North–South Imbalances in the Doha Round: The Use of Specific Duties as a Trade Policy Instrument

Abstract

This article examines one of the major systemic issues in the process of negotiation under the Doha Round of the World Trade Organization (WTO): the tariff lines with non-ad-valorem (NAV) duties in agricultural and allied products (A&AP) and further the process of ad-valorem equivalent (AVEs) calculations. By analyzing the trade policy instruments of the QUAD countries (the United States, the EU, Canada and Japan), plus Switzerland, and comparing them with those of eight developing countries, it clearly reveals how the QUAD Plus countries have added to the overall imbalances in both tariff and non-tariff measures, thereby further constraining market access for developing countries’ exports in agriculture and allied sectors.

Keywords

WTO negotiations agriculture and allied sector tariff simplification SPS and TBT measures non-Ad-valorem tariffs

Introduction

The Doha Round of the World Trade Organization (WTO) has produced an outcome that is unbalanced against developing countries. This article sets out to document this imbalance and analyze how it came about. The Multilateral Trade Organisations (MTOs) led to the creation of an institutionalized framework with binding commitments in goods for the smooth conduct of trade.¹ Progress can be seen in terms of the reduction in ad-valorem (AV) tariff terms undertaken under the negotiations of the various rounds of MTOs. In case of the agricultural sector, this process has been carried out under Agreement on Agriculture (AoA).² The current Doha Round commenced in November 2001, with the objective to reduce trade barriers (tariff and non-tariff measures) and facilitate the increasing of global trade. However, from 2008 onwards the talks have stalled over major issues, such as agriculture and industrial tariffs, non-tariff barriers, services and trade remedies (Fergusson 2008). The major differences are between the developed countries led by the European Union (EU), the United States (USA), Japan and the emerging developing countries.

Tariff reduction has guided all Rounds of MTOs. The GATT negotiations dealt specifically with the concerns of developed countries, with very rare involvement by developing countries, which was mainly limited to manufacturing (non-agricultural sectors). A brief history on the non-agricultural tariff reductions, during the eight rounds of GATT tariff negotiations, held between 1947 and 1994, is shown in Table 1.

Table 1.

Round of Negotiations under the GATT and WTO, 1946 to 2013

Name	Start	Duration in Months	Countries	Subjects Covered	Achievements
Geneva	Apr. 1946	7	23	Tariffs	Signing of GATT, 45,000 tariff concessions affecting $10 billion of trade.
Currency	Apr. 1949	5	13	Tariffs	Countries exchanged some 5,000 tariff concessions.
Turkey	Sep. 1950	8	38	Tariffs	Countries exchanged some 8,700 tariff concessions, cutting the 1948 tariff levels by 25 per cent.
Geneva II	Jan. 1956	5	26	Tariffs, admission of Japan	$2.5 billion in tariff reductions.
Dillon	Sep. 1960	11	26	Tariffs	Tariff concessions worth $4.9 billion of world trade.
Kennedy	May 1964	37	62	Tariffs, Anti-dumping	Tariff concessions worth $40 billion of world trade.
Tokyo	Sep. 1973	74	102	Tariffs, non-tariff measures, ‘framework’ agreements	Tariff reductions worth more than $300 billion dollars achieved.
Uruguay	Sep. 1986	87	123	Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, creation of WTO, etc.	The round led to the creation of WTO, and extended the range of trade negotiations, leading to major reductions in tariffs (about 40 per cent) and agricultural subsidies, an agreement to allow full access for textiles and clothing from developing countries and an extension of intellectual property rights.
Doha	Nov. 2001	138*	159	Tariffs, non-tariff measures, agriculture, labour standards, environment, competition, investment, transparency, patents, etc.	The round is not yet concluded.

Source: WTO (1995a).

Note: * = until May 2013.

In the first four rounds, negotiations were conducted on a product-by-product basis, known as the ‘request/offer’ approach, whereby GATT members exchanged lists of requests and offers on products of interest to them, in order to reach an agreement on tariff concessions. The first five rounds reduced average trade weighted tariffs from 50 to 12 per cent. The Uruguay Round led to an average tariff reduction of 36 per cent (minimum 15 per cent) over six years by the developed countries and an average tariff reduction of 24 per cent (minimum 10 per cent) over 10 years by the developing countries, with an exception made for Least Developed Countries (LDCs). Most of the tariff reductions were based on the Most Favoured Nation (MFN) principle and on the basis of AVaverage tariff. Under the WTO, in the context of the ‘Single Undertaking’ principle, the simple AV averages are not suitable to a balanced outcome in the negotiations, especially when the developed countries have a considerable number of total tariff lines in non-ad-valorem (NAV) or ‘Specific’ tariffs.³ To quote (WTO 1995b: para 5):

[t]ariffs on all agricultural products are now bound. Almost all import restrictions that did not take the form of tariffs, such as quotas, have been converted to tariffs—a process known as ‘tariffication’. This has made markets substantially more predictable for agriculture. Previously more than 30% of agricultural produce had faced quotas or import restrictions. The first step in ‘tariffication’ was to replace these restrictions with tariffs that represented about the same level of protection. Then, over six years from 1995–2000, these tariffs were gradually reduced (the reduction period for developing countries ends in 2005).

Although tariffication led to some level of easing, the situation is alarming in the case of agricultural products which the developed countries kept out of the multilateral trade negotiation (MTN) until 1995. However, since the formation of the WTO in January 1995, the serial ministerial meetings that have occurred have stopped short of any conclusive agreement on NAV tariffs.⁴ The only consensus obtained on the issue of tariff reductions has been largely based on simple averages of ad-valorem tariffs. This process has excluded a large number of tariff lines in the agricultural sector with NAV duties, which were not taken into account in the Uruguay Round and during a substantial period of the Doha Round. Many studies have suggested that an increasing proliferation of the WTO compatible barriers, like the non-tariff measures, may have offset the gains in liberalization made during the successive round of GATT and WTO. However, one important aspect which needs to be fully understood is the role NAV tariffs in agricultural products.⁵

Tariff Simplification under the Agriculture Negotiations

It has been recognized since the Havana Charter that there are inherent inequalities between the ‘players’ in the MTOs, thus justifying special attention to the needs and concerns of developing countries (Toye 2003). The preamble of the Marrakesh Agreement establishing the WTO clearly recognizes the same need and suggests positive efforts to ensure that developing countries and the LDCs play a much greater role and secure a share of the growth in international trade commensurate with the needs of their economic development (WTO 2001). However, virtually the opposite of these suggestions has occurred since the Havana Charter. The Uruguay Round, the eighth round, brought agriculture into the ambit of negotiations under the Single Undertaking of the WTO, while ‘tariff simplification’ for agriculture was officially introduced in 2006, consisting in a process of converting NAV tariffs to AV terms, popularly known as ad-valorem equivalents (AVEs). The large majority of agricultural tariff lines are under these complex NAV duties, which provide sufficient protection. Some of the examples of NAV duties can be represented in four major forms:

Quantitative (Specific) duty is expressed in the form of 35 euro/dollar per one kilogram and euro/dollar 1.34 per 1,000 onions.

Mixed duty would read as: (a) 35 euro/dollar per one kilogram, or 125 per cent of the value (whichever is the higher); (b) 280 euro/dollar per one bottle, or 55 per cent (the lesser); (c) 360 euro/dollar per one ton, but not less than 125 per cent of the value of imports; and (d) 1.92 special unit for tariff lines per one kilogram, or 204 per cent of the value (the higher).

Compound duty would read as: (a) 12.8 per cent + 17 euro/dollar per one ton; (b) 10 per cent + 125 euro/dollar per one kilogram; (c) 5per cent + 661.4 euro/dollar per one ton; (d) 29.8 per cent + 400 euro/dollar per one kilogram.

Other duty types read as: (a) 35 euro/dollar per one kilogram, −0.0207 euro/dollar for each lost bond of sweetness, but not more than 3.14 euro/dollar per kilogram; (b) 13 per cent + Maximum of 7.2 per cent + bound tariff for agricultural products (c) 48 euro/dollar per bottle + 1.3 per cent per bottle; and (d) 10.4 per cent + 71 euro/dollar + specific fee that can be zeroed if entry price is not less than 373 euro/dollar.

The earlier are a few examples of the various forms of NAV tariffs that exist in the real world. Most of these have been applied by the developed countries and need to be converted into AV duties through tariff simplification.⁶ This process is important in partial fulfilment of the WTO’s ‘line-by-line’ binding commitments under AoA—which is primarily based on MFN Simple averages in AV terms. The Doha Round Mandate did not specify any course of action with regard to the conversion of NAV duties, and the use of NAV duties continued as a major trade policy even after 2001. It can be argued that this has been a clear violation of the spirit of ‘free trade’ ever since the binding commitments agreed upon across all goods sectors at the end of the Uruguay Round.

However, there are differences in the proportion of usage of the NAV duties across the agricultural and non-agricultural sectors. The proportion of usage of NAV duties by the developed countries in Agricultural and Allied Products (A&AP) has been greater in comparison to their usage in the non-agricultural sector. The usage of NAV duties has undermined market access by developing countries in A&AP, and this has been one of the fundamental causes of imbalance in the Doha Round.

Only in 2006, under the Doha Round negotiations, was the NAV duty issue raised, through two separate processes of tariff simplification. However, with respect to the agricultural sector, the overall guide has been the Draft Text Mandate (6 December 2008). In the words of the Agricultural Chair concluding the overall negotiation process (WTO 2008: 1, Para 4):

[b]y and large that has been the case, and some other issues have come somewhat closer also since even in July. But, clearly, there is still not formal agreement on any or all of this. Indeed, there is still certain divergence where even the device of square brackets has been dropped, and I have felt it was both instructive and fair to highlight within the text itself a few points where there is still very real divergence (sensitive products being a principal example) or where there is, to say the least, somewhat more heat detectable than on some others (tariff simplification being an example).

It is clear that among the few contentious issues in the negotiations, agricultural tariff simplification is one of the prominent ones. As negotiations progressed, Das and Sharma (2011) concluded that simplification of compound tariffs and mixed tariffs appeared to have receded into the background. In the February 2008 text, there was a specific obligation to convert these tariffs into simple AV tariffs or specific tariffs at the end of the first year of implementation. In the December 2008 text, there was no specific requirement to convert these NAV tariffs into more simplified forms, if the option of mandatory simplification of all NAV tariffs were not agreed. They also suggested that the trend in negotiations to provide greater comfort to developed countries relates to the timeframe in which obligations relating to tariff simplification will be implemented (Das and Sharma 2011).

Agriculture was traditionally protected across the developed and some of the developing countries on the basis of concerns for food security and protection of livelihoods. Therefore, A&AP have always been subject to measures like subsidies, tariff rate quotas (TRQs) and NAV tariffs. One fundamental requirement has been that imported agricultural products must be safe for human consumption and not pose risks to human, animal, or plant health. Countries have always imposed regulations/standards in order to ensure food safety, as well as to avoid the introduction of diseases and pests through trade. Trade in agricultural commodities and related standards/regulations have coexisted since the beginning of international trade under GATT.⁷

To analyze the impact on market access negotiations of the NAV duties in the A&AP and its significance for global trade, we have selected 14 countries, namely, Switzerland, Australia, New Zealand, EU-27, Japan, the USA, Canada, Brazil, India, China, South Korea, Singapore, Mexico and Argentina. WTO members among developed and developing countries, using the integrated database (IDB) of the WTO, which provides detailed and disaggregated tariff information, such as base nomenclature, reporter, year, AV duty rate, NAV/specific duty rate, duty nature, binding code and description.

Use of NAV Tariffs by Developed Countries

Tariff simplification was initiated in the agriculture and allied sectors in order to address the large-scale presence of NAV tariff lines under the AoA negotiations and bring the average MFN applied tariff rates within the ambit of binding commitments,⁸ as well as various other disciplines of market access. This sub-section will specifically address the issue of presence of NAV duties, by examining the QUAD countries (the United States, the EU, Canada and Japan, plus Switzerland, which are the main users of NAV duties (Table 2).

Table 2.

MFN Average and Distribution of Section 4 Tariff (2011) for the EU

Classification of Tariff	Average MFN Applied Duty	No. of Tariff Lines (TLs)
Ad Valorem Tariffs	13.6	430
Non Ad-Valorem (NAV) Tariffs
Specific Tariffs	#	321
Compound Tariffs	#	103
Other Tariffs	#	60
Mixed Tariffs	#	19
Total NAV Tariffs		503

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Note: # = AVEs conversion process yet to be negotiated.

The European Union

The European Union (EU) has been an active member of the WTO negotiations processes in nearly all the committees, demanding tariff liberalization of the partners. Yet, Table 3 shows the prevalence of NAV duties that go unaccounted in the process of simple MFN average tariff calculations. It also suggests the futility of the Doha Round in comparing countries on the basis of simple average AV MFN duties. The EU’s usage of specific duties is unparalleled, and it does not in any manner justify the ‘free trade’ spirit of the WTO.

In the context of market access negotiations for A&AP, the role of specific duties and their impact will clearly be far greater, while their usage has been observed to be highly skewed in favour of Sections 1 to 4 (A&AP). The results clearly suggest that simple average of AV tariffs have shown a reduction of only 0.1 per cent in a span of nearly a decade (Table 3). Interestingly, the Doha Round also began around that time, in 2001. Based on the results of simple averages of largely AV tariffs, we can establish that the EU has not made any tariff liberalization–the average MFN tariff hovering around 4.8 per cent (2001) and 4.7 per cent (2011) (Table 3). However, total tariff lines (TLs) have decreased by approximately 1,000 from 10,458 in 2001 to 9,567 in 2011 (see Table 3, last row). A substantial share of the reduction occurred in the non-agricultural sector, with total tariff lines decreasing by 938, while the Sections 1 to 4 (A&AP) accounted for only marginal reductions in TLs. Based on information on the A&AP of TLs and average MFN, it could be argued that with a marginal reduction in TLs and only negligible reductions in terms of MFN tariffs across the decade, the prospects for market access are bleak for developing countries.

The NAV duties showed an increasing share during the period of study, from 10.3 per cent in 2001 to 11.5 per cent by 2011. The absolute number of NAV duties in A&AP in the EU has shown a marginal increase from 1,014 TLs in 2001 to 1,043 in 2011. However, A&AP, which account for the raw agricultural goods and processed food products, amounted to a substantial portion of these NAV, nearly 95 per cent in the two years studied. The AVEs of these TLs would suggest the extent of duties levied by the EU countries. Clearly, the adverse impact would be borne by exporters to the EU in the agricultural and allied products.

Therefore, in the EU there was a negative impact on A&AP trade. This negative impact can be seen in the Section 4 (prepared foodstuffs, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes) which showed an increase from 841 to 933 TLs. During the same period, the number of AV TLs has shown a decreasing trend. The section-wise trend suggests that Section 4 (a section is an aggregation of few chapters) was one of the most ‘protected’ (given the lack of clarity of the WTO mandate) in the EU, through the use of specific duties.

Table 3.

Usage of Specific/Non Ad-valorem (NAV) Tariff in the European Union

Section	Section Description	2001				2011
Section	Section Description	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
1	Live animals	9.6	443	365	808	8.6	450	355	805
2	Vegetable products	5.7	428	248	702	6.1	400	175	579
3	Animal or veg. fats and oils and veg. waxes	5.9	115	10	125	6.0	114	10	124
4	Prep. foods, beverages & Mfg. tobacco substitutes	13.7	450	391	841	13.6	430	503	933
Agriculture and Allied Sectors (A&AS)		8.7	1436	1014	2476	8.6	1394	1043	2441
% Share to Total TLs		–	15.4	94.1	23.7	–	16.6	94.7	25.5
% Share to Number of TLs (Col. F & J)		–	58.0	41.0	100.0	–	57.1	42.7	100.0
5	Mineral products	0.9	251	3	254	0.8	231	3	234
6	Chemical or allied industries	4.2	1260	27.0	1287.0	4.2	1141	27	1168
7	Plastics and rubber articles thereof	5.1	371		371	4.6	301		301
8	Raw hides and skins, leather	2.7	138		138	3.0	147		147
9	Wood and articles of wood	2.8	192		192	2.4	215		215
10	Pulp of wood or paper or paperboard	2.1	244		244	0.0	209		209
11	Textiles and textile articles	8.6	1289	3	1292	8.0	1168	1	1169
12	Footwear, umbrellas, Art. of human hair	8.0	114		114	8.0	109		109
13	Articles of stone, plaster, glass and glassware	3.8	259	8	267	4.1	232	7	239
14	Nat. pearl, precious metals, imit. Jewel.; coin	0.7	62		62	0.6	56		56
15	Base metals and articles of base metal	2.5	1116		1116	1.8	980		980
16	Machinery; electrical equipment; parts thereof	2.2	1687		1687	2.3	1381		1381
17	Vehicles, aircraft, Asso. transport equip.	4.6	292		292	4.9	273		273
18	Optical, photo.c, medical instruments and app.	2.1	372	23	395	2.4	308	20	328
19	Arms and ammunition	2.5	27		27	2.2	24		24
20	Miscellaneous manufactured articles	2.7	237		237	2.6	203		203
21	Works of art, collectors	0.0	7		7	0.0	7		7
Non Agriculture Sector (N-AS)		3.3	7918	64	7982	3.3	6985	58	7043
% Share to Total TLs		–	84.6	5.9	76.3	–	83.4	5.3	73.6
% Share to Number of TLs (Col. F & J)		–	99.2	0.8	100.0	–	99.2	0.8	100.0
MFN Avg./Total Tariff Lines		4.8	9354	1078	10458	4.7	8379	1101	9567

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Section 4 has been analyzed in detail in Table 4. For at least 503 TLs it may be difficult to compute the average duties due to the presence of specific duties. Section 4 covers about nine processed food chapters; however the highest number of 245 specific duties is seen in only one chapter, beverages, spirits and vinegar. The other dominant chapters were Chapter 2 (vegetable products) with 169 TLs, followed by Chapter 4 (dairy produce and birds’ eggs, and natural honey edible and products of animal origin) with 157 TLs. Clearly one can find that the EU protected these three sectors in response to domestic pressure. It consists in a violation of the basic spirit of free trade in especially higher value-added products. Over all, the EU has paid its farmers direct payments (de-coupled income support) of close to €31,482 million in 2009/10, under its Domestic Subsidies Programme as notified under the AoA (WTO 2012), besides using tariff protection by means NAV duties and non-tariff measures in the form of SPS and TBT measures which deviate from international standards.

Table 4 indicates that at the four digit level the products which faced the stiffest possible entry barriers all belonged to the agricultural and allied sectors. The most protected products are the HS 2204 (wine of fresh grapes), with nearly 20 per cent of the total specific duties used in 2011. Some of the less protected agricultural products were meat (0207); curd and cheese (0406); cereal grains otherwise worked (1104); fruit juices (2009) and rice (1006). Again, this clearly indicates that the EU violates the ‘free trade’ spirit, as well as the special needs and development concerns of the developing countries. Therefore, the process of negotiation by the EU of the AVEs would provide developing countries with more import access and have substantial trade benefits in A&AP.

Table 4.

Top 10 Product Count at HS 4 Digit Level (2011) – European Union

4 Digit	Description	Number of TLs with Specific Duties
2204	Wine of fresh grapes incl. fort. wines grape must other. than that of head. no 2009	219
0207	Meat and edible offal of the poultry of heading no.01.05, fresh chilled or frozen	82
0406	Cheese and curd	42
1104	Cereal grains otherwise worked (as hulled, rolled flaked, pearled, sliced/billed) except rice of heading no 1006; germ of cereals, whole rolled flaked/grounded	34
2009	Fruit juices (including grape must)/vegetable juice unfermented & not with added spirit weather or not sweetened	34
1006	Rice	33
0403	Butter milk, curdled milk & cream, yogurt & other fermented acidified milk & cream	30
0404	Whey & products constituting of natural milk constitute w/n containing added sugar or sweetening matter	30
0204	Meat of sheep or goats, fresh, chilled or frozen	27
0402	Milk & cream concentrated/containing sugar/sweeting material	25
0210	Meat/edible meat offal, slated, in brine, dried/smoked; edible flours & meals of meat/meat offal	24
1905	Bread, pastry & other bakery’s wares, w/n with cocoa; communion wafers, empty cachets of a kind suited for pharmaceutical use, sealing wafers, rice paper & similar products	23
1806	Chocolate & other food preparations containing cocoa	20
2309	Preparations of a kind used in animal feeding	20
Sub Total		643
% Share		58.4
Total NAV Tariff lines		1101

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Canada

Canada has been relatively non-partisan member in terms of the WTO’s negotiations in the AoA. However, Table 5 clearly highlights that, like the EU, Canada also has maintained NAV duties from the beginning of the Doha Round—385 TLs, or 3.5 per cent of total TLs, then reduced by 43 TLs to 342 TLs by 2011.

Table 5.

Canada’s MFN Average Tariff Rates and the Distribution of Specific Duties

Section	Section Description	2001				2011
Section	Section Description	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
1	Live animals	1.9	219	117	336	1.7	235	114	349
2	Vegetable products	2.2	402	101	515	2.5	352	98	450
3	Animal or Veg. fats and oils and Veg. waxes	4.5	68	2	70	5.1	64	2	66
4	Prep. Foods, beverages & Mfg. tobacco Substitutes	6.3	447	144	591	6.0	452	124	582
Agriculture and Allied Sectors (A&AS)		3.7	1136	364	1512	3.8	1103	338	1447
% Share to Total TLs		–	11.2	94.5	14.3	–	13.8	98.8	17.3
% Share to Number of TLs (Col. F & J)		–	75.1	24.1	100.0	–	76.2	23.4	100.0
5	Mineral products	0.6	195		195	0.3	174		174
6	Chemical or allied industries	2.6	1220	4	1224	0.9	1123	4	1127
7	Plastics and rubber articles thereof	4.1	445		445	1.5	383		383
8	Raw hides and skins, leather	3.2	159		159	1.8	183		183
9	Wood and articles of wood	2.4	117		117	2.4	136		136
10	Pulp of wood or paper or paperboard	0.6	295		295	0.0	177		177
11	Textiles and textile articles	9.7	1489	17	1506	5.1	1504		1504
12	Footwear, umbrellas, Art. of human hair	11.1	110		110	10.7	100		100
13	Articles of stone, plaster, glass and glassware	2.7	273		273	1.9	195		195
14	Nat. pearl, precious metals, imit. Jewel.; coin	2.0	76		76	1.6	65		65
15	Base metals and articles of base metal	2.0	1308		1308	1.0	886		886
16	Machinery; electrical equipment; parts thereof;	1.5	2221		2221	0.8	1187		1187
17	Vehicles, aircraft, Asso. transport equip.	2.9	353		353	5.4	238		238
18	Optical, photo.c, medical instruments and app.	1.6	489		489	1.6	324		324
19	Arms and ammunition	3.5	36		36	3.8	31		31
20	Miscellaneous manufactured articles	5.0	240		240	5.0	188		188
21	Works of art, collectors’	1.6	8		8	1.4	9		9
Non Agriculture Sector (N-AS)		3.4	9034	21	9055	2.7	6903	4	6907
% Share to Total TLs		–	88.8	5.5	85.7	–	86.2	1.2	82.7
% Share to Number of TLs (Col. F & J)		–	99.8	0.2	100.0	–	99.9	0.1	100.0
MFN Avg./Total Tariff Lines		3.5	10170	385	10568	2.6	8006	342	8354

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

However, the total number of tariff lines for Canada has seen a substantial drop by 10,568 in 2001 to 8,354.⁹ Decrease in TLs occurred mostly in AV lines, where reductions of 2,214 lines were seen during the decade. This immediately indicates Canada’s strategy of retaining the TLs with NAV duties intact. There has been a substantially higher proportion of specific duty usage in the A&AS (Section 1 to 4). Shares of A&AS products to the total NAV lines across all the sections increased from 94.5 per cent in 2001 to 98.8 per cent in 2011. Canada had virtually 99 per cent of specific (NAV) duties in the A&AS; with only 1 per cent share in the non-agricultural sectors. Animal or vegetable fats and oils and their cleavage products had the lowest number of NAV duties.

In Table 5 we can observe that in both years, the largest number of specific duties were in the prepared foodstuffs, beverages, spirits and vinegar and tobacco and manufactured tobacco substitutes (Section 4), followed by live animals and animal products (Section 1) and vegetable products (Section 2).

However, in 2011, the top 15 four digit products with highest usage of specific duty accounted for nearly 61 per cent share of total specific duties (342). In Table 6, further analysis of the negative impacts, in terms of products identified at four digit level, shows the top 10 products as having the highest count of TLs with specific duties (NAV). Like the EU, Canada has also had very stringent market access for products like: (0406) cheese and curd; (0207) meat and edible; (2206) fermented beverages; (0402) milk and cream; (0709) other vegetables fresh or chilled and foods prepared (1904). Canada was also violating the true spirit of free and fair trade by having the TLs in NAV, which were largely concentrated in the A&AS with impunity and maintaining these as late as 2011.

Table 6.

Top 15 Product with Usage of Non-Ad-valorem (NAV) Tariffs by Canada (2011)

Four Digit HS	Product Description	Number of TLs with Specific Duties
0406	Cheese and curd	34
0207	Meat and edible offal of the poultry	26
2206	Ot. fermented beverages (cider perry mead)	23
1905	Bread, pastry & other bakers wares, rice paper & similar products	13
0402	Milk & cream concentrated	12
0709	Other vegetables fresh or chilled	12
1904	Prpd foods obtained by swelling/roasting of cereals products	12
1702	Other sugar in solid form including chemically pure lactose	11
2208	Undnatrd ethyl alchl wth < 80% alchl strngth	11
0809	Apricots cherries peaches, plums & sloes, frsh	10
1602	Other prep./pres. meat offal/blood	10
1901	Malt extract; food preparations of flour	9
0704	Cabbages, cauliflowers, kohirabi, kale	8
0706	Carrots, turnips, salad beetroot, salsify, etc.	8
1701	Cane/beet sugr chmcly pure sucrse in solid	8
Sub Total (NAV) Tariff lines		207
Top 15 products % Share		60.5
Total NAV Tariff lines		342

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Canada was certainly better placed in terms of market access for the developing countries than the EU. In the case of Canada, by 2011, there was increased usage of NAV, by 4.3 percentage points in the A&AS products, from 94.5 to 98.8 per cent.

The United States

The United States experienced an increasing trend in the NAV tariff line counts. Table 7 shows that here was an increase in terms of its relative shares, from 61.6 to 63.5 per cent in 2001–11. In terms of absolute numbers, there was an increase from 702 in 2001 to 730 in 2011. The A&AS had experienced a pattern similar to that of tariff escalation, with value-added sections/products being relatively more protected in comparison to less value-added sections/products. This is evident from the increase by 22 counts of specific duty in Section 4, from 264 to 286 in 2001–11.

Table 7.

US NAV Tariff Counts and MFN Avg. Tariff Rates

Section	Section Description	2001				2011
Section	Section Description	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
1	Live animals	6.3	317	185	502	5.9	345	184	529
2	Vegetable products	5.2	270	222	492	5.6	273	229	502
3	Animal or Veg. fats and oils and Veg. waxes	3.5	35	31	66	3.7	36	31	67
4	Prep. Foods., beverages & Mfg tobacco Subs.’s	12.0	461	264	725	11.9	454	286	740
Agriculture and Allied Sectors (A&AS)		6.7	1083	702	1785	6.8	1108	730	1838
% Share to Total TLs		–	12.0	61.6	17.5	–	10.4	63.5	15.6
% Share to Number of TLs (Col. F & J)		–	60.7	39.3	100.0	–	60.3	39.7	100.0
5	Mineral products	0.2	160	19	184	0.4	166	36	203
6	Chemical or allied industries	3.8	1523	142	1665	2.7	2564	16	2580
7	Plastics and rubber articles thereof	3.7	350	3	353	3.2	465		465
8	Raw hides and skins, leather	4.9	155	1	156	4.3	219	1	220
9	Wood and articles of wood	2.2	184	2	186	2.4	234	5	239
10	Pulp of wood or paper or paperboard	0.6	217	6	223	0.0	279		279
11	Textiles and textile articles	9.4	1436	120	1556	8.7	1490	110	1600
12	Footwear, umbrellas, Art. of human hair	11.1	144	24	168	11.3	148	26	174
13	Articles of stone, plaster, glass and glassware	5.1	292	7	299	5.3	293	7	300
14	Nat. pearl, precious metals, imit. Jewel.; coin	3.0	104		104	3.0	105		105
15	Base metals and articles of base metal	2.3	938	44	982	1.7	974	50	1024
16	Machinery; electrical equipment; parts thereof;	1.6	1432	5	1437	1.6	1570	5	1576
17	Vehicles, aircraft, Asso. transport equip.	2.6	238		238	2.4	253		253
18	Optical, photo.c, medical instruments and app.	2.8	489	41	530	1.7	477	136	626
19	Arms and ammunition	1.7	36	1	37	1.2	35	4	39
20	Miscellaneous manufactured articles	2.8	255	22	277	2.8	259	23	282
21	Works of art, collectors’	0.0	7		7	0.0	7		7
Non Agriculture Sector (N-AS)		3.4	7960	437	8402	3.1	9538	419	9972
% Share to Total TLs		–	88.0	38.4	82.5	–	89.6	36.5	84.4
% Share to Number of TLs (Col. F & J)		–	94.7	5.2	100.0	–	95.6	4.2	100.0
MFN Avg./Total Tariff Lines		4.6	9043	1139	10187	3.9	10646	1149	11810

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

This suggests that the United States also maintained constrained market access for imported goods in the products under the A&AS. Table 7 shows that the United States has approximately a ratio of 5:95 of NAV usage in the non-agricultural sector, while the ration for the A&AS is as high as 40:60. However, in terms of the usage of these NAV in the N-AS, a clear shift in strategies can be noted. While in 2001 the protected sections with use of NAV were products of chemical or allied industries (Section 6) and textiles and textiles articles (Section 11), by 2011 the textiles and textile articles continued to be the dominant section which was protected by the use of NAV. In addition, Section 18 (optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatuses, clocks and watches, musical instruments, and parts and accessories) showed an increase in the count of NAV from 41 to 136 in 2001–11. It is clear that for the United States, besides textiles and textiles articles, the priority in the last decade has shifted from chemicals (Section 6) to optical instruments (Section 18).

It is evident from an analysis of the top 15 products with specific duties that the highest concentration occurs in Section 18. Specific duties under this section with four digit products (such as 9102, 9108, 9105, 9101, 9109) account for nearly 50 per cent of the top 15 products, out of the total 177 counts, see Table 8. Unlike the EU and Canada, where the A&AS products dominated this list, in the United States both A&AS and N-AS products were equal in number of NAV tariffs.

The United States is a classic case of lack of domestic competiveness in certain agricultural and industrial goods sectors, which are being protected through a number of trade policy instruments like Domestic support, NTMs (SPS and TBT measures) and NAV tariffs. Over 2001–11, the US notified a number of SPS and TBT measures, making it the single largest with more than 2000 notifications among the WTO membership of 159 countries. The majority of these measures have been notified by the Federal Environmental Protection Agency (EPA) which relates to regulating the contents of chemicals and pesticides and food and feed products. The Unites States further used NAV tariffs as an effective trade policy instrument to evade the true implication of the binding commitments of the WTO.

Table 8.

Usage of Specific Duty at Harmonised System (HS) 4 Digit Level (2011) – USA

4 digit HS	Description	Count of Specific Duty Rate
2009	Fruit juices (including grape must)/vegetable juice unfermented.	14
0402	Milk & cream concentrated/containing sugar	12
2005	Other vegetables prepared/other than products of heading no. 2006	10
0406	Cheese and curd	9
1806	Chocolate & other food preparations containing cocoa	9
2204	Wine of fresh grapes including, other than that of heading no. 2009	8
2401	Unmanufactured tobacco, tobacco refuse	8
0401	Milk & cream not concentrated nor containing	7
0802	Other nuts fresh or dried w/n shield or peeled	7
A&AS Products		84
9102	Wrist-watches, pocket-watches, excluding those of heading no. 9101	36
9108	Watch movements, complete and assembled	14
8211	Knives with cutting blades, other than knives of heading. no. 8208	12
9105	Other clocks	12
9101	Wrist-watches, pocket-watches & other watches,	11
9109	Clock movements, complete & assembled	8
N-AS Products		93
Sub Total		261
% Share		48.1
Grand Total		543

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Japan

Japan’s usage of NAV tariffs have been more scattered across the A&AS (Sections 1–4) and the N-AS products (Sections 5–21), with the latter having an edge over the A&AS products. In Table 9, of the total 1973 tariff lines in 2001 and 2042 in 2011, approximately 290 were specific duties in both years. The shares of the counts of specific duties were the same during 2001 and 2011—48.3 per cent for the A&AS products and 51.7 for the N-AS products. The proportion of NAV to AV usage was 15:85 for the A&AS products, while in the case of N-AS it was 4:96 for both the years analyzed.

There is a pattern of tariff escalation observed in the case of Japan, with Section 4 (prepared foodstuffs, beverages, spirits and vinegar, tobacco and mfg. tobacco substitutes) having higher absolute counts of NAV duties of 125 and 123 TLs in 2001 and 2011, respectively. It could be argued that having a larger number of TLs under the NAV could act as tariff escalation phenomenon and lead to higher applied tariffs in some of the lines, effectively keeping it outside the methodology of calculation of simple average MFN duty.

This suggests that, for Japan, it was the N-AG sector that was strategically important. This was observed in Section 11 (textile and textile articles), which had a dominant share of TLs of 73.5 per cent in 2001, gradually being reduced to 69.4 per cent. However, in the total NAV TLs, the shares of the N-AG sector have remained at 51.7 per cent for both years, with Section 15 (base metal and articles of base metal) having recorded an increase in the count of NAV duties by 20 TLs in 2001–11.

Therefore, it could be argued that Japan’s negotiating position was in denial of free trade principles when it came to its own market. This was evident from the prevalence of NAV duties even in sectors of comparative advantage and export interest for developing countries, particularly textile and textile articles (Section 11). It is observed that both the United States and Japan had effectively denied market access in Section 11, as they continued to retain relatively very high counts of NAVTLs, even in 2011.

Table 9.

Japan’s MFN Avg. Tariff Rates and Trends in Specific Duties

Section	Section Description	2001				2011
Section	Section Description	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
1	Live animals	9.6	486	74	560	9.0	516	74	590
2	Vegetable products	6.6	509	58	567	6.6	515	57	572
3	Animal or Veg. fats and oils and Veg. waxes	3.6	49	33	82	3.6	50	36	86
4	Prep. Foods, bvergs & Mfg. tob. Subs.’s	14.9	639	125	764	14.8	671	123	794
Agriculture and Allied Sectors (A&AS)		8.7	1683	290	1973	8.5	1752	290	2042
% Share to Total TLs		–	19.5	48.3	21.3	–	19.6	48.3	21.4
% Share to Number of TLs (Col. F & J)		–	85.3	14.7	100.0	–	85.8	14.2	100.0
5	Mineral products	0.5	183	24	207	0.5	196	20	216
6	Chemical or allied industries	2.0	1220	5	1226	1.9	1483	5	1488
7	Plastics and rubber articles thereof	2.5	282	6	288	2.1	346	6	352
8	Raw hides and skins, leather	10.7	173		173	10.9	225		225
9	Wood and articles of wood	3.0	213		213	3.4	263		263
10	Pulp of wood or paper or paperboard	0.8	174		174	0.0	169		169
11	Textiles and textile articles	7.9	1851	228	2079	6.7	1772	215	1987
12	Footwear, umbrellas, Art. of human hair	14.8	117	28	145	14.4	102	25	127
13	Articles of stone, plaster, glass and glassware	1.2	171		171	1.2	164		164
14	Nat. pearl, precious metals, imit. Jewel; coin	1.4	77		77	1.3	79		79
15	Base metals and articles of base metal	1.4	818	17	835	0.8	815	37	852
16	Machinery; electrical equipment; parts thereof;	0.1	991		991	0.0	918		918
17	Vehicles, aircraft, Asso. transport equip.	0.1	152		152	0.1	146		146
18	Optical, photo.c, medical instruments and app.	0.2	308		308	0.2	278		278
19	Arms and ammunition	6.7	21		21	6.9	24		24
20	Miscellaneous manufactured articles	1.8	207	2	209	1.6	187	2	189
21	Works of art, collectors’	0.0	7		7	0.0	7		7
Non Agriculture Sector (N-AS)		3.2	6965	310	7276	3.1	7174	310	7484
% Share to Total TLs		–	80.5	51.7	78.7	–	80.4	51.7	78.6
% Share to Number of TLs (Col. F & J)		–	95.7	4.3	100.0	–	95.9	4.1	100.0
MFN Avg./Total Tariff Lines		4.9	8648	600	9249	4.5	8926	600	9526

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Table 10.

Top 15 Products Usage of Non Ad-valorem (NAV) Tariff in Japan (2011)

HS 4 Digit	Description	Count of Specific Duty Rate
0203	Meat of swine, fresh, chilled or frozen	12
0402	Milk & cream concentrated/containing sugar/sweating material	16
0404	Whey & products constng of ntrl milk cnstitnt w/n	12
1702	Othr sugar in solid form incl chmcly pure lctse, mltse, glcse	18
1901	Malt extract; food preparations of flour, starch etc. without cocoa powder	18
2009	Fruit juices (incl grape must)/vgtbl juice unfrmntd	15
A&AS Products		134
2710	Petroleum oils & oils obtnd frm bitmns mnrl other than crude	18
5205	Cotton yarn (other than sewing thread) containing 85% or more by wt	58
5206	Cotton yarn (other than sewing thread) put for retail sale	20
5208	Woven fabrics of cotton containing > = 85% by with of cotton weighing	50
5209	Woven fabrics of cotton, containing > = 85% cotton	23
5210	Wovn fbrcs contng < 85% coton, mxd mainly or solely wth manmade fbrs	16
5211	Wovn fbrcs of coton, contng < 85% mnmd fbrs weighing > 200 g/m2	17
6403	Ftwear wth outr soles of rubber, plastics, lthr/cmpstn lthr & upprs of lthr	18
7403	Refined copper & copper alloys, unwrought	16
N-AS Products		236
Sub Total		461
% Share		76.8
Grand Total		600

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

This is also evident from Table 10, which lists the top 15 products with NAV duties at HS 4-digit level. It may be noted, furthermore, that these 15 heading lines accounted for a share of 77 per cent of total lines with NAV TLs. The distribution of A&AS to N-AG was a ratio of 6:9, suggesting lesser protection of A&AS products. Many of the intermediary products (5205, 5208, 5209, 5206, 5211, 5210) belonging to N-AG products (Section 11, textile and textile articles) have been found to be under NAV tariffs. These six products in total accounted for 56.3 per cent of the sub-total of 327 NAV duties. Clearly, therefore, Japan, along with other developed countries, has not been helping the developing countries and the least developed countries to achieve the market access provision of the Doha Round Mandate of 2001. Having an average of 6.5 per cent of the total tariff lines under the NAV duty (and specifically in A&AS, with a nearly 15 per cent share) does not improve market access, especially when it is used as a strategic trade policy instrument.

This does not help in the process of negotiations, as the final outcome will be unbalanced. Furthermore, it is not at all supportive of elementary discipline of binding tariffs under the Doha Round.

Japan being an island nation does not have much at stake in protecting agriculture. This is evident from the usage of NAV TLs. Out of a total 15 heading lines, nine belonged to N-AS products, and out of these N-AG products a majority of seven heading lines belonged to the textiles and footwear sector—a sector in which developing countries are competitive and in which Japan’s trade policy effectively blocked market access.

Switzerland

The specific duties in Switzerland have spread across A&AS and N-AG products. In over a decade, the total tariff lines with specific duties showed a marginal decrease of 48 TLs, from 6946 in 2001 to 6898 tariff lines by 2011. It is interesting to note that Switzerland had a lesser number of TLs with AV tariffs when compared to NAV TLs. The overall pattern of usage of ad-valorem and specific duty suggest that it is skewed in favour of the latter.

Table 11 clearly indicates this in both the years analyzed. In 2001, of the total 8333 TLs, those with specific duties accounted for a majority share of 83.4 per cent (6946 lines). By 2011, there was a marginal decrease by one percentage point, at 82.4 per cent with 6898 tariff lines.

The use of NAV duties in Switzerland was not limited to the A&AS products alone, but extended to N-AG products too.

Table 11.

Switzerland’s MFN Avg. Tariff Rates and Trends in Specific Duties

Section	Section Description	2001				2011
Section	Section Description	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines	Simple MFN Avg. Tariff	Count of Ad Valorem Tariff	Count of Specific Duty (NAV)	Number of Tariff Lines
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)	(i)	(j)
1	Live animals	0.0	102	329	431	0.0	123	322	445
2	Vegetable products	0.0	139	918	1057	0.0	194	876	1070
3	Animal or Veg. fats and oils and Veg. waxes	0.0	24	146	170	0.0	40	149	189
4	Prep. Foods, bvergs & Mfg. tob. Subs.’s	0.0	76	512	588	0.0	104	547	651
Agriculture and Allied Sectors (A&AS)		0.0	341	1905	2246	0.0	461	1894	2355
% Share to Total TLs		–	24.6	27.4	27.0	–	31.2	27.5	28.1
% Share to Number of TLs (Col. F & J)		–	15.2	84.8	100.0	–	19.6	80.4	100.0
5	Mineral products	0.0	117	64	181	0.0	119	63	182
6	Chemical or allied industries	0.0	389	619	1008	0.0	412	609	1021
7	Plastics and rubber articles thereof	0.0	31	198	229	0.0	30	211	241
8	Raw hides and skins, leather	0.0	22	55	77	0.0	15	59	74
9	Wood and articles of wood	0.0	11	92	103	0.0	14	116	130
10	Pulp of wood or paper or paperboard	0.0	21	138	159	0.0	24	157	181
11	Textiles and textile articles	0.0	37	1059	1096	0.0	34	1060	1094
12	Footwear, umbrellas, Art. of human hair			66	66			61	61
13	Articles of stone, plaster, glass and glassware	0.0	2	167	169	0.0	2	158	160
14	Nat. pearl, precious metals, imit. Jewel.; coin	0.0	7	53	60	0.0	7	54	61
15	Base metals and articles of base metal	0.0	39	892	931	0.0	39	874	913
16	Machinery; electrical equipment; parts thereof;	0.0	249	1060	1309	0.0	204	1030	1234
17	Vehicles, aircraft, Asso. transport equip.	0.0	18	179	197	0.0	18	178	196
18	Optical, photo.c, medical instruments and app.	0.0	62	217	279	0.0	55	202	257
19	Arms and ammunition			25	25			28	28
20	Miscellaneous manufactured articles	0.0	33	155	188	0.0	34	142	176
21	Works of art, collectors’	0.0	8	2	10	0.0	8	2	10
Non Agriculture Sector (N-AS)		0.0	1046	5041	6087	0.0	1015	5004	6019
% Share to Total TLs		–	75.4	72.6	73.0	–	68.8	72.5	71.9
% Share to Number of TLs (Col. F & J)		–	17.2	82.8	100.0	–	16.9	83.1	100.0
MFN Avg./Total Tariff Lines		0.0	1387	6946	8333	0.0	1476	6898	8374

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Therefore, the problem of distortion of market access to developing country exporters can be serious, as it is prevalent across all the 21 sections generally, with the exception to two specific sectors, that is, Sections 12 and 19, in which 100 per cent was with NAV duties. Section 12 (Footwear) is an export interest product for developing countries. However, the usage of NAV duties in the A&AS saw a relatively better result in comparison to the totals, dropping by 4.4 per cent. The market access scenario in Switzerland in 2011 suggested a marginal improvement for developing country exporters in A&AS products compared to the scenario in 2001.

Table 12 reveals that close to 80 per cent of the top 15 products with NAV duties belonged to the A&AG section, while only 20 per cent belonged to N-AG. This is in contrast with the overall assessment made that Switzerland had been protecting N-AG products, with nearly 73 per cent having NAV duties.

Such rampaged usage of NAV duties by Switzerland (nearly 85 per cent of TLs even in 2011) cannot be ignored, as these tariffs have a trade distortive effect with currency fluctuations, which occur on a daily basis. It is also evident that even Switzerland, like the other QUAD countries, is not serious on the issue of market access and it is making unnecessary and unrealistic demands for tariff reductions in the negotiations.

Table 13 provides a summary of NAV duty usage across seven developed countries. In terms of import market, these countries account for nearly 69 per cent (average of 2002 to 2011) of the total global A&AS products.¹⁰ As such, these countries are important in the context of market access. In terms of relative shares of A&AS products, the United States and the EU-27 were leading in terms of denial of market access to the developing countries, while the least market access denials were caused by Australia and New Zealand. Switzerland was an exception to the lot, with denial of market access seen across both sectors, agricultural and allied and non-agricultural sectors.

The Case of Developing Countries

The NAV duties of the developing countries are analyzed in one summary table, as these countries do not have many tariff lines under the products belonging to agriculture and allied sectors. The analysis is undertaken for eight developing countries. Some of the prominent economies are analyzed here to understand their pattern of usage of NAV duties. The countries studied are the Russian Federation, the Republic of Korea, Singapore, Brazil, Argentina, China, Mexico and India. The application of NAV duties across 21 sections are analyzed on the basis of the two categories A&AS (Sections 1 to 4) and N-AG (sections 5 to 21) products.

The patterns of NAV usage of these eight developing countries clearly reveal the extent of a fault line in the negotiation process in goods market access in general and A&AS in particular. The eight developing countries can be categorized into three groups: (a) those which do not use specific duty and, therefore, can be seen to have simple average MFN Applied rates which are truly representative of reality; (b) those with mild usage in the agricultural sector and (c) those with low usage in A&AS tariff lines, but highly concentrated usage in the N-AG sector. The last category contains two of the Asian giants, China and India, with both countries accounting for above 90 per cent of the total specific duties. In the first category are two South American countries (Brazil and Argentina) and one Asian (Singapore). In the second category are countries like South Korea and Mexico.

Table 12.

Top 15 Products Usage of NAV Duties in Switzerland (2011)

HS 4 Digit	Description	Count of Specific Duty Rate
0207	Meat and edible offal of the poultry	40
0704	Cabbages, cauliflowers, kohirabi, kale	40
0705	Lettuce & chicory, fresh or chilled	52
0709	Other vegetables fresh or chilled	49
0713	Dried leguminous veg shelled w/n skinned/split	37
1104	Cereal grains otherwise worked, whole, rolled flaked/ground,	47
1207	Other oil seeds & oleaginous fruits w/n broken	71
1806	Choc. & other food preparations conating cocoa	35
1901	Malt extract; food preparations of flour, starch	52
1905	Bread, pastry & other baker’s wares, cocoa; communion wafers	36
2009	Fruit juices (incl grape must)/vegetable juice unfermented	59
A&AS Products (% Share)		742 (80)
5205	Cotn yrn (othr thn swng thrd) cntng 85% or more	52
5206	Coton yrn (othr thn sewng thrd) put for retail sale	40
5515	Othr wvn fbrcs of synthtc stpl fbrs	36
6204	Women’s/girls’ suits, ensembles, jackets, (excpt swimwear)	60
N-AS Products (% Share)		188 (20)
Sub Total (Heading TLs) (% Share)		930 (100)
% Share		13.5
Grand Total (Heading TLs)		6898

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Table 13.

Summary of the Usage of NAV Tariff in Agriculture and Allied Sectors (A&AS)—2011

Section	Section Description	2011 (numbers of TLs)
Section	Section Description	Switzerland	Australia	New Zealand	EU-27	Japan	USA	Canada
1	Live animals	322	5	–	355	74	184	114
2	Vegetable products	876	–	–	175	57	229	98
3	Animal or Veg. fats and oils and Veg. Waxes	149	–	–	10	36	31	2
4	Prep. Foods, bvergs & Mfg. tob. Subs.’s	547	4	4	503	123	286	124
Agriculture and Allied Sectors (A&AS)		1894	9	4	1043	290	730	338
% Share to the total TLs		27.5	52.9	10.8	94.7	48.3	63.5	98.8
5	Mineral products	63	–	–	3	20	36	–
6	Chemical or allied industries	609	–	–	27	5	16	4
7	Plastics and rubber articles thereof	211		1	–	6	–	–
8	Raw hides and skins, leather	59	–	–	–	–	1	–
9	Wood and articles of wood	116	–	–	–	–	5	–
10	Pulp of wood or paper or paperboard	157	–	–	–	–	–	–
11	Textiles and textile articles	1060	–	4	1	215	110	–
12	Footwear, umbrellas, Art. of human hair	61	–	–	–	25	26	–
13	Articles of stone, plaster, glass and glassware	158	–	–	7	–	7	–
14	Nat. pearl, precious metals, imit. Jewel.; coin	54	–	–	–	–	–	–
15	Base metals and articles of base metal	874	–	–	–	37	50	–
16	Machinery; electrical equipment; parts thereof;	1030	–	16	–	–	5	–
17	Vehicles, aircraft, Asso. transport equip.	178	8	–	–	–	–	–
18	Optical, photo.c, medical instruments and app.	202	–	8	20	–	136	–
19	Arms and ammunition	28	–	2	–	–	4	–
20	Miscellaneous manufactured articles	142	–	2	–	2	23	–
21	Works of art, collectors’	2	–	–	–	–	–	–
Non Agriculture Sector (N-AG)		5004	8	33	58	310	419	4
% Share to the total TLs		72.5	47.1	89.2	5.3	51.7	36.5	1.2
Total NAV Tariff Lines		6898	17	37	1101	600	1149	342

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

Clearly, in the case of tariffs the simple ad-valorem averages is not truly representative of the actual market access scenario in A&AS products for the developed countries; it hides more than it reveals, in the case of nearly all the countries analyzed here. In the case of developing countries, the tariff simplification will not make much of difference, as the simple ad-valorem tariffs in agricultural and allied sectors are fairly representative. It will only be a problem in the case of non-agriculture market access (NAMA); here, two countries, China and India, would have to reduce NAV duties through the process of AVEs (Table 14).

In the Doha round, what is important is that the trends based on the NAV usage of the selected 15 (developed and developing) countries in the A&AS clearly indicates that usages are skewed in favour of the developed countries. The 9th Ministerial Conference at Bali failed to come to a consensus on this important issue of AVEs, which if addressed would have gone a long way to correcting tariff imbalances.

Conclusion

It is clearly evident that the overall imbalances in both tariff and non-tariff measures (SPS and TBT) have constrained market access for developing countries’ exports of agriculture and allied sector products.¹¹ In the case of the A&AS sector, Switzerland has the highest share of 80.4 per cent under NAVTLs under the total tariff lines of the A&AS sector, followed by the EU with nearly 43 per cent, the United States with nearly 40 per cent, Canada with 23 per cent and Japan, the lowest among the QUAD countries, with 14 per cent. The QUAD can be seen to be protecting the agricultural sector, while many CGE studies argued that the Uruguay Round liberalization process would bring substantial gains to the developing countries by way of market access provided by the developed countries, especially in exports of agricultural and allied sector products.¹² On the other hand, the developing countries have continued to use mostly ad-valorem tariffs in this sector, meaning that the simple MFN average was truly reflective of market access scenarios. The same cannot be said for the developed countries, which have an average of 40 per cent of tariff lines (products) unaccounted for in the calculation of simple MFN average (NAV duties).

Table 14.

Summary Table of the Usage of Specific Duty in Agriculture and Allied Sectors – 2010/2011

Section	Section Description	2010/2011 (numbers of TLs)
Section	Section Description	Brazil	India	China	S. Korea	Singapore	Mexico	Argentina
1	Live animals	–		7	4		7	–
2	Vegetable products	–	2	–	43		9	–
3	Animal or Veg. fats and oils and Veg. waxes	–		–	1			–
4	Prep. Foods, bvergs & Mfg. tob. Subs.’s	–		–	3	6	46	–
Agriculture and Allied Sectors (A&AS)		–	–	7	51	6	62	–
% Share		–	–	14.3	58.6	100.0	77.5	–
5	Mineral products	–		–				–
6	Chemical or allied industries	–		37	30		14	–
7	Plastics and rubber articles there of	–		–			1	–
8	Raw hides and skins, leather	–		–			1	–
9	Wood and articles of wood	–		–				–
10	Pulp of wood or paper or paper board	–		–			2	–
11	Textiles and textile articles	–	808	–	5			–
12	Footwear, umbrellas, Art. of human hair	–		–				–
13	Articles of stone, plaster, glass and glassware	–		–				–
14	Nat. pearl, precious metals, imit. Jewel; coin	–	3	–				–
15	Base metals and articles of base metal	–		–				–
16	Machinery; electrical equipment; parts thereof;	–		5	1			–
17	Vehicles, aircraft, Asso. transport equip.	–		–				–
18	Optical, photo.c, medical instruments and app.	–		–				–
19	Arms and ammunition	–		–				–
20	Miscellaneous manufactured articles	–		–				–
21	Works of art, collectors’	–		–				–
Non Agriculture Sector (N-AG)		–	811	42	36	0	18	–
% Share		–	99.8	85.7	41.4	0.0	22.5	–
Total Specific Tariff Lines		–	813	49	87	6	80	–

Source: Author’s calculations based on Tariff Analysis Online (TAO), IDB data extracted on 12 December 2012 (http://tariffanalysis.wto.org/?ui=1).

As the Doha negotiations have progressed, tariff simplification of compound tariffs and mixed tariffs appear to have receded into the background. There is no clear mandate in the revised draft modalities for agriculture (TN/AG/W/4/Rev.4, dated 6 December 2008), as there is no specific requirement to convert these tariff lines into a simpler form which would be quantifiable. The protection of the agricultural sector has been the reason for having very high usage of NAV tariff in nearly all the developed countries.

As simple ad-valorem tariff barriers are being reduced under successive rounds of international trade negotiations, concerns have been expressed that a similar effort has been lacking to replace the NAV tariff protection and tighter regulation of agricultural and other food imports through WTO-compatible measures (Kallummal 2013). This article has established that both NAVs and standards have indeed become increasingly important as trade policy instruments in the hand of developed countries for protection or regulatory purposes in A&AS sectors. Furthermore, the evidence based on the manner of usage of NTM versus NAV tariffs suggests that if the European Union were to bring down the intensity of NAV incidence in the A&AS, it may then be replaced with SPS measures, as there seems to be high negative correlation between the two. The developed countries seem to be using these two main channels in order to protect their domestic sectors, which incidentally happens to be the lowest contributor to their GDP.

The discretion provided in the Agreement for basing standards on scientific evidence and the use of local health requirements have led to disguised protection of domestic agricultural sectors, especially among developed countries. Developing country exporters are unable to realize their market access potential in the QUAD Plus countries because of these trade-restrictive measures. Exports of food products from developing countries encounter a formidable hurdle in the form of SPS measures imposed for health and safety reasons in developed countries. The cost of complying with these are often stringent, as the SPS standards are highly burdensome (for example, sub-atomic standards, commonly known as ‘nano standards’),¹³ particularly for low-income countries, and non-compliance would entail damaging loss of export earnings. Utsa Patnaik (1999: 20) has argued along similar lines with respect to the increase in non-tariff barriers by the developed countries and the reduction in time frames:

The time phase of QR removal and tariff reduction has been shortened for developing countries whereas important barriers to their exports to advanced countries like the Multi-fibre Agreement which is a system of quotas, have been given a much longer lease of life; and by the time it is dismantled other non-tariff barriers will have been put in place which will effectively close their markets to our textile exports.

It is clear that for those small and medium-sized countries in which a significant proportion of their population depends on agricultural and processed food exports, an increase in market access is crucial in the short term. The primary concern of market access will not be addressed in its true sense for the majority of such WTO members, unless NAV and NTMs are simultaneously addressed in the Doha Round, together with the introduction of the AVEs. While there have been some negotiations within the WTO committees, there has been little progress in addressing these true concerns.

In summary, developing countries’ agricultural sectors have, in general, come under even greater stress because of the technological divide between developed and developing countries. The distortion effects of NAVs and NTMs has exceeded the impact generated by an equivalent measure of ad-valorem tariff imposed by importing countries and has a prolonged effect on the various segments of production and marketing value chains because of the uncertainty generated around the rules of trade. This may have significant implications for the allocation of production, consumption and trading activities across developing countries.

As the developing country trade negotiators are grappling with unresolved implementation issues under the Doha Round, many of them directly related to the AoA, such as effective TRQ Administration, decoupled payments under domestic subsidies, etc., it is important for the developing country negotiators to press upon the WTO membership to have specific requirements to convert the NAV tariffs into more simplified forms. These are indicative of the questions being raised regarding the WTO’s ability to promote balanced and fair MTNs process and rules that address the past and current inequities which developing countries face.

Even if Doha Round were to be concluded, it may not assure a real solution to market access hindrances caused by these large quantum of NAV tariff lines in A&AS; to understand the complexities also see Kallummal (2005: 36, Annex Table 1). There is an urgent need to bring in some parity in the global market access scenarios between the AV and NAV tariffs, especially in the agricultural and allied sector.

Footnotes

Acknowledgements

The author is extremely grateful for the comments and support provided by Professor Abhijit Das of the Centre for WTO Studies, IIFT. Furthermore, the author is grateful to Ms. Hari Maya Gurung and Ms. Sapna Dua for their research support. Responsibility for the views presented in this article belongs to the author.

Notes

References

Das

Abhijit

Sachin

Sharma, K.

, (2011). Evolution of WTO agriculture modalities: Survival of the financially fattest. CWS Occasional Paper No. 1. Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi.

Das

Bhagirath Lal

(2003). Expiry of the peace clause in WTO’s agriculture agreement: Third World Resurgence. TWN Info Service on WTO Issues.

Dhar

Biswajit

Kallummal

Murali

(2007). Taming non-tariff barriers: Can WTO find a solution? (No. 61). United Nations Economic and Social Commission for Asia and the Pacific [UN-ESCAP], Trade and Investment Division: Bangkok, Thailand.

Fergusson

Ian F.

(2008). World Trade Organization negotiations: The Doha development agenda. CRS Report for Congress, Specialist in International Trade and Finance Foreign Affairs, Defense and Trade Division, Washington, United States.

Jaiswal

Anand Kumar

(2003). WTO agreement on SPS: Strategic implications. Economic and Political Weekly, 38(45), 4737–42.

Kallummal

Murali

(2005). Impact of CAP payments on upstream Indian wine and spirits industry: Study of the common agricultural policy of the EU. Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi. Available at, https://iift.academia.edu/MuraliKallummal/Papers (accessed 2 january 2012).

Kallummal

Murali

(2006). Non-agricultural market access negotiations: Real concerns. Social Scientist, 34(9–10), 34–47.

Mani

Muthukumara S.

(1996). Environmental tariffs on polluting imports: An empirical study. Environmental and Resource Economics, 7(4), 391–411.

Patnaik

Utsa

(1999). The cost of free trade: The WTO regime and the Indian economy. Social Scientist, 27(11/12), 3–26.

10.

Toye

Richard

(2003). Developing multilateralism: The Havana Charter and the fight for the international trade organisation, 1947–48. The International History Review, 25(2), 253–504.

11.

Vaillant

Marcel

(2011). How to encourage the network trade rules interconnections? An application to the case of non-tariff barriers. Trade and Development Symposium Perspectives on the Multilateral Trading System. International Centre for Trade and Sustainable Development (ICTSD), Geneva.

12.

Whalley

John

(2000). What can the developing countries infer from the Uruguay Round models for future negotiations. Policy Issues in International Trade and Commodities Study Series No. 4. United Nations, New York and Geneva.

13.

WTO (1995a). Agreement on agriculture, the legal text: The results of Uruguay Round of multilateral trade negotiations. Available at www.wto.org/english/docs_e/legal_e/14-ag.pdf (accessed 22 May 2014).

14.

WTO (1995b). Understanding the WTO: The agreements, tariffs: More bindings and closer to zero, www.wto.org/english/thewto_e/whatis_e/tif_e/agrm2_e.htm (accessed 22 May 2014).

15.

WTO (2001). Preparations for the fourth session of the ministerial conference, WT/GC/W/442, www.wto.org/english/thewto_e/minist_e/min01_e/min01_proposals_e.htm (accessed 22 May 2014).

16.

WTO (2008). Committee on agriculture special session, revised draft modalities for agriculture, TN/AG/W/4/Rev.4 6 December. Available at www.wto.org/english/tratop_e/agric_e/chair_texts08_e.htm (accessed 22 May 2014).

17.

WTO (2012). Committee on agriculture notification under the domestic support of 2009/10, G/AG/N/EU/10, 19 November. Available at https://docs.wto.org/dol2fe/Pages/FE_Search/…/Q/G/AG/NEU10.pdf (accessed 22 May 2014).