The Haves and the Have Nots: Europse scores a deal in Paris

By Alexandra Strickner and Carin Smaller, TIP/IATP

CONTENTS

I. AGRICULTURE: the aftermath of AVEs - where to from here?
II. NAMA: a formula for disaster
III. SERVICES: marathon ahead
IV. PROCESS: the dangers of exclusion
V. DEVELOPMENT: strengthening SDT or just shrinking it?
VI. A TIME TO PROTECT: taking a stand at the WTO
VII. IMPORTANT DATES TO REMEMBER
VIII. DOCUMENTS

I. AGRICULTURE: the aftermath of AVEs - where to from here?

In the margins of the OECD mini-Ministerial, held in Paris on 4 May, the so-called Five Interested Parties (FIPs) hacked out an agreement on the issue of converting specific tariffs ($X per tonne of imports) into percentage tariffs or ad valorem equivalents (AVEs)(X% of the price per tonne of imports). The agreement got approval by those WTO Members present at the mini-Ministerial and it is likely to be approved by the rest of the membership in the coming days. (See link below to: Draft Guidelines for the Conversion of Final Bound non-Ad Valorem Duties into Ad Valorem Equivalents)

The details of the AVE issue are complex and highly technical but they go to the heart of the market access pillar of the agriculture negotiations. The market access pillar essentially proposes a formula for reducing tariffs, a category of sensitive products for both developed and developing countries to accommodate particular sectors, and a category of special products (SPs) and a special safeguard mechanism (SSM) for use by developing countries on the basis of food security, rural development and livelihood concerns.

To start work on a tariff reduction formula members have to use a common measure to be able to compare tariff levels. For the moment, countries use different measures: some use specific tariffs, some use percentage tariffs (AVEs), some use mixed tariffs (a combination of the two) and some use complex tariffs (whichever is the higher between ad valorem and specific). In the July Package, members agreed to use a percentage tariff measure (AVE) as the common measure from which to embark on tariff reductions. The E.C and some G10 countries are the main members who use specific, complex and mixed tariffs.

Once there is a common measure, tariff lines will be grouped into different bands or tiers depending on whether they are high, medium or low. The formula will then be calculated to ensure the highest tariffs will be cut most and the lowest tariffs least.

For those tariffs already in percentage form, it is possible to determine whether tariffs are high, medium or low. For example, WTO members could declare that tariffs of 20% or less are low, from 20% to 99% are medium and 100% and over are high. For specific tariffs, however, you cannot tell whether a tariff of $20 per kilo of cheese is high, medium or low unless you know what the price is per kilo. If the price is $100 per kilo of cheese for example, then you know that the $20 per kilo tariff is equivalent to a 20% tariff. If the price is $1000 per kilo of cheese however, then the equivalent is a 200% tariff. The difference in the price of the product determines whether your tariff equivalent, AVE, will be classified as a low tariff or a high tariff. The technical problem arises in deciding what price to use to determine the ad valorem equivalent.

There are a number of ways to calculate prices. You can either calculate it based on import prices (how much the importing country pays for a kilo of cheese)