.54 8.88 9.34 Nigeria 7.0 11.1 49.2 14.22 15.20 16.58 Thailand 71.3 8.3 25.4 11.19 11.79 12.60 Indonesia 96.1 6.7 35.6 12.81 13.60 14.69 Source: unknown 13
MODALITAS NAMA WTO Draft Text NAMA Modalitas Fourth Revision, Dec 6 th, 2008 Instrumen Modalitas NAMA a) Tariff Reduction Simple Swiss Formula b) Special and Differencial Treatment (S&D) Azas perlakuan khusus yang berbeda bagi Negara Berkembang (NB) dibandingkan Negara Maju (NM) dalam implementasi modalitas NAMA. Swiss Simple Formula : (untuk Negara Berkembang) koefisien (b) x t 0 (tarif awal) t 1 (tarif akhir) = --------------------------------- koefisien (b) + t 0 (tarif awal) where, t 1 = t 0 = x = Final bound rate of duty Base rate of duty 20, y = 22, z = 25 (to be chosen) = Coefficients for Developing Members. 8 =Coefficient for Develop Members
MODALITAS NAMA WTO Coefficient and Flexibilities for Developing Members Koefisien Formula Untuk NB Fleksibilitas: Opsi 1 (Pemotongan Tarif separuh dari pemotongan tarif dengan formula) Jumlah Post Tarif (%) Nilai Impor Maks (%) Fleksibilitas: Opsi 2 (Tidak dikenakan formula atau post tarif unbound ) Jumlah Post Tarif (%) Nilai Impor Maks (%) Opsi X: 20 14% 16% 6,5% 7,5% Opsi Y: 22 10% 10% 5% 5% Opsi Z: 25 0 0 0 0
MODALITAS NAMA WTO 2. Simulasi Pengurangan Tarif NAMA (Simple Swiss Formula) (1) Current position: Average bound tariff : 36.79% Number of Post Tariff Unbound : 443 Number of total tariff line (2003) : 6446 (2) Application of Swiss formula: No a b c d e f g Description Coefficient: Flex. for Un-Bound: New average bound tariff (%) Average discounted per bound tariff (%) Average Applied Tariff (2003) (%) New average Applied Tariff (2003) (%) Average discounted per Applied Tariff (%) Post Tariff which are discounted to get avg new bound tariff: - Number of (%) post Tarif (2003) - Number of Post Tarif -Number Unbound Tariff which have to be bounded -Number of tariff which are remain unbound (443-419)= Coefficient opt.; Flexibility X Y Z 20 22 25 6,5% 5% 0 12,86 65,06 7,03 6,60 6,19 15,45 997 24 419 13,66 62,87 7,03 6,72 4,44 15,45 997 120 323 14,77 59,85 7,03 6,87 2,32 9,83 634 443 0 Source: Tariff Schedule Indonesia (HS 2002); WTO Sekretariat (Tariff Simulation) Note : 1. Simulation is not including Unbound tariff; 2.Total of Tariff Unbound : 6,87%; 3. Aplied Tariff average of 2010 : 6,7%
Canada EC-15 Japan USA China, PR Hong Kong Indonesia Korea Malaysia (*) Philippines Singapore Thailand Argentina Brazil Chile India Mexico South Africa AVG (%) Results of Uruguay Round: Bound vs Applied Rates 40 35 30 AVG Final Bound AVG MFN Applied 25 20 15 10 5 0 (*) Binding coverage could be overestimated due to partial bindings; Courtesy of South Center 17
What on the table? 2008 Draft Modality Rev.3. Some consider it too complex & needs simplification (Argentina s non-paper) HK Declaration: We adopt a Swiss Formula with coefficients. applied on a line-by-line basis: {a or (x or y or z)} x t 0 t 1 = {a or (x or y or z)} + t 0 where t 1 = Final bound rate of duty t 0 = Base rate of duty a = 8 = Coefficient for developed Members x = 20, y = 22, z = 25 Coefficients for developing Members. Other issues to address: anti-concentration, preference erosion, tariff peaks, high tariffs, tariff escalation, NTBs, sectoral initiatives (14), DFQF, remanufactured goods, environmental goods, different tariff structures 18
Surplus perdagangan nonmigas 2014 lebih besar dari 2013 Perkembangan Ekspor Impor Bulanan Uraian Desember 2013 Nilai (USD Juta) November 2014 Desember 2014 Growth Desember 2014 MoM (%) Growth Desember 2014 YoY (%) Ekspor Impor Selisih Ekspor Impor Selisih Ekspor Impor Selisih Ekspor Impor Ekspor Impor Total 16,967.8 15,455.9 1,511.9 13,616.2 14,041.6-425.7 14,621.3 14,434.5 186.8 7.4 2.8-13.8-6.6 Migas 3,405.1 4,221.6-816.5 2,106.9 3,473.0-1,366.1 2,353.3 3,389.5-1,036.2 11.7-2.4-30.9-19.7 Minyak Mentah 858.6 1,076.0-217.4 752.4 949.0-196.6 877.6 956.6-79.0 16.6 0.8 2.2-11.1 Hasil Minyak 500.8 2,748.5-2,247.7 197.0 2,286.6-2,089.6 228.8 2,218.9-1,990.1 16.1-3.0-54.3-19.3 Gas 2,045.7 397.1 1,648.6 1,157.5 237.4 920.1 1,246.9 214.0 1,032.9 7.7-9.9-39.0-46.1 Nonmigas 13,562.7 11,234.3 2,328.4 11,509.3 10,568.6 940.4 12,268.0 11,045.0 1,223.0 6.6 4.5-9.5-1.7 13732.36 11210.40 13732.36 11210.40 Perkembangan Ekspor Impor Periode Januari-Desember 2013-2014 Uraian Januari-Desember 2013 Nilai (USD Juta) Januari-Desember 2014 Growth Jan-Des 2014 YoY (%) Ekspor Impor Selisih Ekspor Impor Selisih Ekspor Impor Total 182,551.8 186,628.7-4,076.9 176,292.7 178,178.8-1,886.1-3.4-4.5 Migas 32,633.0 45,266.4-12,633.4 30,331.9 43,459.9-13,128.0-7.1-4.0 Minyak Mentah 10,204.7 13,585.8-3,381.1 9,528.2 13,072.4-3,544.2-6.6-3.8 Hasil Minyak 4,299.1 28,567.6-24,268.5 3,623.4 27,362.5-23,739.1-15.7-4.2 Gas 18,129.2 3,113.0 15,016.2 17,180.3 3,025.0 14,155.3-5.2-2.8 Nonmigas 149,918.8 141,362.3 8,556.5 145,960.8 134,718.9 11,241.9-2.6-4.7 The Ministry of Trade of the Republic of Indonesia 19
Key Positions and Differences on NAMA of major WTO members/groups
Tariff Reduction Modalities in NAMA Negotiations In favor of Swiss Formula : MEX, INA, IND, CHN, KOR, PHI, NZ, TAI, EGY, SWS, HK, COL, PER, TUR (It is much clearer where we are going to end up with by adopting the Swiss Formula. It also seeks harmonization of many issues under NAMA) Thinking of averaging as the approach: EU, S-AFR, JAP Majority emphasized open to discuss formula approach & taking O/R to complement Focused on formula-applying Members; Argentina presented its non-paper advocating MFN offer & request approach described earlier 21
Argentina Non-Paper (3 February 2015) referred to Bali Declaration on Post-Bali Work Program: including the need to look at ways that may allow Members to overcome the most critical and fundamental stumbling blocks MFN Treatment Requests & Offers Negotiating Procedures to help building and keeping an ongoing balance country by country negotiation with demand driven results. In such approach no specific defensive tools will be needed Members shall submit bilaterally at their own initiative requests and offers to other members and engage in negotiations with those members in a limited timeframe to be agreed upon There would be the following types of requests: (i) removal of tariffs, charges & other duties on products concerned; (ii) reduction of tariffs, charges & other duties on products concerned; (iii) the binding of unbound products (if applicable); (iv) creation of a TRQ of volume expansion of an existing TRQ 22
Cautions & recommendations from the South Center: Swiss Formula leads to deeper cuts for developing countries Bind only the average tariff, not line-by-line Stop protecting declining industries & cut tariff unilaterally Consider time-bound agreements RI might also: Focus on increasing the binding coverage of as other countries: HK, Korea, Malaysia, Philippines, Singapore, Thailand, India levelling the playing field for RI with major competitors 23
What happened in Nairobi on NAMA
Information Technology Agreement The Information Technology Agreement (ITA) is a plurilateral trade agreement that requires participants to eliminate their tariffs on a specific list of information technology (IT) and telecommunications products. The agreement covers approximately 97 percent of world trade in defined IT products, which is currently estimated to exceed $1 trillion. The ITA is a tariff-cutting agreement focused on trade in information technology goods, and does not include services or software; the agreement does contain a commitment to address non-tariff barriers, but without specifics. It is subject to a "free rider" problem since all WTO members would benefit when the expanded agreement is concluded. Under WTO most-favored nation principles, the non-participating WTO members are able to benefit from the concessions made by other countries while maintaining their own tariffs. In order to minimize the free rider problem, the ITA requires a threshold 90% of global trade coverage to come into force. There are currently 81 participants in the original ITA, including the United States, the 28 members of the European Union (EU), and key East Asian trading partners Japan, South Korea, China and Taiwan
ITA countinue... Products covered under the ITA include computer hardware and peripherals, telecommunications equipment, computer software, semiconductor manufacturing equipment, analytical instruments, and semiconductors and other electronic components. The chart below gives examples of the products in the ITA. The Ministerial Declaration on Trade in Information Technology Products (ITA) was concluded by 29 participants at the Singapore Ministerial Conference in December 1996. The number of participants has grown to 81, representing about 97 per cent of world trade in information technology products. The ITA provides for participants to completely eliminate duties on IT products covered by the Agreement. Indonesia is a member of ITA. After 17 rounds of negotiations, at a meeting on 24 July 2015, nearly all the participants agreed to expand the products covered by the Agreement and eliminate tariffs on an additional list of 201 products Information Technology Agreement 2 ITA2
ITA2 Negotiations In Nairobi Negotiations on the expanded ITA were conducted by 53 WTO members, including both developed and developing countries, which account for approximately 90 per cent of world trade in these products. All WTO members will benefit from the agreement, as they will all enjoy duty-free market access to the markets of the members eliminating tariffs on these products. For every product on the list, ITA2 participants have negotiated the level of reductions and over how many years it will fully eliminate the tariffs. As a result of these negotiations, approximately 65% of tariff lines will be fully eliminated by 1 July 2016. Most of the remaining tariff lines will be completely phased out in four stages over three years. This means that by 2019, almost all imports of the relevant products will be duty free. Indonesia has not yet decided to join the ITA2.
Opportunities and Challenges for Indonesia
Rata-rata Tarif Bea Masuk Challenges for Indonesian Manufactures Tariff MFN Product Non-Agriculture (2010) 18% NON-AGRICULTURE 16% 14% Brasil, 121.238 Country GDP/cap Average Tariff Line GDP (billion) / 2010 12% 10% 8% India, 1.202.762 Cina, 3.127.233 Korea, 614.776 1 EU 32.700,00 4,00% 11.791.878 2 AS 46.860,24 3,30% 11.301.656 3 Japan 42.782,52 2,50% 5.376.915 4 China 4.382,13 8,70% 3.127.233 6% 4% 2% Indonesia, 597.912 Sumber : WTO, 2010, diolah Kemenperin EU, 11.791.878 Jepang, 0% 5.376.915-10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 29 PDB per Kapita 5 Brazil 10.816,48 14,20% 1.530.110 6 India 1.371 10,10% 1.202.762 AS, 11.301.656 7 Korea 20.756,24 6,60% 614.776 8 Indonesia 2.974,02 6,60% 597.912
Daya Saing Global A. TANTANGAN GLOBALISASI BAGI INDUSTRI MANUFAKTUR The Global Competitiveness index 2014-2015 rankings and 2013-2014 comparisons Source: Global Competitiveness Report 2014-2015,World Economic Forum Ranking tertinggi diduduki oleh negara barat yang maju dan tiga macan asia. Posisi Indonesia lebih rendah dari Singapura, Jepang, N.Zealand, Malaysia, Korea dan China. Namun posisi Indonesia lebih baik dari Brazil, Turkey, Mexico, India dan Russia. Ranking Idonesia meningkat 4 point dibandingkan dengan tahun sebelumnya.
Daya Saing Industri Manufaktur A. TANTANGAN GLOBALISASI BAGI INDUSTRI MANUFAKTUR Competitiveness Industrial Performance Index ----- ASEAN FTA Dialog Partners ----- ----- ASEAN ----- Source: Competitiveness Industrial Performance Report, 2012/2013,UNIDO
CONCLUSIONS