AVE Progress Cited at WTO Mini-Ministerial, Deadline Set for NAMA Tariff-Cutting Formula

Original Publication Date: 
6 March, 2005

GENEVA--Senior officials attending a March 2-4 World Trade Organization "mini-ministerial" in Kenya reported progress on resolving their differences over the conversion of specific tariffs for farm goods into ad valorem equivalents (AVEs) for use in an eventual tariff-cutting formula.
The officials also reported agreement on a time frame for accelerating negotiations on a formula for reducing tariffs on industrial and consumer goods in the Doha Round talks on nonagricultural products (NAMA).
Australian Trade Minister Mark Vaile said in a statement March 4 that participating countries agreed the NAMA formula should be decided by the end of May.

Trade ministers and senior officials from 29 countries took part in the informal mini-ministerial gathering, which began with a working dinner March 2 at the Masai Mara National Reserve and continued March 3-4 in the port city of Mombasa.

Speaking to reporters from Mombasa March 4, acting U.S. Trade Representative Peter Allgeier said the WTO countries in attendance have essentially agreed to sidestep temporarily the more controversial issue of whether tariff conversions for the agriculture formula should be made permanent and to focus on the technical details of the conversion methodology.

Allgeier added that WTO members "seem to be on track" to have the technical issues resolved by the end of the next WTO negotiating session on agriculture, which will take place in Geneva the week of March 14, and to submit data on the conversions for work in April.

'Bindings' Issue Side-Stepped

WTO agriculture negotiating chairman Tim Groser warned Feb. 14 that WTO members needed to settle their differences on the conversion methodology "within weeks" if they are to achieve their goal of finalizing modalities for the farm trade talks by the WTO's December Hong Kong ministerial.
The conversion of specific tariffs--those expressed as a fixed monetary value (such as $10 per ton)--and other non-ad valorem tariffs into ad valorem equivalents (expressed as a percentage of the value of the product) is essential for determining where the specific tariffs will fall in the tiered formula, which members agreed will be the basis for reducing tariffs. The United States, the European Union, Switzerland, Norway, and Bulgaria are the WTO members with the most specific tariffs on agricultural imports.

FIPs Agree to Focus on Method

The talks, however, have been dogged by differences on several issues, chief among them the question of whether the tariff conversions should be made permanent and subject to WTO tariff caps, or "bindings"--as pushed by Brazil and other Latin American countries--or whether the conversions should be limited for use in the tariff-cutting formula, as favored by the EU.

In a March 3 side meeting of the so-called "Five Interested Parties"
(FIPs)--the United States, the EU, Brazil, India, and Australia--an agreement was reached to put the issue to the side and focus on finalizing the methodology.

"Both sides gave up imposing precondition on exchanging the data," Allgeier said. "That's an issue for later in the negotiations. The most important thing is to get the data on the table so that people can really start the negotiations on market access in agriculture."

Allgeier said he believed WTO members were close to a final deal on the methodology. "There's sort of odds and ends [that need to be resolved], but not the basic substance of it," he declared.

In a special meeting in Geneva Feb. 25 devoted to the tariff conversion issue, officials reported possible convergence on several technical issues, such as the base method to be used in making the tariff conversions and how to "filter" anomalies in the conversion (such as price distortions caused by tariff rate quotas (38 ITD, 02/28/05) .

NAMA Formula

On NAMA, where negotiations are seen as lagging behind the farm trade talks, participants at the mini-ministerial generally agreed that any new or revised proposals on the formula for reducing tariffs should be submitted in advance of the next meeting of the WTO's NAMA negotiating group, scheduled for the week of March 14.
Those proposals would be examined at the negotiating group meeting with the aim of narrowing differences, Allgeier said.

Kenya's Commerce Minister Mukhisa Kituyi, the chairman of the mini-ministerial, suggested members shoot for finalizing the NAMA formula by the time of the next WTO mini-ministerial in Paris in early May, according to officials attending the meeting. But Brazilian trade diplomats stressed that the deadline was proposed by the chairman on his own authority.

A number of new initiatives have been forwarded in recent weeks, including a proposal from the European Union that would give developing countries "credits" in the form of lower tariff reduction commitments in return for binding more of their tariff lines or reducing the difference between their bound tariff caps and the rates actually applied.

Three Latin American countries--Mexico, Chile and Colombia--also proposed Feb. 24 a "menu of options" for developing countries, which would allow developing countries to make lower cuts in their tariffs if they agreed to submit all their tariffs to "binding" WTO caps, subject all their tariff lines to the reduction formula, and/or agree to shorter periods for implementing the agreed cuts (38 ITD, 02/28/05) .

Allgeier said the goal was to secure a formula that will combine ambition with flexibility for developing countries. The United States put forward its own proposal earlier this year that would establish different coefficients for developed and developing countries under a "Swiss"
harmonization formula, thus ensuring deeper cuts in higher tariffs while allowing developing countries to maintain some flexibility.

'Critical Mass' of Services Offers Needed

On services, also seen to be lagging behind agriculture, Allgeier said ministers reaffirmed that the services talks are on a par with the agriculture and NAMA talks and that there were a number of discussions on how to raise the level of ambition in the talks.
Kituyi "made it clear that there needs to be a critical mass of services offers, not just in relation to countries but also in terms of coverage of sectors," Allgeier said. "I think the standing of services in the negotiations was very clearly affirmed."

The services negotiations have also been hampered not only by the continued absence of offers--more than 40 countries have yet to submit their initial offers, originally due back in March 2003--but also by what is widely viewed as the poor quality of the offers submitted to date. WTO members are due to submit their revised offers by the end of May.

Most of the offers put forward to date contain no commitments in sectors such as distribution, maritime transport, and construction. Other sectors where offers are weak include health care, education, environmental services, and postal/courier services.

In addition to Australia, Kenya, the EU, and the United States, countries taking part in the Kenya meeting were Argentina, Bangladesh, Benin, Brazil, Canada, Chile, China, Costa Rica, Hong Kong, India, Japan, Jamaica, Kenya, South Korea, Lesotho, Mexico, New Zealand, Nigeria, Norway, Pakistan, Rwanda, Senegal, Singapore, South Africa, Switzerland, Tanzania, and Zambia.