WORLD TRADE  
ORGANIZATION  TN/MA/W/58 
4 July 2005 
 (05-2884) 
Negotiating Group on Market Access Original:   English 
  
 
MARKET ACCESS FOR NON-AGRICULTURAL PRODUCTS 
 
Tariff Liberalization in the Chemicals Sector
 
 
Communication from Canada, Japan, Norway , Separate Customs Territory of Taiwan, 
Penghu, Kinmen, and Matsu, Singapore, Switzerland, and the United States 
 
 The following communication, dated 1 July 2005, is being circulated at the request of the Delegations of Canada, Japan, No rway, Separate Customs Territory  of Taiwan, Penghu, Kinmen, and 
Matsu, Singapore, Switzerland, and the United States. 
 
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I. GLOBAL TRADE IN CHEMICALS 
1.   The global chemical industry is essential to a broad range of manufacturing and agricultural 
industries, with virtually every product – from automobiles to zippers – using chemical inputs.  Worldwide, the output of this industry is valued at $1.9 trillion annually.  Of that output, forty percent -- 
$792 billion -- is traded globally, accounting for more than 10 percent of world merchandise exports in 
2003.  The chemicals industry also employs more than 7 million people worldwide.     
 
2.   Due to the ability of the chemicals industry to globally migrate state-of-the-art technology and facilities, chemical industries in countries at all leve ls of development can be internationally competitive. 
According to UNCTAD, developing countries’ share of trade in world chemicals exports grew from 
16.5% in 1990 to 20.7% in 2000.1  During the same period, global chemicals trade nearly doubled from 
$296 billion in 1990 to $566 billion in 2000. 
 
3. Chemicals are inputs into products across a broa d range of sectors.  High tariffs on chemicals 
translate into costs that significantly  raise the prices of intermediate and finished goods.  Chemicals also 
comprise a significant percentage of the value of goods  exported by developing countries.  For example, 
chemicals comprise 35 percent of th e value needed to produce and pack age footwear products, 16 percent 
of the value of material inputs to motor vehicles, and 15 percent of the value of material inputs to jewelry.   
Liberalization in this sector would continue to ensure  that these and other chemical inputs can be supplied 
at a low price globally, thus enabling other industry sectors to diversify and to produce finished goods at 
lower costs.    
II. BUILDING A CHEMICAL SECTORAL INITIATIVE USING CRITICAL MASS 
4.  In the Uruguay Round, a group of WTO Members agreed to harmonize tariffs on a broad range of 
chemical goods to promote liberalization in this sector  and to develop a more predictable and transparent 
                                                     
 
1 United Nations Conference on Trade and Development, Trade and Development Board, Commission 
on Trade in Goods and Services, and Commodities: Expe rt Meeting on New and Dynamic Sectors of World 
Trade, Geneva, 7 February 2005, “Strengthening participation of developing countries in dynamic and new 
sectors of world trade: Trends, issues and policies”, Document TD/COM.1/EM.26/2; 15 December 2004. TN/MA/W/58 
Page 2  
 
 global tariff structure for a growing industry. The result was the Chemical Tariff Harmonization 
Agreement (CTHA), which led to a substantial reduc tion and harmonization of chemical tariffs in the 
signatory countries.  Participants in the Agreement ag reed to harmonize tariffs at three levels: zero, 5.5 
percent, and 6.5 percent.  Basic organic and inorga nic chemicals were harmonized at 5.5 percent, with 
more highly-processed goods such as cosmetics and plastics harmonized at 6.5 percent.  Additionally, 
tariffs on pharmaceutical products in Chapter 30 and some primary petrochemicals in Chapter 29 were 
eliminated.  Since the Uruguay Round, 14 Members have  chosen to participate in the CTHA as part of 
their accession to the WTO.   5. Tariffs on chemicals in some countries not pa rticipating in the CTHA remain as high as 60%.  
Such charges impose unnecessary costs which significantly  raise the prices of intermediate and finished 
goods for both manufacturers  and consumers.   
 6. A chemical sectoral initiative in the Doha De velopment Round should build on the success of the 
CTHA and include WTO Members who are key traders and producers of chemicals. Such an agreement 
would also encourage further growth in global chemi cal exports, which have already grown by more than 
90 percent between 1994 and 2004, as compared to a cu mulative increase of 75 percent in all industrial 
global exports.    7. Building on the CTHA, Members should look to expand participati on in the harmonization 
initiative, and then seek the elimination of tariffs as  discussions move forward in this new initiative.   
Interested Members would determine how critical mass would be defined in this sector and discuss which 
Members should participate in order to make liberalization as meaningful as possible.    8. Participating Members would also decide whic h products should be included in the initiative and 
what form of liberalization (e.g. harmonization, el imination) would be exp ected.  This approach 
encourages all interested Members to  participate in the negotiation of a chemical sectoral initiative, 
including Members that may not currently be major traders, but see future opportunity for economic growth and investment in this sector.    
III. PRODUCT COVERAGE: 
9. A chemical sectoral initiative should be as comp rehensive as possible.  Using the model of the 
CTHA, product coverage should include HS chapte rs 28-39. These chapters cover products including 
inorganic and organic chemicals, fertilizers and pest icides, soaps and cosmetics, and pharmaceuticals and 
plastics.  Ch. 28   Inorganic chemicals, organic or i norganic compounds of precious metals such as: 
chlorine, flourine, sulfur, alkaline, hydrogen chloride 
Ch. 29   Organic chemicals such as : ethane, butane, propane, octane 
Ch. 30   Pharmaceutical products Ch. 31   Fertilizers Ch. 32   Tanning or dyeing extracts Ch. 33   Essential oils 
Ch. 34   Soap, organic surfacing agents, lubricati ng preparations, artificial and prepared waxes, 
candles, etc. 
Ch. 35   Albuminoidal substances; modified starches; glues; enzymes such as: adhesives Ch. 36   Explosives Ch. 37   Photographic or cinematographic goods 
Ch. 38   Miscellaneous chemical products su ch as: pine oil, herbicides, insecticides 
Ch. 39   Plastics and articles thereof such as: resins and polymers  The list could also include additional products  of interest to participating Members.  TN/MA/W/58 
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 IV. SPECIAL AND DIFFERENTIAL TREATMENT 
10. A variety of flexibilities could be employed to  account for the needs of developing countries. 
Possible options might include the following:  
*  Longer implementation periods for all chemical products  
*  Longer implementation periods  in certain products/sub-sectors 
*  Zero for “x” *  Participation in certain sub-sectors 
 11. Varied implementation periods were used su ccessfully during the CTHA to provide appropriate 
adjustment to participating Members based on their tariff rates.  Implementation periods used in the 
CTHA are provided for Members’ reference: tariffs greater than 25% received 15 year staging; tariffs greater than 10 percent and less than 25 percent received 10 year staging; and tariffs less than 10 percent received 5 year staging.  V. CHEMICAL TARIFF LIBERALIZATION AND ECONOMIC DEVELOPMENT 
12. The participation of WTO Members who prod uce and trade chemicals in a Doha sectoral 
initiative is important not only for the liberalization of global trade, but also in terms of economic 
development.  For example, high chemical tariffs  can make crop protection and other chemical-based 
agricultural inputs cost prohibitive for farmers.  These products can ultimately increase crop yields and 
facilitate control of diseases and insects.  Countri es with high chemical tariffs are also potentially 
undermining the export competitiveness of downstrea m manufacturers by keeping tariffs on raw and 
intermediate goods high, thus hindering their ow n economic development, and discouraging foreign 
direct investment that tends to flow to low-tariff economies.   
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