Title: NON-AGRICULTURAL MARKET ACCESS
1NON-AGRICULTURAL MARKET ACCESS
- Edwini Kessie
- edwini.kessie_at_wto.org
- Council and Trade Negotiations Committee
Division, WTO
2Trade 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
3Trade 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)
4Trade 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
5What 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.
6What 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).
7What 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.
8What 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.
9Purpose of tariff
- government revenue
- economic development
- social objectives
- trade negotiating leverage
10Why 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
11Why 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
12Types of tariffs
- Ad valorem tariff
- Specific tariff or non-ad valorem tariff
- Alternative specific tariff
- Compound tariff
- Ad valorem equivalents (AVE)
13Types 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
14Types 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
15Types 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.
16Types 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.
17Types 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.
18Types 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
19AVEs
- 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
20Tariff bindings
- bound rates of duty
- unbound rates of duty
- ceiling bindings
- applied tariff rates
21General 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.
22General 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.
23General 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.
24General 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.
25Tariff 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)
26Customs 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.
27Tariff schedules
- Tariff item number
- Description of product
- Base rate of duty (MFN treatment)
- Preferential rates
- Initial negotiating rights
- Other duties and charges (ODCs)
28Traditional 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
-
29Recent 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
30Recent 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
31Renegotiations
- Renegotiations of bound concessions,
modifications, and withdrawals (GATT Article
XXVIII) - compensation
- calculation of compensation
- retaliation
32Negotiating techniques
- Plurilateral and bilateral approaches of the
multilateral tariff negotiations - plurilateral negotiations
- bilateral negotiations
33Negotiating 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
34Negotiating techniques (contd)
- assessment of value of concessions offered
- simple average reduction
- trade weighted reduction
- revenue foregone
- data requirement and analysis
35THE DDA NAMA NEGOTIATIONS
- Results of the Uruguay Round
- The Doha Mandate
- The Negotiating Issues
36TariffsUruguay Round Reform Programme
37Uruguay Round (1986 - 1994)
Binding
Results
1986 1994
38Uruguay Round (1986 - 1994)
Binding
Results
Developed countries
1986 1994
39Uruguay Round (1986 - 1994)
Binding
Results
Developing countries
1986 1994
40Sectoral Agreements in the Uruguay Round
- Zero for zero Harmonization
- Agricultural equipment Chemicals
- Beer
- Construction equipment
- Distilled spirits
- Furniture
- Medical equipment
- Paper
- Pharmaceuticals
- Steel
- Toys
41Special 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
42The 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
43The 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
44NAMA 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
45NAMA Other issues
- Paragraph 6 countries
- Treatment of unbound tariffs
- Flexibilities for developing countries
paragraph 8 - LDCs, small economies etc
- Sectorals
- NTBs
46Relevant 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