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NON-AGRICULTURAL MARKET ACCESS

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Title: NON-AGRICULTURAL MARKET ACCESS


1
NON-AGRICULTURAL MARKET ACCESS
  • Edwini Kessie
  • edwini.kessie_at_wto.org
  • Council and Trade Negotiations Committee
    Division, WTO

2
Trade Policy
1
Economic ranking (efficiency)
Distortions
Production subsidies
Production
1
Customs duties
Consumption
2
Import restrictions

(global - MFN - quota)
(attributed quota)

Price competition
Protection rent - to private
sector (instead of tariff revenue)
legal
uncertainty
3
Voluntary import restraints

4
Protection rent transferred abroad
additional legal uncertainty
3
Trade Policy
2
Production subsidies
4
Published law or regulation
Budgetary expenditure
Legislative and budgetary control
State revenue
Legislative control
Customs duties
3
Published law or regulation
Import restrictions

(global - MFN - quota)
(attributed quota)
2
Published administrative act
Revenue for national producers
Discretionary powers (administration)
Voluntary import restraints
1
Secret
Revenue for foreign producers
Disretionay powers (administration)
4
Trade Policy
3
Legal ranking (WTO)
Production subsidies
Allowed (subject to countervailing measures)

Customs duties
Allowed up to the bound level (Schedules of
tariff concessions)
Import restrictions

(global - MFN - quota)
(attributed quota)
Prohibited subject to Exceptions

Voluntary import restraints
Prohibited without Exception
5
What is a tariff ?
  • A tariff is a customs duty or charge imposed by a
    government on the entry of goods into its
    territory. Usually, it is imposed when goods are
    cleared through customs for domestic consumption.

6
What are internal charges ?
  • In GATT/WTO terms tariffs (ordinary customs
    duties) are different from internal taxes or
    charges such as sales tax, excise duty, or
    value-added taxes. It is permissible to impose
    internal taxes or charges on imported goods, so
    long as the amount of the tax or charge does not
    exceed that applied to like domestic goods. This
    requirement is often referred to as the national
    treatment principle (Article III of GATT 1994).

7
What are other duties and charges (ODCs)?
  • GATT Article II1(b) requires that goods that are
    subject to bound rates of duty shall be exempt
    from other duties and charges of all kinds in
    excess of the bound tariff rate. This requirement
    is necessary as the imposition of such charges,
    or their increase, tend to diminish the value of
    tariff bindings.

8
What are other duties and charges (ODCs)?
  • In order to clarify the rights and obligations of
    Members in respect of other duties and charges,
    it has been agreed that such charges should be
    included in schedules of tariff concessions. This
    requirement is contained in the Understanding on
    the Interpretation of Article II1(b) of GATT
    1994.
  • Where a duty or charge is included in a countrys
    schedule, it becomes bound at a maximum level.
    Any duty or charge omitted from a schedule may
    not be subsequently introduced.

9
Purpose of tariff
  • government revenue
  • economic development
  • social objectives
  • trade negotiating leverage

10
Why are tariffs better?
  • Raise revenue for governments
  • Imports can adjust to changes in demand and
    supply
  • Rate of protection is known
  • Allocation of access - transparency
  • Rent-seeking costs minimised

11
Why are tariffs better? (contd)
  • QRs
  • absolute protection
  • administrative mechanism
  • cost of protection benefits importers or
    exporters
  • incentive to import high value-added products
  • generally fixed by administration
  • Tariffs
  • margin of protection
  • market mechanism
  • cost of protection benefits government
  • no particular incentive to import high
    value-added products
  • generally fixed by legislatures

12
Types of tariffs
  • Ad valorem tariff
  • Specific tariff or non-ad valorem tariff
  • Alternative specific tariff
  • Compound tariff
  • Ad valorem equivalents (AVE)

13
Types of tariffs
  • Ad valorem tariff
  • An ad valorem tariff is expressed as a percentage
    of the value for duty of goods imported. For
    example a duty of 10 means that the total duty
    payable on the goods would be 10 of the declared
    value of the goods.
  • Value of the goods very important under
    invoicing and over-invoicing where rates are high
    and if there are foreign exchange restrictions

14
Types of tariffs (contd)
  • Specific tariff or non-ad valorem tariff
  • A specific tariff is expressed as a monetary
    amount per unit of quantity of the goods.
    Examples are 5 cents per kilogram or 1.10 per
    litre
  • Flat charge per unit or quantity of goods.
  • i.e. 500 per car or
  • 5 cents per kg of sugar

15
Types of tariffs (contd)
  • Alternative specific tariff
  • An alternative specific tariff uses either an ad
    valorem or a specific tariff, the rate payable
    being whichever rate returns the higher amount of
    duty.

16
Types of tariffs (contd)
  • Compound tariff
  • A compound tariff combines a specific duty and
    an ad valorem tariff. In this case, both elements
    are payable. For example, 15 per cent plus 25
    per tonne.

17
Types of tariffs (contd)
  • Ad valorem equivalents (AVE)
  • Where specific tariffs or compound tariffs are in
    force, it is often necessary to provide an AVE to
    enable tariffs to be compared or to measure
    compliance with an ad valorem tariff target.
  • Specific tariffs, and mixed and compound tariffs
    are normally called non-ad valorem tariffs.

18
Types of tariffs (contd)
  • Ad valorem equivalents (AVE)
  • There are several ways to calculate an AVE for
    non-ad valorem Tariffs. Where data is available a
    relatively easy method is to express the amount
    of duty collected for the goods covered by the
    tariff line as a percentage of the value for duty
    of the goods. As an example, if the duty on a
    product was 3.50 per unit, and the total duty
    collected was 80,000 on imports of 175,000, the
    AVE may be calculated as 80000/175000100
    45.7

19
AVEs
  • Methodology to convert non-ad valorem duties
    (specific duties, compound duties etc.,) into ad
    valorem duties
  • Easier to calculate ad-valorem duties, and more
    transparent
  • Increases competition - specific duties tend to
    be immune to swings in world market prices. Even
    if world prices drop, exporter pays the same
    amount of duty
  • The issue has been discussed extensively in the
    agriculture and NAMA negotiations COMTRADE and
    IDB figures

20
Tariff bindings
  • bound rates of duty
  • unbound rates of duty
  • ceiling bindings
  • applied tariff rates

21
General Comments
  • GATT/WTO rules do not specify which types of
    tariffs may be bound
  • Most tariffs are bound on an ad valorem basis but
    examples of specific and alternative specific
    tariffs may also be found, reflecting national
    tariff practice.
  • With the trend towards world trade
    liberalization, there has been a move away from
    the more complicated forms of tariffs in many
    countries.
  • Trend reflected in WTO schedules of tariff
    concessions.

22
General Comments (contd)
  • Ad valorem tariffs allow an easy comparison of
    rates between countries, or the changes to
    average tariffs within a particular country over
    a period of time.
  • Non-ad valorem tariffs (specific tariffs, and
    mixed and compound tariffs) are less transparent
    than ad valorem duties and their protective
    effects are often hard to assess. In general, the
    protective effect of such tariffs increases as
    the cost of imported goods falls, compared with
    the effect of an ad valorem tariff.

23
General Comments (contd)
  • Given the fact that it is mostly developing
    countries which produce cheap products, the
    impact of specific tariffs on their exports, are
    greater than on expensive products manufactured
    in developed countries. Thus, from developing
    countries point of view, they have more to gain
    if non-ad valorem tariffs are converted to ad
    valorem tariffs.

24
General Comments (contd)
  • Alternative specific tariffs also lack clarity
    but they are particularly useful where the
    valuation of goods is often in dispute, for
    example, for used motor vehicles.
  • Over the past decades, not only tariffs have been
    substantially reduced, but specific tariffs have
    also been eliminated considerably.

25
Tariff classification systems
  • WTO members use the Harmonized Commodity
    Description and Coding System (HS) for tariff
    classification, in accordance with the
    International Convention of the World Customs
    Organization (WCO)

26
Customs valuation
  • WTO recognizes that different methods of valuing
    goods for customs purpose may affect the amount
    of duty payable and thus, the value of tariff
    concessions. This issue is addressed in the WTO
    Customs Valuation Agreement.

27
Tariff schedules
  • Tariff item number
  • Description of product
  • Base rate of duty (MFN treatment)
  • Preferential rates
  • Initial negotiating rights
  • Other duties and charges (ODCs)

28
Traditional tariff negotiations
  • Basic rules
  • substantial reduction of tariffs
  • reciprocity and mutuality
  • selective product-by-product negotiations (or
    bilateral item-by-item)
  • principle supplier rule
  • initial negotiating rights (INRs)
  • participation in MTN
  • multilateralization and assessment of bilaterally
    negotiated agreements
  • organization and procedures
  • statistics
  • role of developing countries

29
Recent tariff negotiations
  • New approaches - Formulae for general tariff
    cuts
  • linear reduction formula
  • non-linear cut - harmonization formula (e.g.
    Swiss - Tokyo Round formula)
  • Tariff band approach

30
Recent tariff negotiations (contd)
  • sectoral approach
  • reduction targets (weighted average, zero)
  • basic rules
  • differences to product-by-product negotiations
  • rules valid for both types of negotiations
  • developing countries
  • modalities can be specified for
  • reduction targets for product groups, and/or
  • on product by product basis

31
Renegotiations
  • Renegotiations of bound concessions,
    modifications, and withdrawals (GATT Article
    XXVIII)
  • compensation
  • calculation of compensation
  • retaliation

32
Negotiating techniques
  • Plurilateral and bilateral approaches of the
    multilateral tariff negotiations
  • plurilateral negotiations
  • bilateral negotiations

33
Negotiating techniques (contd)
  • negotiating objective
  • identification of key market and products
  • the effect of the MFN rule
  • preparation of request list and concessions
    sought
  • analysis of tariff requests received
  • evaluation of offers received
  • major suppliers
  • negotiations with substantial suppliers
  • minor suppliers

34
Negotiating techniques (contd)
  • assessment of value of concessions offered
  • simple average reduction
  • trade weighted reduction
  • revenue foregone
  • data requirement and analysis

35
THE DDA NAMA NEGOTIATIONS
  • Results of the Uruguay Round
  • The Doha Mandate
  • The Negotiating Issues

36
TariffsUruguay Round Reform Programme
37
Uruguay Round (1986 - 1994)
Binding
Results
1986 1994
38
Uruguay Round (1986 - 1994)
Binding
Results
Developed countries
1986 1994
39
Uruguay Round (1986 - 1994)
Binding
Results
Developing countries
1986 1994
40
Sectoral Agreements in the Uruguay Round
  • Zero for zero Harmonization
  • Agricultural equipment Chemicals
  • Beer
  • Construction equipment
  • Distilled spirits
  • Furniture
  • Medical equipment
  • Paper
  • Pharmaceuticals
  • Steel
  • Toys

41
Special and Differential Treatment
  • Developed countries reduce/eliminate barriers
  • Developing countries lower levels of
    binding-ceiling bindings
  • Special treatment for least developed

GATT Part 4 Enabling Clause
42
The Doha Mandate
  • Paragraph 16 of the Doha Ministerial Declaration
    (WT/MIN(01)/DEC/1)
  • reduce or as appropriate eliminate tariffs
  • including the reduction or elimination of tariff
    peaks, high tariffs, and tariff escalation
  • as well as non-tariff barriers
  • in particular on products of export interest to
    developing countries

43
The Doha Mandate (cont'd)
  • Product coverage shall be comprehensive and
    without a priori exclusions
  • The negotiations shall take fully into account
    the special needs and interests of developing and
    least-developed country participants
  • Including through less than full reciprocity in
    reduction commitments
  • In accordance with the relevant provisions of
    Article XXVIII bis of GATT 1994 and the
    provisions cited in paragraph 50 of the
    Declaration

44
NAMA Negotiating Issues
  • The formula Simple Swiss Formula with two
    co-efficients or a Swiss-type formula with
    variable co-efficients depending on the average
    tariff rates of Members
  • Overwhelming support for the use of a simple
    swiss formula with two co-efficients
  • Should co-effiecients be within sight of each
    other?
  • Developed countries answer question in the
    affirmative, while most developing countries in
    the negative
  • Proposals range from 5 to 30 per cent

45
NAMA Other issues
  • Paragraph 6 countries
  • Treatment of unbound tariffs
  • Flexibilities for developing countries
    paragraph 8
  • LDCs, small economies etc
  • Sectorals
  • NTBs

46
Relevant NAMA Documents
  • NGMA CHAIRS DRAFT Amb. Girard
  • TN/MA/W/35/Rev.1
  • GC CHAIRS DRAFT Amb. Perez Castillo
  • JOB(03)/150/Rev.1
  • MC CHAIRS DRAFT Derbezs Text
  • JOB(03)/150/Rev.2
  • Annex B of the August 2004 General Council
  • WT/L/579 2 August 2004 Amb. Oshima
  • Hong Kong Ministerial Declaration
  • WT/MIN(05)/Dec 22 December 2005
  • NGMA CHAIRS DRAFT
  • JOB(06)/200/Rev.1 26 June 2006 Amb.
    Stephenson
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