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TRADE: Proposed Tariff Cuts Will ‘Destroy’ Industrial Development

Analysis by Aileen Kwa*

GENEVA, Feb 29 2008 (IPS) - The Doha Round negotiations on industrial products have once again come under fire at the World Trade Organisation (WTO), with developing countries such as South Africa saying that the proposed tariffs cuts will spell the end of their industrial development.

Member states are upset because the latest draft of the text of the industrial product negotiations, also called non-agriculture market access (NAMA), has not changed significantly from the July 2007 text. The chairperson of the negotiations, Canadian ambassador Donald Stephenson, released the newest draft on February 8. The July version had come under heavy criticism from most developing countries.

Last week, Brazil complained bitterly about the double standards which the U.S., EU and others maintain in the negotiations: being defensive in agriculture, but extremely offensive in NAMA.

‘‘In the agriculture negotiations we are told that we must show flexibility and compromise for two compelling reasons: one size does not fit all; and there are limits beyond which delegations cannot go. In NAMA, however, the same delegations that seek flexibility and understanding in agriculture utterly ignore those two principles.

‘‘In NAMA, one size must fit all and limitations are characterised as ‘lack of ambition’,’’ said Brazil’s representative.

The Brazilian delegation rejected accusations that they lack ‘‘ambition’’ in the NAMA negotiations. ‘‘Under no circumstances will Brazil compromise its industry… There is simply no price for that. The level of ambition of this Round in NAMA is unprecedented under any standards, so let’s not talk about ‘lack of ambition’.

The ‘‘new market access’’ its negotiating partners are seeking, said Brazil, are ‘‘not just a set of empty words. Those words mean restructuring of the productive capacity in developing countries.’’

Stephenson had proposed a range of coefficients between 19 and 23 for developing countries. A coefficient is a negotiated number that will be inserted into the tariff cutting formula. The higher the coefficient, the smaller the tariff cut a country has to make.

With a coefficient of 20, Brazil with average bound tariffs of 30.8 percent will have to cut these tariffs to an average of 12.1 percent. This constitutes a massive 61 percent cut.

According to Kjeld Jakobsen of Brazil’s main trade union, known by the acronym CUT, the affected sectors will include chemicals, capital goods, textiles, automobile, shoes and others. Over two million jobs are at stake.

On February 18, a group of trade unions from the grouping called the NAMA 11 – South Africa, Argentina, Brazil, India, the Philippines, Indonesia and Tunisia – issued a statement denouncing the chairperson’s draft, particularly the range of coefficients in the text.

‘‘Like the July 2007 draft, we consider the proposed range of coefficients for developing countries unacceptable. These coefficients will lead to cuts in applied rates (actual tariff rates) in our countries and will thus affect employment.

‘‘They will lead to low bound (tariff) rates across the board and thus hamper industrialisation processes in our countries. The reductions that developing countries are asked to make are much higher than the developed country reductions,’’ said the unions. The unions also pointed out that their governments ‘‘had indicated in July last year that this range was not acceptable. However, in the new text, the same range is again included. The positions of our countries therefore do not seem to be taken into account.’’

The trade unions stated further than ‘‘competition and unemployment are already too high to further compromise the position of workers through high tariff cuts in NAMA’’.

According to research done by the Congress of South African Trade Unions (COSATU), the major trade union federation in South Africa, if a coefficient of 20 is used, 40 percent of South Africa’s applied tariff lines would have to be lowered.

The affected sectors would include clothing, automobiles, footwear, textiles, electronic components and furniture. The union concludes that this would spell the end of industrial development in South Africa.

*The second in a two-part series

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