RESTRICTED  WORLD TRADE  
ORGANIZATION  TN/MA/M/18 
12 April 2005 
 (05-1507) 
Negotiating Group on Market Access  
  
MINUTES OF THE MEETING 
 
Held in the Centre William Rappard on 14-18 March 2005
 
 
Chairman:  Ambassador Jóhannesson (Iceland) 
  
 The Negotiating Group adopted
 the agenda for the meeting as contained in WTO/AIR/2525 
and Add.1.  The meeting took place in informal mode.  At the request of some delegations, their statements have been reproduced in these minutes.   
Non-reciprocal preferences
 
 1. The representative of Kenya
, speaking on behalf of the African  Group, introduced the African 
Group proposal on the treatment of non-reciprocal  preferences in the cu rrent NAMA negotiations 
(TN/MA/W/49).  He wished to start by saying that although the underlying presumption in the WTO was that freer and non-discriminatory trade was al ways better, this might not be true as a general 
proposition.  For most African economies, liberalisa tion and structural adjustment programmes since 
the 1980s had led to the worsening of already weak  economic and industrial structures.  For such 
Members, the WTO Doha negotiations had to ex emplify appropriate and necessary sequencing to 
allow for trade to contribute to economic growth, development, employment and industrialization in 
Africa.  For this reason, some African countries would need to continue to utilize non-reciprocal 
preferences in order to secure a share in the growth  of world trade.  These preferences had played a 
key role in strengthening some of the African countries' weak and vulnerable industrial base by 
increasing export earnings, promoting diversification, attracting investment, facilitating the transfer of technology, all of which had accelerated economic  growth and development. Additionally these 
preferences had helped some African Countries to pe netrate global markets with a measure of success.  
Historically, it had been proven that the strict application of the MFN principle did not allow for 
development.  In fact, the very first article drafted in the history of this institution, Article 1 of GATT 
1947 embodied both non-discriminatory and discriminatory treatment, very much like the zebra, which one never described as black or white but ra ther both.  Likewise preferential trade and MFN 
trade in this institution, operated in tandem, symbiotic, parallelism which was why MFN tariff 
liberalisation would pose severe developmental challenges for some weak African economies 
dependent on preferences.  This notwithstanding,  African countries could consider allowing MFN 
tariff liberalisation to proceed instead of maintain ing their earlier position of a "carve-out" which was 
legitimate within this rule based multilateral trad ing system, given the way a number of preferences 
had been incorporated under Article I of GATT 1947,   bound and still in force.  Therefore, the Group 
expected that unequal situations would not be treat ed equally and that the economic development of 
this group of countries would not be co nsidered, only after all other modalities. 
2. The task ahead of the Negotiating Group on Ma rket Access (NGMA) was to look at how to 
treat preferences in the negotiations, not to prove whet her they had been beneficial or not.  This was 
quite clear in the Decision on the Doha Work Programme adopted by the General Council on 
1 August 2004.  Indeed, under paragr aphs 1 and 16 of Annex B,  Memb ers had agreed to consider the 
issue of preferences in the NAMA negotiations, r ecognising the challenges faced by non-reciprocal TN/MA/M/18 
Page 2  
 
 preference beneficiary Members.  In addition para graph 1(d) under other development issues gave 
specific reference to preferences as a development tool. 
3. The African Group paper pointed to the rationale  for non-reciprocal preferences and proposed 
positive ideas of how these preferenc es, as a credible instrument of development, should be treated in 
the negotiations.  The paper recognised that reductio ns in MFN tariff rates such as those proposed by 
some Members would substantially reduce or erode completely the preferential margins presently 
enjoyed by a number of African countries.  The loss of preference margins would result in increased 
competition in their traditional export markets lead ing to a contraction in domestic manufacturing 
with its attendant consequences.  As history had shown, it was unlikely that African countries could 
develop their manufacturing structures throug h uncontrolled competitive global environment. 
4. The heart of the paper was in section VI where the African Group had made preliminary 
proposals on the treatment of non-reciprocal preferences.   Due to their critical importance as a tool of 
development, African countries would need to con tinue benefiting from preferences at least in the 
medium term.  The paper had ther efore proposed the use of a correction coefficient to improve on the 
preference margins for products benefiting from prefer ential market access, after the application of an 
approach to be agreed upon.  Longer implementa tion periods would be required to prepare African 
economies to adjust their manufacturing structur es and face global competition gradually.  For 
products which were not zero-rated, the paper pr oposed that the preference-giving Members would 
have to maintain, if not improve, the margin of pref erences by adjusting the levels of preference rates 
accordingly.  
5. The paper had also recommended that in order to  take full advantage of the non-reciprocal 
preference schemes availed to Africa, the prefer ence-giving Members should improve the conditions 
attached to such schemes, by ma king them less stringent while at the same time eliminating market 
entry barriers.  This would be in line with th e 2005 Commission for Africa Report released late the 
previous week which was addressed in part to the G8 members and the international community.  The 
report recommended, among others, an improvement of  preferential trade coverage for sub-Saharan 
Africa and relaxation of the rules of origin.  It  also recommended that developed countries should 
immediately extend quota and duty-free access to  all exports from Sub-Saharan countries.  
6. In conclusion, the African Group looked forw ard to a constructive discussion and positive 
progress in the treatment of non-reciprocal prefer ences in these negotiations.  Accordingly, the 
African Group appealed to Members to refrain from dw elling on the value or basis of preferences as 
Members were long past that phase.  Members had to instead engage meaningfully and agree on 
development-centred solutions to this important issue. 
7. The representative of Mauritius
 introduced the paper submitted by Benin on behalf of the 
ACP Group of States (TN/MA/W/53).  The paper propo sed a methodology to identify products in the 
ACP countries concerned by erosion of preferences.  He stated that he was introducing the paper on 
behalf of the ACP which comprised of 78 countri es, out of which 54 were WTO Members.  The ACP 
also constituted the vast majority of LDCs as well as small, weak and vulnerable countries as could be 
evidenced by their low level of economic development and their tiny fraction of world trade.  Indeed, 
the share of the ACP countries in world trade stood at less than 2.0 per cent and that too was concentrated on a very limited range of products.  This was a clear indication that helping these 
countries maintain at least their current market sh are would in no way impact on global trade, which 
was expected to increase with the removal of trade barriers as a result of the current round of trade 
negotiations. 
8. The philosophy underlying the present submissi on was, first, to reiterate the agreement 
reached in August, both in the decision as well as in  Annex B, that the issue of preference erosion 
needed to be addressed in the negotiations as pa rt of the NAMA package as well as the DDA.  The  TN/MA/M/18 
 Page 3 
 
 
 decision reached in August on other development issues called for the particular concerns of 
developing countries, including preferences, to be taken into consideration in the course of the 
agriculture and NAMA negotiations.  Annex B on NAM A stipulated in paragraph 1 that additional 
negotiations would be required, am ongst others, on the specifics of preferences.  Paragraph 16 in its 
part instructed the NGMA to take into consideration,  in the course of its work the challenges faced by 
non-reciprocal preference beneficiary countries. 
9. The submission also laid down a set of objective criteria that could be used to identify the 
narrow range of products that were concerned with preferences.  It was pertinent to note that, by 
virtue of its narrow scope, preferences could not undermine the broader multila teral trading system.  
In fact, this issue had been on the GATT agenda si nce its inception in 1947.  Article 1 of the GATT 
which laid down the basic principle of non discrimin ation stipulated that the MFN principle shall not 
require the elimination of preferences in resp ect of import duties or charges, under conditions 
obviously.  This was testimony that preferences had been part and parcel of the system right from the very beginning.  This had, however, not prevented th e liberalisation of trade at the multilateral level.  
Indeed, tariffs on industrial goods, which were to th e tune of 40 per cent on average in 1947, had 
dropped to between 4-5 per cent at present.  This was an indication, if need be, that trade preferences 
had never undermined the Multilatera l Trading System, nor had they prevented tariff reductions on an 
MFN basis. 
10. But one thing that needed to be recognised was that trade preferences had been instrumental 
in lifting millions from poverty and the shackles of marginalisation.  Without preferential access, 
neither the LDCs, nor the small, weak and vulner able economies would have been able to secure a 
share in world trade.  Contrary to what the oppone nts said, preferences had not been inconsequential.  
His own country was a case in point.  From a monocrop economy in the 1970s, Mauritius had been able to successfully diversify its economic base and develop an export-le d strategy thanks to 
preferences obtained under the Lome Conventions an d now the Cotonou Agreement.  On average, 95 
per cent of ACP exports to date to the EU took place under preferential access, without which these 
exports would not have been possible and obviously, with the ensuing socioeconomic impact. 
11. The African Growth and Opportunities Act (A GOA) preferences granted to sub-Saharan 
African countries, which were amongst the poorest in the world, were contributing significantly to the development of these countries and by extension to co mbating poverty, famine etc.  A report prepared 
by USTR on AGOA in May 2004 confirmed that  AGOA had a significant impact on growth and 
economic development.  AGOA related trade and i nvestment had created 190,000 African jobs and 
over $340 million in investments.  In 2003, AGOA generated exports of over $14 billion and had 
helped diversify US-Africa trade which was concentr ated on fuel before.  Countries such as Kenya, 
Lesotho, Madagascar, Malawi, Mozambique, Namibia, Zambia and others had been able to attract 
investment in the industrial sector which otherwise would have been impossible.  It would be most 
unfair if these countries were denied further development as a result of a significant erosion of their 
preferential margins.  Already they had been affe cted by the phasing out of textile quotas which had 
been providing them with a guaranteed market.  Tens of thousands of jobs had already been lost as a 
result of the closure of factories, including in Mauritius.  The compounded effect of the quota phase-out and erosion of the preferential margins as a resu lt of tariff reductions on the export market would 
have a devastating impact on their economies as a whole.  This would be counter to the very 
objectives of the Marrakech Agreem ent which were, and he quoted, "to raise standards of living, 
ensuring full employment and a larger and steadily vo lume of real income and effective demand and 
expanding the production of and tr ade in goods and services….." . 
12. It was with the express view of ensuring that the poorest and most vulnerable countries were 
not unduly penalised as a result of the current negotia tions, and at the same time of not jeopardising 
the liberalisation of trade in the broader sense th at the ACP Group was making this submission.  The 
ACP Group was proposing a methodology based on an objective set of criteria to identify precisely TN/MA/M/18 
Page 4  
 
 those products that would be affected by preference erosion.  The methodology proposed was as 
followed: 
13. For a country to be vulnerable to preference er osion, it had to have some characteristics.  
First, it had to already enjoy significant preferen ces (for the "erosion of preferences" to take place).  
Secondly, a country was considered vulnerable wh en it depended on few expor t products and export 
markets, and it was a small exporter, relative to the world. 
14. In concrete terms, this coul d be calculated using three relationships:  the share of the 
particular product of the importing country on the tota l exports of the exporting country;  the share of 
the particular product of the exporting country in the importing country;  the world market share of 
the exporting country, for the particular product.   These three factors could be condensed in an "index 
of vulnerability".  In other words, the product and market concentration was fundamental:  the country 
would be more vulnerable the less  diversified its export markets and export products were, and the 
smaller its world share was. 
15. The list of product obtained by using this met hodology would, in all likelihood, be common 
for exports under different preferential schemes.  Moreover, the number of tariff lines concerned 
would be limited and concentrated in certain sect ors only for which an appropriate modality would 
have to be developed so that preference erosi on was minimal and sequenced  over a longer period of 
time.  The correction coefficient proposed by the Africa Group was certainly a viable option. 
16. This submission did not propose any modality for addressing preference erosion.  This was 
premature at this stage since the core modality for tariff reductions had yet to be defined and agreed 
upon.  Moreover, a decision had also yet to be re ached on the sectoral component which would have a 
direct bearing on preferences.  The ACP Group as well as individual ACP Members reserved the right 
to come up with written/oral submissions on these and other elements in the light of discussions in the 
NGMA. 
17. The representative of Zambia
, speaking on behalf of the LDCs, wished to support the papers 
and statements by the Africa Group and the ACP group of countries.  The proposal for the treatment 
of non-reciprocal preferences for Africa and ACP w as important to LDCs on a number of points.  It 
rightly stressed that non-reciprocal preferences were  an important trade instrument which had greatly 
contributed to the diversification of production,  employment and development in a number of 
developing countries.  
18. Given the reliance of many developing countries on these schemes, the erosion of preferential 
margins of market access would represent a challenge  that needed adequate consideration in the 
NGMA.  The African Group communication supported by the ACP communication proposed to apply 
a correction coefficient to improve preference ma rgins and to strengthen the margin for products 
which were not at zero per cent.  The communication also proposed to improve market access conditions for African developing countries throug h the reduction or elimination of NTBs that 
hindered the full utilisation of preferences (e.g. SPS, TBT, and rules of origin). 
19. LDCs were among the countries that benefite d from the largest number of non-reciprocal 
preferential arrangements and that relied the most on such schemes for their trade.  In fact, LDCs 
would be directly affected by the erosion of marg ins as a result of NAMA tariff reductions.  It was for 
these reasons that the LDCs very much welcomed the communication by the African Group and the ACP group of countries.  The LDCs wished to remind the NGMA that preference erosion would 
affect many other developing countries as well as  many other low income developing countries. 
  TN/MA/M/18 
 Page 5 
 
 
 Unbound tariff lines  
 20. The representative of Zambia
, speaking on behalf of the LDCs, stated that as all Members 
were aware, LDCs were exempted from reducing tariffs whether by the formula or the sectoral 
approach.  However, paragraph 9 of the Framew ork specified that LDCs were expected to 
substantially increase their level of tariff binding commitments.  
21. The LDCs wished to restate that discretion be  given for each LDC to determine the rate of 
tariff binding and the number of additional users to be bound based on each individual country's 
national development needs and the level of industrial sector development.  
22. Members were also aware that the industrial sector in most of the LDCs required special 
attention and therefore adequate leverage to protect  their industries through tariffs was critical.  This 
fact could not be over emphasized. 
23. The LDCs' emphasis for special treatment with re spect to binding of tariffs was consistent 
with the commitment that Members made in the pr eambular paragraph of the Framework on "Other 
Development Issues". 
 
__________