RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/MA/M/8 
19 December 2003 
 (03-6668) 
Negotiating Group on Market Access  
   
MINUTES OF THE MEETING 
 
Held in the Centre William Rappard on 26 – 28 May 2003
 
 
Chairman: Ambassador P-L. Girard (Switzerland) 
  
Subjects discussed
                     Page  
 
1. CONSIDERATION OF POSSIBLE MODALITIES FOR NEGOTIATIONS ON 
MARKET ACCESS FOR NON AGRICULTURAL PRODUCTS......................................2  
A. CHAIRMAN 'S PAPER ON DRAFT ELEMENTS OF MODALITIES FOR NEGOTIATIONS ON 
NON-AGRICULTURAL PRODUCTS (TN/MA/W/35) .....................................................................2  
B. TARIFFS ............................................................................................................................... ......52  
 - Incidence Of Non- Ad Valorem  Tariffs In Members' Tariff Schedules And 
Possible Approaches To The Estimation Of A d Valorem 
Equivalents(TN/MA/S/10)...............................................................................................52  
C. NON-TARIFF BARRIERS (NTB S) ...............................................................................................53  
 - Non-Tariff Barrier Notifications – Addendum  (TN/MA/W/25/Add.1)......................53  
D. CONSIDERATION OF DOCUMENTS SUBMITTED BY PARTICIPANTS AT OR SINCE THE  
GROUP 'S LAST MEETING ...........................................................................................................54  
E. OTHER MATTERS ......................................................................................................................55  
II. OTHER BUSINESS................................................................................................................5 5 
 
______________ 
 
 The Chairman  stated that the agenda for the meeting was contained in document 
WTO/AIR/2098 dated 12 May 2003. An  annotated agenda had been circulated as Job(03)/92. In 
addition, a fax had been sent to participants on 23 May 2003 which indicated that an informal 
information session on the formula was going to be held at 12.15 that day, in the same room, for 
clarification and questions by Members.   He pointed out that since the issuance of th e airgram, three papers had been circulated, 
submission by Chinese Taipei TN/MA/W/19/Add.1,  Colombia TN/MA/W/36 and the United Arab 
Emirates TN/MA/W/47. He also noted two corrections to TN/MA/W/35 for the French and Spanish 
versions.  
  The Negotiating Group adopted
 the agenda as circulated in WTO/AIR/2098. 
  TN/MA/M/8 
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1. CONSIDERATION OF POSSIBLE MODALITIES FOR NEGOTIATIONS ON 
MARKET ACCESS FOR NON AGRICULTURAL PRODUCTS 
A. C
HAIRMAN 'S PAPER ON DRAFT ELEMENTS OF MODALITIES FOR NEGOTIATIONS ON NON-
AGRICULTURAL PRODUCTS (TN/MA/W/35) 
1.1 The Chairman  stated that the focus of the meeting would be on the draft paper on possible 
modalities as prepared under his own responsibilit y as Chairman and circulated under document 
TN/MA/W/35. The paper had been prepared on the basis of paragraph 16 of the Doha Ministerial 
Declaration and the Work Program of the NGMA as outlined in document TN/MA/3. It had also included the results of the work carried out during a series of formal and informal meetings of the 
Group since August 2002. He emphasized that the draft was not meant to represent the elements 
agreed on in whole or in part and that it was wit hout prejudice to the positions of the participants. He 
underlined that some parts of the draft had not been fully elaborated and some points raised during discussions had  not been included. It was in no wa y meant to be comprehensive. Rather, he hoped it 
could serve as a basis for the discussion on possibl e modalities.  It would need to be adjusted, 
completed, refined or further expanded upo n based on the discussions during the meeting. 
Furthermore, he hoped for a constructive discussion that  would lead to an improvement of the text so 
that it could be positively considered by all. Par ticipants should keep in mind  the importance of 
preserving the integrity of the WTO multilateral trading system as embodied in the WTO agreements, building upon the market opening realised thus  far as a major element in promoting trade and 
development and incorporating special and differe ntial treatment as an integral part of the 
negotiations.   
1.2 The formula was a new one that participants ha d not seen before and had been inspired in part 
by the formula proposed by China. It was meant to  address the important points in the mandate such 
as reducing tariff peaks, high tariffs and tariff escalation as well as taking fully into account the special needs and interests of developing and least developed countries and the issue of less than full 
reciprocity. This would be achieved through variou s means. Participants own tariff averages were 
used as a core element of the formula, thus for th ose participants who had a relatively higher tariff 
average, the reduction would be lower because factor "t
a" would be   relatively high. "t a" was to be 
calculated as set out in footnote 6 of the documen t. Equally important in the application of the 
formula was the factor B. B taken together with t a would determine how much each tariff would be 
reduced for each participant. B was a unique coeffici ent that would need to be determined by the 
participants. In general, the lower B was, the gr eater the resulting tariff reduction would be. There was 
a document available in the room which provide d detailed information on how the formula would 
work and what the reductions woul d be for different levels of "t a" and B. It would apply to each tariff 
line. The basis for applying the formula was set out in  the five bullets to that section. The reductions 
would occur from bound rates after their full implem entation (i.e. at the end of all Uruguay Round 
commitments for most participants. However, in  the case of unbound items, the starting-point for 
reductions would be the rates established by multiplying the 2001 applied rate by a factor of 2. Non- 
ad valorem  duties would need to be converted and their ad valorem  equivalent would need to be 
based on the methodology outlined in Annex 1. The nomenclature used in the schedule would be 1996 
but the negotiations would be finalized in HS 20 02 nomenclature. However, if Members so desired 
they could commence with HS 2002 nomenclature if the corresponding concordance tables were 
provided. Finally, the reference period for import data  would be 1999-2001, following the practice of  
providing three years of data in order to mitigate yearly fluctuations.   1.3 Credits may be given for autonomous liberalisa tion, as set out in footnote 2, provided that the 
items were bound on an MFN basis in the WTO since the conclusion of the Uruguay Round. Credit 
would be given by using the previous higher base  rate that was in place before the autonomous 
liberalisation took place. Thus for the tariff line affe cted, the reductions when using the formula might 
not require any further liberalisation or in any case would be less. Because the formula would be 
applied on a line by line basis the credit would not be applicable in those cases where the autonomous  TN/MA/M/8 
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liberalisation had been reduced to zero. This w ould be the case for the ITA and other similar 
initiatives. He underlined that the formula could only be  successful if the releva nt data were available 
for all participants. Therefore he urged all delegations to make thei r annual submissions to the IDB so 
that everyone could participate ade quately in the Round of negotiations. 
 
1.4 Sectorial tariff elimination would be an inte gral part of the modalities and applicable for all 
participants except LDCs. The sectorial elimin ation would commence from the bound rate after the 
full implementation of current concessions or in the case of unbound items the MFN applied rate in 
2001. Elimination would take place according to di fferent phases of implementation depending on the 
participants. For developed particip ants and those other participants who so decided, elimination of 
tariffs would occur at the end of the first phase. E ach of the three phases would be of the same length 
and participants would determine what the length of the phases would be. Thus, for this category of 
participants tariffs would be gradually eliminated  in equal annual stages within the length of time 
determined by the participants for the phase. Fo r other participants a longer time-period was 
envisaged in order to achieve tariff elimination in  those sectors. This would also be done in three 
phases. During the first phase tariffs would be gradua lly reduced in equal annua l reductions to a level 
not exceeding 10 per cent. A second phase would then commence whereby no further reduction 
would take place but the same tariff level would be maintained. Finally, phase three would commence 
whereby the final reductions towards elimination w ould take place, again with equal annual stage 
reductions during this phase.  The sectors had been chosen with a view to identifying products or 
sectors that were of particular exporting interest to  developing countries. This was in line with the 
mandate which stated "….to reduce or eliminate tari ffs in particular products of export interests to 
developing countries". He had requested the Secretar iat to identify sectors where developing countries 
were significant exporters compared to devel oped countries and where there were significant 
possibilities for them to increase export growth thro ugh liberalisation of their markets. He realized 
that each participant would have par ticular products or sectors that were of interest to them but the 
sectors chosen were to benefit developing countries and least developed countries so that they could 
increase their export growth.  He had defined these sectors very broadly and it would be up to the 
participants to specifically identify what was to be covered under each sector as noted in footnote 7. 
Thus, for the sectorial approach, participants would need to determine the product coverage applicable 
to each sector and also determine the length of the phases.  
1.5 With reference to the negotiating mandate a nd the work program, the Chairman recalled that 
special and differential treatment for developing an d least developed countries would be an integral 
part of all elements of the negotiations. Therefore,  in order to provide for the issues raised in the 
discussion thus far, most importantly the issues of sp ecial and differential treatment and less than full 
reciprocity, the modalities included additional provisi ons to take these points further into account. In 
addition to the flexibility already provided for in the formula by us ing the tariff averages of each 
participant, developing countries were  given additional flexibility by the proposal that up to five per 
cent of tariff lines could remain unbound provided that  they did not exceed a total of five per cent of 
the value of their imports.  They would also have  longer staging periods for implementing the tariff 
reduction. LDCs would not be required to make re duction commitments as pertaining to the formula, 
sectorial elimination approach or supplementary approaches but they would be expected to  
substantially increase their level of binding co mmitments. Many participants had recognized the 
substantial market-access commitments already made by newly acceded Members on accession. Therefore, in order to provide some flexibility to them and noting some of their commitments had not 
yet been fully implemented it was proposed that co efficient B in the formula could be adjusted. 
Again, as B would need to be determined for all Members, it was not clear at this time what specific B 
could be used for newly acceded Members. However, he hoped that by incorporating this flexibility it 
would encourage the desired participation level and outcome for all participants.  
 
1.6 The first four elements were all an integr al part of the tariff modalities for participants. 
However, subsection 5 was meant to be a supplementary  element to be undertaken by participants if 
they so desired. Based on the discussion thus fa r, modalities such as request/offer, zero-for-zero, TN/MA/M/8 
Page 4  
 
additional sector elimination as well as sectorial harmonisation had been mentioned by many participants and this was the reason for th eir inclusion under "supplementary modalities". 
Furthermore, the issue of elimination of low or nuisance duties was included. As there was no 
emergent consensus on these issues, they were in cluded as a possibility in that section. Further 
discussions  on these elements would be necessary.  
1.7 With regard to the section on NTBs, the intent was to capture the discussion of the Group on 
this issue. Therefore, there were a number of a pproaches based on the type of NTBs identified. He 
emphasized the need for participants to continue with their identification and examination of NTBs, 
and the outcome of that exercise should allow the Group to proceed in the appropriate manner. There 
would be NTBs that related to other areas of the Do ha agenda and previous discussions indicated that 
they should continue to be addressed in the appr opriate fora established for them. For NTBs that 
currently did not have a specific negotiating mandate in the Doha declaration, the NGMA would  need 
to further clarify the matter and decide if there w as a need to send them to another WTO body. This 
would be done by reporting to the TNC in order for the NTB to be forwarded to the appropriate WTO 
body for action and reporting back. As for NTBs that  would need to be addressed by this Group the 
specific modalities such as request/offer and horizont al or vertical approaches would need to be 
determined. It was currently premature to dete rmine which modality woul d be applicable and 
therefore all possibilities should remain open.  1.8 Paragraph 16 of the Doha Declaration and its reference to paragraph 50 provided for 
appropriate studies and capacity building measures to  assist LDCs to participate effectively in the 
negotiations. Part D of the Draft Elements paper ex plained what the Group had already done in this 
area and proposed that work would continue in th is respect. The information contained therein was 
factual and there had been a substantial amount of work already completed as listed in footnote 11. 
The Chairman hoped that the Group could continue to make proposals and identify issues that would 
reinforce the importance of continuing th is work as the negotiation proceeded.  
 1.9 The representative of Chinese Taipei
 stated that the paper on Draft Elements of Possible 
Modalities might demand further elaboration, fine-tun ing or improvement before it served as a basis 
for more substantial discussions. In terms of the fo rmula proposed in the draft, the introduction of the 
"ta" into the formula would result in a situation where Members with lower base rates would enjoy a 
larger tariff concession. His delegation questioned whet her this was fair.  In addition, the line by line 
approach with no flexibility for Members on some of  their very sensitive product items could lead to 
deadlock in the negotiations. Members always had a few product items which were not  only 
economically sensitive but politically or socially  sensitive as well. If participants insisted on 
disallowing any flexibility on those sensitive items th e negotiations would face  a difficult situation. 
Bearing this in mind, Members should be allowe d to retain lower tariff concessions on a limited 
number of very sensitive and difficult items. With rega rd to sectorial tariff elimination, his delegation 
was pleased to see that the sectorial approach had be en listed as an element of the Chairman's paper. 
However, the draft should only provide Member s with a guideline for further negotiation on a 
sectorial approach, rather than giving Members an impression that they already had an outcome in the 
NGMA negotiations. The sectors for sectorial ta riff elimination should be open to further 
negotiations.  In deciding these sectors the tariffs on exhaustible natural resources such as fishery 
products should not be eliminated for reasons of sustainable development.  With regard to the issue of 
newly acceded  Members, Chinese Taipei had propo sed a longer grace period for Members' further 
consideration. However, it was regr ettable to note that their points had not been incorporated into the 
Chairman's draft proposal. They hoped that the revised version of the draft proposal, if any, could 
accommodate their point in that regard. 
 1.10 The representative of New Zealand
 stated that the draft framework was a very technically 
sophisticated piece of work, with subtleties in its varying treatment of different elements, some of 
which were dealt with in a very specific way, some  only sketched in, some defined but left wide open 
in terms of ambition and some left out altogether as ga ps to be filled in at a later stage. Substantially,  TN/MA/M/8 
 Page 5 
 
 
it was a very direct response to the mandate, certa inly for paragraph 16 of the Doha Declaration, 
although there was a question about consistency with paragraph 1 of the Declaration. His delegation 
welcomed the precise language on base rates, particul arly the negotiation on bound rates, and on final 
rates being bound in ad valorem  terms. Overall they were pleased to see definitive language on the 
table at an early stage on elements that would be cr itical for ensuring that negotiated tariff cuts would 
actually be delivered on in terms of the final results . As a core modality for tariff reduction, the paper 
proposed a single non-linear formula. The fact that it was a harmonizing formula acknowledged that the Group was heading towards zero, although his de legation would have welc omed a more explicit 
signal towards a comprehensive tariff eliminati on objective in the framework. As noted by the 
Chairman, the formula did address national peaks a nd escalation. To address international peaks along 
with high tariffs in many schedules would require a value for coefficient B that was closer to zero 
than to one.  The framework delivered generously on the developing country provisions of the mandate, in particular, the use of national tariff averages as a variable coefficient was a fulsome 
response to the reference in the mandate to l ess than full reciprocity in reduction commitments. 
  
1.11 The elements of the draft framework coul d be worked upon but balance and ambition would 
need to be built in. The current formula proposal implied that if a value of B=1 was assumed the 
major developed participants would face a tariff ceiling in the range of 2-4 per cent, while many 
major developing country participan ts could retain tariff ceilings in  the 30-40 per cent range. That was 
a huge gap. This was matched by parallel issues among developing country participants. Assuming 
that B=1, and excluding newly acceding Members, ta riff ceilings for the larger developing economies 
under this approach seemed set to range from 15 up into the 30s and 40s. These differences were not 
sustainable, leaving a question about how to ultimately address them. If the value "t
a" could be 
harmonized or compressed before running the form ula, he questioned whether a ceiling or a floor 
could be put in for some participants to limit the discrepancies. Likewise, the proposal to allow some 
participants to leave up to 5 per cent of lines unbou nd raised a further issue of equity given that a 
large proportion of the Membership, including many  developing countries, already had 100 per cent 
binding.  Turning to market access, it was uncertain  whether and how this framework delivered real 
market access results. It would certainly deliver fo r exporters into developed country markets, again 
under common assumptions about B. Gains into tho se markets would be even bigger with a low duty 
component, something which should be looked at seri ously if the Negotiating Group was to derive an 
ambitious package. But to get new market access in to major developing markets (South-South as well 
as North-South trade), there would need to be ceilings on final rates not in the 30s or in the 20s, but in 
the teens. With regard to the form ula, such an outcome presented a va lue for B closer to zero than to 
one. The question was whether that was going to be achievable and whether it was realistic. If not, 
perhaps the Group should instead be looking for market access gains elsewhere in the modalities. 
 
1.12 Turning to the sectorial element of the prop osal, it was objectively a direct response to the 
mandate's emphasis on products of export interest to  developing countries. Sectors identified were 
those in which developing country exports were c oncentrated and in which barriers were highest. It 
seemed that against the same criteria there had be en at least one obvious omission in the form of 
forest products. New Zealand wondered whether consensus was going to be swiftly or easily 
achieved. If sectorial elimination a nd harmonization, rather than the formula, was to carry the weight 
of ambition, a wider range of sectors that responded to developed country interests would need to be 
seen under this part of the modalities. Again, the qu estion was whether that was feasible. There were 
important trade-offs that emerged from these questi ons: domestic sensitivities vs. export interests; and 
a sectorial approach to achieving real market access vs. achieving market access through the formula 
for comprehensive tariff reductions.  He believed the Group would hear some calls for a soft value for 
coefficient B, calls for further flexibility on  leaving products unbound or outside the reduction 
commitments and calls for sectorial liberalisation to be purely voluntary – essentially a modality for 
developed participants.    1.13 The New Zealand representative questi oned whether the mandate envisaged essentially 
unilateral reductions by developed countries and whether "less than full reciprocity in reduction TN/MA/M/8 
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commitments" implied leaving actual applied rates la rgely untouched in the majority of markets. He 
also wondered whether the main contribution from major developing country participants would be 
purely in the form of binding final rates somewhat cl oser to current applied rates. His delegation did 
not see that as the sort of deal the mandate e nvisaged, nor did they not see it as commercially or 
politically realistic. Overall, his delegation did not  see the core issues of ambition and reciprocity 
issues being resolved in the Geneva process without  some further political guidance. Those sort of 
choices ultimately involved accepting serious political pain  by virtually all parties in the negotiation. 
Likewise it was hard to imagine those issues being resolved in a NGMA context as there would be a 
need for parallelism with other ma jor market access and rules elements in the mandate. This would 
imply that there were limits to how far the Group could go without further input from ministers. Over 
the next few months work could be focused on ex ploring technical options within the Chairman's 
overall framework. The Group could aim to be in a position to give ministers in Cancun some more 
refined choices, but to get the best results from the framework they would need to play it long.  His delegation could certainly work from the elements in  the text to build ambition, but it would require 
full use of the flexibility envisaged in paragraph 3 of the Chairman's text. It would involve treating the 
elements in the paper as a tool kit rather than as a definitive approach and would require the Group to 
identify how to deliver better balance as well as to deliver reciprocity and genuine market access. 
Finally, there was a need for some concept of how to bring MFN tariff liberalisation into line with the 
reality that applied and preferential rates coveri ng most world trade were now moving towards zero. 
 
1.14 The delegate of Morocco,  on behalf of the African Group, stated that paragraph 16 of the 
Doha Declaration outlined the development compon ent which characterized all areas of negotiation 
agreed on in Doha and recalled particularly the importance for African countries of an agreement 
which would permit real market access for their products which so far had been limited by various 
non-tariff and tariff barriers. The African Group' s concerns which had been expressed on many 
occasions had to be taken fully into account in th e formulation of any draft modalities. They were 
disappointed that their concerns had not been taken into account at all in the approach which had been 
proposed. The formula as well as the sectorial supplem entary approach would not enable them to 
restore balance in their fragile economies. Industria lisation in Africa was a vital necessity in order to 
fight the poverty which was now endemic and industri alisation needs had to be met urgently in order 
to stimulate economies and permit the development of entities that could survive in an increasingly competitive world. Furthermore, customs duties still played a very important part as a provider of income and in certain African countries the tariffs by themselves constituted more than half of the 
fiscal income of the state. Progress in fiscal re form, appropriate and adapted to each case, was 
certainly the medium or the long term solution, but any considerable reduction in customs duties in 
the present phase would mean stifling many of the African economies. African economies largely depended on trade preferences which were a vital resource for their continent. Therefore, a 
considerable and sudden reduction in tariffs would bring about an erosion of those preferences with 
all the resulting negative consequences.  The Afri can Group remained open to any proposal which 
would take legitimate concerns into considera tion, particularly when it came to special and 
differential treatment. There had been little deba te on NTBs in the Group but the obstacles and 
difficulties which they posed for African count ries had to be taken fully into account.  
 
1.15 The representative of Kenya  stated that some of the proposed  elements, if agreed and applied 
by developed country Members, would lead to im proved market access for products originating from 
developing and least developed country Members. Ho wever, the Chairman's paper  did not take into 
account most of the elements proposed by a number of developing countries, particularly those from Africa. For instance, one proposal not included was that made by a group of African countries that, 
based on their weak industrial base and their dismal gains from the previous liberalisation efforts, they 
should be allowed to determin e their further liberalisation including reduction commitments. 
Similarly, it did not take into consideration the adverse impact that the proposed tariff reductions 
would  have on the preferences enjoyed by African  and other developing countries in developed 
country markets. On many occasions they had impl ored the Negotiating Group to explore ways and  TN/MA/M/8 
 Page 7 
 
 
means of developing an appropriate mechanism to res pond to this situation. The inclusion in the Doha 
Ministerial Declaration of the concept of less than  full reciprocity in the reduction commitments in 
accordance with the relevant provisions of Article XXVIII bis of GATT 1994 had been a clear 
recognition that all Members were not expected to undertake similar levels or types of commitments 
due to their different levels of development. Althou gh the proposed formula appeared to have built in 
less than full reciprocity in the use of different av erages, it prescribed the same formula approach. It 
was not the process of applying the formula that shoul d reflect the less than full reciprocity but the 
results of such a formula. The proposed formula,  while seemingly taking into consideration Members' 
different tariff profiles, nonetheless exerted a similar effect on them all. This would lead to serious 
consequences for their balance of trade. The form ula proposed was a variation of the Swiss formula 
which tended to harmonize tariff structures of Memb ers, an exercise which was not specified in the 
mandate. It would impose deeper cuts on higher tari ffs than on lower tariffs  and developed country 
tariffs on non-agricultural products were relatively low compared to those in developing countries, 
particularly those in Africa. Hence, developi ng African counties would be forced to undertake 
dramatic overall tariff cuts that w ould drastically reduce protection of their fragile industry and lead to 
firms not withstanding the competition from outside. C onsequently, firms would be forced out of the 
domestic market and de-industrialisation would r esult. Under such circumstances efforts to 
industrialise would become a mirage.   1.16 Developing countries, particularly African c ountries, needed a different approach to tariff 
reductions. They should be allowed to choose for them selves the rate and timing of trade liberalisation 
so that they could tailor their commitments to th eir situation and needs in the industrial and trade 
sectors. A more realistic and practical approach th at reflected less than full reciprocity in tariff 
commitments was equal percentage point reductions for all Members. This would also give a more 
accurate perception of the effect it would have on imports and on customs revenue. In this case, less 
than full reciprocity should be measured in terms of  less reduction in customs revenue for developing 
countries compared to developed countries. His delegation welcomed the proposal of using bound 
rates as a starting-point for tariff reductions. Howe ver, they had a problem with the proposal of 
converting unbound rates at twice the applied rates and increasing the binding coverage to at least 95 
per cent. Increasing the scope of product coverage improved the security of access and reduced the incidents of reverting to trade remedies but this  should not be at the expense of constraining 
developing countries from using appropriate trade and industrial policy measures to stimulate growth 
and development in these sectors. That was why they had argued in their communication 
TN/MA/W/27 that the rate and the scope of cove rage of bound products shoul d be left to each 
developing country to decide. Th is important element should find a place in the Chairman's paper.  
 1.17 Sectorial tariff elimination might not bri ng about the desired results, particularly for 
developing countries with a weak industrial base.  This was because firms located in Africa, for 
example, had not become competitive to the extent that they could withstand competition from outside. Thus, while the elimination of tariffs in  the export market for products originating from 
African countries could be beneficial to them, app lication of the same measures in their domestic 
markets could be counterproductive. It  would not be in the interest of African countries, therefore, to 
engage in sectorial tariff elimination until they had well-developed and competitive industrial bases. 
While the work program which was adopted on 19 Ju ly 2002 recognized that special and differential 
treatment was an integral part of these negotia tions, it had not been given prominence in the 
Chairman's paper. In addition, the special and differential treatment that was included took the 
traditional style of lower percentage reductions a nd longer implementation peri ods. It also limited the 
unbound products to a conditio nal five per cent of tariff lines. They wondered whether this kind of 
special and differential treatment provided adequate flexibility to st imulate any meaningful industrial 
development. Special and differential treatment s hould be based not on arbitrary decisions but on 
objective criteria like the level of industrial devel opment, export capacity and the likely consequences 
of a dramatic increase in the scope of binding. The new special and differe ntial treatment should, 
therefore, ensure that the multilateral obligation wo uld assist in, and not detract from, the realization 
of the Group's development objectives in trade and industrial sectors. Notwithstanding, they noted the TN/MA/M/8 
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Chairman's efforts to address th e special needs and interests of developing and least developed 
country participants through additional provision s suggested under paragraph 8 of the modalities 
paper. That part of the text could be improved u pon to adequately cater to the developing and least 
developed countries. Therefore, they proposed that  in line with most of the previous rounds 
developing countries should not be subjected to  tariff reductions based on any harmonization or 
formula approach. Instead, developing countries wi th a weak and vulnerable industrial base should 
have the flexibility to choose their own commitments  regarding which sector and at what rate of 
reduction their commitment should be. They should be  allowed to increase their binding coverage at 
the rates and levels to be determined by them and in accordance with their levels of development. The 
newly bound tariff lines should not be subjected to reduction commitment. Increasing the scope of 
binding should be considered to be a sufficient  concession and a contribution to the strengthening of 
the multilateral trading system.  1.18 They were nonetheless gratified to note that  the paper proposed that least developed country 
Members were not expected to undertake any reduc tion commitment as part of special and differential 
treatment applicable to them. While LDCs could be encouraged to increase their level of binding 
commitments, this should be on a voluntary basis commensurate with their level of development.   
Furthermore, the African Group welcomed the Ch airman's proposal to integrate LDCs in the 
multilateral trading system under paragraph 9 of the Dr aft Elements paper. There was a need for firm 
commitment on the part of the developed country Members to integrate LDCs and other low income 
developing countries into the multilateral trad ing system by supporting them through product 
diversification and increasing their export base. In  that regard, well targeted, unrestricted market 
access in developed countries would be a practical wa y of achieving the desired results. The proposal 
on supplementary modalities would need further reflection in order to assess the impact of some of the elements identified so that countries with a weak industrial base did not end up being worse off. They were inclined to favour a voluntary appro ach where no compensation or credit was claimed.  
 
1.19 With regard to NTBs it would not be in the interest of the African countries with limited 
human resources to disperse negotiations to other WTO bodies. They were determined to negotiate 
effectively and in a comprehensive manner and this could only be accomplished under the established 
negotiating bodies. Referring some NTBs to othe r WTO bodies that did not have the mandate to 
negotiate would effectively render those NTBs  covered by WTO Agreements immune from 
negotiations. The African Group would partially agree with the Chairman's suggestion that NTBs that 
had a specific negotiating mandate could be addressed in  that body and the results transmitted to the 
Group but work on the other NTBs should be carried out in the NGMA. Any referrals to other bodies should be done after exhaustive discu ssions had taken place in the NGMA.  
 
1.20 Kenya and a number of other African countri es had proposed prior to the Doha Ministerial 
Conference (WT/GC/W/453) that a study process be conducted to assess the impact of previous liberalisation before embarking on negotiations. Unfortunately this did not happen. Since the launch 
of the Doha work program they had repeatedly requested for the studies to be extended to other African countries and they hoped this would find favour  in the Chairman's paper. They requested the 
WTO Research Division and other organisations including UNCTAD to carry out studies to 
determine the implications of each of the elements proposed in the Draft Elements paper on Members' 
exports and imports both in volume and value term s. The studies should ascertain what would be the 
reciprocal equivalent of different tariff percent re ductions if the starting points of tariff structure and 
rates were different and how to achieve the same re sults in terms of percent decrease in custom import 
prices. Until these studies could be completed and th eir implications fully explored, it would be 
difficult to assess whether the draft modalities proposed  would meet the Doha mandate of less than 
full reciprocity and of fully taking into account the needs and interests of developing and least 
developed countries. More work needed to be d one to evolve modalities acceptable to the entire 
Membership. Time could be of essence and there was a need to work towards the consolidation of any 
gains made so far. The African Group would rema in positively engaged but they would urge caution 
in any attempt to accelerate the pace of negotia tions beyond what was necessary given the challenges  TN/MA/M/8 
 Page 9 
 
 
involved and to avoid undermining the atmosphere of goodwill currently prevailing in the Negotiating 
Group and the progress so far achieved.     
 
1.21 The representative of Japan  stated that the Chairman's paper had a very serious problem in 
that the proposed formula leaned too far toward s the high average tariff countries and it treated 
unfairly the efforts of low average tariff countries th at had reduced their tariffs with great pain. The 
purpose of the current negotiations was to further stimulate trade liberalisation by reducing tariffs 
"building upon the market openings realized thus far as a major element in promoting trade and 
development" as stated by the Chairman. Failure to  require sufficient liberalisation efforts by higher 
tariff counties was a very serious problem since trad e liberalisation would bring benefits to the whole 
world and especially to developing countries. Using the proposed formula would mean the higher a country's average tariff rate the smaller the rate of reduction in the equivalent tariff level would be. On 
the other hand, this formula would harmonize tariff leve ls of different goods within a specific country.  
Overall, the formula was totally insufficient from the view-point of encouraging further reduction 
efforts by higher tariff countries.  Equally it was in sufficient as regarded harmonizing the tariff levels 
among different counties by correcting the disparities in tariff levels world-wide. Consequently, the 
formula did not sufficiently stimulate trade nor, as a result, the development of the world economy.  
 
1.22 Development was a crucial agenda for Japan in this round of negotiations and it was natural 
that the Chairman had said "special and differential treatment was an integral part of the negotiation". 
Yet neither a higher average tariff level nor a lowe r level of tariff binding coverage meant a lower 
level of development. A lower tariff level sometime s reflected the simple f act that the country in 
question had recently acceded  to the WTO. Even though South-South trade was often cited as a key to promoting trade for developing counties, the draft formula would not support South-South trade 
and was even counter-productive by not sufficien tly addressing issues of higher tariff levels in 
developing countries. Another major unfavourable impact of the formula was that, because it did not remove high tariffs in developing countries, devel oped counties could take the option of engaging in 
bilateral or regional trade regimes like FTAs or RT As more than ever. This was exactly opposite to 
the reference in the Chairman's draft paper that  "we will keep closely in mind the importance of 
preserving the integrity of the WTO multilateral tradi ng system." The line by line tariff rate reduction 
approach made it difficult for Members to address sensitive sectors. In light of these problems with 
the Chairman's paper, Japan's proposal, by contrast, would be very realistic. It was essential that most developed and developing countries applied the single formula which would substantially  harmonize 
the general tariff level among different Members. As a realistic means to this end, Japan had been 
emphasizing the effectiveness of a target average ta riff rate reduction formula that would maintain 
flexibility, taking into consideration the various difficulties experienced by individual countries.   1.23 As for the sectorial approach, bearing in mind the DDA for the current round, Japan 
understood that certain considerati on for export interests of developing countries was needed. At the 
same time, Japan was ambitiously seeking to c ontinue negotiations to reach an agreement on 
harmonization and elimination of tariffs in 18 sectors that accounted for two-thirds of global trade in 
non-agricultural products, for example, chemical pr oducts, watches, toys, porcelain, cameras, office 
machines, ITA related products and motor vehicles. However, his delegation could not agree with the 
inclusion of some sensitive sectors like fish, fish  products, footwear and leather goods. The Doha 
Ministerial Declaration strongly affirmed a co mmitment to sustainable development yet the 
Chairman's paper did not address that point. Po sitive consideration of  global environmental 
conservation and the sustainable use of exhaustible  natural resources was a critical element of the 
discussion. From the perspective of expanding glob al trade the modalities for negotiations should be 
well balanced and should resolutely press forward the market access negotiations.                    
 1.24 The representative of Mauritius
 stated that his delegation fully supported the statements made 
by Morocco on behalf of the African Group and by Kenya on behalf of the Group of African 
Countries. Mauritius had deep concerns with regard to  the Chairman's paper. They noticed with regret TN/MA/M/8 
Page 10  
 
that some of the fundamental elements which ha d been canvassed and discussed since the beginning 
of the Group's meetings had been completely ignored, despite their importance for the current 
negotiations. One of these elements was the "erosi on of preferences". This situation was seriously 
compromising the position of the countries benef iting from preferences which also happened to be 
among the poorest and most vulnerable Members of  the WTO. However, Mauritius had taken note 
that the draft was not comprehensive and that it  would be subject to further amendments and 
additions. It could not accept a partial negotiating document containing only certain elements of 
modalities when some of the major issues raised by developing countries had been omitted. It would 
be impossible to negotiate or even discuss the elemen ts being proposed without all the other issues of 
particular concern to developing countries being in cluded in the draft modalities.  No less than six 
submissions from individual as well as groups of  developing and least developed countries from 
Africa, the Caribbean, Asia and Latin America had st ressed the need to address the issue of "erosion 
of preferences". In addition, a large number of dele gations had expressed their views on this issue. It 
was a substantial item of the Chairman's Overvi ew Paper (TN/MA/W/6) and had been discussed at 
length in the two previous Negotia ting Group meetings, resulting in a fruitful exchange of views and 
some concrete proposals being made. His delega tion failed to understand the selective approach 
adopted in the Chairman's draft. The absence of any reference, deliberate or not, to such a vital 
element was tantamount to creating an imbalance in  the negotiations, with the resulting devastating 
consequences on their economies. These elements would shape the negotiations as well as their 
outcome and for that reason it was crucial to include  elements raised by developing countries and to 
discuss them on a par with other proposed elemen ts. The fact that the Group was in a negotiating 
process and that all participants wanted to achie ve success should not distract them from the 
fundamental objectives of the Marrakech Agreements  which were: "raising the standards of living, 
ensuring full employment and a large and steadily  growing volume of real income…". The draft 
elements would lead to negative repercussions since the market access conditions of the most 
vulnerable counties, including the LDCs would unde rgo a rapid deterioration as a result of the 
substantial erosion of their preference margin. Th e proposal to extend full duty free access to the 
LDCs to improve their access would be siphoned off as a result of the level at which tariffs would be 
reduced or eliminated, as the case may be. It woul d be tantamount to snatching with the left hand 
what has been granted by the right hand. He was su re that the LDCs were fully aware of the dangers 
looming ahead.   
1.25 The myth of trade liberalisation had enge ndered numerous economic c asualties. He cited the 
case of Mauritius as an illustration. Since 2002, 10 firm s in Mauritius had been closed down with the 
loss of about 3,600 jobs because of the quotas phased down in the textiles and clothing sector and the anticipated tariffs cut. This was disastrous  for a small economy like Mauritius. Since 2000, 
unemployment had soared to around 10 per cent of th e total work force due to job losses in the textile 
industries. Compared to double-digit growth in the eighties and the first half of the nineties, the EPZ 
Sector had registered a negative growth of 4 per cent last year. Already the anticipated phasing down of the Multi Fibre Arrangement had had a negative  bearing on the local textiles industries. The 
combined effect of quota phase-out with tariff disman tlement would have devastating implications for 
the industrial sector in Mauritius with massive j ob losses which by extension would jeopardize the 
socio-economic fabric of the count ry which was reputed for its peaceful coexistence. This clearly 
could not be the what the WTO aimed to achieve a nd was again clearly in breach of the objectives of 
the Marrakech Agreement.  Trade preferences ha d been instrumental in fostering the economic 
development of many poor and vulnerable countries. Th ey had also contributed to investment inflows 
and by extension to job creation and to raising th e standard of living of the people. The concrete 
example of AGOA (Africa Growth and Opportunity Ac t) supported this view. The report to the 
United States Congress on the achievements of AGOA i ndicated the creation of 2,000 jobs in Kenya, 
15,000 in Lesotho, 5,000 in Malawi, 8,000 in Nami bia and 11,000 in Swaziland. Moreover, new and 
planned investment in Namibia was estimated at US$ 250 million, in Uganda US$ 20 million and in Kenya US$ 12.8 million. All this was due to th e preferential access which AGOA provided to Sub-
Saharan Africa and these counties were starting to ma ke progress thanks to such arrangements. The 
counties of Sub-Saharan Africa were particularly grateful to the US for the timely initiative. The  TN/MA/M/8 
 Page 11 
 
 
substantial benefits ACP counties had been derivi ng from the Lomé Convention and now the Cotonou 
Agreement should also be remembered and he expr essed thanks to the European Communities.  The 
consequences resulting from a substantial erosion of those preferences would be that ACP counties 
and the countries of Sub Saharan Africa would ag ain have to bear the brunt of unbridled trade 
liberalisation and be subject anew to the shackles of poverty and  marginalization.  The issue of 
erosion of preferences had been discussed only two weeks earlier in a Special Session of the General 
Council on Coherence in Global Economic Policy-ma king. He quoted the statement of the WTO 
Director General during that meeting: "Some areas have already been identified in our work at the 
WTO – support for adjusting to the fiscal effects of  reduced revenues, for example, and to the erosion 
of trade preferences". Both the President of the World Bank and the Managing Director of the IMF 
had stressed the need for adequate responses to addr ess the problem of preference erosion. Therefore, 
failure to address such an important issue would definitely accentuate the imbalance.  
 1.26 With regard to the broad thrust of the Chai rman's paper, it put his delegation and others from 
the African Continent in a straightjacket and left them with no option to manoeuver. This was clearly 
inconceivable in a member-driven organisation lik e the WTO. The formula which was being proposed 
as the core modality was unacceptable to them, ev en more so was the sectorial approach. The 
proposals on the table would perpetuate de-industriali zation in the majority of developing countries, 
in particular, in the African continent. They w ould also lead to severe shortfalls in government 
revenue thus creating an explosive combinatio n of declining export earnings with revenue 
compression. On the question of NTBs, it was essential that this issue which was more trade distorting 
than tariff barriers should be fully addressed and th e mandate to negotiate NTBs rested with the 
NGMA and not with any subsidiary bodies. The draft text did not reflect the work and discussions that had taken place in the Negotiating Group and therefore, Mauritius could not accept those draft 
elements in their present form. Mauritius wished to  have a firm commitment from the Chairman that 
these draft elements would be revised and woul d incorporate Mauritius' legitimate concerns. 
Mauritius remained committed to working constructiv ely within the Group with the view to finding 
an acceptable solution.  
                         
1.27 The representative of Nigeria
 stated that his country joined the statement made by Morocco 
on behalf of the African Group and by Kenya. His de legation welcomed the Chairman's bold effort at 
introducing a draft elements paper while noti ng its element of caution in leaving ultimate 
responsibility for decision-making in crucial part s of the modalities to the Membership. This 
cautionary attitude had also been amply displaye d in refraining from giving specific figures in the 
formula suggested. While welcoming this measure of caution, the lack of specific details and 
elaboration in certain crucial areas had rendered it  difficult to make categorical assessments of the 
impact of the proposed formula for tariff cuts, among other elements.   
 
1.28 On a preliminary basis, there were some  issues of concern which required further re-
examination or clarification. They wholeheartedly agreed with paragraph 4 of the Chairman's paper 
but they wondered if the formula proposed went far enough to address the concerns of developing 
countries. Their initial assessment of the formula on tariff reduction commitments indicated that in the 
final analysis the formula weighed more on developing country Members who would undertake 
deeper tariff cuts, in spite of the fact that some element of less th an full reciprocity had been built in. 
They were also concerned about the Chairman 's recommendation for handling unbound items. The 
proposal had attempted to factor in the principle of  special and differential treatment in allowing five 
per cent of tariff lines to remain unbound, provided that  they did not exceed five per cent of the total 
value of a member's imports, calculated for the refe rence period. His delegation questioned the criteria 
used in arriving at the figure of five per cent. Th ey also questioned what criteria had been used in 
arriving at the recommendation of two times the cu rrent applied rate as the basis for binding all 
unbound rates as this inferred an attempt to force all Members to dramatically increase their binding 
scope. Such a proposal did not seem to take cognisance of the serious difficulties which those Members who still had a significant proportion of their tariff lines unbound would have to accept, 
particularly when no criteria had been spelt out for arriving at such a dramatic increase.  They TN/MA/M/8 
Page 12  
 
reiterated their support for efforts aimed at increasi ng the scope of binding, particularly by those 
Members who still had a significant level of tariff lines unbound. But this should  be gradual in order 
to allow for the policy space need ed by such countries to adjust according to their economic 
circumstances.    
1.29 Nigeria had concerns about the issue of sectoria l tariff elimination. The proposal was targeted 
at eliminating and binding all tariffs on products of particular export interest to developing and least 
developed countries and footnote 7 referred to the need for Members themselves to determine the 
applicable scope of coverage. However, it was not  clear why items such as electronics and electrical 
products, motor vehicle parts and components woul d be included as products or sectors of export 
interest to developing countries and particularly  so for African countries. They welcomed the 
recommendation for the elimination of tariffs by developed countries on a one-off basis. But the call for elimination of tariffs by developing coun ties, even on a three-phase programme was not 
acceptable and neither was it helped by the lack of any specific mention of time periods to enable a 
better evaluation of the merits of such an action. There was a lack of consideration for the revenue-
generating role played by tariffs in developing count ries. African countries, in particular, depended to 
a large extent on customs revenue and therefore calls for the elimination of tariffs tended to 
undermine the peculiar economic circumstances of this  group of countries. In this regard, the idea of 
sectorial tariff elimination might not offer significan t benefits for African countries if they would be 
expected to apply similar measures to their own domestic sectors in a situation where their exports 
were not very competitive and their industrial base still remained very weak.        
 
1.30 The Chairman's paper was silent on the subject of tariff preferences in spite of the fact that a 
significant number of preference-receiving participants  had serious fears over the impact of a possible 
erosion of tariff preferences. It was clear that the use of the proposed fo rmula would result in the 
erosion of preferences and preference-receiving coun tries were themselves coming to terms with this 
possibility. Suggestions had been made on the need  to establish possible mechanisms to compensate 
or cushion the adverse effect of the loss of preferences.  It was critical to note that this issue affected a 
significant number of WTO Members and if no timely solution was found the fate of the negotiations 
would be in jeopardy. The counties that enjoye d trade preferences continued to be the most 
marginalized in the global economy, therefore, the Group could not talk about improved market access conditions only to shut the door against the most  marginalized set of counties in world trade. 
Regarding NTBs, the Chairman had only characterised the state of play in the discussions and pointed 
to the fact that more would still need to be done before a clear cut direction could be identified on 
how to deal with NTBs. Equal weight should be give n to this aspect of negotiations as was given to 
tariff negotiations. Otherwise, the gains eventually made in tariff reductions would be undermined by 
the inadequate solutions to the pr oblems posed by NTBs.  With re gard to the positive aspect of the 
proposal targeted at the LDCs, Nigeria particular ly welcomed the recommendation that LDCs should 
not be required to undertake reduction commitments a pplicable to those of the other WTO Members. 
LDCs should increase their scope of binding commitm ents as part of their contribution but they 
should be allowed to do so in accordance with their economic circumstances.  Nigeria considered the 
Chairman's draft as a fair attempt and it would remain positively engaged in the negotiations. Nigeria 
would continue to urge some level of caution and restraint with rega rd to ambitions to conclude the 
modalities negotiation in record time as a lot still needed  to be done to risk too much adventurism.  
 1.31 The representative of Mexico
 stated that the Chairman's paper did not cover the basic 
requirements of several developing countries, including Mexico. As Mexico had stated in its proposal (TN/MA/W/13) the recognition of the principles of special and differential treatment would help in 
the development of the negotiating process and in obtaining results for deve loping counties. The 
Chairman's draft did not fully cover the issues of sp ecial and differential treatment nor less than full 
reciprocity, or if it did, it was set out in a too sub tle a  manner. This meant that there was an un-level 
playing field for the reduction of customs duties which made it impossible to have substantive 
discussions on the issue. While the establishment of longer implementation periods for customs duty 
reductions was a valuable element of special a nd differential treatment the modalities should be  TN/MA/M/8 
 Page 13 
 
 
sufficiently flexible to take account of the sensitiviti es of some developing countr ies. As stated in the 
Mexican proposal, if the negotiations sought an ov erly-ambitious modality with minimum standards 
of liberalisation for each tariff line the general liber alisation would be less for developing countries. 
While there was space for flexibility in the Chai rman's proposal, it was only proposed for some 
developing countries and not all. Those who had not  consolidated all their tariff schedules were 
allowed to maintain five per cent of their ta riff lines unbound while those countries which had bound 
all their tariff lines had no protection. If not all de veloping countries had the right to flexibility it 
would risk disparity in the modalities between thos e who had not bound all their custom tariffs (even 
though they had participated for 40 years in th e multilateral system) and other Members who had 
bound their schedules. All developing counties had some sensitive sectors. 
 
1.32 With respect to sectorial elimination, Me xico recognized that this measure tried to 
complement the Doha Declarati on Mandate regarding pr oducts of export interest to developing 
countries. However, there should be much more  discussion on the list of sectors proposed for 
elimination as well as the inclusion of other sectors. Some elements of the methodology were 
worrying, particularly the sectorial elimination of tariffs for developing countries which went further 
than the formula and also the issue of whether the elimination would be over the same time-period as 
agreed on for a possible tariff reduction formula. Some  of the sectors proposed were of great interest 
for developed counties' exports. The efforts to elimin ate tariffs in a shorter period seemed to generate 
great imbalance in terms of tariff eliminati on. The second approach was called supplementary 
modalities. It was not clear from the paper whether this  approach would take place at the same time as 
the application of the formula or in a second ph ase or whether the application was voluntary, as had 
been the case with many initiatives in the WTO so far.  Mexico was in favour of this type of initiative 
being considered on a voluntary basis in a second ph ase once each member had b een able to evaluate 
the degree of liberalisation achieved. To insist th at the supplementary modalities should be a point of 
departure for negotiations would create an imbalance in the negotiations since some of the sectors 
proposed might be of more interest to developing co untries that to developed countries.  Mexico was 
conscious of the difficulties involved in these negotiations because of the different degrees of 
development and the different economic  situations of countries.  However, as a result of the very little 
progress, if any, achieved in the Negotiating Group so far, there could be a risk of not meeting 
agreement in time for the fifth Ministerial Conf erence. All developing countries should enjoy the 
same point of departure in the negotiations not the unequal conditions proposed in the Chairman's 
draft.  
 
1.33 The representative of Thailand  stated that the Chairman's paper  indicated an ambitious scope 
by proposing a harmonisation formula plus a sectorial approach. As a result it was difficult if not impossible for Thailand to accept such elements as a basis for negotiations without knowing the level 
of ambition in the agricultural negotiations. The ha rmonisation formula with a single coefficient value 
would definitely not reflect the ministerial mandate on the less than full reciprocity principle between 
developing and develope d countries. Moreover, the proposal to use the average base rate as an 
integral part of the formula applicable to all Members could not count as special and differential 
treatment. In order to help Members to understand the proposed formula they requested the Secretariat 
to provide a simulation on the proposed formula for different coefficient numbers, for example 5, 10, 
20 and 30. In this way Members would get a clear pi cture of how the coefficient values would affect 
the rate of tariff reduction for each Member.  With re gard to the sectorial elimination, this approach 
could be accepted as a supplementary approach and on a voluntary basis. However, from past experience, Members should agree the details of produc t coverage in each sector  before taking part in 
sectorial negotiations. Unbound items  had long been recognized as sensitive products for developing 
countries, therefore, Thailand would not accept using the applied rate as a staring point for tariff 
reduction. For developing countries the maximum tari ff rates allowed in their current national tax 
laws should be a good basis for binding a reduction. With regard to non -ad valorem  duties they were 
currently analyzing details of the AVE calcula tion methodology and Thailand supported the proposal 
that final tariff binding should be exclusively bound in ad valorem  form. The definition of  "t
1" should 
be the final rate to be exclusively bound in ad valorem  terms keeping in mind that in the current WTO TN/MA/M/8 
Page 14  
 
tariff schedule a variety of tariff binding terms had been used, i.e., ad valorem , specific tariff rates, 
compound rates, mixed duty rates and technical duty rates etc.. Furthermore, for the sake of transparency, the Secretariat should carry out the conversion of non- ad valorem  duties to ad valorem  
with the results being approved by the relevant Members.  
1.34 On special and differential treatment they supported having a longer implementation period 
for developing countries. However, in order to ach ieve meaningful results all tariff lines should be 
bound. However, they were currently examining possible flexibility for LDCs on this particular 
subject. Regarding newly acceded Members, Thailand w as still to be convinced of the need to give 
special treatment to these  countries. Concerning low duties, there were several points that needed to 
be further clarified such as, the rate of duty refe rred to and whether the proposed elimination of such 
tariffs would be applied before or  after or both before and after applying the reduction formula. The 
elimination of such tariffs should be mandatory fo r developed countries while keeping it voluntary for 
developing countries. With regard to NTBs, Thaila nd requested further clarification on the proposed 
approach to NTBs, especially indents 1, 3 and 4 of  the draft paper. All NTBs should be discussed and 
negotiated in the NGMA with flexib ility regarding certain NTBs that might fall into other areas of 
negotiations.    
 
1.35 The representative of Egypt
 stated that the statement made on behalf of the African Group by 
Morocco and the statement made by Kenya had alr eady expressed Egypt's reaction to the paper. Egypt 
had serious concerns regarding the procedures follo wed in presenting the draft as they would have 
liked to see a complete set of proposals put be fore the Negotiating Group as a specific proposal from 
the Chairman. The paper, specifically paragraph 6, reflected to a great extent the demands made by 
major industrialized countries to harmonize tariff structures among all Members regardless of their level of development and economic needs. Egypt had expected a propo sal that took into account the 
different views expressed by all Members, particul arly developing countries who had clearly indicated 
that a harmonization approach was not the way fo rward. In addition, a harmonization approach did 
not correspond to the Doha Mandate . With regard to the modalities, it would be important to have a 
linkage to what was happening in the Agriculture  Negotiations. The sectorial approach proposed for 
tariff elimination on certain sectors should be di scussed after the Group had agreed upon the core 
modality. There was no need for additional or supplem entary approaches as Members' concerns could 
be taken care of in the core modality. The Chairman 's draft paper ignored the concerns raised with 
regard to the erosion of preferences even though sev eral Members had expressed the need to take that 
issue into account. Egypt had proposed the adoption of a linear reduction approach and in order to 
address the part of the mandate concerning high tariffs all tariff lines above 50 per cent could be 
reduced to 50 per cent and all other lines up to 50 per cent could be reduced by 15 per cent.   
  
1.36 The representative of Chile
 stated that the draft contained some elements which his delegation 
supported and others that it could not. They were not yet in a position to say whether it was an 
acceptable basis for negotiation. They hoped that the debate would make it possible for adjustments to 
be made or even a new proposal put forward so as to comply with the mandate. There was flexibility 
in many elements of the document, for example, the possibility for some Members to leave some of 
their tariffs unbound. In this way the document lack ed ambition, which was in sharp contrast to the 
high level of ambition in other b ilateral or regional negotiations throughout the world. While total 
liberalization was being negotiated outside the WTO it appeared from the Chairman's draft paper and 
the interventions made by delegates that the NGMA did not wish to be even fairly ambitious. If a 
certain level of ambition was not maintained in the negotiations, it would generate considerable 
incentives for Members to continue concluding free tr ade agreements outside the WTO. As a result of 
those bilateral agreements all the preferences that were being defended would continue to be eroded. 
Mauritius and other delegations who had spoken of preferences would have to face greater 
competition as a result of those bilateral agreements . Even worse, they would have to face this 
increased competition with rules of origin which would be even more de trimental and could push 
them out of the market. The problem of preferences was one of time; they would erode whether or not 
something was done. Therefore, it was better to t ackle the issue in the NGMA and create programmes  TN/MA/M/8 
 Page 15 
 
 
that would help preference-benefiting countries to face possible resulting disturbances and improve their export capacity, among other things. In order to do this a concerted programme by the WTO 
together with other international organisations would be required.  
 1.37 Chile considered as inadequate the proposal  that the base rate for unbound tariffs would be 
two times the MFN rate. Applied rates, if they were not already bound, reflected the sensitivity of 
those products. Multiplying the applied tariff by two would artificially increase the tariff average of 
those Members and as a result Members who had reta ined unbound tariffs would be  rewarded more 
than those which had bound their tariffs. The ma jority of Latin America countries had bound all of 
their tariffs and as a result of the approach put forward by the Chairman, Chile would end up being 
punished. Taking the mercantilist approach to the do cument, Chile had trade agreements with many 
other countries, for example, with the US, Latin American countries and the EU among others. The 
relevant markets for Chile were in the Asia-Pacifi c regions. Therefore, using the approach of two 
times the MFN applied rate as the base rate for unbound tariffs would be a poor starting-point for Chile. The negotiations needed to be completed in  such a way that all Members would bind 100 per 
cent of their tariffs with perhaps the exception of LDCs , who could have flexibility in this regard. This 
would lead to increased certainty and predictability.   Mandatory participation in the proposed sectorial 
tariff elimination would pose a serious problem for Chile. Without prejudice to bilateral FTAs, Chile 
managed to maintain a tariff policy which had a si ngle tariff across all products.  In this way it was 
able to avoid distortions in the allocation of r esources and it also avoided complicating the political 
economy whenever the relative values of tariff pr otection for any particular product had to be 
determined. The proposed harmonization formula woul d alter that approach and therefore would be 
very difficult for Chile to accept because it would imply taking a step backwards in the way they 
handled their tariff policy.   1.38 As a positive element, in the Chairman's pa per certain sectors had been identified as having a 
priority interest for developing countries and Chile ag reed that a special liberalization effort should be 
made in these sectors. However, not all the sectors in  the paper were of interest to Chile and some 
sectors which were of  a more primordial interest  to them or to other developing countries were 
lacking. Chile had a keen interest in the fisherie s, forestry, minerals and non-ferrous metal sectors. 
Adding these sectors to some formula that would give incentives to deepening liberalization would be a better overall approach that was more in line with the interests of developing countries. With regard 
to Newly Acceded Members and without prejudice to any further statements by Chile, the Chairman 
had been excessively generous to those Members. While they required a formula which would give 
them a longer implementation period for tariff reductions they should be treated in the same way as all 
other WTO Members and make a significant contribution to trade liberalization.       
 
1.39 The representative of Senegal
 stated that his delegation en dorsed the statement made by 
Morocco on behalf of the African Group. He we lcomed the LDCs exemption from tariff reduction 
commitments which was fully in line with their need to benefit from a certain degree of flexibility in 
their tariff policies since they did not have any ot her trade defense mechanisms to adopt. Referring to 
duty free, quota free access for LDCs, paragraph 42 of the Doha Declaration stated clearly that Members committed themselves to duty free, quota free access for products originating from LDCs. 
Senegal welcomed the fact that since the adoption of the declaration, many developed counties had 
improved market access for LDCs and the Chairman's  draft was also along these lines. It seemed to 
suggest an attempt to set a deadline for participants to achieve that objective. In order to fully work 
towards that objective the duty-free, quota-free acc ess should be a part of the developed countries' 
schedules of commitments. This would ensure great er predictability and efficiency of duty-free 
access. There was no reference in the Chairman's  paper to addressing the issue of erosion of 
preferential margins, and Senegal fully endorsed the comments made by Mauritius in this regard. 
Knowing that an overall drop in duties could have  a negative effect on the exports of LDCs in 
sensitive products to their main market s, Senegal hoped that this was an  oversight and that it would be 
mended. Improvement of market access for LD Cs was a fundamental objective of the DDA although 
Senegal agreed that this should not imply that dut ies could not be cut for other Members. In the TN/MA/M/8 
Page 16  
 
context of studies and appropriate capacity bui lding measures for LDCs provided for in the 
negotiating mandate, there should be an impact study carried out on any modality or reduction 
formula to consider its impact on the LDCs' mark ets.  He hoped that these remarks would be taken 
into account in the improved version of the draft.        
1.40 The representative of Indonesia
 stated that although the Chairman's paper did not 
accommodate all of his country's interests, they we re ready to work constructively with others to 
improve it. With regard to the proposed formula, using average base rates as a determinant factor 
alongside the coefficient would entail a tariff reducti on in accordance with the level of current tariff 
average rates. Furthermore, this formula would r esult in a deeper cut for high tariffs than for low 
tariffs. His delegation preferred to  use linear cuts, however, in orde r to be constructive they were 
willing to look more closely at the formula  propo sed by the Chairman. They were also willing to 
consider using line-by-line tariff reductions in this respect. Indonesia supported the Chairman's 
proposal to use bound rates as base rates. There had already been an argument made for using bound 
rates as one type of flexibility for developing count ries but Indonesia disagreed with this view.  Bound 
rates were the legal commitment and should be the basis of the negotiations. Even if starting from 
bound rates, in terms of real reduction, many de veloping countries would still make a significant 
reduction compared to developed countries. A reducti on in high tariffs had a different effect to a 
reduction in low tariffs.  For example, a 50 per cent reduction from 30 per cent to 15 per cent in 
developing counties was very significant whereas a reduction of a low tariff from 5 per cent to 2.5 per cent in developed countries would have less impact. 
 
1.41 While the proposed formula did not contain a specific coefficient, there should be more 
flexibility for developing countries with  regard to the formula through the use of a higher coefficient. 
This would be an appropriate implementation of th e principle of less then full reciprocity. The draft 
provided that if a Member wanted to bind an unbou nd item it had to convert that rate by using the 
proposed formula. This would result in a Me mber making a double commitment which was an 
onerous undertaking. A Member's willingness to in crease binding coverage was already a substantial 
commitment and should not be subject to further reduction by applying the formula. The formula 
should only be used to cut bound items and a diffe rent method should be used for unbound items that 
would facilitate and encourage Members to increase their binding coverage. Applying the proposed 
formula on unbound items could discourage Members from substantially increasing their binding 
coverage. Their own preliminary exercise showed that leaving five per cent of tariff lines unbound 
would still not accommodate their interest. However, they were not clear as to the purpose of having an additional condition that these five per cent unbound items should not exceed five per cent of the 
total value of a Member' imports. It was not n ecessary to make a linkage between unbound items and 
total import value.  With regard to sectorial tari ff elimination, the sectorial approach should only be 
applied on a voluntary basis taking into account a ce rtain degree of critical mass. Indonesia had strong 
reservations about the pursuit of mandatory sector ial tariff elimination for all Members. They 
supported the Chairman's intention to give priority  to the products which were of interest to 
developing countries. The best way to pursue sector ial tariff elimination was properly set out in the 
first bullet of paragraph 7 of the draft.  However,  the second bullet of that paragraph had gone too far 
in suggesting a mandatory elimination of tariffs fo r all Members.  Indonesia had no objection to the 
proposal to include supplementary modalities as long as those modalities were voluntary.  
 1.42 Indonesia agreed that the NGMA should have  overall responsibility to address NTBs with the 
exception of NTBs that were dealt with in othe r negotiating groups. They recognized the challenge 
ahead and further endorsed the need to conduct the process of identification and categorisation of 
NTBs. This process of categorisation was at a cr itical stage. There should be a common understanding 
on what constituted NTBs and how to address them. It seemed that the modalities on NTBs were not 
yet fully elaborated but they understood that this was due to the fact that the negotiations were not 
sufficiently advanced to enable the Chairman to  develop comprehensive modalities. Indonesia agreed 
with the Chairman's direction on how negotiations  should be conducted. Those issues, as far as 
possible, should be addressed horizontally while at th e same time the use of request/offer and vertical  TN/MA/M/8 
 Page 17 
 
 
approaches should be on a voluntary basis. In partic ular, the use of the request/offer approach would 
be burdensome for many developing countries. Indonesia recognised that some parts of the draft were not yet fully elaborated and they urged the Chairman  to complete the draft modalities.  He hoped that 
the Chairman would take into account the various po ints raised by delegates, especially those from 
developing counties, in order to make this round of negotiations truly a development round. 
            
1.43 The representative of Malaysia
 supported the inclusion in the Chairman's draft of the proposal 
that bound tariffs should be the basis for the reducti on process.  Malaysia also agreed with 2001 as the 
base year. However, Malaysia had serious concer ns regarding the proposed formula which was a 
modified version of the Swiss formula. The incor poration of a Member's average bound tariff into the 
formula had the effect of penalizing those Me mbers which had a lower average bound tariff, but 
which had, for development purposes, maintained so me high tariffs and some selected tariff peaks. 
Furthermore, the formula incorporated the concep t of harmonisation, albeit with one's own national 
average, which Malaysia had urged the Chairman to  reject at previous meetings of the Negotiating 
Group. Malaysia had also spoken against too-steep ta riff cuts because of their negative effects on the 
domestic economy. In addition, the formula did not  incorporate the principle of less than full 
reciprocity. It could not be argued that the u se of a Member's own average bound tariff constituted 
special and differential treatment or the principle of less than full reciprocity. Even if there was 
agreement for all developing countries to use a higher coefficient vis-à-vis  developed counties, it 
would differentiate the treatment between developing countries. Theref ore, the formula to be adopted 
for the reduction process should be the linear-cut a pproach. All developing countries should be given 
the flexibility to bind unbound rates at above the high est prevailing bound rate or at the applied rates, 
whichever was higher. Moreover, the items that de veloping counties were willing to bind should not 
be subject to any reductions.  The flexibility that  was provided for developi ng countries in paragraph 
8a of the draft was clearly insufficient.  
1.44 With regard to the proposal that sectorial ta riff elimination should be an  integral part of the 
modalities, the sectorial approach, whether reduction or elimination, should be purely voluntary and 
only if there was a critical mass of Members willing to  undertake such an approach. In this context, 
Malaysia was unable to accept any modality that made  the sectorial approach mandatory. It should be 
treated as a supplementary approach, on a voluntar y basis, along with request and offer approach, 
zero-for-zero and the sectorial harmonization. On cr edit for autonomous liberalization, according to 
footnote 2 credit could not be given for reductions made by participants to the ITA on the grounds 
that such reductions had not been autonomous. Malays ia disagreed with this vi ew as even the decision 
to join the ITA was a conscious autonomous deci sion, resulting in bound tariff commitments which 
were well below what had been required of ITA participants unde r the formula approach in the 
Uruguay Round. Regarding the treatment of newly acceded Members Malaysia shared the concerns 
expressed by Chile.    
 1.45 The representative of Croatia
 speaking on behalf of four recently acceded countries; Albania, 
Croatia, Georgia and Moldova stated that the Chairm an's draft did not adequately address the specific 
situation of the recently acceded Members. From a conceptual perspective, more thought could have 
been given to the particular concerns faced by recently acceded Members in the course of these 
negotiations. Furthermore, the proposal for the b ase rate, that was of essential importance for the 
reduction of tariffs in the proposal, would not result in  equal treatment for all Members. In respect of 
unbound tariffs, commencing tariff re ductions from two times the MFN applied rates could not have 
the commonly declared goal of reducing duties af ter this round of negotiations. This concept 
penalised the recently acceded Members that had bound 100 per cent of their duties without granting 
them credit for autonomous liberalisation. Accord ing to the Chairman's draft some newly acceded 
Members would have to implement the commitments arising from this round of negotiations directly 
after the accession transition period without providi ng for a grace period or a long transition period. 
This kind of approach was unjustified because th e well-known scope of their excessive commitments 
and highly liberal tariff structures had not been  adequately acknowledged and compensated. The 
proposed formula contained some doubtful elements which had to be addressed in order to preserve TN/MA/M/8 
Page 18  
 
equal treatment within the Membership. The coeffici ent defined as the average of the base rate was 
the most disturbing element in the formula. It gave the upper hand to those countries that had not 
bound their duties yet and again punished those that had bound 100 per cent of their duties. Their own preliminary calculation showed that the countries wi th higher average tariffs would be reducing their 
tariffs less than countries with lower averages. Si mple averages for non-agri cultural duties in their 
countries varied within the tight margins of betw een four per cent and 6.6 per cent. Furthermore, 
while still examining the impact of different levels  of disaggregation of tariffs when calculating the 
simple average it seemed to contain elements whic h favoured countries with a lower number of tariff 
lines on a higher digit level. They commended the proposal in the Chairman's paper that newly 
acceded Members could apply a higher coefficient in the formula but this would be insufficient to 
address all the existing discrepancies between their tariff profile and the vast majority of other 
Members' schedules, especially compared to Member s with similar levels of development. Their 
specific concerns were how big should the difference in the coefficients be and within which margins 
should they expect the future coefficient to be determined. The answers to those questions could 
determine the extent of the potential benefit to their countries. 
 
1.46 The proposed approach to sectorial tariff el imination left open several questions. The seven 
proposed sectors for elimination of tariffs were very sensitive for the domestic industries of the four countries. Coupled with ambitious formula reductions  the sectorial tariff elimination would result in 
leaving their industry virtually without any form of protection within the few years from the date of their accession. Such an outcome would create an a dditional disadvantage for their countries in the 
global economy. Furthermore, some countries that w ould benefit through this type of elimination 
were far more developed than any of the recently  acceded Members. Some of them had stable and 
well-protected domestic markets with GDP even 10 or 15 times higher than some of their own 
countries. They were not convinced that they s hould be giving autonomous preferences to the 
countries at the far more advanced stage of develo pment and therefore believed that they themselves 
should not be included in sectorial tariff elimination or, if they were, their participation in such 
initiatives could only be on a voluntary basis. Re garding the recommendation to consider the 
elimination of low duties, they would be extremely hesitant to undertake such a step given the extent 
and importance of low duties in their tariff prof ile. They had clearly presented arguments which 
proved their existing constraints and difficulties in ad dressing this issue. Therefore a final package of 
modalities should provide for meaningful additional fl exibility for their countries in respect of the 
question and definition of low duties. The count ries on behalf of whom he was speaking were 
seriously committed to the process of liberalisation in spite of the alrea dy high level of market 
openness achieved. They believed that the path wh ich they had taken could serve as a good example 
to many WTO Members.  
 
1.47 The representative of Colombia
 stated that the proposed formula incorporated several of the 
elements that were stressed by ministers in the D oha declaration, namely, the elimination of tariff 
peaks, reduction in high tariffs and reduction in ta riff dispersion. However, the formula was more 
aggressive than Colombia would have preferred. Their capital was evaluating the formula with a  
number of different coefficients to see how it w ould be possible to accommodate their sensitivities. 
While the use of the average base rate identified as "t a" would help some developing countries, it was 
not sufficient in order to meet the mandate of less  than full reciprocity. Introducing an element of 
flexibility and making it possible for developing countri es to apply a differentiated coefficient, even if 
it did not differ very much from that applied by de veloped countries, might fill in the gap referred to 
earlier at least for the most sensitive products in  each developing country . With regard to the 
Chairman's draft, Colombia supported the negotiatio ns being conducted on the basis of bound tariffs; 
a substantial increase in the percentage of bindi ngs and submitting those bindi ngs to reduction. The 
proposal to use as a base rate two times the app lied MFN rate for those products that were unbound 
was excessive in view of the fact  that the differences between the a pplied and the bound rates in the 
present structures in developing countries was not so substantially different. A date had to be set 
within the base year for referen ce to MFN tariffs which would be taken into account in the binding 
process. This date could be 31 December 2001 because there could have been variation in these rates  TN/MA/M/8 
 Page 19 
 
 
over the course of the year. They also supported the idea of promoting conversion of the non ad 
valorem  duties into ad valorem  equivalents and binding the final tariff rates in ad valorem  terms.   
 1.48 Colombia was disappointed with the proposal fo r the sectorial elimination of tariffs as this did 
not reflect the views and feelings of developing countr ies, in particular, of Colombia. A large majority 
of developing countries had expressed their preferen ce for the supplementary and voluntary nature of 
sectorial approaches. Colombia could not accept th at as a result of the sectorial approach the 
elimination of tariffs by all Members, using an accelerated formula, would be a central element of the Chairman's draft paper.  Furthermore, they wanted  to know the criteria used for the selection of the 
sectors proposed, since developing countries had not i ndicated any sectors of particular interest to 
them for coverage under such an initiative. Co lombia would be willing to consider sectorial 
approaches as a central element of the modalities unde r other conditions, i.e., as part of special and 
differential treatment where developing count ries would not have to assume burdensome 
commitments. One of the elements of this negotia tion should be to achieve 100 per cent binding in all 
developed and developing countries,  therefore, it would not be a ppropriate to allow developing 
countries to maintain up to five per cent of th eir tariff lines unbound. With regard to the LDCs, 
Colombia would have no difficulty in agreeing to them applying the proposal contained in the draft. Colombia reiterated its willingness to consider altern atives in order to deal with the specific situation 
of newly acceded Members vis-à-vis the commitment s that they had already undertaken. Colombia 
would not be in favour of adopting decisions that might generate imbalances by granting advantages 
to some countries to the detriment of others. The best alternative would be to grant longer 
implementation periods rather than applying differential coefficients in the tariff reduction formula for 
newly acceded Members.   1.49 The section on NTBs reflected the discussi on so far in the Group regarding the means by 
which they should be dealt with. The procedures as set forth in sub-paragraphs a, b and c of the 
Chairman's draft were very appropriate. Colombia ha d concerns regarding covera ge of the NTBs to be 
included in bullets 3 and 4 of the sub-paragra ph and sought clarification of these through some 
practical examples. Referring to the erosion of preferences, it was quite clearly a topic of legitimate concern for some countries. However, the point made  by Chile was also a valid point. Bilateral and 
regional negotiations would continue  to erode preferences at an ev er faster pace and therefore a 
multilateral type approach supported by other intergovernmental organisations within the coherence 
programmes would be the best response to compensa te those countries which might be suffering from 
the erosion of their preferences. However, at the same time, the erosion of preference issue should not 
diminish the levels of ambition in the negotiations.   1.50 The representative of Costa Rica
 stated that in very general terms Costa Rica could agree with 
the incorporation of some of the elements describ ed in the Chairman's draft paper, which were 
consistent with the mandate in pa ragraph 16 of the Doha Ministerial Declaration and the multilateral 
nature of the WTO. However, other elements fell short of fulfilling the mandate.  Costa Rica had two 
issues of concern with regard to the draft text.  First, the choice of elements could make it more difficult to attain ambitious results in the negotia tions on market access, particularly regarding South-
South trade.  Almost 40 per cent of developing co untries' industrial exports were directed towards 
other developing countries and this needed to be pr operly addressed.  Second, the draft text tended to 
reward or favour Members that had not finished binding all their tariff headings.  There was no reason why any tariff heading should remain unbound.  In agriculture, tariff lines among the most sensitive 
for many Members were already bound in the Uruguay  Round.  It was contradictory that the sector 
most lagging behind in the Organization, namely agri culture, had taken the major step of full binding 
since 1995, whereas this would not happen within even the next 10 to 15 years in the sphere of non-
agricultural products. The reason for this could be that the Group was starting from the wrong premise, which was that there was a direct link between the level of binding and a Member's level of development.  The information prepared by the Secr etariat for previous meetings clearly demonstrated 
that this was an erroneous assumption.  Failure to bind  tariffs tended to lead to major inequalities 
between the rights and obligations of Members at similar levels of deve lopment and it created TN/MA/M/8 
Page 20  
 
inequalities among LDCs and developing countries ge nerally. More serious still, some developing 
countries enjoyed more flexible treatment than certain less developed countries. Mauritius, for 
example, had committed to a minimum level of bou nd tariffs and hence would be able to maintain 
five per cent of its tariffs unbound, although its leve l of development was relatively higher than, for 
instance, Gabon, Djibouti, Rwanda, Lesotho a nd Papua New Guinea, which had bound all their 
non-agricultural tariffs and would, therefore, not be in a position to enjoy such flexibility. This created 
a serious imbalance.  Most Latin American count ries had bound 100 per cent of their tariff lines, 
which provided considerable legal security for other developing count ries' exports to that region.  
Such legal security should be reciprocal.  The principle of less than full reciprocity had been 
extensively discussed in recent months, but this pr inciple did not apply among developing countries. 
All Members should bind their entire tariff universe a nd flexibility in this regard should be reflected 
only in the level of the bound tariff.  1.51 With regard to the elements of the formula,  paragraph 5 contained many of the items that had 
been supported by Costa Rica and other developing c ountries, such as the need for the base tariffs to 
be determined according to the bound rates. Tariff s bound in this Round should also be cut, as this 
was the only way to ensure fulfilment of the manda te of tariff reductions across the board, without a 
priori  exclusions, for non-agricultural products.   Con cerning tariffs that had not yet been bound, the 
use of "two times the applied rate" could drive up the average of the base rates "t
a ". In practice, this 
meant that some Members would become entitled to make  lesser cuts than if their tariffs were bound.  
Costa Rica was also concerned about the clarificat ion given during the technical session that such 
tariffs could be used in order to raise the aver age and then be excluded from any binding. This was 
not equitable in that it generated a perverse syst em favouring Members that had not bound all their 
tariffs. There had to be reciprocity and equivalen ce in the concessions made by developing countries. 
As to the comments in the footnote regarding au tonomous liberalization, Costa Rica was in the 
process of reviewing the listed documents in orde r to ascertain whether these documents included 
only tariff reductions or whether they also covered increases in some tariff levels.  Costa Rica would 
be reluctant to accept the latter as grounds for accruing credit and they reserved their right to revert to 
this matter as a later stage.  With regard to th e base year for tariff rates, Costa Rica had no problem 
with the use of the MFN tariff for a specific day in 2001, which could be set by the notification 
procedures for the Integrated Data Base (i.e., those covering the initial part of the year and notified in 
March of that same year). It had been made cl ear in document G/MA/IDB/2/Rev.16 that the key 
problem was the chronic absence of data for entry in  the IDB.  In Costa Rica's view, it was essential 
therefore that the basis for unbound tariffs should be  the tariffs notified by the Members for the IDB 
and where the relevant information was not availabl e in the IDB, to set the deadline for filling data 
gaps by 1 September 2003 or any date close to that  date. If Members failed to submit the data within 
the specified deadline, then the Secretariat could be  granted authority to enter in the IDB any tariffs 
that could be obtained from other sources, such as trade policy reviews or TRAINS – or it could be 
possible to consider establishing counter-notifications  in this area. Regarding the proposed formula, 
Costa Rica wondered why the national average was selected as an element for modifying the Swiss 
formula - whether it was in order to reflect Members' levels of development.  If that was the reason, 
then Costa Rica could not agree.  The wording of element t 1 (final bound rate) was very interesting. 
They, like Thailand, understood this as already est ablishing the obligation to bind all tariffs in 
ad valorem  form, which was why they would be in favour of adding the word "exclusively". Costa 
Rica fully endorsed such an obligation, thereby joining the large number of Members that had 
expressed support for this element.  He drew atten tion to an apparent error of translation in the 
Spanish version of paragraph 6, wh ich began by stating that the " aranceles aplicados " would be used 
as a basis.  With regard to the proposal to c onduct mandatory zero-for-zero negotiations in some 
sectors, Costa Rica was not convinced that this w as the best course to take in these negotiations. As 
other participants had indicated, these types of elem ent should be dealt with on a voluntary basis. Far 
from promoting liberalization, mandatory partic ipation in all these sectors would guarantee the 
inclusion of only very few products. Costa Rica pr eferred these sectorial nego tiations to be conducted 
on a voluntary basis and to focus on achieving ambitious results with the primary formula. 
  TN/MA/M/8 
 Page 21 
 
 
1.52 Paragraph 12 proposed considering the elimin ation of all low duties.  Almost 50 per cent of 
the value of developing country exports entered developed countries on a duty-free basis.  If the 
matter was negotiated properly, a further 30 per cent of  the value of exports could be added to this 
significant category (by eliminating tariffs bound in th e 0 to 5 per cent range).  It could be ensured 
that more than 80 per cent of the value of devel oping country exports enjoyed duty-free entry into the 
developed countries.  This was not a minor issue an d was worth adding to the main formula.  On the 
subject of the erosion of preferences, Costa Ri ca fully endorsed the st atement made by the 
Ambassador of Chile.  It welcomed the fact that su ch a notion had not been included in the draft text 
and urged the Group to abide by paragraph 3 of the Enabling Clause, which established that tariff preferences could not and should not constitute an impediment to multilateral liberalization. There 
were vast disparities between the commitments undert aken by Members, but the Group had to resist 
the temptation to reduce the level of ambition to th e lowest common denominator. On the contrary, it 
needed to do its utmost to make tariff reductions the rule rather than the excep tion. As in agriculture 
and in many other areas covered in the Doha Round,  Costa Rica remained committed to an ambitious 
outcome that truly established a sound basis for future development.   
1.53 The representative of Pakistan
 stated that the Chairman's pape r was a workable text and that it 
would help the Group to move in the right directio n in a constructive manner. Pakistan would have 
preferred the base year to be 1995 but overall they su pported various elements in the proposal such as: 
the base rate; the draft proposal on non ad valorem; the use of HS96 nomenclature; and the reference 
period for import data.  They could support the lin e-by-line formula but their final position would 
largely depend on the value of the coefficient. Pa kistan generally supported sectorial tariff elimination 
but had some sensitivities with certain items like electronics and electrical goods, motor vehicle parts 
and components. Pakistan was also unsure about th e size of percentage reduction for the category of 
other participants. Pakistan suppor ted the additional provisions for de veloping countries and LDCs as 
contained in paragraph 8 a and b; Pakistan woul d be in a position to give their position regarding 
newly acceded Members once the issue of the coeffici ent in the general formula was agreed. Pakistan 
could also support the proposal on supplementary m odalities, NTBs and the reference to appropriate 
studies and the capacity-building.  1.54 The representative of Guatemala
 stated that with respect to the formula, Guatemala believed 
that the base rate for reductions should be th e bound rate. Guatemala was concerned about the 
proposal that the bound rate for unbound tariffs shoul d be double the applied rate. This would create 
an imbalance among developing countries. The whole tariff universe had to be bound for all 
Members. The crucial point was the negotiation of the coefficient B and Guatemala hoped that special 
and differential treatment would be reflected in the coefficient between developed and developing 
countries, especially for more sensitive products . Guatemala was confused about the sectorial 
approach. In Section II of the draft it would seem that the sectorial approach was non-voluntary but in 
part V, sub-section 2 it was mandatory. In either  case, his delegation did not support sectorial 
negotiation as it did not contribute to achieving the balance which was sought. It would be fairer to 
have a single, unique formula throughout the tari ff universe. Guatemala supported the conversion of 
all tariff rates to  ad valorem  and for having a single conversion methodology as Annex I tried to 
show. Guatemala requested certain clarification on the proposal regarding supplementary modalities, 
particularly the last two bullet points of paragr aph 13.c. Guatemala could not agree with including 
issues in this paragraph which had not been appr oved by the NGMA, neither could Guatemala agree 
to their inclusion for subsequent negotiations.  
 
1.55 The representative of China  stated that the draft modalities could be a basis for further 
focused discussions among Members. The draft modalities put forward a method of tariff reductions, 
covering almost all the elements of tariff negotiations with specific suggestions from a technical perspective. The proposed formula for tariff reducti on would meet the target  of substantial tariff 
reduction as specified in the Doha declaration. Ho wever, the coefficient suggested by the Chinese 
formula could address problems such as tariff peaks and tariff escalation in a more flexible, balanced 
and efficient manner than the proposed formul a. China was ready to explore with Members TN/MA/M/8 
Page 22  
 
appropriate coefficients or ways of making further improvements to the formula. With regard to the 
base rate, in the case of developed Members, app lied tariff rates should be taken as the base tariff 
rates and for developing country Members, the me an value of bound tariff ra tes and applied tariff 
rates should be taken as the base tariff rate. In th is way, the difference be tween applied and bound 
tariff rates would be reduced effectively so that ma rket access conditions would actually be improved.  
China agreed that there was some merit to the sectorial tariff elim ination approach. The paper gave 
consideration to some products whic h were of great export interest to  developing countries. However, 
sectorial tariff elimination should be on a voluntar y basis and it should be a supplementary modality 
to the reduction formula.  China fully agreed that developing countries and LDCs should enjoy a longer implementation period for tariff reduction, which would  help to ease the pressure on their 
domestic industries. China welcomed the effort in the paper to raise the percentage of bound rates - 
the overall binding of tariff rates should be an importa nt target in this Round, as it would contribute to 
effectively enhancing the predictability and transpar ency of trade. As a means of flexibility, higher 
tariff rates could be applied as bound rates for sensiti ve tariff lines.  China also supported the proposal 
of not requiring LDCs to reduce tariff rates. With  regard to the issue of newly acceded Members, 
China was willing to work with the Chairman and Members for an appropriate arrangement of the 
issue on the basis of the draft paper.  China hoped that those Members not in favour of the proposal 
would read the Accession Protocols of China a nd other newly acceded Members so they could 
appreciate why newly acceded Members should not be subjected to further substantive tariff 
reductions during the Round.  With regard to NTBs, China supporte d the idea of identifying them as a 
first step before starting negotiations on them.  It  was preferable that the negotiations should not 
spread out to other committees to allow Members to  focus their efforts on dealing with this trade 
distorting issue in the NGMA.   
 
1.56 The representative of Australia
 stated that the Chairman's draft made a very important point in 
paragraph 4 about the importance of preserving the in tegrity of the WTO multilateral trading system. 
Many Members were losing faith in the ability of multilateral negotiations to deliver market access for 
their exporters as more and more trade was taking place through preferential trade deals. Preferential 
agreements should be exceptions to the multilateral trad ing system but there was a very real risk that 
these preferential arrangements were becoming the pref erred road to liberalisation. The Doha Round 
was a unique opportunity to reverse this trend. It was an opportunity for Member governments to demonstrate to business and consumers that the mu ltilateral trading system could still deliver real 
results in terms of market access. The Round was also an opportunity to build on the impressive 
growth of trade between developing countries by locking in market openings during the 1990s on a 
genuine MFN basis. It was an opportunity for a ll Members to work collectively to address tariff 
peaks, high tariffs and tariff escalation. It was n ecessary to set modalities for these negotiations that 
would maintain a high level of ambition and that w ould put multilateral trade liberalisation back at the 
forefront of Members' trade policies. Australia was not convinced that the package of draft elements 
for consideration realised the full potential of the Doha mandate for all Members. In particular, a 
comprehensive, non-linear harmonising formula shoul d be the core modality. Sectorial negotiations 
had a role to play as supplements but Members should attach priority to an ambitious trade 
liberalising formula that was simple, transparent and equitable. Australia welcomed the fact that the 
proposed formula involved an across-the-board cu t with no products or sectors excluded and that 
currently unbound tariff lines would be bound in the process. However, as other Members had noted, 
the extent to which high tariffs were addressed in  each Members' tariff profiles was conditioned by 
their respective Uruguay Round bindings. These bindings would vary significantly between Members, especially between developing country Members. This le d to tariff reduction results that were in some 
respects arbitrary and inconsistent. Australia was not convinced that th e approach set out in the paper 
was necessarily the best approach to operationalisi ng the Doha mandate on less than full reciprocity 
and they looked forward to further discussion on this aspect.   1.57 Regarding sectorial elimination, the Chairm an's paper put forward a number of sectors that 
were of export interest to developing countries and Au stralia was very interested in the reactions of 
developing countries to this aspect of the proposal. It was important for all elements of the package to  TN/MA/M/8 
 Page 23 
 
 
reflect a high level of ambition. Australia suppor ted the formula approach being supplemented by 
other approaches such as zero-for-zero sectorial el imination, sectorial harmonisation and request/offer 
but an ambitious formula should be the first priority . Similarly with regard to the elimination of low 
duties, Australia was prepared to consider obligations  in this area after the formula had been agreed to 
and the balance of outcomes and offers had beco me a little clearer. All Members should be making a 
contribution to this round. While acknowledging the issue facing newly acceded Members the long 
implementation time frames as actually requested in  their negotiating proposals offered the best way 
forward. Regarding NTBs, the draft elements set out  in the paper were a good basis for advancing the 
issue. There were a number of decisions to be made concerning identifica tion and categorisation and 
these decisions should not be a source of undue dela y or blockage. There must be flexibility under 
these modalities for those with specific well-defined interests to pursue them individually through the 
request/offer approach, on a plurilateral basis or on a multilateral basis.  
 
1.58 The representative of Hong Kong, China  stated that the Chairman's paper had covered the 
major elements of modalities for negotiations. There were elements which Hong Kong, China 
supported e.g. using bound rates as the base rate a nd the non-linear formula with line-by-line tariff 
cuts.  There were also elements they did not support,  e.g. insufficient consideration of giving credit 
for binding of zero applied rates. As a proponent of  ambitious trade liberalisation, they were 
disappointed that the draft modalities had not set the total elimination of tariffs, at least by developed Members as an ultimate target. After half a cent ury's efforts in reducing tariffs and with the 
proliferation of RTAs the time was ripe for deve loped country Members to commit themselves to a 
programme of total tariff elimination under the DDA.  This would be a significant achievement in 
furthering the objective of the WTO and would set a good example for developing country Members to follow.  Nevertheless, his delegation was prep ared to use the draft as the foundation for further 
work. The challenge was to add specificity to the paper to deliver an ambitious package towards the 
goal of trade liberalisation consis tent with paragraph 1 of the D oha mandate. The inclusion of the 
element " t
a  " (individual Member's average base rate) in the formula was meant as a built-in element 
for special and differential treatment while leaving the coefficient B open at this point. In order to 
deliver meaningful results parameter B had to be sufficiently low and preferably as close to zero as 
possible. Another challenge was the wide range of  average tariffs among Members, even among those 
with similar levels of developm ents. In this regard, Hong Kong, China was open to New Zealand's 
idea to set a ceiling for all tariffs, perhaps with a slightly higher ceiling fo r developing countries as 
part of the package for special and differential tr eatment and less than full reciprocity. New Zealand's 
idea of a harmonized or compressed "t a  " could also be further explored.  On the sectors proposed for 
tariff elimination, coming from a free port with zer o applied tariffs for all tariff lines, Hong Kong, 
China welcomed any initiatives to go to zero tariffs.  Members had to first ag ree on the core modality 
for the formula before proceeding to detailed di scussions on any supplementary approaches or the 
sectors to be targeted for tariff elimination. This would avoid the likely complicated and time-
consuming discussions on which sectors should or should not be included in the tariff elimination.   
 
1.59 The representative of the United States  stated that the draft contained almost all the core 
elements necessary to effectively meet the Doha mandate, including a progressive formula applied to each tariff line, sectorial initiatives, low tariffs, an approach to the issue of newly acceded Members, 
special and differential treatment and NTBs. They were disappointed not to see the inclusion of the 
vision of zero duties but were committed to continue  working on the basis of  the core elements as a 
basic structure. They would be guided in their deliberations on the paper and modalities by their 
assessments of how effectively the modalities achie ved equity, ambition and genuine market access 
including market access for North/No rth trade, North/South trade and South/South trade.  The draft as 
currently written did not accomplish these goals, as the a pplication of the formula to bound rates, in a 
large number of cases did not even reduce bound tariffs  to current applied rates. An outcome where 
some Members did not cut applied rates at all made it  virtually impossible for others to put their most 
sensitive sectors on the table for substantial real reductions.  A bold appro ach to liberalising non-
agricultural trade was critical to the Round as a wh ole because it would create momentum to do the 
other difficult things to be accomplished before Cancun. It would send a signal to the world that the TN/MA/M/8 
Page 24  
 
WTO was seriously engaging in real liberalisatio n that would help stimulate global growth and 
contribute to improvement in the global economy. Wh ile the draft elements fell short in meeting those 
objectives, it was possible to continue to work to deliver on these goals employing the elements 
contained in the Chairman's text. The United States continued to support the goal of tariff elimination 
because that was the kind of signal global markets we re seeking and was also the approach that would 
demonstrate most clearly that WTO-based global liberalisation was more relevant than regional 
liberalisation.   1.60 The United States welcomed the application of the formula on a line-by-line basis, although this approach did provide for a priori  exclusions for developing count ries, which was not consistent 
with the mandate. It was important that the form ula proposed was progressive rather than linear. The 
structure of the proposed formula was seriously flaw ed. There would need to be more balance within 
the formula itself and it would be possible to do this equitably by modifying one or both of the " t
a " 
and B factors. The use of average bound rates as an indicator of level of development was a flawed concept and did little to reduce disparities between Members, including those at similar levels of 
development. Effectively the approach proposed in th e draft resulted in the use of 100 coefficients, the 
total Membership of the WTO, counting the EC  as one and minus the 49 LDCs. This approach 
rewarded those who had done less to contribute to the stability of the trading system rather than 
providing incentives for all Members to make greater c ontributions to the system. It was essential to 
reduce disparities between Members, including developing Members and required alternative 
indicators to average bound rates that would bette r reflect the real differences in levels of 
development and stimul ate economic growth. 
 1.61 The United States agreed with the appro ach of converting specific and compound rates to ad 
valorem  tariffs for purposes of negotiation and believed that there should be a significant increase in 
the use of ad valorem  tariffs. They also agreed in principle with the concept of credits for autonomous 
liberalization so long as the measures were bound.  They sought additional information and 
clarification on the approach proposed for this but their main concern, as also expressed by Malaysia, 
was that this element should not create a disincentiv e to future liberalisation and binding outside the 
round. The exclusion of ITA and pharmaceuticals initiatives disadvantaged the many Members that 
had already undertaken commitments which benefited the trading system and it was unfair to all those 
Members particularly the developing country Memb ers who were participating. Once the concept of 
credit was anticipated it could serve as a disincen tive and this was a cause for concern.  They 
welcomed the inclusion in the text of two suggested  approaches to providing sectorial liberalisation. 
The approach suggested in paragraph 7 was mandato ry while paragraph 11 called for augmentation of 
the mandatory sectorial component through additiona l sectorial initiatives employing more traditional 
critical mass concepts to produce zero tariff or harm onisation initiatives. The sectors indicated in the 
proposal were highly traded by developing countries.  The United States were not demandeurs in these 
sectors although they did have interests in some of them. However, the sectorial component would need to be augmented through the additional mechanis m to reflect sectors of interest to developed 
countries. There was merit in including this as an  important element in expanding both North/South 
trade and South/South trade, in particular, as a m eans to liberalise inputs and to encourage greater 
access to developing countries to the global supply ch ain in those sectors.  The approach to mandatory 
sectors appeared to be an effort to set up a sufficien t level of market access liberalisation to offset the 
highly modest formula. If the ultimate modalities did not include such a component the formula itself would need to have a far more robust approach.  Even some of the poorest Members of the WTO 
were globally competitive in some of these sectors and they should contribute in areas where they 
were competitive. Her delegation also noted the c onspicuous absence of several other sectors that met 
the same criteria of highly traded goods of developing countries  notably the forest products and 
chemicals areas as well as environmental goods which  was the one area where Ministers had mandated for a sectorial initiative.     1.62 The United States welcomed several aspects of  the draft elements: special and differential 
treatment was distributed throughout the draft text including in the use of cuts from bound rather than  TN/MA/M/8 
 Page 25 
 
 
applied tariffs; the formula's use of average boun d rates as a base; the proposed provisions on 
unbound rates; the approach to autonomous liberalisa tion; the phasing of sectors for elimination.  The 
approach suggested in paragraph 8a was an inter esting concept. Some way should be found to address 
sensitive areas but her delegation was less certain of the specific approach pro posed in the draft. It 
would be better to consider the idea of a less than formula cut for a certain percentage of tariff lines, 
with a cap on the amount of trade and measures to ensure that entire sectors were not carved out, as 
the proposal submitted by a group of 10 countries (T N/MAW/31) had also suggested. The goal of the 
NGMA should be 100 per cent bindi ng for developing countries.  They had concerns that the 
approach to LDCs did not help encourage integra tion of these countries into the trading system nor 
provide the kinds of certainty of market opportuniti es that attracted investment to these markets. It 
perpetuated discrimination between LDCs countries given that many LDCs had bound rates of 100 
per cent. If it was agreed that LDCs should not be re quired to bind 100 per cent then a more equitable 
approach should be considered. A ll LDCs could be encouraged to undertake a level of binding above 
the current 49 per cent average of all LDCs binding s. Her delegation was prepared to consider binding 
duty free and quota free treatment for LDCs in the Round, except where LDCs were globally 
competitive. It would be useful for all WTO Members to phase in their tariff reductions immediately 
upon implementation for all LDC exports to their markets.  The United States recognised the extensive commitments undertaken by many newl y acceded Members which often exceeded those of 
existing Members. Ways had to be found to recogn ise these contributions, to recognise the need to 
consolidate the recent reforms and to ensure that other Members provided new market access to newly 
acceded Members in the Round. That said, no newl y acceded Member had suggested an approach 
such as that outlined. According to the draft, not  only would newly acceded Members benefit from a 
different coefficient, if they were developing c ountries, they also would benefit from the relevant 
special and differential provisions. Approaches such  as those suggested by Latvia which called for 
longer staging rather than different coefficien ts was a more appropriate way to proceed.  
 
1.63 With regard to supplementary measures, the concept of harmonisation was a useful concept to 
consider even in the context of the mandatory area. The inclusion of low duties in the mix of elements 
was welcome and they were willing to explore it further, noting that some Members had proposed 
elimination of duties of five per cent or below and others were suggesting elim ination at lower levels. 
This was a challenge for recently acceded Members a nd other developing countries with a substantial 
number of low duties but the overall level of ambition of the modalities should produce a significant 
enough result that would permit the in clusion of this element in the fi nal approach. They were broadly 
in agreement with the approach on NTBs which they considered to be workable on an overall basis 
from the point of view of the types of NTBs, th e cocktail of modalities, the use of bilateral, 
plurilateral and multilateral agreemen ts and the need for transparen cy mechanisms. They did have 
some concerns on how burdensome the administra tive process would be and the time needed for the 
categorisation exercise which would detract from the need to actually address the problems. A more 
flexible approach to the manageme nt of this exercise was required. The United States was prepared to 
work hard on the draft to try to reach a consensu s but would continue to judge the results on the 
contributions of all economies to economic growth. Li ke Costa Rica, they were deeply concerned that 
the NGMA should not approach the exercise as a l east common denominator exercise and reaffirmed 
that tariff reductions should be rule, not the exception.  
 
1.64 The representative of India
 stated that the Chairman's pape r was somewhat complex in that it 
did not propose just a formula modality, there w as also the sectorial dimension which made the 
examination more complicated. The proposals were  far-reaching and ambitious  and would also be 
particularly demanding on developing countries. The most important lacuna in the Draft Elements 
paper was the lack of provision to address developi ng countries' problems in respect of domestically 
sensitive products that were already bound. While some  limited flexibility was indicated in respect of 
unbound items, India had already expressed the importa nce of also ensuring some special treatment 
for bound items that were highly sensitive because there was a high dependence of large segments of 
the work force at relatively low capital cost such as small scale industries on products that now 
figured in the industrial products list.  This was al so the case for certain items which could be called TN/MA/M/8 
Page 26  
 
agricultural products, sharing all the characteristi cs of products covered under the Agreement on 
Agriculture, but which nevertheless prevailed on the list of non-agricultural products. It was vitally 
important that the specific problems in such areas were fully recognised. In their submissions India 
had indicated the need for developing countries to have flexibility with  regard to reduction 
commitments resulting from the formula in respect of a certain limited number of domestically 
sensitive bound tariff lines. This exclusion was propo sed to be compensated by a more-than-average 
tariff reduction in other tariff lines. Such flexibilit y should be built into an y tariff reduction modality 
to be agreed upon. India had proposed a linear form ula with a certain modality to address tariff peaks 
and had expressed its reservations regarding the use of a Swiss formula type modality. The Chairman's paper proposed precisely such a modality but with a variation. To some extent, provision 
for adjustment was made by using the average tari ff coefficient but it would be necessary to know the 
value of coefficient B to assess the full impact. Presumably B would be higher for developing countries than for developed countries in line with th e need for less than full reciprocity in reduction 
commitments for developing countries. Also, the formula was to be applied to both bound and 
unbound tariff lines. Unbound items were more sensitive than bound items and binding an unbound 
tariff in itself should be deemed as a concession. It would not be appropria te to seek a further 
concession from developing countries by applying the formula to such tariff lines even if the starting-point was from twice the applied rates. They sought clarification on whether the proposal envisaged total elimination of the use of specific duties. Th e third bullet in paragraph 5 did not contain any 
affirmation in this regard, although while defining " t
1 " it had been said that " t 1 is the final rate to be 
bound in ad valorem  terms" which appeared to indicate that the final bound rate could only be in ad 
valorem  terms. It had been indicated that " t a " was the average of the base rates. Paragraph 8(a) stated 
that developing country participan ts could retain five per cent of tariff lines as unbound provided that 
these did not exceed five per cent of the total va lue of the Member's imports during the reference 
period. While this flexibility would be important the double restriction could curtail the available 
flexibility. In the computation of the average of base rate, i.e. " t a " would the tariff lines which could 
eventually remain unbound be also used for computing " t a"? Regarding the proposed increase in 
binding coverage the particular needs of Memb ers which currently had a low level of binding 
coverage or were LDCs should be adequately provided for. Footnote 6 of the draft indicated a certain 
procedure for the calculation of tariff averages in order to reduce the bias by the disaggregation of 
Members' tariff schedules. While this was useful, ther e could be even further scope to reduce the bias 
by undertaking these averages at each of the disaggregat ed levels. It would be useful if the Secretariat 
could consider and work on this suggesti on to further refine the procedure.  
 1.65 India had constantly stated that sectorial tariff elimination approaches should be voluntary 
and kept to the absolute minimum. As per the existing WTO practice with several precedents, these 
initiatives were open to those desiring to join in, with the further proviso that the initiative itself 
would come into force only if a "critical mass" of  Members had joined. Was a global participation in 
these initiatives envisaged and if so, what was th e reason for this departure? Any zero for zero 
proposals in specific areas was tilted against developing countries and it would also distort the duty structure in an economy by radically changing the eff ective rates of protection even in other sectors, a 
point made earlier by Chile.  The first sub-paragr aph in paragraph 7 of the proposal mentioned that 
the sectorial tariff elimination was "in addition to th e application of the formula"  In paragraph 6 it 
again stated that "all non-agricultural tariffs sh all be reduced on a line-by-line basis using the 
formula". Presumably, this envisaged an applicati on of the formula on all tariff lines including those 
which had been proposed for sectorial elimination.  However, the second sub- paragraph of paragraph 
7, which explained the sectorial tariff elimination, stated that the basis for elimination would be the 
final bound rates as after the full implementation of current concessions. How was the sectorial tariff 
elimination proposed to apply to the tariff lines cove red by those sectors on top of the formula? They 
also sought further information on how the proposal s regarding retention of certain tariff lines as 
unbound and the possibility of some of them being included in the product coverage of the sectorial 
initiative would be resolved.   TN/MA/M/8 
 Page 27 
 
 
1.66 The sectors identified for sectorial initiativ es were precisely in areas in which developed 
countries, after eight rounds of tariff negotiations, s till retained certain high tariffs. It was expected 
that any meaningful contribution of developed c ountries in the current tariff negotiations on import 
prices in their markets was expected to be mainly in  those specific sectors, in return for substantial 
tariff reductions that developing countries would be expected to make on their entire tariff universe. 
He queried why developing countries were also be ing required to contribute so drastically in the 
sectorial initiatives.  The identified sectors were pres aged by the sentence that these sectors were of 
particular export interest to developing countri es and LDC participants. Except for one developing 
country, which requested the inclusion of gems and jewellery sector, no other developing country 
appeared to have requested such sectorial elimina tion. India had identified a few of these sectors as 
the ones for targeted reduction of tariffs in develope d country markets and not for such a wide ranging 
sectorial tariff elimination initiative where developi ng countries were also mandatorily required to 
participate.  With regard to the implementa tion period, certain WTO Members had their Uruguay 
Round tariff reduction commitments going beyond 2005, not referring to the newly acceded 
Members. The question, therefore, was whether th e commencement of the first phase was proposed to 
be a common date for all Members. Finally, with  regard to NTBs, considering both the discussions 
held in the NGMA as well as the specific propos als submitted it was diffi cult to outline a more 
detailed modality than that proposed in the Chairman 's draft. The principles that should govern these 
negotiations, for example, that the negotiations on NTBs should be concluded in the same time-frame 
as tariff negotiations and that negotiations on NTBs  in any fora should be inclusive allowing all 
Members to participate equally should be mentioned up front. 
 
1.67 The representative of Venezuela  stated that the NGMA should do its utmost to reach a 
consensus while bearing in mind that the manda te emphasized specific measures for developing 
countries to ensure a balanced outcome that would prove the Doha Agenda really was an agenda for 
development.  His delegation welcomed  the recogni tion that tariff reductions should be based on the 
bound rates, as these were the rates which reflected  Members' obligations as contained in their 
schedules of concessions.  They also welcomed that the final tariffs were to be bound in ad valorem  
terms.  This was an important initiative which woul d enhance the transparency of the system.  While 
the Chairman's draft was a basis for working ou t the path to Cancun and beyond, some of the 
elements might prove very ambitious  or onerous for the developing countries.  Such was the case with 
the sectorial elimination of tariffs.  His delegation was concerned to see the elimination of tariffs in 
certain sectors as an integral a nd mandatory part of the modalities.  Venezuela had thought that it had 
been widely recognized in the Group that this t ype of approach should be examined once the core 
modality had been agreed and should be adopted on a voluntary basis.  They had doubts as to which 
criteria had been used for selecting the proposed sector s and for confirming that they were of interest 
to all developing countries.  A preliminary analysis  taking the total value of Venezuela's exports for 
2001 showed that the sectors in question did not a ppear to be of primary interest to them.  
Furthermore, sectors of interest to some countries could be sensitive sectors for other countries. That was where a "voluntary approach" became impor tant, because it would apply only where common 
interest existed among the parties. Incorporating that component as a key element of the modalities 
could run counter to the mandate of less than fu ll reciprocity laid down in the Doha Ministerial 
Declaration.  In this respect, Ven ezuela needed more time to complete  the assessment of the impact of 
the formula using different coefficients. They also  needed time to assess the impact on the national 
tariff structure as they completed the regional c oordination required for the customs union to which 
Venezuela belonged.  Nevertheless, although the formula contained the simple average of bound 
tariffs component, which varied the reduction accordi ng to each country's tariff structure, this might 
not be sufficient to take into account certain sens itive issues for developing countries.  Venezuela had 
conducted several simulations on the basis of the form ula, using coefficients of 0.5, one, two and 
three. The result, even using a coefficient of thr ee, was that the bound level was exceeded in certain 
sectors that were particularly sensitive because they were major sources of employment.  This was the 
case, however, for only a few tariff lines.    TN/MA/M/8 
Page 28  
 
1.68 The proposals on special and differential treatment provided for longer time-frames and 
allowed five per cent of lines to remain unbound.  Because the latte r would not apply to all of the 
developing countries,  especially those that had bound their entire tariff universe, provision should be made for another type of treatment that would a llow for less than full reciprocity and special and 
differential treatment to be fulfilled.  They sup ported Colombia's proposal to examine the possibility 
of a differential B coefficient for developing count ries and for a reduction on certain tariff lines that 
would not correspond to the formula.  The raison d'être  of special and differential treatment was, first, 
to recognize the structural imbalances between i ndustrialized and developing countries, which were 
such that trade liberalization did not automatically lead to development or an equitable sharing of 
benefits;  and second, to recognise that developi ng countries did not have the same capacity as 
industrialized countries to take advantage of the op portunities offered by trade liberalization. With 
regard to the calculation of ad valorem  equivalents, Venezuela was c oncerned that Annex I provided 
for the possibility of using different calculation methods. It would be more appropriate for all 
Members needing to make such a calculation to  use a single methodology.  Venezuela had doubts 
about some of the proposed draft elements.  Fo r example, it was still necessary to define what 
constituted a "newly acceded Member". Venezuela also had doubts regarding the meaning of the 
phrase "tariff reduction will take place after implementation of current concessions", because according to the document containing Members' tariff  profiles countries such as the United States and 
Japan would reach the last year of implementation of their concessions in 2009, and it was unclear as to how they would then apply the reductions. A number of the draft elements still needed clarifying or 
discussing in order to reach agreement.  
 
1.69 The representative of Canada
 stated that the Chairman's pape r was a set of basic elements on 
which more work needed to be done. They supporte d the thrust of the New Zealand intervention, in 
particular, the emphasis on sectorial trade liberalisation since the formula alone appeared insufficient to achieve a high level of ambition. His delegati on associated with Chile's remarks concerning the 
consequences for the global trading system if the NG MA failed to be ambitious in the negotiation. On 
the subject of the erosion of the preferences, it was just a matter of time before this happened anyway. Canada had negotiated FTAs with a number of Member countries and by definition the margin of 
preference extended to developing countries under its  general preferential tariff program  had been 
lowered. This trend was likely to continue in th e future unless the NGMA was able to achieve a high 
level of ambition in the negotiations. Only in this way could it give effect to a recent proposal by 
former WTO Director-General Mr. R. Ruggiero that countries agree to a standstill on new RTAs.  The 
Draft Elements Paper appeared to cover most of th e elements that needed to be addressed in the 
context of the current discussion. However, the draf t elements would not provi de the required level of 
ambition to enable the achievement of significan t liberalisation in non-agricultural products. They 
were disappointed with the proposed formula. The way in which it incorporated an average of the 
base rates very significantly blunted the effect of the cut as it applied to higher rates. This rewarded 
Members who maintained many high rates. One part of the Group's mandate was to address high tariffs and tariff peaks, and in that context a more ambitious approach would be in order. That might 
be achieved by using a more direct application of  the Swiss formula, which would serve to address 
both tariff peaks and high tariffs.  
1.70 Canada was pleased that the proposal c overed all non-agricultural products, including 
currently unbound items, and that it used a line- by-line, non linear reduction. However, it was 
unfortunate that the base rate for unbound items would be double the applied rate. There was no 
justification for being asked to negotiate down fro m 80 per cent on an applied rate of 40 per cent  
which was already high and which basically a fforded little or no access. This approach simply 
rewarded Members who had a large proportion of hi gh rates and those who still had a high proportion 
of unbound items. It was magnified for those who had both. The word "reward" was used loosely since high tariffs often prevented rather th an promoted economic growth. Conversely, it 
disadvantaged other Members, many of which were  developing countries, that had already bound a 
very high proportion of their tariff lines, or even al l of them. In addition, the distribution of these so-
called rewards was uneven and disadvantaged many of them. Canada welcomed the sectorial element  TN/MA/M/8 
 Page 29 
 
 
of the paper and the indication of a number of sectors. The sectorial proposal was designed to 
encompass both developed and developing Members, in order that the benefits of such liberalisation 
would accrue to all Members and would thus also  promote rapidly expandi ng South-South trade. 
However, some Members would no doubt attach vari ous sets of priority rankings to the sectors on the 
list. Canada's participation in any specific sector would depend on their overall balance of interest in 
any eventual package of agreed sectors, and on the overall level of ambition attained in the 
negotiations. At this point, the le vel of ambition was both uneven a nd too low.  Some sectors were 
conspicuously absent from the list, most notably  environmental goods which were singled out by 
Ministers in the Doha declaration paragraph 31. In  addition, a number of other sectors were excluded, 
which might have appealed to va rious broad groupings of Member s including developing countries, 
for example, forest products, non-ferrous metals, fer tilizers, chemicals, and energy-related equipment. 
The proposal for longer implementation period for developing country Members could be appropriate 
for some developing countries but it might not be ne cessary or justifiable for others, especially those 
at higher levels of development.  
1.71 Canada was disappointed that the Chairm an's draft did not propose the binding of all non-
agricultural tariff lines. All ag ricultural lines had been bound in the Uruguay Round. In addition, 
many Members including some developing countries and newly acceded Members, were at or near 100 per cent binding coverage. Both these sectors made it anomalous that the NGMA could seriously consider ending the negotiations with anything less than 100 per cent bindings for all products.  
Canada agreed with the proposal that LDCs' contri bution be limited to binding their tariffs. This 
proposal could also be extended to the poorest of  the non-LDCs. Imports from those countries should 
also be granted duty-free and quota-free entry. However, the upper-income developing countries 
should grant similar terms to imports from LDCs. If development was to be truly at the centre of the 
negotiations, it needed a wider range of participants  who were improving and building on new market 
access opportunities for LDCs.  It was not necessary or justifiable to use a different coefficient in the 
formula for newly acceded Members. While some degree of special consideration was needed, a 
combination of appropriate staging and a breathing space between implementation periods would meet this objective. Canada welcomed the ment ion in the paper of supplementary modalities, 
including zero-for-zero, harmonisation agreements, and request/offer activity. There were significant 
benefits in using these approaches to further the sh ared negotiation objectives. However, the invitation 
to simply consider the elimination of low duties should be strengthened in order not to miss the 
opportunity to simplify and streamline tariffs, el iminating those which served little or no real 
industrial policy purpose. The proposals on NTBs appeared to be practical and useful and a good basis for further consideration of the issue.  On the overall range of issues to be addressed, Canada would 
work to build on the draft elements contained in the paper to move toward a more ambitious and 
balanced outcome. In this connection there w as an inevitable connection to the agriculture 
negotiations where similarly a more ambitious resu lt was very important to Canada.  The DDA was 
about development and the road to development lay in more effective integration of all WTO 
Members into the world trading system through the active process of reform and liberalisation of trade 
policies rather than leaving many high tariff rates and other barriers and distortions largely intact. 
 
1.72 The representative of the Kyrgyz Republi
c stated that his delegation had some serious 
concerns about the Chairman's draft. His delegation considered that all tariffs should be converted to 
ad valorem  rates and then the harmonisation formula app lied to them. This would result in a more 
predicable and fairer initial phase of the core  negotiation process. The idea of elimination or 
significant reduction of low nuisance duties should be voluntary. The prevalence of low duties in a schedule merely indicated a country's commitment to be integrated into the multilateral trading 
system. They welcomed the proposal under footnote 2 to grant credits to those Members who had 
prepared their schedules of commitments after th e conclusion of the Uruguay Round. His delegation 
reserved its right to further elaborate on the proposal regarding newly acceded Members, especially with respect to the grace period for the implementati on, numeric value of the coefficient B as well as 
the tariff average " t
a ".  
 TN/MA/M/8 
Page 30  
 
1.73 The representative of Norway
 stated that the draft paper refl ected the discussion in the Group.  
Norway had endeavoured to consider the package of draft elements taken together as a basis for 
building modalities. They welcomed the proposal of a harmonising formula to be utilised on a line-by-line basis for all non-agricultural products, resu lting in binding commitments. The formula had the 
potential to reduce tariffs significantly at least in OECD markets with already low average tariffs. It 
incorporated an element of less than full recipr ocity for developing countries as average tariff rates 
were generally higher in developing countries than in OECD countries. Therefore, the reduction in 
any given duty in a developing country would be lower than the same duty in an OECD country. 
Norway appreciated the concerns of several developi ng countries that the average tariff levels did not 
necessarily reflect the level of development in all cases. The main question was the level of ambition, 
namely the value of the coefficient B. A number of  issues discussed in the Group were not mentioned 
in the draft and Norway would have welcomed the in clusion of the elimination of tariffs on a general 
basis. However, the discussions so far had not give n a sufficient basis to include this element, nor a 
number of other elements proposed by Members. There were some technical aspects, some of which were important and could have significant conse quences for the outcome of using the formula and 
they were prepared to have technical discussions at  a later stage. The draft proposal was not the final 
solution, it was up to Members to ensure that this round on non-agricultural tariff negotiations 
delivered meaningful market access. In order to r each consensus on the moda lities for the negotiations 
on NTBs a clear outline for the Group's work was requ ired. As the Group was currently in the process 
of identifying and examining NTBs of relevanc e to the negotiations it should agree on a set of 
modalities that would be sufficiently flexible to be adju sted in light of a more extensive analysis of the 
measures notified, as well as further information and reflection by Members. The overall 
responsibility for dealing with NTBs lay with th e NGMA which had been mandated to deal with 
them. The Group should proceed with a first phase of  identification and examination of the various 
NTBs  as well as categorising and identifying them an d then select the individual NTBs that needed to 
be addressed further. In light of the limited time  available a specific deadline should be agreed upon 
for the former phase in order for the NGMA to be ab le to conclude the negotiations by the end of 
2004. Norway's overall assessment of the draft el ements on modalities was positive, albeit with a 
number of questions. They were prepared to work co nstructively on the basis of the draft in order to 
secure a result that was both ambitious and balanced.  1.74 The representative of Cuba
 stated that the Chairman's Draft Elements of Modalities was a 
particularly useful tool for enabling the Group to reach an agreement on the modalities. The summary 
prepared by the Secretariat show ed that consensus was possible on the base rate, the nomenclature to 
be used and the reference period.  However, the pa per failed to fully comply with a basic premise of 
the Doha mandate, which provided that "The negoti ations shall take fully into account the special 
needs and interests of developing and least-devel oped country participants, including through less 
than full reciprocity in reduction commitments". Developing country Members promoted the use in 
these negotiations of a line-by-line tariff reducti on formula using different reduction rates for 
developing and developed country pa rticipants, but this was not the same as that set out in the 
Chairman's draft.  He asked the Secretariat to prepare a simulation, possibly through a technical 
assistance work programme, to help Members to de termine the impact of the application of the 
formula on tariffs. The sectorial tariff elimination approach had been severely criticized by 
developing country Members who stated that it s hould be used as an supplementary approach on a 
voluntary basis by countries with similar devel opment levels once the basic modalities had been 
agreed to.  
 
1.75 The representative of Argentina  stated that it was prepared for a high level of ambition as an 
integral part of the single undertaking, considering the balance that needed to be achieved between the 
different negotiating areas, in accordance with paragr aph 49 of the Doha Ministerial Declaration.  
Argentina attached special signifi cance to agriculture. They endorsed the notion of "positive linkages" 
established by the WTO Director-General and were confident that strong advances in agriculture 
would lead to equally strong advances in non-agricu ltural products.  Such a balance was necessary  in 
order to meet the interests of all Members and to ensure that the benefits secured in each individual  TN/MA/M/8 
 Page 31 
 
 
negotiation were bolstered by the outcome in the ot her negotiating areas. The incorporation of special 
and differential treatment was an integral part of the modalities as was the fulf ilment of the less than 
full reciprocity mandate. Argentina was paying clo se attention to the element of non-discrimination 
between developing countries, separate from the ca tegory of LDCs for whom there should be even 
more favourable treatment. Argentina agreed that  bound rates should serve as the basis for tariff 
reductions and that non ad valorem  tariffs should be bound in ad valorem  terms at the outcome of the 
negotiations. The proposal that the base rate for un bound tariffs should be tw ice the MFN applied rate 
would not only mean taking much higher rates as the starting-point for reduction but would also, in 
the absence of any specific moderating mechanism, significantly impact the tariff average and hence 
the coefficient used to apply the formula. Arge ntina was examining the negative effect of this 
proposal, especially on developing countries that had bound 100 per cent of their tariffs.  They were 
also examining the proposal on sectorial tariff elimination, as this could have far-reaching 
implications for the industrial structure of developi ng countries, in many instances adversely affecting 
development opportunities. Sectorial elimination should  be adopted on a voluntary basis, at least in 
the case of LDCs, so as to ensure th at the principle of less than fu ll reciprocity was maintained. The 
proposal in paragraph 8(a) to allow five per cent of  tariff lines to remain unbound could only benefit a 
limited number of developing countries. Practica lly all of Latin America had bound 100 per cent of 
their tariffs in the Uruguay Round, which meant that an entire region would be deprived in a 
significant respect of the benefits of the pr oposed exception. The modalities should incorporate 
special and differential treatment in such a way th at they would benefit all developing countries and 
not exclude those who had made a very significan t and hard-earned contribution to the multilateral 
trading system by binding their entire tariff universe. With regard to NTBs, clarification would be 
required on the scope of the bulle ts in paragraph 13(c). Having c onducted an initial analysis of the 
various categories of NTBs identified, there was some overlap and it was not at all clear what course should be adopted in each case.  
 
1.76 The representative of Brazil
 stated that the Chairman's paper was a good first step in 
achieving the Ministerial mandate, containing both po sitive and less positive points. It was a workable 
basis for drawing up agreed modalities in the future that would meet the challenge of both complying 
with the Ministerial mandate and establishing a level of ambition that was compatible with other areas 
of the single undertaking.  Devising a relatively simp le formula using each Member's tariff average as 
a component of the coefficient to be applied to the Swiss-type formula was presumably intended to 
integrate the concept of less than full reciproc ity in the formula itself while the personalised 
coefficient for each Member recogni zed that each country's tariff structures was a reflection of its 
development process. It was also intended to act as an instrument to tackle tariff peaks, tariff 
escalation and high tariffs. Brazil would still need to calibrate the level of ambition they would 
ultimately aim for, but that was not a task that c ould be solved exclusively in the NGMA. Brazil had 
no objections in principle to the sectorial zero-fo r-zero negotiations. Brazil ha d understood that the 
broader feeling of Group pointed towards s upplementary modalities being discussed only after 
agreement on the core modality. This point w as essential because treating these sectorial negotiations 
as part of the core modality would completely ne gate and undermine the less than full reciprocity 
component of the formula. It was self-evident that tariff elimination on a range of non-agricultural products that made up a very considerable portion of trade would lead to greater reductions in tariff 
commitments from developing countries, in direct o pposition to the mandate given by ministers. The 
only way around this would be to leave the sectoria l negotiations, be they zero-for-zero or otherwise, 
exclusively to the supplementary modalities proposed in section 5 of the document.    1.77 While sections 3 and 4 of the proposal were nominally mandatory components of the 
modalities, they were in essence a selective non-ap plication of the modalities for some Members. 
Some of the concepts conformed to the principles of special and differential treatment for developing 
countries and LDCs and respected the Group's ma ndate, such as longer transition periods for 
developing countries and the exemption of reducti on commitments for LDCs. The other components 
would have to be further analyzed. Additional time w ould be required to completely evaluate the draft 
elements proposed and certain specific details would ha ve to be explored in greater depth before they TN/MA/M/8 
Page 32  
 
were prepared to sign on to the proposed modalities, for example, the question of non- ad valorem  
tariffs. The Annex on modalities for calculation of ad valorem  equivalents was merely a marker for 
this issue, as the NGMA had agreed to revert to this point on the basis of a Secretariat background document on possible alternatives. It was essential that there be greater clarity on the final outcome in 
this area, with a precision that final rates be bound exclusively in ad valorem  terms, so as to enhance 
transparency for the private sector. Notwithstandi ng these points, Brazil was prepared to continue 
working on the draft elements paper as a basis for th e further deliberations of this Group, within the 
overall context of the single undertaking of the round. 
 
1.78 The representative of Hungary
 stated that the Chairman's Draft Elements Paper could be the 
basis for further work on the modalities. They welcom ed the principle of a single formula applied on a 
line-by-line basis but had certain doubts about the effects of tariff averages being introduced as a component to the coefficient of the formula.  Ta riff averages did not necessarily reflect the level of 
development of the Members concerned. Her dele gation had no problem with the proposed technical 
elements, namely with the base rates, base year, non- ad valorem  duties, nomenclature and reference 
period. Although they did not like the idea of sectorial tariff elimination and had some problems with 
the sectors proposed, they could consider it as an a ddition to the application of the formula. They 
agreed that this modality should be applied by all Members. With regard to the additional provisions 
for developing countries and LDCs, they could go al ong with most of the proposals made except the 
flexibility of developing countries retaining five pe r cent of unbound tariff lines. According to the 
Doha mandate, product c overage should be comp rehensive and without a priori  exclusion, therefore 
the binding coverage should also  be comprehensive. Supplementary modalities should be considered 
after reaching an agreement on the core modality. W ith regard to NTBs, while Hungary would have 
preferred to see export duties listed in the draft.  
 
1.79 The representative of Israel
 stated that since 1990 Israel had gone through extensive 
autonomous liberalisation. While there were benefi ts from lowering tariffs th ere was also pain and 
structural change that had to be undergone in or der to achieve such benefits. Israel recognised the 
necessity of giving every Member flexibility in determining when its economy was ready for such 
dramatic changes, although it was clear that it w as a necessary step for real economic growth.  His 
delegation would have difficulty accepting the prop osed formula as it was a straightforward line by 
line approach without flexibility to deal with highl y sensitive sectors. In this respect, Israel was 
carefully examining footnote 2 relating to credit for autonomous liberalisation and paragraph 8(a) 
dealing with implementation periods and tariff line cove rage. Israel was not sure that this would give 
the flexibility needed to avoid causing damage to Isra el's industries. Sectorial tariff elimination should 
be part of the supplementary modalities and there shoul d not be a list of sectors identified at this stage, 
especially along the lines included in the draft.  At this point in formulating the modalities, the 
sectorial tariff elimination should be a supplementary  modality. Israel also preferred a more voluntary 
approach to sectorial tariff elimination, similar to  the ITA. This, together with a request and offer 
stage, would give an opportunity for real negotia tions on market access for sectors of importance to 
developing and developed Members. 
 
1.80 The representative of Ecuador  stated that it was important to preserve the integrity of the 
multilateral trade system where market access on the basis of special and differential treatment and 
less than full reciprocity in commitments was of unique importance for developing countries. Using bound rates as the base rate in the proposed formul a was important. However, adjustments would 
have to be made not just to the formula but also  to the estimation made for the reduction of unbound 
rates. If a line-by-line approach to tariff re duction was being considered, the modality should 
contemplate a special and differential treatment am ong Members through differentiated coefficients 
and reductions and longer im plementation periods for de veloping countries. Non a d valorem  duties 
should be converted to ad valorem  terms so as to achieve transparency and predictability. However, 
Ecuador supported Venezuela's statement regard ing the methodology. With regard to sectorial 
elimination the Group had to adhere to the Doha mandate. It was premature to identify areas or 
sectors for tariff elimination. Additionally, the prin ciple of less than full reciprocity between Members  TN/MA/M/8 
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should be incorporated. Ecuador still had doubts rega rding the time-frame for the three annual phases 
of reduction and considered that it would be necessary to first determine the formula and then consider supplementary methods. With regard to newly acceded Members, it would be desirable to 
specify which Members were considered newly acceded and for how long. If newly acceded Members 
were granted longer periods for ta riff reduction Ecuador wondered wh at the situation would be for 
other developing countries. Granting longer impl ementation periods to newly acceded Members 
would be the right option rather than higher coeffi cients in the formula since tariff reduction was the 
goal of the negotiations. With regard to NTBs, Ecua dor sought further clarification on the last point 
made on the issue in the draft elements. To preserve  the integrity of the multilateral trade system the 
level of ambition being pursued in  other negotiating groups, particularly in the area of agriculture 
which was the main area of revenue for many de veloping countries had to be borne in mind.  
 1.81 The representative of Uruguay
 stated that the proposed formula was an ambitious one and her 
delegation was analysing it on the understanding that  the same level of ambition would prevail in 
other areas of the negotiations, particularly in agri culture. Uruguay agreed with the elements on which 
the formula would be based as well as with its a pplication on a line-by-line basis. Uruguay also 
agreed that the final rate " t 1" had to be bound exclusively in ad valorem  terms. Uruguay needed 
further analysis of the proposal for sectorial eliminat ion since they considered it to be very ambitious. 
Uruguay agreed with identifying certain sectors but other sectors could be included subject to negotiations among Members. The special and differen tial treatment in the proposal did not cover the 
Doha mandate completely since it penalized those Members who had bound all their tariffs; they were 
just given more time to implement the reduction.  While understanding that the ultimate goal of these 
negotiations was full binding, Uruguay could conced e as a special and differential treatment to 
developing countries the flexibility to maintain exce ptions up to five per cent of tariff lines. The 
Chairman's paper proposed a differential coeffi cient for recently acceded Members and not for 
developing countries. Uruguay was not clear from the document which Members were considered 
newly acceded and from what date they would no longer be considered as such. Uruguay could 
consider a longer timeframe or differential coefficient for newly acceded Members if the same treatment was given to developing countries. With regard to NTBs, Uruguay requested more 
information on paragraphs 1 and 4 of the draft. Developing countries should be included among the 
Members to be considered in capacity-building m easures in accordance with paragraph 50 of Doha.  
 
1.82 The representative of Switzerland
 stated that the Chairman's Draft Elements Paper contained 
the basic elements of draft modalities. It proposed  procedures without proposing figures, it showed a 
path without prejudging the destination or the out come; it proposed ways to fulfil the mandate for 
each specific issue of the modalities; the only point it did not mention and where there was a mandate 
from Ministers in Doha was the issue of envir onmental goods. This was an important issue which 
would have to be dealt with in the modalities, but w as also one of the issues which could be dealt with 
once the basic elements were known.  The draft cont ained useful elements as a basis for discussion as 
it allowed for an ambitious approach but also contai ned proposals on some basic elements to take into 
account different development situations of WTO Me mbers.  With regard to the formula, it should 
fulfil the criteria of being transparent, easy to  use, harmonising, take into account different 
development situations of WTO Members and a ddress effectively peaks and escalation. Comparing 
these five criteria to the proposed formula showed  that the formula satis fied the transparency 
requirement.  Regarding easiness of use, the calculation of the average tariff which depended on the tariff structure of specific Members could prove to be complicated and difficult. There was need for 
some discussion to ensure that the average was ca lculated in a unbiased way. Regarding the criterion 
of harmonisation, the formula allowed for harmoni sation within a Member's tariff, depending on the 
level of coefficient B. However, the use of the average in the formula did not allow an effective 
harmonizing effect between Members'  tariffs which was an important  element of any tariff reduction 
on non-agricultural products. Regarding the fourth crite rion, taking into account the different levels of 
development, the average tariff rate was a flawed i ndicator of their level of development. The formula 
addressed the level of development indirectly, ta king into consideration only developing countries 
with higher tariff levels. In general, the formula c ould have very different effects on countries which  TN/MA/M/8 
Page 34  
 
had a similar level of development and this was a serious shortfall. Switzerland would reflect on more 
appropriate indicators to build into the formula in order to be able to take into account Members' 
levels of development.  Finally whether intern ational peaks and escalation would be effectively 
addressed by the formula  would depend on coefficient B.  Only if B was very low, closer to 0 than to 
anything else, might the formula come to grips with peaks and escalation. 
 
1.83 Regarding the different parameters of the formula, Switzerland agreed that the bound rates 
should be the base rates for the negotiations. Th e proposal in the case of unbound rates (double MFN 
or five per cent if the MFN was zero) seemed to give  a very high point of departure, especially for 
Members with high applied rates and a low rate of bound tariffs and Switzerland would favour a much 
lower figure. The proposal on import data made sense in order to avoid yearly fluctuations. 
Switzerland was more concerned with the actual submi ssion of the relevant information as in order to 
really appreciate the effects of the formula the releva nt data would be required.   Therefore, it was very 
important that all Members submit the necessary data as soon as possible.  With regard to the issue of 
non ad valorem  duties, they agreed that for the u se of the formula the calculation of non ad valorem  
equivalents was necessary, but this was without prejudice to the conversion of specific duties to ad 
valorem  duties on a more permanent basis. While it was an important issue with regard to 
transparency, the solution would depend on the overall level of ambition.   Switzerland was in a 
special situation with respect to the AVE issue and its specialists were studying the different 
calculation methods in order to come up with a me thod which would be transparent while at the same 
time taking into account the fact that the base rate s for all Members in these negotiations were the 
bound rates. 
 
1.84 With regard to sectorial tariff elimination,  her delegation supported the idea of eliminating 
tariffs on goods which were of special interest  to developing countries and LDCs. Switzerland was 
still in the process of evaluating which sector should fall under this heading. Regarding the treatment 
of developing countries and LDCs, Switzerland was no t convinced of the proposal to exclude five per 
cent of tariff lines from binding as contained in pa ragraph 8(a). 100 per cent binding coupled with 
flexibility on the level of bindings was a much more  promising way to proceed. As regarded LDCs, 
Switzerland agreed that better ma rket access was crucial to them and therefore supported the proposal 
regarding duty free and quota free access for non-ag ricultural goods for LDCs. Switzerland also 
agreed that the contribution expected from LDCs should be confined to enhancing the level of 
binding, but at a level of 100 per cent or close to it. This treatment should be extended to poorer 
developing countries not belonging to the category of LDCs.  Regarding newly acceded Members, the 
extensive market commitments which they had made during accession should be taken into account 
and these Members should be given longer implementa tion periods rather than a specific coefficient. 
Switzerland welcomed the possibility of supplemen tary modalities in the draft and would further 
explore that issue. Switzerland also welcomed the proposal's consideration of the elimination of low 
duties, while acknowledging that there was no consensus on that point. The solution would depend on the level of ambition of the overall results.  The a pproach to NTBs in the draft made sense. The 
difficulty would lie in the identification and exam ination of the various NTBs and their individual 
legitimacy. Switzerland was prepared to work in the NGMA on the basis of the draft in order to come 
to an ambitious result which had to be to the benef it of all Members and had to, in particular, ensure a 
more effective integration of developing  countries in the world trading system. 
 1.85 The representative of Iceland
 stated that the Chairman's paper made a serious attempt at 
addressing all the major objectives of paragraph 16 of the DDA in a constructive manner.  The formula succeeded in addressing the reduction or elimination of tariff peaks as well as addressing 
tariff escalation. However, it might not go far enough to meet the objectives of reducing or 
eliminating high tariffs. This w ould depend on the value of the coefficient B. Members with high 
average tariff bindings would still be able to a pply high tariffs after the reduction according to the 
formula, which had the principle of less than full reciprocity built-in. This could be of advantage to developing countries. As other Members had pointed  out, the level of average tariff bindings did not 
reflect a country's level of development. The lower the B coefficient, the closer the formula would be  TN/MA/M/8 
 Page 35 
 
 
to fulfilling the objectives of the Doha declaration. The concept of tariff elimination was addressed in 
an interesting manner which was worth exploring furt her. However, the formula alone would not be in 
line with what the Group had agreed because it would not result in any tariff elimination. 
Commitment by all Members, with the exception of  the LDCs, to eliminate tariffs on selected sectors 
that were of export interest to developing countr ies and LDCs would be in line with the mandate on 
elimination of tariffs taking the export interests of developing countries into account. Iceland was 
willing to take part in the elimination of tariffs on products of interest to developing countries and to 
negotiate an extension of the proposals in the draft to  additional sectors that were of export interest to 
developing countries, especially LDCs. The ideas presen ted in paragraph 8 on special and differential 
treatment for developing countries and LDCs and the issue of less than full reciprocity were 
interesting, especially those regarding the LD Cs. The proposal on newly acceded Members in 
paragraph 10 was also worth exploring further. On the elimination of low duties, such duties provided limited revenues to governments, even more li mited protection and hindered trade and trade 
development. The definition of what constituted a nuisance duty was arguable but five per cent or 
under had been suggested. Such a move , even if multilateral, would be more favourable to developing 
countries. Even though Iceland supported supplementi ng additional tariff reduction and elimination 
on sectorial modalities with other complementary a pproaches, such as zero for zero, such a move 
would not be necessary if the modalities proposed were used properly.   1.86 The representative of the Philippines
 stated that a majority of Members had problems with 
tariff elimination so the formula gave Members flex ibility by allowing them to contribute to trade 
liberalisation according to their ability. Members had to make a choice on a unique value for the 
coefficient which, together with Members' averag e base rates, would determine the manner in which 
high tariffs, tariff peaks and escalation would be addressed. While this compression objective might 
only work within each Member's tariff profile it was a good start, as not all Members could attain the level of tariff elimination. While average base rates did not represent Members' development levels 
they provided a modulating influence on the final bo und rate which could give a more efficient tariff 
cut compared to linear cuts of a proportionate na ture.  His delegation objected to such linear cuts 
because they retained the relative level of tariff di sparities in the final outcome.  In order to provide 
special and differential treatment and less than full reciprocity, the value of coefficient B had to be 
higher for developing countries than for developed.  While there was still a lot of work to be done 
before completing the formula and assessing the full impact of its application on all Members' tariff 
profiles, the Philippines were willing to work on the proposal with an open mind. The Philippines 
supported the use of bound rates after full implem entation of the Uruguay Round commitments as the 
base rates, but they wanted to further explor e the implication of commencing the reduction on 
unbound tariffs at two times the MFN applied rates and of using the 2001 applied rates as the base 
year. In past negotiations, commitments had been pa id for in terms of the bound rates and changing 
the rules of the game would be unfair if Members we re not duly compensated for it. It would have the 
effect of pushing some base and average rates upward, thereby penalising Members who were involved in the reduction process. However, the pr oposal would be acceptable to his delegation if 
Members were not required to make further reduc tions once having bound their tariffs at two times 
the applied rate. Another element missing from the proposal was the phasing of final bound rates in 
the formula.  Longer phasing for developing countr ies should not only be available in sectorial 
initiatives but in the basic formula itself.   
 1.87  According to the study (TN/MA/S/10) non ad valorem  duties of varying complexities were 
imposed by more than a third of WTO Membership on a number of products of export interest to 
developing countries, mostly in agriculture but also in industries like textiles. The agriculture 
negotiations had taken an earlier decision to adopt a tariffs-only basis and it was timely for the non-
agriculture sector to do so. The Philippines expect ed early agreement on a conversion guide of non ad 
valorem  rates to ad valorem  rates so that it could be integrated into the existing tariff profiles of non 
ad valorem  imposing Members. This was a necessary prerequisite in completing the element of the 
non-linear harmonizing tariff formula. They also suppor ted the exemption of five per cent of total 
unbound tariff lines from binding and from tariff reduction commitments. The exempted products TN/MA/M/8 
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should also be excluded in calculating the averag e base rates. With regard to sectorial tariff 
elimination, he queried whether the proposed list of sectors was open-ended. The Philippines 
supported the sectorial approach as a supplementary m odality and one limited to only a few sectors so 
that it would not lead to distortion in the overall outcome of the non-agricultural sector. While participation could only be on a voluntary basis th e liberalisation commitments arising from them 
must be extended on an MFN basis. On the elimin ation of low tariffs, as a measure of flexibility his 
delegation would have no objection to developed countries eliminating their tariffs which were around 
three per cent. A 50 per cent tariff cut on low tariffs in developed countries meant practically nothing but for developing countries they were essential sources of state revenues, a lifeline of employment for a number of people.  Without prejudging thei r position on paragraph 8 (a) and (b) each element in 
the proposed draft and any future elements should include its own special and differential treatment 
and less than full reciprocity provision i.e. the form ula for tariff reduction, sectorial tariff elimination, 
supplementary modalities, the treatment of NTBs  and the phasing of implementation.  Where 
Members agreed, the modalities could still be suppl emented by a request/offer approach but this 
should only done if the main approaches could not yi eld the same results and it was carried out in a 
transparent manner with the outcome extended on a MFN basis for all. 
 1.88 The matter of appropriate studies and capacity building as a means of technical assistance was of immediate priority. The UNCTAD studies had been very instructive as had the recent WTO discussion paper on industrial tariffs and the DDA. W ith regard to South/South trade, which was 
referred to by many developed countries, it was important to determine whether it was a myth. A 
Dutch paper on economic benefits of the DDA estima ted that up to one third of the benefits from 
liberalisation would come from the full participa tion of developing countries but this was probably 
mainly due to North-South trade which was generally  in favour of the former. Another third of the 
estimated gains from DDA was supposed to come from agriculture and the OECD, World Bank and 
IMF highlighted  the centrality of agriculture, not only in the success of the trade round, but more so 
because of the benefits that could arise from it. The dispersal effects of agricultural reforms and 
liberalisation, which had not been imputed into the estimates could be substantial particularly from the 
viewpoint of poverty elimination. Hence the esse ntial linkage of non-agricultural negotiations to 
agriculture negotiations should never be lost.  The NGMA should exercise "ownership" management 
and overarching control of the nego tiations on NTBs particularly as they affected products covered by 
its liberalisation commitments. The procedural outlin e presented in the Draft Elements paper fell short 
of requirements and required further discussions. Nego tiations on NTBs had to run in parallel with 
and finish in the same timeframe as negotiations on tariffs. His dele gation was not convinced that the 
erosion of preferences was an acute issue for many participants. Tariff elimination was still 
unacceptable for most Members even on a longer term basis, therefore, the impact of preferential 
erosion could be predicted and assessed in advance for bilateral donors and international financial 
institutions to address. The WTO trade policy orient ation would neither provide  the sole nor crucial 
answer but it could help mobilize global resources  where the problems of specific countries were 
identified. Multilateral liberalisation should not be held back in order to protect bilateral or regional 
liberalisation and the reverse was also true, bilate ral or regional initiatives should not be restrained 
should multilateral liberalisation fail.  
1.89 The representative of Singapore
 stated that the Chairman's paper was not ambitious enough, 
particularly when measured against the Doha mandate. The essence of paragraph 16 of the DDA was the reduction and the elimination of tariffs, tariff peaks and tariff escalation. The NGMA should work 
toward improving the draft so that it could respon d adequately to the Doha mandate. His delegation 
supported the notion of applying a single non-linear  harmonising formula but the contents of the 
current formula needed to be improved. The use of  average tariff rates would frustrate the goal of 
achieving ambitious tariff reductions or elimination. It would also accentuate the discrepancies in the 
tariff structure of countries with high tariff rates and those with low average ra tes. In addition, there 
could be conceptual and measurement difficulties in establishing comparable and credible average 
tariff rates. While Singapore questioned the advisab ility of using average tariff rates in the formula 
Singapore would work constructively within the Group to find innovative ways to address any  TN/MA/M/8 
 Page 37 
 
 
potential problems inherent in the use of average tariff rates in the formula. In this connection, 
Singapore noted New Zealand's idea of  including th e possibility of capping the average tariff rates. A 
low value of coefficient B, preferably close to  zero was required to facilitate meaningful tariff 
reductions. Additionally, a low B was necessary, tho ugh not sufficient, to balance the minimum tariff 
cuts that the current formula would enta il for Members which had high tariff rates vis-à-vis  those with 
lower average tariff rates.  The sectorial approach was an importa nt complement to the formula though 
Singapore would have preferred more sectors to be  included in paragraph 7 of the draft. The 
mandatory nature of the sectorial approach was also  very critical. Singapore agreed with paragraph 4 
of the draft modalities that these negotiations should be carried out in such a way that the integrity of 
the multilateral trading system was preserved. Tariff lib eralisation in the form of ambitious tariff cuts 
and tariff elimination should be the rule and no t the exception in these negotiations. A good outcome 
on NTBs was also needed to complement the tari ff reduction and elimination and to maintain the 
ambitious outcome of the tariff negotiations.  1.90 The representative of the European Commission
 stated that they would evaluate any elements 
of modalities put on the table on the basis of the D oha mandate which had placed development at the 
heart of the negotiations. Progress in this respect wa s not only a matter of greater access to developed 
country markets; since 40 per cent of trade of deve loping countries occurred between themselves, the 
need for participation by developing country Me mbers was a key element in meeting the Doha 
development objectives. His delegation welcomed th e use of bound rates as the base rate for bound 
items, the proposed base year, the HS nomenclatur e as well as the reference period and the line-by-
line approach of the formula. However, the formula might need some adjustments in its application.  
It was the most innovative part of the draft elements but it did not include any of the elements of the EC's proposed compression mechanism, which would enable Members to negotiate different degrees of compression depending on their current situation. Such an approach met all the objectives of the 
Doha mandate. The EC was prepared to examine the draft elements but several issues would have to 
be addressed in order for it to live up to the obj ectives subscribed by Ministers in Doha. There was 
currently a real risk of inequity among Members and this had to be discussed since it raised the 
question of the definition of what special and diffe rential treatment commensurate to the needs of all 
developing countries and LDCs meant. The EU w as committed to a rules-based system. As such it 
could only support a formula that favoured the reduction of dispersion not only within the tariff schedule of a Member but also between Members at the same level of development. The question was 
how to address the concerns expressed by some Memb ers regarding the equitable application to all 
developing country Members of the concept of less than full reciprocity.  Least developed Members should be an exception to any such considerations. In that respect paragraph 8.b. of the draft elements 
went in the right direction.   
1.91 The draft elements proposed an approach that  was de facto based on a definition of peaks as 
"national" peaks, as opposed to "international". That  was at odds with the position traditionally taken 
by the EU, and it would not be able to change its  stance. It would be difficult to explain to 
stakeholders that some Members with very high tariff averages remained protected, irrespective of 
their level of development and as a result  did not  offer real concessions that would benefit EU 
exporters or developing country exporters, the latte r being where the largest potential for growth and 
development existed. With regard to unbound items , some form of credit had to be granted to 
developing countries putting their unbound items on th e negotiating table, provided the final rates 
were bound. If one of the parameters of the formula to be agreed upon was to be anchored to the tariff 
profile of a Member, then only tariffs that would be  finally bound deserved to be taken into account. It 
was proposed that developing countries could reta in up to five per cent of tariff lines unbound 
provided that they did not exceed five per cent of a Member's imports but there had to be a question 
over who benefited from this.  Over fifty Members (EU counted as one), about half the Membership, 
had fully bound their tariffs and that group encompassed Members from developed to least developed 
countries. Over 30 Members had a binding coverage well above 95 per cent and several were in the 
range of 99.9 per cent. 13 Members had a binding coverage between 50 per cent and 95 per cent. 
Most of the Members that were below 50 per cent of  binding coverage were LDCs.  This meant that TN/MA/M/8 
Page 38  
 
there were extremely limited exceptions to the list of  countries that had bound their tariffs.  Therefore, 
whether the proposal met the test of special and diffe rential treatment available to all Members needed 
to be clarified. With regard to sectorial tariff elim ination, the EC welcomed the inclusion of textiles, 
clothing and footwear, and, in particular, the sugg estion that it would be mandatory. They attached 
great importance to making progress on this initiative wh ich could be part of the core modalities to be 
adopted. A sectorial approach should be part and par cel of the core modalities applied to all Members 
even though the definitive list could only be finalised at a later stage in the negotiations. As regarded 
the staging proposed, they agreed  with the need for differentiated periods between developed 
countries and other Members but questioned the economic rationale for the three-phase staging where there would be a sort of plateau in the middle.  The proposals on tariffs, newly acceded Members and 
supplementary modalities contained so me initial elements which could be further worked upon. It was 
a complex task, but so far good progress had been made while bearing in mind the importance of preserving the integrity of the WTO multilateral system.   1.92 The representative of the Czech Republic
 stated that the wide disparity in the positions of 
Members over how to reduce or, as appropriate, elim inate tariffs and NTBs could explain why the 
Chairman's draft elements lacked a number of  proposals raised in discussions to date. 
Notwithstanding this, the draft contained a number of positive elements which were worth further 
exploration and elaboration. The most important element was the formula which called for across-the-board cuts in tariffs on non-agricultural produc ts. This approach was fully in line with the 
comprehensive coverage of the ongoing  negotiations, as set by ministers in Doha. It also went in the 
direction of engaging all Members in new market openings which was of paramount importance. His 
delegation would need more information on how th e formula would operate in order to assess its 
implications and whether it involved something sp ecific for his country. At the same time they 
continued to review the manner in which the formul a addressed their concerns with regard to high 
tariffs and tariff peaks and the extent to which it endo rsed the idea of compressing tariffs into a flatter 
range. They understood the Chairman's rationale for proposing the use of a country's average tariff 
rate as one of the components of the formula but it should not result in a situation where those who had already substantially reduced their tariffs would become hostages of their past efforts. It was not 
advisable to use a formula which would result in a country having an opportunity to offer a lower 
reduction just because of a higher average tariff. This  concern could be addressed by using a variable 
coefficient approach, in which all products would be  subject to the same reduction formula but would 
be subject to different coefficients , depending on the average levels of the base rates or the levels of 
individual base rates.  Another important element missing from the draft was the establishment of a maximum tariff that Members would be authorized to keep. They requested further details on the 
suggested rules for credit for unilateral liberali sation taken since the conclusion of the Uruguay 
Round. The Czech Republic would examine the possi bility of giving credit in a formula-based 
approach for recently acceded Me mbers whose tariffs were lower than those of countries with 
comparable levels of development.   1.93 His delegation supported the addition of sect orial supplements to the formula approach. 
However, the Czech Republic would be extremely re luctant to bring any specific sector on board at 
this particular point in time and in a situation wh ere Members were still striving for an agreement on 
the parameters of the formula to be used. While th e seven sectors proposed by the Chairman for tariff 
elimination were of particular export interest to developing and LDCs participants, it would be 
necessary to look at some data concerning trade in the products in question, including trade shares of 
individual Members and their levels of protection, before agreeing to those sectors. Members should 
be cautious about rushing discussions on the elimina tion of nuisance tariffs.  Special and differential 
treatment should be in proportion and constructed in a way that enabled a balance between the 
principle of less than full reciprocity and the need  to have adequate and meaningful contributions 
from all participants. His delegation preferred sp ecial and differential treatment which was more 
customised to the specific situations of individual developing country Members. In that regard, his delegation did not support the possib ility of developing countries keepi ng five per cent of their tariff 
lines unbound and the modalities should include a commitm ent by all Members to bind all tariff lines.  TN/MA/M/8 
 Page 39 
 
 
With regard to LDCs, his delegation fully endor sed the concept of duty-free and tariff-free treatment 
for non-agricultural products originating in the LD Cs, and would seek a more ambitious outcome by 
having a clear commitment on the part of develope d countries and some other major LDCs' trading 
partners. The Czech Republic was willing to consider the Chairman's proposal for proceeding with 
NTBs and expressed the need for acceleration in this  issue so that there could be maximum benefits 
resulting from market access.  They strongly expected that Members would be able to agree, as a 
minimum, on the general principles which would be further elaborated in the run-up to Cancun and 
finally approved by the time of the Fifth Ministerial Conference.  1.94 The representative of Trinidad and Tobago
 speaking on behalf of Barbados, Jamaica and 
Trinidad and Tobago stated that the Chairman's dr aft was lacking in the basic elements which were 
crucial to their interest, which was the developmen t dimension of the Doha negotiations. Therefore, 
they were gratified to understand that these modal ities were to be seen as a set of basic elements, 
which would need to be adjusted, refined, etc. The concept of less than full reciprocity had been less 
than fully provided for and meaningful special and differential provisions needed to be integrally 
reflected in the basic elements. These concepts were key principles in the formulation of the 
modalities for negotiation. The formula approach pr oposed in the draft would have a detrimental 
impact on their economies and development objectiv es, since for certain small developing countries 
tariffs were an importance source of fiscal revenue, and drastic cuts in the level of tax receipts would 
have a disruptive effect on their economies and furt her threaten the viability of domestic industries. 
Furthermore, they would expect to see provisions for the special treatment of certain domestically 
sensitive products in keeping with the proposal that  special and differential treatment was to be 
incorporated as an integral part of the negotiations .  They supported Mauritius' position that erosion of 
preferences should not be arbitrarily dismissed as be ing inconsequential, as some Members seemed to 
consider. The matter of preferences was of critical importance to a significant number of WTO Members and had to be taken into account in the de velopment of modalities.  Finally, the prompt and 
focused delivery of technical assistance was one of the integral elements which would facilitate their 
effective participation in the negotiations as well as other developing countries such as small 
vulnerable economies which would also benefit fro m the provision of studies and other capacity 
building measures. They hoped that the Chairman's revised draft would reflect this.   1.95 The representative of Japan
 stated that the formula sugg ested in the Chairman's Draft 
Elements paper virtually offered two separate form ulae, one for developed country Members and one 
for developing country Members. This would not ser ve to remove disparities in tariff levels among 
the WTO Members.  In contrast, the Japanese propo sal, a trade-weighted average formula, was both 
appropriate and realistic. Each Member should increase its binding ratios by binding as many tariff 
lines as possible. It was necessary to study the appropriateness of the use of two times the MFN 
applied rates as the base rate for unbound dutiable items and applying the formula based on these base 
rates. It would also be necessary to study the appropriateness of the method of calculation of ad 
valorem  equivalents for specific duties through consu ltations with domestic industry concerned. At 
the same time, he underlined that specific duties were  consistent with the WTO rules. With regard to 
the sectorial approach, while the Chairman's pape r included some sectors such as electronics and 
electrical goods and motor vehicles parts and componen ts which were also s uggested in the Japanese 
proposal, they could not agree to the inclusion of  fish and fish products and leather goods and 
footwear as mentioned in the Chairman's paper. From the viewpoint of the global environmental 
conservation, they could not agree to the inclus ion of the forestry sector. The use of different 
coefficients for newly acceded Members would be pr oblematic since there were no persuasive reasons 
to differentiate them from other Members since th ey had already obtained full Membership in the 
Organisation. As regarded the elimination of low duties, since they were the outcome of enormous 
efforts made on tariff reduction during past Rounds, th eir elimination should be left to the judgement 
of each WTO Member, particularly as it was not easy to establish a reasonable definition of low tariff duties.  They supported the Chairman's approach to NTBs as contained in the draft. Japan was fully 
committed to the process of liberalisation in the n on-agricultural trade area according to the mandate 
of the Doha declaration.  TN/MA/M/8 
Page 40  
 
 1.96 The representative of Romania
 stated that Romania supporte d a single formula to address 
each tariff line, even though it still had some con cerns about how this formula would address 
development needs and give impetus to South-South trade. The basic elements for the application of 
the formula seemed very close to those already discussed and Romania's c oncern related to unbound 
rates, for which the envisaged approach was too so ft. The idea of sectorial tariff elimination was not 
strongly supported but it should be seen as a supplementary step in liberalising trade and the sectors to 
be included should be a matter of negotiation. The el imination calendar was also a matter for further 
evaluation. They were unhappy with the additio nal provisions included in paragraph 8(a) which 
represented a roll-back even from the Uruguay Round in itial objective, which was to bind all customs 
duties. During the Uruguay Round Romania had taken the objective of binding all their tariffs very 
seriously.  Binding all tariff lines was a very important element of pursuing a principle that would govern multilateral relations i.e. transparency and predictability. If there was agreement to provide 
some flexibility for developing countries, this flex ibility could be in relation to the level at which 
developing countries had to bind all their tariff lines or it could be an exception to the rule and maybe 
one, two, three or five per cent could be taken in to consideration. The e limination of low duties 
should not be compulsory but rather a matter of negotiation. Newly acceded Members should be given credit for the higher degree of liberalisation assumed at the moment of their accession but the proposed solution could impede on the idea of a sing le formula and maybe another solution should be 
found. The proposal of supplementary modalities incr eased Romania's concerns regarding the concept 
of reductions based on one single formula. There w ould be enough work to be done in applying the 
formula and negotiating on possible sectorial approach es, therefore, Romania would be in favour of 
the request and offer modality. With the focus bei ng on having balanced modalities, there remained a 
lot of work to be done in the area of NTBs. There should be more specific provisions regarding how the negotiations would cover trade facilitation, improve ment of rules, technical barriers, export duties, 
etc. It appeared from the draft that a selection of non-tariff measures would be made, put into different 
boxes and then agreement reached that there were  not enough clear modalities for their elimination, 
reduction or improvement. In conclusion, Romani a considered this draft as a good beginning and 
would contribute to its impr ovement and development.  
 1.97 The representative of the Slovak Republic
 stated that the Chairman 's paper was a structured 
compilation of a number of elements discussed rath er than a comprehensive modality draft. Outlining 
some proposals in a general way could allow for d esired flexibility in the modalities. However, the 
Chairman's text required more clarity and precision. On a preliminary basis they could support a number of proposed elements. Firstly, they supporte d the use of the formula approach as the working 
basis for further tariff reductions since this was th e most appropriate way to achieve the objectives set 
out by Ministers. Such an approach would ensu re comprehensive product c overage, it could remove 
the disparities among the WTO Members as well as tackling high tariffs, tariff peaks and tariff 
escalation at the same time. However, they ha d some doubts about whether the proposed formula 
would fully achieve all the above-mentioned objec tives. The element of using average base rates 
would not sufficiently eliminate the differences be tween countries with a high level of average duties 
and those with a low level of average duties, neith er would it reflect the level of development of 
individual Members. The Slovak Republic suppor ted using bound rates as the basis for tariff 
elimination on all non-agricultural products, includ ing other technical parameters. They were not 
happy with using the calculation of two times the app lied rate for the reduction of unbound tariffs as it 
would further weaken the ambition of the proposed  formula.  Furthermore, they did not support 
additional sector initiatives which could be consider ed as supplementary elements to the formula 
approach as it could potentially deepen differences among the Members in terms of tariff protection. 
Further clarification of coverage, criteria as well as status (voluntary versus  compulsory) was needed. 
They also had some doubts about the proposal to eliminate low duties before more detailed information on possible parameters was available.  They favoured tackling this issue after core 
modalities had been agreed upon. They supporte d the proposal on newly acceded Members though 
they would have preferred a longer period for the im plementation of future agreed liberalisation steps 
for these Members.  They welcomed the inclusion of duty-free and quota-free access for the LDCs as  TN/MA/M/8 
 Page 41 
 
 
well as a gradual phasing of commitments for de veloping countries as part of the negotiation 
modalities, while indicating the need for discussion on the issue. They agreed that the identification 
and examination of the various types of NTBs s hould be undertaken since market access would not be 
significantly improved without addressing this issue properly.  
1.98 The representative of Poland
 stated that the formula appro ach proposed in the Chairman's 
Draft Elements Paper was biased against Members who had shown a greater degree of tariff discipline in terms of bindings and low or moderate duty levels. With the pr oposed formula tariff peaks would 
remain a major problem. It was also important that  the computation of trade data and the levels of 
aggregation at which the simple average tariff rate was calculated followed exactly the same 
methodology for national schedules. Work would also have to be done to determine the criteria for 
setting the value of coefficient B. With regard to the selection of sectors envisaged for special 
liberalisation, the substance of the proposal woul d be further examined when the Group defined the 
product coverage as mentioned in footnote 7. No final decision on tariff liberalisation would be 
possible without ensuring that non-tariff obstacles to trade would not be used to circumvent the new 
tariff commitments. Some positions expressed in the Group seemed to imply reluctance to do away 
with unbound tariffs, allegedly fo r development related reasons. In a certain way, one could 
understand the view that less trade discipline mean t more freedom.  In its own case, Poland entered 
into the Uruguay Round negotiations with a complete ly unbound tariff structure. It emerged from the 
Round with some 97 per cent of  its total schedul e bound, all in one step, and would soon have 100 
per cent binding. While it had not been easy it had b een  worth the price.  Concerns had also been 
expressed about declining tariff preferences with sugg estions of possible claims of compensation to 
offset this side-effect of tariff liberalisation. It should be noted however that the Doha round was not 
just about development as such but also about the development of the WTO and all that it represented. 
It had to be accepted that market access would become  easier for all at the expense of tariff preference 
margins that were hardly anything more than just a temporary instrument of adjustment. This fact was 
not so much a product of WTO politics, but rather the matter of plain arithmetic and economic logic. 
 1.99 The representative of Korea
 stated that its primary expectation was that the current 
negotiations would bring about a s ubstantial improvement in market  access with a higher level of 
ambition than was achieved at the Uruguay Round. Ho wever, Korea needed fl exibility in applying a 
tariff reduction formula to its sensitive products whic h were largely in two sectors: fish and fish 
products and forestry products. The two sectors were  not very large in Korea's overall economic  
landscape and the relevant tariff lines of the two sect ors combined accounted for barely six per cent of 
Korea's total tariff lines.  The domestic sensitiv ity of these two sectors arose from Korea's unique 
level of development as they held very important political, social and cultural implications for Korea.  
They hoped that their expectation for a high level of  ambition in this negotia tion would be met while, 
at the same time, retaining flex ibility for sensitive sectors, which were the views expressed by Mexico 
and other delegations in this rega rd. There were two possible options for dealing with flexibility for 
sensitive products.  One was the idea of the minimum reduction rate and the other was the idea of an 
average reduction target rate. Both would be applicable  to a certain percentage of Members' total tariff 
lines, for example five per cent or so or even less.   
1.100 The introduction of the average tariff rate in the formula could reflect the difference in 
Members' development level and tariff structure but  it could also result in unfairly favouring those 
countries with higher tariffs over countries with lowe r tariffs. As a result it might not be effective in 
improving market access to countries with higher av erage tariffs. Since the proposed formula took its 
shape largely from the Swiss formula, this would for ce greater reduction to higher tariffs than to lower 
tariffs and in this way the formula could addr ess the Doha mandate on addressing high tariffs and 
tariff peaks. The value of coefficient B would be cr itical in determining the level of ambition in tariff 
reduction since the formula would vary with different values of B. Korea expected that the value of B 
would be such that would result in a high level of  ambition in accordance with the Doha mandate.  
There were two elements of difficulty in the pr oposed formula. Korea had advocated the trade-
weighted average tariff reduction formula in its appr oach to tariff reduction in order to take into TN/MA/M/8 
Page 42  
 
account the different levels of de velopment and tariff structures of Members and to provide flexibility 
for Members dealing with sensitive sectors in a pplying the tariff reduction formula. The proposed 
formula lacked such flexibility which had been one  of main elements constituting Korea's formula in 
the tariff reduction approach. The inclusion of such  flexibility would increase the level of comfort in 
the negotiation process.  The second element of diffic ulty was the binding issue.  Like many Member 
countries, Korea subscribed to the view that the coverage of bound tariffs had to be improved as an 
outcome of the negotiations and they were prepared  to improve binding coverage as much as possible 
by binding unbound items significantly. However, they did not favour reducing the bound rate of 
newly bound products as proposed in the Chairman 's draft. Binding should occur at the current 
applied rates and such rates should not be subject to further reduction by the formula after binding. In 
that situation Korea would be willing to make effo rts to improve its binding coverage as close as 
possible to total binding.  1.101 The representative of Uganda
 stated that Uganda associated  itself with Morocco's statement 
on behalf of the African Group as well as with the statements made by Kenya and Mauritius. Uganda 
welcomed the exemption of LDCs from reduction co mmitments which recognized the place of LDCs 
in the multilateral trading system. As mostly net importers of industrial goods, Uganda's average 
applied tariffs were low and more oriented to revenue collection. These tariffs might only be 
considered high in sectors where infant industries n eeded protection. Uganda  hoped that the increase 
in the level of binding commitments by LDCs would be  strictly on a voluntary basis in order to take 
into account their particular needs. They welcomed  India's support on this issue. Paragraph 7 seemed 
to negate the preferential access given to LDCs in paragraph 9 under EB A, Cotonou; AGOA, GSP, 
etc.. Their products had to compete with those already dominating the markets or those actively 
seeking market access. Uganda agreed with the vi ews expressed by Mauritius, Kenya and Nigeria on 
the question of preferences. This issue had to be  addressed seriously so that vulnerable and weak 
economies were not the ones that had to reform dram atically and at a fast pace.  A large number of 
WTO Members including LDCs, ACP countries and ot hers would be affected by the erosion of 
preferences. Costa Rica's proposal on this issue was not helpful and should be rejected by the Group. 
The agreed approach should take into account the concerns of all Members. The negotiations were 
about the livelihood and welfare of all peoples and more  so the most disadvantaged of all. They noted 
that the proposal on NTBs did not suggest modaliti es as such. This was a matter of great importance 
to LDCs and they would like to see the substance of the approach to NTBs.  
 
1.02 The representative of the United Arab Emirates  stated that the proposal on sectorial tariff 
elimination excluded a sector which was a priority fo r them in the negotiations, i.e., the sector of raw 
materials and primary products, and they believed that  it should be added to the list contained in the 
draft. It was a sector of particular export interest not only for the UAE but for other Members as well 
and its liberalisation would be profitable to bot h developed and developing countries. Duty-free raw 
materials and primary products were essential fo r the competitiveness of developed countries' 
manufacturing and semi-manufacturing businesses, while at the same time such products generally constituted strategic exports  and emerging industries of  developing countries. They were still studying 
the impact of the proposed formula and would retu rn to it later. Participation in supplementary 
modalities should be on a voluntary basis. Furthermore, it should be explicitly stated that particular 
attention should be given to the interests of  developing countries during the application of 
supplementary modalities and the de termination of low duties. The final results of the negotiation 
should be transposed into the HS2002 in order to preserve the stability of the process and to relieve 
the burden of the negotiators, especially those of the developing countries.   
1.103 The representative of Paraguay
 stated that his  delegation attached high priority to the issue of 
market access. As a developing country with a smal l economy they had a large number of limitations 
in being part of the multilateral system and they al so had some other intrinsic disadvantages in areas 
such as greater cost of transportation for imported and exported products and in  attracting investment 
for the development of the non-agricultural goods sector. This resulted in a double impact when it 
came to further liberalising a small and already op en market. The debate and assessment of the draft  TN/MA/M/8 
 Page 43 
 
 
should take into account the concerns expressed by all Members and in particular by developing 
countries. Paraguay agreed, in genera l, with the proposed formula and with the use of  bound tariffs as 
the base rate. The greatest possible efforts should be made to bind 100 per cent of tariffs as this would 
avoid differentiated treatment among Members. Para guay had bound 100 per cent of its tariffs and 
urged Members that still had unbound tariffs to take advantage of the negotiations to bind them. They 
supported  the use of MFN applied tariff rates fo r 2001 as the base year. They also supported the  
proposal to convert non ad valorem  duties into ad valorem  equivalents on the basis of the Annex 1 
procedures. Paraguay already had all of its customs duties on an ad valorem  basis. They also 
supported the use of HS96 as a basis for negotiati on. They would comment further on the formula 
once the figure for the coefficient B was known.  
 
1.104 The proposal on sectorial tariff elimination could be a response to the Doha mandate but not if it retained its proposed mandatory approach. Instead, it should be voluntary. They were also 
concerned with the present drafting which placed an  obligation on developing countries to eliminate 
tariffs in sectors which might not be of interest to  them currently but which in the future could be 
important for their development.  Many developing countries which currently had a high degree of 
dependency on agricultural exports could diversify their exports by including industrial products. 
Supplementary modalities should be left to Member s to apply as a further complement to tariff 
reductions. It was premature to determine formulae or  any other modalities to deal with NTBs as they 
still required study and subsequent categorisation.  The WTO together with other international 
organisations should identify the issues related to capacity building within the framework of 
strengthening coherence in global economic polic y-making thereby improving developing countries' 
participation in negotiations. Preferential tariff schemes in their present state were discriminatory 
against other third party developing countries since part of the market share gained by preference-
receiving countries was at the expense of other de veloping countries who had equal if not worse 
conditions. These negotiations c ould effectively reduce preference margins for the current 
beneficiaries but it could also improve access opportu nities for other developing countries which were 
not covered at this point in time. However, some Members had a legitimate interest in this issue and 
Paraguay supported Mauritius and ot her delegations who pointed to the need to find a means of 
resolving this matter in a balanced way to the satisfaction of Members.  1.105 The representative of Morocco
 stated that the proposal to use two times the MFN applied rate 
as a basis for calculating unbound items penalized countries like Morocco which had made a 
considerable effort to bind their tariffs on a broad basis.  It amounted to depriving those countries of a 
virtual liberalization credit equal to the MFN app lied rate. While there were differences between the 
bound rates and the applied rates in Morocco's ta riff these differences were far from equalling twice 
the applied rates. It would be fairer to allow deve loping countries with a high level of binding to be 
able to choose for the calculation of the applied rate for " t a " between the bound rate or double the 
applied rates for a percentage of positions to be de termined.  This would ensure a degree of equity 
among Members and it would not counter the leve l of ambition for the negotiations because the 
Members had to determine the level of the B coeffici ent for the formula.  It was important to find a 
certain balance with respect to special and differe ntial treatment, since the proposal that developing 
countries retain five per cent of tariff lines unboun d deprived countries with high binding levels of 
such a measure.  Sectorial tariff elimination should be considered on a voluntary basis once the 
Group's negotiations on core modalities for tariff reductions had been finalized. 
 1.106 The representative of Hong Kong, China
 stated that they were disappointed that credit was 
only given to autonomous liberalisation that resu lted in non-zero bound rates. The actual effect was 
that credit would be given to Member A who deci ded to lower autonomously its tariff from 30 per 
cent to 10 per cent but not to Member B who lowered its bound rate from 30 per cent to zero. This would send a discouraging signal to those Member s which had autonomously bound tariffs at zero. 
While the autonomous liberalisation of binding ta riffs above zero was certainly contributing to 
liberalising international trade, the liberalisation of bound tariffs at zero was the ultimate step for 
achieving a tariff-free environment. According to the S ecretariat, the omission of credit for binding at TN/MA/M/8 
Page 44  
 
zero was for technical reasons and not as a matter of principle. While there could be technical difficulties in giving credit for zero bound rates with the line-by-line reduction formula they urged Members to work out an approach to calculate and give recognition to such credits. The proposed 
formula had not adequately addressed the binding of  zero applied rates. As a free port, Hong Kong, 
China had all along maintained zero applied rates for all its imports. Pursuant to paragraph 2(a) of 
Article XXVIII bis of GATT 1994, the binding of duty-free treatment should, in principle, be 
recognised as a concession equivalent in value to  the reduction of high duties. Accordingly, Hong 
Kong, China considered that the level of tariff re duction required by a formula approach should, in 
their unique case, be translated into the portion of tariff lines to be bound at zero. Further deliberations 
on this could be made after dete rmination of the core modality. 
 
1.107 The representative of New Zealand
 stated that while arguments had been that the preferences 
enjoyed by some Members should be protected agai nst "the myth of trade liberalisation which had 
engendered numerous economic casualties" and some other delegations had argued that they should 
be allowed to choose the rate and timing of libera lisation for themselves, it was necessary to recall the 
overall purpose and objectives of the WTO and D DA. The preamble to the WTO agreement said 
"parties wish to contribute to those objectives by en tering into reciprocal and mutually advantageous 
arrangements directed to the substantial reduction of  tariffs and other barriers to trade and to the 
elimination of discriminatory treatment in international trade relations" and the parties go on to express that they are "determined to preserve the basic principles and further the objectives underlying 
this multilateral trading system (MTS)".  This w as the agreement which had been signed up to and 
which the current negotiation aimed to advance fu rther. As a small country, New Zealand fully 
endorsed the EC's observation that there was no subs titute for the MTS. As Chile had noted, this 
negotiation was really about whether or not the M TS would be able to respond to the challenge from 
FTAs. To sustain the MTS, Members had to make meaningful contributions and the modalities negotiated had to be directed to achieving the deve lopment objectives which were central to the round 
through liberalisation of tr ade rather than an attempt to avoid li beralisation.  It was hard to see the 
basis on which the preservation of preferences could ha ve been included in the Chairman's draft. It 
was not part of the mandate and it would be incons istent with the wider goals of the WTO.  The 
Enabling Clause, in paragraph 3 was clear about this  point. More importantly, trade preferences were 
precarious foundations on which to build economic development as they were not bound in the WTO 
and therefore could be withdrawn or made conditional at any time.  
 
1.108 He disagreed with suggestions that the draf t text did not contain sufficient provision for less 
than full reciprocity or special and differentia l treatment. The proposed formula and associated 
provisions even without considering the selection of  sectorial deals was a fu lsome response to that 
aspect of the mandate, if not too fulsome in some pl aces. Tariff cuts had to be off bound rates, but it 
did not mean that participants with large gaps  between their bound and applied rates, typically 
developing countries, would be relatively sheltered fro m the effects of cuts. The proposal to calculate 
the base rate for unbound lines at two times the a pplied rate would mainly benefit developing 
countries which typically had from 30 per cent up to more than 90 per cent of their tariff unbound. This proposal could inflate the overall value of th e tariff average and needed to be examined. The 
proposal to allow some countries to keep up to five  per cent of their tariff lines unbound raised several 
intractable problems: there was a huge varia tion in binding coverage even among developing 
countries and LDCs. More than 40 developing c ountries and LDCs were 100 per cent bound so they 
would not benefit from the proposed special and di fferential provision. This appeared to be an 
exemption for a select group of Members rather than  special and differential treatment. There were 
some real equity concerns arising from that aspect  of the proposal. It went against the basic WTO 
principles of transparency and building predictabilit y for trade and it was clearly not compatible with 
the mandate which emphasised comprehensiveness.  Allowing participants from the outset to exclude 
from binding up to five per cent of their tariff lines would amount to a priori exclusion. The formula would produce large and probably unsustainable ga ps between the final bound tariff ceilings of 
typical developed countries (two to three per cen t) and developing countries (30 to 40 per cent for 
some major developing country economies). It would also lead to unsustainable discrepancies among  TN/MA/M/8 
 Page 45 
 
 
and within developing countries. One structural pr oblem was the interplay of coefficient B and "t a" 
under the current formula.  This could make it diffi cult to have a realistic negotiation on the value of 
B because the level of ambition would be discussed in  a variable geometry because of the impact of 
"ta". The structural problem and many of the other problems of equity might be reduced if tariff 
averages were harmonized before applying the form ula. That could set up the basis for a more 
realistic negotiation at a later stage in the process around the value of the coefficient B. It would also 
allow the formula to address a significant omi ssion of addressing international peaks between 
Members. With regard to sectorial liberalization, New Zealand supported the maintenance of fish and 
fish products in the list of sectorial proposals in the draft and the addition of other sectors to that list, 
for example, forestry  would be a reasonable response to the export interest of developing countries. 
 
1.109 The representative of Chile  stated that there appeared to be  a great degree of resistance to the 
sectorial approach proposed. With regard to the formul a, it could result in an unfair situation for many 
developing countries in different wa ys depending on, for example, the value of the coefficient, the use 
of the averages tariff, the multiplication of the a pplied rate by two for unbo und tariffs, the five per 
cent margin of unbound trade. New Zealand had ex pressed some ideas which would be interesting to 
explore further. Taking several elem ents into consideration, includi ng the configuration of the formula 
and the opinions expressed by delega tions, in particular, from the relevant markets for Chile in the 
Asia-Pacific area, it appeared that at this stage the negotiations offered very  few benefits for Chile.  
Furthermore, the formula could create a very unfai r, very unbalanced situation for countries such as 
Chile, in particular, because of some of the asser tions made by Japan on forestry and Korea on 
fisheries. In the NGMA the two delegations had resorted to environmental arguments against the 
liberalization of those sectors saying that liberalisa tion could lead to a problems of exploitation while 
in other fora they said that there are no problems of  exploitation and that there was no need to reduce 
subsidies. From a sustainable development point of  view and from an economic point of view, all the 
empirical evidence showed that the best support that  could be given to sustainable resources was to 
allocate resources most efficiently and that did not happen with closed markets. It was achieved by 
open and undistorted markets, so therefore, to u se an environment argument had no economic basis at 
all. Many countries were concerned that reducing customs duties would lead to lower fiscal income 
and while it was important to recognise and support this, it was necessary to explain exactly on what 
products, what markets and for what country this wo uld be the case. In that way negotiations could 
move past abstract talk about the problems caused by preference erosion. Joint efforts had to be made 
to analyse the erosion of preferences in detail fo r agricultural and non-agricultural products and from 
that diagnosis to find solutions that  would be sustainable in the long-term and that would be coherent 
with the fundamental basis of the multilateral trade system.   1.110 The representative of Cost Rica
 stated that they had made no proposals for negotiations 
regarding the topic of erosion of preferences. Howe ver, there was already an express agreement on the 
issue in the Enabling Clause and Co sta Rica had only limited itself to recalling this principle which 
was also part of the negotiations. He clarified that they were expressing this position as a Member 
which was a recipient of various preferential schemes.  1.111 The representative of Chinese Taipei
 stated that his delegation wished to echo Korea's view 
on the importance of flexibility to sensitive products  when considering the tariff reduction formula. 
The options proposed by Korea to address sensitiv e products, i.e., minimum reduction rate and the 
idea of a target rate could serve as a basis for furt her discussion in that regard. In terms of a sectorial 
approach, tariffs on exhaustible natural resources su ch as forest and fishery products should not be 
eliminated for reasons of sustainable development.   Chinese Taipei also had difficulties in including 
products such as textiles and auto parts into the pr oposed list of sectors subject to sectorial tariff 
elimination. 1.112 The representative of India
 stated that Article XXVIII bis paragraph3 of GATT 94 was worth 
bearing in mind as the first principle for negotiation.  His delegation was concerned with the tenor of 
certain interventions regarding the need to harmonise  the tariffs of all countries and the importance of 
modalities working towards that objective. This w as not spelt out anywhere in the mandate. The TN/MA/M/8 
Page 46  
 
proposed formula would bring down higher tariffs in each national schedule by a much higher percentage than India had envisaged in its linear a pproach. In this regard, the Secretariat document on 
the results of the Uruguay Round stated "when consid ering tariff reductions it should be kept in mind 
that what matters as far as the stimulus to exports  is concerned  is not the percentage cut in tariff per 
se but rather the decline in the tariff inclusive pr ice in the importing country. This means that the 
absolute size of the tariff cut was important. For ex ample, a 50 per cent reduction in a 3 per cent tariff 
will in principle cause the tariff inclusive price to de cline by 1.5 per cent whereas a 25 per cent cut in 
a 36 per cent tariff would result in a 6.6 per cent re duction in the tariff inclusive price". India would 
examine the Chairman's proposal fro m that perspective and also from the view that the objective of 
the NGMA was to carry forward national schedules wh ich were the result of successive negotiations. 
His delegation agreed that appropriate flexibility shou ld be provided in respect of products which had 
been bound. While India was willing to go along with  the line-by-line application of a formula type 
modality to a large majority of bound items it was important that this limited flexibility was provided 
for developing countries. Virtually all develope d countries, barring Japan, were now arguing for no 
flexibility. In the previous round, those countries ha d used this flexibility to desist from overall tariff 
reduction percentages particularly in sectors of interest to developing countries.  
 1.113 Some questions had been raised as to why the flexibility proposed in the draft should be given 
when all agriculture tariff lines were already bou nd. While the coverage was no doubt 100 per cent 
the level of bindings taken were arbitrary. The appropriateness of the precedent of AOA was therefore 
questionable. While granting this limited flexibilit y the proposed draft at the same time sought to 
bring rigour to the manner in which the rest of  the unbound items should be bound, i.e., after the 
application of the formula. This was not what I ndia had proposed and they would be examining the 
proposal carefully from that perspective. Some Members had commented about the importance of a 
low coefficient B, closer to zero than to one. Th eir understanding of the proposal was that a number 
by definition was either one, two or three and not a fraction. It was important that the development 
process taking place in many developing countries, including India, was not undermined in the name 
of ambition. India was progressively liberalising but  also keeping in view the twin concerns of 
revenue considerations and the needs of industry.  With regard to the proposed sectorial initiatives, 
several countries mentioned the difficulty they might have in participating in sectorial initiatives but India would have also liked to hear some comme nts about the asymmetry involved in the process. A 
balance was being sought in sectors where devel oping countries had a comparative advantage. All 
Members would bring their tariffs down to zero and in return for bringing down their tariffs 
substantially developing countries had expected so me gains in areas where they had a comparative 
advantage.  However, what was being proposed was that to be able to secure gains in those areas 
developing countries would also have to reciprocally  bring their tariffs down to zero. This showed a 
certain level of asymmetry in terms of the additi onal contribution that developing countries had to 
make in sectors of export interest to them.  
 1.114 The representative of Uganda
 stated that there was no doubt about the existence of a 
preference erosion problem, citing as an exampl e his own country which was a landlocked LDC, 
dependent on a few primary products.  They were ma king an effort to diversify but if they were to 
diversify to textiles and clothing, leather goods, fish a nd fish products they would then be faced with a 
proposal to zero tariffs.  The  DDA had specific mandates which Members had signed but paragraph 
44 on special and differential treatment talked ab out provisions that should take into account the 
concerns of all developing countries including in pa rticular the LDCs. For th at reason, erosion of 
preferences had to be addressed and should not be put aside as having no place in the modalities. 
Paragraph 2 of the DDA talked of enhanced mark et access, but it was unclear what that meant for 
LDCs. In the case of other countries enhanced mark et access possibly meant MFN zero, but for LDCs  
it was through preferential treatment that they were able to enhance their market access.  1.115 The representative of Egypt
 stated that the view of some delegations that the proposed 
formula induced further disparities and inequi ty among Members' tariff schedules depended on 
whether consideration was given to the reduction percentage or to th e absolute reduction cut. Ignoring 
the disparities in Members' tariff structures and applying an average independent harmonisation  TN/MA/M/8 
 Page 47 
 
 
formula would entail higher concessions on the part of developing countries as compared to those entailed by developed countries. Those delegations who supported th is approach had based their 
argument on a harmonisation approach, which was not the basis of the Group's work nor should it be, as it contradicted the mandate for negotiations. Egypt  had proposed at the meeting to adopt a linear 
reduction approach where all tariff lines above 50 per cen t could be reduced to th at level, and all other 
lines up to 50 per cent could be reduced by 15 per cent. 
 1.116 The representative of Mauritius
 stated that there was an incorrect perception among some 
delegations that addressing the issue of erosion of preferences would undermine trade liberalisation at 
the multilateral level.  Addressing the problem basically meant that the percentage tariff cuts on a 
number of products exported by preference beneficiar y countries, especially those considered to be 
sensitive, would have to be marginal and modulat ed over a longer time scale. Not all countries had 
equal capacity to evolve in a competitive environmen t, pursuant to trade liberalisation, nor had they 
the means to undertake competitive adjustment as competition unfolded. Since preference erosion was 
intricately linked to the current negotiations it was clear that it would have to be addressed in the 
NGMA. Mauritius agreed with the proposal by some delegates that the question should also be 
tackled in the context of the debate on global cohe rence, in particular regarding the setting up of a 
competitive adjustment fund.  However, the WTO,  and by extension the NGMA Negotiations were 
also pillars of global coherence. So the question of  preference erosion could not be disassociated from 
the negotiations.  Mauritius had serious apprehensi ons about the sectorial approach proposed as a 
modality.  They would favour one core modality  that took on board the different levels of 
development of Members as well as their specific situations. A harmonised approach would therefore 
not be the answer to the concerns of one and a ll, either in terms of addressing fiscal problems or 
pursuing domestic industrial policy. They would favour tariff cuts on an average basis as proposed by a number of delegations.  
1.117 The representative of Norway
 stated that the Group had a number of commitments that it had 
to address in accordance w ith the Doha mandate. One was that the modalities for tariff reductions or, 
as appropriate, elimination included tariff peaks, high ta riffs and tariff elimination. In order to fulfil 
this part of the mandate, coefficient B in the formul a would have to be sufficiently low. Also, in order 
to fulfil the Doha mandate the concept of less th an full reciprocity in reduction commitments for 
developing countries had to be operationalized . The formula was based on the assumption that 
Members at similar levels of development had simi lar tariff structures and levels and this was not 
necessarily always the case. So some way would have to be found to correct unwarranted results that 
would come from utilising the formula. With regard  to tariff elimination on sectors of particular 
interest to developing country Members, her dele gation was surprised at the suggestion of many 
developing country Members that this part of the formula should be voluntary. In practical terms, a 
voluntary scheme would imply that those Members with the most interesting export markets for 
exports from developing countries be it textiles, or footwear would have the possibility to opt out, 
which would make the whole thing useless. The Group needed to continue to look at the modalities to 
find a way to deal with the products of particul ar interest to developing countries. There was a 
substantial proliferation of re gional and bilateral trade arrange ment between neighbours and across 
continents and Members who were part of such  arrangements tended to defend them. One problem 
with such agreements was that third party Me mbers had no control over what Members were doing 
and what deals they struck. All Members had a co llective responsibility to preserve the multilateral 
trading system as Members were best served by transparent and predictable market access on an mfn 
basis.  
1.118 The representative of Malaysia
 stated that with regard to the treatment of unbound tariffs his 
delegation welcomed the five per cent window for unbou nd tariffs subject to it being less than five per 
cent of a developing country Member's total imports  (without prejudice to their position stated earlier 
that they would like the linear-cut approach).  Even though some delegations had questioned such 
flexibility his delegation would like to see it retained in  the text. They appreciated  the fact that several 
Members, particularly those in Latin America ha d bound 100 per cent of their tariffs. Malaysia would TN/MA/M/8 
Page 48  
 
have  liked to have done so but it was not possible given its level of devel opment. While it would not 
be able to bind all its tariffs, it would very much like to move in that direction but no Member should 
be forced to take specific action. Flexibility had to be provided. While recognising the importance of 
ambition, ambition had to also be tempered with realism. Some developing country Members had two 
per cent binding levels and it would be impossible for th em to even come up to the five per cent level. 
Unbound duties should not be subject to the proposed formula, they should be treated in a different 
way.  While retaining the five per cent window, th e binding of the remaining 95 per cent of tariff lines 
should also be flexible in the sense that bindings c ould happen at the applied le vel or at a ceiling level. 
Referring to special and differential treatment, Mala ysia disagreed with Canada's statement that a 
longer time-frame should not be available for all developing countries. The longer time-frame should 
be for available for all developing countries regard less of their level of development.  Malaysia 
supported Uganda's statement regard ing erosion of preferences.  Members such as Uganda had to be 
helped. Such Members were not against multilateral liberalisation, even though they were preference-
receiving countries. They were only seeking assistance to help them out of a difficult period. A similar situation was contained in the agriculture  modalities, where the text targeted technical 
assistance to help in the diversification of crops. Pe rhaps in the context of ma rket access for industrial 
products, something similar could be done.   1.119 The representative of Brazil
 stated that his delegation rejected the allegations that beginning 
negotiations on the basis of bound rates was in any way a concession to developing countries. Bound 
rates had been paid for by corresponding concessions and any lower applied rates that had been in 
effect since the end of the Uruguay Round had in effect been a bonus. They did not constitute any 
kind of acquired rights for trading partners. The ma ny calls for a core modality that would ensure a 
harmonising effect among different Members tariff structure was not reflected in the Ministerial Mandate. Such an approach would fundamentally  negate the development dimension of the 
negotiations since it presumed that every WTO Member was at a similar stage of development and 
thus should have a similar tariff structure. Somewhat in contradiction to this, there were calls that the 
proposed formula should in some way adapt the con cept of the tariff average taking into account that 
it was not really a reflection of each Member's stage of development. Ministers had explicitly 
cautioned against the creation of new sub-groups of Members in paragraph 35 of the Doha Ministerial 
Declaration. Equally, it would be impossible to agree upon a definition of which country should qualify for what kind of treatment. He questioned what  criteria could be used to separate developing 
countries; per capita GDP, a PPP methodology or th e UNDP Human Development Index. The options 
were inexhaustible and wo uld only serve to delay the Group's work. Ultimately, a formula had to be 
agreed upon that gave each Member an acceptable ba lance of gains and concessions. Allegations were 
made that the proposed formula would produce very li mited reductions in the applied rates of many 
developing countries yet reductions in tariffs from fo ur to two per cent would also produce negligible 
additional market access opportuniti es. The best approach was to offer each Member a tempting 
package which would allow it to make the necessary painful concessi ons in its own sensitive sectors. 
Reference had been made in the debate to sectoria l elimination and that the seven sectors identified 
were of export interest to developing countries.  Yet it was the developing countries who had shown 
the greatest hesitancy on those sectors. Referring to the proliferation of RTAs, FTAs, etc., while understanding the issues that motivated such con cerns, why had more meaningful progress not been 
achieved in the forum specifically established to  discuss the relationship between RTAs and the 
WTO? That was a specific negotiating forum trying to address the issue and yet the results had not 
been overwhelming.   1.120 The representative of Tanzania
 stated that his delegation supported the statements by 
Morocco, Egypt, Mauritius and Uganda. In addition , being a co-sponsor of the paper presented by 
Kenya they concurred with the issues highlighted in  that document. One of their main concerns was 
the proposal that developed countries grant on an  autonomous basis duty-free and quota-free market 
access for non-agricultural products originating from LDCs. The LDCs had requested binding 
commitments for such duty and quota free access.  The proposal that selected NTBs would be dealt 
with by the NGMA while others would be sent to appropriate WTO bodies for action and reporting  TN/MA/M/8 
 Page 49 
 
 
back also caused them concern. As LDCs, they had small missions and w ould be unable to follow 
NTB issues if they were spread over several gr oups and bodies. In addition, the Doha mandate had 
stipulated that NTBs should be dealt with in the NGMA.  They requested that both these elements of 
modalities be reconsidered.   
1.121 The representative of Nigeria
 stated that countries likely to be affected by the erosion of 
preferences and those who still had a significant proportion of tariff lines unbound were coming to 
terms with the challenges and the likely outcomes of  the current negotiations. With regard to unbound 
items, Members who still had  not bound all tariffs had shown a degree of flexibility and would be 
willing to increase their scope of binding. This  was a reasonable way forward and would be a 
significant contribution to the negotiations.  With re gard to the transparency and predictability of 
bound rates, some Members had questioned what  special and differential treatment would be 
applicable to those Members who had already bound  all their tariff lines if some developing country 
Members were allowed to maintain five per cent of  tariff lines unbound. Such a situation if allowed, 
would be discriminatory. He requested clarification from the Secretariat on specific decisions taken 
by the Membership on binding non-agricultural products at the end of the Uruguay Round. 
Developing countries had been encouraged to incr ease their scope of binding, yet were given the 
opportunity and discretion to determine at what leve l they wished to bind. If this was correct, then 
each Member had taken advantage of the provision. As a result, some developing country Members, 
at their own discretion and given the economic consid erations and exigencies which prevailed in their 
economies at the time, decided to undertake 100 per cent binding. Equally, those developing country 
Members who at the end of the Uruguay Round chose not to bind at 100 per cent had taken such 
decisions based on their own economic conditions.  Therefore, it was unclear why those Members who bound at 100 per cent now argued that all Memb ers had to bind all tariff lines, simply because 
they had already done so. There was no discriminat ion in a situation where Members had exercised 
their choice. Those Members who were asking for certain items to remain unbound had not said that 
they would not contribute to the process, instead they had shown an increasing amount of flexibility 
by agreeing to increase their scope of binding.  1.122 Preference-beneficiary Members were coming to terms with the possibility that there would 
be an erosion of preferences. However, to argue that preferences were not part of the negotiations, 
even when the outcome of the negotiations were going to have a huge impact on those preferences 
and consequently impact adversely on the econom ies of a significant number of WTO Members was 
to belittle the issue. The WTO recognised that pref erential schemes were a means of responding to the 
needs of a group of countries in a manner in whic h the WTO could not.  While WTO rules were the 
basis on which global trade should operate, WTO rul es had not conferred equa l benefits to all its 
Members. If they had, there would have been no n eed to enter into the bilateral, regional and free 
trade arrangements that were currently proliferating. The issue of equity had been raised in connection 
with unbound tariffs and preferences, but persis ting implementation-related problems and existing 
agreements in agriculture and textiles and clothing di d not point to equity in the WTO rules. If those 
Members who had specific obligations under special and differential treatment had been forthcoming 
with the assistance needed by developing countries th en there would no imbalances in the agreements. 
The WTO Agreement emphasized the need to preser ve the principles and objectives of the MTS, 
including the substantial reduction of tariffs and e limination of discriminatory practices. At the same 
time, it talked about raising the standard of liv ing, ensuring full employment, expanding production, 
including sustainable development and enhancing the means of doing so in a manner consistent with 
Members' respective needs and concerns for different  levels of development. In that context, all 
Members' concerns had to be addressed.  It was not enough to quote statis tics about the number of 
Members having attained a specific binding threshold or to say that because preferences were not part 
of the WTO rules they could not be entertained.  Progress could only be made when Members began 
to appreciate each others' difficulties and worked to wards solutions which would be acceptable to all 
Members.   TN/MA/M/8 
Page 50  
 
1.23 The representative of Jamaica
 stated that her delegation s upported Malaysia's comment that 
LDCs were not against further liberalisation or  their countries' participation in multilateral 
negotiations but rather were seeking measures to assi st them during an adjustment period. Technical 
assistance and capacity building measures, while valuable  for the effective participation of developing 
least developing countries in the negotiations and as such should be integral elements, were not the 
only solutions to addressing developing countries' co ncerns. The substantive content of the modalities 
had to also meaningfully address their particular needs.  1.24 The representative of Indonesia
 stated that the proposed formula had to use a method other 
than two times the applied rate for binding unbound items. Some Members had stated that this method 
would not give a meaningful reduction in tariff rates,  but having run a simulation on the Secretariat's 
paper his delegation found that re ductions would be quite significant . Another approach which would 
encourage Members to increase their binding covera ge should be used. It would be counterproductive 
if Members had to apply the proposed formula and at  the same time increase their binding coverage. 
With regard to the five per cent unbound tariff flexibility for developing countries it was unnecessary 
to link the five per cent with the total import value.   Members' binding levels were a matter of policy 
and it was up to Members whether or not to bind all tariffs.  Tariff bindings should not be harmonised 
in the current round of negotiations but the next ro und of trade negotiations.  Additionally, the latter  
could have higher levels  of ambition where binding coverage of 100 per cent for all Members could 
be reached.  
1.25 The Chairman
 clarified certain points on the draft paper. There had been a lot of discussion 
about which were the core modalities and which were  the supplementary modalities. All four sections 
of the paper, formula, sectorial elimination, add itional provision for developing and least developed 
countries and newly acceded Members were integral pa rts of the paper and should be taken together. 
T1 was the final  rate and it would be bound in ad valorem  terms and reflected in the schedule. With 
respect to " t a " and the kind of rate to be included ther e, all non-agriculture tariff lines only would be 
used. Coefficient B would have a unique value, i.e, all the participants with the exception of the newly 
acceded Members, (it being understood that the LD Cs would not have to apply the formula) would 
have the same value B which would be determined by Mem bers.  W ith respect to the coverage of 
sectorial tariff elimination, the formula would not ap ply to products included under those sectors, they 
would get special treatment. The starting date for sectorial elimination would be the same for all 
participants and it would be the same date as the commencement of formula reduction. The sectors 
indicated in the draft had been clarified in a ge neral way and footnote 7 indicated that the specific 
coverage of sectors would be up to the participan ts. All the sectors mentioned in the paper had so 
appeared because according to studies and statisti cs these sectors were of special interest to 
developing countries. The five per cent flexibility on unbound lines provided that five per cent of 
tariff lines could remain unbound provided they did not  exceed five per cent of the total value of a 
Members' imports. This provided a double safety va lve because while the flex ibility only allowed for 
five per cent of the tariff lines to remain unbound, in some cases, theoretically, this could constitute a 
huge percentage of a Member's im ports during a reference period. In  addition, the five per cent of 
imports applied only to products subject to the form ula. The products subject to tariff elimination 
were not concerned as indicated in footnote 9 which said "does not apply to those products included 
in the sectorial tariff elimination approach". In  response to a question raised regarding the 
beneficiaries of appropriate studies and capacity buildi ng, he drew attention to a sentence that he had 
deliberately included which indicated that studies and other measures would not be restricted in the very narrow sense to LDCs but would also take into account the concerns of other developing 
countries.  
 
1.126 With respect to some questions which were raised regarding the calculation of t
a the 
Secretariat would elaborate further on the e ffects of different methods of calculating t a in a transparent 
manner while taking into account problems which were posed by the different levels of 
disaggregation in Member's tariff schedules. In this re gard, the Secretariat would be very interested in 
receiving proposals from Members. With regard to questions raised about NTBs, the identification  TN/MA/M/8 
 Page 51 
 
 
process had to be completed before the Group could go on to define in a more precise way the various 
modalities that might be agreed upon. In response to a question as to the definition of newly acceded Members, the Doha declaration gave some guidance on this matter but it was up to the participants to 
make the decision themselves. With regard to a request for a simulation using the formula, the 
Secretariat had gone as far as it could with simulations  for the time being. To make a further step 
would require more guidance from participants and in particular with respect to the parameters to be 
used. Rates bound at zero given in the contex t of, for example, accession negotiations and 
renegotiations under Article XXVIII were by defini tion not autonomous and consequently had not 
been part of the credit scheme.  If there were ot her requests then they would have to be further 
discussed in the Group. In response to comments on the non-inclusion of erosion of preferences in the 
paper, while it was a serious issue for a number of  countries the way that had been proposed to 
address the matter would delay liberalisation which w as inconsistent with the letter and spirit of the 
WTO. Therefore, alternative means and innovative s uggestions would need to be made in order to 
address this serious issue.   
1.127 The representative of Egypt
 stated that  it would be useful to know whether specific treatment 
on erosion of preferences was being accorded in  the draft modality for the Negotiating Group on 
Agriculture.   1.128 The representative of Thailand
 stated that his delegation did not understand how the formula 
worked and it was for that reason that they had suggested that the Secretariat help Members by 
providing further explanations or simulations. It  was necessary to see the effect of different 
coefficients by using the actual tariff structure of each Member.   1.129 The representative of Mauritius
 stated that they supported th e sentiments expressed by Egypt 
regarding the question of preference erosion. The Chai rman's text had to reflect that this was an issue 
that needed to be addressed. Trying to address th e problem of preferences did not mean halting the 
process of trade liberalisation. It was a question of af fecting tariff cuts margina lly on certain items and 
maybe modulating the process but not halting it. It was his delegation's strong view that this had to be 
reflected in the text since it w as an issue that had support. 
 1.130 The representative of Pakistan
 requested clarification on whether there was any timeframe in 
mind for the identification and examination of the va rious types of NTBs. A decision had to be made 
as to which NTBs would be dealt with in a verti cal/horizontal approach, sent to other WTO bodies or 
dealt with through request and offer and that would be a huge exercise.  1.131 The Chairman
 stated that the categorisation of NTBs could start as soon as the Group agreed 
that sufficient inputs had been received. 
 1.132 The representative of the Philippines
 stated that if different valu es did not exist for coefficient 
B then support for the formula could dissipate. The integration of special and differential treatment 
was an integral part of the nego tiations and had to be negotiated in  the discussions before agreement 
could be reached on the modalities. In that context it was fundamental that B would be different for 
developing countries as a matter of sp ecial and differential treatment.  
 1.133 The representative of Uganda
 stated that the Chairman should address the question of 
preferences.   
1.134 The Negotiating Group took note
 of the statements made. 
  TN/MA/M/8 
Page 52  
 
B. T
ARIFFS  
- Incidence Of Non- Ad Valorem  Tariffs In Members' Tariff Schedules And Possible 
Approaches To The Estimation Of A d Valorem Equivalents(TN/MA/S/10) 
 
1.135 A member of the Secretariat  (Mr. J. Richtering) stated that document TN/MA/S/10 drew 
heavily on an earlier document " Ad valorem,  Specific and Other Tariffs: Background Paper by the 
Secretariat" (AIE/S5 February 1998).  TN/MA/S/10 showed the incidence of non ad valorem  duties in 
the final bound duties as recorded in th e CTS database and the incidence of non ad valorem  duties in 
the MFN applied tariff schedules as recorded in th e IDB. It showed the importance of these non ad 
valorem  duties in Member's tariff schedules, in partic ular in the Annex table 4 which showed the 
significant importance that these duties had in agricu lture but also in industry.  Non-agricultural 
products used to have a very large incidence of non ad valorem  duties. Annex Table 4 showed that 
only six HS chapters had non ad valorem  duties at all, leaving aside Switzerland which was a special 
case in that respect. Annex Table 2b also pointed out that ad valorem  equivalents were available for 
five countries but they were not available for all non ad valorem  duties, neither were they available 
for the year 2001. In addition the ad valorem  equivalents available were  only provided for the IDB, 
for the MFN applied tariffs. The paper pr esented two approaches to the calculation of ad valorem  
equivalence; the revenue method and the unit value method, and it showed the limitation and possible 
applications of these two methods.  1.136 The representative of Switzerland
 stated that they had problems with the two methods of 
calculation.  When the revenue method was applie d to the tariffs, taking into account preferential 
trade, the method understated the applied rate. This  was not an appropriate method of calculation if 
the bound rate was the basis of the negotiations. The unit value method was a more appropriate method but depending on the product, it did not yield stable figures. Applying it to homogenous 
products could give stable unique values but when  applied to products which changed according to 
quality or because of technological progress or changes in  the origin of the product, it had resulted in 
products changing value up to 100 times. This method would need to be refined in order to get a 
method which would better reflect the value of the specific duty. While the unit value method was relatively easy to apply neither of the two met hods was the correct methodology to apply and her 
delegation welcomed the proposal in the Chairm an's draft that Members could use another 
methodology as long as it was transparent.  
 
1.137 The representative of the United States
 stated that they were very comfortable with the 
approach proposed in the Annex and that the pa per was generally moving in the right direction. 
 1.138 The representative of New Zealand
 stated that they welcomed the proposal to convert non ad 
valorem  duties to ad valorem  duties and to bind results in ad valorem  rates.  However, they had some 
hesitation with the provision allowing Members to calculate their own ad valorem  equivalents with 
certain specified qualifications. If the Secretariat were to calculate the ad valorem  equivalents for all 
Members that had non ad valorem  duties then all Members would be able to have a high level of 
confidence in the consistency and the comparibility of  those calculations. It was important to be able 
to accurately and reasonably cal culate binding levels for ad valorem  equivalents and that was quite 
difficult with the revenue method. In addition, ther e would need to be a method that delivered proper 
ad valorem  equivalents for bound tariffs as well as applied rates. 
 1.139 The representative of the Philippines
 stated that Members were not being asked to change the 
method of imposing tariff measures, only that there was a need for a reliable, transparent methodology 
for use in the negotiations. It would be used as one of the elements in completing the proposed 
formula. The Secretariat had the responsibility to gi ve reliable, transparent, comparable and stable 
criteria to Members.   TN/MA/M/8 
 Page 53 
 
 
1.140 The representative of Costa Rica  stated that the calculation of ad valorem  equivalents was key 
to the full achievement of two clearly differe ntiated and separate objectives. The first objective 
concerned the application of various types of fo rmula, including the harmonization formula and the 
formula proposed in the Chairman's paper.  The proposed formula could not be applied without ad 
valorem  equivalents. The second objective concerned the way in which the tariffs would be expressed 
in Members' schedules. Costa Rica, as well as ot her developing and deve loped country Members 
endorsed the proposal to bind all lines exclusively in ad valorem  form. There were numerous systemic 
reasons justifying the substitution of non- ad valorem  tariffs. Such tariffs were non-transparent, 
penalized more effective and lower-cost producers a nd did not provide for a maximum percentage in 
their application in order to raise protection as prices dropped. They also tended to be used as part of 
the tariff escalation scheme, i.e. not only did the amount charged  tend to increase with the level of 
processing of raw materials, but the type of tariff  levied on a product with greater value added also 
tended to become increasingly complex. They had noted several cases in which a relatively low or 
zero ad valorem  tariff was applied on raw materials, speci fic tariffs were levied on intermediate 
products, and the final product was generally subject  to a mixed or compound tariff. When a highly 
sensitive product was exported, the final product woul d in all likelihood be subject to a technical 
tariff.  It was hardly equitable for some Members to  be using these types of tariffs in their schedules 
when the majority of Members used solely ad valorem  tariffs. In the interests of trade facilitation all 
non-ad valorem  tariffs of Members should be eliminat ed as there was no technical reason for 
maintaining them.  TN/MA/S/10 recognized the feasibility of calculating ad valorem  equivalents in 
most cases and recognised that the exercise would ha ve to be undertaken by only a small number of 
Members.  Costa Rica sought clarification from the Secretariat on what percentage of bound tariffs 
fell into the "computable" category and what percen tage would be "non-computable" according to the 
typology in Tables 1a and 1b.  Should a calculati on prove impossible in some cases because of the 
type of tariff used there would be very good reasons for this Group to carefully examine that type of 
tariff and convert it as soon as possible into ad valorem  terms.  It was very important that the 
methodology for the calculation of ad valorem  equivalents was unique, transparent, generally 
accepted and applicable by any interested Member, i. e calculations should be made on the basis of 
data available to all Members and in such a manne r that any Member wishing to verify a calculation 
could do so.  Any arbitrary or "watered-down" me thod of calculation should not be accepted.  This 
was the only way to ensure uniform, systematic and comparable results for all the Members involved. 
 
1.141 The Negotiating Group took note  of the statements made. 
 C. N
ON-TARIFF BARRIERS (NTB S)  
- Non-Tariff Barrier Notifications – Addendum  (TN/MA/W/25/Add.1) 
 
1.142 The representative of the United States  stated that at the April meeting of the NGMA a 
number of delegations had asked questions about th e US proposal for vertical NTB agreements as a 
negotiating modality.  They now wished to provide some clarification on how this vertical modality 
might work.  Many industries were highly globali zed and they wanted assurance before tariffs were 
liberalised that NTBs which were critical to their market access would also be  addressed so that they 
would achieve real market access at the end of the negotiations. Packaging together NTBs of interest 
to a single industry with a vertical approach was a useful way of engaging industry in the negotiating 
process and would put them in a position to sell the results to industry. In their NTB modality 
proposal, the United States had suggested textiles and clothing and automotive products as priority 
sectors for the vertical approach but there were other highly globalized industries for which this 
approach might be equally useful, for example, several Members had mentioned fish and forest 
products as possible candidates and the chemical indus tries were also interested in the vertical 
approach and were already discussing it with their industry counterparts.   1.143 A vertical NTB agreement would be highly flex ible. It could include a mix of plurilateral and 
multilateral elements and in addition, individual Members could customize the vertical package by TN/MA/M/8 
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adding bilateral elements. The multilateral elements could be negotiated horiz ontally either in the 
NGMA or in other negotiating groups, as could the plur ilateral elements. Participation in the vertical 
NTB packages was also flexible. Multilateral aspects would clearly involve all Members, however, 
the package might also include plurilateral and bila teral elements. There would need to be a core 
group of countries for each of the plurilateral elements but  participation in the various plurilateral 
agreements within a single vertical agreement might  not involve the same exact number of countries. 
There could be several different plurilateral agre ements within a single vertical agreement which 
would have different participation. All agreemen ts within a single package whether they were 
multilateral, plurilateral or bilateral would be a pplied on an MFN basis and there would be no re-
opening of existing agreements through the protocol agreement process. With regard to the role of the 
NGMA in the vertical agreements it would be up to interested Members of this NGMA to identify the 
elements of a particular vertical package, for ex ample, customs documentation, licensing, standards, 
etc. It would be more appropriate for some of t hose issues to be addressed elsewhere and appropriate 
transparency mechanisms would have to be devised , as already discussed for NTBs more generally. It 
would be appropriate to deal with other of the issues in the NGMA. At the end of the negotiating 
process, the Group would have two tasks:  to re-pack age the elements of the vertical NTB agreement 
including the results of the work of other comm ittees or other negotiating groups; and to devise 
appropriate mechanisms for achieving commitments  made. This could take the form of a short 
summary with the various elements listed, whether ea ch element was multilateral, plurilateral, etc. and 
include a list of the signatories to each plurilateral agreement.  
1.144 The representative of New Zealand
 stated that there were a couple of details on the treatment 
of NTBs within the Chairman's paper that needed further examination.  Regarding the proposed 
preliminary process of identification/categorisation, this could be more procedurally heavy than was required and the limited time available to the Group could become taken up in that process, leaving 
insufficient time to address the substance of the issu es. On the other hand there was a need to ensure 
sufficient transparency about the process and the specifics of what would be addressed. A workable, 
practical process had to be found that would put mo re weight on a proponent driven process including 
the identification of specific NTBs. Their second concern was regarding the suggestion that participants should agree on selected NTBs to be ne gotiated. Ministers had already agreed in general 
that negotiations should be conducte d to reduce or eliminate NTBs and against that background it may 
not be necessary to have an additional step of Members agreeing to negotiate on particular NTBs. 
They were unsure about sending NTBs via the TNC to WTO bodies which did not have a mandate for 
negotiations as it  could have some consequences fo r those agreements where there was  no mandate 
for negotiations.  1.145 The Negotiating Group took note
 of the statements made. 
 
D. CONSIDERATION OF DOCUMENTS SUBMITTED BY PARTICIPANTS AT OR SINCE THE  GROUP 'S 
LAST MEETING  
1.146 The Chairman stated that five papers had b een submitted by participants at or since the last 
meeting.  He invited those Members who wish ed to do so to introduce their papers.  
 
1.147 The representative of Chinese Taipei  stated that they as well as other Members had noted the 
contribution issues facing newly acceded Members in the Doha negotiations. The average tariff rates 
for industrial products of these countries were between four and nine per cent, with almost all of the 
tariff lines bound while at the same time some deve loped Members did not have their tariff lines close 
to being fully bound. Newly acceded Members had to participate fully in the Doha negotiations and 
make contributions to further advancing the liberal isation of the multilateral trade system However, 
newly acceded Members faced difficu lties when it came to fulfilling Doha commitments so soon 
after, or even in the same timeframe as the im plementation of their WTO accession commitments. To 
address this issue, Members had suggested that newly acceded Members could make a small tariff 
concession and receive a longer implementation period. The next issue was how to decide the length  TN/MA/M/8 
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of the grace period and in this regard, Chinese Taipei proposed a six-year grace period between fulfilling their respective accession commitments specified in their tariff schedule and embarking on 
the implementation of the Doha commitment. Accord ing to Article II of the Protocol of the GATT 
1994, "Tariff reductions agreed upon by each Member  shall be implemented in five equal rate 
reductions and the final rate shall become effective no later than the date four years after the date of 
entry into force of the WTO agreement". In othe r words, Members as of 1995 should complete the 
fulfilment of their concession commitments made in the Uruguay Round by 1 January 1999. On the 
other hand, the mandate of the Fourth Ministerial Conference was for WTO Members to finish negotiations by 1 January 2005. Therefore, existi ng WTO Members had not been required to fulfil 
any concession obligations for most non-agricultural products between 1999 and 2005 and as a result, 
their national industries would have enjoyed a grace pe riod of 6 years before having to adjust to a new 
round of liberalisation concessions. Taking this in to account it was only fair that newly acceded 
Members be given a similar period to adjust their industries. If newly-acceded Members could have a grace period of six years, on a product-specific basis, from the year of completion of their accession commitments to the year that implementation of Doha commitments began, it would both help the 
industries of newly acceded Members and the su ccessful completion of the current multilateral 
negotiations on non-agricultural trade by their governments.   1.148 The representative of Latvia
 stated that they considered th e draft elements as a good basis for 
further work.  They welcomed the structure of the proposed draft elements using formal bound rates 
as base rates and the conversion of non ad valorem  tariffs to ad valorem  duties. However, they had 
concerns regarding the flexibility for developing countries to leave five per cent of tariff lines 
unbound. When Latvia joined the WTO they had bound all tariffs at levels which were close to 
applied rates. They also had concerns relating to " t a " and found it very hard to accept any average as 
a determinant of a final tariff rate. As a result of  such treatment, Members with lower tariff rates 
would be hit harder than other Members, and newly acceded Members were among those countries 
with low average tariff levels. Therefore, Latvia  sought a formula which would not include tariff 
averages. They were looking for greater market ac cess in their export markets as a result of these 
negotiations and not for some protection on the basis of their recent accession.  1.149 The Negotiating Group took note
 of the statements made. 
 
E. OTHER MATTERS  
1.150 No items were raised under Other Matters 
 
II. OTHER BUSINESS  
2.1 No items were raised under Other Business. 
 
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