RESTRICTEDWORLD TRADE
ORGANIZATIONTN/MA/M/5
11 July 2003
(03-3741)
Negotiating Group on Market Access
MINUTES OF THE MEETING
Held in the Centre William Rappard on 2-3 December 2002
Chairman: Ambassador P-L. Girard (Switzerland)
Subjects discussed             Page
1. Consideration of possible modalities for negotiations on market access (tariff
and non-tariff barriers) for no n-agricultural products.........................................................1
2. Other Matters................................................................................................................ ..........44
3. Stock-taking of the work in progress ....................................................................................44
4. Establishment of the calendar of meetings up to 31 May 2003...........................................45
5. Annex (EC PowerPoint presentation) ...................................................................................46
_____________
The Chairman noted that the agenda for the meeting was contained in document
WTO/AIR/1976 dated 22 November 2002, and an  annotated agenda had been circulated as
JOB(02)/191.
The Negotiating Group adopted the agenda as circulated in WTO/AIR/1976.
1. Consideration of possible modalities for negotiations on market access (tariff and
non-tariff barriers) for non-agricultural products
1.1 The representative of Switzerland stated that the objective of the modalities should be to
ensure the greatest possible reduction of tariffs across all Members.  The best way to achieve this was
to use a harmonizing formula which would be tran sparent and which would reduce tariff peaks, high
tariffs and tariff escalation substantially, i.e. more than other duties.  In order to fulfil the Doha
mandate with regard to development objectives, the formula should be modulated to take into account
different levels of development, of trade participation and of competitiveness of WTO Members. The
formula should be supplemented in parallel by initiatives which would go further and would enhance
liberalization even more, be it harmonization at a very low level or an elimination of tariffs.  SomeMembers had made proposals in this respect in their recent submissions and Switzerland was studying
them.  In this context, Switzerland felt that special consideration should be given to pharmaceutical
products referred to in the Doha Declaration on TRIPS and public health.  Finally, for a very limited
number of sensitive products, a request-offer approach could be envisaged.  This possibility, however,
could not have the effect of sheltering specific sectors from liberalization, especially if these sectorsconcerned products of particular interest to developing and least-developed countries.  On the subject
of "low" duties, such duties had to be the subject of negotiations like all other duties, but their
elimination should be considered a concession like any other concession in these negotiations.
Regarding the basis of the negotiations, her delegation proposed the bound rate at the end of theTN/MA/M/5
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implementation period of the Uruguay Round, and the HS96 nomenclature.  However, with respect to
the latter point the results of the negotiations should be published in HS2002.  Regarding coverage,
the objective should be to bind all tariff lines of all Members, and in principle they should be bound at
the applied rate at the beginning of the negotiations, i.e. 2001. On staging, Switzerland favoured a
specific time-period, for instance five years combined with longer periods for major cuts on sensitiveproducts to developing countries. On initial negotiating rights (INRs), although INRs were not
applicable when a formula was used, it was an important issue for medium and smaller sized
economies when tariffs had been negotiated bilaterally. The agreed modalities should include that
INRs would be reflected in the final results of the negotiations, in those cases where they were
applicable.  On environmental goods, the discussion had demonstrated that it would be very difficult
to agree on a common set of criteria for the goods to be covered. Therefore the best way to proceed
would be to draw up a list of the goods to be cove red. This corresponded to the approach taken by the
ITA regarding product coverage. Such an approach would enable participants to cover those products
included in the APEC and OECD lists which they  deemed should be covered but would also go
further and could cover other environmental friendly products. This approach also ensured that the
interests of all Members were covered. For Switzerland, the part of the negotiations on market access
for industrial products was important as it enhanced trade liberalization while at the same time takinginto account some specific environmental concerns. Finally, on non-tariff measures, Switzerland had
sent a questionnaire to the business community in  order to get the information necessary on NTMs
which affected trade. Speaking from experience so far, she assumed that for a substantial part of the
problems it should be possible to come to a solution through bilateral negotiations between the
Members concerned.
1.2 The representative of Chile stated that his country had a very high level of ambition for these
negotiations.  Chile recognised that there were links between this negotiation and others, including
agriculture and rules, mainly anti-dumping.  The proposals made by New Zealand and Hong Kong,
China did point in the right direction.  Most particip ants were moving towards a fully liberalized trade
regime for goods on the basis of regional, sub-regional, transregional or plurilateral integration
patterns.  Chile's main concern was whether this liberalization should take place inside or outside the
framework of the WTO.  If it was inside the multilateral system, then distortions on, for example,
rules of origin which could result in a distortion of trade and an inappropriate allocation of resources
could be avoided.  On time-frames, there was a direct relationship between the level of ambition of
these negotiations and the time-frames to be established to implement their results. The longer the
time-frames the more ambitious participants could be. As regarded modalities for negotiations, themost effective, transparent and fair approach was the formula approach. This had to be applied across
the board to the non-agricultural sector without exceptions. As a consequence, Chile did not believe
that it would be fair to do this on the basis of averages, be they simple or weighted. A Swiss formula
approach would address higher tariffs more significantly, in other words an element of harmonization
would be included.  In addition it would make the negotiations simpler and easier. If participants wereto agree on a formula it would not be necessary to define such concepts as tariff peaks, tariff
escalation, high tariffs or environmental goods. There may be additional complementary approaches
such as a sectoral or request-offer approach that would make it possible to liberalize further and more
quickly.  The basis of the negotiations should be bound tariffs and in the case of unbound tariff lines
the applied tariffs in force at the time these negotiations were launched.  As for environmental goods,there was no commonly accepted definition. The definitions that had been suggested were arbitrary or
dangerous such as Production and Process Methods (PPMs).  The Ministerial Declaration referred to
environmental goods but nowhere in the Declaration was it said that there should be priority
liberalization of such goods over other goods in cluded in the negotiations. In other words, Chile
considered environmental goods to be on the same level as other goods and the same level of attentionhad to be accorded to both. As regarded environmental goods, there were environmental concerns and
interests but trade interests were also involved.  These environmental goods were processed, produced
and sold by companies. Obviously there was a profit to be made on them.  Thus those who wished a
deeper and speedier liberalization of environmental goods would have to give quid pro quo  in otherTN/MA/M/5
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sectors and other products in order to achieve mutually profitable results for the negotiations. As
regarded negotiations on non-tariff barriers (NTBs), the Group should avoid a duplication of work.
1.3 The representative of the United States was pleased to announce the US modalities proposal
for the negotiations on non-agricultural market access  which was an ambitious, far-reaching proposal.
It reflected a great deal of thought, hard work, consultations with civil society, and though political
decisions, by the entire US government. This proposal was a further demonstration of the US
commitment to continue to move the world towards free trade. The three elements of market access in
the Doha agenda – agriculture, services and non-agricultural goods – drove world trade, and they
constituted the core of the overall negotiations. The US proposal on non-agricultural market access
complemented the initial US contributions made in  agriculture and services earlier this year. Her
delegation looked forward to moving into a more intensive stage of negotiations. Her delegationintended to pursue all three market access areas with equal vigour. In the case of industrial and
consumer products, her delegation was proposing a different approach to that which it had pursued in
the Uruguay Round. This approach demonstrated her delegation's understanding of the limitations of
past experience, its efforts to meet the specific ma ndate set out in Doha mindful of the long history of
industrial tariff negotiations, and its commitment to moving this negotiation and liberalisation ofmarket access for non-agricultural goods forward in a definitive manner. Her delegation had listened
to the concerns of Members, particularly developing country Members, as it had developed its
proposal.  It was to be noted that the US propos al was comprehensive. It did not exclude any non-
agricultural product from the negotiations. As she had already noted, this was a departure from earlier
positions taken by her delegation, such as pursuing request-offer negotiations, which had resulted inexceptions, higher tariffs and escalation on some products and widely skewed schedules across the
membership. The US proposal aimed to ensure that market access opportunities were created for all
Members and that all Members participated in the li beralisation process. When it viewed the situation
of non-agricultural goods trade today, her delega tion believed that the most effective means toward
this end was the elimination of all non-agricultural tariffs and NTBs by all WTO Members. Herdelegation noted that some already had remarked about how ambitious this proposal was and reflected
concerns about whether it could be achieved. She had also noted that some other Members, including
both developed and developing Members, were attr acted to the idea of an ambitious goal. Her
delegation believed that Members should not let fears and protection stand in the way of solid
progress in liberalisation.  Her delegation was inspired further by several key facts: 1) as a result of
more than 200 regional or bilateral FTAs now in place, over 50 per cent of global trade was conducted
in a duty free basis, yet, according to the WTO Secretariat, only six per cent of duties were bound atzero in the WTO. This gap stood to widen after the implementation of near 50 FTAs that were
currently under negotiation. Developing countries were likely to be the most affected by resultant
trade distortions. Clearly the explosion of FTAs over the past decade was a recognition of the benefits
of liberalisation, including for developing countries. On a global scale, the World Bank estimated that
the complete elimination of all tariffs would generate income gains of US$ 500 billion for developingcountries. Nearly US$ 6 trillion in world goods trade would become duty free. Her delegation
believed it was time for the WTO to return to its core role as a central global liberalising force,
bringing benefits to all and had now to set the st andard for duty free trade, rather than lag behind
regional initiatives. The US  view was that a point had been reached in non-agricultural market access
where there was no other choice but to be ambitious. She hoped that others would explore this goaland the US approach to it with an open and creative mind. Continuing the positive momentum in this
negotiation was critical to driving other issues in the Doha agenda.
1.4 As to the modality, the proposal called for an elimination of all tariffs by 2015 using a simple
two-step approach. The first step called for WTO Members to cut and harmonise their tariffs during a
five-year period from 2005 to 2010. Specifically, WTO Members would: 1) eliminate all tariffs at or
below five per cent by 2010; 2) eliminate tariffs in highly traded industry sectors as soon as possible,
but no later than 2010.  The US written proposal also included the successful Uruguay Round zero-
for-zero sectors as well as those which were discussed during the Uruguay Round on which there wasTN/MA/M/5
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no conclusion. The US also was open to consideration of other sectors and possibly might table
additional sectors, for example, in the electrical and equipment sectors and fertiliser sectors; and 3) for
all other tariffs, apply a Swiss formula with a coefficient of eight which would reduce tariffs to less
than eight per cent by 2010. The second step would occur from 2010 to 2015 and called for all
Members to go to zero through equal annual cuts on all remaining tariffs. Reductions had to be basedon applied rates or final UR bound rates, whichever were lower.  In this regard, if this modality were
to be employed, the issue of base rate was less relevant. Finally, she stressed that negotiations on
specific NTBs had to take place concurrently. Tariff elimination could not be undermined by existing
or new NTBs. As her delegation reviewed its proposal on tariffs with US industry, it had consistently
heard complaints about NTBs and the need to ensu re that they were addressed in this negotiation,
particularly if an ambitious approach was undertaken. Her delegation would be offering more specific
thoughts on this critical component of the negoti ation and would provide an inventory of NTBs in
response to the Chairman's request by the end of January 2003.
1.5 Regarding how the US proposal addressed developing country concerns, while industrial
goods made up approximately 89 per cent of devel oping country exports this in no way diminished
the importance of the US efforts in agriculture and services. Through the US proposal, developingcountries would secure bound duty free market access for non-agricultural goods now entering the US
at tariff levels at or below five per cent, within five years. This represented a significant down-
payment on liberalisation that would help developing country trade almost immediately. Despite
impressions to the contrary, this component accounted for three-fourths of US imports from
developing countries and currently could result in  significant tariff charges for some developing
country exporters. For the remaining developing country exports that faced a US tariff above five per
cent, the US proposal would reduce those rates to le ss than eight per cent in five years. This fully
addressed the Doha mandate to reduce or eliminate tariff peaks, high tariffs and tariff escalation, all
primary concerns expressed by developing countries. However, access to developed country markets,
while important, was only part of the story. Under the US proposal, developing countries at variouslevels of development would be able to realise significant liberalisation with respect to trade with one
another, since 70 per cent of duties collected by developing country exporters were imposed by other
developing countries. This proposal promoted deve loping country interests and should be welcomed
as the modality that maximized market access opportunities for all Members, in particular developing
countries. In the US proposal, her delegation signalled the importance it attached to special and
differential treatment and the role that it could play in ensuring effective integration of developing
countries into the trading system. Her delegation was mindful, for example, of concerns expressedabout the need to maintain revenues. She noted that the international financial institutions, particularly
the IMF and World Bank could provide technical and financial support for countries willing to
undertake tax and trade reform efforts in the context of sound economic programs. Reforms of this
nature would not only help developing countries generate sufficient revenue more equitably, but
would improve resource allocation and reinforce their growth prospects. Her delegation was preparedto discuss further about how special and differential treatment could be provided in a manner that
would ensure revenues could increase, not decrease as a result of these proposals. In this regard,
however, her delegation noted the experience of th e Information Technology Agreement (ITA), where
for many Members, national revenues had increased significantly as a result of participation in this
zero initiative. However, in the US view, as a first step, general parameters and the direction thatMembers wished to pursue had to be established. It was her delegation's intention to work with
developing countries and LDC partners to identify more precise, customized approaches to special
and differential treatment to ensure full participation. Her delegation firmly believed this proposal was
fair. The US was putting its own sensitive areas – textiles, apparel, footwear, glassware – on the table
in an unprecedented manner. The US was also reflecting the knowledge that for many developingcountries, their priorities went beyond these traditional sectors to a much broader range of industrial
products. The US was matching this proposal with equally bold proposals in other areas of market
access.TN/MA/M/5
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1.6 The representative of India commented on the EC proposal and said that while it appeared
from the  graphic representation of the proposal made to the meeting that the formula would sharply
bring down high tariffs, it would not address peak tariffs effectively. Paragraph 5 of the proposal
suggested an additional initiative for products of interest to developing countries. While India
welcomed that the Communities were ready to address peak tariffs in these products, it had to bepointed out that while the formula sharply reduced high tariffs, its relatively easier treatment of lower
tariffs was favourable to developed countries. This was not appropriate and would be a negation of the
principle of less than full reciprocity in reduction commitments, which was an integral part of the
Doha mandate. Without prejudice to this position, on the additional initiative proposed for dealing
with textiles and leather, his delegation sought a clarification on what the EC meant when it said that
the tariffs should come within a narrow common range as close to zero as possible. He asked if this
meant that the end tariffs of all countries may not be  identical, for example, in the case of developed
countries, the tariff could be zero while in the case of developing countries it could be a different
value. Japan had also proposed a specific formula for tariff reductions but, as with the EC submission,
this formula had not built in the concept of less than  full reciprocity. Also with regard to the Japanese
formula, his delegation saw that there was discontinuity in the cutting ratio in Japan’s formula where
the initial tariff rate increased from 10 per cent to 20 per cent to 30 per cent. He sought clarificationon whether these were the different target tariff rates Japan had mentioned in its paper. If so, as in the
EU submission, if high tariffs were being tack led by a common formula which would be hard on
developing countries he queried the need for any additional measure to deal with tariff peaks. The
proposal by Oman was very interesting in that it recognised the concerns of developing countries and
their need for flexibility in order to address th eir developmental concerns. Oman’s suggestion for
dealing with tariff peaks in developed markets could effectively address the problem. The Mexican
paper had also made similar suggestions. India agreed  with Mexico that the current discussions should
lead to the establishment of a formula for global reduction of tariffs. Mexico’s suggestion for a linear
reduction seemed more appropriate for developing countries even though using such a percentage
reduction resulted in higher tariffs being reduced mo re significantly in absolute terms. The flexibility
Mexico had suggested in terms of sensitive items was very important for developing countries.
Therefore, India requested greater clarity with rela tion to the proposal for an average tariff reduction
of (X per cent).  His question was whether the X per cent would be the same for both developed and
developing countries alike. India also wished to know whether for tariff peaks the intention was to
bring down tariffs by the same percentage "X".
1.7 India noted with interest the elements of the US proposal and said that it was a radical
initiative that could perhaps be undertaken by the developed countries. However, as indicated in
India's comments on the EC and Japanese proposals, India found no provision in it with regard to
special and differential treatment for developing countries. Market access had to be calibrated to allow
for flexibilities to developing countries and not create economic, social or political unrest in them.
Tariffs were also vital for generating government revenues and for meeting developmentalexpenditure. Many developing countries, including India, had autonomously been bringing down
tariffs and this would continue but such action needed to be undertaken on an autonomous basis. In
fact, India saw the reference to Article XXVIII bis of GATT 1994 in the Doha mandate as precisely
intending to take account of such needs of developing countries. India also needed to reflect carefully
on whether the zero-for-zero or harmonisation appr oaches were developing-country friendly. India
had presented its initial thoughts on this issue in some detail in its paper TN/MA/W/10.
1.8 The Chilean paper rightly recognised that the zero-for-zero approaches resulted in the virtual
exclusion of developing countries. Calling upon developing countries to reduce their tariffs to zero
irrespective of their current levels of tariffs was clearly unfair and did not take into account thedevelopmental and fiscal needs of developing countries. Moreover, such approaches did not reflect
any special and differential treatment. However, this did not preclude unilateral action of duty
elimination by any developed country. The impact on developing countries needed to be carefully
examined. India did not share the argument outlined in the Chilean paper for binding unbound itemsTN/MA/M/5
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at their applied tariffs. In the earlier part of the same paragraph the Chilean proposal stated that bound
tariffs must be the basis for these negotiations. India wished to stress that unbound items were
generally far more sensitive than bound items in a country's tariff schedule and that flexibility was
required with regard to the level of bindings on such products. Additionally, if certain items were very
sensitive or were of strategic interest then flexibility should be given to keep them unbound.
1.9 Regarding the communication from Switzerland, India agreed that the bound rate should be
the starting-point for bound items. There appeared to be wide agreement on this point. India also
noted that the proposal recalled the main elements  of the Doha mandate and the reference in the
Ministerial Declaration to place developmental issues at the heart of the Doha agenda. However, it
was not clear to his delegation how it could be inferred that the mandate sought to ensure a
harmonising effect on tariff schedules of all WTO Members. More important to India was the need toaddress the developmental aspects clearly refered to in the Doha mandate. The reference to INRs in
the proposal was a new element and of some interest although it would have been useful if
Switzerland had indicated how it intended to carry out its proposal. With regard to environmental
goods, his delegation reiterated its position that th e OECD and APEC lists could not form the basis of
the negotiations as most of the products in these lists were industrial products, with at best a limitedenvironmental use. The acid test should be whether a product had a predominantly environmental use
and no more than a handful of products in the OECD  and APEC lists would meet this test. As for
NTBs, their identification was a necessary first step.  India had received the proposed format for
NTBs submission prepared by the Secretariat, which it noted was an indicative format, and would
examine it in detail. An issue of some concern to his delegation related to what were virtual NTBsoperating in many markets that were being prescribed not by governments but either by buyers acting
in concert or by other means and which had the same effect as NTBs. Some of these measures were
not even related to the product or its standards. His delegation wished to hear any suggestions on how
such measures could be captured in the Group's work.
1.10 In conclusion, he wished to stress the importance of factoring in what was clearly laid down
in Article XXVIII bis of GATT, namely that "the needs of less-developed countries for a more
flexible use of tariff protection to assist their economic development and the special needs of these
countries to maintain tariffs for revenue purposes". No one questioned the importance of progressive
tariff reductions which many developing c ountries including India had been undertaking
autonomously during the past few years and which India would continue to do. However, one should
not forget the fact that the dependance on customs revenue in developed countries was much less thanin developing countries. For the top 25 countries in the scale of development, the contribution of
customs revenues to total state revenue was less than three per cent. In respect of the US for example,
the Bureau of Economic Analysis figures showed that customs duties contributed only one per cent to
current revenue. Developing countries on the other hand derived a substantial chunk of their revenues,
in the region of 30 per cent to 40 per cent and in some cases even more, from customs revenues. Anyformula that was based on sharper reduction of high tariffs in comparison with low tariffs would
imply that developing countries would have to sacrifice a much higher proportion of their total
revenues than developed countries which in effect was tantamount to going against the principle of
less than full reciprocity. Any such result would have an adverse impact on the scarce resources of
developing countries resulting in higher fiscal defi cit and lower availability of funds for infrastructure
building and social services. All developing countries should therefore be extremely careful while
evaluating such proposals and the impact they were likely to have on the development process.
1.11 The representative of New Zealand wished to focus on the US proposal.  This was not
surprising in light of New Zealand's own proposal  for eliminating non-agricultural tariffs which was
introduced at the previous meeting.  The US proposal shared with New Zealand one central
overarching goal which was "putting the WTO back as the central globalizing force for the
liberalisation of trade".  It deserved very careful reflection. He was surprised to see the US proposal
for the simple reason he did not think that there c ould be an internal consensus inside the US to putTN/MA/M/5
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forward a proposal as bold as this.  It was an ambitious proposal and the real question was whether it
was realistic. This, after all, was the question raised with respect to New Zealand's own concept paper
suggesting that the time for elim inating industrial tariffs had come.  While it was not realistic to
imagine agreement within the next 6-12 months on such a goal, it was a very different question when
looked at as a goal for the end of the round. He recalled that the basic lesson of the Uruguay Roundwas that participants had built ambition to enlarge the package to create more trade-offs and had
expanded the vision for that negotiation. In terms of being realistic, if a participant, at the outset of the
Uruguay Round, had proposed comprehensive tariffication of all agricultural quantitative restrictions,
the capturing of export subsidies, the binding of dispute settlement rules and the replacement of
GATT with a new institution other participants would have called these proposals unrealistic.  So,
such a goal of zero duties was not realistic now because it clearly went beyond the negotiating
instructions of the large majority of delegations. Several comments had been made on the fact that theUS proposal was a self-serving proposal.  He reflec ted on that statement in terms of New Zealand's
own proposal.  Was the proposal by New Zealand self-s erving?  It had taken many months to steer the
concept through New Zealand's tariff peak industries of  inter alia  textiles, clothing and footwear.  It
had caused a lot of political pain and eventually ended up with the Council of the CTU, New
Zealand's main trade union body, disassociating itself from the government as well as some otherlobbies.  So when New Zealand had put forward the proposal, he did not get a sense that it was self
serving.  When he applied the same test to the US he looked at, for example, the reaction of the textile
lobby which was summarized in the journal "Inside US Trade" where it stated that "the American
textile manufacturers institute blasted the proposal this week. It said that the proposal put at risk one
million US textile and apparel jobs"  He recalled that the figure in the World Bank was that for everyjob protected in the EU, Canada and the US textile and clothing sectors, it was at a cost of 35 jobs in
the developing world.  So assuming the figure was right, it might mean the loss of 1 million jobs in
the US, but 35 million jobs in the developing world would be created.  Whether the figure was
accurate or not, it was quite clear that to categorise these proposals as self-serving was stretching the
point.  If the US proposal had been self-serving, then it would have required the liberalisation ofdeveloping country tariff peaks down to the level of the US tariff peaks, it would have indulged in an
exercise of cherry picking of various types, it would have chosen a formula the target of which could
have been met without cutting into defensive sectors and most important of all it would have  used the
request-offer as a central modality because of the political and economic power of the US.
1.12 On special and differential treatment, this was a difficult issue that needed to be solved not
just in this Negotiating Group, but across all Negotiating Groups. Was special and differentialtreatment achieved by minimising the liberalisation of developing countries' protective frontiers or
was it to be achieved by maximising economic oppo rtunities for developing countries? This was not a
black and white matter. When one looked at the level of integration of developing countries into the
global trading system, there was need for greater flexibility. So, on that aspect of the development
agenda, the US proposal was a bit light.  However, the US proposal did state that "As a first step inthe negotiations, Members should secure agreement on the modalities and a common vision for the
result of our negotiation.  Once achieved, WTO Members should turn to more precise and customised
approaches to ensure participation by individual developing countries, particularly the least-developed
country Members, consistent with their individual development needs."  Most professional negotiators
should be capable of interpreting what that meant.  His authorities had felt that they could be a littlemore forthcoming in their version of the tariff el imination proposal – precisely to meet at least one
concern relating to revenue issues. So, New Zealand had proposed that any contribution from LDCs
should be voluntary. From a long-term development prospective, relying on revenues from
introducing distortions in the trading framework was not a long term solution. The second aspect of
development was the creation of trading opportunities and the US had contributed to this developmentaspect. Like New Zealand's own more modest proposal, putting forward all protected sectors on the
table was as large a contribution as any a country could make to the process of development
especially when the sectors were of primary interest to developing countries. So would developing
countries say now that this was a tactic, that this was not realistic?  It required very careful reflection.TN/MA/M/5
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1.13 Turning to the most difficult and uncomfortable political fact of all which had been discussed
extensively, the implications that developing country trade barriers were a larger problem for
developing countries than developed country trade barriers, he said that this was a very sensitive
matter.  However, such a negotiating round did not happen frequently and as indicated by Chile, the
question was not whether this would be done or not, but whether this would be done multilaterally orthrough a network of regional agreements. Those developing countries which were very concerned
about the erosion of preferences through multilateral liberalisation needed to reflect on this central
fact. This was going to happen as these regional agreements proliferated. If the US were giving a set
of countries preferences and was simultaneously offering regional trade agreements to a whole series
of other trading partners, it was, by definition, inevitable that those preferences would be reduced over
time.  The fundamental question for all Members was whether this was the most efficient way to do it.
1.14 His delegation saw two types of proposals.  Those that fell into the traditional mercantilist
mode which meant putting forward a position in which the targets could be met without doing much
to the most protected sectors. There were a number of such proposals. Then there were the
comprehensive proposals.  There were also statements by a number of delegations that pointed in this
direction such as that from Hong Kong, China.  Switzerland's, Chile's, Mexico's and New Zealand's
proposal could also be put in this framework.  It  would also include the EC and the US proposals.
The interesting question from New Zealand's perspective was how different was the EC proposal from
the US proposal?  First of all both of these major trading entities had to be congratulated for putting
forward comprehensive proposals that would involve adjustment by their most protected sectors in the
non-agricultural area.  The EC proposal was somewhat less ambitious with respect to tariff peaks. Forexample if one looked at the tariff peak of 20 per cent, under the EC compression proposal this would
move to 12.2 per cent and under the US proposal it would move to 5.7 per cent. So, there was a high
level of ambition in the coefficients and the technical structure of the US proposal.  However, one
could say that the proposals were pointing in the same positive direction. There was one particularity
of New Zealand's exports in non-agricultural trade where it had a considerable number of items thatfell into a tariff range from 5 per cent to 10 per cent.  By definition, the approach that the EC had
chosen did rather less there but nevertheless it woul d result in some improvements. The two proposals
were very encouraging, they were not self-serving, and they both pointed in the same direction.  They
were consistent with the overriding reason why this institution exists. The question as to whether at
some future point the EC proposal could be modulated  to go a step further was an interesting one.  It
was not necessarily inconsistent to think that this proposal could be developed in a more ambitious
direction.
1.15 With respect to the choice of modalities, one of the main reasons why New Zealand favoured
the ambitious proposal of tariff elimination, accepting that further flexibilities for developing
countries had to be defined, was that it facilitated a whole range of negotiating problems that could
arise in choosing modalities. For example, the use of bound versus applied rates. One thing that NewZealand did not agree with in the US proposal was the US decision to base reductions on applied rates
as of 1 January 2001 or the Uruguay Round final rates whichever were lower.  Participants needed to
reflect more carefully on this but his delegation believed that the negotiations should be based on
bound rates and New Zealand, like some developing countries, wanted credit for autonomous
liberalisation. If one were to look at New Zealand's tariffs on automotive vehicles for example, thebound tariff rate was 55 per cent, and the applied rate was zero per cent. New Zealand wanted some
credit for that.  But the point was that once the objective was the elimination of duties, base rates
became a very small issue. He fully understood those delegations, such as Canada and US that had
argued for the use of applied rates, because they wanted to ensure that what looked like a very
significant tariff cut actually could be said to liberalise trade.   In certain situations, where there was alarge gap between the bound and applied rates, such as was the case in New Zealand's tariffs on motor
vehicles, elimination of the bound rate would be required to reach the level of applied rates. So there
was a legitimate concern.  The second example concerned the front loading of export opportunities for
developing countries. If the Group agreed on this long-term objective of tariff elimination whichTN/MA/M/5
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involved a huge contribution from everybody then it would be politically very straightforward to
achieve a significant and large front loading of export opportunities in any formula that the Group
might negotiate. In short, the choice of modalities was very much facilitated by having this unifying
objective.
1.16 The representative of Uruguay stated that with regard to the Chile's submission, Uruguay
shared the views and concepts set out therein. First,  Uruguay shared the very high level of ambition to
be given to the negotiations.  For this purpose, it was vital that participants accepted a Swiss type
formula. Second, Uruguay agreed with some of the a dditional approaches to the Swiss formula. Third,
Uruguay wished to use bound tariffs as the basis of the negotiations. Fourth, there had to be a
correlation between the level of ambition and deadlines. The more ambitious the expectations the
longer had to be the time-periods for implementation.  Fifth, Uruguay also recognised that there werelinks between the level of ambition in these negotiations and the level of ambition in other
negotiations such as agriculture and rules.  Uruguay also agreed with the views expressed regarding
environmental goods and NTBs. As a result Uruguay welcomed Chile's paper which seemed to be a
good basis for future discussions.  On the US paper, Uruguay agreed with the views regarding the
high level of ambition that had to be given to these negotiations for two reasons: 1) Ministers hadagreed on that in the Doha Declaration which called for significant reductions and removal of tariff
and NTBs.  The US proposal fitted in very neatly with that ambition; 2) Uruguay had embarked on the
negotiations with the view to setting up a free trade area for the Americas and with the EU.  Another
point was that the world trading situation was facing very poor growth prospects for the coming years,
therefore something had to be done to improve worl d trade generally in order to convert it into a
driving force for better world economic growth. Every effort had to be made to liberalise trade with
that purpose in mind.
1.17 Turning to the US proposal, he said it pointed in the right direction and although there were
differing views on some aspects, it would be useful  to get the discussion moving forward. However,
there were two important qualifications that he wished to make on the proposal. First, this type of
proposal could be accommodated by Uruguay if the same level of ambition was applied to all sectors
including agriculture. The average tariff on agricultural goods was twelve times that of industrial
goods. Tariff peaks and tariff escalation in the agricultural area were far more important than in
industry.  Uruguay's objective was to place agriculture on a par with industrial goods. This was a
minimum objective for Uruguay. Liberalisation had to move forward in parallel in both sectors.  The
US proposal on agriculture was ambitious but not as ambitious as its proposal on industrial goods.However, it was part of a series of proposals by industrial countries where the level of ambition on
industrial goods and agricultural goods was totally different. The first qualification Uruguay would
have on the US proposal, if it were to be implemented, was that it should try to bring into the
negotiation a certain amount of balance in ambition among all sectors. His second qualification on the
US proposal related to developing countries. In Uruguay's view the US proposal did not accommodate
the development needs of developing countries. It provided for longer time-periods to achieve full
liberalisation but it did not appropriately reflect and incorporate different levels of development of
Members or different levels of industrialisation.  The US representative had explained that the US was
determined to continue to negotiate with developing countries and he was sure that a number of
elements could be incorporated to reflect the specific interests of developing countries as thenegotiations moved forward.  On the Swiss proposal, the fact that Switzerland was in favour of a
negotiation based on bound tariffs and with harmonisation in view was commendable.  However, the
two qualifications he had made with regard to the US proposal also applied to the Swiss submission.
1.18 The representative of Singapore stated that the US proposal was positive and ambitious and
aimed towards a tariff free world, with a  parallel track for the elimination of NTBs. Singapore
particularly welcomed the US commitment that it would not exclude any industrial product from its
proposal.  In Singapore's view, the objective of a tariff free world was very much in line with
proposals by New Zealand and Hong Kong, China which sought to match regional and bilateralTN/MA/M/5
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initiatives.  It was one that was quite consistent with Singapore's own objective to see the eventual
elimination of tariffs and NTBs for industrial products. Singapore felt that a tariff free world might
become a reality eventually.  Singapore also felt that the proposals from the US, New Zealand, and
Hong Kong, China would stand to benefit all countries, developed and developing alike, as trade in
industrial goods made up a very significant proportion of world trade. Singapore noted other apparentsimilarities between the elements of the US proposal and elements in proposals by other Members.
For instance, the US and the EC proposed some form of harmonisation of tariffs to address tariff
peaks and high tariffs as well as elimination of low tariffs which would increase access to developed
country markets. The US and Japanese proposals proposed certain sectors for immediate reduction or
elimination including products that were covered under the ITA. Singapore was keen to see increased
liberalisation for trade in products under the ITA with perhaps the possibility of expanding product
coverage, for instance by including those that were contemplated under ITA II.  On the Swissproposal, one interesting element was its proposal to have modalities for INRs.
1.19 The representative of Korea stated that the US had proposed a new formula for tariff
reduction and elimination. Korea appreciated the US proposal for its boldness and unexpectedly high
level of ambition.  Without a doubt, tariff-free trade was the ultimate goal of market accessnegotiations on non-agricultural products. No country would reject such an idea in principle. But the
question was would it be possible for all WTO Members to support in reality.  Korea's average tariff
rate in non-agricultural products was below eight per cent and Korea did not have many tariff lines
considered as high tariffs or tariff peaks. Therefore, Korea's burden of tariff reduction or elimination
under the proposed US formula would not be as serious as one might anticipate if there was someflexibility in applying the formula. Each country, developing and developed country alike, had
various sectors or products with different kinds of sensitivity. Developing countries might have more
sensitive sectors or products of their own. Given such realities, Korea wondered whether WTO
Members, developing countries in particular, could accept a proposal for eliminating all tariffs with
no exceptions. Korea also wondered whether the proposed formula was fair enough in terms ofbalancing advantages or disadvantages among Members. The burden of tariff reduction on developing
countries through what the US called a "tariff equalizer" formula was far greater than on developed
countries, because the formula targeted developing countries with high tariff structures. Given the
already low level of average tariffs in developed countries, the burden of tariff reductions on the part
of the developed countries would be only minimal, except for a few sensitive sectors where tariff
peaks were prevailing. As emphasized by Korea at the previous meetings, modalities should be
designed to address tariff peaks of both developing and developed countries in a balanced manner.Korea had been working on a tariff cut formula based on this approach. But as internal consultations
on specifics of the formula were still underway, Korea was unable to submit its proposal before this
meeting. Korea hoped that, by the agreed deadline, Korea could contribute a proposal that it believed
was more balanced in addressing tariff disparities of both developing and developed countries.
1.20 The representative of the Slovak Republic speaking also on behalf of Bulgaria, Czech
Republic, Estonia, Hungary, Latvia, Poland and Slovenia stated that he attached great importance to
the further liberalisation of trade in non-agricultural products. The gradual liberalisation in the
industrial sector had been going on for decades now and these negotiations provided an opportunity to
carry forward this process in an equitable manner.  Compared to the agricultural sector, where the
substantial opening of markets started only after 1995, the liberalisation of trade of industrial products
should be speeded up.   The Members on whose behalf he was also speaking comprised of both
founding WTO Members and recently acceded Members which had undertaken considerable
liberalisation commitments. It was their clear expectation that the present imbalances in the openness
of industrial markets in various countries would be greatly decreased and that WTO Members with alevel of development comparable to these countries would also contribute to this process. Turning to
some specific issues, product coverage had to be comprehensive, without a priori  exemptions and
aimed at a substantial reduction of tariffs, in order to achieve further improvement in market access.
The aim of the negotiations should be improved transparency and stability resulting from bound rates,TN/MA/M/5
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reduction or elimination of tariff peaks, high tariffs and tariff escalation. Comprehensive coverage
was of utmost importance for the predictability of the tariff regime and for the functioning of the
whole system. Scope of bindings had to be improved. These Members were ready to fulfill this
ambitious mandate and commit themselves to reach improved market access through tariff reductions.
On modalities, they favoured a formula approach that would best ensure comprehensive productcoverage and address issues like tariff peaks, high tariffs, and tariff escalation. Such a formula
approach also had to be flexible enough to take into account the different levels of development and
competitiveness of WTO Members. The difficulties of LDCs and other WTO Members with lower
levels of development were understood and less stringent obligations would be expected from them.
On the other hand, he could not support an understanding of special and differential treatment which
would mean that competitive developing countries with highly developed industrial sectors did not
open their markets to an extent comparable with the commitments of the countries on whose behalf hewas also speaking. These elements needed to be fully reflected when establishing modalities.
Regarding the basis for the negotiations, he proposed the use of final bound rates in Members'
schedules. With regard to the NTBs, he supported the reduction and elimination of these trade
distorting measures. The starting-point should be the identification of the concrete problems that
Members faced.
1.21 The representative of Hong Kong, China stated that he could see some common ground
emerging from the proposals on the table. For instance, he noted that there was general agreement that
non-agricultural market access was germane to the core business of the WTO. There were high
ambitions for these negotiations and he noted that most Members were mindful that the liberalisationprocess had to take into account the development needs of countries and that the outcome had to be
beneficial to all Members.  Obviously an overall target for the negotiations had to be set and this
would guide the discussions on the detailed elements of modalities. In this regard, Hong Kong, China
was encouraged by the number of proposals includi ng that from New Zealand, United States and his
own delegation that had set tariff elimination as a target.  Hong Kong, China saw merit in having such
an overall target. It was indeed timely to do so especially for developed Members who could set an
example for developing Members. In return, developing Members were expected to commit to
substantive and progressive reduction of tariffs in th is Round with the view to ultimate elimination in
the longer term. This was indeed an ambitious approach but as was so eloquently argued by the
representative of New Zealand, he did not think that such an approach was unrealistic. It was against
this background that Hong Kong, China had put forwar d the two-stage approach in its proposal. In the
first stage, Hong Kong, China had proposed that Members follow a formula approach to reduce or
eliminate tariffs immediately upon the conclusion of the Doha negotiations. Developing Members
would be subject to a smaller reduction. In the second stage, Hong Kong, China proposed that
developed Members eliminate all remaining tariffs within a reasonably short period of time, for
example five years, whereas developing Members continue to reduce tariffs over a longer time-frame
by re-applying the formula. Hong Kong, China's proposal fulfilled the mandate of the DohaDeclaration by addressing products of export interest to developing economies and by providing
special and differential treatment for developi ng and LDC economies, including less than full
reciprocity in reduction commitments.
1.22 Turning to the proposals introduced at this meeting, he noted their high level of ambition.  He
was very encouraged by the US proposal which was even more specific than Hong Kong, China's
proposal in setting a clear time-frame for elimination of tariffs by all Members. Overall, Hong Kong,
China welcomed the US proposal as an ambitious one. In particular, Hong Kong, China welcomed the
suggestion that no single product would be excluded in the elimination of tariffs of five per cent or
less; the elimination of tariffs of highly traded goods and the harmonization of tariffs to less than eightper cent by 2010. Hong Kong, China noted that the harmonization of tariffs to less than eight per cent
and elimination of tariffs of five per cent or less would benefit all Members.  However, it was not
clear how the US proposal addressed the mandate of special and differential treatment and less than
full reciprocity in reduction commitments. Another preliminary observation was that while the USTN/MA/M/5
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proposal suggested fast-track zero-for-zero initiatives  for some sectors, it seemed to his delegation
that those were not necessarily products of significant export interest to developing Members. One
obvious omission in this regard was the textil e, clothing and footwear sector.  He requested
clarification on a couple of technical points regarding the US proposal: 1) what were the modalities
for tariff reduction from the conclusion of the negotiations, presumably 1 January 2005 to 2010?Should Members follow a linear reduction or wait until 2010 to eliminate the duty? 2) Applying the
tariff equalizer formula to a duty of for example, seven per cent would result in a duty of 3.7 per cent.
Would tariffs on these products be eliminated immediately in 2010?
1.23 The representative of Costa Rica welcomed the thought-provoking views put forward by the
United States, which, as he understood, concurred with those expressed by New Zealand at the
previous meeting.  Costa Rica saw these proposals as a constructive step towards fulfilling theambitious negotiating mandate set out in paragraph 16 of the Doha Ministerial Declaration.  He
wished to ask a preliminary question of the Un ited States.  Paragraph 8 of the US document,
describing step 1 and the elimination of tariffs lower than five per cent, implicitly suggested that all
non-ad valorem  duties would be converted to ad valorem  equivalents in order to apply such criteria.
He wished to receive confirmation that his understanding was correct.
1.24 As regarded the proposal made by Korea at the previous meeting on the definition of "tariff
peaks", Costa Rica wished to use a few figures to illustrate its concern in this respect.  Korea proposed
to define tariff peaks as tariffs "equivalent to or higher than X per cent".  In Costa Rica's opinion,
Table 8 in document TN/MA/S/4/Rev.1/Corr.1 was most useful in estimating the potential level of theX per cent in question.  According to the table, if the international definition of tariff peaks (i.e.
X=15 per cent) were to be adopted, 57 Members, all of them developing countries, would have more
than 50 per cent of tariffs above that level.  This meant that over 50 per cent of their tariff levels
would be considered "tariff peaks".  The table's simple average duty column was also very useful in
assessing the potential level of the X per cent in question.  It showed that, for 87 of the 144 Members,the average tariff level was higher than 15 per cent.  For 74 Members, i.e. more than half of the WTO
membership, the simple average of non-agricultural bindings was above 20 per cent.  If one looked at
higher levels, 59 Members had a simple average of more than 30 per cent, and 35 even stood at over
40 per cent.  If one considered that these simple averages did not include unbound levels or non- ad
valorem  duties (NAV), both of which were, in Costa Rica's view, tariff peaks, then obviously the
chances of agreeing on an X per cent figure that even came close to 15 – or any other relatively low
figure – were very slim indeed.  Therefore the question regarding the use of agreeing on such adefinition could be legitimately asked.  As a result, Costa Rica concurred with those delegations
which felt that it would be best not to attempt to define these elements in explicit terms but to
establish a formula that came to grips with these pr oblems in mathematical terms.  For instance, the
Swiss formula was a mathematical tool for dealing with tariff peaks, high tariffs and tariff escalation
without resorting to definitions.  If Members nevertheless considered it necessary to have a definition,Costa Rica thought that it should be of the type that Korea proposed for high tariffs, for example "Y
times the national average";  or a criterion similar to that used by the Secretariat in defining "national
peaks" in its document.
1.25 As regarded Japan's proposal, Costa Rica appreciated the clarification of the formula in
document TN/MA/W/15/Corr.1.  Costa Rica viewed the proposed formula as a constructive step
towards the implementation of paragraph 16 of the Doha Declaration.  Despite the clarification
provided, Costa Rica still failed to understand the reason why the " α = 0.3" component was added at
the end of the formula.  As he saw it, its sole function was to increase the result by 0.3 per cent in
order to prevent certain levels from reaching zero per cent.  What purpose would this serve?  CostaRica also requested Japan to explain how the "t
0" would be calculated, and what would happen in
respect of tariff lines with no imports.  Since import weighted tariffs were being dealt with would one
be looking at a zero base rate for these lines?  In other words, would application of the proposedTN/MA/M/5
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formula mean that all tariff lines with no imports be bound at zero per cent?  And if not, Costa Rica
wished to know what impact the form ula would have on such tariff headings.
1.26 Costa Rica welcomed Switzerland's recent proposal, which appeared to be very constructive
and pragmatic.  Costa Rica also agreed with a number of aspects of Chile's proposal.
1.27 On bindings of tariff levels and in reference to what the representative of India had said about
the subject, Costa Rica considered that all non-agricultural products of all Members should be bound
without exception as a result of these negotiations.  Table 8 in the Secretariat document
(TN/MA/S/4/Rev.1/Corr.1) was most instructive in this regard.  Only 52  of the 144 WTO Members
had bound all their non-agricultural duties;   46 Members had bound less than 95 per cent of their non-
agricultural duties, including 33  Members for which less than 50 per cent of tariff items were
unbound.  In addition, 17 Members had bound less than 10 per cent of their non-agricultural tariff
headings.  Costa Rica was concerned about this situation, which ran counter to the transparency and
predictability that should prevail under the multilateral trading rules. Moreover, Costa Rica saw no
reason why a Member should have so many unbound tariff items, especially if it had no local
production under most of those headings.  Clearly, an unbound tariff was tantamount, in mathematicalterms, to a tariff binding equal to infinity, which (by any definition) was the highest of all tariff peaks
or high tariffs.  Costa Rica believed that the levels at which such products would be bound were
certainly negotiable and that the concerns expressed by certain Members could be accommodated in
these negotiations.  In this respect, Switzerland's proposal, as set out in document TN/MA/W/16, that
tariffs should be bound in principle at the applied rate, with the possibility of a binding at a higher ratefor a specified number of tariff lines, seemed to be a good way of accommodating such concerns.  In
any event, Costa Rica considered that all duties of all Members should be bound as a result of these
negotiations.  This was by no means a novel concept, since it already emerged during the Uruguay
Round in respect of the most sensitive of all products, i.e. agricultural products.  Costa Rica therefore
reiterated that binding of the tariff universe shou ld be one of the key outcomes of the Doha Round in
this area.
1.28 Finally, Costa Rica endorsed the comments made by the representative of Uruguay regarding
global balance in the Doha round of negotiations and the connection between these negotiations and
those on agriculture.
1.29 The representative of Colombia congratulated the US for its proposed objective of completely
eliminating tariffs from 2015 onwards in an exer cise that would involve all goods. In addition,
considerable progress was planned for 2010 which would bring a substantial improvement in export
access for developing countries to the US market. The least that participants could do was to make a
commitment to analyse the conditions under which the reduction formulas and harmonisation
formulas for tariffs would operate especially in those areas which were traditionally protected frominternational competition. However, Colombia had concerns regarding the base rates proposed by the
US.  He welcomed Members' views regarding NTB elimination, tariff rate quotas and non ad valorem
tariffs. Switzerland's contribution contained extremely valuable elements. One could begin to get a
glimpse of consensus around the definition of negotiating modalities. Colombia would emphasise as a
modality the application of a transparent formula which contained a harmonising element and whichwould be complemented by the use of the request-offer approach (for a limited group of products
which were sensitive) as well as sectoral initiatives or the zero-for-zero approach for environmental
and pharmaceutical goods. Colombia had also listened to different proposals for the treatment of so-
called nuisance tariffs which, according to Switzerland, should be the subject of negotiations.
Colombia wished to analyse these proposals further because rather than facilitating negotiations, theycould end up complicating them. Colombia welcomed additional information on the Swiss proposal to
take account of INRs in the negotiations. It was also important to hear Switzerland's view with respect
to non ad valorem  tariffs, less than full reciprocity in reduction commitments, and special and
differential treatment. Colombia shared a large number of the points which had been raised by ChileTN/MA/M/5
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in these negotiations, particularly in respect of th e role of regional initiatives and the correlation
between implementation periods and the level of ambition. Furthermore, Colombia believed that
Chile's view was correct on the use of a Swiss style formula rendering the exercise of defining tariff
peaks and high tariffs superfluous.  Colombia also agreed on the points made by Chile regarding the
disadvantages of using formulas which had as their objective a simple or weighted trade averagereduction. Finally, Colombia fully agreed with the points made by Costa Rica on tariff peaks.
1.30 The representative of the European Communities stated that in the power point presentation to
be made by his colleague the Group would see figures which had been used to illustrate the
Communities' approach. At this stage, the most important issue to discuss was the approach.  When
the time was right, the EC would table its proposal regarding the figures to be applied to this
approach.
1.31 Another representative of the European Communities, in making the power point
presentation,(see Annex), stated that her delegation's analysis was based on two specific questions:
"Where do we want to go?" and "How do we want to get there?" (Slide 1).  WTO Members would
have to reach a common vision on both points. On the question, "Where do we want to go?", this
depended also on the starting-point.  Members had inherited a certain legacy from the Uruguay Round
(Slide 2).  The legacy meant that developed countries tended to have almost 100 per cent bindings,
and an average reduction of 40 per cent or more.  Developing countries tended to have a binding
coverage which was on average 73 per cent, with an average tariff reduction of 25 per cent (these
figures were sourced from WTO studies).  Various criteria could be used to examine the profiles ofschedules namely (Slide 3): the scope of bindings;  the average duty; the binding overhang (i.e. the
difference between the bound and the applied duties); tariff dispersion; (tariff dispersion meant
several things, but it also meant the way schedules tended to be construed with eight-digit headings
which were sometimes far removed from the overall average of the schedule); High tariffs, tariff
peaks, tariff escalation – basically what the Doha mandate quoted.  The language in which these peakswere written into the schedules were also looked at i.e. whether they were written in terms of specific
duties or ad valorem  duties because the difference tended to be very marked for analytical purposes
but also in respect of a proposed formula; finally commitments entered into by Members in terms of
export restrictions or otherwise. These were the criteria that were examined and which enabled her
delegation to move towards reaching a proposal.
1.32 There were three principles at the heart of the Communities approach on which the
Communities could show no flexibility (Slide 4): 1) a balanced outcome; 2) achieving growth and
alleviation of poverty; and 3) a single undertaking.  With respect to the third point, the achievements
of GATT and  the WTO should be achievements for the whole membership. The Communities did not
like the idea of a two tier membership or second class membership.  Those three principles were the
core of the Communities' strategy. However, there were always constraints and three main areas ofconstraints could be identified: 1) the different tariff structures; 2) sustainable development.
Liberalisation was not something that her delegation conceived as attainable without keeping in mind
sustainable development which had several facets; and 3)  backsliding from WTO rules.  These three
areas of constraints created problems such as 1) high protection and sheltering; 2) economic
inefficiencies, lack of a level-playing field; and 3) lack of predictability. Sheltering might be the resultof high tariffs, tariff peaks or non-tariff protection, but it might also be due to the fact that
commitments which were undertaken were not being implemented, which was the notion of
backsliding from WTO rules.  There were economic inefficiencies resulting from high tariffs because
such tariffs protected industries that possibly should not be there. Economic inefficiencies could also
stem from a type of development which was not sustainable. Regarding lack of predictability, it mightbe due to the fact that a Member was unable to apply what it had committed to because its level of
development did not enable it to apply those commitm ents.   However, there was a distinction to be
made between sheltering which was prompted by a deliberate attempt to not abide by the rules that
one had committed to and the problem of  lack of development which made it impossible for one toTN/MA/M/5
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implement those rules. Specific solutions had to be devised for all these problems. In the EC's
opinion, the solutions came in the shape of: 1) a compression mechanism that would address problems
created in the traditional field of tariffs; 2) consolidation, i.e whatever was agreed had to be
consolidated. For tariffs there was the idea of bindings but  there could be other aspects; and 3) special
and differential add-ons  There had to be elements that addressed the problems created by a desire toattain sustainable development. So this was an explanation of the basis of the Communities' approach
which was why the formula was only one part of the equation.
1.33 Slide 5 showed old tariffs and the new tariffs resulting from the application of the
Communities' compression mechanism. The blue line (old tariffs) indicated where duties currently
stood.  Applying the compression mechanism one obtained the red line (new tariffs). One could also
see what the situation would be like with the US approach up to 2010.  However, no details had beenprovided by the US on the staging process but it was obvious that for 2015 there would be a dot at the
heart of the graph with respect to the US proposal.
1.34 Why did the Communities get to the compression mechanism which was one part of the
whole picture?  The Secretariat in its paper on formula approaches had shown the historicaldevelopment of formulas. Formulas could be line ar, harmonizing like the Swiss formula, or even
logarithmic. However, one needed to have a goal. The linear or the Swiss formula was more or less
process oriented (Slide 6). Depending on the tariff profile, such formulas had a certain impact. The
approach that the EC had put forward before the Seattle Ministerial Meeting had contained
deficiencies. However, there was one aspect of it that was interesting which was the idea of an endresult.  She had seen a similar idea in the proposal by Japan when it referred to a target rate. The
Communities had decided that a formula that mixed the two approaches was required i.e. a formula
that resulted in a reduction, but also one that ach ieved a certain result. In fact in the compression
mechanism,  the idea of the end or target rate had been kept in mind.  Slide 6 showed a pyramid.  The
compression mechanism formed the first building bloc k of the Communities' approach.  In this regard,
the Communities were willing to discuss the figure s to be included in it. The second building block
was called special and differential add-ons.  These were the solutions that the Communities were able
to conceive, but they were willing to listen to ot her ideas about how special and differential treatment
could be translated into the Communities' proposal. Then there was the third building block which
was that of deeper cuts. The Communities were interested in deeper cuts, for example on
environmental goods. That was the structure of the Communities' approach. Her delegation was
willing to discuss what should be included in eac h individual part. For the deeper cuts, proposals had
been tabled by Japan, Korea and the US of a sectoral nature. However, for the time being, the
Communities did not think that that was the priority.
1.35 Slide 7 showed a graph which contained figures.   There was a triple jump in that graph.  In
the first jump, there was the first stretch of duties which the Communities had taken to be between 0and 15 per cent, and as mentioned by the representative of India, the reduction on those duties was not
that sharp.  Her delegation was willing to discuss this. That first stretch had a reduction which was
more or less the reduction that had been achieved during the Uruguay Round. There was a second
stretch which started from 15 per cent.  This was the stretch that was of concern to her delegation
because of tariff peaks.  The Communities thought that 50 per cent could be the area where the thirdjump could start.  She noted that the compression mechanism was run on the basis of provisional
figures and all figures could be discussed. The formula had also been distributed, but the results
depended on where upper and lower bands were set.
1.36 On special and differential treatment, there was the compression mechanism, although for
specific products of interest to developing countri es, the Communities were willing to go further, and
move to a flatter range of duties. The Communities had indicated that such duties could be as close as
possible to zero. Since historically textiles, clothing and footwear tended to be engines of
development, her delegation had offered this possibility, this add-on.  On the phasing-in of results, herTN/MA/M/5
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delegation had specified that depending on the level of ambition, the Communities would be willing
to discuss the phasing.  In addition, by proposing to dismantle very low duties her delegation had
thought that it would be accommodating requests made by developing countries concerning some
specific sectors. In addition, all developed countries should be offering tariff and quota free access to
LDCs.
1.37 So, in short the proposal comprised of a whole series of elements that were of importance.
First of all, the compression mechanism applied to the HS heading. Her delegation did not want to use
averages, or an overall goal. The Communities wanted the compression mechanism to be applied at
the tariff item level so that sheltering was no longer possible. Furthermore, this approach applied to
bound duties. Depending on the binding overhang, the re duction would be more or less painful. These
two elements could not be forgotten.  Finally, there was a possibility for the Group to devise someguidelines for credit for autonomous liberalisation. She stressed that the Communities were proposing
a method, not figures. The figures were for the membership to choose.
1.38 The representative of Australia welcomed the tabling by the US of its proposal on market
access.  Market access was the core business for the WTO and for this round of negotiations. It could
be argued that the response by the US to the mandate in this particular sector would be critical to the
success of not just the non-agricultural negotiations but to all the market access negotiations. Of
course the US was not the only major Member whose responses across the three market access
negotiations would be judged as critical for the pace of the whole Doha agenda. Nor was it the case
that the success of these negotiations would be determined solely by the contribution of the developedcountries to these negotiations. The US paper made the point that developing countries would be
major beneficiaries from industrial market liberalisation. The econometric modelling of the kind
quoted in the US paper made it clear that, as most protection remained in developing countries, and in
view of the growing South/South trade, developing  countries themselves would benefit most if they
also participated fully in the liberalisation process.  To some this remained a counter-intuitive finding.
What was not counter-intuitive was that the politics of managing trade liberalisation was based on the
ability of negotiators to sell to their domestic constituencies the fact that all countries were engaging
in trade liberalisation and that markets in other Members were being opened up at the same time as
domestic ones were.  This message, at least, should be self-evident to all Members. Of course, the
special circumstances of developing countries, particularly the LDCs would need to be reflected in the
modalities that the Group ultimately agreed on for dealing with market access liberalisation.
1.39 Returning to the US paper, this appeared to be a comprehensive response from the US to the
Doha mandate and was particularly welcome against the background of what were sensitive sectors
for the US. It helped to set the benchmark for the levels of ambition in this sector. There were a
number of features in the proposal that Australia particularly welcomed: it conformed to the mandate
for the negotiations of being comprehensive with no exclusions; it aimed through a definite time-frame, for an initial tariff elimination including th rough the elimination of nuisance tariffs leading to
the elimination of all remaining tariffs by 2015; it called for the earlier elimination of tariffs in sectors
to be agreed but including a range of Uruguay Round and other sectors; it envisaged the participation
of all Members; it addressed NTBs on a parallel track, and flagged an intention to provide more
specific details on options for dealing with this important element of the mandate while at the sametime trying to identify specific NTBs of concern to the US.  Like others, Australia had recently
become aware of a number of the details of the US proposal and would want to find out more about
how precisely the US intended to operationalise its approach.  On the Japanese proposal, Australia
was interested in the observations by Costa Rica on the implications of the Japanese formula.
Australia shared some of those observations and would welcome a response by Japan.
1.40 The representative of Romania stated that during the present negotiations Members had to be
realistic and ambitious without forgetting the core development component of the Doha agenda.
Further liberalisation in the area of non-agricultural products was important. Romania stronglyTN/MA/M/5
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supported the idea of starting these negotiations from the levels bound in the Uruguay Round and
using 2002 or 1996 HS nomenclature. As far as the scope was concerned, it was important that all
products were covered here including textile and clothing. Tariff peaks and tariff escalation were to be
addressed with the view to their elimination. Romani a was in favour of a formula approach that would
best ensure both comprehensive product coverage and address high tariffs, tariff peaks and tariffescalation. The formula identified as appropriate shou ld be flexible enough to take into consideration
the different levels of development of WTO Members and thus make place for fair special and
differential treatment. About modalities, Romania's view was that it was crucial for the transparency
and predictability of the multilateral system to establish as an objective the binding of the new custom
duties resulting from the negotiations. Even if, after so many rounds of negotiations, the average level
of custom duties had diminished considerably, Roma nia felt that the role of customs duties remained
unaltered mainly for developing countries. Customs duties were the only protection instrumentallowed including for new industries and restructuring ones. Keeping this in mind, liberalisation of
trade in non-agricultural products had to continue w ith the view to ensuring better access on the world
market for all WTO Members. To this end, reduction of tariffs was essential but not enough.
Elimination of NTBs became compulsory.  Romania hoped that the initiative of the Chairman would
be useful and that WTO Members would be able to identify the modalities for reducing andeliminating these trade distorting measures.
1.41 The representative of Chinese Taipei stated that his delegation found the Swiss paper helpful
and well-balanced and that it took account of Members' various concerns. His delegation shared some
views with the Swiss delegation on the issue of nomen clature, base rate, etc.  His delegation was also
quite interested in the idea of INRs and they hoped to learn more about this from the Swiss delegation.
On the US paper, Chinese Taipei considered it a very ambitious negotiating proposal which envisaged
the ultimate goal in the multilateral trade system  and drew a roadmap. However, he wondered how a
coefficient of eight had been chosen.  Moreover having heard the comments made by other Members,
the US proposal might be more acceptable if it allowed Members to have more flexibility, forexample by having longer staging period for sensitive items.
1.42 The representative of Mexico stated that the US proposal was very ambitious and in keeping
with what the US had proposed in other negotiating groups. This was different from other developed
countries which unfortunately had not demonstrated the same ambition on other fundamental issues in
order to make progress in the Doha Development Agenda. However, this very ambitious proposal
meant that one would have to see if developing countries could support it in light of the sensitivitiesthat such delegations had expressed in meetings. In this connection, Mexico wished to hear how
special and differential treatment would be dealt with in a more concrete manner in this proposal.
Mexico also had some doubts as to whether this proposal could withstand internal pressures exerted
by some sectors in the US.  Mexico favoured a balanced approach which promoted broad trade
liberalisation and which at the same time paid heed to the sensitivities and sensibilities of developingcountries.
1.43 The representative of Malaysia stated that his delegation could agree with parts of Chile's
paper, in particular, on the fact that the request-offer approach should only be used to complement a
formula based approach.  Malaysia also agreed on the treatment of environmental goods as suggestedby Chile; on the approach taken on high tariffs, tariff escalation and tariff peaks; and that reductions
should be from bound levels and not applied levels. Malaysia also agreed with Chile's suggestion on
the treatment of NTBs. However, Malaysia was unable to agree with Chile’s ideas on the treatment of
unbound tariff lines and with its argument that since current applied rates could be considered as
providing sufficient levels of protection, such items should be bound at the applied levels. Thisreasoning did not take into account the fact that such tariffs remained unbound for the simple reason
that they were sensitive items, be it from the point of view of tax revenue or the vital goal of
economic development. On the Swiss paper, Malays ia wished to know more about the inclusion of
INRs in the final results of the market access negotiations. With regard to the US paper, he consideredTN/MA/M/5
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it to be extremely ambitious. While appreciating the ne ed to be highly ambitious, particularly at this
time of the negotiations, one had to be realistic. Special and differential treatment and less than full
reciprocity in reduction commitments as contained in paragraph 16 of the Doha Declaration were
absent from the US proposal.  Also absent was the gist of Article XXVIII bis. While it was well-
meaning to see export markets of developed countries opened up for goods from developingcountries, it was of paramount importance to understand that developing countries like Malaysia
harboured their own ambitions to become developed countries in their own perspective and time-
frame. The important step in this direction was the economic development of their country and the
ability to afford the appropriate level of tariff protection to their industries, and this would be
zealously guarded. He wondered how the US proposal would take on board this particular concern.
1.44 With respect to revenue, while for Malaysia, the use of revenue from customs duties was
increasingly becoming less important as a policy tool, nevertheless it still relied on customs revenue
to a certain extent, a case in point being the Asian crisis in 1997 during which Malaysia had to raise
tariffs on certain items. Malaysia, therefore, was not ready to commit to surrendering this important
source of revenue in the foreseeable future.  In fact, the US proposal reminded Malaysia of the
discussions held in 1994 in the context of APEC, when Malaysia was unable to join in a veryambitious idea for commitments that went beyond only voluntary and best endeavour commitments.
Malaysia was still unable to join in such a high level of ambition for the very same reason that had
been expounded and argued in APEC in 1994 and as stat ed in this intervention. On the specifics of the
US proposal and firstly, on nuisance duties or extremely low tariffs, Malaysia would not, for reasons
already stated, be able to join such an endeavour. The US had also proposed the use of applied rates asthe basis for reduction. Malaysia had always stated that the basis of reductions should be bound
levels. Lastly, Malaysia sought clarification regarding the meaning of the last sentence in paragraph
15 of the US proposal concerning special and differential treatment.  The Group needed to find an
appropriate formula that would deliver substantial tariff cuts in all markets while allowing developing
countries sufficient flexibility to pursue their economic development goals including through the useof tariffs.
1.45 The representative of Japan stated that the US proposal was comprehensive, ambitious and
idealistic. From a realistic perspective, the negotiating timeframe was limited and there were over 140
WTO Members engaged in these negotiations. Taking into account these fundamental conditions,
Japan believed that a realistic and flexible approach was needed for tangible achievements. In this
regard, Japan drew attention to its proposal tabled at the previous meeting which was intended to berealistic. Japan's proposal was a formula named "Target Average Tariff Rate" combined with "zero-
for-zero" and "Harmonization" sectoral approaches. Japan had prepared handouts for participants to
further examine its proposal. Japan's proposal was, in short, simple, substantial and realistic. There
were two approaches, a formula and a sectoral approach. By combining the two approaches, market
access for a substantial part of global trade in industrial products could be improved. In addition, tariffpeaks and tariff escalation could be addressed by using the two approaches. He pointed out that
Japan's specific formula had been provided on page two of the proposal. He then responded to
clarifications which had been sought by Costa Rica and Australia. The first clarification concerned the
meaning of " α = 0.3" in the formula. Originally this form ula was designed to bring about an overall
outcome of tariff reductions equivalent to that of the Uruguay Round. Meeting this target meant
certain adjustments had been required which explained the inclusion of " α = 0.3" in the formula. The
other clarification related to tariff lines which carried no trade. Since Japan was using the trade
weighted tariff average, such tariff lines had not been included in the calculations. Page three of theproposal provided information on Japan's sect oral approach in which Japan had proposed
approximately 18 sectors for duty elimination a nd harmonization; sectors which were not only of
interest to developed country Members but also to developing country Members, such as textiles and
clothing.TN/MA/M/5
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1.46 Regarding the US proposal, Japan believed that there was need to be realistic. Participants
had to aim for a tangible result within an agreed time-frame which would enhance the credibility of
the WTO.  Japan had some preliminary comments and clarifications. First, the US proposal suggested
the use of applied rates as a  base rate for the tariff negotiations. Japan, however, supported the use of
bound rates as the base rate for the negotiations which was a tradition in WTO/GATT negotiations.Second, Japan could support the sectoral approaches proposed by the US such as "zero for zero"
which were fairly effective during the Uruguay Round. Specific sectors proposed by the US were
identical to sectors contained in Japan's proposal and these included glass, ceramic products, motor
vehicles, etc. The US had included the textile and clothing sector which was an area of interest to both
developed and developing Members.  Japan had already expressed its willingness to liberalise trade in
textile and clothing. In this regard, Japan extended its appreciation to the US for its effort to include
these product areas in its proposal in spite of their sensitivity. Japan believed that this formed part oftaking account of developing country Members' interest. Japan wished to know whether or not any
other specific consideration or elements pertaining to developing country Members' interest or special
and differential treatment were included in Phases I and II of the US modalities proposal. Lastly, the
US proposal referred to "zero for zero" for fish and fish products and wood products. Japan was of the
view that these groups of products had serious impl ications in terms of environmental protection and
the sustainable use of exhaustible natural resources referred to in the Doha Declaration. Therefore the
US proposal on these groups of products was not realistic. Regarding the Swiss paper, Japan
appreciated it and supported the idea of using bound rates as base rates for the negotiations. However,
the granting INRs in a formula cut was a new idea and Japan would  need to study it further.
1.47 The representative of Pakistan stated that all participants wished to have an ambitious
reduction in tariff levels in line with the Doha mandate. In fact, many countries had substantially
restructured and reformed their tariffs. So while ambitious proposals were fine, unfortunately many
developing countries might not be in a position to go along with such proposals. First, as Malaysia
and Japan had said, participants needed to be realistic and not idealistic. It would be difficult toachieve zero levels within the foreseeable future. Second, if Members agreed to drastic reductions
such as zero rate of duty for certain sectors such as  automobiles, this would result in the termination
of further investment in any of those sectors that were in the process of being developed. Moreover,
although reliance on customs duties was going down even in the case of developing countries, for
example in the case of Pakistan it had gone down from 40 per cent to 12 per cent, it still represented a
substantial sum of money which developing countries could not do away with currently.  With all this
in mind, he wished to make some specific points: 1) Pakistan's preference was for a formula cutapproach.  Such a mechanism was feasible and would enable the negotiations to move at a
comparatively faster pace. At the same time, it would provide flexibility to developing countries to
tackle certain sensitive sectors. In this connection, Pakistan strongly supported the Communities'
suggestion that all WTO Members agree to deeper cuts on textiles, clothing and footwear with the
view to bringing these tariffs as close to zero as possible. Developing countries should have the liberty
to follow a different time-table.  Pakistan could also agree with Japan's proposal in Annex 1 to
document TN/MA/W/15, that the textiles and clothing sector should be dealt with by a sectoral
approach. For tariff bindings, Pakistan was of the view that all countries could commit themselves to
binding their entire tariff headings. However, cons idering the extreme sensitivity of certain sectors,
many developing countries might not be in a position to do so. Therefore, Pakistan suggested that as afirst step developing countries might bind three-fourths of their tariff headings and developed
countries could bind 100 per cent of their tariff headings. The base rate for developing countries
should be the bound rate and if applied rates had to be used, then they should be those prevailing at
the conclusion of the Uruguay Round of negotiations. For the purpose of tariff negotiations, the
HS 2002 version should be taken into account as almost 70 per cent to 80 per cent of participants hadalready implemented that version.  Even if participants agreed to conduct the negotiations in the HS96
version, a transposition into the HS2002 and a process of verification would have to take place.
Lastly, Pakistan felt that some of the tariff schedules were extremely complicated and had the effectTN/MA/M/5
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of impeding trade; such schedules had to be simplified. Pakistan was developing a paper and hoped to
submit it soon.
1.48 The representative of Norway stated with regard to the EC proposal which had been presented
at the last NGMA meeting, that in many respects the so-called compression formula addressed the
same issues that Norway considered necessary for meaningful negotiations to take place. Norway
hoped that the Group could enter into a constructive discussion on the EC proposal.  However, there
were some improvements which could be made to it, regarding two aspects in particular. The first one
was the floor below which tariffs would be eliminated. The second one was the ceiling of 25 per cent
and the modest reductions of tariffs in the range of up to 15 per cent, which was where most tariff
lines lay in practice.  Norway's main impression of the EC proposal was a very good one and this
augured well for the future negotiations. On the Japanese proposal, Norway welcomed the fact thatJapan had chosen a formula approach and appreciated that the formula proposed would ensure
reductions of the overall tariff level of Members. Norway's greatest concern was that the formula left
it to each Member to decide what tariff rates to reduce, and what not to reduce.  At the last meeting,
the representative of New Zealand had focussed the Group's attention on the issue of when and how
tariffs for non-agricultural products could be eliminated. This was a very important initiative. Norwayagreed that eliminating tariff barriers on a MFN basis for all non-agricultural products should be the
long-term ambition. On the US proposal, Norway appreciated that the US, on the same basis as the
EC, had so clearly come out in favour of a general cross-cutting formula approach. There seemed to
be a growing body of consensus that it was through such approaches that the Group could best
achieve the comprehensive tariff reductions whic h the Doha Mandate had laid down. Norway could
also endorse the high level of ambition in the US proposal as it agreed that the aim of the negotiations
had to be tariff elimination within a reasonable timeframe. She understood that 10 years was the
figure put in the US proposal and Norway did not find that unreasonable. By suggesting elimination
of tariffs at or below five per cent in the first phase by 2010, the US was taking a cautious first step.
The second step, from 2010 to 2015, would consist of five equal annual cuts. That was an importantdetail because one needed to avoid the situation where Members made the seemingly easy cuts in the
first instance and left the sensitive products for last minute reductions. There had been such an
experience in another area.
1.49 Regarding the treatment of developing countries and in particular how to ensure special and
differential treatment in the market access negotiations, both the EC and US had emphasised in their
proposals the positive effect of increased market access for products of export interest to developingcountries. Norway could agree that to eliminate tariffs on all non-agricultural products would be of
major importance for exporters in developing countries – arguably even more so than for exporters in
OECD countries. There was no doubt that competitiv e exports of industrial products from developing
countries often met high tariffs, tariff peaks and tariff escalation. Tariff elimination and bound duty
free tariff rates would do away with all that in a more transparent, simple and predictable way thanany preferential GSP scheme could do. Therefore, th ere should be no doubt that it would be in the
interest of most developing countries to participate actively in these negotiations to bring about the
ambitious goal of tariff elimination by 2015. Norway  acknowledged, however, that to adhere to the
same ambitious goal could be difficult for some developing countries and this was reflected in the
mandate from Doha which inter alia  referred to "less than full reciprocity in reduction commitments".
Norway, for its part, would expect developing countries other than the LDCs, to make contributions to
the negotiations in line with their level of development. Depending on how the formula was finally
constructed there should be ample ways of working in different treatment of tariffs of developing
countries through the coefficients and timeframes. In addition, two particular elements had struck his
delegation when studying the tariff profiles as compiled by the WTO Secretariat and needed to beaddressed were: 1) there were very large differences in the number of bound tariff lines among
developing countries and that with the possible exception of some African countries, there did not
seem to be any systematic differences based on levels of development. Norway saw no reason why
not all Members could not do as Angola, Bolivia, Djibouti, Mozambique and Solomon Islands hadTN/MA/M/5
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done which was to bind 100 per cent of their tariff lines. This was a contribution that Norway would
expect from all WTO Members. The second point was that for quite a number of developing country
Members, there were very significant differences between bound and applied rates. Again it was
difficult to see any systematic link between the level of bindings and the level of development of the
particular WTO Member. Since the Uruguay Round, many WTO Members had taken significant stepsto open up their economies to outside competition including through the autonomous lowering of
tariffs on a wide range of products. This had been done mainly to improve the efficiency of their own
economies as part of programs of broader structural changes. However, it had the important side-
effect of improving market access for outside trader s. However, the unbound nature of the resulting
tariff rates limited the value of such liberalisation efforts. The modalities for discussion by the Group
needed to include ways to acknowledge such autonomous tariff reductions where the Member at a
minimum was prepared to bind resulting tariff rates as part of its commitments in the DohaDevelopment Round.
1.50 The representative of the Philippines stated that he admired the level of ambition in the US
proposal. This complemented the US submission in ag riculture, services and rules. The first question
that the US paper elicited was whether this proposal was realistic and he had heard Japan mentionmany times that it was not.  The Swiss and the EC proposals appeared to be more realistic, and more
friendly to the Doha development mandate.  In this regard, he subscribed to Malaysia’s views on the
US proposal.  Philippines could not support the zero per cent target rate that the US had proposed for
2010 as it would impose, as India had said, a greater burden on countries with relatively high tariffs
and the revenue implications for those countries which needed this revenue for their development andsocio-economic situation, would be harsh.  His delegation was also concerned with the issue of
elimination of so-called nuisance tariffs.  Such an  action would also have revenue implications which
were unacceptable to the Philippines.  On special and differential treatment, paragraph 15 of the US
paper stated that WTO Members should customise a process to ensure participation by individual
developing countries. This theme had been heard in discussions on special and differential treatmentin a forum which had been intended for agreement-specific provisions and their operationalisation but
which had then wandered into cross-cutting issues like tiering, differentiation and graduation. If the
intention of the US was to define special and differential treatment in this manner, then the
Philippines and the US were going in opposite directions.  Like Chile, his delegation did not want to
have a definition of environmental good for negotiating purposes, but wished to undertake
negotiations in this area on the basis of a request and offer list. If there was full implementation of
special and differential treatment and less than full reciprocity in reduction commitments and theconcept of credit for autonomous liberalisation, th en the Philippines would engage in positive
negotiations. Without these elements, the Philippines would reserve its position as far as the
negotiating proposals were concerned.
1.51 The representative of Croatia stated that as one of the countries that had recently joined the
WTO, its position within the membership was specific and delicate in many aspects.  The high degree
of liberalisation of the domestic market, which could be perceived as a common denominator for the
countries that had recently joined the WTO, was recognized by Ministers in paragraph 9 of the Doha
Declaration. He wished to stress that Croatia’s position regarding the course of negotiations was
similar in many aspects to those expressed by the representative of the Slovak Republic on behalf ofCroatia’s close partners. Croatia shared their view that the discrepancies in current liberalisation and
level of openness of non-agricultural product markets throughout the world should be reduced to the
maximum after completion of the present round. Nevertheless, Croatia believed that there should be
room for adjustments in the case of LDCs in particular, as well as other Members with a low level of
development and for recently acceded Members. Th is would ensure that implementation of future
liberalisation would be balanced and acceptable to all Members. Furthermore, with reference to the
modalities, Croatia shared the view that NTBs should be abolished in order to ensure an efficient
development of trade flows. A full increase in the scope of bindings, along with the elimination of all
specific duties together with full product coverage in the negotiations on non-agricultural marketTN/MA/M/5
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access would constitute one of the most important outcomes of this round for the world trading
system. The benefits of such undertakings would be far greater than any possible increase in global
trade flows. Transparency and predictability of global market conditions, together with security which
would accrue as a consequence of these developments, would undoubtedly bring more benefits to
individual Members and to the system as a whole.
1.52 The representative of Canada recalled that at the end of the Negotiating Group’s August 2002
meeting his delegation had concluded its statement with the following quote from a speech presented
by Mr. M. Moore at the end of his term: "it was now about substance and real negotiations". At Doha,
Ministers had laid out an ambitious agenda for this Negotiating Group. As part of the it’s mandate, the
Group was to aim "to reduce, or as appropriate, eliminate tariffs… in particular on products of export
interest to developing countries". In doing this, "product coverage shall be comprehensive and withouta priori  exclusions". There were several modalities proposals before the Group which sought to
address the Doha market access agenda for non-agricultural goods in a direct and open manner.
Several of the proposals were far-reaching. They were both bold and innovative and warranted the
Group’s collective close consideration for at least two very good reasons. In the first place, they
addressed the level of ambition as originally envisaged in paragraph 16 of the Doha Declaration – thatis they aimed "to reduce, or as appropriate, eliminate tariffs". In the second place, they addressed, in a
significant manner, "unfinished business" – i.e. those tariffs that remained after eight previous rounds
of negotiations. Canada welcomed the level of ambition that these proposals asked all Members to
consider. Very clearly, several of the proposals stood to deliver major economic benefits of a size and
scale that had never been attained in past rounds. This included the opportunity to address the problemof poverty for all Members, particularly many developing Members who stood to reap at least one-
third to one-half of the total welfare gains that would come from eliminating barriers to trade.  Canada
was drawn to certain principles in its examination of the proposals. Canada saw distinct benefits in
those proposals that were comprehensive in product coverage and without a priori  exclusions. Canada
was attracted to those proposals that would result in commercially significant, real, progressive tariffliberalisation. Canada supported those that specifically prescribed a role for all Members, both
developed and developing, since without such partic ipation benefits would be skewed or one-sided.
On the other hand, Canada was less attracted to those proposals that represented one-sided
approaches, that limited overall benefits, or that fell short of the level of ambition set out in the Doha
declaration.
1.53 From the discussions to date, Canada saw that a formula-based approach had considerable
merit in meeting the needs of a broad range of Members, in bringing forward across-the-board
liberalisation of interest to all Members and in respecting the set timeframes.  Canada continued to see
scope to include other modalities, including sectoral agreements and request-offer in order to meet
and address the individual needs of Members. As stated previously, Canada supported the sectoral
approach as a way to attract attention from the trading and investing community. Formula approachesalone, aside from the ones that aimed for duty-free tr ade as their target, fell short of the goals Canada
had set for advancing further sectors in the course of this Round and in broadening the participation in
sectoral agreements reached in previous rounds. In addition, the request-offer modality might provide
flexibility to advance and respond to selected spec ific interests. Another element addressed at the
Group’s last meeting was the so-called "nuisance tariffs". An emphasis on nuisance tariffs was notdisplaced. Across-the-board liberalisation would be complemented by the elimination of these low
rates; their role was too important to be overlooked. Aside from the Group’s focus on modalities,
there were other elements that warranted the Group’s attention if it was to ensure that the benefits of
liberalisation were fully captured and secured. This first involved an emphasis on raising the number
of bindings to as high a level as possible,  some had mentioned 100 per cent. In addition, ad valorem
rates had to be used to the greatest extent possible. Canada supported the concept of credit for prior
autonomous liberalisation. Credit should be given where liberalisation was secured by bindings.TN/MA/M/5
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1.54 Regarding the role of the Doha Round as a "development round" and the guidance provided
in the mandate on non-agricultural goods, Canada recognized that these "negotiations shall take fully
into account the special needs and interests of developing and LDC participants, including through
less than full reciprocity in reduction commitments ". Canada believed that it was in the interest of
developing countries to improve access to their markets. One could not lose sight of the fact that truebenefits were contingent upon enhanced access for products to all markets – those of the developed
countries and increasingly so, those that involved new opportunities in South-South trade. In the latter
case, this also delivered related benefits, for example, the attraction of investment. Several proposals
to date had raised differentiated timetables and commitments and the use of stagings to address
concerns. The Group needed to use these and other strategies with a view to best advancing and
delivering benefits to all.  Canada also wished to reiterate a concern expressed by other Members that
the Group had to redouble its efforts to obtain the necessary data to support its discussions. It wasimpossible to assess the impact of the various formulas if information in the IDB was incomplete or
out of date.  Canada therefore urged Members who had not yet completed their submissions to the
IDB to do so urgently.
1.55 The representative of Brazil stated that there appeared to be some common points in several
of the submissions. The first of these threads was the fact that there seemed to be a remarkable
consistency in putting that portion of the Group’s mandate regarding the concept of less than full
reciprocity to one side.  Brazil appreciated the efforts that had been made to include the issue of
addressing products of special export interest to developing countries in the proposals but this was an
entirely different part of the mandate. Brazil also appreciated the efforts to discuss and considerelements of special and differential treatment such as staging or transition periods. These concepts in
themselves did not go to the heart of the concept given by Ministers which was that of less than full
reciprocity and this was an unambiguous mandate. It meant very clearly that concessions given by
developed countries had to be deeper than those given by developing countries. To propose that this
could be achieved by enhanced reciprocal market  access among developing countries could only be
perceived as shifting the burden of the concept of less than full reciprocity to developing countries.
Furthermore, it would require, at least on the part of Brazil, a major leap of faith to accept that such
market access concessions by developing countries would have other developing countries as the
main beneficiaries. In any case, he would appreciate clarification from proponents on how they
intended to incorporate the concept of less than fu ll reciprocity into the negotiating modalities. The
second aspect which was apparent in several proposals was the perception that it was inherently
necessary or even desirable for Members to have broadly similar tariff structures. It seemed onlylogical that each Member’s tariff structure reflected its own particular circumstance and level of
development. Furthermore there was, as far as he could tell, nothing in the mandate that guided the
Group in the direction of harmonizing tariff structures of all Members. A number of Members had put
forward a very bold interpretation of the Group’s mandate to reduce or as appropriate eliminate tariffs
by moving straight to the full elimination of tariffs.  Brazil welcomed the political impetus that thiskind of proposal gave to the negotiations but at the current stage Brazil remained to be convinced that
it made sense to strive for full liberalisation in non-agricultural tariffs while leaving in place a whole
range of restrictions that continued to afflict developing country exports, be they restrictions in the
agricultural sector or in the area of rules. Finally, he wished to express concern that a lot of the
submissions seemed to address the concepts of tariff peaks and high tariffs in exactly the samemanner. By suggesting approaches which would tackle tariff peaks and high tariffs in the same way, it
seemed that this would lead to a less favourable treatment of developing countries, as they would be
in a position of making significant concessions on almost their entire tariff structure, while developed
countries would limit their concessions to some specific sectors where tariff peaks existed.
1.56 The representative of Kenya stated that his delegation was pleased to note that Switzerland
was proposing to extend treatment applied to LDCs to countries with similar development
characteristics.  He hoped that this meant quota free, duty free market access for developing countries
that had the same characteristics as LDCs.  The current international trading framework had alreadyTN/MA/M/5
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limited the range of development options available to developing and LDC Members and the period
available to them to get their international policie s in tune with international market demands. Since
the concept of development had not been adequately addressed in the existing international trade
regime, future trade agreements had to take fully into account the reality in developing countries and
LDCs, especially those of Africa. This meant making readjustments in trade agreements that wouldtake account of development needs. In the past, developing and LDC Members that had responded to
pressure to liberalise their economies had suffered greatly from overexposure.  A weakened industrial
base and market failures had in effect created a situation where there were now millions of newly poor
people in developing and LDC Member countries. The recent trade liberalisation had been
accompanied by worsening income distribution. While Kenya agreed with those arguing that greater
openness to trade should be the ultimate aim of all Members, it should not be the immediate aim of
countries at early stages of industrialisation. Developing country Members at an early stage ofindustrialisation would need to go through the learning phase to improve productivity and
competitiveness. Learning took time as the process was specific to each sector and activity. The recent
process of mergers and acquisitions had made the entry of new developing country firms into the
markets even more difficult and learning had therefore become more complicated. Hence the need for
protection of infant industries was more justified today. The modalities that the Group was striving to
establish had to take this into consideration. It had to allow Members to assist infant industries in
developing and least developed countries to compete with well established firms in the international
market. Across-the-board trade liberalisation had to be supportive of and not a substitute for trade in
industry policy.
1.57 Regarding the approaches suggested by some Members, a formula-based approach had the
advantage of reducing tariffs that would benefit Members with a limited ability to negotiate on a
request-offer basis. However, care had to be taken in the formulation to avoid some Members being
adversely affected by such a formula. For instance, a 36 per cent average cut, as was the case in the
Uruguay Round, could be achieved by undertaking very high percentage cuts on very low tariff rateswhile allowing high tariffs to remain intact. This  was not what Kenya wanted. If a formula approach
was found desirable, it should target high tariffs, tariff escalation and tariff peaks in developed
countries. Exceptions had to be provided for developing country Members to address their
development needs. The starting-point of the formula approach had to be the bound rates and not
applied tariff rates as had been suggested by some delegations. The modalities had to recognise how
the important and useful functions of maintaining a difference between bound and applied rates and of
not binding some products lines served developing countries’ interests. Developing countries had tobe allowed to choose to reduce the difference between the bound and applied rates or to increase the
number of bound tariff lines according to their development needs. On special and differential
treatment, most of the provisions in the WTO Ag reements on special and differential treatment were
not binding on developed country Members and some had been reduced to longer transitional periods.
Taking development seriously meant that the traditional special and differential treatment had to ceaseto be applied and this would require mainstreaming development in the WTO Agreements so that
trade could be a vehicle for achieving certain national development objectives. Kenya expected that
the Negotiating Group would take a new approach to special and differential treatment so as to
include development in the modalities to be established. In short, the new special and differential
treatment had to seek to ensure that multilateral obl igations would assist in and not detract from the
realisation of development objectives.
1.58 The representative of Egypt noted with concern that the level of ambition contained in some
of the proposals went beyond the Doha mandate and the parameters of paragraph 16 of the Doha
Ministerial Declaration.  He wished to emphasize that the negotiations had to take fully into accountthe special needs and interests of developing and least developed countries including through less than
full reciprocity in reduction commitments in accordance with Article XXVIII bis of GATT and as
contained in the Doha Declaration. This point had been clearly elaborated upon by India, and Egypt
shared India’s view in this regard.TN/MA/M/5
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1.59 The representative of Thailand stated that the US proposal seemed to forget that the WTO
comprised of developed and developing countries. In the US paper, the modality proposed seemed to
be built on a parity treatment principle rather than the less than full reciprocity principle. The latter
was the principle which should drive forward the negotiations on market access on non-agricultural
products. The sectors proposed for zero-for-zero and cited in footnote 3 did not cover any sector of
interest to developing countries. Additionally, mention had been made of the use of applied rates as
the base rates. Thailand could not accept this and was of the view that the bound rate should be the
basis of the negotiations. The special and differential treatment section of the paper was the most
disappointing because it seemed to suggest that Members should agree on the modalities first and
work out the details on special and differential treatment subsequently. Thailand wished to see special
and differential treatment being discussed first and being made part of the modality. While Thailand
could agree in principle with the following senten ce of the US proposal: "Simultaneously, as part of
these negotiations, Members must work to eliminate non-tariff barriers, in parallel with tariff
commitments", his delegation nevertheless needed to see the details of the US proposal on modalities
for NTB negotiations.
1.60 The representative of Jamaica wished to register her delegation’s concurrence with a
particular comment made by several developing countries on the value of customs duties. Many
developing countries relied on duties as a significant source of revenue, Jamaica for example, derived
about 30 per cent of government revenue from customs duties. This was not to discount the concept of
liberalisation but simply to point out that the pace of liberalisation had to take into account a number
of factors. These included the possibility to realistically make use of trade remedy measures especiallyif tariff protection was to be removed from nascent and sensitive sectors.  These were some of the
factors which Jamaica believed had to be taken into account when considering approaches to tariff
reduction and/or elimination.
1.61 The representative of Indonesia stated that Indonesia shared the view expressed by some
Members that the US proposal was very ambitious. However, implementation of tariff elimination
was difficult for many Members, especially developing countries. This concept even went beyond
what Indonesia had envisaged when it had agreed on negotiations on non-agricultural products.  The
exercise in this Negotiating Group should be focused on tariff reduction rather than tariff elimination.
Tariff elimination was best pursued among more advanced Members. With regard to special and
differential treatment, this aspect was not fully reflected in the US proposal. Indonesia believed that
given the solid mandate in the Doha Declaration, special and differential treatment should be anintegral part of the modalities.
1.62 The representative of Nigeria stated that the representative of New Zealand had appropriately
classified Members in these negotiations into two categories – namely the mercantalists and the
comprehensive proponents. Unfortunately, Nigeria did not think that it fell into any of thesecategories.  Nigeria saw itself in a third category, that of the "developmentalists". This was because
Nigeria neither possessed the ability of the mercantalists nor the capacity of the comprehensive
proponents. On the US proposal, Nigeria in principl e did not have much problem with the general
thrust of the proposal based on the following: it was a comprehensive approach with no exclusions; it
had an initial phase of tariff elimination, reduction and harmonisation and a second phase ofeliminating all remaining tariffs;  participation of all WTO Members was required; and NTBs were to
be addressed on a parallel track. While welcoming the vision of eliminating all tariffs, Nigeria was not
certain about the achievement of such an objective by the target date of 2015. Nigeria’s position about
the uncertainty of this date was based on the experiences already had in the WTO. It pointed to the
fact that it was easy to set target dates but sufficient thought was not always given to theimplementation aspects, particularly by developing countries. This proposal did not seem to give
much weight to the different levels of development much as it strongly noted that developing
countries in overall terms were also bound to draw improved gains. In this regard, his delegation had
also observed that like some other proposals including that of the EC, acknowledgement was made ofTN/MA/M/5
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the need to give cognisance to special and differential treatment but sadly these proposals had been
lacking in specific details on this aspect. Nigeria noted that the US had said that it was giving further
thought to this aspect of the negotiations. His dele gation also wished to know what consideration was
given to the issue of less than full reciprocity in reduction commitments when proposing tariff
elimination. Nigeria did not share the view that reductions should be based on applied rates. The basisfor reductions should be the bound rates which were the legal commitments Members had undertaken.
He wished to remind Members that the mandate of the negotiations aimed to achieve among others
the reduction of high tariffs, peaks and escalation, especially on products of export interest to
developing countries.
1.63 The representative of the European Communities stated that his delegation was pleased to see
an increasing number of delegations actively participating in the debate on modalities, and he thanked
all of them, in particular those who had submitted specific papers on the issue. The latest
communications by the US, Switzerland and Chile were useful contributions because they were
anchored to the idea of a formula (i.e. no exclusions), and because the formula they advocated was a
single one.
1.64 The US proposal, as stated by the US delegation itself, was a clear departure from positions
defended by the US in previous rounds and which hinged on the request-offer system of old. His
delegation was pleased to see that the US, agreed on the virtues of a formula and actually proposed it
as modality for this round. The US proposal was also a clear departure from the active sheltering the
US industry had demanded from its negotiators for decades and which, as New Zealand hadmentioned, contributed to weaken the value of the Uruguay Round for a number of participants. His
delegation was most pleased to see that the US, just like New Zealand at the Group’s latest meeting,
was now urging all Members, developed, developing and least developed ones, to conclude the work
on non-agricultural tariffs that began in the GATT over fifty years ago, an objective which had never
been expressly provided for by the GATT Agreement. The US proposal stressed that the goal of tariffelimination had to be shared by all delegations. As New Zealand would say, it had to be a "unifying"
goal.  The Communities would fully agree with the significance of such a common objective which
had also been singled out by Chile, and he could confirm that the Communities could certainly
consider participating in a move towards elimination if shared by all Members. His delegation had
come to this meeting well nourished by the several press releases on the impressive proposal by the
US. However, his delegation was surprised to see in the US previews a comparison with the EC
proposal, although the EC had not yet proposed any sp ecific figures. Equally, he did not understand
New Zealand’s comment which explicitly referred to figures the EC had never put on the table. The
EC was hoping to participate in an enthusiastic debate on this daring and bold objective.
Unfortunately, the degree of comfort with the proposal was not equally shared, and his delegation
wondered whether this could not have been be foreseen in advance.
1.65 Going into greater detail, when analysing the possibilities that would therefore interest the
whole of the Membership, there were two distinct questions which could be put: "1. Where do we
want to go? and 2. How to get there?"  Regarding the first question, one possibility was to go towards
elimination. When analysing this possibility, his delegation realised that there were countless
arguments in favour of it and they were certainly not self-serving: total liberalisation of all markets forall products including developing country markets that were of crucial importance to developing
countries themselves, multilateralisation of treatment that was up to now only preferential,
dismantlement of origin systems, etc.
1.66 The debate on "progressivity" vs. "big bang" was an old but fascinating one. Still in Latin he
could say summun jus, summa injuria:  multilateralisation of zeros would deprive some of the weakest
Members of a relative margin of protection which they still needed for a period of time if they were to
adapt and to compete on an equal footing with their competitors. As the Kenyan delegate had onceTN/MA/M/5
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indicated, such a move should be assessed against the background of the EC’s EBA1 scheme (or the
AGOA2 initiative), which was now bearing its first fruits by attracting investment towards the weakest
Members. The Communities had therefore thought, and this idea had been vindicated by the
comments heard today, that total elimination acro ss-the-board still remained very difficult, if not
impossible for the DDA, in particular if Members were keen on preserving the balance of concessionsneeded to achieve a single undertaking, of which all Members would be able to benefit by subscribing
to commitments in keeping with their capacity and level of development. The EC considered that
tariff elimination could only be a priority of this Round if all Members shared in this objective.
However, he had to admit to the fact that the extreme level of ambition shown in the US proposal
clearly bore out the intensity of the US desire for true multilateralisation, which appeared definitely to
be preferred over regional trade arrangements. Given the US current activism on the regional board,
this demonstration could not but be praised by all Members.
1.67 His delegation felt that a more adjusted target would be sharp compression of all duties. To
prepare Members for a last step to be taken at a la ter stage i.e. duty elimin ation, and in keeping with
the mandate, the Communities had proposed a formula that was aimed at sharply reducing existing
duties and trade-distorting discrepancies between tariff profiles of Members. Yet the mandateincluded another target too: consideration of products of export interest to developing countries. This
was the reason why the Communities had tabled a specific proposal on labour-intensive manufactures,
i.e. textiles, clothing and footwear, convinced that no modality would ever be accepted if this element
of the mandate was missing. His delegation was ex tremely pleased to see that the US had not
excluded textiles from their bold approach.
1.68 Once Members knew where they wanted to go, the next was to understand how. In this
respect, modalities were co-essential with the target that was to be achieved. There had to be
agreement on the end goal, but also on the way to achieve it. This was why his delegation thought that
realism played a major role in devising modalities where all Members could be on board, and wherethe most developed countries helped the weakest in taking the last few steps.
1.69 The US proposed to achieve elimination in a two-stage approach. They also proposed that
more customised approaches be devised after "agreement on the modalities and a common vision on
the result of the negotiations". If one were to in terpret the US statement correctly, his delegation
would tend to agree that where appropriate and depending on the results of the negotiations, there
could be differentiated phase-in periods for the various Members.
1.70 In the various contributions to the debate and through the various papers, his delegation could
discern some common strands upon which the Group should build its approach:  Members were
interested in a formula. Their interest had been variously justified. Amongst the most recurring
reasons were: current disparities between tariff profiles: intractable in the absence of a formula; theneed to abide by the DDA Mandate that required no a priori  exclusions: request-offer or zero-for-zero
would offer ample possibilities of sheltering; the risk that in request-offer because of the small size of
their markets, some developing countries would find it impossible to make progress; the distortions
that zero-for-zero approaches could cause in the economies of developing countries. Raw materials
and intermediates tended to be inputs for several sectors, whose inclusion or exclusion in zero-for-zero would result in differential effective rates of protection which would affect producers of raw
materials/intermediates differently.
1.71 There was need to abide by the mandate. On this basis, the formula chosen would have to
reduce or eliminate peaks, high tariffs and tariff escalation. One single formula could tackle the three
                                                     
1 EBA stands for “Everything But Arms”, the EU initiative for tariff and quota-free access for products
from LDCs.
2 AGOA is the acronym for the US “Africa Growth Opportunity Act”.TN/MA/M/5
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aspects as the EC formula did. One single formula applied to the whole of the membership would live
up to the criterion of transparency rightly quoted by  the Swiss representative. In this respect, he
wished to recall that the compression mechanism that the EC proposed ensured a balanced exchange
of concessions as all duties were compressed focussing on developing countries’ priorities: (a)
developed countries’ peaks (generally tilted against developing countries’ exports) would beeliminated; (b) by reducing dispersion, compression reduced tariff escalation, which mattered so
much to developing countries; (c) compression of high tariffs through a cap improved the possibilities
of fully exploiting the complementarities between markets (increase in trade between partners at
similar stages of development was important for countries taking steps up the technology ladder).
Developing countries needed to pay more attention to the tariff structures applied between themselves
as trade with neighbours was more important than trade with the rest of the world.
1.72 There were to be no a priori  exclusions.  All submissions had reiterated that no sector could
be excluded. In fact, his delegation had some doubts that some of the proposals on the table which
referred to "average reductions" (as was the case of the Korean, Mexican or Japanese proposals)
would result in sheltering of sensitive sectors that were not consistent with the DDA mandate. The
Communities wished to emphasise that the compression method applied to each tariff line and was not
to be averaged.  In this respect, he noted with concern that specific duties did not appear to beincluded in the US proposal, which was rather striking coming from a Member whose schedule
included a relatively high number of specific duties, particularly in the clothing section.
1.73 There was need to eliminate peaks, high tariffs and tariff escalation in particular on products
of export interest to developing countries. Any modality had to include specific proposals on this
issue. In this respect, he wished to recall the words of Commissioner Lamy and of the Belgian PrimeMinister Verhofstadt, who in a recent declaration emphasised the need for developed countries to
open their markets to the products in which developing countries had a competitive edge. This was
why the EC proposal included a specific initiative on textiles and footwear, historically central to
industrialisation strategies and poverty reduction. Developing countries accounted for some 50 per
cent of world textile exports and 70 per cent of world clothing exports. A bold liberalisation initiativeby developed countries on products of interest to developing countries sent a strong signal to
developing countries on the importance and urgency to  follow up with their own reforms. High tariffs
in developing countries on textiles and clothing had equally large costs: intra-developing country
trade accounted for half of their total exports of textile exports and over 20 per cent of clothing
exports.
1.74 The EC had also included other unilateral or asymmetrical elements in favour of developing
countries and LDCs such as: 1) the elimination of low duties :  even if multilateral, the move was more
favourable for developing countries. However, he stressed the importance of tackling high/peak tariffs
through a formula. If only low tariffs were remove d, there was the risk of reducing economic welfare
by diverting imports away from high labour intensive manufactures; 2) the EBA: experience in the EC
had shown that broad-based tariff-free market acces s for LDCs, such as the EBA scheme, could assist
in diversifying their export structures. Recent research suggested that if such schemes were adopted atleast by all Quad markets, LDC exports to the Quad could increase by US$2.5 billion, or about 11per
cent, with virtually no cost in terms of trade diversion; 3) Members could follow different timetables
to implement final commitments.
1.75 More importantly his delegation failed to see how "dogmatism" in approaches to "full
liberalisation" would indeed comply with the spirit and the letter of paragraph 16 of the Doha
Mandate, when it mentioned that "negotiations sha ll take fully into account the special needs and
interests of developing and least-developed country participants, including through less than full
reciprocity in reduction commitments". The US described their proposals on market access as a triad.
As regarded their proposal on non-agricultural products, the US had put developing countries underpressure not to stand in the way of full liberalisation, as the gauntlet they and New Zealand hadTN/MA/M/5
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thrown could only be picked up by developed countries. Particularly, if one bore in mind the very
short implementation period envisaged (ten years after the end of this Round). In this respect, one had
to take into consideration the views developing countries had expressed on the issue of revenues. As
Mexico had mentioned in its submission, abiding by the deadline of 2005 was important for the
credibility of this institution. Several submissions were now on the table, some more revolutionarythan others.
1.76 The representative of the United States stated that with regard to the Swiss proposal, the US
would agree with the emphasis on formula as part of the modality but like others would be very
interested to see what precise formula Switzerla nd would suggest.  She also noted the Swiss support
for the goals of the greatest possible reduction in tariffs and the inclusion of sectoral elimination
where possible. Those were important elements of the US proposal. The US also agreed that theadvanced developing countries had to participate fully. She was not clear what the Swiss proposal had
in mind with regard to using request-offer for sensitive sectors and wondered whether this was a
Tokyo Round approach that was being suggested and would welcome some clarity on this. On
bindings, the US shared the Swiss view that the goal should be 100 per cent bindings. The US
sensitive products were bound as well.  Oil products which were the only unbound items in the USschedule were on the table in this Round and were included in the current US proposal. Her
delegation would also welcome further elaboration of the Swiss ideas on tariff bindings at 2001
applied rates. Finally, her delegation agreed that low duties were not to be seen as a free concession.
As the US proposal and background material demonstrated, low duties represented a huge portion of
global trade. Such duties were not nuisance duties and such trade was not nuisance trade. Like others,the US remained interested in the Swiss ideas on INRs and would welcome the responses to questions
already posed about how this work could move forward.
1.77 Her delegation shared many of Chile’s views including those concerning the direction of the
Group’s work. Her delegation strongly shared the view that in light of the growing number of RTAs,WTO Members could either embrace multilateral liberalisation or be caught in a web of RTAs that
would leave many, in particular many developing countries, outside the scope of liberalisation.
However, if significant liberalisation did not come  from this process, the US and others would
proceed on the RTA route. In paragraphs 7-9, Chile had suggested that it would like to explore the
issue of staging within all of these proposals. He r delegation was ready to work with Chile and others
on this issue. Finally, her delegation appreciated Chile's effort to facilitate discussions on
environmental goods and also welcomed Chile's thoughts on NTBs.
1.78 Regarding the questions raised on the US proposal, there was a first step in the first five years
which consisted of the elimination of duties that were currently at or below five per cent. Then the
Swiss formula with a coefficient of eight would be applied to the remaining items. In response to the
specific question posed by Hong Kong, China, if a seven per cent tariff  was cut to 3.7% by 2010,then the resulting 3.7% duty would be further reduced to zero through equal linear cuts over five years
along with all other duties. This component alone represented more than 75 per cent of imports from
developing countries to Japan, the EC and US ma rkets. This would be a major contribution and
evidence of the US commitment to liberalisation and a major benefit to developing country exports.
However, this could only happen if countries participated actively.  Her delegation believed that thesectoral component as well would bring additional benefits up front, including for developing
countries. In response to queries regarding the sectors proposed in the initial US proposal, her
delegation had indicated that it was open to consideration of other sectors. The challenge was to find a
core of sectors that could command broad support.  However, she noted that the sectors in the US
proposal constituted 54 per cent of world imports and represented greater than 50 per cent of importsfrom Brazil and Korea, and 37 per cent from India. So these sectors were important to all Members
not just developed Members.  As to Thailand’s comments suggesting that these sectors represented
little interest to Thailand, her delegation was surprised at this statement.  Looking at Thailand's
exports alone, she noted that gems and jewelry, fish and electronics should be of significant interest.TN/MA/M/5
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Securing and binding these sectors at zero should benefit Thailand tremendously.  The US would
encourage developing countries not to foreclose on this option and to talk actively with their
respective business communities in order to assess the benefits and deficiencies of this component of
the proposal.
1.79 With respect to the tariff equalizer component and the application of the Swiss formula,
Chinese Taipei had asked why the US had selected a coefficient of eight. The US had thoroughly
studied a wide range of options on modalities and determined that a coefficient of eight was the most
effective at reducing disparities across schedules and meeting the various aspects of the Doha
mandate, including addressing tariff peaks, tariff escalation and high tariffs.  Her delegation had also
received several questions on the issue of staging in the initial period of 2005 to 2010. In this regard,
her delegation was open to discussion on the appropriate staging, but specified that by 2010 this mid-term goal had to be achieved.  Norway had raised a question on phase 2, i.e.  how the US proposed to
eliminate duties in the second step. The US proposed to reduce tariffs in equal annual cuts after 2010
until they were fully eliminated in 2015. There were several questions with regard to ad valorem
versus specific duties.  On industrial goods, the US would propose to convert specific tariffs to ad
valorem  tariffs and reduce them from that level. In general, the US believed that it would be useful to
encourage the use of ad valorem  duties and minimize the use of specific duties in final commitments
to the greatest extent possible.
1.80 With regard to NTBs, Thailand had asked for more specifics on the US approach to NTBs.
As others, the US continued to view NTBs as a critical part of these negotiations.  It was clear that theGroup needed to ensure that it looked at specific NTBs that related to individual HS lines.  The US
had put in place a system internally that would help to do this, and to seek the advice of interested
parties in its own economy. Her delegation would welcome the exchange of ideas on this issue and
how others were developing information in response to the Chairman's request on NTBs.  The US aim
was to ensure that the liberalisation secured by eliminating a duty was not undermined by a NTB.  Insome cases, it might be that existing agreements needed to be confirmed and to ensure that they
addressed problems. In others, the Group might need to find a way to enshrine liberalisation of
requirements that were not already addressed in some of the NTM Agreements. And in yet other
cases, the Group might need to address specific items one by one.
1.81 Regarding the issue of the use of applied versus bound rates, her delegation was deeply
concerned about the tariff binding overhang issue. Her delegation also noted that the entire USschedule was bound at applied rates, and thus represented a significant advantage in comparison to
those with a binding overhang in market access terms. In essence the US ability to eliminate tariffs
was related to the US obtaining real market access in return. That was why her delegation had
consistently focused upon applied rates as a base.  She noted that in the UR a number of countries did
negotiate from applied rates. She heard the concerns about this issue, but also believed that the USposition remained relevant. If the goal was zero duties then the issue of base rate became much less
significant and could be managed. Her delegation had received a number of questions with regard to
special and differential treatment. Her delegation did not have all the answers on the best way to
undertake special and differential treatment in the context of this dramatic proposal. As the Group
moved towards a final modality decision, the US fully expected to elaborate on these points further,taking account of the critical issues that had been raised at this meeting.
1.82 In terms of preliminary comments, first on the issue of erosion of tariff revenues, evidence
suggested that as tariffs were reduced, tariff revenues went up as the incentives not to circumvent
were reduced and trade was stimulated. Nevertheless, her delegation understood the concerns that hadbeen raised and working with the Chairman woul d try to find a way to address these concerns.
Second, with regard to overall revenues, she noted that for countries with efficient tax systems,
revenues went up significantly with reductions in duties or elimination of duties as trade increased to
respond to the reduced or eliminated duty.  She realized that not all Members currently had efficientTN/MA/M/5
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tax systems in place. However, tariff regimes were neither an equitable nor economically efficient
means of raising revenues in the short term, since they tended to distort resource allocation and shift
the tax burden to the poorest segments of the economy. The US therefore believed that Members
should look more closely at how to address the problem of improving tax systems in tandem with an
elimination of duties. Some Members had suggested that they were more reliant on tariff revenuesthan other Members. The goal of relying less on tariff revenues was a development friendly approach.
This proposal would help developing countries move to less reliance on such revenues, with the
assistance of the IMF and World Bank and others. Once again, Members should be thinking about
how this proposal could be used to achieve related goals, rather than simply not considering it.  On the
issue of erosion of tariff preferences, under the US proposal, these preferences would eventually
disappear because tariffs would be at zero. Bindings at zero would provide greater predictability,
certainty and permanence that preference programs because of their very nature, could not provide.She also pointed out that the Enabling Clause stated  that special and differential treatment should not
constitute an impediment to the reduction or elimination of tariffs and other restrictions to trade on a
most-favoured-nation basis. It was important to not e that many of the products excluded from the US
and other preference programs had intricate rules of origin. She also pointed out that consultations
with industry had shown that many companies especially small and medium-sized exporters hadindicated real problems in administering differing rules of origin for many preferential trade
agreements now in effect.  The US proposal, on ce implemented, would eliminate the need for such
rules which tended to negatively effect small suppliers and developing countries the most. On the
issue of less than full reciprocity, the US had always taken the view that the objective of special and
differential treatment was to assist developing countries integrate into the global economy. Thequestion was whether this integration was hindered or hastened by maintaining high tariffs and tariff
plateaus.
1.83 The US proposal for modalities set a destination that her delegation hoped Members would
agree needed to be arrived at for a successful result in the negotiations.  Starting with exceptions,either by taking products out or by opting out of participation in tariff reduction meant that others
would take a similar path and there would be a very limited outcome. If countries wanted to realise
the sweeping liberalisation in products of interest to developing countries, there would have to be far-
reaching liberalisation for all participants. Her delegation was open to looking at transitions and other
means to enable countries take more time to implement concessions but what her delegation was
looking for was an eventual elimination of duties for industrial products. The US view was that the
parameters or the destination point for the negotiations could be set and where needed adjustments toaddress specific special and differential concerns could be done. But her delegation did not believe
that a single set of responses to special and differential treatment was the answer. Her delegation
invited further discussion on this topic. A lot had been said about the realism of the US proposal. It
was true that the US had been aggressive and probably surprised many people who thought the US
would press for a limited negotiation, using modalities from the UR.  The US aim had been to set the
bar very high consistent with the US aims in the other spheres of market access for agriculture and
services. Using a quote, "we should not confuse re alism with obstructionism", she agreed with the
representative from New Zealand that Members should not lower their ambition at this point in time.
1.84 The representative of Switzerland stated that the US proposal showed the long-term goal that
this organisation should follow and as a long-term goal Switzerland could subscribe to it. However in
the framework of the Doha Round, it was Switzerland’s conviction that the modalities could be
followed and agreed to by all Members.  This was what made her delegation think that the time was
not right for such a bold and far-reaching initiative.  The objective of the Swiss proposal was to ensure
substantial further trade liberalisation of industrial products which was an essential part of the Dohanegotiations. At the same time Switzerland had tried to be pragmatic and realistic in order to ensure
that all Members could go along with the modalities of liberalisation, and she was comforted by some
of the comments by developing countries saying that they thought that the Swiss approach was a
realistic and pragmatic one.  On the issue of INRs which had raised a lot of interest from manyTN/MA/M/5
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delegations, Switzerland was conscious that more information was needed on this issue. The purpose
here was actually to flag the issue and not to make an in-depth explanation of what Switzerland
wished to achieve. The importance of the issue of INRs would depend on the approach used for tariff
cuts, because when using a formula INRs were not really applicable.  Switzerland would submit more
detailed information on how INRs should be reflected in the results of the negotiations at a later stage.On the subject of the formula to be proposed, Switzerland had not proposed a formula because there
were already many such proposals. Switzerland was looking at the proposals to see which one would
be the most effective in fulfilling the objectives of these negotiations. However, it was important that
such a formula be modulated to take into account the Doha mandate which stated that negotiations
shall take fully into account the special needs and the interest of developing and LDCs participants
including through less than full reciprocity in reduction commitments.
1.85 The representative of Chile stated there were a number of points of convergence between
Chile’s and the Swiss proposal. For example, the use of a formula, the binding of all tariff lines, the
use of the HS96 nomenclature and the Swiss position on the non-use of the PPMs criteria for the
definition of environmental goods. However, there were a few differences. For example, Chile did not
think that the sectoral and the request-offer approaches should be used in parallel with the formulaapproach but rather as a complement. In Chile’s view there had to be an implementation period which
was much longer than five years precisely in order to raise the level of ambition. Chile found the US
proposal interesting and attractive. It contained very positive elements and served as a good
complement to the US proposal in another area of the negotiations. Chile noted the fact that the
proposal covered all products and all types of tariffs and this was a good input to the negotiatingprocess. However, there were three elements of the US proposal that Chile did not agree with: 1) the
basis on which the negotiations would take place. The bound level should be used and in the case of
unbound tariffs the applied rate at a specified date should be used. The US maintained that reductions
should be based on applied rates as of 1 January 2000 or UR final bound rates, whichever was lower.
The US had said that effective results should be obtained from these negotiations and in that regard hehad two comments: 1) Chile's applied tariff rate was seven per cent and its bound rate 25  per cent.
Chile had not reduced the binding on its tariffs because its trading partners were not able to "pay"
more for such reductions. So a binding at a higher level than the applied rate was nothing more than
the expression of the outcome of the negotiations; 2) If the US paper proposed to take the lower of
either the applied or the bound rate as the basis of reduction, then in the case of products under the
GSP the basis of reduction should be the level of ta riff preferences. Otherwise, the reductions would
take place from a level that would always be higher than the generalized system of preferences. As aresult of which, for a certain amount of time no concrete benefits would go to developing countries
who had GSP access to the US.
1.86 The second element of the US paper with which Chile did not agree was with respect to the
zero-for-zero approach.  Chile’s understanding was that this approach could be a complement to theformula approach which would accelerate tariff reductions in certain sectors, but not all Members
would have to participate in these agreements. The comment made by the EC had to be borne in mind
which was that sometimes the zero-for-zero approach could apply a tariff reduction for certain
products with a resulting increase in effective protection for other more manufactured goods.  Under
such circumstances, Chile as a provider of raw materials and a country which wished to diversifywould be in a worse off situation than before;   3) the US paper proposed that special and differential
treatment had to be defined once agreement was reached on modalities. However, this was not the
correct approach. Special and differential treatment had to be an integral part of the modalities.
1.87 He requested that the EC intervention be circulated.  Additionally, he could not resist asking
whether the comment made by Commissioner Lamy and the Belgian Prime Minister Verhofstadt,
regarding the need for developed countries to open their markets to the products in which developing
countries had a competitive edge also covered agricultural products.TN/MA/M/5
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1.88 India and Malaysia, in reference to Chile’s proposal on unbound items, had stated that these
items were unbound because they were highly sensitive. However, he had worked on the hypothesis
that the tariffs being applied to sensitive products took account of that sensitivity. As Members
wanted to have stable and clear rules, the star ting-point for unbound tariffs should be their applied
rates at the beginning of this Round. Any sensitivity that existed with respect to these products couldbe taken into account in the reduction periods or the slope of the reduction, for example whether it
took more time before reductions actually began. With regard to special and differential treatment,
this needed to be defined at the very beginning and it contained several elements. One component,
perhaps the most important of special and differen tial treatment was to design much longer time-
frames for developing countries, either on a country or a sectoral basis. There were some sectors
which were more sensitive then others. On this aspect, the Group could explore having a high
flexibility component.  In Chile’s view, every country was different and each sector was different.  Asensitive sector in Chile might be different to a sensitive sector in Bolivia. As a result, the idea of
special and differential treatment in terms of longer time-periods should contain this element of
flexibility where each developing country would be able to choose the time-frame and the rate of
liberalisation. Second, there was another element of special and differential treatment which might not
seem to be as important but was equally attractive and that was ensuring that in this liberalisationprocess priority attention be given to products of export interest to developing countries. Therefore,
Members should liberalise more quickly on products of interest to developing countries. In this way
greater trade opportunities could be generated earlier on for developing country exports.
1.89 Members needed to keep in mind the trade concerns that many countries had with respect to
the reduction of customs duties resulting in a reduction of the level of fiscal collection.  The
liberalisation process had to be a gradual process accompanied by programs which would change the
tax collection base. There was a trend to move towards tax systems which were less and less based on
customs duties and there were several programs underway for certain developing countries through
the World Bank or regional banks such as IADB.  Members needed to look at the time-frame and theprospects that these programs offered so that any liberalisation effort by such developing countries
should face no prejudice to their economies. The delegations of Pakistan, Philippines, Japan,
Switzerland, the EC had referred to being realistic.  The reality was that approximately 50 per cent of
all world trade was conducted on a duty free basis due to bilateral or plurilateral agreements. If one
were to project the agreements which were being negotiated now and look at the situation a few years
from now, i.e.  2005-06, one could imagine that 70 per cent of world trade would be conducted on a
duty-free basis. Some countries that did not participate in these bilateral/plurilateral liberalisationexercises could be severely hit because their economies would be more and more marginalised. Brazil
had stressed that ambitious results could be obtained for non-agricultural goods, but all of this was
very closely tied-up with the degree of ambition and depth of achievement in other areas of
negotiations particularly in agriculture and rules, in particular anti-dumping.
1.90 The representative of Korea stated that the representative of Costa Rica had expressed
concerns about Korea’s preliminary suggestion on the definition of high tariffs and tariff peaks. The
suggestion Korea had made at the last meeting di d not presuppose the proposal on modalities that
Korea was going to table at a later stage. The suggestion was made as an attempt to contribute to
conceptualising the issues at hand so that the process could move forward in a more balanced manner.By raising the issue of clearly defining the terms tariff peaks and high tariffs, Korea had wanted to
emphasise the need to take different approaches to dealing with tariff peaks of developed countries on
the one hand and high tariffs of developing countries on the other. Otherwise, the outcome of
negotiations would not be balanced as it should be in terms of tariff reduction commitments or
benefits.  Korea might use a different tariff cut formula to deal with each of the two problems moreeffectively but it did not necessarily mean that Korea was going to introduce a definitional element
per se  in its proposal to address problems of tariff peaks and high tariffs. By introducing the concept
of tariff peaks based on x times the national average tariff criterion, Korea had thought that tariff
peaks of developed countries could be dealt with more effectively. Most of the high tariffs inTN/MA/M/5
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developing countries could also be addressed by applying the x times the national average criterion.
At the last meeting, Korea had not suggested spec ific figures such as the 15 per cent international
standard to deal with high tariffs of developing countries. On the contrary, Korea had mentioned that
the 15 per cent criterion could not effectively resolve problems of tariff peaks in developed countries
because not many of their tariff peaks were higher then 15 per cent. Korea appreciated the concernsexpressed by some developing and developed countries regarding the danger of an exercise of
defining such terms and took note of their comments. Korea hoped that it could address those
concerns in a specific formula that it was going to present at a later stage.
1.91 The representative of the European Communities referred to the comment made by the
representative of Chile on part of the following statement made by Commissioner Lamy together with
the Prime Minister of Belgium: "We would urge the rich countries to take up their responsibilities byoffering more direct access to products for which the developing countries had comparative advantage
including in agriculture and services. Tariff peaks and tariff escalation must be reduced which very
frequently affect products for which developing countries are precisely in a competitive position
particularly textiles and clothing, food products and footwear. Agriculture subsidies on exports which
distort trade must be seriously reviewed."  The other part of the text referred to the "Everything ButArms" initiative taken by the EC. It also referred to special and differential treatment and in general
the matter of making globalisation an instrument for development. He agreed with having a long-term
objective but it was worth noting that short-term and more accessible objectives were more
motivating.  This would justify the EC's approach which set an attainable objective which was not lost
in time.
1.92 The representative of Japan stated that India had requested clarification on three aspects of
Japan’s proposal: 1) whether or not less than full reciprocity elements were included in the formula;
2) if there was discontinuity in the cutting ratio in Japan’s formula; and 3) whether tariff peaks were
addressed in the specific formula. On the first point, four different coefficients (10, 20, 30 and 40)were used depending on the level of the bound rates.  Those four coefficients manifested the element
of less than full reciprocity.  As a result, for the relatively higher average tariff rates there were less
than deeper cuts. On the second point, it was true that there was some discontinuity in the cutting
ratio.   However, Japan had given priority to having a simple formula. Technically, Japan could have
accommodated those elements but instead it had preferred to keep the formula simple since there were
more than 140 WTO Members were engaged in these negotiations. As to the point raised on tariff
peaks, Japan’s modality had two elements. One was the formula and the second the zero-for-zero andharmonisation sectoral approach. By using both pillars, one could rectify the peaks to some extent.
However, Japan believed that the zero-for-zero was the more effective approach to address tariff
peaks particularly in the area of textile and clothing. That was why Japan was promoting the
harmonisation of tariffs in the textile sector. Regarding the EC’s comment that an average tariff
approach could lead to a sheltering of sectors, he pointed out that Japan had proposed the averagetariff approach in order to be realistic.  However, Japan had no intention of sheltering any specific
area as it respected the principle of comprehensive coverage without a priori  exclusions.
1.93 The representative of India stated that his delegation supported the idea of simplicity in a
formula because it would be more transparent and easier to comprehend. However, on Japan’s
proposal he was not sure that reductions would be less on higher tariffs. Additionally, according to
Japan’s formula were all tariff rates in a country’s sche dule to come closer to the targeted tariff rate or
was it only the average that had to reach this targeted  tariff rate?  If the idea was the latter, then the
question of tariff peaks became even more important because as had been seen in the past, while
substantive average tariff reductions had taken place, peak tariffs remained. A related question washow under such circumstances tariff peaks woul d be addressed. Regarding the EC compression
mechanism, it would appear that while it brought higher tariffs down much more sharply, it was
relatively soft on tariff levels which were more prevalent in the EC’s schedule. In light of this, he
wished to know how special and differenti al treatment had been taken into account.TN/MA/M/5
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1.94 The representative of Japan stated that the use of different coefficients addressed the idea of
less than full reciprocity in reduction commitments. If Japan had used only one coefficient in its
formula and assuming it was 10, then if the average tariff rate was 20 per cent, the average tariff
reduction would be to eight per cent.  However, as four different coefficients were being used
depending on the average tariff and using the same example, the coefficient actually used for anaverage tariff of 20 per cent could be higher and th e reduction would be to 14 per cent. Tariff peaks
were to be addressed through the use of zero-for-zero sectoral approach.
1.95 The representative of Costa Rica asked whether, according to Japan’s formula, Costa Rica
would have only one t 0 or would have as many t 0 as bound tariff rates.
1.96 The representative of Japan responded that each Member would have only one t 0.
1.97 The Chairman wished to give the floor to those delegations which had some comments
regarding specific elements on modalities such as base rates, nomenclature, tariff peaks, high tariffs,
tariff escalation, staging implementation and special and differential treatment. While he recognized
that some Members had made their views on these elements known in their general interventions, hewished to ensure that everybody had had the opportunity to take the floor on these issues.
1.98 The representative of Colombia stated that it was important to work on the basis of the HS96
nomenclature.  As indicated by Switzerland, once the negotiations had concluded, Members would
have to transpose their schedules with the new concessions into the HS2002 version. As to the baseyear, Colombia thought that the trade figures for 2001 could be used. However, this would require an
effort on the part of all countries to update their IDB submissions. Regarding the base rate,
negotiations had to be conducted on the basis of the final bound rate of the UR. Colombia was also in
favour of increasing the coverage of bound products and only in certain cases would it be possible to
leave certain products unbound. It should also be possible to bind a product above its applied tariff.Colombia supported giving credit for autonomous liberalisation measures undertaken since the end of
the UR. On tariff peaks and high tariffs, Colombia agreed that the formulas that might be adopted
should take these elements into account without it being necessary to agree to any definitions of these
terms. Five years would be a reasonable period of time to implement reductions. Colombia was in
favour of a linear approach so that implementation would be progressive and not take place in the last
year. In given cases, longer periods of time could be considered depending on the commitment made.
On environmental goods Colombia felt that a list based on end-use of the product was an adequatestarting-point. Any attempt to define environmental goods would be much too complex a task. It
would be more productive to prepare a list of such  goods. On this point, she wished to know from
Switzerland which criteria were applied to define environmental friendly goods. On NTBs, she
indicated that her authorities were working with exporters to identify and notify difficulties that the
latter encountered when exporting.  At the second meeting of the Negotiating Group, Colombia hadsupported New Zealand’s diagnosis of the complexity of the issues, as well as the initial classification
which was made in order to categorize questions which would have to be analysed by this Negotiating
Group when it began to look at these measures. Colombia therefore proposed that this document be
used as a guide in developing the work programme. Finally, Colombia did not have very clear and
precise ideas as yet on special and differential treatment. However, Colombia felt that there should bea distinction between special and differential treat ment and the principle of full non-reciprocity and
that special and differential treatment should not be  restricted to extended implementation periods for
more extensive commitments.
1.99 The representative of Costa Rica stated that  Costa Rica had considered that bound levels, as
historically recognized in these negotiations, should be used as the base tariff rate for tariff reductions.
Costa Rica, along with other delegations, had given numerous reasons for this. Some Members had
stated that only by using applied duties would "real" reductions be achieved.  They had also pointed
out that reductions in bound levels which did not affect applied levels were "empty" concessions andTN/MA/M/5
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should not be considered as concessions in these negotiations. They had even said that a difference
between bound and applied levels was not good. Costa Rica did not consider these to be valid
arguments. The objective of these negotiations was clearly traditional, namely to reduce bound levels.
The mere fact of a tariff being bound was very important in this Organization as was demonstrated by
the great interest expressed by many Members in seeing the completion of work related to the bindingof tariff levels during these negotiations. The existence of applied tariffs which were lower than
bound ones was a positive sign in that they reflected a trade liberalization effort on the part of the
Member in question. Bound tariffs translated into tr ansparency and predictability for trade in the
products concerned.  It therefore followed that making cuts in bound levels was also important per se .
GATT history had confirmed this point. Costa Rica had made it clear since the very beginning of
these negotiations that it aimed for ambitious results and that it believed that all Members should
make reductions in their bound levels. However, Costa Rica considered that the level of ambition asregarded modalities for tariff reduction should be negotiated on the basis of the tariff reduction
method, not the choice of the base tariff rate.  As  far as nomenclature was concerned, Costa Rica was
of the opinion that the nomenclature used to prepare Members' new schedules of commitments should
be that used in their certified schedules on a given date. Needless to say, ideally all Members would
use the same tariff nomenclature, but Costa Rica did not believe that this was crucial to the Group’swork, nor that this point warranted much discussion by the Group. It had to be recalled that the
procedures for transposing the 1996 version of the Harmonized System to the HS2002 version had
already been established, for which reason Costa Rica saw no need to dwell unduly upon this point.
Costa Rica had taken note of the Swiss proposal, according to which the negotiations would be
conducted on the basis of HS96 nomenclature and subsequently transposed to HS2002 forpublication. Costa Rica found this proposal reasonable and was prepared to go along with it, provided
that all Members' schedules were already certified on the basis of HS96.
1.100 With regard to the methodology for tariff reduction, Costa Rica concurred with those
delegations which preferred the use of a formula or formulae, in the belief that this would be theinstrument best suited to the current size of the WTO membership. Likewise, and as Costa Rica had
stated previously, this (these) formula(e) had to be carefully crafted to tackle all related problems and
comply with the considerations set forth in paragraph 16 of the Doha Ministerial Declaration.
However, Costa Rica was still not in a position to  endorse any one particular formula. Costa Rica
hoped that the European Communities would soon be able to present the algebraic formulation for its
tariff compression mechanism so that Members could examine its proposal in detail.  Only when all
elements and coefficients were on the table would Costa Rica be able to determine which formula metthe objectives most efficiently.
1.101 With regard to possible supplementary modalities, Costa Rica was in favour of Members
being able to decide to continue liberalization on the basis of other modalities, such as the zero-for-
zero approach and sectoral negotiations. However, these negotiations should be on a voluntary basisand take place only after a general formula for all products had been applied. That was to say,
approaches such as these had to complement the general modality, namely the application of a
formula.
1.102 As regarded the specific mandate of reducing or eliminating tariff peaks, Costa Rica had
already stated that it did not feel that defining such terms was necessary.  Costa Rica considered that
all that was required was a formula which tackled such problems in mathematical terms.  Costa Rica
believed that this would be the most efficient way of making good use of the little negotiating time at
the Group’s disposal.  Costa Rica had taken due note of Korea's positive comments and clarifications
in this respect and awaited its final proposal before making any further remarks.
1.103 With regard to products of interest to developing countries, Costa Rica considered that the
possibility of including other sectors, in addition to textiles and footwear, should be left open.  While
these two sectors were indeed important to some developing countries, it was also true that otherTN/MA/M/5
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developing countries, including Costa Rica, also ha d interests in other non-agricultural sectors which
should be taken into consideration pursuant to paragraph 16 of the Doha Ministerial Declaration.
1.104 As other delegations had also indicated, Costa Rica believed that credit should be accorded
for autonomous liberalization measures in this sector. For example, Costa Rica had made freshcommitments during the Uruguay Round under the ITA, whereby it had undertaken to modify its
schedule of non-agricultural products and to liberalize trade in certain products on a multilateral basis.
Costa Rica considered that it should receive credit  in these negotiations for this mfn liberalization
implemented during the Uruguay Round.
1.105 Costa Rica did not as yet have a definite position on special and differential treatment. Most
probably it would not be submitting a formal negotiating paper by the end of 2002.  It thereforerequested that the positions which it had put forward since the first substantive meeting in
August 2002, as recorded in the minutes of these meetings prepared by the Secretariat, be fully taken
into account in the consolidated overview of proposal s to be submitted to participants at the first
meeting of the Group in 2003, as agreed by this Negotiating Group in the Programme of Meetings
(TN/MA/3).
1.106 The representative of the European Communities stated that her delegation would try and
circulate the EC formula as requested by Costa Rica. To respond to the Indian query, she stressed that
all figures in the EC proposal were indicative, therefore she did not understand how it could be
construed that the EC approach was softer on lowe r duties. In fact, the EC had proposed to eliminate
low duties at and below a floor level to be negotiated.  In any case, she stressed that all aspects of the
EC proposal were negotiable. Her delegation wa s only proposing a method and not figures. As
indicated in the EC submission and regarding the various elements of the modalities, the base rate of
the negotiations should be bound. The nomenclature should be in HS96 with the results of the
negotiations transposed into the HS2002 nomenclature. Tariff peaks, high tariffs and tariff escalationdid not need to be defined if the correct approach was adopted. As to staging, her delegation was
willing to discuss differentiated staging. On special and differential treatment while her delegation
had included some elements in its proposal, it was willing to listen to proposals by all Members. Her
delegation was willing to discuss credit for autonomous liberalisation measures.
1.107 The representative of India stated that the EC representative had stressed many times that her
delegation was proposing only a method and the actual formula would depend on the numbers to be
negotiated. Therefore, the numbers were an important detail in the formula and the graph which had
been shown to the Negotiating Group during the pres entation might not be sufficiently representative
of the final method. Maybe once the formula once circulated, it would help clarify matters for his
delegation.  However, the aspect of how lower duties were going to be brought down was important.
Additionally, he wished to know when the Communities would elaborate on the special anddifferential treatment which they had envisaged in their method.
1.108 The representative of the European Communities stated that the special and differential
treatment was elaborated in her delegation’s submission. However, as had been stressed already
everything was negotiable and her delegation was willing to listen to further proposals on that aspect.The Communities’ submission contained also proposals on deeper cuts on products including
environmental goods which her delegation did not regard as a sectoral negotiation but rather cuts in
the name of higher objectives which might be environmental policy objectives.
1.109 The Chairman stated that on NTBs, as agreed to at the last meeting of the Group, a letter
dated 27 November 2002 had been sent to participants providing a common format for the notification
of NTBs.  He underlined the fact that this matter should not be looked at in a mechanical manner. He
hoped that by the end of the exercise the Group would have some material that would help it clarifyTN/MA/M/5
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its views on both the substance of NTBs that economic operators were encountering as well as
permitting it to define a way to tackle in a more practical and operational manner this issue.
1.110 The representative of the United States stated that the proposed format met her delegation’s
needs in terms of the structure and that it was the kind of information her delegation was alreadylooking at. However, she gave a few words of caution and made a practical comment.  Participantshad to be careful to not fixate on the columns or on this process. Sometimes, one could get caught in
the details and loose the substance. In that regard, her delegation had learned from a recent
experience, i.e. the ITA discussion on NTBs, that sometimes at the start of the process it helped to not
initially include the "Maintaining participant" column  but to look at the existing barriers and their
commonality.  It would be useful as a first step to focus on where substantive problems existed.  As a
practical point, it would be useful if this information could be submitted in an excel format as it would
make it easier to manipulate and analyze.
1.111 The Chairman recalled that this communication had been sent to participants at their request.
He drew attention to the fact that it was a proposed format with flexibility regarding the information
to be included or not included in the various proposed columns.
1.112 The representative of New Zealand stated that his delegation saw merit in focusing on the
generic nature of measures at the outset rather than getting into too much detail about which particular
Member was maintaining the measure.  In this rega rd, the Chairman’s clarification was very helpful.
It was vital that this Negotiating Group delivered substantive results on NTBs if it had to deliver
market access improvements which were meaningful for business. Participants were facing somedifficulty in identifying the shape of the manageable negotiation on NTBs which would deliver these
results. In that context, New Zealand would agree with Chile that it was likely that most of the
measures which would be notified by end January 2003 would be already covered by WTO
Agreements. For those measures which could not be covered elsewhere in the Doha mandate,
New Zealand did not think that it was going to be very productive to try and decide whether or notthat measure was WTO legal. That could only be definitively determined through the dispute
settlement system and it was not likely that participants in this Negotiating Group would join a
consensus that they were maintaining an illegal measure. Dispute settlement remained there as a
possibility but it would imply a pretty limited discharge of the Group’s mandate to push everything in
that direction. In this context, New Zealand believed that the mandate from ministers on NTBs should
be recalled which was to reduce or as appropriate eliminate NTBs.  The legal status of an NTB was
not on the face of it a consideration in this mandate. By analogy with tariffs which were WTO legalmeasures the Group’s mandate was to reduce or eliminate the incidence of NTBs.  One also needed to
recognise that many NTBs were linked to legitimate public policy purposes, for example health,
safety or environmental protection. So one coul d not simply reduce or eliminate an arbitrary
proportion of those measures. Nonetheless, some of those measures did impose unnecessary costs on
business and consumers and distort trade. This was especially the case where there were differencesor variations for instance in mandatory product standards or the procedures for assessing compliance
with those technical regulations among the major markets in the world. That was one of the issues that
New Zealand saw as having to come to grips with in this Negotiating Group if it had to deliver some
real results.
1.113 Like Chile, New Zealand had noted earlier that  bilateral request-offer was a possible approach
for dealing with these measures.  New Zealand expected that request-offer would prove necessary for
many measures but would caution against making request-offer the main modality for dealing with
NTBs. It was a practical matter given the large membership and the potentially huge number of
NTBs. The OECD had conducted a survey earlier this year in which more than 7000 such measureshad been identified.  New Zealand wished to suggest that to achieve substantial progress on the NTB
part of the mandate, this Negotiating Group would also need to consider the feasibility of more
generic approaches.  New Zealand had in mind the possi bility of looking at generic clusters of issues
that arose around particular product groups.  Such an example would be the forest products area andTN/MA/M/5
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the whole range of NTBs that arose in connection with building codes.  This was an area and there
might be others which could be approached in a generic fashion and on which the Group might be
able to make some real progress.
1.114 The representative of the European Communities stated that the proposed format sent by the
Chairman was a useful start for this complicated part of the Group’s mandate. It was also useful to
hear from the Chairman that there was flexibility  regarding the filling up of the columns as the
inventory on NTMs (TN/MA/S/5) that had been proposed was old and in the meantime, there were
some "new" barriers which did not fit in with this Inventory.  Her delegation hoped to be able to
introduce some new sub-categories.  The New Zealand representative was right in stating that the
Group should concentrate on general barriers. She wished to draw attention to the importance of
column 4 of the proposed format entitled "Trade effects of the barrier". It was a difficult column to fillin.  The most important part, at least for Members to discuss was going to be information in column 3
entitled "Nature of the barrier". Participants had to explain, to the extent possible, what type of
obstacle was being referred to. Column 6 entitled "Relevant WTO provision" was also a difficult
column to fill in, and Members had the freedom to not provide information and engage in any difficult
discussion. Finally, Column 7 entitled "Treatment of the barrier" was very useful but at the same timea very challenging one because it dealt with how such NTBs should be addressed, i.e. multilaterally,
bilaterally etc.
1.115 The Chairman recalled that on environmental goods, the Group, at its last meeting, had agreed
that as an illustrative exercise the Statistics Division would generate statistics basing itself on the
Japanese list of environmental goods in order to try to see the volume and direction of trade in such
goods.  The exercise was more complicated and less clear than expected but nevertheless it might be
interesting for Members to have this informati on as an illustration of the special case of some
environmental goods.
1.116 A representative of the Statistics Division (Ms. R. Jackson) stated that the document entitled
"Trade in Environmental Goods" (TN/MA/S/8) gave  a snapshot of the situation and was based on
available official export/import statistics that were found in the UN Statistical Division COMTRADE
database and in the WTO IDB. Information for all WTO Members was not available and data was
missing for thirty-four Members which were listed in footnote 2. The Secretariat had also run into a
practical problem which was that the HS codes in the Japanese list were at the 6-digit level and there
were quite a few cases where the 6-digit HS level was not detailed enough to identify theenvironmental goods in the list. That meant that a precise idea of the magnitude of each Member’s
trade on environmental goods as defined in the Japanese list was not possible. Table 1 of the
document demonstrated this problem. In that table there were two sets of data. The first one was
called "Excluding ex" and that was the sum of the HS 6-digit codes in which all the products
contained therein were defined as environmental goods in the Japanese list. The list of these codeswas given in Annex 1 of the document. The second set of data was called "Including ex" which was
the sum of all the HS 6-digit codes in the Japanese list. It included products that were not
environmental goods but which could not be excluded because they could not be identified at the HS
6-digit level. The first data set underestimated the magnitude of the trade and the second data set
overestimated the magnitude of the trade. To help participants in assessing the relative importance of
the two datasets the Secretariat had provided a column which gave the share of the two sets of data in
each economy’s total merchandise trade.  For example, in the case of the first Member on the list, the
share of exports ranged from 0.2 per cent to 0.9 per cent.  The Secretariat also had available for each
Member listed in Table 1 detailed HS6 digit level data. The totality of this data set ran to over
80 pages so the Secretariat proposed to make it available on the Members' website. If this was done,the information could be accessed in spreadsheet format and participants could undertake further
analytical exercises on it.TN/MA/M/5
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1.117 The representative of Australia requested that comparable data be prepared for the APEC
environmental goods list.
1.118 The representative of Japan stated that Japan had used "ex" in some instances in this list
because the product coverage at the HS 6 digit-level was too broad.
1.119 The representative of Brazil stated that his delegation took note of the lists on environmental
goods that had been presented to this Negotiating  Group. Brazil was not a party to the elaboration of
any of them and so did not feel bound by any of them. Brazil accepted them as useful contributions to
the work, but no more than that. The second issue was the question of how the Group was going to
decide on what the list would contain. The list could not be a compilation of what 144 Members
understood as being an environmental good; there had to be a criteria. To give an example, in the
Japanese list, there was under Section 2, "Cleaner Technology and Products", a first item was an "ex"of paper and paper board called "recycled paper". This was an issue that had been object of debate in
other fora but the question was whether recycled paper was inherently better for the environment than
paper produced from sustainably managed forestry products. The Group would enter into a very
difficult debate if it had to discuss whether each proposed item was in effect an environmental product
or not. Brazil wished to see the CTE in Special Session take up a bigger role in the definition of anenvironmental product.
1.120 The Chairman expected the CTE in Special Session to take an active role in this matter as
they had a mandate on that.
1.121 The representative of Malaysia stated his country's position was that all goods were to be
treated in the same manner and subject to the same formula without prejudice to special and
differential treatment. In this case, Chile’s and Malaysia’ approach as far as the treatment of
environmental goods was concerned was the same. Notwithstanding this position, Malaysia supported
Australia’s proposal that the Secretariat do similar statistical work on the APEC list of environmentalgoods.
1.122 The representative of the United States supported the request that the Secretariat prepare an
additional statistical study using the APEC list.1.123 The representative of Canada supported Australia’s request that the Secretariat do similar
work using the APEC list.1.124 The representative of Pakistan agreed with Brazil that the exercise of compiling a list of
environmental goods was a difficult job.  Pakistan also agreed with Malaysia that all goods should get
the same treatment.
1.125 The representative of New Zealand stated that if the Group were to adopt as a working
assumption a move to tariff elimination over time, Chile’s proposal on the treatment of environmental
goods looked rather attractive. In the meantime, as a practical point the Group would need to continue
with the analysis of the options available to it and from that perspective New Zealand saw value in
Australia's suggestion that statistics be generated on the APEC list of environmental goods. NewZealand shared Brazil's observation that questions of  definition in this debate properly belonged with
the CTE in Special Session.
1.126 The representative of Argentina stated that in light of the problems related to the statistics
generated on Japan’s list of environmental goods, it might be preferable not to do more of the same
type of work.  With regard to the work on environmental goods, Argentina agreed with Brazil that the
Group should establish a criterion to decide which products should be on that list. The list should be
established in a clear and specific manner in order to make sure that the products listed had a direct
relationship with the environment.TN/MA/M/5
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1.127 The representative of the European Communities stated that concerning the statistics
produced by the Secretariat, she wished to know from a technical perspective how certain figures
were produced. This was with respect to the "ex out" items. The correct approach on the issue of
environmental goods would be to develop a criterion. However, the perception of an environmentalgood differed from Member to Member, and th ere was nothing that prevented Members from
submitting proposals of products at the same time explaining why such a good had been included in
the list or the criteria used. She was pleased to hear the remark by Brazil when he had referred to
"recycled paper" and raised the question of whether recycled paper was inherently better for the
environment than paper produced from sustainably managed forestry products. In the latter case, one
would be using the criteria of PPMs. It was a g ood indication of how developing countries could find
possibilities of balancing lists. While, she was not against a study being undertaken by the Secretariaton the basis of the APEC list, she would caution against the utility of such a study since the Japanese
list subsumed most of the APEC products. She did not wish the scant resources of the Secretariat to be
used to analyse yet another list.
1.128 The representative of India stated that one piece of information that India had been looking
forward to from this list was how equitable it would be to give special treatment to environmental
goods in terms of benefits to developing countries and products of comparative advantage. It seemed
that the document did not give that information. It was not the fault of the Secretariat.  It was because
Members did not have a classification based on items which were used for predominantly
environmental purposes. Even if another statistical analysis was produced of the APEC list, theremight be the same limitations. With the more general data, his delegation had not been able to come
to any conclusion and he looked forward to the detailed tariff line information on the Members’
website.  On the issue of classifying environmenta l goods, India had examined the APEC list and had
come to the conclusion that only a handful of items, maybe 12 to 16 would fall into a group of
products which could be classified as being used predominantly for environmental purposes. Indiahad taken the point that not all products could be used 100 per cent for environmental purposes. So
that being the nature of those lists, India was attracted by the Brazilian proposal that it was not the
work of the Negotiating Group on Market Access to define and identify products which were
predominantly for environmental purposes.
1.129 The representative of Costa Rica was pleased to note that the Swiss proposal suggested
moving away from the criterion of PPMs, a position which Costa Rica endorsed. Costa Rica
welcomed clarification as to what kind of "environment friendly" products Switzerland was referring
to in paragraph 13 of its proposal.  Could it provide some examples of products which it considered
environment friendly?  Costa Rica had on previous occasions shown an interest in Chile's proposal
that the focus should first of all be on the modalities for tariff reduction and subsequently, as an
additional task for this Negotiating Group, on an analysis of the issue of environmental goods. Thiswas reflected in writing in paragraph 16 of the formal proposal submitted by Chile and circulated in
document TN/MA/W/17.  Costa Rica had taken note of Brazil's remarks concerning the definition of
environmental goods taking place in the Committee on Trade and Environment in Special Session and
hoped to comment on them on a future occasion.
1.130 The representative of Switzerland stated that in its submission, Switzerland had indicated that
participants should draw up lists of products because discussing criteria would make the process
difficult. Of course, every list was based on some  criteria including the APEC and the OECD lists.
These lists were a good basis but they did not cover all the products which could be of interest for
Members. In its submission, Switzerland made the point that one could envisage havingenvironmental friendly goods other than those men tioned in the APEC and OECD lists which could
be of interest.  In this connection, Switzerland had thought of packaging material like jute or other
kinds of products which had as characteristic environmental friendliness. This was just one example.TN/MA/M/5
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Switzerland was drawing up some more examples, and hoped to give more information to the Group
in the future.
1.131 The representative of Brazil recalled that at the Group’s last meeting, he had asked the
question whether in transferring this matter to this Negotiating Group, the CTE in Special Session hadsent only non-agricultural products or all produc ts. If it was just non-agricultural products, would
there be a treatment of agricultural products in any other body under the mandate of paragraph 31.3 of
the Doha Declaration.
1.132 The representative of Japan stated the reason for submitting this list was to avoid a
philosophical discussion on the definition of environmental goods and to engage in a more practical
discussion on this matter.
1.133 The Chairman stated that regarding the general issue of whether the Group should try to
define environmental goods, his view was that the Group was not that far yet in the debate.  It had
been useful for this Group to have an exchange  of views on so-called environmental goods without
this being clearly and precisely defined. There had been an exercise of trying to illustrate what the
flow of trade would be with respect to a list containing environmental goods as defined by Japan.Members would have at their disposal additional information which might help clarify more
questions. The point made by Brazil was legitimate, and it was in this way the Group could clarify its
views with respect to th e whole subject of environmental goods. It was clear that there was no take
over by this Group of what the CTE was mandated to do. There was no misunderstanding about the
fact that there were many ways to deal with so-called environmental goods, whether it was firstthrough defining them and giving them special treatment or giving the same treatment to all non-
agricultural products and then giving special treat ment to environmental goods. The only point which
was important to keep in mind was that in the Doha Ministerial Declaration there was a special
mention under paragraph 31.3 of environmental goods and a hint from Ministers, at far as he had
understood it, that they had to be given special treatment. The Group was in the process of clarifyingthe matter. In this connection, there had been a suggestion by a number of delegations that the
Secretariat do the same exercise with the APEC list as it had done with the Japanese list. There were
limitations in doing that but he wished to give th e floor to the Secretariat to indicate whether such
work could bring more value to what had already been done.
1.134 A representative of the Secretariat (Ms. R. Jackson) stated that in response to the question
raised by the EC as to how the data was compiled in Table 1, it was an extraction from the databases
at the 6-digit HS level of all of the codes that were included in the Japanese list. Therefore it included
HS 6-digit codes that were greater in scope than in the Japanese list.  So, in that sense the statistics in
this table were indicative. In fact, the one column "including ex" items was much broader than if one
had been able to define more precisely in the import and exports statistics the products covered in the
Japanese list. The same problem would exist for any statistics compiled on the APEC list. The
Secretariat could only do it at the HS 6-digit leve l and therefore would come up with a total that
would be broader than what was actually defined in the APEC list.
1.135 The Chairman stated that it appeared that undertaking statistical work on other lists of
environmental goods would bring very limited value added. With the output produced by the
Secretariat, there were already some elements which helped to illustrate the matter. He proposed that
the Group pause for the time being and reflect on th e matter. He would convene a meeting with the
Chair of the CTE in Special Session and try to obta in information from her about the intention of the
CTE concerning its own work in this area. He noted that nothing prevented any participant from
tabling a list of what it considered to be environmental goods.
1.136 The representative of New Zealand noted that his delegation’s support on having data on the
APEC list was prompted by an interest in having more updated trade figures. New Zealand had
circulated the APEC list in the CTE and had included an annex which contained trade data from 1999.TN/MA/M/5
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So earlier trade data at the 6-digit level was available, with the caveats mentioned by the Secretariat,
for any interested Members and was contained in TN/TE/W/6.
1.137 The representative of Brazil agreed that a compilation of new statistics might not be very
useful. The level of trade would not give a clue as to whether a product was environmental or not.  Sohe could understand the Chairman’s recommendation that the Group pause and reflect on this issuefor a while.  He requested the Chairman that when consulting with the Chair of the CTE to ask for a
very precise indication of the mandate that the CTE had transferred to this Group, i.e. had the CTE
transferred the whole mandate under paragraph 31.3 of the Doha Declaration or was it undertaking the
definition itself and should this Group wait for it to finish that work before starting its own.
Additionally, had the CTE transferred the responsibility for negotiating on all products or only on
non-agricultural products.
1.138 In response to a question by Malaysia, the Chairman stated that he was going to ask the CTE
Chair where the CTE was in respect of its work, what was the intention of the CTE regarding this
issue, and how each Group could reinforce the other in fulfilling the Doha mandate.
1.139 The representative of Malaysia stated that there was no question of asking the CTE to
undertake a definitional exercise of an environmental good. Brazil had raised an important point that
should be taken up with the Chair of the CTE.  Malaysia’s position was that the treatment of all goods
should be the same and in this regard it differed from the Chair’s and other Members’ interpretation
regarding paragraph 31 of the Doha Declaration.  Malaysia took the Chair’s advise that the Group
pause and reflect on this matter and therefore would not insist on trade statistics on the APEC list atthis stage.
1.140 The Chairman noted that the CTE in Special Session was a sovereign body which could
undertake the definitional exercise if it so desired.
1.141 The representative of Australia noted the Chairman’s intention on how to proceed on the
proposal which Australia had put forward concerning work on the APEC list. He did not demur from
the Chairman’s judgment on that, having noted at the same time that there was support for proceeding
with that work and no strong opposition. The point was that part of the value of being able to have
that information at some stage would be to help those who were sceptical about the value of putting
up lists of environmental goods. The trade statistics would help to enlighten that discussion.  On the
discussion of the definition of environmental goods in the CTE, he recalled being in the CTE at thetime when the discussion was held on what to do with the mandate. A suggestion was made at the
time that the CTE should in fact be looking at a definition of environmental goods, and he recalled
making an intervention at that point saying that while Australia had no difficulty with the CTE
looking at that issue, his delegation did not want to be in a position whereby work in this Negotiating
Group was held up pending agreement in the CTE on the definition of environmental goods. That wasaccepted at the time and he would not want to see any subsequent discussions unravelling what was a
clear understanding at the time.
1.142 The Chairman stated that there was no problem  generating the statistics for the APEC list as
requested by Australia, however, the question was what was the value-added in doing that work.
From the information provided it appeared that the value-added would be limited.
1.143 The representative of Australia clarified that his delegation was not insisting on the statistics.
He had merely indicated that if those statistics were available, they would help some of those
Members who were raising questions about the value of the sort of lists which were on the table fortheir own particular trade interests.
1.144 The Chairman proposed that the Group pause on this matter. He did not foresee, at this stage,
additional statistical work.  As he had understood from the discussion, delegations needed to clarify inTN/MA/M/5
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their minds much more important issues and questions regarding environmental goods which
additional statistics would not help to do. The Group could revert to the question of additional
statistics at a later stage.
1.145 The Negotiating Group took note of the statements.
2. Other Matters
2.1 No discussion was held under this item.
3. Stock-taking of the work in progress
3.1 The Chairman stated that he was satisfied with the work done in the Negotiating Group.  The
Group had held very interesting meetings where a number of important submissions had been
introduced, and where an even greater number of substantive statements had been made. Participants
had held a focused debate and dealt with modalities almost from the first day. A lot of progress had
been made in terms of clarification, statement of positions and the beginning of defining parameters
for the modalities. On the basis of the work done so far the Group could enter with some confidence
into the phase beginning in January 2003 which would hopefully lead the Group to an agreement onmodalities by the end of May 2003 at the latest. The Group would need to focus more and be more
operational in the future but if it were to keep the spirit and the commitment that it had shown so far,
it was going to make good progress toward fulfilling its mandate.
3.2 The representative of Brazil shared the Chairman’s sense of optimism and the most important
aspect to underline was that the Group was where it should be at this stage. Concerns that might have
existed regarding the late start in the Group’s work had been eliminated. As the Chair had indicated
the Group should be trying to arrive at a more operational or focused debate.  It had been useful to
have this general debate where delegations could present a complete overview of their views on the
whole modalities issue.  However, moving to next  year it would be more useful if the Group could
have a more focused and interactive debate on each one of the multiple elements that would have to
be taken into account in defining modalities. In this sense, the annotated agenda was a useful guide of
how the agenda and the debate of this Group could be structured for next year.  In preparing such a
format, he requested the Chair to separate out the issue of special and differential treatment from less
than full reciprocity which were two different concepts and deserved each their own individual
treatment. He also suggested that this approach be applied in the overview paper in order to give the
Group an additional input for the discussions next year.
3.3 The representative of the United States concurred with the Chair’s overall assessment of the
discussions so far.  From the first meeting until this meeting, Members had come prepared and with
an open mind.  His delegation also wished to remind Members that there still remained 28 days to
submit proposals on modalities. The more proposals there were, the more fruitful would be thediscussions as the Group moved forward into 2003. He also encouraged Members to use the data and
the software tool that were available in order to apply the various proposals to their own schedules
and to the schedules of their major trading partners so that participants could discuss in greater detail
the various modalities. He encouraged Members to continue to provide tariff and trade data as such
data would be a critical element to the Group’s ability to discuss these modalities. His delegation alsoencouraged Members to be mindful of the objective of providing some input to the NTBs process.
His delegation intended to provide its initial thoughts and contribution by the end of January 2003.
3.4 The representative of New Zealand wondered whether the Chairman could give some
indication of the form the overview paper would take.TN/MA/M/5
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3.5 The Chairman stated that it was going to be a consolidated overview of proposals which
participants had submitted until 31 December 2002.  For the moment, there had been no decision
taken on the precise form that this overview paper would take. Brazil had made some suggestions in
this regard and any other suggestion would be welcome.
3.6 On the question of the state-of-play of the negotiations, it would appear that participants
shared the short positive assessment that he had made.  He took it also as a sign of the commitment
that participants were going to continue to put into the negotiations of non-agricultural goods. He
reminded participants once more about the requests which had been formulated regarding submission
of tariff and trade data and/or the authorization letter and information on NTBs. Regarding the
authorisation of transfer of data to the IDB, so far only a limited number of authorisations had come.
He understood that some Members did not feel it necessary to send this so-called authorisationbecause they had already fulfilled their obligati on in this respect. Nevertheless, he asked all
participants to have a look at this matter again and remind respective capitals of the request which had
been addressed.  Signing such an authorization paper would ensure that the necessary data would be
available for participants for the negotiations.
3.7 The Negotiating Group took note of the statements.
4. Establishment of the calendar of meetings up to 31 May 2003
4.1 The Chairman proposed the following meeting dates until May 2003: 19-21 February,
14-16 April, 26-28 May 2003.  The proposed dates had not been reached easily. He had kept in mind
a certain number of constraints and parameters.
4.2 The representative of Japan stated that as it was clearly stated in the work programme, all
Members had agreed that not only the end of May but also the end of March 2003 were important
target dates and the Group should proceed in fully observing this time-frame. The absence ofmeetings in the month of March 2003 further reinforced the importance of the consolidated overview
of proposals to be submitted to the February 2003 meeting. In this regard, the Japanese delegation
would like to highlight the importance that all modality proposals were to be incorporated and
properly reflected in this consolidated overview in an objective manner
4.3 The Negotiating Group took note of the statements and agreed
 to the following calendar of
meetings until 31 May 2003: 19-21 February, 14-16 April, 26-28 May 2003.TN/MA/M/5
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