04 tariff negotiation

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SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK SEATRANET ADVANCED COURSE NON AGRICULTURAL MARKET ACCESS (NAMA) Module TARIFF NEGOTIATIONS SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Outline of Module Nature of tariff Negotiations Request – Offer Negotiations Formula Negotiations Sectoral Negotiations, including zero for zero Regional Agreements The Doha Development Agenda (DDA) SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Nature of Tariff Negotiations SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Nature of Tariff Negotiations Domestic Priorities • Export interests and import sensitivities • Support of domestic Economic and Social Policy – Economic development, national or regional – Social development, including employment of women – Political SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Export Interests and Gender Equality • Trade expansion creates jobs in export-oriented sectors • In many developing countries women often account for 53-90% of workers in export sectors • Women cannot easily move to more skilled or highly paid jobs • Export sectors can be identified, which create new opportunities both in current jobs and for future training SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Import/Export Sensitivity and Gender Equality • Traditional export-oriented sectors – textile and clothing – dominated by female employees may continue to be treated as sensitive • Prospective, new, potentially more highly paid, employment can be treated as sensitive on a prospective basis • Clearly, trade policy by itself not a cure for gender inequality, but rather part of a domestic policy package aimed at taking advantage of trade liberalization and minimizing any negative effects SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Request – Offer Negotiations SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Request – Offer Negotiations •Each Participant (Country) makes specific requests of other countries, and they respond with offers Success is when the balance is perceived as equal or approximate • Can have a target overall percentage reduction or simply continue to exchange until offers are exhausted and perceived balance is reached • These bilateral negotiations are kept secret until agreement is reached SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Benefits of Request – Offer Negotiations •Focused tariff reduction on areas of greatest interest with level of reduction dependant on interest •Potential for exclusion or minimization of tariffs of greatest sensitivity •Potential for smaller economies to be free riders (under the radar) as all benefits are MFN 10 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK The ABI Swiss Formula •The higher the tariff, the deeper the cut •The larger the coefficient (B) the smaller the cut • The coefficient (B) is modified by the multiplier Tavg which reflects the current tariff structure of the individual member –Higher tariffs continue to be reduced more, but the level of reduction will be less for a country with a high average tariff 49 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK The ABI Swiss Formula •Proponents of this type of formula also wish to have access to the flexibilities for developing members proposed in paragraph of the July 2004 framework • Both types of formulae cut tariff peaks, tariff escalation and high tariffs • The harmonizing effect of the simple Swiss formula is greater both within and among members, as the highest possible tariff will be the same for all 50 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Tariff Negotiations in the DDA Issues •From what base rate should reductions will be made? -The Hong Kong Ministerial agreed “we adopt a non-linear mark-up approach to establish a base rate for commencing tariff reductions.” •How will unbound tariffs be treated? 51 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Tariff Reductions in the DDA Issues • Currently two types of proposals (although others have been raised) - The first is to add a fixed percentage to each unbound tariff and bind them - An example would be to add percentage points to each unbound tariff 52 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Non Linear Mark-up Unbound Applied Tariff Rate 15 20 25 35 50 New Base Rate 10 20 25 30 40 55 Percentage Mark-up -500 250 100 33.3 25 20 14.3 10 53 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Tariff Reductions in the DDA Issues •A second type would use different mark-up rates with more added to lower unbound tariffs • This would reduce the non-linear aspect of the previous example 54 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Tariff Reductions in the DDA Issues •Sectoral discussions continue on a voluntary basis –Sectors under consideration include bicycles, chemicals, electronics/electronic equipment, fish, footwear, forest products, gems and jewelry, pharmaceuticals and medical equipment, raw materials, sporting goods, apparel, autos and textiles 55 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK • • • • Doha Development Agenda Sectoral issues product coverage elimination or harmonization phasing critical mass - Results will be MFN 56 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Current State of NAMA Negotiations July 17, 2007, Chair tabled draft Modalities - Not a consensus document • Based on five general observations – All will have to change positions – All must contribute – Special treatment for developing countries – Comparable ambition with agriculture – Differentiated groups of countries 57 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK • Proposed NAMA Modalities Simple Swiss formula with two coefficients – – Developed coefficient 8-9 Developing coefficient 19-23 • Bind tariffs with non linear 20% markup • Differentiated reduction periods of equal reductions for developed, for developing 58 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK • Proposed NAMA Modalities Added a new flexibility for developing countries – One option: use flexibility coefficient b+3 • Sectoral voluntary in addition to formula • Special flexibilities for developing countries with low binding coverage 59 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Proposed NAMA Modalities • Special treatment for small vulnerable countries • Least Developed Countries – Exempt from tariff reductions – Will considerably increase binding coverage – Developed will implement H K commitment to tariff free 60 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Proposed NAMA Modalities • Recently acceded members (RAMs) special treatment including year grace period and year tariff reduction period extension – Viet Nam not required to reduce tariffs • Preference erosion to be reduced by extending tariff reduction period for specific goods of interest by years 61 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Current Status June 3, 2008: Chairman temporarily suspends discussions as little progress achieved Talks were later resumed to lead into July 2008 “mini-ministerial” 62 SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK DOHA Current Situation • Technical negotiations resumed with gradual progress – Committee chairs drafted texts to assist reaching consensus on modalities – Mini-Ministerial meeting in July 2008 moved forward, but negotiations broke down again over special safeguards for agriculture • But US Fast Track Authority has already expired – Election cycles in several key members make an agreement difficult before 2009-10 63 ... TRADE POLICY TRAINING NETWORK Outline of Module Nature of tariff Negotiations Request – Offer Negotiations Formula Negotiations Sectoral Negotiations, including zero for zero Regional Agreements... SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Nature of Tariff Negotiations SOUTH EAST ASIA TRADE POLICY TRAINING NETWORK Nature of Tariff Negotiations Domestic Priorities • Export interests and... main types of formula: – A tariff independent formula is not dependent, in any way, on the initial tariff rate Simple example: just reduce every tariff by a fixed rate – A tariff dependent formula
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