Non-agricultural market access and services trade.

AuthorBhala, Raj
PositionPoverty, Islamist Extremism, and the Debacle of Doha Round Counter-Terrorism, part 2 - International Law in Crisis
  1. SYNOPSIS II. ENHANCING INDUSTRIAL MARKET ACCESS THROUGH THE SWISS FORMULA A. Product Coverage B. Swiss Formula Coefficients, the Mark Up, and Implementation Periods C. The Anti-Concentration Clause III. RESTRICTING INDUSTRIAL MARKET ACCESS THROUGH FLEXIBILITIES A. Flexibilities for Developing Countries B. Further Flexibilities for CUs, Plus Argentina and Venezuela. C. Still Further Flexibilities for Members Engaged in Sectoral Negotiations D. Still Further Flexibilities for Members with Low Binding Coverage E. Still Further Flexibilities for SVEs, Plus Bolivia, Fiji, and Gabon F. Still Further Flexibilities for Least Developed Countries G. Still Further Flexibilities for RAMs IV. OTHER MANUFACTURING PROVISIONS A. Preference Erosion and Still Further Flexibilities for Beneficiaries and Non-Beneficiaries B. Supplementary Modalities and Elimination of Low Duties C. NTBs and Capacity Building D. Non-Agricultural Environmental Goods V. EXPORT TAXES VI. DITHERING ON SERVICES TRADE LIBERALIZATION A. Goal B. Modalities C. Schism D. New Obama Strategy E. Still No Deal, Despite Extra Time on the Built-in Agenda VII. IS CHINA HELPFUL? A. Seeking "Face" B. Sobering Facts C. A Global Problem Solver? D. Thinking Locally, Acting Globally? E. Can a Security State Make the Necessary Compromises? I. SYNOPSIS

    The title of the Trilogy on the Doha Round, of which this article is Part Two, connotes the general argument: the Round is a failed instrument of counter-terrorism. The Round, launched in November 2001, was supposed to make the world safe for free trade, and in doing so, give hope and a stake in the global trading system to hundreds of millions of poor people, particularly in Islamic communities, who might otherwise be vulnerable to pernicious, ostensibly religious, ideologies. But as the decade-long negotiations of the Round progressed, commercial self-interest of World Trade Organization (WTO) Members dwarfed their shared interest, and thus the common good, in fighting poverty, thereby attacking one factor related to the spread of violent extremist organizations (VEOs) in the name (but, in fact, abuse) of Islam.

    Part One of the Trilogy advanced this argument in the context of trade liberalization in agriculture, namely, efforts to reduce agricultural tariffs, discipline domestic support, and eliminate export subsidies. Part Two does so in the contexts of trade liberalization in industrial products, so-called "non-agricultural market access" (NAMA) negotiations, and services trade. As with Part One, the context of Part Two is technical. The "devil," in the sense of straying far away from the initial purpose of the Doha Round, is in the "details" of lengthy, mind-numbing draft modalities texts. The texts critically analyzed here are the December 2008 Draft NAMA Modalities Agreement, (1) the April 2011 NAMA Document, (2) and April 2011 Services Document. (3)

    Part One concluded with observations on how the WTO and its Members artificially created a new logic for the Doha Round, namely, to fight the global economic slump, so as to justify their collective but flagging endeavor. Part Two concludes with observations about the role the People's Republic of China has played in the Round. It proposes China has not lived up to its ballyhooed promise on the eve of its accession to the WTO, which occurred on December 11, 2001: to act with statesmanship and be a problem-solver. (4) Failing to rise above the mercantilist fray, it has been a player along with the U.S., EU, and other significant powers. Gripped by fear of losing power amidst socioeconomic distress, ethnic tensions, and rising expectations about democracy and human rights, the Chinese Communist Party (CCP) has backed rules in the negotiating texts that incline more toward managed than free trade and have no link, or are even orthogonal, to the interest of the common good in counter-terrorism. These observations, like those of Part One, support the overall Trilogy argument that the Round is not about trade liberalization, poverty alleviation, or reducing threats from VEOs.

  2. ENHANCING INDUSTRIAL MARKET ACCESS THROUGH THE SWISS FORMULA

    "NAMA" is WTO-speak for all products not covered by the WTO Agreement on Agriculture and Doha Round agriculture negotiations. It includes not only industrial products, but also fish and fish products, forestry products, and mining products--though the terms "industrial" or "manufactured" goods usually are meant to connote all such products. (5) NAMA negotiations are significant for at least two related reasons. First, industrial products account for nearly ninety percent of the value of world merchandise exports. (6) Second, all or nearly all poor countries--Islamic and non-Islamic alike--seek to increase production and export capacity in their manufacturing sector. That is because industrial products are higher value added than primary and processed farm goods. For poor countries to develop economically, increasing their output and exports of higher value added goods, and thereby their earnings, is essential. These two reasons have long been known, and the importance of industrialization in the development process is chronicled by (inter alia), Walt Rostow in his classic The Stages of Economic Growth: A Non-Communist Manifesto. (7)

    The December 2008 Draft NAMA Modalities Text covered well-trodden issues. Large swathes of the text were nearly identical to its July predecessor. The new Text, running 126 pages, covered familiar topics, and spotlighted choices facing the Members. (8) There were few remarkable changes, meaning WTO Members had not narrowed, much less healed, existing schisms on the following matters. Indeed, several innovations in the December 2008 Text (e.g., on Swiss Formula Coefficients, flexibilities, and the anti-concentration clause) came directly from the Friday Night Proposal put forth by the WTO Director-General, Pascal Lamy, in the July 2008 Ministerial meeting--the meeting that had broken up in disagreement. (9) In turn, the April 2011 NAMA Document recorded few noteworthy developments, observing the "divergence in views between some Members about the appropriate level of ambition," which has been "the main stumbling block of the NAMA negotiations since mid-2008." (10)

    1. Product Coverage

      Product, or binding, coverage is important because the greater such coverage, the more predictable trade is. If an industrial product tariff line is unbound, then the importing country can raise duty rates on that product with no ceiling limit. In contrast, if that line is bound, then exporters can be certain as to the maximum duty rate their product will face. Uruguay Round negotiators were successful, but not entirely so, in increasing the binding coverage for industrial products. Among developing countries, binding coverage increased from twenty-one to seventy-three percent of all NAMA products. (11) Accordingly, Doha Round negotiators--especially from developed countries--sought to increase this coverage yet more, ideally to one hundred percent.

      At the same time, developed countries had little to give in return. Through the post-Second World War multilateral trade rounds under the General Agreement on Tariffs and Trade (GATT), they had generally increased their binding coverage to high levels, and lowered their average industrial product tariffs following the Uruguay Round from 6.3 to 3.8 percent. This asymmetry, namely, between low binding coverage and high tariffs in poor countries, and high binding coverage and low tariffs in rich countries, bedeviled Doha Round NAMA negotiations. It was obvious, as was the burgeoning middle classes in the likes of Brazil, China, and India, to which American manufacturers looked for customers and salvation from the forces of long-term de-industrialization. In turn, for American negotiators in the Round, the temptation of short-term mercantilism became irresistible, at the expense of identifying NAMA strategies that would put poor people to work in high value-added sectors and thereby give them a stake in the capitalist world trading system, not in Islamist extremist ideology.

      As with the July 2008 Draft NAMA Modalities Text, the December 2008 Text proclaimed that product coverage must be comprehensive, and no a priori exclusions would be allowed. (12) Although that proclamation was technically correct, it lacked real meaning.

      True, back in November 2001 when they signed the Doha Development Agenda (DDA), the WTO Members had not excluded from consideration for tariff cuts any industrial products. Yet, ever since then they had labored mightily to make sure that their favored sectors--their sensitivities--were taken off the bargaining table or at least shielded partially from full trade liberalization commitments. Put succinctly, to say there are no a priori exclusions is not to mean there are no post hoc exceptions. After seven years of negotiations over intricate minutiae, in retrospect it might well have been easier if at the Doha Ministerial Conference each Member had been permitted to designate ten products on which it would not negotiate.

    2. Swiss Formula Coefficients, the Mark Up, and Implementation Periods

      The Swiss Formula remained the methodology for industrial product tariff cuts. This Formula would yield non-linear cuts, meaning that for any given Coefficient, the deepest percentage reductions would be imposed on the highest bound tariffs. (13) Critically, the lower the absolute value of the Coefficient, the greater the percentage cut in the pre-Doha rate. The Coefficient in the formula also would set the maximum bound rate, i.e., the highest tariff peak.

      Cuts would be made to bound most favored nation (MFN) rates of duty. Any duties not expressed as an ad valorem tariff would have to be converted to their ad valorem equivalents (AVE) on the basis of the May 2005 Paris Methodology. (14) Generally, the result from applying the Formula to bound rates would be some...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT