G20 Executive Talk Series

September 2016

Doha

Authored by: Jamal Malaikah

Saving Doha, Part II:
Plurilateral Sectoral Tariff Initiatives

At a time where economic recovery remains weak and uneven and the DDA is stalled, the business community must actively engage to help restore conditions for sustainable economic development.

A year ago, in an article titled “Saving Doha: Focusing on Priority Issues”, I underlined the importance of the continued liberalization of trade for the business community at large and provided three ideas to revive the moribund Doha Development Agenda (DDA). A year later, I review the progress made and the merits of plurilateral sectoral tariff initiatives, an option to improve trade and deliver much-needed benefits in the short to medium term.

Progress on the three DDA priorities since last year?
Achievements at the World Trade Organization’s (WTO) 10th Ministerial Conference that was held at Nairobi were modest. The “Nairobi Package” only includes six ministerial decisions on agriculture, cotton and issues related to least-developed countries.

Despite last-minute efforts to have a decision on transparency-related issues regarding anti-dumping and countervailing proceedings, differences between WTO Members were irreconcilable and no agreement could be reached. As highlighted in the latest Report from the WTO Director-General on Trade-Related Developments, trade remedies remain a serious impediment to trade. However, in view of recent exchanges within the Negotiating Group on Rules, which is mandated to improve and clarify anti-dumping and countervailing rules, any progress is unlikely in the near future.

No significant progress could also be achieved in the negotiations on market-access for non-agricultural goods (NAMA). The Nairobi Ministerial Declaration recognized that WTO Members have different views on how to address the DDA negotiations. While some WTO Members are committed to concluding the DDA in line with its original mandate others call for its termination and the development of new approaches. As recently recognized by G20 Trade ministers, plurilateral sectoral tariff initiatives are a mean to achieve further liberalization in key economic sectors while accommodating the interests of the majority of WTO Members.

On a positive note, significant efforts have been made on the ratification of the Agreement on Trade Facilitation (TFA). A total of 87 WTO Members has ratified the TFA, more than three-quarters of the ratifications needed to bring the agreement into force. The TFA can thus be expected to enter into force in the short term and reduce trade costs by 15 percent.

The interest of business for plurilateral sectoral tariff initiatives
During the Trade Dialogues, an event held in May of this year at the WTO headquarters in which business leaders highlighted the challenges and opportunities before them and shared their views on how the WTO can help address these, participants stressed the significant trade-restrictive effect of tariffs. With the development of global manufacturing and the international fragmentation of global value chains, the cumulative effect of tariffs along the supply chain amplifies their impact. To address tariff barriers, business leaders proposed “delivering more plurilateral and sectoral agreements at the WTO to reap quick wins”.

Plurilateral sectoral tariff initiatives are not new. In the Uruguay Round, the last successful round of global trade negotiations, these were used to liberalize trade for a great range of products as diverse as agricultural equipment, chemicals, construction equipment, furniture, paper, steel and toys. More recently, WTO Members concluded the Information Technology Agreement and some are negotiating an agreement on environmental goods.

The Chemical Tariff Harmonization Agreement (CTHA), which provided for tariff liberalization and harmonization in the Uruguay Round and has since been used as a standard for countries acceding to the WTO, is a good example of a successful plurilateral sectoral tariff initiative. It could be used by its signatories and the other leading chemical producing and trading countries as a basis for the complete liberalization of tariffs on trade in chemicals.

Plurilateral sectoral tariff agreements have a number of benefits. They are easier to negotiate than global agreements, particularly if supported by the industry, because THEY ARE narrower in scope.

Key benefits of sectoral tariff initiatives
Plurilateral sectoral tariff agreements have a number of benefits. They are easier to negotiate than global agreements, particularly if supported by the industry, because they are narrower in scope. Also, they can be implemented rapidly and not delayed by the “single undertaking” approach of the DDA. Furthermore, these agreements are, by definition, concluded only by interested countries. However, they must be concluded by countries that account for a “critical mass” of world trade to be operational.

From a business perspective, plurilateral sectoral tariff agreements result in a significant reduction in trade barriers and support the emergence of global value chains. These agreements also facilitate the participation of small and medium enterprises, including from least developed and developing countries, in world trade by promoting competition with the dismantling of barriers on key industrial inputs.

How can the business support sectoral tariff initiatives?
As in all trade negotiations, industries must be the driver for change. They must call on their governments to rapidly initiate plurilateral tariff negotiations in sectors where further liberalization can be achieved and would result in significant cost reductions. At a time where economic recovery remains weak and uneven and the DDA is stalled, the business community must actively engage to help restore conditions for sustainable economic development.

Jamal J. Malaikah is President and Chief Operating Officer (COO) of National Petrochemical Industrial Company (NATPET) since 2008. Previously, he was a Managing Director of Copak, Egypt and a Senior General Manager of Saudi Carton Company. He held senior positions in several projects at Xenel Industries Limited, Saudi Arabia. Jamal is a member of the Boards of Directors Memberships of Al Ahli Takaful

Company (ATC), Public Insurance Company in Saudi Arabia. He is also a member of the Petrochemical Manufacturers Committee (PMC), Saudi Arabia and a member of Turkey’s B20 Trade Taskforce having previously been a member of Australia’s B20 Trade taskforce.

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