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

2. Available instruments
Trade Policy 1
Available instruments
Economic ranking (efficiency)
Distortions 1
Production subsidies
Production 2
Customs duties
+ Consumption 3
Import restrictions (global - MFN - quota) (attributed quota)
+ Price competition Protection rent - to private sector (instead of tariff revenue) legal uncertainty 4
Voluntary import restraints
+ Protection rent transferred abroad additional legal uncertainty

3. Available instruments
Trade Policy 2
Available instruments
Political ranking (democratic element)
Finances
Transparency
Control 4
Production subsidies
Published law or regulation
Budgetary expenditure
Legislative and budgetary control
State revenue
Legislative control 3
Customs duties
Published law or regulation 2
Import restrictions (global - MFN - quota) (attributed quota)
Published administrative act
Revenue for national producers
Discretionary powers (administration) 1
Voluntary import restraints
Secret
Revenue for foreign producers
Disretionay powers (administration)

4. Available instruments
Trade Policy 3
Available instruments
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 II:1(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 II:1(b) of GATT 1994.
Where a duty or charge is included in a country’s 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? (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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: $80000/175000*100= 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 (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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 (cont’d)
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. Tariffs Uruguay Round Reform Programme

37. Results 88% 83% 70% 44% Uruguay Round (1986 - 1994) Binding 1986 1994
Number of bound tariff lines
Volume of bound trade

38. Results 88% 83% 70% 44% Uruguay Round (1986 - 1994) Binding 1986 1994
99 %
99 %
94 %
Developed countries
88%
83%
78 %
70%
44%
Number of bound tariff lines
Volume of bound trade

39. Results 88% 83% 70% 44% Uruguay Round (1986 - 1994) Binding 22 %
Developing countries
88%
83%
72 %
70%
22 %
15 %
58 %
44%
Number of bound tariff lines
Volume of bound trade

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 CHAIR’S DRAFT – Amb. Girard
TN/MA/W/35/Rev.1
GC CHAIR’S DRAFT – Amb. Perez Castillo
JOB(03)/150/Rev.1
MC CHAIR’S DRAFT – Derbez’s 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 CHAIR’S DRAFT
JOB(06)/200/Rev.1; 26 June 2006 – Amb. Stephenson