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4.28.2007

DOHA Round Updates & Preferential Tariffs in Practice


The DOHA round of the World Trade Organization (WTO) negotiations intends to promote the opening of markets and promoting free trade. This April, the latest meeting failed to reach a conclusion.

Director-General Pascal Lamy of the World Trade Organization delivered a speech before the US Chamber of Commerce on April 23, 2007. Here are excerpts from his speech.

"Today we know that the Doha Development Round will not be concluded until and unless all these participants are ready to walk the extra mile and table additional contributions to the collective success of this multilateral enterprise. It is clear that the contributions will be linked to the degree of development and wealth of each participant, with the world poorest countries making the smallest contribution. It is also clear that no one will be asked to move first: countries will have to move in concert, like a big orchestra playing to the same tune.

For the moment, a group of major actors — the EU, US, Brazil, India — despite being politically committed to concluding this negotiation by around the end of this year, are somewhat paralysed by fear that any move in the negotiation by any one of them will be
pocketed by the others and will not lead to reciprocal moves. They are locked in a sort of “prisoner's dilemma”, as if the only concern of each individual player would be maximizing his/her own payoff, without any concern for the other player's payoff. It is as if the cooperation, essential to the multilateral trading system, was dominated by withdrawing, so that the only possible balance for the game would be for all players to withdraw." Read the complete speech here.

The speech reminded me of the Asean Free Trade Area (AFTA) initiatives, wherein members of the Association of South East Asian Nations (ASEAN) were supposed to give preferential tariffs to one another.

Working for an international trading company, an encounter with the AFTA wasn't my finest hour. By 1995, the Philippines was abiding with the terms of the agreement. Because of that, I was able to convince clients to buy ASEAN products despite its higher prices (compared to goods coming from elsewhere). My selling point was the lower landed costs that will be incurred by the clients due to the preferential tariff rates. Such a selling point sold a lot of AFTA goods but disaster struck when 1996 showed up in the calendar.

As soon as my first shipment for the year arrived at the port, a client who bought hundreds of tons of high valued special steel products called to complain that they were being charged tariffs higher than what I told them. Confidently, I quoted the book on special tariffs that stated the lower rates that are supposed to be enjoyed by products coming from members of the AFTA.

The shocker came when the customs officers informed us that they have decided to revert the tariff rates back to the original since other AFTA members were not abiding by the agreement. At that time, some of the goods were being levied as high as 40% compared to the supposedly 3% that were to be enjoyed by the AFTA members. Needless to say, there were all of a sudden, a lot of angry importers. They closed their deals when the rate was supposedly 3%. But when the goods came in, the tariffs that were actually charged to them was much higher. So much for AFTA.


A short research showed that the program (AFTA) still exists. In fact, the tariff rates are supposed to be zero by this year (click here). Vamos a Ver!

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