Tag: NAMA

From the EU, a Bad Proposal on Market Access

The National Association of Manufacturers on April 14 joined other trade associations in a letter to Obama Administration officials opposing the latest proposal from the European Union on international standardization under the Non-Agricultural Market Access portion of the WTO negotiations, that is, provisions dealing with limits on trade of such items as manufactured goods. From the letter:

The EU’s newest NAMA proposal on international standards restricts choice and flexibility not only by naming their list of preferred standardizing bodies and suggesting that only standards developed by these bodies are relevant internationally within the context of the WTO Agreement on Technical Barriers to Trade, but by essentially requiring countries to use standards from those bodies. While this proposal is consistent with traditional European standards strategy, it fails to recognize that thousands of international standards and test methods that emanate from other globally respected standardizing bodies that currently serve as the basis for effective technical regulations or conformity assessment procedures which facilitate trade and enhance protection of public health, safety and the environment across many WTO Members and observers. The proposal also ignores significant proposals in Europe, Japan and elsewhere to expand the range of legally acceptable standards, including those developed by fora and consortia. (continue reading…)

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What’s Needed for the Doha Round to Move Ahead

Trying to regain the momentum for the Doha Round of global trade talks, the National Association of Manufacturers and other business groups outlined a set of priorities and strategies in a letter Wednesday to Karel De Gucht, the European Union’s trade commissioner, and U.S. Trade Rep Ron Kirk.

Reuters covered the story today, “Business groups press emerging economies over Doha“:

BRUSSELS, July 22 (Reuters) – Brazil, China and India must use their growing economic might to help revive deadlocked global trade talks, a coalition of business lobby groups said in a letter to U.S. and European Union trade negotiators.

The letter …is the latest sign that interest is growing in completing the Doha round of talks, which was launched in 2001 to help poor countries prosper through trade but has been stalled since 2008.

The business groups, from Europe or the United States, said the Doha round would progress only if Europe and the United States convince the big emerging economies to reduce tariffs on important industrial sectors and services.

Right. As the letter (available here) stated:

The success of the Doha Round depends on the willingness of the large emerging countries —especially Brazil, China and India—to assume the responsibility commensurate with the economic benefits they have been realizing as a result of global trade and investment liberalization. The large emerging countries now have the fastest growing economies in the G-20, and will clearly be major beneficiaries of the Doha Round. With their new economic power, they are now clearly distinguished from the least developed members of the WTO and, as a result, have a new and greater responsibility to share in leading the Doha Round forward in the NAMA, agriculture and services negotiations. Indeed, most of the significant additional market access available for the least developed countries lies in the reduction of market access barriers to the rapidly emerging economies—which could substantially boost south-south trade.

The NAM was joined by Business Europe, the Business Roundtable, Coalition of Service Industries, European Services Forum and the U.S. Chamber of Commerce. Chris Wenk of the Chamber writes about the letter at the Chamber Post, “Deliverable from Chamber Doha Mission.”

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Report from Geneva, the Debriefing

So what happened? Well, the proximate cause of the failure was the hang-up on India’s and China’s insistence that they and other developing countries be able to break their WTO tariff bindings if they felt they had to protect themselves against surges of food imports if prices fall.

Why was that such an important issue? Because tariff bindings are one of the pillars of the GATT-WTO system ever since 1947. A binding is an inalterable promise that you will never ever raise tariffs above that bound rate. You exchange concessions with other countries and bargain on rates, and what you end up with is the rate at which you will lock your tariff in.

If the Doha Round had permitted bindings to be violated for some food products, it would have meant loss of market access for existing food exports, but would also have meant that a basic premise of the WTO had been undone – with the inevitability that this undoing would spread.

The issue was so central that it really consumed full attention, a fire so intense that it drew the air out of other issues. Everything else halted. And in the end, the two sides could not agree. Those wanting protection just would not be satisfied with something within the present rules.

But more broadly, there was little meeting of minds here. Pascal Lamy, the Director-General, took a real risk in calling this meeting. He figured if there was any chance of doing a deal this year, the agreement on terms of negotiation had to be done now. If the basketball was going to go through the hoop, there had to be a backboard off which to bounce it – and that was this meeting of ministers.

But, to be trite, it was a bridge too far. Issues just weren’t ready, whether they were in manufactured goods or agriculture. Ministers were being asked to make decisions on matters on which their deputies had been unwilling to agree – and based on my experience, just because you bring in someone with a higher title, that country’s position is not going to change.

On NAMA – Non-Agricultural Market Access – we actually made a little progress. The non-tariff barrier text was so non-controversial that no one even mentioned it. On tariffs, we have known the tariff cutting formula is too weak to open markets for us, so we had to look for deeper cuts in major industrial sectors. The goal here in Geneva was to move Brazil, China, and India away from absolute refusal to even talk about sectorals and to a position where they would at least be willing to enter into beginning to negotiate sectorals.

This was the NAM’s bottom line. I don’t know if, had the Ministerial gotten to that point, we would actually have achieved that objective, but all three of the countries were moving somewhat in that direction. On the other hand, the terms were weakening somewhat, so we don’t know what would have come of this.

Where do we go from here? NAM President Governor Engler has called for a cooling-off period. Everyone must recognize that there is now no way to conclude these negotiations before the end of this Administration. The new Administration needs to come on board and begin looking at this, and there will also be a new EU Commission.

There is no point in picking up where we left off. People need to think about what they really want and what they are willing to give up for it. But we must resist the wags who can’t wait to pronounce this the end of the WTO. Absolutely not. And here I am going to agree with Indian Trade Minister Kamal Nath, who said, “My confidence in the institution of the WTO remains intact, and we will take this up and move forward.”

The World Trade system should actually be viewed the stronger for having just gone through a difficult process of disagreement. It is flexible enough to withstand this, so long as we do not become its enemies and accuse the institution of failure, rather than a failure of some large new countries to realize that it is give and take, not take and take.

The NAM will certainly be looking at ideas on how to move ahead. One excellent idea that perhaps can gather traction is that of an environmental sectoral that would reduce or eliminate tariffs on products meant to help clean the environment. There are other possibilities as well. Since non-tariff barriers were non-controversial, maybe some of those could move ahead – so long as we get away from the idea nothing can happen outside a huge round.

I want to end my last blog from Geneva by saying how proud I am of Amb. Susan Schwab, Presidential Assistant Dan Price, Commerce Under Secretary Padilla, Ambassadors John Veroneau and Peter Allegeier, and the entire U.S. interagency negotiating team. They worked ceaselessly, with little sleep, looking for ways to make this thing work. If anyone could have made it happen, it was them. But even they couldn’t make it work when others just said no.

Thanks for reading these blog posts, and I look forward to coming back to Washington and to home.
NAM’s Man in Geneva
Frank Vargo

For the previous reports from Frank Vargo, NAM’s vice president for international economic affairs, please click here.

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Report from Geneva, VII

Two steps forward, and one step back. Or is it one step forward and two back? At any rate there was no forward movement in the WTO talks today. This morning, the U.S. had some very pointed words for India and China, stressing that the Lamy text was the only way forward. If countries were to reject the text or backtrack, there is no chance for a deal. Nobody is completely happy with the Lamy text (including the NAM), but if there are to be negotiations, the Lamy text is really the only basis on which to have the terms of negotiation. (Lamy’s update for July 28 is available here.)

The U.S. is not the only delegation concerned. Press reports indicate that France continues to pressure the EU delegation to resist agricultural changes and Germany is now understood to be pressing on the industrial side, saying German industry is not getting enough market access. China and India pushed back, saying they are being asked to do too much, and then they all went back into a “Group of Seven” (G-7) meeting – ministers only this time, no note takers or observers, so the ministers could frankly exchange views.

The G-7 met most of the day, broke up, and reconvened. So far, without resolution. The big issue is “SSMs – special safeguard mechanisms by which developing countries can clamp down on agricultural imports if there is a surge. They want, in fact, to be able to slap tariffs on that are higher than their legal WTO bound rates. Wow! That would in essence destroy one of the longest-standing pillars of the WTO, going back to 1946-47 when the GATT was first agreed. Big issue. But not just a theoretical issue. U.S. farm interests are extremely concerned about the protectionist possibilities here.

The issue is so serious that the whole Ministerial meeting could come unwound. We’ll see.

The other hot issue is the question of whether Brazil, India, and China will sign on to Annex Z and participate in sectoral negotiations. Brazil doesn’t seem to have a serious problem here, but China and India are still very resistant. My tea leaf readings, though, indicate that the degree of loudness of “no” is diminishing. Some questions are being asked about the nature of sectoral negotiations, whether if you start the process you are bound to finish it, etc. These are good and useful questions.

But first we have to get past the SSM issue, and that seems to be as big as Mont Blanc, which looms in the distance from Geneva.

NAM’s Man in Geneva
Frank Vargo

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Report from Geneva, VI

I sympathize with journalists who have to fill a newspaper even when there is nothing to report. There is a lot going on here in Geneva, but most of it has continued to be the small group meetings and one-on-one bilaterals. And that’s really how things get done in trade negotiations. You cannot have 30 people sitting around a table and get anything agreed. You have to get the most interested parties to meet with each other, see what they can swap, get them to agree on some language, and then to out and sell it to the rest.

There are 153 countries in the WTO and theoretically any one of them could hold up a deal. That’s very unlikely, but there are probably 40-50 countries who absolutely have to be in accord with an agreement.

WTO Director General Pascal Lamy’s text, which I reported on in an earlier blog, is the basis of the agreement, if there is one. After a full day of bilateral discussions on this, a “Green Room” was convened about 7 p.m. Geneva time and could run quite late tonight – it is 11 p.m. as I write this, and I don’t know if the Green Room is running or not.

Lamy’s plan is to have his text – really his outline – incorporated into the ag and NAMA chairmen’s’ texts and given out for approval tomorrow. Then there will be another day of discussion and angst, and hopefully we will be done Wednesday – although I was asked to be prepared to be here through Thursday (groan). You know, you can only eat so much raclette.

My activities today involved meeting with General Director Lamy’s Chief of Staff, meeting with Commerce staff to discuss some technical details, and trading rumors with some of the press. And I did get to take a long walk along the beautiful lake. It is very warm in Geneva, and thousands of people were out in the lakeside parks or out on sailing boats.

I had earlier promised to discuss in somewhat greater detail the “anti-concentration clause (ACC),” so let me do that now. Developing countries are allowed to exclude up to 14 percent of their tariff line items from making cuts, and there is concern that they will cluster these tariff lines in sensitive areas, particularly textiles and autos. So, the European Union came up with the idea that no more than half of a tariff category could be excluded – or 40 percent, depending upon the breadth of the category definition. That would ensure that at least half the items in the tariff category (4-digit HS, for those of you who do that sort of thing) would have to take the formula cut.

Well, this set off a cacophony among the developing countries, who precisely want to concentrate their exemptions in key sectors. The result was that Lamy’s text says that at least 20 percent of a tariff category must take the full percentage cuts – meaning a country can exclude up to 80 percent. That’s not very helpful in spreading the flexibilities and keeping them from being clustered, and is one more problem we face on the road to trying to cobble out a deal that looks reasonably balanced for us.

NAM’s Man in Geneva
Frank Vargo

For previous posts from Geneva, please go here.

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Report from Geneva, V

A quiet day in Geneva, at least on the surface. The major event today was the long-anticipated “signaling conference” on services, in which countries indicated what they were prepared to do in liberalizing services. The Coalition of Services Industries indicated it was very pleased, and hoped that substantial new offers would be made as a result.

On NAMA, this has been a day of very intensive bilateral negotiations. The U.S. has been working in close tandem with the EU, and both have been pressing for China, Brazil, and India to step up to the plate. There seems, for the time being at least, to be some distance opening up between Brazil and India – in which Brazil is making some reasonable statements, indicating willingness to move ahead, and not being shrill in its tone. India, on the other hand, continues to be extremely difficult and critical.

Not too much to report. NAM was asked to speak for manufacturers at a meeting of Congressional staff who are here in Geneva, along with the Farm Bureau for agricultural interests. There is a lot of congressional concern for what this deal might do to affect import-sensitive industries and a lot of questions as to how there can be enough gain for export-oriented industries.

Also met again with U.S. negotiators, and continue to admire the job they are doing. It is not easy to be in bilateral meetings all day, be in green room and other WTO meetings, plan the next day, examine strategies, report back to Washington, etc.

Tomorrow will bring more bilateral meetings, and probably a meeting of the Green Room in which about 30 countries will give their reactions to the Lamy text developed yesterday. Most of them apparently will say in general it is OK, but they have problems in that the U.S. and Europe aren’t doing enough in agriculture. Many of them also oppose the anti-concentration language in the text for NAMA and the provision for sectorals.

Could be an interesting day tomorrow.

NAM’s Man in Geneva
Frank Vargo

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A Doha Round that Manufacturers Can Agree On

Reuters:

GENEVA, July 26 (Reuters) – U.S. manufacturers will not back a proposed compromise in world trade talks unless leading developing countries like Brazil, India and China agree to sharply cut tariffs in key industrial sectors, a top industry official said on Saturday.

“If they don’t commit to sectorals, I see no way we can get behind this,” Frank Vargo, vice president of the National Association of Manufacturers, told Reuters one day after a compromise shaped by World Trade Organization Pascal Lamy broke a deadlock in the long-running Doha round.

And…

The compromise plan for cutting overall tariffs in developing countries is “so weak” U.S. manufacturers can only support the package if top emerging markets join in negotiations to slash tariffs to zero in specific sectors such as electronics and industrial machinery, Vargo said.

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Report from Geneva, IV

Sorry to be posting this so late, but the U.S. Government briefing on today’s developments occurred very late, and I stuck around after that to get some more of my points in.

What happened today is that Director-General Lamy worked with the “Group of Seven” (G7) core countries to agree on an outline of points where there have been key differences. The text is a positive development, but “breakthrough” is too strong a word because at this stage it is only being forwarded to the broader group of countries participating in the “green room.”  They may or may not endorse it, and will probably seek some changes.  In addition, while of the Group of Seven core countries, India did not veto the text it indicated it was being forwarded without India’s approval. Moreover, the text is really only an outline of key points. It is not a self-contained text and if agreed by all, its points would be incorporated into the existing agricultural and NAMA texts.

That the text was developed and passed the Group of Seven hurdle, however, is a very positive step – and without this development the Mini-Ministerial quite probably would be coming to an end.  The text allows forward movement to the next step, and of course each step has its own perils.

Regarding the content of the Non-Agricultural Market Access (NAMA) text, the content of the three alternative tariff formulas and the amount of product exclusions remains a problem.  The anti-concentration content also remains a problem.   I will go into greater detail tomorrow.

The non-tariff barrier part of the existing negotiating text was not altered in any way, which is fine since it has not been controversial or opposed by anyone and actually ha  ne of the best chances of being approved pretty much as is – including the auto industry component.

The sectoral part was strengthened significantly by noting that certain (undesignated) countries will agree to participate in at least two sectorals. That is a big change from the vague “maybe we will, maybe we won’t” earlier position. Also, an incentive was put into the language that developing countries could be allowed to have a slightly weaker tariff cutting formula for the rest of their imports if they participated in a sectoral. This is to the U.S. advantage since so much more market access is gained by having countries participate in sectorals than is lost by a one-point tariff formula change.

The sectoral component is only worth something if key countries participate. The idea is to have Brazil, China, and India participate in sectorals. If they do not, the sectoral in itself will produce relatively little. The idea behind the sectorals is to produce more balance for the United States. If the country participation or the industry sectors included do not give the United States enough balance at the “end of the day” when the results of formula cuts, NTBs, and sectorals are added up, then there is no deal.  And the tariff cutting formulas are pretty weak.

Don’t forget that what is being discussed in Geneva now are just the “modalities,” the guidelines for the negotiations – not the negotiations themselves. Trade negotiations never follow a straight line, and their various upward and downward movements should not be seen too dramatically.

However, today’s development was positive and indicates for at least six of the seven “Group of Seven” countries a desire to try to reach an agreement.  That counts for a lot. But the outlier – India, could still take the whole thing down.

NAM’s Man in Geneva
Frank Vargo

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Report from Geneva, III

Well, there is good news and there is bad news. The good news is that they are really engaged in meaningful discussions and negotiations at WTO Headquarters, having broken into smaller groups that can actually talk about swapping concessions. The bad news is that the divides have not been bridged. As this is the NAM, I focus on industrial trade, but the situation in agriculture is not much better. French Prime Minister Sarkozy today said there is no way France will agree to what’s on the table, for example. That’s a pretty blunt and serious statement. At the same time, Brazil and India say the United States still needs to reach more deeply into its agricultural pockets and give them more. In the Non-Agricultural Market Access (NAMA) discussions, things are pretty heated. Three key issues are in contention: the “flexibilities” (amount of imports that developing nations can exclude from making any tariff cut at all), sectoral agreements, and the anti-concentration clause (limiting the ability of developing countries essentially to exclude entire industries from tariff cuts, and compelling them to spread their “flexibilities” around.

In all three case, the United States and the European Union are very much shoulder-to-shoulder and U.S. and European industries have basically the same goals and the same concerns. But in all three cases, the three primary big emerging manufacturers (BEMs) — Brazil, China, and India — so far are intransigent. It is “eyeball-to-eyeball,” and went on well through last night and into this morning. They are at it again this evening in Geneva.

On the anti-concentration clause, vigorously opposed by India, their Trade Mininster Kamal Nath made the most amazing – and incomprehensible statement. He chided “high-cost” U.S. and European businesses for trying to prevent developing nations from shielding entire manufacturing industries from tariff cuts, and is reported to have said, “is at the heart of globalization, if you’re non-competitive you can’t seek refuge under an agreement of the WTO …The future is that cars are not going to be made in Stuttgart or Detroit — they’re going to be made in Asia.”

Huh? Excuse me, but I think he got it exactly backward. Our auto industry is so efficient that we are down to 22 hours or so of labor in a car, charge only a 2.5% import duty on cars, and export $45 billion of our cars around the world – 2.5 million cars. How many of those cars went to India? Last year exactly 417 cars, worth a little over $3 million. Why so few? For starters, how about India’s 100% import duty? And then there are those non-tariff barriers.

You want to talk about being non-competitive and seeking refuge under a WTO agreement – you’re talking India. Mr. Nath, we will compete with you any day – if you will come out from hiding behind your huge tariff wall you are trying to keep.

Really very little more that I can add from Geneva today. Had more good meetings with key U.S. negotiators. Also met with European industry groups and Japan’s Keidanren – all of whom are pressing their negotiators for market access.

One area hasn’t been talked about much – non-tariff barriers. There really is little controversy here between industrial and emerging nations, and seems to be something that can be put into the negotiation stream with little difficulty at this point. Of course the actual negotiations could be difficult.

And behind the closed doors of the negotiating rooms at the WTO headquarters, they keep going at it, with U.S. and European negotiators pressing for market access, and the BEMS pressing for protection. Ambassador Schwab, Dan Price, Peter Allegeir, John Veroneau and the whole U.S. government team are just fantastic. They are getting by on a couple of hours of sleep a night, and are trying everything possible to get other countries to get with the program and truly negotiate. They deserve a real hand.

That’s about it for this evening . It could still go either way. The negotiations could come to an inconclusive halt tomorrow, or they could go on perhaps into next week and perhaps with real results. Stranger things have happened, right?

Frank Vargo
NAM’s Man in Geneva

 

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Report from Geneva, II

From the NAM’s perspective it was a mixed day at the WTO negotiations in Geneva. Contrary to some predictions, nobody walked out. Also Indian Trade Minister Nath rethought his rather critical initial comments on the U.S. offer to cap total agricultural subsides at $15 billion and said it was a useful thing for the United States to do Additionally, Brazil is understood to have said they could work within the present NAMA text. NAM has said the same thing, but we have low end developing coefficients in mind, along with reasonable flexibilities not excluding too many products, and of course participating in major sectorals. I don’t think Brazil is in the same corner as we are.

On the other hand, some mid-range developing countries were understood to step forward and say they could do sectorals. That is very good, and hopefully a bandwagon could develop that might develop some momentum. However, Argentina dumped all over the NAMA text and South Africa had major problems as well, being concerned that cutting their tariffs would allow China to decimate their manufacturing industry.

The U.S delegation began advancing some thoughts about how sectorals might be made more attractive, but I think it is too early to expect a reaction to that, and I should not get into details at this point.

Director General Lamy decided that the “Green Room” process with 30 or more ministers in the room was not helping narrow differences and was locking things into their already established positions. So he decided to move to “Small Group Meetings,” for example, with the U.S., EU, Japan, Brazil, India, and Australia, to see if these groups could do a better job of narrowing differences.

In my experience from previous negotiations, that is the right thing to do at this time. I don’t read any backward movement into it all. This is a good thing, and we will see where it goes.

NAM had a good session with Commerce Under Secretary Padilla today on sectorals. Chris is totally convinced that without sectorals there cannot be enough balance to move forward with NAMA, as is Ambassador Schwab and key White House advisor Dan Price. Conversation with Chris came up with some additional ideas, and they may work their way into the U.S. position.

Also met with Japanese officials, who said they have been advocating sectorals in their bilateral meetings, and with the Federation of Indian Chambers of Commerce and Industry, who are certainly not supportive of sectorals. We had a good and friendly talk, though, to try to understand each other’s positions better. My view is that India’s position is not wholly based on hard economic analysis, but also reflects a strong legal view that they do not want to be committed to things to which they did not agree in the Doha or Hong Kong ministerial text. But they certainly made their point that they are an immovable object on sectorals, and I made the point we are an irresistible force. So who knows where this will turn out.

Also had discussions with Business Europe, who is increasingly on board with sectorals, but also wants the anti-concentration clause which would limit the proportion of any import category that could be exempted from tariff cuts on the part of developing countries.

Finally, had detailed discussion with a key Congressional staffer to explain NAM’s views on sectorals from top to bottom.

All in all, a busy day. No wheels fell off the cart, and we are off to Thursday.

Frank Vargo
NAM’s Man in Geneva, July 23, 2008

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