The U.S. July 2002 WTO proposal outlines an approach that brings all tariffs in all countries to similar levels, that is, by harmonizing tariffs at a substantially lower level than what is currently allowed. This objective is achieved by a specific formula – the Swiss 25.

The Swiss 25 formula is a mathematical equation, which results in higher tariffs being reduced more than lower tariffs, with no tariff being over 25 percent. This type of reduction pattern -- higher tariffs being reduced more than lower tariffs – is called harmonization and results in all tariffs being reduced to similar levels. The Swiss formula is not a new concept. It was used in the Tokyo Round for industrial products.

T₁ is the new tariff T_o is the current tariff

"a" is the coefficient to be applied each time. In our proposal, a = 25.

Example:

If the current tariff is 50 percent (T_o = 50): then, T₁ = (50 * 25) / (50 + 25) = 16.7; the new tariff will be 16.7 percent.

If the current tariff is 10 percent (T_o = 10): then, T₁ = (10 * 25) / (10 + 25) = 7.1; the new tariff will be 7.1 percent.

In this example, a 50-percent tariff is reduced to 16.7 percent, or a 67-percent reduction. The 10-percent tariff is reduced to 7.1 percent, or a 30-percent reduction. Here the higher tariff is reduced more that the lower tariff, while no tariff is over 25 percent. Furthermore, the resulting tariffs of 16.7 percent and 7.1 percent have only a 9-point disparity between them whereas the current tariffs of 50 percent and 10 percent have a 40-point disparity.

Main Page: U.S. Proposal for Global Agricultural Trade Reform

Background on the current round of WTO negotiations

Last modified: Friday, November 18, 2005