ATTACHMENT WITH PAKISTAN’S PERMANENT MISSION TO THE WORLD TRADE ORGANIZATION

GENEVA

FEBRUARY 27th TO MARCH 10th 2006

REPORT BY:

MUHAMMAD IRFAN

SECTION OFFICER (WTO)

MINISTRY OF COMMERCE

ISLAMABAD

92-51-921 8832

92-300-8478606


TABLE OF CONTENTS

IOVERVIEW

IIDETAILS OF NAMA ISSUES DISCUSSED IN MEETINGS

II-1THE SECTORAL INITIATIVE

II-1.1OVERVIEW OF SECTORAL NEGOTIATIONS

II-1.2KEY ISSUES IN SECTORAL NEGOTIATIONS

II-1.3HOW TO BUILD A SECTOR AND THEIR ROLE IN DEVELOPMENT (CASE STUDIES)

II-1.4PAKISTAN’S POSITION ON SECTORAL APPROACH AND SPECIFIC SECTORS

II-1.5OBSERVATIONS & RECOMMENDATIONS FOR FURTHER WORK:

II-2FLEXIBILITIES

II-2.1OBSERVATIONS & RECOMMENDATIONS FOR FURTHER WORK:

II-3UNBOUND TARIFFS

II-3.1FURTHER WORK

II-4NON-TARIFF BARRIERS

II-4.1JAPAN’S CASE STUDY: PROPOSAL TO ENHANCED TRANSPARENCY ON EXPORT RESTRICTIONS

II-4.2PAKISTAN’S POSITION

II-5PREFERENCE EROSION

II-5.1PAKISTAN’S POSITION

II-6AD VALOREM EQUIVALENTS

II-7SPECIAL MEETING WITH TEXTILES INDUSTRY

II-7.1PAKISTAN’S POSITION

IIIMEETING OF THE COUNCIL FOR TRADE IN GOODS (CTG)

III-1US WAIVER REQUEST FOR PREFERENCE SCHEMES (AGOA etc)

III-2TURKEY’S REQUEST ON TEXTILES AND CLOTHING

III-3PAKISTAN’S EXTENSION ON TRIMS

III-4APPOINTMENT OF OFFICERS TO SUBSIDIARY BODIES

IVMEETINGS WITH SECRETARIAT OFFICIALS

IV-1MEETING WITH MR. ALEJANDRO GAMBOA AND MR. UMBERTO IN MARKET ACCESSES DIVISION

IV-2MEETING WITH MS. NORA NEUFELD IN TRADE FACILITATION DIVISION

VCONCLUSION AND OBSERVATIONS

V-1PROPOSALS

V-1.1WORK PROPOSALS

V-1.2GENERAL PROPOSALS

ANNEX – I

INTRODUCTION

I was nominated by the Ministry of Commerce to undergo two weeks practical training with Pakistan’s Permanent Mission to the WTO in Geneva from Monday, February 27th 2006 to Friday, 10th March 2006. The following is a report giving a complete account of all aspects of the training, including activities at the Pakistan Mission and various meetings attended at the WTO secretariat, (both bilateral with secretariat officials and multilateral meetings of WTO members).

The report will be sequenced as follows. First, an overview of the activities is presented in section I. In section II, all NAMA issues discussed during various meetings have been detailed along with personal observations and suggestions / recommendations for further work. Section III describes the activities in the meeting of the CTG. Section IV covers an account of the meetings held with secretariat officials. Section V is the conclusion with observations and impact of the training along with recommendations. The annex to the report contains a list of all meetings that were attended during the 2 weeks.

An attempt has been made throughout this report to highlight some issue-specific observations with a series of recommendations alongside. Furthermore, this report is intended to be submitted to the Permanent Mission in Geneva as well as the Ministry of Commerce in Islamabad. The recommendations and observations will hence cover both aspects.

IOVERVIEW

The first week (February 27th to March 3rd – NAMA Week) was mostly dedicated to meetings at the WTO secretariat on various subjects within NAMA (Non-Agriculture market Access). On the sidelines of the multilateral meetings, some bilateral meetings with different countries were also held to discuss country positions and stands on certain issues.

During the week, the Mission was also joined by a team of two officials from the Central Board of Revenue for 3 days who had been sent to attend the NAMA week on behalf of their organization.

A detailed briefing was given to all officers by the Ambassador Dr. Manzoor Ahmed on all current issues, latest developments and Pakistan’s position. He specifically provided an update on the developments on NAMA and our negotiating stance vis-à-vis different countries or country groups. An in-depth, issue-specific briefing was later given by Dr. Saeed in which he highlighted all modalities, the main issues and the things that needed to be done by Pakistan before the completion of the modalities negotiations. The briefing was followed by questions and answers.

During the second week (March 5th to March 10th), apart from the usual meetings at the Secretariat, work was carried out at the Mission premises regarding stocktaking of the NAMA week and proposals for further course of action. Meetings included that of the CTG[1], CTD[2], informal consultations on TRIMS[3] and informal discussions with Small Economies on NAMA. I also met bilaterally with some WTO secretariat officials dealing with NAMA, Trade Facilitation and Development issues. A list of all meetings attended is placed at Annex I.

IIDETAILS OF NAMA ISSUES DISCUSSED IN MEETINGS

The following account is an issue-by-issue illustration of the discussions during all meetings at the WTO secretariat and the Mission:

II-1THE SECTORALINITIATIVE

The NAMA week’s activity was predominantly focused towards discussions on Sectoral initiatives proposed by different countries. The discussions started in the first plenary meeting of Monday 27th February and continued throughout the week with informal meetings on different sectors taking place at various times. A joint presentation by some developed and developing countries during the plenary meeting of February 27th gave an overview of the sectoral negotiations and explained some key concepts and questions that need to be addressed:

II-1.1OVERVIEW OF SECTORAL NEGOTIATIONS

It is one of the key modalities in NAMA, the mandate for which is derived from the Doha Ministerial Declaration (DMD) and Para 7 of the NAMA Framework[4]. At present there are ten sectors, which are under discussion in the WTO as part of the modalities for NAMA. The following sectors have so far been tabled (names of the main proposing member(s) are in parentheses)

  1. Auto/auto parts sector (Japan)
  2. Bicycles and related parts (Taiwan)
  3. Chemicals (USA, Canada, Japan, Taiwan, Singapore, Switzerland, Norway)
  4. Electronics / Electronic products (Japan)
  5. Fish and Fish products (Canada)
  6. Forest products (Canada)
  7. Gems and Jewellery products (Thailand)
  8. Raw materials (UAE)
  9. Sports equipment (Taiwan)
  10. Healthcare products (Switzerland)

All sectoral negotiations, apart from some specific issues, harbour around some key elements, which are common throughout all sectors. A brief description is as follows

II-1.2KEY ISSUES IN SECTORAL NEGOTIATIONS

During the sectoral negotiations, 5 issues are basically under consideration:

  1. Product coverage: The products to be covered within the sector are also negotiated and an attempt is made to cover as many products as possible within the sector providing for members’ sensitivities. The product coverage is agreed on a tariff line basis.
  2. Implementation schedule: The implementation schedule is the time period during which the tariffs have to be reduced or eliminated on the products. Members willing to join the sector have to negotiate this period.
  3. Final target rate: It is generally understood that sectoral discussion is aimed at tariff elimination but members can agree not to completely eliminate tariffs and approach a mutually agreed, reduced rate instead. The only qualification is that the reduced rate must be lower than the rate arrived at after applying formula cuts in the general NAMA negotiations[5].
  4. Critical mass: A sectoral negotiation is only concluded if a critical mass of members is generated within the sectoral discussions. A critical mass is constituted by those members whose cumulative world trade share (combined share of imports and exports in world trade) in that sector is 90% or more. This minimum (critical mass) percentage can be negotiated by members during discussions but is generally assumed to be 90%.
  5. Special and differential treatment for developing members: Developing members can choose not to follow the ‘zero-for-zero’ (complete tariff elimination) approach. Instead they can choose a zero-for-‘x’ approach; ‘x’ being an agreed low level of tariff greater than zero provided that it is lesser than the tariff reached after applying formula cuts.
  6. Developing members may have longer implementation periods Developing members may seek deviation from linear cuts in that sector and may opt for another agreed approach

II-1.3HOW TO BUILD A SECTOR AND THEIR ROLE IN DEVELOPMENT (CASE STUDIES)

  1. Thailand presented a case study and shared their experience on initiating a sectoral negotiation. The following points will highlight the sequence in which they went about preparing themselves for this initiative:
  1. Discussion on the need for having a sectoral approach in this area. With an ambitious objective to gain more than a formula reduction, they needed to initiate sectoral discussions. They felt this would make the consumers benefit as well as lead to job creation
  2. Consultations with stakeholders, mainly the Federations / Chambers of Commerce and relevant trade bodies / Associations to create a win-win situation for all. They brought on board all people involved in the supply chain i.e. miners, processors, traders etc.
  3. Identification, coordination and consultations with key members to develop a critical mass
  4. Initiation of discussions on product coverage at home as well as with members in the WTO
  5. Further coordination to come up with a concrete proposal
  1. Chinese Taipei discussed their experience in the IT sector as a result of the ITA since the Uruguay Round to make a case for ‘development’associated with a sectoral elimination of tariffs:
  2. December 1996, the ITA was concluded in Singapore and at that time only 29 countries having 87% of world trade in IT products had signed it.
  3. Now, about 63 countries having more than 95% of world trade have signed the ITA.
  4. As a result from 1997 to 2004 global trade in IT products increased by 69%
  5. Chinese Taipei’s trade in IT products increased by 58% during that period.
  6. Increase in trade had led to employment generation, increase in exports and consumer benefit.

II-1.4PAKISTAN’S POSITION ON SECTORAL APPROACH AND SPECIFIC SECTORS

During the meetings, Pakistan’s stance and position were keenly observed and discussed with officers of our mission. Up till now, Pakistan’s position on the sectoral negotiations has been firm and objective. Pakistan feels that sectoral negotiations are not the main modality and that more effort should be concentrated on the formula and flexibilities. Also, that any tariff reductions in the sectorals have to be over and above the formula reduction and the formula approach must get primary importance. This view was categorically stated by our Ambassador in the plenary meeting of February 27th. He pointed out during an intervention that while the initiatives on sectorals were welcome, we should be careful about how we pursue it since too much focus on sectorals may compromise our concentration on the formula approach which is the main modality in NAMA.

Nevertheless, despite the stance, all the sectoral negotiations were closely observed and active part was taken in almost all the informal meetings for sectoral discussions. It constantly kept one abreast of the developments within the negotiations and if at any time a need was felt to participate in any one or more of the sectoral initiatives in products of interest to Pakistan, it would be wise to know what was actually being discussed.

II-1.5OBSERVATIONS & RECOMMENDATIONS FOR FURTHER WORK:

It was felt that if a sector were to be joined, the earlier a decision was made on it the better. An early joining of the sectoral discussion would allow more time and room to negotiate and incorporate our interest into whatever was decided. Once the modalities in the sector had been decided on, joining the sector then would tantamount to merely jumping on the bandwagon with whatever was available at that time.

Among the sectors presently being negotiated, Automobiles and Auto Parts is perhaps the most sensitive for Pakistan. Not only are Pakistan’s tariffs on automobiles unbound, the applied tariffs are also at very high levels. The domestic industry is very sensitive to any reductions in tariff on imported automobiles. Thus participation in this sector for Pakistan would be near to impossible (at least for the moment) since it would be very hard to bring all stakeholders on board on the issue. It may however be feasible to discuss the implications of tariff reduction / elimination in the auto sector with our stakeholders.

Also, it was felt that the sectors, which could be of interest to Pakistan especially in terms of an offensive interest, are the Sports Equipment sector, the Healthcare sector and the Gems and Jewellery sector. In all these sectors, tariff elimination or reduction at our end might not hamper the industry to a large extent. However, market access in other countries could provide a boost for our exports. In the medical equipment sector especially, reduction of tariffs at our end would reduce the cost of imported medical machinery. On pharmaceutical products, tariff elimination by participating developed members would allow us to export more.

It is recommended that if it is felt that we need to participate in any of the sectorals, we bring stakeholders on board in the above-mentioned sectors of interest, and discuss with them the possibility of joining these sectoral negotiations. Further, the consultations may be done as soon as possible to take maximum benefit of the sectoral negotiations. However, as stated before, joining any of the sectors may not compromise Pakistan’s firm stance on the formula approach.

II-2FLEXIBILITIES

Other than the Sectorals, meetings were also held to discuss modalities of Paragraph 8[6] flexibilities. According to paragraph 8 of the NAMA Framework from July 2004, developing countries will have longer implementation periods and can moreover choose certain flexibilities while applying formula cuts[7].While the numbers within the [] s still remain negotiable, members have been discussing various issues on how to apply the flexibilities. Certain countries even raised questions during meetings as to the interpretation of paragraph 8. The issues that were discussed along with Pakistan’s position on each are given in tabular form below:

ISSUE / PAKISTAN’S POSITION
The questions usually pertained to the meaning of ‘exclusion of entire HS chapter’ and ‘member’s total imports’.
One view given during an intervention by an African country was that ‘member’s total imports’ could mean imports of NAMA and Agriculture and also, that the percentage of tariff lines to be treated as an exception could also include agricultural tariff lines. / Pakistan’s position on Para-8 flexibilities is again well defined[8]. It was stated during the meeting on flexibilities that a ‘common sense approach’ should be adopted towards the interpretation of paragraph 8. Since the negotiations are aimed towards NAMA, and Para-8 itself comes from Annex-B which is the NAMA framework, there could have been no intention by the framers to include agricultural tariff lines or talk of agriculture imports as a part of NAMA negotiations. Also, that the language of Para-8 was very clear and no issue should be brought in to derail the discussions. To this extent Pakistan’s view was well supported by most developed and developing members.
Discussion were held also on the Mexican proposal, that if they chose not to apply the flexibilities, they should be given some more credit perhaps in the form of a higher coefficient in the formula which would allow them to cut their tariffs by a lesser percentage. The proposal has been supported by Chile and Colombia. / On the Mexican proposal, during bilateral meetings with New Zealand and Canada, it was stated that although the flexibilities were a mandated right of the developing countries, any credit for not using the flexibilities in the form of ‘lesser (than formula) reductions would not be acceptable since it would compromise the whole exercise of tariff reduction in NAMA.
Another issue was the transparency within the application of the flexibilities. Developed members are insisting that developing countries identify beforehand what tariff lines they would be including in the flexibilities and what kind of flexibility they would be choosing. / Regarding transparency within the use of flexibilities, it was stated that transparency meant that all members should know what is being done by other members, and once the flexibilities had been used and the draft schedules notified, all members would automatically know what the others had done. This was the basic principle of transparency in the WTO and any attempt to ask for disclosure beforehand what members were doing was not warranted and would unnecessarily delay proceedings.

II-2.1OBSERVATIONS & RECOMMENDATIONS FOR FURTHER WORK:

Immediate work needs to be undertaken at the level of the Ministry of Commerce to provide feedback and a policy decision to the WTO mission. An exercise needs to be carried out to identify whether we should use flexibilities in paragraph 8(a) or 8(b). The possibilities may be discussed with CBR and the Ministry of Industries keeping in mind the sensitive sectors. Once an in-house consultation has been carried out the specific tariff lines identified may be discussed with the relevant stakeholders to take their opinion on the possible impacts.

II-3UNBOUND TARIFFS

No specific meeting was held on the treatment of unbound tariffs during the NAMA week. However the issue was highlighted during informal consultations with the members on different occasions. It was also discussed during the bilateral meeting with the Chairperson of the negotiating group on NAMA. While it has already been decided that there will be a non-linear mark up approach to treat unbound tariffs, it needs to be decided what actually will be the mark up. Pakistan has tabled a proposal of 30, as mark up which is one of the many options given by members. The Chairperson has hoped that a result would be arrived at through consultations by the end of the deadline.

Another related issue specific only to Pakistan is the bound tariff level in 2001. Pakistan, at the time of the launching of the Doha round in 2001 had bound about 37% of its tariff lines. Subsequently, the binding was revised in 2003 and 2005 and the binding stands at almost 98%. The NAMA framework mandates that bound tariff levels at the beginning of the Doha Round would be used for applying formula cuts. If we use the 2001 binding we would have to treat as unbound most of our tariff lines. If we use the current binding levels, it would be easier to only apply the formula cut. The difference in outcome in both cases only seems to be academic since the actual impact on the tariffs would be similar.

The issue has been taken up with the Secretariat officials by our Mission and the general perception is that it would not make much of a difference and that it would not be impossible to use the present bound levels. However, no explicit decision can be made in this regard and members would have to agree to any of the options. The issue was also brought to the notice of the NAMA Negotiating Group Chairman in a bilateral meeting. He agreed that an appropriate solution could be found to the issue.