This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 05 GENEVA 002370 
 
SIPDIS 
 
PASS USTR FOR BROADBENT/BOVIM 
DOC PASS ITA/JACOBS, SJONES AND CMORROW 
 
E.O. 12958:  N/A 
TAGS: ETRD WTRO USTR
SUBJECT:  REPORT ON NON-AGRICULTURAL MARKET ACCESS 
NEGOTATIONS SEPTEMER 19-23, 2005 
 
 
SUMMARY 
 
¶1. The WTO Negotiating Group on Market Access (NAMA) met in 
Geneva from September 19-23, 2005 to continue work on the 
modalities for the reduction and/or elimination of tariff 
and non-tariff barriers (NTBs) affecting industrial goods, 
with the goal of determining the formula for tariff 
reductions and other key approaches to liberalization by no 
later than the Hong Kong Ministerial Meeting in December 
¶2005. 
 
¶2.  Discussions were substantive and focused.  Members 
discussed formula and sectoral tariff cuts as well as non- 
tariff barriers.  Though Argentina, Brazil, and India (the 
ABI countries) continued to push their own tariff proposal, 
support for this approach continues only among the 
Caribbeans and some African countries.  Members expect that 
the ABI countries will not abandon their proposal for 
strategic reasons related to the balance with agriculture 
and services results.  Mexico and Pakistan both presented in 
detail their formula proposals seeking to bridge the 
discussion between the two main options on the table: the 
dual-coefficient Swiss formula and the ABI formula (which 
makes use of the country's average tariff level as a primary 
coefficient). END SUMMARY 
 
FORMULA 
¶3.  NAMA Chair Stefan Johannesson asked Members to be 
prepared to address a cluster of issues in an integrated 
fashion: 1) the tariff cutting formula, 2) treatment for 
unbound lines, and 3) developing country flexibilities. 
Mexico presented its idea on how to operationalize the 
balance between ambition in the formula, Paragraph 8 
flexibilities, and the treatment of unbound lines. While a 
number of countries including the U.S and other friends of 
ambition spoke of clear linkages between the three items in 
the cluster, others (including India and Brazil) argued that 
flexibilities are not linked to the formula and should be 
treated outside of other issues.  Members also discussed 
Pakistan's formula proposal to use dual coefficients based 
on a simple Swiss formula. 
 
¶4.  The U.S. engaged Members in plenary sessions and 
bilateral meetings to clarify Member needs in all three 
areas and push for an ambitious outcome that properly 
balances all three components of the cluster of tariff 
related issues.  In bilateral's it became apparent that a 
number of developing countries (including China) are anxious 
to begin discussions on numbers that would be appropriate 
for the formula coefficient, but there is some hesitancy in 
linking the numbers on flexibilities to the coefficient 
discussion. Some Members continue to link progress in NAMA 
to progress in other negotiating areas, making it difficult 
to initiate detailed discussions on numbers in the absence 
of progress in those areas.  Brazil made an intervention 
that it will not be able to negotiate seriously in NAMA if 
it does not see equivalent movement and concessions from 
developed countries in Agriculture and on antidumping NAMA 
or other forums.  Argentina echoed this statement.  Brazil 
also called for reduced distance between the timing of 
negotiations in agriculture and NAMA. 
 
PAKISTAN'S PROPOSAL: 
 
¶5.  Pakistan's proposal uses the same structure supported by 
the U.S. (i.e., a Swiss formula with dual coefficients, one 
for developed and one for developing).  However, it proposes 
using the average bound non-agricultural tariff rates  (6 
for developed and 30 for developing countries) as the 
coefficients.  For unbound tariffs, Pakistan proposed a 30 
percentage point mark up of current applied rates before the 
application of the formula.  Member reactions seemed to fall 
into three camps: 1) Members supporting Pakistan in 
structure but not on the numbers (including the U.S., 
 ¶6. Canada, Australia, Hong Kong, EC, Turkey, Philippines 
and Korea, which believe 30 is too high, and the gap between 
developed and developing country coefficients is too wide to 
be able to achieve new market access; 2) Members that 
appreciated having real numbers to consider and like the 
high figure for developing countries; and 3) Members that 
did not like the structure or the numbers.  In informal 
consultations with the U.S., China confirmed that Pakistan 
sees its numbers as negotiable.  While there is one school 
of thought that thinks paragraph 8 flexibility is not 
negotiable, China thinks this viewpoint is too rigid. 
Mauritius raised concerns about the impact of the Pakistan 
proposal for a developed country coefficient of 6 on their 
preference margins in the US and EC markets.  South Africa, 
followed by a few other delegations, raised the notion of 
running different scenarios on the Pakistan formula proposal 
with different ranges of numbers. The U.S. indicated that 
while not opposed to looking at numbers in different ranges, 
the Pakistan numbers do not work for us, and that concerns 
remain over the Secretariat running these numbers for 
technical reasons. 
 
MEXICO'S PROPOSAL: 
 
¶7.  Mexico gave a comprehensive presentation on its 
proposal, which mathematically integrates formula, 
flexibility, and treatment of unbound lines.  While based on 
the concept of a Swiss formula with dual coefficients, 
Mexico's proposal requires developing countries to apply a 
more ambitious coefficient, if they exercise Paragraph 8 
flexibilities (formula exemptions or less than formula cuts 
on a certain percentage of lines). A similar mechanism would 
apply for unbound lines whereby developing countries would 
be allowed to depart from the Mexican rational approach for 
unbound lines on a limited subset of lines in return for 
applying a lower markup on the remaining unbound lines. 
 
¶8.  The complexity of Mexico's proposal elicited numerous 
questions and comments from Members.  A number of Members 
spoke out against the concept of what they viewed as a 
"trade-off" between the formula coefficient and use of 
flexibility.  Members including India, Brazil, Argentina, 
Malaysia, Thailand, El Salvador, and Barbados argued that 
developing countries should not have to pay for using 
flexibility by applying a more ambitious formula cut.  Other 
developing countries, including Chile, Costa Rica, South 
Africa and Uruguay supported Mexico's concept because it 
gives Members choices on flexibility, and/or credit for not 
using paragraph 8 flexibility. 
 
 
CHINA BILATERAL 
 
¶9.  In a separate meeting with the U.S., China said it does 
not endorse adding additional flexibilities to the text 
because it could open the door for even more options and 
limit their market access in developing country markets. 
China promised to talk about results of an evaluation it is 
conducting on specific industry needs for paragraph 8 
flexibility at the next session. 
 
EGYPT BILATERAL 
 
 
¶10.  The U.S. delegation also met with Egypt to resolve 
confusion over their position on the structure and ambition 
of the tariff-cutting formula.  In response to the U.S. 
request for clarification, the Egyptian representative 
stated that they have no preference regarding formula 
structure and that their position will be driven by the 
coefficient that determines the depth of tariff cuts.  They 
also stated their discomfort with the link between the 
formula and flexibility. The U.S. asked how much comfort 
Egypt expects from the flexibility already provided by 
paragraph 8 and for details on what paragraph 8 does not 
provide.  Egypt was reluctant to get specific on the level 
of coefficient they would be willing to undertake, however 
their `interest' in the ABI proposal suggests that their 
number hovers around 30.  Egypt's sensitivities in the 
textiles sector seem to be driving their lack of ambition in 
the formula, and they also seemed reluctant to pursue a 
`sectoral approach' on textiles outside of the formula given 
Cairo's impression that a sectoral agreement would be more 
ambitious than the formula. 
 
TRINIDAD AND TOBAGO BILATERAL 
 
¶11.  The US delegation also met with representatives from 
Trinidad and Tobago to exchange positions on the formula and 
flexibilities, as well as discuss CARICOM's July proposal 
for giving credit in the formula to small economies based on 
a number of `development' indicators.  Trinidad did indicate 
that revenue dependence was not a concern for them, but was 
a significant issue for other smaller CARICOM countries. 
The US delegation expressed concerns that many of the 
criteria identified in the CARICOM proposal were 
unquantifiable while others captured key US markets like 
Brazil and India.  Trinidad and Tobago did indicate that 
revenue dependence was not a concern for them, but for other 
smaller CARICOM countries.  On the formula, Trinidad and 
Tobago stated that the CARICOM position on the formula, i.e. 
their unwillingness to undertake any formula reductions that 
would cut into applied rates, had not changed. They would 
like to maintain sufficient `policy space' which would allow 
them to develop future industries (such as steel and cement) 
and did not see longer implementation periods as a mechanism 
to address this concern.  When pressed as to what formula 
coefficient would address their needs, they hinted at the 
ABI formula with a B coefficient of 4, or a Swiss 200.  On 
Paragraph 8, they indicated that they would use exceptions 
from the formula for those products bound at 70, but that 
the trade limitations currently in brackets in Annex B were 
not sufficient to cover their sensitivities. 
 
 
AD VALOREM EQUIVALENTS 
 
 
¶12.  The Chair briefed the plenary on the significant 
progress made during consultations on September 13 on how to 
calculate ad-valorem equivalents (AVEs), noting that Members 
seemed willing to use the agriculture method for calculating 
AVEs without filters.  The Secretariat then presented its 
guidelines on AVE calculations to the plenary.  The Chair 
said that Members might need to deviate from these 
guidelines, but would need to provide justification for 
these deviations.  The United States thanked the Secretariat 
for the guidelines and noted concerns on two technical 
issues: 1) the treatment of pooled tariff rate quotas and 
the need to calculate these at the tariff line level, and 2) 
how to calculate mixed duties. Argentina suggested these 
guidelines be used for both agriculture and non-agriculture 
products. (Note:  The Agriculture negotiating group has 
already agreed on its own guidelines, on which the NAMA 
approach is based.  NAMA rules are slightly simpler, 
reflecting the fact that there are no major differences 
between world market prices and domestic prices in 
industrial products.)  The Secretariat indicated it would be 
sending Members spreadsheets to be used for calculating and 
verifying AVEs. 
 
PRODUCT COVERAGE 
 
¶13.  The Chair introduced a revised paper on product 
coverage (JOB(05)/166) and noted that the Secretariat will 
be preparing a paper on how tariff lines with some 
agriculture components in sub-headings should be treated in 
the negotiations.  The United States stated that it would 
like a specific list of products rather than guidelines from 
the Secretariat. 
 
SECTORALS 
 
¶14.  Members continued their work in informal meetings on 
nine sectors, detailed below.  Developing countries continue 
to be involved in the discussions, with the most active 
participation coming from developing ASEAN members and 
Chinese Taipei.  Members participating in several sectoral 
initiatives have collaborated on formal papers that have 
been submitted to the larger negotiating group proposing 
tariff liberalization in specific sectors.  Two developing 
countries (Chinese Taipei and Thailand) have authored papers 
on sectoral liberalization that were submitted to the 
negotiating group during the week of September 19. 
 
¶15.  Electronics and Electrical Goods:  Japan hosted the 
meeting with the EC, Switzerland, Hong Kong, Canada, 
Malaysia, Japan, Mexico, Thailand, Korea, Indonesia, 
Australia, Chinese Taipei, Singapore, United States, and 
Kenya in attendance.  Japan circulated some additional data 
and ideas for product coverage that participants will use 
for consultation with industry and capital officials.  A 
number of developed countries have asked developing country 
participants for additional guidance on what type of 
flexibility and special and differential treatment 
provisions they may need.  Thailand indicated after the 
meeting that it would co-sponsor the paper submitted to the 
negotiating group in July by Japan, Korea, Singapore, and 
the United States. 
 
¶16.  Forest Products: Canada hosted the meeting with the EC, 
Singapore, Turkey, Norway, Switzerland, Turkey, Peru, 
Indonesia, South Africa, New Zealand, Chinese Taipei, 
Thailand, Hong Kong, Malaysia, and the United States in 
attendance. Canada circulated its draft paper, which 
proposes tariff liberalization on wood, paper, and printed 
materials as well as other products of export interest to 
participants.  Canada is seeking co-sponsors for its paper; 
thus far the United States and New Zealand have agreed to 
sign on. Canada's proposal highlights the growth potential 
in this sector for many developing countries. Some 
participants (Thailand and Chinese Taipei) inquired about 
the inclusion of wood furniture. 
 
¶17.  Drugs and Devices:  Switzerland hosted the meeting with 
Japan, Chinese Taipei, Israel, Thailand, Hong Kong, the 
United States and the EC in attendance. India and Brazil 
were invited but did not attend. The United States will 
circulate the list of products covered by the Uruguay Round 
medical equipment agreement for participants to comment on. 
Thailand, Japan, and Hong Kong will continue to consult with 
industry on areas of export interest in this sector. As few 
developing countries have attended the meetings, 
participants agreed to expand the invitation list to the 
following countries: Malaysia, the Philippines, Zambia (as a 
representative of the LDC group), Morocco, Kenya, Peru, 
South Africa, and Korea. An invitation will again be sent to 
India and Brazil. 
 
¶18.  Gems & Jewelry:  Thailand hosted a meeting with Japan, 
Israel, Switzerland, Norway, Australia, Korea, Turkey, EC, 
Peru, China, South Africa, Hong Kong, Chinese Taipei, 
Canada, Singapore, and the United States in attendance. 
Thailand circulated its proposal on tariff liberalization in 
the gems & jewelry sector, which proposes tariff elimination 
in precious stones, pearls, synthetic stones and precious 
metals. Thailand submitted its proposal to the larger 
negotiating group with three co-sponsors:  Singapore, Hong 
Kong, and the United States. 
 
¶19.  Bicycles/Bicycle Parts and Sporting Goods:  Chinese 
Taipei hosted a combined meeting on these two sectors with 
Japan, Norway, Thailand, the United States, Canada, New 
Zealand, Australia, EC, and Hong Kong in attendance. 
Chinese Taipei circulated two separate papers on tariff 
liberalization in the sporting goods and bicycles sectors. 
Although, Chinese Taipei submitted these papers to the 
larger negotiating group, it continues to seek co-sponsors 
of its proposal.  For sporting goods, Chinese Taipei is 
recommending product coverage that includes recreational 
equipment, including skis, balls, rackets, and skates.  For 
bicycles, its paper proposes tariff liberalization on all 
bicycles and parts. 
 
¶20.  Chemicals:  The United States hosted a meeting with 
Japan, Chinese Taipei, Thailand, South Africa, Singapore, 
Switzerland, Norway, Hong Kong, EC, Korea, Australia, 
Turkey, Canada, Oman, the UAE, and Croatia in attendance. 
The meeting focused on products that could be liberalized in 
this initiative using the Uruguay Round Chemical Tariff 
Harmonization Agreement as a basis.  At present, the 
participants are interested in including a wide range of 
chemical products across the supply chain from basic organic 
and inorganic chemicals to more processed products such as 
plastics, soap, and fertilizers.  Japan is also interested 
in including some rubber products and will circulate 
potential additions to the list electronically. 
 
¶21.  Fish:  New Zealand hosted the meeting with Chile, 
Australia, Peru, Switzerland, Norway, Thailand, Canada, 
Singapore and the United States in attendance.  Norway is 
working on a draft paper on proposed liberalization in the 
fish and fish products sector for tariffs as well as non- 
tariff barriers.  The meeting focused on tariff 
liberalization; participants discussed broad product 
coverage in fish and fish products, end rates, 
implementation periods, and flexibility for developing 
countries.  Canada and Norway are interested in reducing 
tariffs to zero.  Thailand noted its interest in this sector 
but will need some flexibility for a few products. 
 
¶22.  Autos:  Japan hosted a meeting with Hong Kong, Korea, 
Canada, Malaysia, Singapore, Korea, Mexico and the United 
States in attendance.  Japan introduced its draft paper on 
tariff liberalization for autos, which included critical 
mass data and suggested product coverage of passenger 
vehicles.  Japan also reported on the activities of the 
Global Automotive Industry Dialogue (GAID), comprised of 
industry associations from Brazil, Canada, India, Japan, 
Korea and the United States.  The GAID will meet the week of 
October 10 in Geneva to discuss non-tariff barriers 
affecting the autos sector. 
 
 
NON-TARRIFF BARRIERS (NTBs) 
 
¶23.  NTB meetings this week were substantive and better 
attended than previously.  Several new informal papers on 
the "nature of the barrier" were circulated.  A common 
thread was discussion on how to move the process from the 
identification phase to the next level of actual problem 
solving.  The U.S. hosted two meetings to reach out to LDCs, 
certain developing countries, and small economies to get a 
better sense of their NTB concerns and how the U.S. might 
assist their efforts.  The United States also hosted an 
informal meeting on NTBs affecting the automotive industry. 
In separate bilaterals with EU and Japan after the auto 
meeting, the US delegation suggested that individual WTO 
Members take leadership to draft proposals to advance 
specific auto NTB issues.  Japan agreed to shepherd work on 
automotive customs issues that may be too industry specific 
to be taken up in the more general Trade Facilitation 
negotiations, and the EU agreed to take the lead on TBT 
issues affecting the auto industry.  India is considering 
our suggestion that it take the lead on intellectual 
property issues affecting the auto industry.  New Zealand, 
Korea, the EC, and Japan led informal NTB meetings on wood 
products electronics, export taxes and export restrictions, 
respectively.  At the electronics meeting, Korea distributed 
a report of the group's activities since its inception, and 
indicated that its plan to invite regional coordinators 
(e.g., for LDCs and Africa) to the October NAMA meeting.  In 
addition, Members focused on the case of NTBs resulting from 
the convergence of IT and non-IT products (such as LCD 
monitors) and the need to include industry input due to the 
highly technical nature of the discussion.  The US noted 
that it is developing a proposal to address regulatory 
barriers faced by the electronics industry and hoped to have 
this proposal ready to circulate later this fall. At the EC- 
hosted meeting on export taxes, the EC spoke of eliminating 
export taxes and, where elimination is not possible, 
imposing a cap.  Japan raised the issue of quantitative 
export restrictions on minerals and its view that current 
WTO disciplines do not provide guidance as to quantitative 
export restrictions (as they do for quantitative import 
restrictions).  In response to a U.S. question as to whether 
this proposal would cover the large number of dual-use items 
of proliferation concern that are subject to export 
restrictions, Japan affirmed that such controls were not 
part of the proposal.  Japan believes that a discussion 
should take place on how to balance the WTO agreement such 
that export and import restrictions are treated equally, 
both in a systemic manner as well as in the specific context 
of minerals. 
 
 
NEXT STEPS 
 
 
¶24.  The Chair set the next NAMA session for October 10-14 
and indicated that the short gap between sessions was 
necessary as we approach Hong Kong.  The Chair emphasized to 
delegations that with the Ministerial fast approaching, they 
should be prepared for continuous negotiations and the 
possibility of being called in for consultations on short 
notice.