US Tariff Plan Raises Concern at WTO

The ambitious proposal by the US to eliminate all import tariffs on industrial products by 2015 yesterday received a cautious response from developing countries at the World Trade Organization. However, some of them said the proposal would 'destabilise' their main source for revenue.

In a preliminary response, Indian ambassador K M Chandrasekhar told WTO members that while the US proposal is radical and useful, developing countries cannot 'destabilise' the structure of their revenue base. Thus countries like India cannot agree to a complete elimination of tariffs.

The US ambassador, Linnet F Deily, tabled the five-page proposal to the negotiating body on non-market agricultural access that is currently debating what 'framework' that members should adopt for cutting tariffs during the Doha trade liberalisation talks.

WTO members are required to first agree on what are called negotiating modalities by end-May 2003, which would become the basis for tariff cuts for the 145 WTO members. Earlier, New Zealand, Japan, the European Union, and Singapore had also presented 'ambitious' proposals to cut tariffs on industrial products.

Eliminating tariffs on all industrial products, according to the World Bank, would offer US$300 billion worth of market access for middle and low-income developing countries. The US wants a two-step approach to cut import tariffs in various countries to zero by 2015. During the first phase, the US said members must agree on cutting tariffs to zero by 2010 on all industrial products in countries where they currently stand at 5 per cent.

Second, the US proposed that by 2010, members should eliminate tariffs in sectors such as information technology and sale of civil aircraft. Besides, the WTO members are urged to eliminate tariffs in sectors such as wood products, non-ferrous metals, bicycle parts, certain chemicals and allied products, including soda ash, photographic film, electronics, fish and fishery products, and scientific products. Developing countries would benefit most from these tariff cuts as they have '70 per cent of remaining tariff barriers' among them, the US ambassador said.

Significantly, the US is willing to eliminate tariffs on textiles and apparels, footwear, and glassware - sectors that are considered 'sensitive' in the American economy because of their huge lobbying influence in the US Congress. So far, there is great convergence on tariff-elimination proposals by the industrialised countries such as Japan, the European Union, New Zealand, Singapore, and others, but these proposals are 'oblivious' to the development and fiscal needs of poor countries in Africa and Asia, analysts said.

A South-east Asian developing country trade envoy said he is concerned with the US proposal because of 'its glaring absence of special flexibilities for developing countries with different levels of economic development'.

'While it is easy for industrialised countries to bring down their tariffs from the current average of some 7 per cent, it would place more burden on developing countries whose average tariffs are well above 15 per cent,' the envoy said.