AETIC Trade Acqui 22 September 2008 by Hans Driessen Océ-Technologies B.V. Netherlands

Contents
1.
WTO Section
1.1
Mission
1.2
History
1.3
GATT
1.4 Uruguay Round
1.5 WTO
2.
NAMA and NTB’s
2.1
What is NAMA
2.2
Definitions Tariff
2.3
Swiss Formula
3.
DOHA
4.
ITA
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Mission WTO
“The WTO is the only international organization dealing with the global rules of trade between nations.
Its main function is to ensure that trade flows as smoothly and freely as possible”
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History WTO
 Attempt to create an International Trade
Organization shortly after WW II (Havana Charter)
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Attempt failed, however, 23 countries agreed to reduce tariffs in a “General Agreement on Tariff and
Trade” or GATT:
23 founding members, or so called
“Contracting Parties”
GATT signed in 1947
 GATT is aiming on reduction of tariff barriers related to trade in goods only.
 GATT still is base for all subsequent trade agreements
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GATT
 Article 1: Most-Favoured-Nation treatment:
Conditions applied to the most favoured nation (the one with the least restrictions) apply to all nations. No discriminations between
MFN’s
MFN in EU
EU: See B. General rules concerning duties
1. The customs duties applicable to imported goods originating in countries which are Contracting Parties to the General Agreement on Tariffs and Trade or with which the European Community has concluded agreements containing the most-favoured-nation tariff clause shall be the conventional duties shown in column 3 of the schedule of duties. Unless the context requires otherwise, these conventional duties are applicable to goods, other than those referred to above, imported from any third country.
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GATT - some important articles
 Article VI:
Anti dumping (less than a normal value) and countervailing duties (to compensate export subsidies)
 Article VII:
Customs value (in those days “sold or offered for sale”)
 Article IX:
Marks of origin
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GATT follow-up
 Signatories agreed to further liberalize trade (tariffs)
 Signatories agreed for special provisions for less developed countries as well
 8 rounds of negotiations completed.
 During Tokyo round (end seventies) Non Tariff
Measures for first time on agenda
 Last one was Uruguay round which lasted 87 months
 At present Doha round is held. Meanwhile also taking up 80 months (to August 2008)
 Doha more or less failed in July 2008
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Uruguay Round
 Early 80’s economic recessions:
 Resulting in a system of increased protection through subsidies on agricultural trade and bilateral market sharing agreements with competing countries
 Increased importance of global trade
 Increased importance of trade in services (no trade agreements for that in those days)
 Deteriorating system of trade policy leading to:
 Necessity to start a new round: Uruguay Round in 1986
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Uruguay Round
 Completed in 1993 (60 agreements in 550 pages!!)
 Ambitious program:
 Include services
 Capital
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Intellectual property
Reform Trade in sensitive areas such as Textiles and Agriculture (price-distorting farm subsidies and quota systems)
 Original GATT updated and WTO was established and began as of 1 January 1995 (Marrakesh agreement)
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Uruguay Round
 Uruguay round also gave a number of deadlines to be completed for pending issues, one of which:
1998: Rules of origin: Work program on harmonization of rules of origin to be completed (20 July 1998 )
This expired already a while ago.
 The good news: It also led to a swiftly agreed deal for freer trade in Information Technology that was signed in December in Singapore during Ministerial Conference, called ITA (Information Technology Agreement)
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WTO
 Main activities:
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Organization for liberalizing Trade (and permitted exceptions)
Forum for Governments to negotiate Trade agreements
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Body to settle Trade disputes
It operates a system of Trade rules
 while
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 protect consumers prevent the spread of diseases
 Possibly leading to trade barriers
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WTO
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Focus on three major areas of Trade:
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Trade in Goods
Trade in Services
 Trade related aspects of IPR (Intellectual Property
Rights)
Principle of “National Treatment”, giving others the same treatment as the national ones.
System of gradually introduced changes through progressive liberalization. Developing countries usually have more time to introduce new agreements.
System promotes predictability, stability and transparency through official publications.
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WTO
 WTO nothing more than set of rules.
 Principles of Trading System:
 Without discrimination
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MFN principle (not discriminate as well between domestic and foreign products)
As freely as possible (also NTB’s included): open, fair and undistorted
Predictable (bound commitments)
More competitive
More beneficial for Less Developed Countries
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WTO
 Decision making process through consensus
 Top is the Ministerial Conference which meets once every two years.
 Below that is the General Council and working groups reporting to the GC.
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Questions WTO?
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What is NAMA
 NAMA: Non-Agriculture Market Access
 Scope: Simply everything, except Agriculture.
 Large part of worldwide trade
 NAMA negotiations successful in Uruguay Round:
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 some 50% cut in tariffs to the developed countries new tariff bindings (maximum duties or “ceiling level”)
 leading to:
Sharply increased predictability for Trade
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What is NAMA
 Also referred to as Industrial products or manufactured goods
 Major step ahead in Uruguay Round for market access to developed countries
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Definitions tariffs
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Tariffication:
 Used in Agriculture to convert quotas etc into tariffs so to have better coverage and more transparency
Tariff Peaks:
 Relatively high duties on sensitive products: For industrialized countries tariffs of 15% and above
Tariff escalation
 Higher tariffs on semi finished products and higher on finished products. Protects domestic processing industries, but discourages the developments thereof
Tariff Binding (or Bound rates)
 Ceiling level for maximum level for levying duties
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Definitions tariffs
 Countervailing duties:
 Additional duties to counter export subsidies
 Anti Dumping duties:
 Additional duties for products sold at unfairly low prices
(usually lower than sales price in home market)
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Reduction in tariffs
 As of Tokyo Round formulas as alternative to product cuts
 Mathematical Formula to calculate the effect if tariff rates will be cut in Trade negotiations is Swiss formula.
 System to harmonize existing high and low tariffs to reach a maximum allowed tariff in a certain period of time (high tariffs are degressively reduced faster than lower tariffs).
 Alternative to linear tariff cuttings (fix percentage) proposed by Switzerland during the Tokyo Round.
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Swiss Formula
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Swiss Formula: Z = AX / (A+X)
 X = Initial Tariff Rate
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A = maximum final tariff rate and the coefficient (agreed to represent the level of tariff cutting)
 Z = final tariff rate that result.
Example:
Coefficient = 30 (final tariff of 30% of existing one) = A
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Initial tariff: 100 %
Z = 30x100 / (30+100)
Z = 3000 / 130 = 23% = final tariff rate that results.
or
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Same cut on an initial tariff of 15% (= A)
Z = 30x15 / 45 = 10% = final rate that results.
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Questions NAMA?
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TBT
 TBT: Technical Barriers to Trade Agreement
 Aiming on elimination of different regulations, standards, testing and certification procedures
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Agreement on code of practice for standards by central governments, but also local ones
Countries should recognize each other’s standards
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NTB
 Definition: Any measure other than tariff that protects domestic industry through import restrictions.
 No official WTO definition exists
 Most important Non-tariff barriers:
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Import licensing
Rules for the customs valuation of goods
Pre-shipment inspection (Veritas etc.)
Rules of origin: made in, where and how to determine?
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Investment
Others
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NTB
 How to resolve NTB’s:
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Identify, categorize and examine NTB’s within negotiation group.
 Resolve through bilaterals, on sectoral bases or multilateral NTB Agreements
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Doha round
 Ministerial Conference in Doha (Qatar) launched new negotiations with 21 subjects in November
2001
 Known as DDA (Doha Development Agenda)
 Deadline:
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January 2005
New deadline end of 2006
Latest deadline 2008 missed!
missed!
missed again!
 Finally failed during the July session in Geneva 2008
 One on the subjects (again): Rules of Origin
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Doha round
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Negotiations in the TNC (Trade Negotiations
Committee)
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Issues:
Implementation of current WTO Agreements (Uruguay) mainly at developing countries
21 subjects in total.
1.
For this lecture 2 main ones:
February 2002 the Chairman of General Council decided in the first TNC that negotiations on NAMA would take place in a Negotiating Group on Market Access (NGMA) linked to TNC
2.
Completing harmonization of NPRoO
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Doha round and NAMA
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DOHA Declaration par 16:
“reduce, or as appropriate eliminate tariffs, including the reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff barriers, in particular on products of export interest to developing countries” on all non-agriculture products
How?
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Through mathematical formula (Tokyo round) or product by product (Uruguay Round)?
Decision made to work on “modalities” but missed the deadline of 1 August 2003.
 Members agreed on new target date of December 2005
(Ministerial Conference at Hong Kong)
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Doha round
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DDA General Council decision on 1 Aug 2004
(July package), adopts the framework set out in
Annex B. (called “NAMA Framework”)
Framework to determine modalities in Market Access for Non-
Agricultural products
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Simply put: Which non-agricultural products are in scope?
Future work amongst others :
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The formula
Flexibility for developing countries
 Non-ad valorum duties shall be converted to ad valorum
(Simply put: what to work on)
Reaffirmed again on reducing or eliminating tariffs
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Doha round
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NAMA Framework reaffirmed at Hong Kong
Ministerial Declaration in 2005 in Paragraph 13-24
Status as per July 2008, by Ambassador Don
Stephenson*:
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July 2008 Package to settle range of questions
Series of meetings held in Geneva 21-30 July 2008
Scope to be defined
*
Don Stephenson: Ambassador of Canada and Chairman of the Negotiating
Group on Market Access
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Doha round
 Scope to define modalities presented on
10 July 2008 (3 rd revision):
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Product coverage: Fish, Oils, Silk, Cotton and the like.
Nothing of chapters High-Tech (already in ITA)
Coverage based upon HTS chapters (2002 version)
 No High-Tech, no Automotive and the like
 Of course: there is no High-Tech exports of developing countries
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Doha round
 Final text of the NAMA modalities (July 2008)
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Tariff reductions through “Simple Swiss” Formula with separate coefficients for developed and developing countries
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One option for developed countries, three for developing countries (rule based)
Anti concentration mechanism (preventing entire sectors from tariff cuts)
Overall the approximately 40 members applying the Swiss formula (others have special provisions), account for 90% of NAMA trade
Non-tariff barrier proposals (for many sectors!)
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Doha round
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Why it failed:
Almost agreed on everything except a SSM: Special
Safeguard Mechanism:
The extent to which developing countries would be able to raise tariffs to protect local farmers from import surges (often caused by export subsidies: unfair competition)
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Doha round
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Next steps?
Elections in the US, elections India, Lost of momentum will all influence ongoing talks. Developing countries are suffering most
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Result: More focus on increased number of bilateral agreements
EU-Korea, EU-Asean, EU-India, EU liberalizing trade
 with Japan in non tariff talks
US-Korea, US-Malaysia, many many more
 Undermining the importance of WTO, critics say.
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Questions Doha?
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ITA Declaration
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Agreement made during Ministerial Conference in
Singapore 1996, implemented in 1997.
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Started with 29 participants, covering 80% of world trade in IT products; now to 70 signatories, covering
97% of world trade
Product coverage specified in 2 annexes:
Annex A: HS Headings
Annex B: Positive list of specific products
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ITA Declaration
18. Taking note that a number of Members have agreed on a
Declaration on Trade in Information Technology Products, we welcome the initiative taken by a number of WTO
Members and other States or separate customs territories which have applied to accede to the WTO, who have agreed to tariff elimination for trade in information technology products on an MFN basis as well as the addition by a number of
Members of over 400 products to their lists of tariff-free products in pharmaceuticals
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ITA Declaration
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Most important articles (total just 10 articles):
Art. 3: Periodic meetings for product review to modify annexes A and B, due to technological developments
Art. 5: Frequent meetings to consider any divergence among members in classifying IT products.
Participants agree on a common objective of achieving a common classification, based on HS nomenclature
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The Dispute 2008
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US and Taiwan and Japan brought case to WTO dispute settlement body.
US is blaming EU to classify IT products incorrectly (in headings out of ITA scope) as well as ignoring technological developments (convergence) by classifying these out of ITA headings
EU argues that US c.s. does not want to negotiate, according ITA agreement and already pushing for months to start reviewing the goods concerned
EU also counters issue that products were not in scope in original Agreement (printers as example)
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The Dispute 2008
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State of Affaires:
60 days consultation period (informal negotiation to
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 reach consensus) failed
WTO forced to take a legally binding decision
Outcome difficult to predict
Very important issue to follow for IT and CE Industry
Also crucial for possible new signatories, such as Brazil,
Mexico or South Africa
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Questions ITA
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