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Tuesday, 26 November, 2002, 18:01 GMT
US calls for tariff-free world
US Trade Representative Robert Zoellick met with Indonesian officials regarding bilateral trade and investment issues last Thursday.
US Trade Representative Zoellick pushed for the plan
The US government has called for the elimination of all tariffs on manufactured goods under World Trade Organisation (WTO) rules.

The plan would lead to the elimination of all tariffs on industrial and consumer goods by 2015 in an attempt to jump-start global trade talks.


Our proposal would turn every corner store in America into a duty-free shop for working families

Robert Zoellick,
US trade representative
The proposal, unveiled on Tuesday by US Trade Representative Robert Zoellick and Commerce Secretary Donald Evans, would eliminate tariffs on $6 trillion (3,870bn) worth of non-farm goods.

But some developing countries, like India and Brazil, are worried that the plans could put severe pressure on their own manufacturing sector, before it was ready to face the force of full global competition.

However, countries like China, who fear further restrictions on their fast-growing exports of textiles and clothing, may welcome the move.

Far-reaching plan

The plan includes a reduction of tariffs on non-agricultural products to a ceiling of 8% by 2010, then progressively cut to zero by 2015.

Existing tariffs of less than 5% would also be eliminated by no later than 2010.

A parallel scheme to cut tariffs in many industrial sectors - such as chemicals, paper, wood and construction equipment - would also be tabled.

The plan would not apply to agriculture, the main export of most developing countries.

Nor would it affect investment and intellectual property rights, the subject of difficuilt negotiations between rich and poor.

Family friendly

In announcing the scheme, Mr Zoellick said it would benefit American manufacturers as well as American consumers.

US plan
Maximum tariffs of 8% by 2010
Zero tariffs by 2015
Tariffs under 5% to zero by 2010
"Our proposal would turn every corner store in America into a duty-free shop for working families," Mr Zoellick said at a noon-time press conference in Washington.

"This historic proposal would benefit the average American family of four with an extra $1,600 a year, while removing high foreign tariff barriers on more than $670bn (432bn) in US industrial and consumer exports," he said.

Prior to Tuesday's announcement US Treasury Secretary Paul O'Neill said world economic output would increase by $2 trillion (1,300 billion) if all trade barriers were removed.

"There's a very important reason to do it, the whole world will be better for it," Mr O'Neill said.

Seeking higher ground

The package is expected to be presented to the 144 members of the WTO in Geneva, as discussions continue following last year's Doha meeting in Qatar.

WTO members are in the midst of talks aimed at lowering global trade barriers.

The talks have stalled amid increasing signs of trade tension between the US and the rest of the world.

The US has imposed high tariffs on imported steel and passed legislation increasing subsidies to its farmers - both of which have angered developing countries.

Many analysts think the new proposal is designed to recapture the moral high ground, after a year in which the US commitment to free trade has come under question.

Deep cuts

However, some developing countries may have difficulties with the plans, especially in relation to their manufacturing sector.

Developing countries tend to have higher tariffs on manufacturing goods, so it will be easier for the US to meet the proposals than for poorer countries.

Rahul Bajaj, head of the Indian conglomerate Bajaj Group, criticised the US proposals, claiming they do not include agricultural products.

"There is no question of moving forward , if you move forward in a direction that suits you, " Mr Bajaj told the BBC's World Business Report.

"They seem to be looking after their own interests.....without being concerned about other countries."

The timing and speed of the cuts could also pose a threat to the so-called "infant industries" in countries like Brazil and India, which have flourished behind tariff barriers.

The Brazilian car market, for example, would be thrown open to international competition.

But the US will vow to cut its high tariffs on textiles and clothing, an area of particular concern for developing countries.

Bold plan

Recently US manufacturers have begun lobbying for further restrictions on the import of clothing from China, despite the formal expiry of all quotas and tariffs on textile and clothing on 1 January, 2005.

Poorer countries are also pressing for access to wealthy-nation markets for their agricultural products, but these are not included in Tuesday's proposals.

The US, however, has already proposed the elimination of agricultural subsidies - an idea certain to be opposed by the European Union and Japan.

The plan may allay fears that the US is planning to abandon the WTO to work for mainly regional and bilateral trade agreements.

It already has a plan to create a Free Trade Area of the Americas, stretching from Alaska to Chile, which would rival the EU in size and scale.

 WATCH/LISTEN
 ON THIS STORY
The BBC's Stephen Evans
"The American plan is to cut tariffs on non-agricultural goods substantially"
Rahul Bajaj, Bajaj Group
"They must be magnanimous and sympathetic to the needs of developing countries"
Peter Sutherland, former WTO chief
"Any initiative to breathe new life into the Doha trade talks is a very good thing."

World trade talks

Farming

Steel wars

Other disputes

Regional trade deals

Background

FORUM
See also:

14 Nov 02 | Business
10 Nov 02 | Business
04 Nov 02 | Business
01 Nov 02 | Business
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