GLOBAL UNIONS TRADE, INVESTMENT AND LABOUR STANDARDS (TILS) TASK FORCE, GENEVA, 11-13 APRIL 2005

BRIEFING NOTE ON NON-AGRICULTURAL MARKET ACCESS (NAMA)
NAMA negotiations in the WTO have gained momentum over the last couple of months, and their intensity can be expected to continue to grow in the run up to the 6^th WTO Ministerial Conference in Hong Kong, which will take place on December 13-18. The negotiations are putting a lot of pressure on developing countries, in particular on the smaller and more vulnerable economies, to bind and reduce their import tariffs and to open up their markets for imports from other countries. If not done in the right way, this could lead to sharp increases in imports, relocation of industries, company closures, unemployment, and severe adjustment processes in many sectors and countries.
This briefing note, which summarises significant research findings and other sources of information, seeks to explain in adequate detail what NAMA is, what the important and controversial issues in the negotiations are, and what the major impact on production and employment is likely to be. 
 What is NAMA?

1. NAMA is the acronym for Non Agricultural Market Access, and refers to one of the ongoing negotiating groups in the WTO Doha Development Round. These NAMA negotiations focus on market access for a wide range of non-agricultural products, basically all products that are not covered by the agriculture negotiations or the services negotiations. NAMA products therefore include fish and fishery products, wood and forestry products, electronics, manufactures, automotive products, machinery, textiles, clothing, leather, chemical products, and mining products.
2. The negotiations aim to reduce and eliminate the barriers that restrict trade in these products. Negotiations therefore focus on the reduction of tariffs and non-tariff barriers (NTBs). Non-tariff barriers include, for example, quotas, safety and health standards, technical requirements, packaging requirements, and environmental standards. A complete list of NTBs to be addressed in the negotiations has not yet been decided upon, and some of these barriers are already the subject of negotiations in other groups, such as subsidies, technical barriers to trade (TBTs) and Sanitary and Phytosanitary measures (SPS). Other barriers are likely to be covered by the negotiations on trade facilitation.

 The Doha mandate

1. The ongoing negotiations are based on the mandate that was given for the Doha Round at the 4^th WTO Ministerial Conference (Doha, Qatar, November 2001). The Doha mandate states that NAMA negotiations should address:

• tariff peaks – these are tariffs that are three times higher than the average tariff applied by a country, in order to protect a certain sector or products. Not all high tariffs are tariff peaks, since tariff peaks are defined in relative terms, as tariffs that are high in comparison to the average level of tariffs that the country applies;
• high tariffs;
• tariff escalation – tariffs that increase when the value added of a product increases. For example, average tariffs for natural resources are 5%, whereas average tariffs for processed natural resources are 15%;
• and non-tariff barriers (NTBs, such as quotas and technical requirements). According to the Doha text, these should be addressed in particular for those products that are of interest to developing countries.

1. The Doha text states the need for comprehensive product coverage, and for less than full reciprocity, which means that developing countries should be allowed to decrease tariffs to a lesser extent than industrialised countries and spread commitments over a longer time period. And finally, paragraph 16 of the Doha text says: “the modalities to be agreed will include appropriate studies and capacity-building measures to assist least-developed countries to participate effectively in the negotiations”.

NAMA negotiations

1. A first proposal for modalities for NAMA negotiations was made in 2003 by the Swiss chairman of the NAMA negotiating group, Pierre-Louis Girard. The main elements of the Girard text included a Swiss formula (cutting higher tariffs by a larger percentage than lower tariffs in order to achieve harmonising of tariffs), a sectoral initiative for the full elimination of tariffs in seven sectors, and some elements of Special and Differential Treatment (S&D) for developing countries.
2. During the Cancún Ministerial in 2003, a second text on NAMA was proposed, the so-called Derbez text. This text was based on the Girard text, but left more flexibility. The text included a non-linear  formula (i.e. harmonising of tariffs, with similarities to the Swiss formula) and a proposed sectoral initiative (without specifying the sectors). This text was not adopted in Cancún, and was the subject of considerable opposition from developing countries, in particular from the G-90 countries (Africa, least developed countries (LDCs) and ACP countries).
3. During the July 2004 General Council meeting at the WTO, a number of developing countries strongly opposed the inclusion of the Derbez text on NAMA in the July package.  They wanted to include several further proposals in future work; asked for the non-linear formula to be deleted; asked for alternative language to the proposal that “unbound tariffs should be bound at twice the applied rate”; wanted the sectoral tariff component to be voluntary; and asked for more flexibility in tariff cuts and tariff bindings.
4. However these proposals were reflected only in an introductory paragraph that was added to the annex on NAMA. The July text on NAMA was similar to the Cancún proposal (the Derbez text) except for that paragraph.  The text had the following elements:

• A formula approach for tariff reduction and for reduction or elimination of tariff peaks, tariff escalation and high tariffs. This formula approach included the following elements:

1. no a priori exclusion of products;
2. reductions in tariffs from bound rates (bound rates indicate the maximum tariff level a country can apply), or from twice the applied most favoured nation (MFN) rate in the case of unbound tariffs (taking the level applied in 2001 as the base year);
3. credit for autonomous liberalisation (trade liberalisation on an MFN basis that was undertaken independently from the WTO negotiations);
4. conversion of non-ad valorem duties (based on quantity) into ad valorem duties (based on product value) and binding of ad valorem duties;

• Countries that had bound less than 35% of their tariffs would be exempt from tariff reductions through the formula, but have to bind 100% of their tariff lines[1];
• A sectoral approach, aiming at eliminating or harmonising tariffs in a specific sector. Seven sectors had been identified previously (in the Girard proposal) for this sectoral approach.

9. The only difference with the Derbez text was that the July text had an introductory paragraph which stated that: “This Framework contains the initial elements for future work on modalities by the Negotiating Group on Market Access. Additional negotiations are required to reach agreement on the specifics of some of these elements.  These relate to the formula, the issues concerning the treatment of unbound tariffs in indent two of paragraph 5, the flexibilities for developing-country participants, the issue of participation in the sectoral tariff component and the preferences.  In order to finalise the modalities, the Negotiating Group is instructed to address these issues expeditiously in a manner consistent with the mandate of paragraph 16 of the Doha Ministerial Declaration and the overall balance therein.”  This was taken to mean that further discussion was needed on the formula, on tariff binding, on participation in the sectoral approach, on preferences and on flexibilities for developing countries.

Where do negotiations stand?

10. There are substantial differences between most industrialised and most developing countries. Most industrialised countries are being very ambitious in their proposals, whereas most developing countries are defensive. The main focus at the moment is on:

• Product coverage: It still has to be determined which products will be covered by NAMA negotiations.
• The formula: Some new elements have been added such as the possibility to have one formula with two different coefficients, one for industrialised and one for developing countries, proposed by the US (in exchange for less S&D, and for participation of developing countries in the sectoral negotiations).

[1]              Those tariff lines had to be bound at an average level that does not exceed the overall average of bound tariffs for all developing countries after full implementation of current concessions.

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