US Lifts WTO Round With Tariff-Reduction Proposal

by Mike Godfrey, Tax-News.com, New York

26 November 2002

In an attempt to rescue the struggling Doha Round of World Trade Organization tariff-reduction talks, which has appeared threatened by agricultural protectionism on the part of the EU and the US, and by an increasing tendency for trade deals to take place on a bilateral rather than multilateral basis, the US administration will today float a bold proposal to eliminate by 2015 all tariffs on manufactured goods among members.

Although many developed-country manufacturers will automatically support the new proposals, some industries will hate it; and it will be opposed by developing countries such as Russia, India and Brazil which use tariff walls to protect their fledgling industries from 'first world' manufacturers.

The US plan, authored by US Trade Representative Robert Zoellick and Commerce Secretary Donald Evans, calls for all duties on manufactured goods to be cut to 8% by 2010, and then for a gradual reduction to zero over the following five years. Duties on goods that now are set at 5% or less would be reduced to zero by 2010. On industrial machinery, for example, tariffs are 1.2% in the US and 1.8% in the European Union, but 35% in Argentina and 36% in India.

The textile sector would see major reductions in US tariff rates, currently averaging 17.5%, and this would be attractive for many developing countries such as India which have extensive textile manufacturing industries.

This is not the first attempt by the Bush administration to save the Doha talks, although its own protectionist packages on steel and agricultural subsidies have weakened its credibility. In July, Mr. Zoellick tried to reverse the damage done by the President's domestic agricultural support package by announcing that he would push to cut world-wide agricultural tariffs to 25% or less, from an average of 62% now, and to end export subsidies for farm products in five years.

If the US and, even more the EU, accompany the manufacturing proposals with meaningful progress on the agricultural front, then there is a chance that the WTO log-jam could be cleared. Unfortunately, asking the EU to reduce agricultural tariffs is like asking an alcoholic to give up the booze; just yesterday Brussels announced an increased agricultural support package for the ten countries due to join the Union in 2004, which will ensure their farmers' dependence on the addictive flow of subsidy which is so ruinous for undeveloped countries' agriculture.

Recommended