WORLD TRADE
ORGANIZATIONTN/MA/S/3
9 September 2002
(02-4711)
Negotiating Group on Market Access
FORMULA APPROACHES TO TARIFF NEGOTIATIONS
Note by the Secretariat1
I. INTRODUCTION
1. The present study was prepared in response to a request from the delegation of Brazil to
prepare a study that illustrates the various modalities used in tariff negotiations.
2. The study is divided into four sections including an introduction. Section II reviews the
mandate for tariff negotiations. Section III covers different formulae that have been proposed and
adopted.  The approach that has been taken in this section is to divide the different approaches into
two types depending on whether they are a function of the initial tariff rate.  The study does not coverthe request and offer approach, since this is bilateral in nature.  Section IV then closes with a
discussion of the types of exceptions that have historically been used.
3. It should be noted that this study is meant to complement the studies that have been listed in
the documents TN/MA/S/1 and TN/MA/S/1/Add. 1.
II. MANDATE FOR MODALITIES
4. The actual modality for tariff negotiations that have been used by contracting parties has
evolved since the first set of negotiations.  Up to and until the 1956 Geneva Tariff Conference the
rules and procedures used for negotiations was the selective product-by-product approach.
Article XXVIII bis, established in 1957, allows for Members to establish procedures that are
acceptable to them.  It leaves it to the participants to decide whether the negotiations should be carried
out on a selective product-by-product basis or by the "application of such multilateral procedures asmay be accepted by the contracting parties concerned".  Full use of this provision was made during
the Kennedy Round of negotiations (1964-1967) wher e negotiations would be based upon a plan of
"substantial linear tariff reductions".
5. The Ministerial Declaration of the Tokyo Round stated that negotiations should aim, inter
alia, to "conduct negotiations on tariffs by employment of appropriate formulae of as general
application as possible".  In slight contrast, the Ministerial Declaration that established the Uruguay
Round broadened the mandate for negotiators by stating using the term "appropriate methods",
without providing a definition for appropriate. Similar language is used in paragraph 16 of the Doha
Ministerial Declaration, which says that modalities “should be agreed”.
                                                     
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to
the positions of Members and to their rights and obligations under the WTO.TN/MA/S/3
Page 2
III. FORMULAS APPROACHES
6. Two types of formulas can be used in negotiations.  The first type is one that reduces the
applicable tariff rates by the same amount, regardless of the initial tariff rate.  These are called tariff
independent formulas.  The second type of formula is called a tariff dependent, since the percentage
reduction in tariff rates depends on the tariff rate subject to negotiations.  Such formulas are also
known as harmonisation formulas since they also have the effect of reducing the dispersion of theapplicable tariff rates.
7. In order to illustrate how the two different types of formulas work, a hypothetical tariff
structure is assumed.  The shape of the tariff structure takes into account the possibility of tariff peaks,
escalation and high tariffs, although it should be pointed out at the outset that the definitions for each
of these terms is specific to this paper (box 1).
BOX 1 HYPOTHETICAL STRUCTURE
For simplicity and for expositional purposes a hypothetical tariff profile is assumed for this
paper.  Only 25 lines are assumed in the tariff structure so that each line reflects one particular
commodity.  For example, line 1 is product 1.  The tariffs are assumed to increase by
2.5 per cent starting from line 2.  The tariff rate for line 1 is assumed to be 1 so that the
highest tariff rate is for line 25, which is 60 per cent.  Descriptive statistics for the
hypothetical profile are provided in box table 1.
Box table 1 Summary Statistics of Hypothetical Tariff Profile
Mean 30.04
Standard Error 3.67
Median 30
Standard Deviation 18.3
Minimum 1
Maximum 60
Count 25
The structure also allows for alternative interp retations of key terms in paragraph 16 of the
Doha Ministerial Declaration. For example, a commonly used definition of the term "tariff
peak" is 15 per cent.  For this profile, using this definition, all the lines between 8 and 25would be defined as having a peak.  For tariff escalation purposes, the approach used here is
to assume one multiple production stage product, commodity 13, and one intermediate
product, commodity 5.  The reason for doing this is that a simple coefficient of tariff
escalation can be calculated, which would be the ratio of the tariff in line 13 over the tariff in
line 5.  In this case the value is 3.0.  A lower coefficient value would imply less escalation,since the tariff rate on the final product would be approaching the tariff rate of the
intermediate product.TN/MA/S/3
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8. Over the various rounds of negotiations s ubmissions by CONTRACTING PARTIES have not
followed a common format, although they all have the same objective of reducing tariffs.  Some
proposals use the rate of reduction as the benchmark. For example, a specific number of 30 or 50 per
cent is the specified reduction of the tariff for a particular line.  Others have focussed on the final rate
of duty, allowing for the necessary rate of reduction.  Therefore, a benchmark, or point of comparison
for the various approaches is required.  In order to present the different approaches in a uniformmanner this section uses the rate of reduction as the basis of the formula. That is the formula describes
the percentage reduction that arises from the implementation of a particular proposal.
A. T
ARIFF INDEPENDENT MODALITIES
9. The defining feature of independent modalities is that they are not dependent, in anyway, on
the initial tariff rate.  What is important is simply the rate of reduction.  For example, the most
commonly cited independent modality is the one used for the Kennedy Round where “an across theboard cut of 50 per cent would be used as a working hypothesis for the determination of the general
rate of linear reduction” (Hoda, 2001; pg. 31).
10. Assume that the initial tariff rate prior to negotiations is given by t
0 and the final tariff rate
resulting from the negotiations is t 1.  The expression which relates the two tariff rates, where c is a
constant parameter, would be:
()0 1 tct= (1)
11. The final tariff rate would necessarily depend upon both the parameter c and the initial tariff
rate.  The rate of reduction, however, is independent  of the tariff rate.  To see this, let R be the rate of
reduction which is defined as:
00 1
tttR−= (2)
12. Substituting expression (1) into (2) will result in the following expression, which is
independent of the initial tariff rate.
()
()
11
0000 0
−=−=−=
cRtctRtt tcR
(3)
13. The rate of reduction in the original tariff rate depends only on the parameter c.  The original
tariff rate is not a determinant of the rate of reduction.  All tariff rates will be reduced by the same
amount.
14. To assess how this particular modality operates consider our hypothetical tariff profile
assuming values for c that result in a 10, 25 and 50 per cent cut respectively as indicated by
expression (3). Table 1 presents the original tariff profile and the resulting profile for the three
different values of c.TN/MA/S/3
Page 4
15. Some of the key descriptive statistics of the old and new tariff profiles are also provided in
table 1. They indicate that the formula results in a reduction in the overall average, minimum and
maximum tariff rates.  The impact on peaks and escalation, however, is quite limited.  The number of
peaks, even with a 50 per cent reduction is reduced by a relatively small amount and there is no
impact on our pre-defined tariff escalation ratio.  The latter result arises since all tariffs are cut in the
same proportion, which would not change relative prices.
B. TARIFF DEPENDENT MODALITIES (HARMONISATION FORMULAS )
16. In contrast to the previous section where the rate of reduction is independent of the initial
tariff rate, there is a whole class of formula based modalities that are a function of the initial tariff.
The basic element of these formulas is that they aim to have higher reductions for higher tariffs.
Hence, they can be called ‘harmonising’ formulas, since the overall dispersion of the tariff profile is
reduced.
17. In this case the formula can be linear, or non-linear.  It should also be noted that during the
Tokyo Round a specific functional form of the non-linear formula was proposed by Switzerland. This
formula is now commonly known as the Swiss formula and is treated separately in the subsection on
non-linear formulas.
FIGURE 1 TARIFF INDEPENDENT MODALITIES: VARIOUS COEFFICIENTS
010203040506070
Line
1Line
2Line
3Line
4Line
5Line
6Line
7Line
8Line
9Line
10Line
11Line
12Line
13Line
14Line
15Line
16Line
17Line
18Line
19Line
20Line
21Line
22Line
23Line
24Line
25
Original Tariff
c=.90
c=.75
c=.50TN/MA/S/3
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TABLE 1 TARIFF INDEPENDENT MODALITIES: VARIOUS COEFFICIENTS
Original
TariffFinal
Tariff(c=.90)Final
Tariff(c=.75)Final
Tariff(c=.50)Rate of reduction (per cent)
Line 1 1 0.90 0.75 0.50 10.00 25.00 50.00
Line 2 3 2.25 1.88 1.25 10.00 25.00 50.00
Line 3 5 4.50 3.75 2.50 10.00 25.00 50.00
Line 4 8 6.75 5.63 3.75 10.00 25.00 50.00
Line 5 10 9.00 7.50 5.00 10.00 25.00 50.00
Line 6 13 11.25 9.38 6.25 10.00 25.00 50.00
Line 7 15 13.50 11.25 7.50 10.00 25.00 50.00
Line 8 18 15.75 13.13 8.75 10.00 25.00 50.00
Line 9 20 18.00 15.00 10.00 10.00 25.00 50.00
Line 10 23 20.25 16.88 11.25 10.00 25.00 50.00
Line 11 25 22.50 18.75 12.50 10.00 25.00 50.00
Line 12 28 24.75 20.63 13.75 10.00 25.00 50.00
Line 13 30 27.00 22.50 15.00 10.00 25.00 50.00
Line 14 33 29.25 24.38 16.25 10.00 25.00 50.00
Line 15 35 31.50 26.25 17.50 10.00 25.00 50.00
Line 16 38 33.75 28.13 18.75 10.00 25.00 50.00
Line 17 40 36.00 30.00 20.00 10.00 25.00 50.00
Line 18 43 38.25 31.88 21.25 10.00 25.00 50.00
Line 19 45 40.50 33.75 22.50 10.00 25.00 50.00
Line 20 48 42.75 35.63 23.75 10.00 25.00 50.00
Line 21 50 45.00 37.50 25.00 10.00 25.00 50.00
Line 22 53 47.25 39.38 26.25 10.00 25.00 50.00
Line 23 55 49.50 41.25 27.50 10.00 25.00 50.00
Line 24 58 51.75 43.13 28.75 10.00 25.00 50.00
Line 25 60 54.00 45.00 30.00 10.00 25.00 50.00
Average 30.04 27.04 22.53 15.02
Minimum 1 0.9 0.75 0.5
Maximum 60 54 45 30
Std. deviation 18.33 16.5 13.75 9.17
Peaks (>15) 19 18 17 13
Escalation t 13/t5 33 3 3TN/MA/S/3
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1. Linear reduction formulas
18. The most basic linear formula is one which equates tariff reductions with the initial tariff.  For
example, where:
0tR= (4)
19. The higher the initial tariff, the higher the rate of reduction.  For example, for line 1, using our
hypothetical tariff profile, the reduction would be 1 per cent since the tariff rate is 1 per cent.  The
final tariff, therefore, would be 0.99 per cent. Accordingly, for line 25 which has the highest tariff rate
at 60 per cent, the final tariff would 24 per cent, representing a 60 per cent reduction of the 60 per cent
tariff.  The net effect of this approach is that higher tariffs will have larger reductions.
20. Equation (4) is a special case of a linear reduction formula where there is no intercept, nor
any slope coefficient.  The general functional form of a line is typically given as y=a +bx, where a is
the intercept and b is the slope.  Therefore, in equa tion 4 the slope coefficient is one, and the intercept
is equal to zero.
21. Now consider the case where an intercept term of 50 is added. In this case, regardless of the
level of the initial tariff there will at least be a 50 per cent reduction.  Added to this reduction rate is a
further reduction based on the level of the tariff as in equation (4).  The new reduction formula in this
case is:
0 50 t R + = (5)
22. The additional term clearly results in a larger reduction.  However, it should be noted that it
also creates a upper bound for the final tariffs if the initial value is above 50.  If the initial tariff is
equal to 50, then R will be equal to 100. Therefore, the net effect of equation (5) is to reduce all tariff
rates above or equal to 50 to zero (column 4 in table 2).
23. Yet another variant of this approach would be to increase the slope coefficient of t 0 in either
equations (4) or (5).  Consider increasing the reduct ion rate associated with to in equation (5) from 1
to 1.5.  The new reduction equation in this case is:
()05.150 t R + = (6)
24. In this case the net effect is to further increase the reduction rate of tariffs.  All tariff rates
equal to or above 35 per cent will be reduced to zero.
25. Figure 2 illustrates the impact of equations (4) – (6) on our hypothetical tariff profile.  As
indicated before, there are two points to note about this class of formulas.  First, higher tariff will face
higher cuts, as measured by the gap between the original tariff profile (straight) line and each of the
other curves on the graph.  As the initial tariff rate increases, the gap between the original tariff andthe new tariff rate widens.  Second, this gap, or cut is highest for the formulas with a slope coefficient
that is greater than one, for a given intercept coefficient.
26. The summary statistics for these formulas are presented in table 2. In contrast to the case of a
tariff independent formula, not only are the average, minimum and maximum reduced, but there is
also an impact on the peaks and escalation.  Equations (5) and (6) in particular have a significant
impact. In both cases there are no tariff peaks as defined by the 15 per cent threshold and the relativeTN/MA/S/3
Page 7
price of product 13 to product 5 is reduced from 3 in the original tariff schedule to 0.43 in the tariff
schedule for equation (6).
TABLE 2 TARIFF DEPENDENT LINEAR REDUCTION FORMULAS: VARIOUS
FUNCTIONAL FORMS
Reduction Formula Final Tariff
Original
TariffR=t 0 R=t 0+50 R=1.5(t 0)+
50R=t 0 R=t 0+50 R=1.5(t 0)+
50
Line 1 1.0 0.99 0.49 0.49 1.00 51.00 51.50
Line 2 2.5 2.44 1.19 1.16 2.50 52.50 53.75
Line 3 5.0 4.75 2.25 2.13 5.00 55.00 57.50
Line 4 7.5 6.94 3.19 2.91 7.50 57.50 61.25
Line 5 10.0 9.00 4.00 3.50 10.00 60.00 65.00
Line 6 12.5 10.94 4.69 3.91 12.50 62.50 68.75
Line 7 15.0 12.75 5.25 4.13 15.00 65.00 72.50
Line 8 17.5 14.44 5.69 4.16 17.50 67.50 76.25
Line 9 20.0 16.00 6.00 4.00 20.00 70.00 80.00
Line 10 22.5 17.44 6.19 3.66 22.50 72.50 83.75
Line 11 25.0 18.75 6.25 3.13 25.00 75.00 87.50
Line 12 27.5 19.94 6.19 2.41 27.50 77.50 91.25
Line 13 30.0 21.00 6.00 1.50 30.00 80.00 95.00
Line 14 32.5 21.94 5.69 0.41 32.50 82.50 98.75
Line 15 35.0 22.75 5.25 0.00 35.00 85.00 100.00
Line 16 37.5 23.44 4.69 0.00 37.50 87.50 100.00
Line 17 40.0 24.00 4.00 0.00 40.00 90.00 100.00
Line 18 42.5 24.44 3.19 0.00 42.50 92.50 100.00
Line 19 45.0 24.75 2.25 0.00 45.00 95.00 100.00
Line 20 47.5 24.94 1.19 0.00 47.50 97.50 100.00
Line 21 50.0 25.00 0.00 0.00 50.00 100.00 100.00
Line 22 52.5 24.94 0.00 0.00 52.50 100.00 100.00
Line 23 55.0 24.75 0.00 0.00 55.00 100.00 100.00
Line 24 57.5 24.44 0.00 0.00 57.50 100.00 100.00
Line 25 60.0 24.00 0.00 0.00 60.00 100.00 100.00
Average 30.04 17.79 3.34 1.5
Minimum 1 0.99 0 0
Maximum 60 3.75 6.25 4
Std Deviation 18.33 7.84 2.39 1.68
Peaks (>15) 19 17 0 0
Escalationt
13/t53.0 2.3 1.5 0.43TN/MA/S/3
Page 8
FIGURE 2 LINEAR REDUCTION TARIFF INDEPENDENT FORMULAS:
VARIOUS FUNCTIONAL FORMS
2. Non linear formulas
(a) General formulas
27. The simplest specification of a non-linear tariff dependent reduction formula is to simply
square the initial tariff rate. That is to multiply equation (4) by the initial tariff.
()2
0t R= (7)
28. This has the effect of increasing the reduction rate by a factor that is directly related to the
initial tariff rate.2  With equation (4) all tariff rates above 100 per cent would be reduced to zero.   The
specification in (7) will result in all tariff rates above 10 per cent being reduced to zero.
29. Given the significant difference in the impact between equations (4) and (6), another
approach has been to amend (7) to reduce its impact by deflating the amount of the reduction.  This
can be accomplished by dividing equation (7) by some factor.  Consider the following specifications,which divide equation (7) by a constant, resulting in equation (8) and dividing (7) by a constant plus
the original tariff rate (equation (9)).
                                                     
2 Except where the initial tariff rate is less than or equal to 1.0.010.020.030.040.050.060.070.0
Line
1Line
2Line
3Line
4Line
5Line
6Line
7Line
8Line
9Line
10Line
11Line
12Line
13Line
14Line
15Line
16Line
17Line
18Line
19Line
20Line
21Line
22Line
23Line
24Line
25Tariff
R=t0
R=t0+50
R=1.5(t0)+50TN/MA/S/3
Page 9
()
202
0tR= (8)
()
02
0
20 ttR+= (9)
30. The results of these specifications are illustrated in figure 3 and table 3.  The most significant
impact arises from the implementation of equation (7).  This has the overall effect of reducing
virtually every tariff line to zero.  The overall average is only 0.41 and there are no peaks, nor is therean issue with tariff escalation in our defined products since the tariff rate for the intermediate and final
product are equal to zero. On the other hand, equation (9) has a minor impact on the overall number of
peaks and the escalation ratio.  Peaks are reduced by one line, and the escalation ratio is reduced to
2.54 from 3.0.
FIGURE 3 NON LINEAR TARIFF DEPENDENT FORMULAS: VARIOUS
SPECIFICATIONS
010203040506070
Line
1Line
2Line
3Line
4Line
5Line
6Line
7Line
8Line
9Line
10Line
11Line
12Line
13Line
14Line
15Line
16Line
17Line
18Line
19Line
20Line
21Line
22Line
23Line
24Line
25
Tariff
y=t0(t0)
y=t0(t0)/20
y=t0(t0)/(20+t0)TN/MA/S/3
Page 10
TABLE 3 NON LINEAR TARIFF DEPENDENT FORMULAS:
VARIOUS SPECIFICATIONS
Reduction rate (Per cent) New Tariff
Original
Tariff R=t 0(t0)R = t 0(t0)/20R=
t0(t0)/(20+t 0 R=t 0(t0)R = t 0(t0)/20R=
t0(t0)/(20+t 0)
Line 1 1.00 0.99 1.00 1.00 1.00 0.05 0.05
Line 2 2.50 2.34 2.49 2.49 6.25 0.31 0.28
Line 3 5.00 3.75 4.94 4.95 25.00 1.25 1.00
Line 4 7.50 3.28 7.29 7.35 56.25 2.81 2.05
Line 5 10.00 0.00 9.50 9.67 100.00 5.00 3.33
Line 6 12.50 0.00 11.52 11.90 100.00 7.81 4.81
Line 7 15.00 0.00 13.31 14.04 100.00 11.25 6.43
Line 8 17.50 0.00 14.82 16.07 100.00 15.31 8.17
Line 9 20.00 0.00 16.00 18.00 100.00 20.00 10.00
Line 10 22.50 0.00 16.80 19.82 100.00 25.31 11.91
Line 11 25.00 0.00 17.19 21.53 100.00 31.25 13.89
Line 12 27.50 0.00 17.10 23.12 100.00 37.81 15.92
Line 13 30.00 0.00 16.50 24.60 100.00 45.00 18.00
Line 14 32.50 0.00 15.34 25.96 100.00 52.81 20.12
Line 15 35.00 0.00 13.56 27.20 100.00 61.25 22.27
Line 16 37.50 0.00 11.13 28.33 100.00 70.31 24.46
Line 17 40.00 0.00 8.00 29.33 100.00 80.00 26.67
Line 18 42.50 0.00 4.12 30.22 100.00 90.31 28.90
Line 19 45.00 0.00 0.00 30.98 100.00 100.00 31.15
Line 20 47.50 0.00 0.00 31.62 100.00 100.00 33.43
Line 21 50.00 0.00 0.00 32.14 100.00 100.00 35.71
Line 22 52.50 0.00 0.00 32.54 100.00 100.00 38.02
Line 23 55.00 0.00 0.00 32.82 100.00 100.00 40.33
Line 24 57.50 0.00 0.00 32.97 100.00 100.00 42.66
Line 25 60.00 0.00 0.00 33.00 100.00 100.00 45.00
Average 30.04 0.41 8.02 21.67
Minimum 1 0 0 1
Maximum 60 3.75 17.9 33
Std. deviation 18.33 1.06 6.82 10.52
Peaks (>15) 19 0 6 18
Escalation t 13/t5 3 0 1.74 2.54TN/MA/S/3
Page 11
(b) Swiss Formula
31. Another formulation of this type of formula is the well known Swiss formula.  This was
initially proposed during the Tokyo Round of negotiations and adopted by some developed countries.
The specification of the formula is as follows, where a is simply a coefficient.
00
1taatt+= (10)
32. The formula has the property of being a function of both the initial tariff and the coefficient,
which can be negotiated.  To see this equation (10) can be rearranged so that it is in a form that it can
be compared easily to the other formulas that have been presented in this paper (see annex for the
transformation).  The end result is given as equation (11) which shows that the as a increases the rateof tariff reduction decreases.
3
00
tatR+= (11)
33. Since the value of the coefficient is critical to the effectiveness of the formula to reduce
tariffs, four values have been chosen: 5, 10, 15 and 50.4  As the constant increases is a smaller overall
reduction on the key descriptive statistics.  When a is equal to 5 the average is 3.89, the tariffescalation is 1.29 and there are no tariff peaks.  However, when a is equal to 15 the average increases
to 8.8, there are no peaks, but the escalation coefficient rises slightly to 1.5.  In the final case where a
is equal to 50, there is still a significant cut in the overall average, but the number of peaks drops to 16
from 19.  Furthermore, despite the tripling of the value of a the escalation coefficient is only 1.7. The
results in table 4 and chart 4 illustrate these points.
34. Overall, however, the general impact of the Swiss formula is similar to that of equations (7)-
(9) as can be seen by comparing the results in figures 3 and 4. Again, the gap between the original andfinal tariff profiles widens as the original tariff rate increases indicating that the cuts are greatest for
the higher tariffs.  Figure 5 illustrates this point graphically. It also shows that the percentage cuts are
non linear and vary with the tariff.
                                                     
3 As the denominator increases the whole fraction decreases.
4 Hoda (2001) notes that 14 and 16 were used during the Tokyo round by some members.TN/MA/S/3
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TABLE 4 IMPACT OF THE SWISS FORMULA: VARIOUS COEFFICIENTS
Tariff Percentage Cut
Original
Tariffa=5 a=10 a=15 a=50 a=5 a=10 a=15 a=50
Line 1 1.00 0.83 0.91 0.94 0.98 16.67 9.09 6.25 1.96
Line 2 2.50 1.67 2.00 2.14 2.38 33.33 20.00 14.29 4.76
Line 3 5.00 2.50 3.33 3.75 4.55 50.00 33.33 25.00 9.09
Line 4 7.50 3.00 4.29 5.00 6.52 60.00 42.86 33.33 13.04
Line 5 10.00 3.33 5.00 6. 00 8.33 66.67 50.00 40.00 16.67
Line 6 12.50 3.57 5.56 6. 82 10.00 71.43 55.56 45.45 20.00
Line 7 15.00 3.75 6.00 7. 50 11.54 75.00 60.00 50.00 23.08
Line 8 17.50 3.89 6.36 8. 08 12.96 77.78 63.64 53.85 25.93
Line 9 20.00 4.00 6.67 8. 57 14.29 80.00 66.67 57.14 28.57
Line 10 22.50 4.09 6.92 9. 00 15.52 81.82 69.23 60.00 31.03
Line 11 25.00 4.17 7.14 9. 38 16.67 83.33 71.43 62.50 33.33
Line 12 27.50 4.23 7.33 9. 71 17.74 84.62 73.33 64.71 35.48
Line 13 30.00 4.29 7.50 10. 00 18.75 85.71 75.00 66.67 37.50
Line 14 32.50 4.33 7.65 10. 26 19.70 86.67 76.47 68.42 39.39
Line 15 35.00 4.38 7.78 10. 50 20.59 87.50 77.78 70.00 41.18
Line 16 37.50 4.41 7.89 10. 71 21.43 88.24 78.95 71.43 42.86
Line 17 40.00 4.44 8.00 10. 91 22.22 88.89 80.00 72.73 44.44
Line 18 42.50 4.47 8.10 11. 09 22.97 89.47 80.95 73.91 45.95
Line 19 45.00 4.50 8.18 11. 25 23.68 90.00 81.82 75.00 47.37
Line 20 47.50 4.52 8.26 11. 40 24.36 90.48 82.61 76.00 48.72
Line 21 50.00 4.55 8.33 11. 54 25.00 90.91 83.33 76.92 50.00
Line 22 52.50 4.57 8.40 11. 67 25.61 91.30 84.00 77.78 51.22
Line 23 55.00 4.58 8.46 11. 79 26.19 91.67 84.62 78.57 52.38
Line 24 57.50 4.60 8.52 11. 90 26.74 92.00 85.19 79.31 53.49
Line 25 60.00 4.62 8.57 12. 00 27.27 92.31 85.71 80.00 54.55
Average 30.04 3.89 6.69 8.88 17.04
Minimum 10 . 8 30 . 9 10 . 9 40 . 9 8
Maximum 60 4.62 8.57 12 27.27
Std. Dev 18.33 0.97 2.10 3.15 8.02
Peaks (>15) 1 9000 1 6
t13/t5 3 1.29 15 1.7 2.25TN/MA/S/3
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FIGURE 5 TARIFF PROFILES USING SWISS FORMULA: VARIOUS COEFFICIENTS
FIGURE 5 PERCENTAGE CUTS USING SWISS FORMULA:
VARIOUS COEFFICIENTS010203040506070
Line
1Line
2Line
3Line
4Line
5Line
6Line
7Line
8Line
9Line
10Line
11Line
12Line
13Line
14Line
15Line
16Line
17Line
18Line
19Line
20Line
21Line
22Line
23Line
24Line
25
Tariff line
Original Tariff
a = 5
a=10
a=15
a=50
0.0010.0020.0030.0040.0050.0060.0070.0080.0090.00100.00
Tariff Line
a=5
a=10
a=15
a=50TN/MA/S/3
Page 14
IV. RELATED ISSUES: EXCEPTIONS AND STAGING
35. An important element of the effectiveness of a particular formula based modality, regardless
of the formula, is the coverage.  The previous sections assumed full coverage of the selected modality.
This is not necessarily case.  Indeed, as noted by Hoda (2001) a formula approach is always applied
with exceptions.  Examples of types of exceptions that are used include are specific sectors that can beexcluded
36. Another important element to the implementation of the different types of formulas is the
staging of the reductions.  In response to a situation where the application of one particular formula
may not suit a member, it is possible to stage the implementation of the formula.  For example, as
noted by Hoda (2001), some members have proposed a particular formula with different stages of
implementation.
V. REFERENCES
Hoda, A. (2001), Tariff Negotiations and Renegotiations under the GATT and WTO: Procedures and
Practices , Cambridge:  Cambridge University PressTN/MA/S/3
Page 15
ANNEX TARIFF REDUCTIONS AND THE SWISS FORMULA
Let t 1 be the final tariff, t 0 the initial tariff.  The Swiss Formula is given as:
00
1taatt+= A.1
The difference between the new tariff and the old tariff is:
()
()
()
()
()
()02
002
0 0 000 0 00
00
0 1
tattatat attatat atttaattt
+−=+− −=++ −=−/g247/g247
/g248/g246
/g231/g231
/g232/g230
+=−
A.2
The rate of reduction is given as:
100
00 1⋅−=tttR A.3
Substituting A.2 into A.3 gives us:
()
()
()
()
100100100
00002
0002
0
⋅+=⋅+−=⋅+−
=
tatttatttat
R
A.4
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