The “Girard” proposals on cuts to non-agricultural tarrifs

An informal summary of the non-agricultural market access proposals put forward by the Chair of the WTO negotiating group Pierre-Louis Girard (Switzerland) in the WTO document TN/MA/W/35 on 16 May, 2003 (“download”: from WTO) that have pleasedno one much. They have, however, one innovative aspect that has caused some developing countries to reassess their interest in a general application of ‘S&D’ provisions. Ambassador Girard has proposed a tariff cut (using a modified ‘swiss’ formula) and a complementary sectoral approach aimed at tariff elimination. His suggestions have not completely pleased any Members—which may be not a bad thing—but they potentially contain the seeds of an agreement once the priority problems of agreement on agriculture are out of the way. h3. Overview of the plan Starting from the bound tariff rates resulting from the end of the Uruguay Round—or from rates of twice the MFN applied rate in the case of unbound tariffs—all countries except least-developed countries will cut tariffs by # Converting all specific duties to ad-valorem rates using a specified procedure
# Applying a formula to tariffs that has the effect of cutting higher tariffs more than lower tariffs (a harmonising formula). The specific formula proposed, however, requires countries with higher average tariff rates to cut its tariffs by less than those countries with lower average tariff rates. The tariff averages are to be calculated with reference to rates at the 6-digit level of the HS. The purpose of this modulation of the formula is to integrate the Doha Declaration’s prescription that developing countries should not be required to offer ‘full reciprocity’ in market access negotiations. Since developing countries on average maintain higher duties than developed countries, the formula would lead developed countries to make proportionally bigger cuts than developing countries.
# On a sectoral basis (coverage to be negotiated but focussing on product areas of interest to developing countries) participants will eliminate tariffs in three equal steps starting from either bound or applied rates. Developed countries will eliminate tariffs at the end of the first phase; developing countries will cut to a rate of no more than 10 percent by the end of the first phase, maintain this rate during the second phase and achieve elimination of tariffs by the end of the third phase. Among the sectors proposed for elimination of tariffs are: electronics and electrical goods, fish and fish products, footwear, leather, motor vehicle parts and components, textiles and clothing. h3. Specifics of the tariff formula:

The final tariff (t ~1~) is a function of * the current tariff t ~0~ and
* the average tariff level t ~a~ and
* a coefficient Without the reference to the current average of tariffs at the 6-digit level of the Harmonized System, the Girard formula would be a standard ‘swiss’ harmonising tariff cut of the kind that has been proposed by e.g. the USA and the Cairns group for cutting agricultural tariffs in the Doha round. For each tariff rate, a higher rate will be cut more than a lower rate: e.g. a 40% tariff will be cut more than a 10% tariff. But, by importing current averages into the formula the overall impact on relatively projectionist economies is relatively small. In fact, the ‘coefficient’ makes very little difference to the outcome as these illustrations show.

The graphs show the range of cuts in a 20% ad ad-valorem tariff (on the Y axis) in a range of countries with (hypothetical) tariff averages ranging (across the X axis) from 300% to 5%. A country with a 40% average tariff would cut a 20% tariff to about 14% -16% whether the ‘coefficient’ chosen was 4 or 1. The starting average which is a multiplier in the numerator and an addition in the denominator of the formula has the biggest effect on the proportional cut. h3. Reactions Japan has objected to the paper, saying it would prefer the use of an average percentage cut—as opposed to the Chairman’s across-the-board tariff reductions—that would allow Members to keep ‘sensitive’ sectors from deep tariff cuts. The Japanese delegation also took issue with the inclusion of fish and fish products, footwear and leather goods as sectors where Members would negotiate eventual tariff elimination. Several other industrialised countries said that they would like to see the modalities cut more into high tariffs and that the proposal rewarded those who keep higher duty rates. Some developing countries with lower average tariffs such as China and Malaysia, are not pleased with the draft either for the same reason. Developing countries’ export markets are increasingly in other developing countries. By integrating S&D treatment, the Girard proposal has, ironically, the benefit of making the developing country interest in broadly-based liberalization more explicit.

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