MARKET ACCESS NEGOTIATIONS FOR
NON-AGRICULTURAL PRODUCTS (INDUSTRIAL TARIFFS)
Frequently Asked Questions
BACKGROUND
Market access negotiations are negotiations in which participating countries commit to each other an assured degree of access to their markets. While this would include market for all goods and services, in this brochure we shall confine ourselves to only negotiations on market access for non-agricultural products.
In WTO, there is a specific “Agreement on Agriculture” which lists all the products on which it applies; (See Annexure-I). All other products are taken as non-agricultural products.
Non-agricultural products include fish, rubber, jute, minerals & ores etc. and therefore are wider in scope than “industrial products”.
Negotiations by WTO Members seek to obtain
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The extent of bindings, itself, is normally subject to negotiations. In India’s case, for instance, about 32% of tariff lines of non-agricultural products are still unbound. On the other hand all agricultural products are presently bound.
If yes, is there a cost to be paid? Applied tariffs can be raised beyond bound levels. Before doing so, however, we have to renegotiate the binding with other Members who have a substantial trade interest in the product and will be affected as a result.
Yes, there is a price to be paid. The price is in the form of equivalent reduction in a trade weighted form in the bindings of those products in which the affected Members have a trade interest.
No, market access negotiations also take place bilaterally between two countries such as between India and Nepal or in a regional setting such as the South Asian Preferential Trade Agreement (SAPTA). WTO is however the only multilateral forum for such negotiations.
Eight rounds of multilateral trade negotiations have been held between 1947 and 1994.
These were the Geneva Tariff Conference (1947), the Annecy Tariff Conference (1949), the Torquay Tariff Conference (1950-51), the Geneva Tariff Conference (1956), the Geneva Tariff Conference (1960-1961), also known as the Dillon Round, the Kennedy Round (1964-1967), the Tokyo Round (1973-1979) and the Uruguay Round (1986-94). The first four conferences, which are also referred to as rounds, are known by the place where they were held, the next two after individuals who had provided the inspiration for the negotiations (US Under Secretary of State, Douglas Dillon and the US President, J.F. Kennedy). The last two rounds have been known by the place/country where the Ministers adopted the Declaration launching the negotiations.
8. Did
all Members participate in all GATT Rounds of market access negotiations?
No, during the GATT period it was not necessary for all Members to participate. Most
developed countries and some developing countries looking for specific concessions
participated.
The Uruguay Round was the most comprehensive trade negotiations ever. All WTO Members, developed or developing, participated and contributed towards tariff reductions. In the case of developed countries the percentage of bound tariff lines increased from 78% to 99% whereas in the case of developing countries it increased from an average of 21% to 73%.
As a result of the Uruguay Round of negotiations, following tariff reductions came about in developed countries:
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Yes, if Members want they can hold such negotiations without linking them to a “Round”. The Information Technology Agreement (ITA) under which Members agreed to reduce the tariff on information technology products to zero took place in 1996.
The actual or applied tariff (which has to be less than the bound level) is autonomously decided by a country and can be increased or decreased depending on its domestic policies.
A country can also unilaterally reduce its tariff bindings in the WTO.
Trade Weighted
Average Tariffs in Some Developing Countries
India has at present bound 68.2% of the tariff lines for non-agricultural products. Wherever the bindings have been taken, they are 40% for finished products and intermediates and 25% for raw materials. There are however a few items which have been historically bound at different levels. A pictorial representation of share of bound tariff lines in manufactured products may be seen in Annexure-II. In addition to what has been indicated therein, bindings have also not been taken in respect of fish and crustacean products.
With the general reduction in tariff levels in developed countries, non-tariff measures remain the most significant restrictions on market access.
Studies have shown that non-tariff measures have the effect of significantly increasing the level of protection afforded to products in developed markets thus acting as barriers to market access for developing countries. Non-tariff barriers include quotas & other seasonal quantitative restrictions; non-transparent administration of tariff rate quotas; restrictive rules of origin; unduly high product standards; delayed conformance testing procedures; consumer boycotts; improper use of anti-dumping or countervailing measures etc.
As mentioned earlier, although the average tariffs in developed markets have come down after the Uruguay Round to an average of around 3.8%, there are several items of interest to developing countries, such as textiles or leather goods, fish and fish products or transport equipment where there is a prevalence tariff peaks and tariff escalation. In several sectors, there are also various forms of non-tariff barriers that are coming in the way of expanding developing country exports to developed markets. The elimination or reduction of all these barriers in a fresh set of market access negotiations would be in developing countries’ interests.
On the other hand, developed countries favoured fresh negotiations, as they were looking for increased market access in developing countries where the tariffs are perceived by them as being significantly higher.
Yes, the Doha work programme mandates fresh market access negotiations for non-agricultural products and also for environmental products.
This is in addition to the negotiations already taking place on market access for agricultural products and services.
The Doha Ministerial Conference mandate on the commencement of tariff negotiations on non-agricultural goods reads:
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(iii)
There is a growing environmental awareness in the world. A specific mandate to promote free trade of products that are environment friendly or environment related is seen as WTO’s contribution to promoting and protecting the environment.
Modalities are the basic parameters of the negotiations. These include issues like – l l l l l l
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Agreement on modalities is important, though not necessary, for the smooth conduct of the actual negotiations. In all negotiations modalities are first discussed and attempts made towards arriving at an agreement on these.
In the Uruguay Round no agreement on the modalities of the market access negotiations could be reached. Thus, Members went their own way in making offers and carrying out the negotiations. All the same agreement was reached amongst all Members.
21. How are the
actual negotiations conducted?
Negotiations may be conducted using three broad methods; any or a combination of all
of these methods may be employed:
a.
b.
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Regarding coverage, the mandate mentions that it will be ‘comprehensive and without a priori exclusions’. A case may therefore be made for all its Members to undertake commitments on all non-agricultural products.
However this will also depend on the negotiations themselves.
Peak tariffs are identified either as:
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The common definition for High Tariffs is tariffs higher than the international/ regional averages. However, high tariffs are also described in Article XXVIII bis of the GATT 1994 as tariffs that discourage the importation even of minimum quantities into a WTO Member’s territory.
Tariff escalation is the tool by which products at a lower level of manufacture have a lower tariff and that at a higher level a higher tariff. In international trade tariff escalation discourages higher value added imports vis-à-vis lower value addition, promoting value addition at home. For developing countries this is an issue since as they move up the production chain towards being producers of finished goods their exports start facing higher tariffs.
No, as “less than full reciprocity in reduction commitments” is a special and differential treatment for developing countries built into the mandate.
Further, in the WTO, reciprocity between the obligations undertaken by developed country vis-à-vis those by developing countries are specifically excluded in the agreements governing the various market access negotiations.
The negotiations are to take fully into account the special needs and interests of developing and least-developed country participants through:
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Unlike tariffs which are well defined and uniform for all countries, non-tariff barriers are nebulous and what may be a non-tariff barrier in one country may not be in another. Thus, how to deal with non-tariff barriers will have to be discussed and decided during the negotiations.
Further, several trade actions such as imposition of anti-dumping duties; determination of product and health standards; administration of licensing procedures; etc. are already the subject matter of WTO agreements . While, it may not be feasible to discuss all these actions in their entirety as part of the market access negotiations, specific aspects could certainly be discussed and commitments registered.
The process of negotiations would take place broadly in two stages –
a) the first would be discussions and an agreement on modalities; and
b) the actual market access negotiations based on the modalities agreed to.
Regarding the time-frame for modalities, Members may submit proposals by 1 November 2002, however proposals submitted until 31 December 2002 will be fully taken into account in a consolidated overview of proposals to be submitted to participants at the first meeting of the Negotiating Group in 2003. A common understanding on a possible outline of modalities is to be reached by the end of March 2003 with a view to reaching an agreement on the modalities by 31 May 2003. The actual market access negotiations commencing thereafter is stipulated to conclude by January 2005.
A Negotiating Group has been established to conduct the negotiations on market access for non-agricultural products. The Group will have to evolve its modalities before proceeding to the actual market access negotiations based on those modalities.
Regarding implementation of results, as per precedent available in the GATT era implementation of tariff reductions is an element in tariff negotiations.
In the Tokyo Round, the tariff reductions were implemented in eight equal annual reductions beginning on 1 January 1980 and becoming fully effective on 1 January 1987.
The Uruguay Round provided for five equal annual instalments beginning on the date of entry into force of the WTO Agreement for industrial products and six equal annual instalments for developed countries and ten for developing countries in agricultural products.
For the present negotiations, therefore, the implementation period would also be negotiated and agreed to. If the negotiations conclude as per schedule in January 2005, the implementation of the reduction commitments could thereafter come into effect over perhaps another five year period.
30. What are the advantages of such negotiations for India?
Advantages for India may be two fold, the first is that it allows establishment of a
long-term framework of customs duty structure allowing the domestic industry to plan in
advance its business strategies. The second advantage lies in providing the opportunity to
secure greater market access in foreign markets including through elimination of tariff
peaks and tariff escalation which are prevalent in developed markets on products like
textiles, leather and marine products as also the removal of non-tariff barriers in these
and other areas of export interest to us.
One other indirect advantage is that increasingly regional preferential trading arrangements are diverting trade from countries like India to Members of such arrangements. General tariff reductions would reduce the difference between the preferential tariff and the general (or MFN) tariff thus improving the market access for non-members of the regional arrangements.
India has been autonomously reducing its tariff levels with the peak rate now pegged at 30%. In his Budget Speech for 2001-02, the Finance Minister had said that
“I have already promised that our customs tariff would be brought down to East Asian levels. I will like to move progressively within three years to reduce the number of rates to the minimum with a peak rate of 20%. The modalities for this will be worked out in time for the next budget”.
In his
budget speech for 2002-2003 the Finance Minister further stated:
“I have decided that, by the year 2004-05, there would be only two basic rates of
customs duties, namely, 10% covering generally raw materials, intermediates and components
and 20% covering generally final products. The existing rates would be adjusted and
subsumed in these two basic rates with some exceptions on account of WTO bindings or
higher tariffs for agricultural products.”
We are therefore reducing our tariffs in any case to reach the South East Asian levels in a few years time and our industry is adjusting to these changes quite well.
We would, however, not benefit from a similar reduction in other markets in an assured manner particularly in items of interest to us if we do not bind our duty reductions but only reduce them autonomously.
While the offer to be made by India would depend on its domestic policies and imperatives, it will be very important to modulate the same with requests to other Members regarding opening of their markets. This basically would mean requesting for reduction in customs duties and non-tariff barriers, if any, in all markets where we are exporting or where we have a potential to export. Exporters and export promotion councils can help us identify and provide specific details of such products, countries to which we are exporting or have a potential to export and the specific details of the tariff and non-tariff measures, removal of which can be requested by India.
33. What role can industry and trade
associations play?
Industry and Industry Associations are concerned with both ends of trade i.e. they are
importers of goods and services as well as exporters. Industry and Industry Associations
can help pinpoint the domestic imperatives to create a suitable tariff commitment
structure so as to provide the necessary degree of protection while allowing import of
competitively priced inputs.
34. Are any inputs expected from
State Governments?
State Governments are increasingly being involved in export promotion activities.
Export promotion is a vital aspect of the industrial policy of a State. Since the WTO
negotiations would in a macro sense set limits for the tariff policy of India which in
turn would have an effect on the industrial regime, inputs from the State Governments
would help in formulating a tariff commitment structure that would address the specific
needs of the State Industrial Policy.
35. Is the government taking the
assistance of any research organisation for providing the analytical back up?
Yes, several research organisations and government departments are analysing the
implications and providing inputs for these negotiations. The Research and Information
System for Non-aligned and Other Developing Countries (RIS) has also been requested to
provide back-up studies for assisting the Government.
36. Is there a way by which even individuals, companies and other stakeholders can provide their viewpoints to the Government?
The purpose of the entire exercise is to have detailed information about the ground level situation in India. This information can only be procured from the actual stakeholders’ i.e. individual companies and any other organisations in any way involved with issues concerned.
The interaction with the State Governments’; Industry Associations; and Export Promotion Councils is based on their interacting with the individual stakeholders. Therefore, individuals may contact the concerned association or council or forum easily available to them and provide the information/ comments/ views. Such bodies can in turn collect and collate the information preparing an industry perspective of the issues or even transmit the individual stakeholders’ views directly. Individuals may also directly contact the Government at the following E-mail addresses:
• snmenon@ub.delhi.nic.in
• vseshadri@ub.delhi.nic.in
• asen@ub.delhi.nic.in
ANNEXURE I
PRODUCT COVERGE OF THE AGREEMENT ON AGRICULTURE
1. The Agreement on Agriculture covers the following products:
(i)
(ii)
HS Code 2905.44 (sorbitol)
HS Heading 33.01 (essential oils)
HS Headings 35.01 to 35.05 (albuminoidal substances, modified starches, glues)
HS Code 3809.10 (finishing agents)
HS Code 3823.60 (sorbitol n.e.p.)
HS Headings 41.01 to 41.03 (hides and skins)
HS Heading 43.01 (raw furskins)
HS Headings 50.01 to 50.03 (raw silk and silk waste)
HS Headings 51.01 to 51.03 (wool and animal hair)
HS Headings 52.01 to 52.03 (raw cotton, waste and cotton carded or combed)
HS Heading 53.01 (raw flax)
HS Heading 53.02 (raw hemp)
ANNEXURE II
[In addition, India has not any bound tariff lines relating to Fish and Crustacean Products (HS Chapter 3) which also come within the non-agricultural market access negotiations.]
PROCESS OF GLOBALISATION SHOULD BE HARNESSED TO GENERATE BENEFITS FOR ALL - SUPACHAI
‘First of all, let me say how much honoured I feel to have been given the opportunity to serve this important Organisation. It is also a source of major pride to be able to participate and be involved with some of the historic events that are taking place within the new work agenda, the Doha Development Agenda. The WTO itself is gaining in importance because of the mandates that have been given to us, because the new mandates that have been given to us from the Doha Ministerial Conference, because of the future challenges that will be confronting us in several aspects not only in terms of breaking into new paths, in gaining more opportunities for all membership to trade more openly and more intensively with one another with less and less impediments in any forms to trade. Avenues are opening up for us to be working closely with various other organisations so that we can harness the process of globalisation that can generate benefits for all concerned, that we can help those who still lag behind to get on board and to be able to partake in the process of globalisation so that they will gain in terms of their own benefits, upgrading their quality of life, enhancing the opportunities for gainful employment and having the kind of environment that we would like to see being improved. This morning, I have had the opportunity to meet with our staff, the incumbent, present Deputies Director-General, who have been very helpful together with the former Director-General, Mr Mike Moore, in giving me all kinds of meticulous assistance to facilitate the transition process since the beginning of this year. It has been seamless, it has been most efficient, and to all of them, the former Director-General and the present Deputies Director-General, I would like to emphasise my sincere appreciation. One of the most urgent issues that I intend to undertake is to see to it that we move into the phase of substantive negotiation under the Doha Development Agenda as soon as we can, as intensively as we can, as productively as we can. I intend to be actively involved in a way that I can help with the negotiating groups, to monitor the progress and to lend all my assistance to guarantee that progress helps us to meet all the deadlines, and I would like to emphasise again that deadlines are important if we want to make this a successful and efficient round. We have little time to waste, we have actually no time to waste, so every bit and pieces of time that can be spent to advance the cause of the substantive negotiations, to come up as quickly with the substantive proposals, this is really my most immediate task. Apart from this, I will be tasking my deputies, the four deputies, to have concrete and clear-cut areas of responsibilities. There will be four major areas of responsibility that will reflect my own programme, my own principles in managing this Organisation. First is in the area of legal affairs. I hope to assign one of the Deputy Director-Generals to work in the areas of legal affairs, to improve the kind of activities that would be as helpful as possible to the Members to avoid conflicts, to be able to abide by the rules at all times, to be able to have the kind of interpretation of the rules in a way that it would help to resolve any conflicts and to be able to make use as much as we can of the consultation process to prevent the conflicts from becoming too costly and too time-consuming to solve. The second area of responsibility that I will assign to one of the Deputies is the area of the strengthening of our Organisation and our institution, meaning both the Secretariat, the staff and also the trading system. I hope to be holding some sessions with the staff members of the Secretariat so that we can determine the need to strengthen and if needed to restructure the system, to improve as much as we can the work that we can do to serve our membership. The third area in which one of the Deputy Director-Generals will be tasked to work on is the area of technical assistance, which I see that is needed to be continued beyond the Doha Development Agenda. The Doha Agenda is meant to have the short-term effects in helping countries to be adequately equipped to participate in this new work programme but I perceive that beyond the Doha Agenda, we will be needing to continue with our trade-related development programmes so that countries that still lag behind could be helped to narrow the gap in catching up. The last area of responsibility will be the area of coherence of policies between our own institution and other organisations because my opinion is that in order to be able to make real use of trade for sustainable development, the WTO would need to be working in tandem with other responsible organisations like the World Bank, the UNCTAD, the IMF, the UNDP, ILO, WHO, and so on and so forth, and not working only from time to time, but to be always in touch with one another, to be jointly developing certain programmes that we could enhance the instruments of trade for sustainable development. So this will be the work programme, the programme that I have set for myself and that I would ask the responsible Deputy Director-Generals to take care of and the allocation of divisions under the supervision of each Deputy Director-General will be structured according to this allocation of responsibilities. I will have three years to work, three years is not a very long period of time because we have so many tasks on our hands and ahead of us and so I would need to be as clear as possible as to the directions in which I will be going and certainly many of the things that I have said, many of the things that I will be proposing, I will be in close touch with the Membership so that we can do our best, I can do my best to serve the Membership and that, if permitted, I would like to take the opportunity to also make some proposals so that we can improve our own institutions in due time, but certainly I will build on the achievements that Mr Mike Moore and his team have been building up for me and I have been very fortunate in that several things that have been done have helped to reduce the burden for me that I amu,e with my team that we will continue with this good work.’
• INDIA FOR FTA WITH ASEAN – MARAN
India would like to have a Bilateral Regional Trade and Investment Agreement (RTIA) or
Free Trade Area (FTA) with the ASEAN in the long-term so as to make this economic
integration meaningful, Mr. Murasoli Maran, Commerce & Industry Minister said while
addressing the First ASEAN Economic Ministers (AEM) – India Consultation held at
Brunei Darussalam on 15th September, 2002. The meeting was historical in the sense that
for the first time, the Trade Ministers of India and ASEAN met to discuss the issues of
enhancement of trade and investment linkages and economic integration between India and
the ASEAN. Mr. Maran led the Indian delegation at the consultations, which was co-chaired
by Mr. Pehin Dato Abdul Rahman Taib, Minister of Industry and Primary Resources, Brunei
Darussalam. The Ministers agreed that a Regional Trade & Investment Agreement between
ASEAN and India should be the long-term objective. They also agreed to establish a
ASEAN-India Economic Linkages Task Force, which would submit its recommendations,
including the draft of a framework agreement to enhance ASEAN-India trade and economic
cooperation. The Task Force would also include members of the private sector. The first
summit of leaders of India and the ASEAN is to be held in Phnom Penh, Cambodia, in the
first week of November, 2002. The Prime Minister, Shri Atal Behari Vajpayee, is expected
to attend the summit. The Ministers exchanged views on broad aspects of the present global
economic climate in general and recent developments in ASEAN-India in particular. They
noted with satisfaction the recent trends in ASEAN-India trade, which grew by 30% from US
$ 7.6 billion in 1999 to US $ 9.88 billion in 2001. The ASEAN Economic Ministers welcomed
the efforts to bridge the gap between ASEAN’s average tariff and Indian tariff and
also Mr. Maran’s expression of interest in having a bilateral RTIA or FTA as a
long-term goal of ASEAN-India economic relations.
• INDIA SUBMITS MARKET ACCESS FOR PROFESSIONALS: RUDY
The supply of services through Movement of Natural Persons i.e. Mode 4 is of primary
interest to developing countries. Under this mode of supply, the commitments taken are
largely linked to commercial presence i.e. Mode 3 and, therefore, are of limited use to
the developing countries. Further the commitments are primarily horizontal and these are
subjected to a number of limitations and administrative hurdles. The limitations existing
in these commitments include restrictions on the entry and stay of service providers,
limits on duration of stay, quantitative limits on visas, economic needs test (ENT), lack
of recognition of qualifications and payment of social security taxes. India has submitted
a proposal on “Liberalisation of Movement of Professionals under General Agreement on
Trade in Service (GATS)” during the ongoing Services negotiations at the WTO, Mr.
Rajiv Rudy, Minister of State for Commerce & Industry, said in a reply in an unstarred
question in the Lok Sabha. In preparation of the proposal, consultations have been held
with stake holders and industry associations, including FICCI. The proposal identifies the
barriers faced in the movement of professionals for delivery of services and suggests
strategies to achieve meaningful liberlisation in this area and to improve trade &
services through Mode-4. The strategies suggested include delinking of commitments from
Mode 3 by inclusion of a category of independent professionals in the horizontal
commitments, establishment of multilateral norms to reduce the scope for discriminatory
practices in use of ENT: exemption from Social security contributions; transparent and
objective administration of visa regimes and separation of temporary service providers
from permanent labour flows by introducing separate visa procedures; establishment of
multilateral norms to facilitate Mutual Recognition Agreements (MRAs) among member
countries, and exemption from social security contributions for developing country
professionals. The proposal also seeks specific sectoral commitments on Mode 4 from
developed countries. During discussions at the Special Sessions of the CTS, WTO member
countries appreciated the importance of the issues raised in India’s proposal to
developing countries and expressed interest in them. Developing countries were particulary
interested in liberalisation of this mode of supply and wanted more sector specific
commitments from developed countries. Though the developed countries were supportive of
the importance of greater procedural transparency and improved access to information on
laws and regulations by the service suppliers and were inclined to work on definitions of
various categories of personnel, they were not favorably inclined towards the proposals
for separate visa procedures and exemption from social security payments and the
development of multilateral norms on MRAs.
• WTO ASSISTANCE FOR TRADE NEGOTIATIONS
At the Fourth Ministerial Conference of the WTO held at Doha, the members confirmed
that technical cooperation and capacity building are core elements of the development
dimension of the multilateral trading systems. It was decided to develop a plan to ensure
long term, secure and predictable funding for the WTO technical assistance activities.
Pursuant to the mandate contained in the Doha Ministerial Declaration, the General
Councial decided to convene a Pledging Conference and also to create the Doha Development
Agenda Global Trust Fund. In the Pledging Conference held on 11th March, 2002, the member
governments pledged to the Global Trust Fund an amount of over 30 million Swiss Francs for
the WTO to conduct the technical assistance and capacity building activities for the
developing countries for their constructive and fruitful participation in the Doha Work
Programme. The coordinated WTO Secretariat Annual Technical Assistance Plan 2002 which is
being implemented, lists various technical assistance activities for the developing
countries including LDCs. For India, the activities listed include Technical Missions
on Trade and Competition Policy, Trade and Investment (in cooperation with the UNCTAD),
Trade Facilitation, Integrated Data Base, Services, Intensive Training Course for Asia and
Pacific Region to be organised in New Delhi (in cooperation with the UNCTAD) and a
Regional Workshop on SPS Agreement. Further action in respect of these activities and
others considered necessary will be taken in accordance with our felt needs at the
appropriate time.
• INCREASE IN CROP - SUBSIDY BY AMERICA
It is reported that the subsidies proposed in the US Farm Security and Rural
Investment Act, 2002 would be of the order of US$ 180 billion in next ten years. The
proposed increase in subsidy to agriculture in America would not be consistent with the
spirit of Doha Ministerial Declaration where it was decided to engage into negotiations
aimed at substantial improvement in market access; reduction of, with a view to phasing
out all forms of export subsidies; and substantial reduction in trade distorting domestic
support. Reports are indicating that US Farms Security and Rural Investment Act, 2002 will
have a price depressing effect on world markets. This may have negative effects for
developing countries as well.