Stick to average of bound tariffs for coefficient

Updated: Nov 17 2005, 05:30am hrs
In the on-going negotiations on non-agriculture market access (Nama) at the World Trade Organisation (WTO), India should insist on basing the reduction coefficient in the tariff formula on the average of bound tariffs of members.

This would lead to members with higher average bound tariffs bringing about a proportionally lower cut in their present tariff rates.

An Icrier paper on the issue states that India should maintain that the coefficient in the Swiss formula (the reduction formula) should be average of bound tariffs, which is also Indias stated stand in the submission made as part of the Argentina, Brazil, India (ABI) group.

It adds that reciprocity will not be achieved if same (as suggested by the EU) or nearly same (as suggested by the US) coefficient is applied to developed and developing countries.

If the developed countries have their way, developing countries will actually be confronted with the prospect of not getting even full reciprocity although the stress in the current round is on less than full reciprocity, the paper warned. As agreement on different numbers for developing and developed countries would be difficult, the authors suggested that the best option was to stick to the average of bound tariff for coefficient.

For countries with very low average bound tariffs, following Indias proposal could lead them to bring about very high proportional cut. For such countries, the paper recommended that India could agree to a mark up in coefficient. The low averages could either be multiplied by an agreed factor or a minimum average could be agreed to.

It further stated that for India, a mark up by a factor of two in the applied level in 2001 for determining the base rate for unbound tariff lines would be adequate.

For countries with low applied levels on unbound tariff lines, both non-linear mark up and binding at a reasonable target level should be acceptable. Once agreement is reached on average bound levels being the coefficient in the Swiss formula, India could agree to minimise the demand for flexibilities for developing countries.

On sectoral initiatives, optional approach as well as maintenance of low tariffs by developing countries should remain Indias stand till the end.

For reduction of non-tariff barriers, India could assess the cost and benefits of vertical and horizontal approaches but should concentrate on bilateral product-specific approach. The authors advised that India should remain resolute on the above mentioned bottom lines till the end. If agreement is reached particularly on the coefficient and mark up for unbound tariff lines in the formula approach, India could also participate in negotiations for further reductions on a request-offer basis.

Based on a paper by Anwarul Hoda & Ashok Gulati