US embassy cable - 05GENEVA2668

UNCLAS  GENEVA 002668 
 
SIPDIS 
 
 
PASS USTR FOR BROADBENT/BOVIM 
DOC PASS ITA/JACOBS, SJONES AND JJANICKE 
 
E.O. 12958: N/A 
TAGS: ETRD, WTRO, USTR, Trade 
SUBJECT:  REPORT ON NON-ARGRICULTURAL MARKET ACCESS 
NEGOTATIONS October 10-14, 2005 
 
SUMMARY 
__________ 
 
1.  The WTO Negotiating Group on Market Access (NAMA) met in 
Geneva from October 10-14, 2005, to continue work on the 
modalities for the reduction and/or elimination of tariff 
and non-tariff barriers (NTBs) affecting industrial goods, 
with the goal of determining the formula for tariff 
reductions and other key approaches to liberalization by no 
later than the Hong Kong Ministerial Meeting in December 
2005.  Participants emphasized the short period of time 
available in order to reach a successful result in all the 
negotiating groups, including NAMA. 
 
2.  Members focused discussions on formula and sectoral 
tariff cuts as well as NTBs.  New Zealand presented a 
detailed analysis of different formula scenarios, seeking to 
inform the discussion on how a Swiss formula would operate 
with different coefficients and flexibilities for Developing 
Country Members 
 
NAMA Plenary - October 11, 2005 
____________________________ 
 
3.  Chair Stefan Johannesson opened the plenary noting that 
Members need to make considerable progress on NAMA and that 
negotiators need to be prepared for a "NAMA month".  He 
thanked all delegations for good bilateral consultations 
thus far on treatment of unbound, tariffs, formula, and 
flexibilities.  He noted that there are a number of 
outstanding issues where Members are still divided, and need 
to build bridges.  He sees a need for delegations to engage 
on numbers now. 
 
4.  New Zealand then made a presentation on hypothetical 
formula options that tested the results of using a single 
coefficient of 25 for all countries (with flexibility for 
developing) against a scenario using a coefficient of five 
for developed countries and a coefficient of 10 for 
developing countries with no flexibility.  These simulations 
showed that the use of a single high coefficient for all 
countries yielded only modest improvements in market access 
for all countries and that gain from formula cuts were 
reduced, further by the use of paragraph 8 flexibility. 
Further, the proportion of tariff peaks is only slightly 
reduced under this scenario and the level of contribution 
from developing countries varies widely.  New Zealand 
demonstrated that the use of dual low coefficients (5 and 
10) yields greater gains in market access for all  and can 
still deliver less than full reciprocity in reduction 
commitments while more effectively addressing tariff peaks. 
 
5.  Delegations then proceeded to ask technical questions 
and make interventions on New Zealand's presentation. 
Several countries- including those supporting the Argentina, 
Brazil and India (ABI) proposal- asserted that the first New 
Zealand simulation ignores less than full reciprocity while 
the second took away paragraph 8 flexibilities while 
utilizing a coefficient that is too low.  Many countries 
repeated that a simple Swiss formula with a single 
coefficient ignores the development dimension of the Round 
and that the New Zealand scenarios favor developed countries 
on the issue of less than full reciprocity. 
 
6.  The United States intervened to support New Zealand's 
presentation and noted the importance of the choices Members 
must make with regard to delivering modest versus real 
market access results.  The U.S. representative also 
welcomed the variety of indices of contributions used by New 
Zealand in its presentation and highlighted the conclusion 
that a high coefficient will not eliminate peaks. 
 
7.  The representative from India stated that harmonization 
of tariff schedules is not included in the mandate and the 
percentage cut to bound rates is much higher for developing 
countries.  India asserted that New Zealand's conclusions 
are misleading and that the only appropriate measurement of 
contributions is the percentage cut to bound rates.  Brazil 
called New Zealand's presentation misdirected and reiterated 
India's statement that the percentage cut to average bound 
tariffs is much higher for developing countries.  The 
representative from Brazil also criticized New Zealand's 
measurement of some benchmarks by cuts to applied rates. 
 
8.  Norway spoke out in support of New Zealand's 
presentation, saying that it focused on gains to all 
exporters and that offensive interests in the negotiation 
need to be evaluated as much as defensive, particularly for 
niche exporters, where paragraph 8 flexibilities could 
exclude entire sectors of importance to some Members. 
 
Barbados stated that New Zealand's scenarios demonstrate 
benefits only to those pursuing aggressive market access 
opportunities and reminded the group that Annex B notes the 
needs of revenue-dependent countries. 
 
9.  The EC then intervened to remind the group that a 
package will be necessary by the end of the month with real 
numbers and that rehashing old arguments is not productive 
at this stage.  The EC representative went on to say that a 
percentage cut in applied rates in developed countries, when 
multiplied by trade volume, will be a significant 
contribution and that the negotiation needs to be focused on 
end rates, not the average cut to bound rates. 
 
10.  The U.S. representative followed with a report on 
Zurich meetings held earlier in the week, noting that the 
focus had been on a new U.S. offer on agriculture that were 
tabled in an attempt to break the deadlock in those 
negotiations and spur additional progress in other areas of 
the negotiation.  The United States then notified all 
Members about meetings on non-tariff barriers in the autos 
sector to be attended by industry representatives from the 
Global Auto Industry Dialogue, as well as a meeting on 
remanufactured goods and a session with the least-developed 
countries on non-tariff barriers.  The U.S. delegation also 
reported on sectoral meetings, adding specific details on 
the chemicals meeting it hosted on Monday, October 10.  The 
EC, Korea, New Zealand, Canada, Japan, and Thailand all 
reported on informal discussions on sectoral meetings on 
tariffs and non-tariff barriers held during the week. 
 
Small Recently-Acceded Members (RAMs) Meeting 
__________________________________________ 
 
11.  Participants in this meeting included Croatia, Jordan, 
and Moldova.  The United States emphasized its efforts to 
find a small RAMs solution and floated the concept of trade 
shares criteria (treating those Members with very small 
shares of World Trade differently)  in general terms. 
Croatia said they did not think China would accept any RAMs 
differentiation, especially based on their meeting with the 
Chair last week.  China cites GDP per capita as an indicator 
of their low development status.  Moldova is very concerned 
about how they will be treated but has not received much 
feedback on their small economies in transition proposal. 
Several RAMS are concerned that they are not considered 
developing (Croatia) and thus may not have access to 
paragraph eight, flexibilities Moldova, and Georgia, also 
are concerned that as "transitional"  versus developing 
economics, they need to do more liberalizing in the round 
than other poor members.   Jordan is interested in the 
erosion of textile preference margins under the FTA. 
 
Pakistan Bilateral 
______________ 
 
12.  The bilateral focused on discrepancies between U.S. and 
Pakistani simulations of Pakistan's dual coefficient 
proposal, which calls for a Swiss 6 coefficient for 
developed countries, and a Swiss 30 for developing.  U.S. 
representatives noted that the Pakistani simulations 
measured the share of total lines cut, rather than the share 
of dutiable lines.  This skewed results so it appeared that 
countries with significant bound and or applied lines at 
zero (i.e., the U.S.) were offering less market access.  By 
including U.S. tariff lines that are already bound at zero 
(and thus cannot be cut), the Pakistani simulations 
significantly understated the impact on U.S. tariff lines. 
In fact, a Swiss 6 co-efficient would cut 99.9% of U.S. 
tariff lines, rather than two-thirds as suggested by the 
Pakistani analysis.  U.S. representatives also noted that 
Pakistani simulations did not include treatment of currently 
unbound tariff lines, which are significant for some 
members, and paragraph eight flexibility impact.  This 
overstates the impact on same developing country schedules. 
Pakistani representatives agreed to recheck calculations 
based on dutiable lines, but were not prepared to adjust 
simulations to unbound lines and paragraph 8 due to 
uncertainties in assumptions. 
 
13.  Pakistan noted that it was difficult for developing 
countries to accept a low coefficient, especially with 
competition from China.  Even a Swiss 30 represents a big 
cut for many.  U.S. countered that Swiss 30 was the same as 
the ABI proposal, would not result in much new market access 
in our key target markets, retains peak tariffs, and would 
waste a once-in-a-generation opportunity.  Pakistan thought 
it not surprising that New Zealand's analysis showed that 
low coefficients reduce duties paid on developing country 
exports by more than on developed country exports since 
developing country exports face higher duties in both 
 
developed and developing country markets. 
 
14.  Pakistan is still looking for ambitious multilateral 
results, since FTAs and preferences are not an option.  It 
recognizes that preference countries need help, but not at 
Pakistan's expense (where 80% of its exports were apparel 
and leather).  Pakistan did not have a problem with unbound 
approaches under consideration, but noted that it was 
primarily Japanese investors in Pakistani unbound sectors 
that were raising the most concerns. 
 
China Bilateral 
____________ 
 
15.  The United States met with China to discuss sectors, 
paragraph 8 sensitivities, and the formula coefficient.  The 
United States shared data with China on growth in trade for 
products covered by the Uruguay Round sectoral initiatives 
in the past nine years, noting that trade has grown 
significantly in that time period.  The U.S. explained the 
different ways Members could interpret paragraph 8 less than 
formula cuts and the impact of using twice the coefficient 
versus half the cut for export interests in developing 
country markets.  China said it had sensitivities in the 
following areas: processed oil, some chemicals, plastics, 
rubber, filaments, fibers (some in HS chapters 54-55), 
scientific equipment, and seats in chapter 94.  China 
finished by asking about treatment for newly acceded members 
and said it feels nothing has been done on this issue. 
 
Mexico Bilateral 
______________ 
 
16.  At the meeting U.S. representatives emphasized to 
Mexico that Members would need to engage in a discussion 
over numbers to balance flexibilities with unbound.  Mexico 
responded that a first order problem was to fix the type of 
formula rather than the numbers.  The United States pointed 
out that the level at which the coefficient stops delivering 
is important, especially with binding overhang   In addition 
to these unresolved issues, the ACP countries and others 
with preference erosion concerns could be obstacles at Hong 
Kong.  On ABI, the Mexicans hoped to see some movement away 
from the consensus by Brazil, but were less optimistic 
regarding India. 
 
Sectorals 
________ 
 
17.  Members continued their work in informal meetings on 
nine sectors, detailed below.  Developing countries continue 
to be involved in the discussions, with the most active 
participation coming from developing ASEAN members and 
Chinese Taipei. 
 
Forest Products:  Canada hosted the meeting, Mexico, South 
Africa, Norway, Hong Kong, Singapore, Indonesia, Thailand, 
EC, Australia, Peru, Switzerland, Malaysia, the United 
States and Chinese Taipei attended.  The meeting focused on 
Canada's proposal for tariff liberalization in the forest 
products sector.  Co-sponsors will be Hong Kong, New 
Zealand, the United States, and Thailand.  Participants in 
the meeting discussed the inclusion of wood furniture in the 
product coverage of the sector as well as special and 
differential treatment options for developing countries. 
Canada plans to submit its paper to the negotiating group as 
soon as possible. 
 
18.  Autos:  Japan hosted the meeting, Switzerland, Mexico, 
Malaysia, Korea, Norway, Canada, Chinese Taipei, Hong Kong, 
Singapore, Australia, Indonesia, Brazil, the United States, 
and Turkey attended.  The United States attended the meeting 
but remained silent.  The meeting was co-hosted by the 
Japanese government and its automotive industry association 
(JAMA).  After a short presentation by the industry 
representative on the benefits of the sector to both the 
global economy and developing countries in particular, 
participants discussed critical mass, potential product 
exclusions under paragraph 8, and participation in this type 
of sector.  The JAMA representative confirmed that the 
Global Auto Industry Dialogue Members have agreed to focus 
on NTBs in NAMA. 
 
19.  Chemicals:  United States hosted, Japan, South Africa, 
Turkey, Switzerland, Singapore, Hong Kong, EC, Canada, 
Korea, Norway, Australia, Thailand, and Mexico attended. 
The United States announced the November fly-in for the ICCA 
and reviewed product coverage at the 4-digit level.  Japan 
then presented a list of additional rubber products it would 
like to include as part of product coverage for this 
sectoral.  Participants discussed how to increase 
 
 
NEGOTATIONS October 10-14, 2005 
 
 
participation in a potential sectoral initiative as well as 
potential product exclusions.  A number of participants 
commented on the ICCA proposal, which noted the importance 
of end rates of zero in this sector due to large investment 
flows from developed to developing countries.  India 
attended the meeting apparently by mistake; it thought it 
was attending a NTB meeting on chemicals. 
 
20.  Bicycles and Sporting Goods:  Chinese Taipei hosted, 
Korea, Hong Kong, Japan, Canada, Thailand, Mexico, the 
United States, and Norway participated. This meeting focused 
on product coverage, specifically Switzerland's additions to 
both the sporting goods and bicycle/bike parts initiatives, 
which were specific products, related to sporting goods and 
bicycles.  Current co-sponsors for the bicycles initiative 
include Chinese Taipei, Hong Kong, Japan, Singapore, 
Thailand, Norway and Switzerland.   Co-sponsors for the 
sporting goods initiative include Chinese Taipei, Thailand, 
Japan, Norway, Switzerland, and possibly the United States, 
pending industry clearance.   Participants discussed 
potential sensitivities in both sectors and the United 
States expressed its interest in including bowling balls and 
equipment. 
 
21.  Environmental Goods:  The United States hosted, Canada, 
New Zealand, Norway, EC, Chinese Taipei, Thailand, Korea, 
and Switzerland participated.  In preparation for the Hong 
Kong Ministerial, the United States pitched the idea of 
treating environmental goods as one of the sectoral 
initiatives in the NAMA negotiations.  Environmental goods, 
like other sectorals, seek better than formula treatment on 
final tariff rates and are undergoing detailed discussions 
on product coverage.  A number of delegations expressed 
concern with using the concept of critical mass for this 
sector.  Some delegations also expressed hesitations that 
including the environmental goods as a sector in the NAMA 
negotiations at this point could undermine the environmental 
benefits and the participation of developing countries. 
However, many participants agreed that some sort of 
reference to environmental goods should be included in the 
NAMA Hong Kong text. 
 
22.  Fish Market Access:  New Zealand convened a meeting on 
fish tariffs and NTBs attended by South Africa, Norway, 
Australia, Switzerland, Canada, Thailand, Taiwan, Singapore, 
Hong Kong, Peru, and Indonesia.  Participants discussed the 
importance of ensuring that fish tariffs are not excluded 
from NAMA treatment.  Norway presented its draft paper on 
tariff liberalization and NTBs in this sector, Canada has 
indicated that it will co-sponsor the paper.  A number of 
delegations noted an interest in inviting other delegations 
to achieve a higher level of critical mass if key traders do 
not participate.  Participants agreed to keep the product 
coverage broad at this point. 
 
23.  Electronics/Electrical Goods:  Japan convened the 
meeting, which was attended by Switzerland, Korea, Malaysia, 
the EC, Chinese Taipei, Canada, Thailand, Indonesia, Peru, 
Hong Kong, Japan, South Africa, Singapore, Philippines, 
Mexico, and Australia.  Japan welcomed Thailand as a new co- 
sponsor of the paper and will re-submit the paper to the 
negotiating group.  Japan proposed the inclusion of 
industrial machinery to the product coverage for the sector 
since many of the electrical machinery HS categories overlap 
with these products.  Several delegations said that they 
will consult on the inclusion of industrial machinery with 
capital and domestic industry.  Delegations agreed to focus 
further discussions on 4-digit product coverage that Japan 
will circulate intercessionally.  Members also discussed a 
range of flexibility options, including zero for "x", longer 
implementation, and product exclusions. 
 
24.  Gems and Jewelry:  Thailand convened the meeting, which 
was attended by Canada, Switzerland, South Africa, the U.S., 
Norway, the EC, Hong Kong, Japan, Korea, and Chinese Taipei. 
Switzerland announced that it will co-sponsor the paper, 
joining Thailand, the U.S., Hong Kong, Japan, and Singapore 
in this initiative.  Members discussed product coverage to 
include Chapter 71.  Participants also discussed potential 
product exclusions and how to expand participation in the 
sector, including Middle Eastern countries, India, 
Australia, and China.  Members also discussed preparations 
for Hong Kong, and what might be necessary and participants 
in general noted an interest in some sort of reference to 
sectors in the Hong Kong text. 
 
25.  Drugs and Devices:  A small meeting was held between 
the United States, Switzerland, and Singapore to discuss 
putting together a proposal on tariff liberalization in the 
pharmaceutical and medical equipment sectors for submission 
to the larger NAMA negotiating group (as has been done for 
 
chemicals, electronics, etc).  The Swiss agreed to circulate 
a first draft in the next couple of weeks. 
 
Non-Tariff Barriers 
_______________ 
 
26.  As in September, meetings on NTBs continue to improve 
in terms of substance and attendance.  The U.S. team 
continues to lead the negotiating process and make slow but 
steady progress on moving beyond identifying NTBs of common 
concern and towards laying out specific proposals for 
solutions.  The U.S. held a second successful meeting with 
least-developed countries and small economies to see how we 
can assist their efforts in identifying NTBs.  Discussions 
at this meeting revolved around the difficulty that 
developing countries are having in identifying NTBs and, 
after having identified them, in negotiating a solution. 
The WTO Secretariat gave a helpful presentation on how it 
can help developing countries in this regard. 
 
27.  On sectoral NTB discussions, New Zealand and the United 
States also hosted an informal meeting on forest products 
NTBs, while Korea hosted a meeting on electronics NTBs. NTB 
discussions relating to autos and remanufacturing benefited 
at this meeting from the presence of industry. Auto industry 
representatives from the United States, the EC, Brazil, 
India, Japan, and Canada, also known as the Global Auto 
Industry Dialogue (GAID), made two presentations on autos 
NTBs which, for the first time, identified in some detail 
NTBs of common concern and articulated possible remedies. 
(Note:  The Korean auto industry - KAMA - is also a part of 
the GAID, but was not able to attend this meeting, although 
KAMA is apparently on board with the overall GAID 
positions.)  India and Brazil (industries and governments) 
both seem very interested in pursuing an autos NTB 
initiative, as does the EC.  Japan is also interested in the 
initiative, and has, along with its industry, circulated a 
non-paper on auto issues in the customs areas.  The next 
step will be to build on these common areas and figure out 
what solutions might be possible.  [Note:  China, which 
maintains many of the NTBs that the GAID would like 
eliminate, was in the room for the first time during the 
second presentation, though it remained silent.] 
 
28.  The U.S. remanufacturing industry (represented by the 
earthmoving, auto parts, and medical equipment sectors) also 
for the first time made presentations to WTO Members that 
detailed specific solutions to their NTB issues. While 
discussions related to auto parts remanufacturing, in 
particular, were quite passionate, an intensive discussion 
is needed in order to fully understand what type of solution 
might be acceptable. 
 
Next Steps 
________ 
 
 
29.  Both the NAMA Chair and WTO DG Lamy (during an October 
13 TNC meeting) emphasized the compressed time schedule for 
movement on all parts of the Doha Round negotiations.  Lamy 
stated that in NAMA there is an emerging consensus over a 
Swiss formula with a limited number of coefficients. 
Members needed to ascertain by mid-November a range of 
numbers for the formula, comparable detail on flexibilities, 
and a way to fix the base rate for unbound tariffs.  This is 
the minimum before addressing issues such as preference 
erosion, sectorals, and NTBs.  The Chair emphasized to 
delegations that with the Ministerial fast approaching, they 
should be prepared for continuous negotiations. 
 
 
ALLGEIER