NON-AGRICULTURAL NON-AGRICULTURAL MARKET ACCESS MARKET ACCESS Edwini Kessie [email protected] Council and Trade Negotiations Committee Division, WTO
Mar 30, 2015
NON-AGRICULTURAL NON-AGRICULTURAL MARKET ACCESSMARKET ACCESS
Edwini [email protected]
Council and Trade Negotiations Committee Division, WTO
Trade PolicyTrade Policy
Production subsidies
Economic ranking (efficiency)
Available instruments
Customs duties
Import restrictions (global - MFN - quota) (attributed quota) Voluntary import restraints
Distortions
Production
+ Consumption
+ Price competition + Protection rent - to private sector (instead of tariff revenue) + legal uncertainty
1
2
3
4 + Protection rent transferred abroad + additional legal uncertainty
1
Trade PolicyTrade Policy
Production subsidies
Available instruments
Customs duties
Import restrictions (global - MFN - quota) (attributed quota)Voluntary import restraints
4
3
2
1
Political ranking (democratic element) Finances
Transparency Control
Published law or regulation
Published law or regulation
Published administrative act
Secret
Budgetary expenditure
State revenue
Revenue for national producers
Revenue for foreign producers
Legislative and budgetary control
Legislative control
Discretionary powers (administration)
Disretionay powers (administration)
2
Trade PolicyTrade Policy
Production subsidies
Available instruments
Customs duties
Import restrictions (global - MFN - quota) (attributed quota)Voluntary import restraints
Legal ranking (WTO)
Allowed (subject to countervailing measures)
Allowed up to the bound level (Schedules of tariff concessions) Prohibited subject to Exceptions
Prohibited without Exception
3
What is a tariff ?What is a tariff ?
A tariff is a customs duty or charge imposed by a government on the entry of goods into its territory. Usually, it is imposed when goods are cleared through customs for domestic consumption.
What are internal charges ?What are internal charges ? In GATT/WTO terms tariffs (ordinary
customs duties) are different from internal taxes or charges such as sales tax, excise duty, or value-added taxes. It is permissible to impose internal taxes or charges on imported goods, so long as the amount of the tax or charge does not exceed that applied to like domestic goods. This requirement is often referred to as the “national treatment” principle (Article III of GATT 1994).
What are other duties and What are other duties and charges (ODCs)? charges (ODCs)?
GATT Article II:1(b) requires that goods that are subject to bound rates of duty shall be exempt from other duties and charges of all kinds in excess of the bound tariff rate. This requirement is necessary as the imposition of such charges, or their increase, tend to diminish the value of tariff bindings.
What are other duties and charges (ODCs)?
In order to clarify the rights and obligations of Members in respect of “other duties and charges”, it has been agreed that such charges should be included in schedules of tariff concessions. This requirement is contained in the Understanding on the Interpretation of Article II:1(b) of GATT 1994.
Where a duty or charge is included in a country’s schedule, it becomes bound at a maximum level. Any duty or charge omitted from a schedule may not be subsequently introduced.
Purpose of tariffPurpose of tariff
government revenueeconomic developmentsocial objectivestrade negotiating leverage
Why are tariffs better?Why are tariffs better?
Raise revenue for governmentsImports can adjust to changes in
demand and supply Rate of protection is knownAllocation of access - transparencyRent-seeking costs minimised
Why are tariffs better? Why are tariffs better? (cont’d)(cont’d)
QRs– absolute protection– administrative
mechanism– cost of protection
benefits importers or exporters
– incentive to import high value-added products
– generally fixed by administration
Tariffs– margin of protection
– market mechanism
– cost of protection benefits government
– no particular incentive to import high value-added products
– generally fixed by legislatures
Types of tariffsTypes of tariffs
Ad valorem tariffSpecific tariff or non-ad valorem tariff Alternative specific tariffCompound tariffAd valorem equivalents (AVE)
Types of tariffsTypes of tariffsAd valorem tariff:
An ad valorem tariff is expressed as a percentage of the value for duty of goods imported. For example a duty of 10% means that the total duty payable on the goods would be 10% of the declared value of the goods.
Value of the goods very important – under invoicing and over-invoicing where rates are high and if there are foreign exchange restrictions
Types of tariffs Types of tariffs (cont’d)(cont’d)
Specific tariff or non-ad valorem tariff:
A specific tariff is expressed as a monetary amount per unit of quantity of the goods. Examples are: 5 cents per kilogram or $1.10 per litre
Flat charge per unit or quantity of goods. – i.e. $500 per car or –5 cents per kg of sugar
Types of tariffs Types of tariffs (cont’d)(cont’d)
Alternative specific tariff: An alternative specific tariff uses either
an ad valorem or a specific tariff, the rate payable being whichever rate returns the higher amount of duty.
Types of tariffs (cont’d)Types of tariffs (cont’d)
Compound tariff:A compound tariff combines a specific duty and an ad valorem tariff. In this case, both elements are payable. For example, 15 per cent plus $25 per tonne.
Types of tariffs Types of tariffs (cont’d)(cont’d)
Ad valorem equivalents (AVE): Where specific tariffs or compound tariffs
are in force, it is often necessary to provide an AVE to enable tariffs to be compared or to measure compliance with an ad valorem tariff target.
Specific tariffs, and mixed and compound tariffs are normally called non-ad valorem tariffs.
Types of tariffs (cont’d)Types of tariffs (cont’d)Ad valorem equivalents (AVE):
There are several ways to calculate an AVE for non-ad valorem Tariffs. Where data is available a relatively easy method is to express the amount of duty collected for the goods covered by the tariff line as a percentage of the value for duty of the goods. As an example, if the duty on a product was $3.50 per unit, and the total duty collected was $80,000 on imports of $175,000, the AVE may be calculated as: $80000/175000*100= 45.7%
AVEsAVEs Methodology to convert non-ad valorem duties
(specific duties, compound duties etc.,) into ad valorem duties
Easier to calculate ad-valorem duties, and more transparent
Increases competition - specific duties tend to be immune to swings in world market prices. Even if world prices drop, exporter pays the same amount of duty
The issue has been discussed extensively in the agriculture and NAMA negotiations – COMTRADE and IDB figures
Tariff bindingsTariff bindings
bound rates of dutyunbound rates of dutyceiling bindingsapplied tariff rates
General CommentsGeneral CommentsGATT/WTO rules do not specify which types of
tariffs may be boundMost tariffs are bound on an ad valorem basis but
examples of specific and alternative specific tariffs may also be found, reflecting national tariff practice.
With the trend towards world trade liberalization, there has been a move away from the more complicated forms of tariffs in many countries.
Trend reflected in WTO schedules of tariff concessions.
General Comments General Comments (cont’d)(cont’d)
Ad valorem tariffs allow an easy comparison of rates between countries, or the changes to average tariffs within a particular country over a period of time.
Non-ad valorem tariffs (specific tariffs, and mixed and compound tariffs) are less transparent than ad valorem duties and their protective effects are often hard to assess. In general, the protective effect of such tariffs increases as the cost of imported goods falls, compared with the effect of an ad valorem tariff.
General Comments General Comments (cont’d)(cont’d)
Given the fact that it is mostly developing countries which produce cheap products, the impact of specific tariffs on their exports, are greater than on expensive products manufactured in developed countries. Thus, from developing countries’ point of view, they have more to gain if non-ad valorem tariffs are converted to ad valorem tariffs.
General Comments (cont’d)General Comments (cont’d)Alternative specific tariffs also lack clarity but
they are particularly useful where the valuation of goods is often in dispute, for example, for used motor vehicles.
Over the past decades, not only tariffs have been substantially reduced, but specific tariffs have also been eliminated considerably.
Tariff classification systemsTariff classification systems
WTO members use the Harmonized Commodity Description and Coding System (HS) for tariff classification, in accordance with the International Convention of the World Customs Organization (WCO)
Customs valuationCustoms valuation
WTO recognizes that different methods of valuing goods for customs purpose may affect the amount of duty payable and thus, the value of tariff concessions. This issue is addressed in the WTO Customs Valuation Agreement.
Tariff schedules
Tariff item numberDescription of productBase rate of duty (MFN treatment)Preferential rates Initial negotiating rightsOther duties and charges (ODCs)
Traditional tariff negotiations Traditional tariff negotiations Basic rules
– substantial reduction of tariffs– reciprocity and mutuality– selective product-by-product negotiations (or bilateral item-by-item)– principle supplier rule– initial negotiating rights (INRs) – participation in MTN– multilateralization and assessment of bilaterally negotiated agreements – organization and procedures– statistics– role of developing countries
–
Recent tariff negotiations Recent tariff negotiations
New approaches - Formulae for general tariff cuts:
– linear reduction formula– non-linear cut - harmonization formula (e.g.
Swiss - Tokyo Round formula)– Tariff band approach
Recent tariff negotiations Recent tariff negotiations (cont’d)(cont’d)
sectoral approach reduction targets (weighted average, zero) basic rules
– differences to product-by-product negotiations– rules valid for both types of negotiations
developing countries modalities can be specified for
– reduction targets for product groups, and/or – on product by product basis
Renegotiations Renegotiations
Renegotiations of bound concessions, modifications, and withdrawals (GATT Article XXVIII)– compensation
– calculation of compensation
– retaliation
Negotiating techniquesNegotiating techniques
Plurilateral and bilateral approaches of the multilateral tariff negotiations– plurilateral negotiations
– bilateral negotiations
Negotiating techniques Negotiating techniques (cont’d)(cont’d) negotiating objective identification of key market and products
– the effect of the MFN rule preparation of request list and concessions
sought analysis of tariff requests received evaluation of offers received major suppliers
– negotiations with substantial suppliers– minor suppliers
Negotiating techniques Negotiating techniques (cont’d)(cont’d)
assessment of value of concessions offered
–simple average reduction
–trade weighted reductionrevenue foregonedata requirement and analysis
THE DDA NAMA NEGOTIATIONSTHE DDA NAMA NEGOTIATIONS
Results of the Uruguay Round
The Doha Mandate
The Negotiating Issues
TariffsTariffsUruguay Round Reform ProgrammeUruguay Round Reform Programme
Developed countries6 years: 1995-2000
Developing countries10 years: 1995-2004
TariffsAverage cut foragricultural products -36% -24%
Minimum cut perproduct -15% -10%
Results
1986 1994
Binding
Number of bound tariff lines
Volume of bound trade
Uruguay Round (1986 - 1994)
Results
1986 1994
Binding
Number of bound tariff lines
Volume of bound trade
Developed countries
78 %
99 %94 %99 %
Uruguay Round (1986 - 1994)
Results
1986 1994
Binding
Number of bound tariff lines
Volume of bound trade
Developing countries
22 %72 %
15 % 58 %
Uruguay Round (1986 - 1994)
Sectoral Agreements in the Uruguay Round
Zero for zero Harmonization Agricultural equipment Chemicals Beer Construction equipment Distilled spirits Furniture Medical equipment Paper Pharmaceuticals Steel Toys
Special and Differential Special and Differential TreatmentTreatment
Developed countries reduce/eliminate barriers
Developing countries lower levels of binding-ceiling bindings
Special treatment for least developed
GATT Part 4GATT Part 4Enabling ClauseEnabling Clause
The Doha MandateThe Doha Mandate
•Paragraph 16 of the Doha Ministerial Declaration (WT/MIN(01)/DEC/1):
•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
The Doha Mandate (cont'd)The Doha Mandate (cont'd)
–Product coverage shall be comprehensive and without a priori exclusions
•The negotiations shall take fully into account the special needs and interests of developing and least-developed country participants
•Including through less than full reciprocity in reduction commitments
•In accordance with the relevant provisions of Article XXVIII bis of GATT 1994 and the provisions cited in paragraph 50 of the Declaration
NAMA – Negotiating IssuesNAMA – Negotiating Issues The formula – Simple Swiss Formula with two co-
efficients or a Swiss-type formula with variable co-efficients depending on the average tariff rates of Members
Overwhelming support for the use of a simple swiss formula with two co-efficients
Should co-effiecients be within sight of each other? Developed countries answer question in the affirmative,
while most developing countries in the negative Proposals range from 5 to 30 per cent
NAMA – Other issuesNAMA – Other issuesParagraph 6 countries
Treatment of unbound tariffs
Flexibilities for developing countries – paragraph 8
LDCs, small economies etc
Sectorals
NTBs
Relevant NAMA DocumentsRelevant NAMA Documents NGMA CHAIR’S DRAFT – Amb. Girard
TN/MA/W/35/Rev.1 GC CHAIR’S DRAFT – Amb. Perez Castillo
JOB(03)/150/Rev.1 MC CHAIR’S DRAFT – Derbez’s Text
JOB(03)/150/Rev.2 Annex B of the August 2004 General Council
WT/L/579; 2 August 2004 – Amb. Oshima Hong Kong Ministerial Declaration
WT/MIN(05)/Dec; 22 December 2005 NGMA CHAIR’S DRAFT
JOB(06)/200/Rev.1; 26 June 2006 – Amb. Stephenson