Letter to DfID SoS re NAMA negotiations at WTO

Douglas Alexander MP
Secretary of State
Department for International Development
1 Palace Street
London
SW1E 5HE

our ref DFID-NAMA6.7.07

date: 06 July 2007

contact: Sam Gurney

direct line: 0207 467 1395

email: sgurney@tuc.org.uk

Dear Douglas

Non-Agricultural Market Access (NAMA) negotiations at the WTO

I am writing to you with regard to the ongoing negotiations on NAMA and in particular the negotiations on draft modalities that are currently under preparation with an aim to finalise modalities in NAMA by the end of July this year.

We are extremely concerned that these tend to focus on ambitious market access objectives and far-reaching tariff liberalisation, without taking developmental, employment and workers' rights concerns into account. Our concerns are shared with the other organisations affiliated to the International Trade Union Confederation (ITUC) which unites 304 trade union centres from 153 countries, representing 168 million workers, and to which the Trades Union Congress) is affiliated. A resolution with respect to NAMA and the Doha negotiations was adopted at the recent ITUC General Council meeting (Brussels, 20-22 June 2007) and is attached to this letter.

Paragraph 16 of the Doha Ministerial Declaration states clearly that 'the negotiations shall take fully into account the special needs and interests of developing and least developed country participants.' However, this fundamental principle stands to be flouted as negotiations are taking place on the basis of a Swiss formula, an approach that will result in a disproportionately steep level of tariff reductions by developing countries. In fact, a Swiss formula with a coefficient of 10 for developed countries and a coefficient of 15 for developing countries - as it appears the EU and other major industrialised countries would like - will lead to reductions in tariffs of between 60 and 70 per cent in developing countries compared to 20-25 per cent in developed countries. Similarly, the proposal by Chile and

others for a coefficient of around 20 in developing countries will lead to tariff reductions in the order of 60 per cent on average, which is still very high. Moreover the level of trade liberalisation aimed for in the NAMA negotiations is extremely high compared to the Agriculture negotiations, especially when considering the level of its potential impact on employment and adjustment in developing countries. This is not in conformity with the criteria upheld in the Doha Declaration of 'less than full reciprocity' with regard to the levels of tariff reductions expected of developing countries relative to industrialised countries. Nor is it in conformity with paragraph 24 of the Hong Kong Ministerial Declaration, which requires similar levels of ambition in both areas. We therefore consider that the negotiations should not be concluded on the basis of the current proposals.

Despite those developmental concerns being raised in the negotiations, there continues to be pressure for a coefficient of 15 for developing countries. This would lead to deep cuts in applied tariff rates in developing countries that would severely harm developing countries' local industries, their balance of payments, and their tariff revenue, all of which are crucial elements in development and poverty reduction strategies. Many developing countries face a serious unemployment and underemployment challenge at the present time. Taking away the instruments that enable them to create and maintain productive employment is likely to result in deindustrialisation and increased informalisation and poverty. An increase in exploitation of workers both generally and in export processing zones, as governments seek to compete on the basis of worsening labour standards in order to decrease their export costs, is a further probable outcome.

In light of the above, we call upon the government to work with the EU and:

Not adopt or promote a NAMA package such as that presently under negotiation, but ensure that developing countries can apply a tariff reduction that is in line with their stage of development, in conformity with the agreed principle of less than full reciprocity, and which should be substantially lower than the cuts undertaken by developed countries and the proposals for tariff cuts currently on the table.

Ensure that developing countries' 'paragraph 8' flexibilities, as currently set out in the July 2004 framework, are expanded substantially. The flexibilities should allow for both the exemption of tariff lines and lesser tariff cuts for a number of tariff lines. Developing countries should not have to choose between these two options. At the same time, these percentages should be increased to a percentage considerably higher than the current levels in brackets, and criteria with regard to import value should be dropped. This would assist developing countries in managing the adjustment of sensitive sectors and preventing the social disruption caused by job losses and closure of enterprises that would result from further liberalisation. The flexibilities should also allow for changes over time in the tariff lines selected under paragraph 8, so as to respond to future industrial development needs.

Support offers of greater market access in Agriculture by industrialised countries, which should not be linked with NAMA. The benefits from market access in agriculture are likely to flow to a few countries only, and are likely to benefit capital intensive agriculture. Industrial development and jobs in manufacturing in developing countries should not be exchanged against these. Even in countries that benefit from market access in agriculture, it is not appropriate to have a trade-off between future industrial growth and agriculture.

Not to get rushed into an agreement that compromises development. At this stage of the negotiations there is likely to be a push for trade-offs and compromises. But we ask the government not to pressure or be pressured to sign a deal that will not benefit working people by boosting development in developing countries. Only a balanced agreement will show its value in the long term.

The current push for high and disproportionate tariff cuts for developing countries stands to have a most negative effect on the employment, conditions and rights of working men and women in most developing countries, and a serious impact on development strategies and efforts to attain the Millennium Development Goals (MDGs). We therefore ask you to consider the impact of the current formula proposals seriously, and will not pursue the NAMA negotiations on the current basis aimed at maximising market access, but in a way that will contribute to and not undermine the sustainable development needs of developing countries.

We look forward to receiving your views.

Yours sincerely

Brendan Barber

General Secretary

CC John Hutton MP, Secretary of State, BERR

Gareth Thomas MP, Under Secretary of State, DfID