Transcript NON-AGRICULTURAL MARKET ACCESS

NON-AGRICULTURAL
MARKET ACCESS
Edwini Kessie
[email protected]
Council and Trade Negotiations Committee
Division, WTO
1
Trade Policy
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
2
Trade Policy
Available instruments
Political ranking (democratic element)
Transparency
Finances
Control
4
Production subsidies
Published
law or
regulation
Budgetary
expenditure
Legislative
and budgetary
control
3
Customs duties
Published
law or
regulation
State revenue
Legislative
control
2
Import restrictions
Published
administrative
act
Revenue for
national
producers
Discretionary
powers
(administration)
1
Voluntary import
restraints
Secret
Revenue for
foreign
producers
Disretionay
powers
(administration)
(global - MFN - quota)
(attributed quota)
Trade Policy
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
Prohibited subject to Exceptions
(global - MFN - quota)
(attributed quota)
Voluntary import
restraints
Prohibited without Exception
3
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.
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).
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.
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.
Purpose of tariff
 government
 economic
 social
 trade
revenue
development
objectives
negotiating leverage
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
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
Types of tariffs
 Ad
valorem tariff
 Specific tariff or non-ad valorem tariff
 Alternative specific tariff
 Compound tariff
 Ad valorem equivalents (AVE)
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
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
Types of tariffs (cont’d)
 Alternative
 An
specific tariff:
alternative specific tariff uses either
an ad valorem or a specific tariff, the
rate payable being whichever rate
returns the higher amount of duty.
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.
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.
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%
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
Tariff bindings
bound rates of duty
 unbound rates of duty
 ceiling bindings
 applied tariff rates

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.

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.
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.
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.

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)
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.
Tariff schedules
Tariff item number
 Description of product
 Base rate of duty (MFN treatment)
 Preferential rates
 Initial negotiating rights
 Other duties and charges (ODCs)

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
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
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
Renegotiations
 Renegotiations
of bound
concessions, modifications, and
withdrawals (GATT Article XXVIII)
– compensation
– calculation of compensation
– retaliation
Negotiating techniques
 Plurilateral
and bilateral approaches
of the multilateral tariff negotiations
– plurilateral negotiations
– bilateral negotiations
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
Negotiating techniques (cont’d)
 assessment
of value of concessions
offered
–simple average reduction
–trade weighted reduction
 revenue foregone
 data requirement and analysis
THE DDA NAMA NEGOTIATIONS
 Results
of the Uruguay Round
 The
Doha Mandate
 The
Negotiating Issues
Tariffs
Uruguay Round Reform Programme
Developed countries
6 years: 1995-2000
Developing countries
10 years: 1995-2004
Average cut for
agricultural products
-36%
-24%
Minimum cut per
product
-15%
-10%
Tariffs
Uruguay Round (1986 - 1994)
Binding
Results
1986
1994
Number of bound tariff lines
Volume of bound trade
Uruguay Round (1986 - 1994)
Results
Binding
Developed countries
94 %
99 %
78 %
1986
1994
Number of bound tariff lines
Volume of bound trade
99 %
Uruguay Round (1986 - 1994)
Results
Binding
Developing countries
72 %
22 %
15 %
1986
1994
Number of bound tariff lines
Volume of bound trade
58 %
Sectoral Agreements in the
Uruguay Round
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Zero for zero
Harmonization
Agricultural equipment
Beer
Construction equipment
Distilled spirits
Furniture
Medical equipment
Paper
Pharmaceuticals
Steel
Toys
Chemicals
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
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
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
NAMA – Negotiating Issues
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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
NAMA – Other issues

Paragraph 6 countries

Treatment of unbound tariffs

Flexibilities for developing countries –
paragraph 8

LDCs, small economies etc

Sectorals

NTBs
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
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
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