NAMA Negotiations in the WTO and Preference Erosion

The on-going negotiations on non-agricultural market access (NAMA) in the World Trade Organization (WTO) are expected to lead to substantive reductions in MFN tariff rates on industrial goods in both the developed and developing countries. Although the LDCs are not required to undertake any tariff reduction commitment under the Doha Round, they are likely to suffer substantive tariff preference erosion as a consequence of these negotiations since any reduction of MFN tariffs by the developed countries will result in a reduction in the preferential margins currently enjoyed by LDCs under the various GSP schemes operated by those developed countries. In this context this article undertakes the following: (a) reviews relevant literature dealing with the issue, (b) examines the importance of preference erosion for LDCs, and particularly for Bangladesh, (c) makes an attempt to estimate, under various scenarios, the range of preference erosion which Bangladesh is likely to suffer given her current trade pattern and the preferential treatment she currently enjoys as a beneficiary of the EU and US GSP schemes, and (d) presents a number of possible solutions to address the issue of preference erosion. In this context the article also reviews the WTO Ministerial Decision in Hong Kong as regards the duty free, quota free market access as articulated in Annex F of the Decision on S&D treatment for LDCs, and also subsequent developments with respect to NAMA negotiations in Geneva and examines their possible implications in terms of preference erosion for LDCs.