POLICY FOR THE TEAM OF NEGOTIATORS FOR Project funded by the - PowerPoint PPT Presentation

SHORT TRAINING IN TRADE POLICY FOR THE TEAM OF NEGOTIATORS FOR Project funded by the ETHIOPIA’S WTO ACCESSION European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF Module 3: Preparation of offers for non-agricultural products 28 - 31 March 2011 Derk Bienen Day1/Session 2: How are schedules prepared? – Negotiations on market access bkp DEVELOPMENT RESEARCH & CONSULTING

Overview – Session 2 1. GATT/WTO tariff negotiations on non-agricultural products  Principles of tariff negotiations  GATT negotiations on tariffs  Negotiation techniques for tariff reductions  History of negotiations and outcomes 2. Accession negotiations on tariffs  Difference to “normal” negotiation rounds 1 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

GATT/WTO tariff negotiations on non-agricultural products 2 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate (1) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations “1. The Contracting Parties recognize that customs duties often constitute serious obstacles to trade; thus negotiations on a reciprocal and mutually advantageous basis, directed to the substantial reduction of the general level of tariffs and other charges on imports and exports and in particular to the reduction of such high tariffs as discourage the importation even of minimum quantities, and conducted with due regard to the objectives of this Agreement and the varying needs of individual contracting parties, are of great importance to the expansion of international trade. The Contracting Parties may therefore sponsor such negotiations from time to time.” 3 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate explained (1) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations § 1  importance of tariff negotiations  common recognition of the trade-restrictive effects of tariffs on international trade, in particular of those which are high and discourage the importation even of minimum quantities  mandate  calls for multilateral tariff negotiations to take place periodically  the principle of tariff negotiations  explicitly calls for these to take place on a ''reciprocal and mutually advantageous'' basis 4 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate (2) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations “2. (a) Negotiations under this Article may be carried out on a selective product-by-product basis or by the application of such multilateral procedures as may be accepted by the Contracting Parties concerned. Such negotiations may be directed towards the reduction of duties, the binding of duties at then existing levels or undertakings that individual duties or the average duties on specified categories of products shall not exceed specified levels. The binding against increase of low duties or of duty-free treatment shall, in principle, be recognized as a concession equivalent in value to the reduction of high duties. (b) The Contracting Parties recognize that in general the success of multilateral negotiations would depend on the participation of all Contracting Parties which conduct a substantial proportion of their external trade with one another.” 5 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate explained (2) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations § 2  use of tariff negotiating techniques ( § 2(a))  selective product-by-product basis (i.e. request-offer) or  other multilateral procedures as agreed by the Contracting Parties  objective of tariff negotiations ( § 2(a))  reduction of duties  binding of duties at then existing levels or  undertakings that individual duties or the average duties on specified categories of products shall not exceed specified levels  recognition that multilateral trade liberalization is based on the participation of all Contracting Parties ( § 2(b)) 6 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate (3) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations “3. Negotiations shall be conducted on a basis which affords adequate opportunity to take into account: (a) the needs of individual Contracting Parties and individual industries; (b) the needs of less-developed countries for a more flexible use of tariff protection to assist their economic development and the special needs of these countries to maintain tariffs for revenue purposes; and (c) all other relevant circumstances, including the fiscal, developmental, strategic and other needs of the Contracting Parties concerned.” 7 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Mandate explained (3) Article XXVIIIbis GATT 1947/1994: Tariff Negotiations § 3  tariff negotiations should take into account the varying needs of individual contracting parties, especially developing countries which need  a more flexible use of tariff protection to assist their economic development and  to maintain tariffs for revenue purposes.  What about accession countries? 8 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

1. Principles of tariff negotiations Summary The key principles (1) reciprocity and mutual advantage  Exception: SDT for developing countries - Non-reciprocal preferential access to DCs under the Enabling Clause (e.g., GSP) - Lesser liberalisation from DCs in negotiation rounds (“less than full reciprocity”) (2) the MFN treatment principle; and (3) predictability and transparency on tariff concessions (tariff bindings)  What about accession countries? 9 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

2. GATT negotiations on tariffs Negotiation principles Two staged procedure in negotiations: 1. Agree on modalities  Modalities determine the way in which the new Schedules of concessions will be prepared - guidelines on how WTO Members will prepare and implement their new commitments: conditions, requirements and flexibilities  Types of modalities - Product-by-product - Formulas - Sectoral approach 2. Agree on reductions commitments 10 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

2. GATT negotiations on tariffs Negotiation rounds Negotiating Rounds Modality used to reduce tariffs Geneva Round 1947 Product-by-product negotiations; Annecy Round 1949 Product-by-product negotiations; Torquay Round 1950 Product-by-product negotiations; Geneva Round 1956 Product-by-product negotiations; Dillon Round 1960-1961 Product-by-product negotiations; Kennedy Round 1963-1967 Tariffs: formula approach (linear cut formula) with exceptions; Product-by- product negotiations; Tokyo Round 1973-1979 Tariffs: formula approach (''Swiss Formula'') with exceptions; Product-by- product negotiations; Uruguay Round 1986-1994 Tariffs: formula approach (simple average reduction + sectoral approach); Product- by-product negotiations; 11 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

2. GATT negotiations on tariffs Product-by-product or request/offer technique Bilateral product by product/Country by Country technique  Oldest negotiating technique: used in first 5 rounds  Exporters request ed concessions in the products in which they were likely to be the principal suppliers to the country from which the concession was being asked  Country being asked - Would make an offer for concessions or - Had the right to refuse by invoking the "principal supplier rule“ if the real main supplier did not participate in negotiations  Country that successfully secured a concession through this approach would receive an "initial negotiating right“  Bilateral agreements extended to the other participants on an MFN basis and "consolidated" in a single document: the Schedule of concessions 12 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF

2. GATT negotiations on tariffs Product-by-product or request/offer technique Advantages  Flexibility to protect sensitive sectors/products  Focus on those sectors/products which are most important for exporters Disadvantages  Lack of transparency  High transaction costs (too many WTO Members, too many products)  Dependence on the “principal supplier rule”  Prevents negotiations where principal supplier is not a GATT/WTO Member  Excludes small traders with high interest from negotiations 13 Project funded by the European Union under its Trade Capacity Building Programme for Ethiopia under the 9th EDF