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NAMA negotiations in the WTO and preference erosion: concerns of Bangladesh and other regional LDCs

By Dr. Mustafizur Rahman and Wasel Bin Shadat

Abstract

The ongoing negotiations on non-agricultural market access (NAMA) in the WTO are expected to lead to substantive reductions in the tariff rates on industrial goods in both the developed and the developing countries. Although an agreement on the formula and coefficient(s) is yet to be reached, it is becoming increasingly clear that countries are moving towards a differentiated swiss-type formula with deeper cuts for higher tariffs. The July (2004) Framework Agreement stipulated that LDCs will not be required to undertake any tariff reduction commitments under the NAMA. However, LDCs are likely to suffer substantive tariff preference erosion as a consequence of NAMA negotiations since any tariff reduction by the developed countries will result in a fall in the preferential margins currently enjoyed by the LDCs under the various GSP schemes operated by the developed countries. Consequently, the competitive edge currently enjoyed by the LDCs by taking advantage of the preferential treatment under the various GSP schemes is set to suffer erosion. This is a major concern for Bangladesh and other LDCs in the Asia-Pacific region. This paper attempts to make an estimate about the range of preferential erosion for Bangladesh given her current trade pattern and preferential treatment enjoyed by her exports. The paper finds that for Bangladesh, the preferential erosion could be substantial (e.g. $42.1 million worth of net preference erosion in the EU alone for RMG products under one of the possible scenarios). Reduced preference margin will also undermine future competitiveness in the developed country markets. It is also to be noted that tariff reductions under NAMA will have positive implications for Bangladesh in the US market where most of Bangladesh’s industrial goods do not enjoy GSP treatment. Thus, tariff reduction under NAMA is expected to have diverse implications for Bangladesh’s export of industrial goods. NAMA, thus, may increase Bangladesh’s competitive edge vis-à-vis Caribbean and Sub-Sahara African countries which are currently enjoying zero-tariff access for apparels under the AGOA and the CBI. The paper reviews some of the proposals that are being discussed to address the possible negative consequences of preference erosion for the LDCs

Topics: HF, HB
Publisher: University of Warwick. Centre for the Study of Globalisation and Regionalisation
Year: 2006
OAI identifier: oai:wrap.warwick.ac.uk:1915

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Citations

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  2. (4-5) Value of preference (foregone tariff) received by
  3. (5-21) Reduction in tariff considering that export value remains same
  4. (5-9) Reduction in tariff considering that export value remains same (million US$)
  5. (8-9) Value of preference (foregone tariff) received by
  6. 5) is applied to current MFN tariff profile doi
  7. 8) applied to current MFN tariff profile doi
  8. Actual Import Duties on BD exports, if Simple Swiss Formula (with coefficient 0.3) is applied to current MFN tariff profile
  9. Import Duties on BD exports, if Simple Swiss Formula (with coefficient
  10. Import duties on BD exports, if there was no
  11. Import weighted average tariff for Bangladesh (%)
  12. of which Under doi
  13. Reduction in tariff considering that export value remains same
  14. (2004). The Impact of Preference Erosion on Middle-Income Developing Countries”. The IMF Working Paper. doi
  15. Value of preference (foregone tariff) received by

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