MARKET ACCESS GAINS FOR SOUTH MUCH LESS THAN MADE OUT ?

7:09 AM Sep 15, 1994

MARKET ACCESS GAINS FOR SOUTH MUCH LESS THAN MADE OUT ?
Geneva Sep (Chakravarthi Raghavan) -- Developing countries may have gained much less in terms of market access out of the Uruguay Round than was made out in the GATT secretariat and the World Bank/OECD studies and reports based on overall average tariff cuts, a careful reading of UNCTAD's Trade and Development Report, 1994 suggests.

TDR-94 provides the secretariat's initial assessment of the outcome of the Marrakesh accords. Supporting papers on this are due to be published by the secretariat in a separate volume on 26 September.

Neither of these have attempted a quantitative assessment of trade gains that could accrue to the developing countries under the tariff cuts and other market liberalisations of the Marrakesh accords.

This, UNCTAD officials say, is because of the nature of the actual market access negotiations and tariff cuts, industrial and agricultural, which had targets for average reductions to be achieved, but gave considerable leeway to the importing countries, in terms of the tariff-line bargaining with principal suppliers or by autonomous decision in filing schedules.

Though the negotiations were concluded on 15 December, the tariff talks in reality went on almost till end March, and the actual schedules became available only by July. Many of the classifications, at tariff line, have been changed by several of the majors.

As a result, the officials say, the tariff schedules of the major importing markets have to be looked at the six-digit HS tariff line, compare it with actual tariff of the pre-Uruguay Round, and calculate possible gains or losses in terms of the trade flows.

This is a time-consuming process, but UNCTAD secretariat which has been asked to produce some quantitative assessments, hopes to be able to provide this by the end of the year.

Last year, in the final stages of the round, the World Bank and then OECD Secretariat gave projections of world GDP and welfare gains in the region of $200-300 billion annually, based on the 30 percent average tariff cuts.

The GATT secretariat early in December, and again just on the eve of the Marrakesh meeting, came out with its figures of 750 billion dollar trade gains, and of gains to the developing world because of trade liberalisation and rules in agriculture.

A careful look at the tables in TDR-94 -- on the trade-weighted tariff averages in the Quad countries, product groups -- suggest that many of these claims have been exaggerated.

As against this has to be weighed the medium- to long-run gains of clearer rules and the trade security of a rule-based system that would encourage and provide incentives for export-oriented investments in productive sectors of developing countries -- an area where rules and intentions have to be weighed and seen in their implementation.

At a briefing on the TDR, Roger Lawrence, the Deputy to the Secretary-General of UNCTAD said the successful conclusion of the Round "should" result in substantial strengthening of the multilateral system.

He noted in this regard that the Marrakesh agreement and its GATT 1994, provide more detailed rules to govern application of trade measures which under GATT 1947 have weak or unclear disciplines, derogations 'grey area' measures, undermining the credibility of the system and giving rise to trade tensions and conflicts. These include anti-dumping, subsidies, safeguards, agriculture and textiles and clothing.

The detailed elaboration and tightening of multilateral disciplines, the introduction of new concepts and detailed criteria for their application and the improvement of the dispute settlement mechanism, the TDR-94 says, provide new scope for action against trade-restrictive measures and could be expected to encourage countries to initiate litigation to assert or clarify their rights and obligations. ) are clearer, though leaving considerable leeway and discretion to the importing countries still.

The trade security that these rules, and the dispute settlement mechanism for enforcement of rights, would bring in, the TDR-94 brings out would depend on the implementing legislations in the majors to give effect in domestic law and their trade regimes to these strengthened rules, and how they would in fact interpret and implement the discretions.

In many cases, such obligations codify current practices, sometimes to legitimise measures that had been the subject of controversy. Many of the agreements provide technical solutions to practical problems that have arisen over recent years between the US and EC. Other solutions represent an alignment with existing practices of one or other party, and derived from national jurisprudence -- in many cases by alignment with national provisions with relatively higher level of discipline, but in others of less stringency than now.

"However, certain provisions may still lend themselves to abuse by providing openings for discriminatory measures and trade harassment. In specific cases (such as in antidumping) decisions by national authorities are relatively shielded from aspects of the dispute settlement process. In summary WTO members will only be able to derive and maximize the anticipated benefits from the post-Uruguay Round system through active assertion and pursuit of their rights".

What the TDR does not say on this last is that such an assertion and pursuit of rights is a costly process for many of the developing countries (and their exporters in the first instance who have to contest countervailing investigations and proceedings in importing countries). Even more, the final remedy is only retaliation: a succession of administration protagonists (from Mickey Kantor, the USTR and Jackson, leading GATT jurist) in testimony before the US Congress have made clear that there is no automatic implementation of the panel rulings if they go against the US and that in that event the other parties could only withdraw equivalent concessions.

In terms of market access, the TDR-94 in its initial assessment notes that a substantial degree of tariff liberalization has been achieved, but that "tariff reductions on key products of export interest to developing countries have been considerable less than the general norm, while many developing countries have made major tariff reductions and binding.

On market access and tariff cuts, the Mid-term review set for industrial countries a 36 percent average tariff reduction, with a minimum cut of 15 percent for each tariff line. For developing countries, the targets were respectively 24 and 10 percent.

Both these were achieved, though the reductions were not across the board but negotiated on individual tariff lines.

The major thrust for reductions in industrial products came out of the Quad accord -- zero for zero approach on pharmaceuticals, construction equipment, medical equipment, steel, pulp and paper, beer, furniture, farm equipment and distilled spirits; greater than average reductions in electronics, scientific equipment, toys, wooden products and some non-ferrous metals; and harmonization of tariffs on chemical products.

While the agreed tariff reductions and concessions in the Quad markets (accounting for more 90% of total imports of developed countries) will result in general reduction of share of tariffs facing imports to ten percent or more, and developing countries will benefit from liberalization in all sectors, the proportion of imports attracting duties of ten percent or more remain relatively high, in particular for imports from developing countries for products of export interest to them: agricultural (non-tropical) products, textiles and clothing, leather and footwear. And while high tariffs have been generally reduced, significant proportions of imports from developing countries are still subject to high-tariffs.

In general, and making allowance for the preferential imports from developing countries under GSP, the post-Uruguay Round tariffs (specially, in agriculture products, textiles and clothing, leather and footwear) facing imports from developing countries are higher than overall tariff in each of the Quad markets for imports from all sources. This also generally holds true at higher level of product disaggregation -- for roots, rice, tobacco, nuts and fruits (particularly in Japan and the EU) within the tropical agricultural product group; for dairy products in all four markets, and meat, cereals and fruits and vegetables (within non-tropical agricultural product group) in the EU and Japan; for fish and fishery products in EU.

In manufactures -- apart from textiles, clothing and footwear -- developing country exports will still face relatively high tariff barriers on travel goods (EU and North America), cork and wood products (in Japan), automotive products (in EU), sanitary, plumbing and heating appliances (in US).

If imports from developing countries are used as weights, instead of imports from all sources, the trade-weighted tariff reductions in the Quad markets is smaller. This is because most of the products successfully exported by the developing world face relatively high tariffs in the developed markets.

In agriculture, the tariffied rates are very high, because of the choice for base year of 1986-1988 -- a period when world prices for many agricultural products were exceptionally low.

As a result, in fact the outcome suggests an increase in border protection after tariffication, to be reduced subsequently through the (36 percent average over six years by developed countries) tariff cuts applying to this sector.

In many important agricultural sectors, the tariffication process has resulted in tariff rates "that may prove to be as prohibitive as the non-tariff barriers they replace, often reaching levels, in the major developed countries, in the range of a 200-500 percent ad valorem".

The schedules of the Quad countries show that very high initial tariffs are to be applied on imports of some of these products. In the EU items affected will be meat products, dairy products and cereals, bananas, citrus fruit and sugars; in Japan it will affect leguminous vegetables, cereals and preparations of cereal flour etc; in the US it will affect dairy products, sugars and some edible preparations.

Under the tariff cutting formula, countries have been enabled to confine their cuts on individual product lines to 15 percent, while conforming to the overall average 36 percent by eliminating low tariffs on other products.

In many sectors, the TDR notes, the tariffication process will not by itself provide any significant improvement in market access conditions and, where have been no significant imports, the only available access under the agricultural accord is the minimum-access commitment obliging countries to open a tariff quota equivalent to three percent of domestic consumption and increased to five percent over the implementation period.

But these minimum access tariff quotas will not necessarily provide duty-free access, though it should be at substantially reduced rates. Where imports were hitherto globally or from specific countries, but subject to quantitative restrictions or voluntary export restraints etc, the suppliers are to be allocated tariff quotas to preserve their "current market access opportunities".

Many of these tariff quotas have been allocated to specific suppliers, and where imports already account for five percent of consumption, existing quota levels have been maintained without increase.

High MFN tariffs have always been a source of traditional concern to developing countries. In previous GATT rounds, developed countries benefited from tariff cuts traded among themselves, while products of export interest to the developing world were exempted from across-the-board commitments. These were socalled sensitive products where developing countries are important suppliers (textiles, clothing, footwear and steel).

In the post-Uruguay Round while tariffs on all ranges have been reduced considerably, proportion of imports facing tariffs in the high tariff ranges will still be significant in a number of cases, UNCTAD notes.

The MFN tariff averages in the Quad countries after Uruguay Round will also be high on an unweighted basis in various instances. In addition to the very high tariffs on imports of agricultural products, such tariff peaks will also affect products in sectors where the rates deviate significantly from the unweighted average.

There has been some progress in reducing escalation for some products of export interest to developing countries, but escalating tariffs at higher stages of processing may still discourage exports from developing countries of exports with value added.

While the TDR has not specified these, a cursory look at the annexes of the Quad countries shows for example that tropical beverages (cocoa, coffee, tea) will face no problem when entering as raw product, there are high barriers at higher processing stages -- cocoa butter and chocolate products, processed coffee (instant, decaffeinated etc).

An UNCTAD official commented "The higher the processing, the greater the tariff barrier. On this there has been no significant change".

TDR-94 suggests: "The WTO should preserve the momentum built up in the Uruguay Round by providing for a continuation of tariff negotiations, given that these are foreseen for 1999 in the Agreement on Agriculture. Pending such multilateral action, autonomous improvement of the GSP could be considered".