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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