This article originally appeared in The Financial Express (June 28, 2006). The author is with Centad.
The views are personal.
The draft report by Ambassador Don Stephenson, the chair of the non-agriculture market access (NAMA) committee in the WTO, has only served to further consolidate and build developed countries’ interests. Although there exist several disconcerting issues in the text of the draft report, the cake clearly is taken away by fresh stipulations, which seek to link the architecture of the tariff reduction formula to ‘real market access’, at the very tail end of negotiations. The obvious intent is to push the developing countries into reducing tariffs from their applied tariff rates. While the NAMA-11 group of developing countries, including India, have protested against these formulations, it must also be understood that a good part of the blame lies at their own door given the history of compromises and easy give-ins throughout the NAMA negotiations.
The flip-flop of developing countries like India on the issue of tariff reduction formula merits attention here. It is worth recalling that tariff reduction in NAMA is to be achieved by using a mathematical formula such as the ‘Swiss formula’. A ‘Swiss formula with two coefficients’, championed by developed countries such as the US and the EU, is the simple ‘Swiss formula’ that cuts tariffs very steeply. On the other hand, ‘Swiss formula with multiple coefficients’ such as the one proposed by Argentina, Brazil and India (ABI) last year, is relatively soft on tariffs and also gives due consideration to the existing tariff structure of a particular country.
However, developments post-the Hong Kong (HK) ministerial conference have demonstrated that the proponents of the ABI formula have abandoned their own baby. This compromise has happened in spite of the HK declaration stating that a ‘Swiss formula with coefficients’ will be adopted.
The report also states in the same breath that there is a broader and stronger support for the pure ‘Swiss formula’. This dangerous assertion has not been attacked by NAMA-11, clearly showing that the pure ‘Swiss formula’ has been accepted and the ABI formula buried forever. This abandonment of the ABI formula by India is the latest compromise.
In the past, India compromised by giving up its demand for a linear formula to cut tariffs. And, again, by accepting to bind all the tariff lines. Such concessions are justified by arguing that compromises have to be made in global trade talks and that concessions in NAMA will enable India to clinch a favourable deal on services. This is a flawed argument, as developed countries do not seem to be in the mood to give anything on services. Moreover, all potential gains in services are mere promissory notes in anticipation of which India seemingly has already conceded a lot in NAMA.
One reason that has been voiced for giving up the ABI formula is lack of support from other developing countries. This argument is also untenable. The opposition of many developing countries to the ABI formula was known even before it was formally proposed. Instead of searching for innovative solutions to push the ABI formula, such as proposing a ‘mark-up’ for countries that have low-bound tariff rates, India decided to get into the compromising mode risking its entire manufacturing sector. In the given circumstances, collapse of the round seems to be the only way out.
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