US embassy cable - 05GENEVA1211

UNCLAS SECTION 01 OF 05 GENEVA 001211 
 
SIPDIS 
 
PASS USTR FOR BROADBENT/BOVIM 
DOC PASS ITS/JACOBS, SJONES AND CMORROW 
 
E.O. 12958: N/A 
TAGS: ETRD, WTRO, USTR, Trade 
SUBJECT:  MEETING OF THE WTO NEGOTIATING GROUP ON NON- 
AGRICULTURAL MARKET ACCESS (NAMA) ON APRIL 25-29, 2005 
 
Ref:  Geneva 1115 
 
1.  SUMMARY.  The WTO Negotiating Group on Market Access (NAMA) 
met in Geneva on April 25-29, 2005 to continue discussions on 
tariff formula options, treatment of unbound tariffs, sector 
tariff liberalization, issues of concern to developing countries, 
and non-tariff barriers.   The meeting moved the NAMA process 
from clear preparatory work into the more structured negotiating 
phase of work, as efforts intensify in the lead up to the July 
initial deadline and the Hong Kong Ministerial in December, where 
the means to reducing and eliminating tariffs are to 
be finalized.  END Summary. 
 
FORMULA 
 
2.  A recent proposal from Argentina, Brazil, and India (ABI) was 
the initial focus of discussion, as four other proposals from the 
US, EC, Norway and Mexico/Chile/Colombia (all based on a simple 
Swiss formula model) were discussed in detail at the last 
meeting.  The ABI proposal did not generate the groundswell of 
support that the ABI countries hoped for.  While reactions to the 
proposal were generally negative, the proposal received support 
from some members, particularly those with a purely defensive 
stance. The treatment of unbound lines repelled many Members from 
Latin America and south east Asia due to the self-serving 
character of the ABI proposal's approach to unbound rates which 
is design to meet the needs of India).  Educational efforts and 
analysis sharing by the US delegation also dampened the Africa 
Group's enthusiasm for the proposal due to the formula's inherent 
inequities among developing countries and the severe erosion of 
Africa's preferential access to developed country markets.  In 
defending the proposal, the authors emphasized that, unlike 
proposals from the US and EC, it provided both special and 
differential treatment and less than full reciprocity; that 
average bound tariffs may not reflect levels of development but 
they do reflect economic reality; and that the inherent 
sensitivity of unbound lines suggests binding levels should be 
near the average target. 
 
3.  Support for the ABI proposal came from Caribbeans (Jamaica, 
Trinidad and Tobago, and Barbados), North Africans (Egypt, 
Tunisia), the Dominican Republic, and China.  Members in a middle 
ground included Bolivia, El Salvador, and Thailand. Friends of 
Ambition, (most developed countries plus Chile, Costa Rica, Hong 
Kong and Singapore), Turkey, Chinese Taipei, and many Latin 
American countries such as Colombia, Ecuador, and Peru 
universally suggested the proposal did not meet the objectives of 
the July Framework of cutting tariff peaks in all the major 
traders, was based on previously discarded formula options, and 
had too many unclear components (e.g. treatment of unbound and 
link to other market access negotiations).  Malaysia and Uruguay 
privately told us they did not support the proposal, and it was 
reported to us that Indonesia did not support the ABI proposal 
although they found it "interesting." 
 
4.  In informal consultations the chair pressed Members to get 
specific on what they are prepared to give and what they want to 
get out of the formula, i.e. tariff liberalization.  The US, 
Canada and EC indicated they expected to virtually eliminate 
their tariffs in this round if real new access can be achieved in 
the  markets of key developing countries in exchange.  Brazil and 
India were non-committal but noted that their goal was to ensure 
that this round did not widen the gap on market access between 
agriculture, where they perceive relatively high barriers, and 
NAMA where there is better market access.  When pressed on 
whether they were prepared to make cuts in applied rates given 
their much higher bound tariffs, Costa Rica said they were 
prepared to make real cuts in order to achieve reciprocal market 
access in other developing country markets.  Jamaica admitted 
they did not have sufficient instructions to advance 
negotiations, in particular with respect to their actual goals. 
  In the closing plenary the chair noted that while there seems 
to be agreement on a Swiss-type formula, Members need political 
guidance on the level of ambition in the formula and in 
particular the number, level, and criteria for determining the 
coefficients.  (Note:  The term "Swiss-type" formula embraces 
both a pure Swiss formula (on which the US, EC, Norway and the 
Chile, Colombia, Mexico proposals are based) and the significant 
variation of the Swiss formula proposal by the ABI proposal.) 
 
5.  Members are grappling with what type of analysis might help 
Members better understand the effects of the formula proposals on 
the table. In an informal session with the Chairman, the 
Secretariat indicated it intended to update previous data runs 
 
SIPDIS 
showing the effects of different Swiss formula coefficients 
against Member's average tariffs.  The United States offered to 
provide some illustrative examples or country tariff profiles 
demonstrating the effects of various Swiss formulae and the 
"Girard formula" (using average tariffs as a coefficient) on a 
product line-by-line basis.  The Secretariat welcomed this 
contribution and suggested it would be helpful for the June 
meeting. 
UNBOUND LINES 
 
6.  On currently unbound lines with low applied rates (which 
approximately 27 countries subject to the formula maintain), 
discussions have centered around a proposal from Canada, Hong 
Kong, Norway, Costa Rica, Norway and Peru, a longstanding 
proposal from Malaysia and the unbound element of the ABI 
proposal.  The United States has been endeavoring to understand 
better the particular problem several ASEAN countries 
(Philippines, Thailand and Malaysia) have on this issue in order 
to determine what solution might be appropriate that would not 
significantly undermine liberalization.  Unfortunately, during 
NAMA week, the United States was unable to make much progress 
with Malaysia regarding its numerous unbound tariffs, since no 
technical experts from Kuala Lumpur attended the meeting.   The 
United States will work to set up a subsequent technical meeting 
as well as share with Malaysia analysis of how this issue affects 
their export interests in other developing country markets. 
Switzerland told us that they had a productive meeting on this 
issue with Thailand.  In the Chair's informal session Thailand 
and the Philippines said that in the end it is the level at which 
these tariffs are bound rather than the methodology to get to 
that level, but Malaysia still focused on binding as a concession 
and the inequity between their own Uruguay Round commitments at 
low rates and that of Latin American countries which bound all 
lines but at high levels. This will remain a contentious issue as 
the July Framework is clear that treatment of unbound tariff 
lines is for purposes of establishing the base rate for 
application of the formula. The chair flagged this as a key issue 
for political guidance. 
 
OTHER TARIFF-RELATED ISSUES 
 
7.  Discussions on a Canada/Hong Kong proposal to eliminate low 
duties after the application of the tariff formula drew out 
several camps.  Recently acceded members (Croatia, Moldova) don't 
want this provision to apply to them since most of their tariffs 
are already low even before application of the formula.  Many 
developing countries (Cuba, Jamaica, and Brazil) claimed that low 
duties are important source of revenue, although the Philippines 
noted that this was mainly a concern with low applied rates (most 
of their bound rates do not fall in the category of low 
duties.)Hong Kong, Singapore, and Costa Rica pointed out that 
agreeing to eliminate low duties this would be a significant 
concession from developed countries which have extensive low 
duties already.  Switzerland said that it was too much of a 
concession from developed countries to consider at this stage. 
The United States suggested that such a contribution would need 
to be looked at in the context of progress in reducing high 
tariffs and peaks in key developed and developing country 
markets.  In his closing remarks the chair stated that he did not 
think this issue was ripe for negotiations at this point.  It is 
likely it will be revived at a later stage of the negotiations. 
Canada does not plan to press the proposal at this time. 
 
8.  There was a short discussion of technical issues.  On 
availability of data for the tariff negotiations, , the chair 
instructed the Secretariat to begin creating trade negotiating 
files with best available data from other sources for countries 
that have not submitted data to the WTO's Integrated Data Base. 
Discussions on some technical and policy questions related to 
product coverage for the NAMA negotiations will take place when 
there are more submissions from Members, and discussions on ad 
valorem equivalents for specific rates applied on industrial 
goods will occur when there is more progress on this issue in the 
agriculture negotiations. 
 
NON-RECIPROCAL PREFERENCES 
 
9.  The Room D (each delegation is limited to three participants) 
discussion of preferences revealed that the Africa Group wants an 
explicit reduction of the formula's impact on their key 
preference products, and the Africa-Caribbean-Pacific (ACP) 
countries have yet to finalize a list of such products for NAMA 
scrutiny.  To describe the "correction coefficient" suggested in 
their proposal, Kenya's specific example noted that the formula 
could reduce a developed country applied rate from 10% to 4%, but 
if such a tariff-line cut harmed a preference country, the final 
tariff could be bumped up to 6% to recapture some of the 
preference margin. 
 
10.  The Kenyan explanation reinvigorated the preference erosion 
debate, which again separated developing countries into 
preference beneficiaries (Mauritius, Kenya, Jamaica, Antigua & 
Barbuda, Lesotho, Tunisia, Zambia, Zimbabwe, and Bangladesh on 
behalf of the LDCs) versus those favoring ambitious cuts in 
developed country markets (Colombia, Sri Lanka, Costa Rica, 
Ecuador, and Pakistan).  In presenting the Argentina-Brazil-India 
(ABI) proposal, Brazil side-stepped the issue, stating that it 
was premature until the formula becomes clear.  Mauritius, Kenya, 
and Zambia also objected to the preference erosion impacts of 
sectoral initiatives, in particular in sectoral initiatives that 
might target final tariff rates at zero.  The USDel, Norway, and 
Chinese Taipei noted that preference beneficiaries could join 
sectoral discussions and participate in discussions to air their 
concerns and highlight sensitivities.  Sri Lanka highlighted the 
potential of sectorals to address almost all key preference areas 
(textiles and apparel, footwear, and fish). 
 
11.  The USDel and others again emphasized the need for a 
concrete list of preference products to define the scope of the 
issue.  The USDel had also raised concerns in March that the ACP 
Index of Vulnerability resulted in an artificially long list of 
key preference products and that key factors (such as product 
export share and preference margin) had been omitted from the 
Index.  In Room D, Mauritius signaled its willingness to consider 
these factors as additional filters to fine-tune a product list. 
Privately, Mauritius promised to discuss the product list with 
the United States prior to distributing it to NAMA, and Kenya 
seemed willing to unblock a "notional" product list, if it could 
change depending on a final NAMA formula.  The Chairman noted 
that an ACP listing of products of concern, using additional 
filters, would be useful and if such products were limited to a 
few sectors a more targeted approach might be warranted. 
 
12.  U.S. engagement on preference erosion also focused on 
educating preference beneficiary countries that the ABI Girard- 
like formula (1) caused greater preference erosion than dual 
coefficient proposals and (2) failed to offset preference erosion 
with new access to major developing country markets.  USDel made 
some headway in discrediting the ABI proposal during a 
plurilateral with the LDC Group, bilaterals with Mauritius, 
Kenya, Rwanda, Barbados, Antigua and Barbuda, Guyana, and Sri 
Lanka, and to a lesser extent in bilaterals with Antigua & 
Barbuda and Barbados.  The Caribbean group, in particular 
Jamaica, remains attracted to the ABI proposal because it 
effectively shields them from any cuts in applied tariffs. 
 
SECTORALS 
 
13.  In the NAMA plenary the US presentation on critical mass 
served to answer some questions about how this mechanism worked 
and drove home the point that sectors will take time to negotiate 
and will not appear out of thin air.  During the course of the 
week informal sectoral discussions were held on footwear, forest 
products, raw materials, drugs and devices, and chemicals. The 
informal meetings were generally well attended, with developing 
country Members asking questions rather than remaining silent.  A 
US presentation on critical mass initiatives would be developed 
(which contains potential flexibilities for developing countries) 
clarified the concept for many developing countries. 
 
14.  Chemicals:   Switzerland hosted a meeting on chemicals in 
which a number of developing countries (Malaysia, Singapore, and 
Thailand) participated.    This meeting focused on discussion of 
possible product coverage to augment the existing Chemicals 
agreement and the means to assess the merits of different 
potential approaches to product coverage.  The group will meet 
again during the next NAMA week to advance discussions further. 
 
15.  Drugs and Devices:   Switzerland also hosted a meeting to 
advance quiet discussions on whether there could be a tariff 
component to the access to medicines issue and whether the NAMA 
negotiations could be a means to deliver additional 
liberalization that would help reduce the costs of drugs and 
medical devices in developing countries (developed countries have 
generally eliminated duties already under the Uruguay Round 
Pharmaceutical Zero for Zero Agreement).  This effort would 
parallel efforts by existing Members of the Pharmaceutical 
agreement to expand product coverage of the UR agreement among 
them and grant these further tariff reductions on an MFN basis 
within the next few months.)   The goal of the drugs and devices 
initiative would be to entice other developing countries to 
reduce their applied and bound tariffs as a contribution to the 
Round that would also reduce the costs of medicines internally. 
At the Swiss meeting, delegations discussed how this might be 
accomplished and reviewed several recent studies that had been 
done by academics and NGOs highlighting the issue of tariffs as a 
barrier to access to medicines. 
 
16.  Footwear: The US hosted an initial meeting to ascertain 
potential interest in a sectoral initiative on footwear. 
Participants included Canada, China, Chinese Taipei, Hong Kong, 
Mexico, New Zealand, Pakistan, Switzerland, and Thailand.  While 
discussion highlighted a range of perspectives on the merits of a 
footwear initiative, there was not yet much enthusiasm 
demonstrated for the idea. 
 
17.  Forest Products: Canada hosted a meeting following up on 
discussions during the last session.  Australia, Chile, Croatia, 
Malaysia, Mexico, Norway, the Philippines, Thailand, and the 
United Stated attended. Participants discussed possible sector 
coverage, target end rates and possible accommodations for 
developing countries. Although most participants were not 
prepared to get specific, Canada and Norway indicated they would 
like to see the inclusion of pre-fabricated buildings and New 
Zealand indicated they would like to see pulp and paper along 
with wood furniture included. On end rates New Zealand indicated 
it could go to zero, however others either couldn't comment until 
they spoke with capitals (Malaysia and Chile) while others 
indicated particular lines were sensitive and going to zero would 
be difficult (Canada and Chinese Taipei). 
18.  Raw Materials: The United Arab Emirates hosted the meeting. 
Australia, Egypt, Hong Kong, Japan, Jordan, Kuwait, Norway, Oman, 
Qatar, Switzerland, Trinidad and Tobago, and the United States 
attended. Also in attendance was the acceding Saudi Arabia. 
Participants reviewed the list of potential products submitted by 
the UAE as possible candidates for tariff reduction or 
elimination. The U.S. indicated it would like to add energy 
equipment which was supported by Canada, while Australia 
distributed its own list of products to include. The UAE said it 
was attempting to focus on a simple definition for the sector, 
and reported that it still had not received a clear signal from 
the Gulf States on various positions. 
 
NON-TARIFF BARRIERS (NTBs) 
 
19.  The plenary discussion of the Secretariat's compilation of 
all NTBs tabled by Members did not elicit any new information on 
how Members plan to pursue notified NTBs.   Kenya continued to 
throw up procedural hurdles and appears to be setting the stage 
to justify pulling the plug on the NTB negotiations.  For 
example, although unsuccessful in its initial attempt to have all 
NTBs addressed in NAMA (even those clearly under the purview of 
other negotiating groups), Kenya is now requesting transparency 
on progress Members are making in resolving all NTBs on the list, 
including those Members are pursuing in other fora (i.e., 
existing Committees or other negotiating groups), which could be 
such a cumbersome process as to make the negotiations 
unmanageable.  While transparency is a fundamental principle of 
the WTO, the Chairman also noted that Members were traditionally 
free to negotiate bilateral problems without making all 
information available to other members.   A second Kenyan 
suggestion to schedule joint sessions where NAMA can meet with 
other Committee to review progress on addressing NTBs was met 
with reservation by several Members since the standing Committees 
do not have a negotiating mandate and meet less frequently. 
 
20.  The informal meetings on wood products, autos, and 
electronics were more successful, with the United States, New 
Zealand, and Korea taking leadership roles.  The EU participated 
constructively in both the autos and electronics NTB meetings and 
hosted its own meeting to promote a horizontal agreement on 
export duties.  The presence of industry representatives in the 
wood products meeting was useful in answering technical questions 
and speaking authoritatively on issues faced by regulators. 
Whereas the wood products group (hosted by the U.S. and New 
Zealand) is focusing on a particular set of NTBs, the autos and 
electronics groups (hosted by the United States and Korea 
respectively) are continuing to exchange information on a broad 
scope  of NTBs and seeking to determine the extent of shared 
concerns.  At this point, although all participants have been 
invited to share detailed information on NTBs they wish to 
pursue, only the United States and Korea have done so.  The 
United States has circulated five papers in autos and three in 
electronics, and Korea has circulated three papers in autos and 
four papers in electronics.  All participants have been invited 
to continue the discussion of these papers "virtually" between 
now and the June NAMA meeting. 
 
21.  The Chair convened a "Room F" process (consultations with a 
limited number of delegations that have expressed 
concerns/interests in the subject, chosen by the Chairman) to 
consult with a few delegations on NTBs to discuss his concern 
that NAMA may be headed toward "meager" results on NTBs. 
Participating were Australia, Bangladesh, the EU, India, Japan, 
Kenya, Korea, New Zealand, Norway, Philippines, Trinidad & 
Tobago, and the United States.  In a good brainstorming session, 
delegates seemed to share the view that results on NTBs are 
important, NTBs are complex, and it will not be possible to reach 
any results on NTBs by July so we should use July to clarify how 
work will proceed.  The developed and advanced developing 
participants also agreed that NTB negotiations are a Member- 
driven process, and on the difficulty in resolving NTBs because 
they keep "popping up" in other forms.  Kenya continued to 
express concern that many NTBs would not be addressed in NAMA. 
The Kenyan rep stated that he had "thought NAMA would come up 
with resolutions, but now you (the Chair) are saying that Members 
have to resolve."  The Chair observed that "NAMA is not a divine 
being; the onus is on Members to come forward with proposals." 
As a way to respond to the Kenyan (and other African) concerns, 
the group discussed ways to guarantee transparency of efforts to 
address NTBs bilaterally or plurilaterally, for example through 
more detailed reporting and consideration of written reports of 
bilateral or plurilateral meetings to plenary, through sharing 
information on how NTBs have been resolved, and ultimately 
through scheduling NTB commitments.  Given the complexities of 
NTBs, there was an initial discussion of the possible need to 
have a framework post-DDA, possibly like the Information 
Technology Agreement Committee, to monitor and ensure 
implementation of NTB commitments as well as to provide for a 
continuing forum to address NTBs. 
22.  As next steps, Members are encouraged to circulate papers to 
the plenary with details of NTBs they wish to pursue through 
NAMA, and include ideas on possible solutions.  The Secretariat 
will update the latest JOB62 document with any updated materials 
from Members, and will also create a separate distilled version 
of the document that lists only NTBs Members have indicated they 
plan to pursue in NAMA.  Members are encouraged to submit any 
updates for either notification to the Secretariat by May 15. 
 
23.  NAMA NEXT STEPS: Chair Johannesson said the June meeting 
would follow essentially the same format as this meeting, with 
plenty of time for Room D and small group consultations with the 
Chair.  The Chair noted that although Members have done a 
considerable amount of work, there is still a lot of work to do 
and only 35 working days until the end of July when the first 
draft of the Hong Kong Ministerial text is due.  Deily