Doha round enters final stage

The World Trade Organization (WTO) conducts negotiations through what is called "rounds". The Doha Development Round commenced at Doha, Qatar in November 2001. Its objective is to lower trade barriers around the world, permitting free trade between countries of varying prosperity.

At present, negotiations to free up world trade are finally set to enter the final stage with the release of new draft deals involving agriculture and industrial goods. The texts were released by the Geneva headquarters of the WTO last July 10.

For industrial goods under the Non-Agricultural Market Access (NAMA) talks, countries are being given three-tiered tariff cut options which use the so-called Swiss Formula, where in deeper cuts mean more flexibilities. The Swiss Formula relies on coefficients to "harmonize" tariffs or reduce differences across countries, instead of uniform cuts which will only reproduce existing tariff profiles at a lower scale.

The tariff cuts will be on "bound" tariffs, or the maximum rates that countries have committed to the WTO, rather than "applied" or actual rates being charged on imports, supposedly to make the international trading system more predictable. To get the final bound rate, the formula is:

Bound Rate = (Base Rate x Coefficient) / (Base Rate + Coefficient)

In the latest NAMA draft, already on its third revision, the coefficients are seven to nine for developed countries, and 19-21, 21-23, and 23-26 for developing countries.

Developing countries opting to apply the lowest set of coefficients, 19-21, can shield 12%-14% of their most sensitive tariff lines from cuts, as long as they do not exceed 12%-19% of the total value of imports, or keep 6%-7% of tariffs lines unbound or exempt from cuts as long as they do not exceed 6%-9% of the value of imports.

For the middle range coefficients, developing countries can apply just half of the formula cut for up to 10% of its most sensitive products as long as they do not exceed 10% of the total value of exports, or keep 5% of tariff lines unbound or exempt from cuts as long as they do not exceed 5% of the value of imports.

On the other hand, there are no flexibilities for the highest set of coefficients.

For tariff lines that do not have bound rates, countries can add a markup of 25 percentage points to the applied rate before applying the Swiss Formula.

On the other hand, the base level for reductions in Overall Trade-Distorting Domestic Support (OTDS) for agricultural goods shall be the sum of the final bound rate, plus 10% of the average total value of agricultural production in the 1995-2000 base period for developed countries. Meanwhile, developing countries shall have additional 20% of the average total value of agricultural production in the 1995-2000 or 1995-2004 period as may be selected by the nation concerned.

The base OTDS shall be reduced in accordance with the following tiered formula: 75%-85% reduction if the base ODTS is greater than US$60-billion; 66%-73% reduction if the base ODTS is between US$10-billion and US$60-billion; and 50%-60% if the base ODTS is less than or equal to US$10-billion.