II. Issues:

The NAMA negotiations will address precise definitions and the means to address tariff peaks, high tariffs, and tariff escalation.  Moreover, the negotiations will have to provide for products of export interest to developing countries and require LTFR in their reduction commitments.  There will also be credit for autonomous liberalization measures by developing countries.

The proposed sectoral initiatives will also have to address product coverage and participation.  Meanwhile appropriate studies and capacity building measures have to be provided to the developing Members as well as account for the so-called tariff revenue dependency.

The NAMA also aims to address non-tariff barriers (NTBs) to trade.  Other measures like product coverage of the NAMA negotiations, the treatment of unbound tariff lines in relation to the formula, ad valorem equivalents of non-ad valorem tariffs, data availability, flexibility for developing countries in paragraph 8 in Annex B of the July Package, newly-acceded Members, elimination of low duties, non-reciprocal preferences and the question of "environmental goods" all have to be factored into the proposed formula for tariff reduction and/or elimination.

The formula currently evolves over two options, namely, the "Swiss Formula" or the "Girard Formula".  Both are designed to harmonize tariffs.  The "Swiss Formula" is as follows:  

            Where:      t1 is the final rate to be bound  
                            t0 is the base rate, and
                             "a" is the coefficient.

This is a non-linear formula dependent solely on the level of tariffs i.e., the higher the tariff, the higher the cut. Members defer on either having a single coefficient "a" or double coefficients to differentiate developed from developing country Members. 

The Girard Formula on the other hand provides: 

where:      t1 is the final rate to be bound in ad valorem terms
                   t0 is the base rate
               ta is the average of the base rates, and 
               β is the coefficient with a unique value to be determined by 
                  Members.

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III.  Status

To date, convergence is far from sight and significant gaps are beginning to be visible.
It may be likely that the 6th MC will be another holding ministerial.

IV.  Unofficial Policy Thinking and Suggestions 

The NAMA negotiations should take into full account Members like the Philippines which have low applied tariffs, and that have embarked on a unilateral tariff liberalization programme. The negotiations should result in reductions in tariff peaks, high tariffs, and tariff escalation in other countries while at the same time obtaining lower or no reduction commitments on bound tariffs, flexibility in treatment of unbound tariffs and longer time frames.

The Philippines should target developed country low or nuisance tariffs and achieve coefficient differentiation in any formula. If there is a sectoral approach, the Philippines should prefer that the process be voluntary and determined after the modality and/or formula for tariffs have been agreed upon.

The Philippines should indicate measures of tariff revenue dependency and prioritize its sensitive products. The Philippines should also work on the use of the unit value approach to convert non-ad valorem tariffs into ad valorem equivalents (AVEs).

Further the Philippines should determine what percentage of tariff lines should be kept unbound sufficient for policy needs as well as define a set of "environmental goods".

In the proposed formula the Philippines should work towards those with higher tariff averages being allowed lower coefficients and vice versa; and with the lowest coefficient applicable to developing countries being set at higher than coefficient of developed countries.

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