A key element of the Doha Round of trade negotiations is the liberalisation of trade in industrial products, commonly known as non-agricultural market access (NAMA). Negotiations under NAMA focus on market access for all products that are not covered under the negotiations on agriculture or services and aim to reduce, if not possible to completely eliminate, tariff and non-tariff barriers (NTBs) that restrict trade in these products. The framework adopted for modalities for negotiations under NAMA, known as the ‘July Package’, envisages reduction of industrial tariffs in both developed and developing countries, according to a formula that is yet to be agreed. These negotiations are important for developing countries, as these will determine the market access opportunities available to developing countries through which they can improve their growth prospects.
As per the WTO text on NAMA of December 6, 2008, the developing countries have been asked to undertake tariff reductions of 60 - 70 per cent while the developed countries are offering a reduction of only 20 - 30 per cent based on Swiss formula for tariff reduction which gives a coefficient of 8 for developed countries and 22 on an average for developing countries. The insistence on developing countries to cut their bound tariffs in NAMA or agriculture until they go below the applied levels along with the continuation of US practice of having a bound level that is twice its actual spending on agricultural domestic subsidies has been objected by India and China.
India desires that the modalities for tariff cuts should reflect the mandate of less than full reciprocity in reduction commitments and comparability in ambition between NAMA and Agriculture.
So far as the tariff reduction is concerned, it may be mentioned that the Swiss formula should not be used for making commitments on tariff reduction as it involves the use of an arbitrary coefficient, a, which can be manipulated by member countries. Even, the simple average formula has its own limitations. For instance, it overlooks the values that are either very high or very low and thus cannot solve the problem of tariff peaks.
The simplest way is to reduce the bound levels of developed countries to 5 or 10 per cent for all tariff lines as their industries have already developed. Otherwise, the developed countries can be asked to bring their bound tariff rates to 5 to 8 per cent for those tariff lines that cover at least 98 per cent of the potential exports, and not the actual exports as that may be lower because of existing high import tariff or domestic support in importing country, of developing countries to developed countries. This potential of exports for developing countries can be calculated through revealed comparative advantage or by matching the developing countries exports and developed countries imports at different commodity classification levels.