Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Non-Agricultural Market Access (NAMA) Prepared by Wenguo Cai The Conference Board of Canada Jakarta, Indonesia September 9-10, 2015 1 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Presentation Outline • History of GATT and NAMA • DDA NAMA negotiations • Current Status • Likely Results and Implications for Indonesia 2
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) What is NAMA? • NAMA stands for non-agricultural market access in the WTO negotiations • NAMA refers to all products not covered by the AoA: – NAMA coverage : manufactured goods, fuels and mining products, fish and fish products and forestry products – Importance of NAMA negotiations: NAMA products account for almost 90% of the world merchandise exports 3 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Non-Agricultural Products HS 1992 Nomenclatures HS 2002 Nomenclatures • Chapter 03 • Chapter 03 – Headings: 05.09;15.04, 16.03-16.05 – Headings: 05.09;15.04, 16.03-16.05 – Sub-headings: 23.01.20 – Sub-headings: 23.01.20 • Chapters 25-97 • Chapters 25-97 • Except for the following: • Except for the following: – 2905.43 and 2905.44 – 2905.43, 2905.44 & 2905.45 – 35.01 to 35.05 – 35.01 to 35.05 – 3809.10 – 3809.10 – 3823.60 – 38.23 ?? – 41.01 to 41.03 – 3824.60 – 43.01 – 41.01 to 41.03 – 50.01 to 50.03 – 43.01 – 51.01 to 51.03 – 50.01 to 50.03 – 52.01 to 52.03 – 51.01 to 51.03 – 53.01 and 53.02 – 52.01 to 52.03 – Source: WTO – TN/MA/S/14 – 53.01 and 53.02 4
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATT, Uruguay Round, and NAMA • Industrial tariffs were the focus of the GATT from its very beginning • Several rounds of tariff reductions • Uruguay Round results: – Average tariffs: Developed 6.3%-3.8%; Developing countries: 6.8% - 4.3% – Tariff bindings: Developed: 78%-99%; Developing countries: 21%-73% 5 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Tariff Bindings: Bound and Applied Tariffs • Bound tariff: a ceiling level under the WTO commitments above which a Member is not allowed to apply a tariff or go beyond • Applied tariff: the tariff effectively applied at the border. The applied tariff is lower than the bound tariff. The difference is called “water” or “binding overhang” Why are bound rate and applied rate different • – Bound rate provides more predictability of trade for its trade partners – Applied rate is set below or equal to the bound rate and provides flexibility to that WTO Member 6
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Bound and Applied Rates: Some Examples • Simple Average MFN • Simple Average MFN Bound Rates Applied Rate: – Developed: 12.3% – Developed: 5.5% – Developing: 29.40% – Developing: 11.6% – LDCs 45.2% – LDCs 12.6% – Indonesia: 47.3% – Indonesia: 8.6% – China: 9.2% – China: 8.7% 7 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Tariff Negotiations in GATT • In the first GATT rounds, tariffs were cut on a selective product-by-product though requests and offers • Kennedy round: Linear formula/ Tokyo round: Swiss formula • Uruguay round: a variety of methods with a comparable target to that of the Tokyo round (1/3 cut) • Reduce tariffs, including tariff peaks, high tariffs, tariff escalation and NTBs 8
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA Negotiations in DDA • Doha round: a formula approach agreed with different coefficients, plus sectoral approach • Advantages of a formula approach: – Transparency (every member knows how the other will reduce its tariffs) – Efficiency (simpler process than the request/offer product- specific approach) – Equity (reduction depends on rules rather than “power”) – Predictability (easy to foresee the results of the negotiations) 9 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA Mandate • Doha Ministerial Declaration, 2001 – On the basis of modalities to be agreed; – Reduce tariffs (tariff peaks, high tariffs and tariff escalation) and NTBs – All non-agr products without priori exclusions – SDT for developing and LDCs – Appropriate studies and capacity building for LDCs 10
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA and Developing Countries • All products, particularly of export interest to developing countries • Addressing tariff peaks, tariff escalation and high tariffs • Special and differential treat for, and “less than full reciprocity” by developing countries • LDCs are not required to apply the formula or participate in the sectoral approach – increasing their binding coverage only 11 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA: Flexibilities • Exempt a limited number of tariff lines from the formula: – Up to 10 of all tariff lines – Not more than 10% of national imports (value) – Not an entire HS chapter – Not full exemption, but half formula reductions • Keep a limited number of tariff lines unbound – Up to 5% of all tariff lines – Not more than 5% of national imports (value) – Not an entire HS chapter 12
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA and NTB Negotiations • No official definition on NTMs or NTBs • Normally NTB refers to any measure other than a tariff which protects domestic industry • Many NTMs are legitimate and WTO consistent (SPS, TBT, etc) • NAMA: identifying, categorizing and examining various NTBs • DDA deals with NTBs through bilateral, sectoral, and trade facilitation negotiations. • DDA (para. 31) calls for elimination of tariffs and NTBs to environmental goods 13 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Groupings in the NAMA Negotiations • Friends of Ambition: 8 members, including Canada, USA, EU, Japan, Korea, NZ, Norway, Switzerland • NAMA 11: developing, including Indonesia, Argentina, Venezuela, Brazil, Egypt, India, Namibia, Philippines, South Africa and Tunisia • Middle Ground: 10 members: Chile, Colombia, Costa Rica, Hong Kong, Israel, Mexico, Pakistan, Peru, Singapore and Thailand • LDCs: 32 WTO members • SVEs (small, vulnerable economies): 15 members • Developing with low tariff binding: 12 members • RAMs (recently acceded members): 19 members • ACPs: 79 members (48 from Africa, 16 from the Caribbean, and 15 from the Pacific) • African Group: 41 members 14
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) NAMA State of Play • “Swiss formula” with coefficients • Cover both simple Swiss formula and a Swiss-type formula • Coefficients excludes a single, common coefficients – at least two different values • In both formulae, what determines the extent of reduction is the value of the coefficient 15 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Simple Swiss Formula • Final Tariff = coefficient x initial tariff coefficient +initial tariff – Applied on every tariff line (HS) and not on average – Non-linear: the higher the initial tariff, the greater the cuts – Initial tariff: bound rates or marked-up base rate for unbound tariff lines – The coefficient becomes the ceiling, irrespective of the initial rates – It results in international harmonization of tariffs – Coefficients: 5, 10, 15, 20, 30.. 16
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Examples of Simple Swiss Formula • Coefficient=10 • Coefficient=20 initial - % final - % initial - % final - % 10 6.7 10 5.0 40 13.3 40 8.0 100 16.7 100 9.1 200 18.2 200 9.5 17 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Effects of Formula on QUAD Swiss formula coefficient: 10 Current Bound % Final rate % Reduction % Canada 5.8 3.0 29.8 EU 4.0 2.3 23.4 Japan 3.5 2.0 19.8 USA 4.0 2.1 21.2 Average 23.6 18
Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Effects of Formula on Developing Countries Swiss formula coefficient: 20 Current Bound % Final rate % Reduction % Argentina 30.6 13.0 56.4 Brazil 29.8 12.8 55.4 Egypt 30.5 12.9 50.4 India 46.6 16.6 61.1 Indonesia 36 13.4 57.1 Malaysia 26.5 12.3 46.8 Venezuela 33.8 13.7 59.2 Pakistan 55.6 17.2 67.1 19 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Different Modalities Applied • Developed Counties: 9 Members, apply the Swiss formula – no flexibility • Developing countries: 84 members, some apply Swiss formula and some don’t. – 36 Members: apply the Swiss formula with higher coefficient and leave some lines unbound – SVEs: 23 members, exempt from the Swiss formula, subject to a “target approach” – Low binding members: 12 members: exempt – increasing their tariff bindings at a target rate – RAMs: overlap with others, some flexibilities apply – Exempt from tariff reductions: including some RAMs, SVEs and LDCs 20
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