WTO E-Learning. WTO E-Learning Copyright July Trade and Development

Transcription

1 WTO E-Learning WTO E-Learning Copyright July 2012 Trade and Development

2

3 Preface In 2008, the WTO initiated a reform of its technical assistance activities to establish more coherent products, which would better respond to the specific needs of the beneficiaries of trade-related technical assistance. The current "progressive learning" training strategy, rests on a gradual and incremental learning path, taking beneficiaries through the basic principles of the WTO to the more complex issues related to WTO Agreements. Trade related development issues have always been at the heart of much of the work of the WTO. These were given even more prominence with the launch of the Doha Development Agenda in This internet-based training complements the WTO's progressive learning strategy and will help to increase the knowledge of the developmental aspects of the multilateral trading system. The training module covers important issues ranging from the complex relation between trade and development, and the contribution of the WTO to achieving the MDGs, to looking at how developing countries and LDCs participate in world trade. The module also looks in detail at the evolution of special and differential treatment in GATT and WTO and the present status of the work programme on S&D launched at Doha, as also on the working group on trade and transfer of technology. It also presents the work that is currently being done in the Committee on Trade and Development, under the work programme for small economies and the LDC work programme. Finally it also covers the very important initiative on Aid for Trade, which seeks to complement market access openings with appropriate assistance for building supply side capacity and trade related infrastructure. This training module thus offers a broad and comprehensive perspective on trade and development issues in the WTO. I would like to thank my colleagues of the Development Division and of the E-Learning Unit of the WTO Institute for Training and Technical Cooperation for having contributed to the development of this flagship product. Shishir PRIYADARSHI Director Development Division

4

5 Table of Contents MODULE 0: COURSE GUIDE... 1 I. INTRODUCTION... 3 II. COURSE ORGANIZATION... 4 II.A. OBJECTIVES... 4 II.B. STRUCTURE AND DURATION OF THE COURSE... 4 II.C. WHO IS WHO?... 6 II.D. EVALUATION AND CERTIFICATE... 6 III. E-LEARNING WEBSITE... 7 III.A. TRAINING MATERIALS... 7 III.B. INTERACTIVE TOOLS... 8 IV. USER AGREEMENT... 9 MODULE 1: THE WTO AND THE MULTILATERAL TRADING SYSTEM I. INTRODUCTION TO THE WTO I.A. WHAT IS ''WTO''? I.B. GATT AND WTO I.C. OBJECTIVES OF THE WTO I.D. FUNCTIONS OF THE WTO I.E. WTO ORGANIZATIONAL STRUCTURE I.F. DECISION-MAKING AT THE WTO II. OVERVIEW OF THE WTO AGREEMENTS III. BASIC PRINCIPLES OF THE WTO IV. ACCESSION OF NEW MEMBERS V. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT AGENDA MODULE 2: INTRODUCTION TO TRADE AND DEVELOPMENT I. TRADE AND DEVELOPMENT I.A. HOW TO MAKE TRADE WORK FOR DEVELOPMENT? I.B. BASIC ISSUES REGARDING DEVELOPMENT IN THE WTO II. THE WTO AND ACHIEVING THE MDGS II.A. THE DOHA ROUND II.B. THE AID-FOR-TRADE INITIATIVE II.C. WTO'S CONTRIBUTION TO OTHER MDGS II.D. CONCLUSIONS AND THE DEVELOPMENT AGENDA BEYOND

6 III. PARTICIPATION OF DEVELOPING COUNTRIES AND LDCS IN THE MULTILATERAL TRADE SYSTEM III.A. RECENT TRADE DEVELOPMENTS FOR DEVELOPING COUNTRIES III.B. RECENT TRADE DEVELOPMENTS FOR LDCS MODULE 3: SPECIAL AND DIFFERENTIAL TREATMENT I. INTRODUCTION II. EVOLUTION OF S&D II.A. S&D IN THE GATT II.B. S&D IN THE URUGUAY ROUND AGREEMENTS II.C. S&D TREATMENT IN THE WTO AGREEMENTS III. SOME CONCERNS WITH S&D IV. WORK PROGRAMME ON S&D V. S&D PROVISIONS RESULTING FROM THE 8TH WTO MINISTERIAL CONFERENCE V.A. ACCESSIONS V.B. SERVICES V.C. INTELLECTUAL PROPERTY: VI. FUTURE OF S&D IN THE WTO MODULE 4: THE WORK OF THE CTD I. INTRODUCTION II. THE WORK OF THE COMMITTEE ON TRADE AND DEVELOPMENT (CTD) SOME EXAMPLES.. 82 II.A. CONSIDERATION OF NOTIFICATIONS UNDER THE ENABLING CLAUSE II.B. DEVELOPMENTAL ASPECTS OF THE DOHA ROUND II.C. COMMODITIES II.D. HONG KONG MINISTERIAL DECISION ON DUTY-FREE AND QUOTA-FREE MARKET ACCESS FOR LDCS II.E. TECHNICAL ASSISTANCE MODULE 5: THE LEAST-DEVELOPED COUNTRIES AND THE WTO I. INTRODUCTION II. SPECIAL STATUS OF LDCS IN THE WTO III. IMPLEMENTATION OF THE WTO WORK PROGRAMME FOR THE LDCS IV. SPECIAL STUDIES/REPORTS UNDERTAKEN TO ENHANCE THE UNDERSTANDING OF LDCS AND TO ADVANCE ISSUES OF INTEREST TO LDCS IN THE WTO V. THE DOHA DEVELOPMENT AGENDA AND THE LDCS VI. LDCS AND TRIPS MODULE 6: THE WORK PROGRAMME ON SMALL ECONOMIES (WPSVES) I. GENESIS OF THE WPSVE

7 II. THE DOHA MANDATE AND THE CTD IN DEDICATED SESSION III. THE SVES CHARACTERISTICS AND PROBLEMS IV. THE HONG KONG MINISTERIAL DECLARATION V. PROPOSALS AND DECISIONS IN THE CTD-DS VI. DECISION ON THE EXTENSION OF CERTAIN EXPORT SUBSIDIES VII. PROPOSALS AND TREATMENT OF THE SVES IN THE NEGOTIATING BODIES VII.A. AGRICULTURE VII.B. NAMA VII.C. RULES FISHERIES SUBSIDIES VII.D. SERVICES VII.E. TRADE AND ENVIRONMENT VII.F. TRADE FACILITATION VIII. THE WPSE AND MC IX. IMPLICATIONS AND FUTURE OF THE WPSE MODULE 7: TRADE AND TRANSFER OF TECHNOLOGY I. INTRODUCTION I.A. TRANSFER OF TECHNOLOGY AND THE WTO I.B. PROVISIONS RELATING TO TRADE AND TRANSFER OF TECHNOLOGY IN THE WTO AGREEMENTS I.C. WORKING GROUP ON TRADE AND TRANSFER OF TECHNOLOGY (WGTTT) MODULE 8: AID FOR TRADE I. BACKGROUND I.A. HONG KONG MINISTERIAL CONFERENCE I.B. AID FOR TRADE TASK FORCE II. GUIDING PRINCIPLES III. IMPLEMENTATION IV. MONITORING AND EVALUATION FRAMEWORK V. GLOBAL REVIEWS OF AID FOR TRADE VI. RESULTS VI.A. MOBILIZATION OF RESOURCES VI.B. IMPROVING COHERENCE BETWEEN TRADE AND DEVELOPMENT POLICY VI.C. SUPPORTING REGIONAL PROCESSES OF TRADE INTEGRATION VI.D. ENGAGING THE PRIVATE SECTOR VI.E. SHOWING RESULTS AND EVALUATING EFFECTIVENESS VII. AID-FOR-TRADE WORK PROGRAMME

8 MODULE 9: WTO TECHNICAL ASSISTANCE AND TRAINING I. WTO TECHNICAL ASSISTANCE AND TRAINING I.A. WHO BENEFITS FROM WTO TECHNICAL ASISSTANCE AND TRAINING? I.B. THE TECHNICAL ASSISTANCE AND TRAINING PLAN I.C. THE PROGRESSIVE LEARNING STRATEGY (PLS) I.D. TECHNICAL ASSISTANCE ACTIVITIES AND TRAINING PROGRAMMES I.E. TECHNICAL ASSISTANCE ACTIVITES AND LCDS MODULE 10: CONCLUSION - THE FUTURE OF DEVELOPMENT IN THE MULTILATERAL TRADING SYSTEM

9 List of Figures MODULE 1: THE WTO AND THE MULTILATERAL TRADING SYSTEM Figure 1: Organizational Structure of the WTO MODULE 2: INTRODUCTION TO TRADE AND DEVELOPMENT Figure 1: Figure 2: World, developed and developing economies quarterly merchandise trade, World and developing economies' trade in goods and commercial services, Figure 3: Share of developing economies in world trade, MODULE 8: AID FOR TRADE Figure 1: Regional and sectoral distribution of Aid for Trade Figure 2: Impacts reported in Aid for Trade case stories MODULE 9: WTO TECHNICAL ASSISTANCE AND TRAINING Figure 1: WTO Progressive Training Paths

10

11 List of Tables MODULE 1: THE WTO AND THE MULTILATERAL TRADING SYSTEM Table 1: The WTO Agreements MODULE 2: INTRODUCTION TO TRADE AND DEVELOPMENT Table 1: Developing economies' trade in goods and commercial services between 2000 and 2010: Asian economies lead the expansion Table 2: Tariff treatment on merchandises imported by selected developing countries, 2005 and 2009 (percentages)... 47

12

13 MODULE 0 Course Guide ESTIMATED TIME: ½ hour CONTENT Organization of your course; main functions of the E-Learning platform; and, the User Agreement 1

14

15 I. INTRODUCTION Welcome to the course "Trade and Development"! This Course Guide is envisaged to give you an overview of the organization of your course, as well as of the main functions of the E-Learning platform. At the end of the Course Guide, you will find the User Agreement, which was initially sent with your username and password. We advise you to print this Guide and have it readily available throughout the course. 3

16 II. COURSE ORGANIZATION II.A. OBJECTIVES After successfully completing the elements of the E-Learning course "Trade and Development" you will have: enhanced knowledge of the relationship between trade and development in the WTO; enhanced knowledge of the developmental aspects of the multilateral trading system (MTS); improved ability to find relevant WTO information and documents on issues related to trade and development, and to use the WTO legal texts and related background materials; and benefited from the establishment of a network of useful contacts between course participants and experts from the WTO Secretariat. To facilitate the achievement the objectives of the course, you will have access to training materials, background documents and the interactive tools of the E-Learning platform. WTO E-Learning courses are part of the WTO Progressive Learning Strategy (PLS). The primary aim of the PLS is to promote higher levels of learning, with a view to sustaining the human and institutional capacity of beneficiary countries to participate more effectively in the WTO. This course is a level 2 (intermediate level) course in the specialist path of the PLS. TO KNOW MORE The PLS is the progressive, multi modular sequencing of products aimed at improving the delivery of WTO technical assistance and training. To know more about the WTO PLS: To know more about WTO technical assistance and training, please refer to: II.B. STRUCTURE AND DURATION OF THE COURSE WTO E-Learning courses give you the flexibility to combine your training activities and professional responsibilities. Furthermore, you will be able to wholly benefit from interactive activities such as Chat Sessions with WTO Experts. WTO E-Learning is available for government officials. While the WTO E-Learning material is freely available on the WTO E-Learning website, you have to register and submit the nomination form in order to access the course exams and obtain a WTO certificate. Once your registration process is complete, a username and password will be sent to you by . Your access codes will be available for a two month period. In this period, you will have to complete AND submit all exams. During these two months a Trainer will be available to assist you with any questions you may have. 4

17 The estimated study time per course is hours. Therefore, the course requires around 2 hours of study per working day. Note You will have access to the E-Learning website during the duration of the course and your account will expire at 23:59 (Geneva time) of the last day. In order to finalise the course in a timely manner, you should submit the Final Exam before this deadline. Structure of the course Training materials The course is divided into 10 Modules. Each module contains training materials on a specific issue, including explanatory texts and examples, which take two forms: Illustrations: A simplified explanation of WTO provisions or theoretical points developed throughout the module. Case studies extracted from WTO jurisprudence, which show how WTO rules have been interpreted by the Dispute Settlement Body. Exercises Self-assessment exercises are available in each module. They allow you to measure your personal progress in the course. Your academic profile allows you track your progress, using graphs and charts. End-of-module Exams Please note that you may take the end-of-module exam only once and it will count towards your final average. Final Exam The final Exam is the exam at the end of the last module of your course. This exam covers all the issues addressed during the course. Take your time to complete and submit it, since you will only be able to do it once and it counts double in the calculation of your final average. 5

18 II.C. WHO IS WHO? During your course, you will have the opportunity to interact with colleagues from other WTO Members and Observers, as well as with WTO experts in the subject matter of the course and the E-Learning Unit. Who is who? Participants Government officials who are taking part in the course and have the potential to interact and build a network. Trainer Your Trainer is a WTO expert, who is available to guide you and respond to your queries on the academic content of the course. Feel free to contact your Trainer using the Internal Service, whenever you need some clarification. Help Desk The E-Learning Help Desk is ready to assist you on technical issues related to the functioning of the website. II.D. EVALUATION AND CERTIFICATE At the end of each module, you will have to complete and submit an exam. These exams contain multiple-choice questions addressing the substantive content, as well as case studies, of the pertinent Module. Should you have questions on the evaluation of your exams, please remember to first carefully read the reasoning for correct answer, which you will see together with your test results. The results of each exam will be taken into account for the calculation of your final average. After completing the last module, you will find the Final Exam, which counts double in the calculation of your final average. Note You may only take the end-of-module exams once and they count towards the calculation of your final average. Upon successful completion of the course, the WTO Institute for Training and Technical Cooperation will issue and send you a certificate, signed by the Director General, if you: reach a final average of at least 60% of correct answers; have more than 50% in each exam except in one. (This means: If the course has 5 Modules, you have to have 4 exams above 50%.); have taken part in the interactive activities (chat and/or forum). Participants with outstanding results (i.e. a final average above 90% and no exam below 50%) will receive a Certificate with Distinction. 6

19 III. E-LEARNING WEBSITE The E-Learning website has been designed for you and to foster an efficient training experience and allow you to interact with other participants and WTO experts. It contains the training materials for your course, as well as background documentation and interactive tools. You may take the Online Tutorial available on the website, to get familiar with the different functions and interactive tools. Note In order to login, you should always enter the username and password that were sent to you. III.A. TRAINING MATERIALS E-Learning offers comprehensive courses. Each module consist of the following elements: Training and theoretical materials on the WTO and its Agreements; Illustrations and examples; Case studies and exercises; Text of the WTO Agreements and Official Documents; Access to further information through hyperlinks or the module support documents; End-of-module exam. Furthermore, you will have access to the elibrary, which contains background documents (WTO Agreements, the Analytical Index of jurisprudence, Glossary of Trade Terms, Trade Policy Review Reports, List of WTO members and Information on WTO Negotiations), as well as useful links to complement your study. 7

20 III.B. INTERACTIVE TOOLS The E-Learning website offers interactive tools to foster the exchange among course participants, as well as between participants and WTO experts. Please refer to the Online Tutorial for more detailed information on: Interactive tools Internal Service: Your own E-Learning account! Use it to contact your Trainer, Help Desk, other participants... and build-up your network. News Forum: This is the place to discuss the latest WTO news of interest for you by exchanging comments and views with other participants and trainers. Chat Sessions: Chat Sessions with WTO Experts and Special Guests will be organized during the course. An invitation with the date and time will be sent to you. Important note Do not wait to fully benefit from the interactive features of the E-Learning website! Take the first step in contacting your Trainer and take the initiative in the process... talk about the most important trade issues for your country and region with colleagues and share your knowledge and experiences. 8

21 IV. USER AGREEMENT The use of the E-Learning platform, the training materials and interactive features is subject to the terms and conditions contained in the User Agreement. You have automatically agreed to the User Agreement by using the log-in details (username and password) that were sent to you. The User Agreement reads as follows: 1. The E-Learning platform is property of the World Trade Organization. It is managed by the E-Learning Unit of the Institute for Training and Technical Cooperation and its objective is to deliver online courses on the WTO and its Agreements, while taking full advantage of the internet and the latest multimedia technologies. 2. The User is a trade official from a developing country or economy in transition, nominated by his/her respective government. The User enjoys access to the E-Learning platform during the duration of the course, under the following terms and conditions: a. The WTO is the copyright holder of the content of the E-Learning platform. Training materials and other tools available online shall not be disseminated without prior written authorization from the WTO E-Learning Unit; b. During the course, the User may print the training materials and documents available on the E-Learning platform for his/her personal use only; c. Citations and references to the course materials available on the E-Learning platform shall fully acknowledge the source (i.e. WTO E-Learning course); d. Only authorized Users (i.e. participants, nominated by their governments, who have received a username and password) are entitled to use the E-Learning platform; e. The User is responsible for maintaining the confidentiality of the username and password to access the E-Learning platform. If you become aware of any unauthorized use of your account, you shall notify the E-Learning Unit (elearning@wto.org) immediately; f. The utilization of the E-Learning platform and its contents shall be exclusively in relation to the course that is being followed by the User; g. Communications through and the Discussion Forum may be monitored by the WTO to ensure civility and compliance with the User Agreement; h. If the User breaches the terms and conditions of this User Agreement, his/her right to access the E-Learning Platform will be revoked unilaterally by the WTO. 9

22

23 MODULE 1 The WTO and the Multilateral Trading System ESTIMATED TIME: 1 hour OBJECTIVES OF MODULE 1 To introduce: the objectives, functions and organizational structure of the WTO; the basic principles of the WTO; the WTO Agreement; and, the on-going Doha Round of negotiations. 11

24

25 I. INTRODUCTION TO THE WTO I.A. WHAT IS ''WTO''? IN BRIEF "WTO" is the acronym for World Trade Organization. The WTO is an intergovernmental organization which came into being in The WTO is the only international organization dealing with multilateral trade rules. At its heart are the WTO Agreements, which lay down rules the global for international trade. The WTO has almost a global membership. More than 150 governments are Members of the WTO. This section will explain that the WTO is many things, including: 1. An organization for trade liberalization 2. A forum for trade negotiations 3. A set of international trade rules 4. A place for settling trade disputes AN ORGANIZATION FOR TRADE LIBERALIZATION The WTO is an organization for progressively liberalizing trade. Trade liberalization is the main approach that WTO Members have adopted to promote economic growth and development. The purpose is to reduce trade barriers for the benefit of producers, exporters, importers and consumers. A FORUM FOR TRADE NEGOTIATIONS The WTO provides a multilateral forum for Member governments to negotiate rules of international trade. Negotiations in the WTO are conducted directly and exclusively by its Member governments. The WTO was born out of negotiations, and everything the WTO does is the result of negotiations among its Members. The WTO is, since 2001, hosting negotiations under the Doha Development Agenda. A SET OF INTERNATIONAL TRADE RULES International trade rules, concluded as a result of negotiations, are contained in the WTO Agreements. They are essentially contracts binding Members to keep their trade policies within agreed limits. The WTO Agreements lay down the legal ground rules for international commerce between WTO Members. They cover trade in goods, trade in services and trade-related aspects of intellectual property rights. 13

26 The WTO Agreements are based on a number of simple and fundamental principles: Non-discrimination: Members shall not discriminate between their trading partners (most-favoured nation principle); or between national and foreign like products, services or nationals (national treatment principle). More open trade: reducing or eliminating obstacles to trade. Transparency and predictability: traders and Members need to know what are the trade rules around the world (transparency) and that trade measures will not be raised arbitrarily (predictability). Special treatment for less developed Members: least developed Members face particular challenges when benefiting from trade liberalization and therefore, they have more time to adjust to the rules and other special rights. The WTO Agreements recognise that, in certain circumstances, Members may need to apply trade restrictions to meet certain policy objectives, such as the protection of human health or the environment. In those cases, Members are allowed to depart from the basic principles, but subject to specific conditions. A PLACE FOR SETTLING TRADE DISPUTES The WTO is also a place for settling trade disputes between its Members. The WTO's procedure for resolving trade disputes is vital for enforcing the rules and for contributing to the smooth conduct of world trade. WTO FACT FILE: Location: Geneva, Switzerland Established: 1 January 1995 Membership: 155 member governments (as of May 2012) Secretariat staff: Around 700 Official languages: English, French and Spanish I.B. GATT AND WTO IN BRIEF ''GATT'' is the acronym of General Agreement on Tariffs and Trade. While legally distinct from the GATT, you will see that the WTO and the GATT are interrelated. 14

27 The original GATT was concluded in It contained the rules and obligations that governed trade in goods for almost fifty years between its "Contracting Parties". Until the creation of the WTO in 1995, the GATT provided the legal framework for the bulk of world trade. The GATT 1947 is now part of the GATT The GATT developed rules for a multilateral trading system through eight "rounds" of trade negotiations. The early rounds dealt mainly with tariff reductions on goods, but later rounds included other areas. The last round under the purview of the GATT, which lasted from 1986 to 1994, is generally known as the "Uruguay Round" and extended negotiations from goods to services and trade-related aspects of intellectual property rights. The Uruguay Round negotiations also led to the creation of the World Trade Organization (WTO) in GATT ROUNDS OF TRADE NEGOTIATIONS Year Name Subjects Covered Parties 1947 Geneva Tariffs Annecy Tariffs Torquay Tariffs Geneva Tariffs Dillon Round Tariffs Kennedy Round Tariffs and anti-dumping measures. Section on trade and development Tokyo Round Tariffs and non-tariff measures, "framework" agreements. Enabling Clause (development) Uruguay Round Creation of WTO. Tariffs, non-tariff measures, rules, services, intellectual property, dispute settlement, textiles, agriculture, etc Participants in the Uruguay Round of multilateral trade negotiations concluded the Round by adopting the "Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations" ("the Final Act"). The Final Act includes the "Marrakesh Agreement Establishing the World Trade Organization" (the "Agreement Establishing the WTO") and its four Annexes (''the WTO Agreements''). The GATT 1994 is the WTO's Agreement containing the main rules for trade in goods. 15

28 I.C. OBJECTIVES OF THE WTO IN BRIEF In the Preamble to the Agreement Establishing the WTO, Members recognize certain objectives they wish to attain through the multilateral trading system: raise living standards; ensure full employment; ensure a large and steadily growing volume of real income and effective demand; and, expand the production of and trade in, goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development. The Agreement also recognizes the need for positive efforts to ensure that developing countries, and especially the least-developed among them, secure a share in the growth in international trade commensurate with the need of their economic development. The WTO recognizes the importance of continuity with the previous GATT system. Thus, the objectives of the WTO are not fundamentally different from those contained in the Preamble to the GATT However, it is worth noting that the WTO adds three new dimensions: Preamble to the Agreement Establishing the WTO - New Dimensions added to the Objectives of the GATT 1947 the expansion of "the production of and trade in goods and services". While the GATT 1947 covered only trade in goods, the WTO coverage was expanded to trade in services; the objective of sustainable development seeking both to protect and preserve the environment and to enhance the means for doing so ;" the "development dimension" aiming at helping " developing countries and especially the leastdeveloped among them secure a share in the growth in international trade commensurate with the needs of their economic development". Furthermore, it is noteworthy that although the objectives of the WTO do not mention trade liberalization explicitly, the drafters considered "substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international trade relations" as important steps to achieving the stated objectives. 16

29 I.D. FUNCTIONS OF THE WTO IN BRIEF According to Article III of the Agreement Establishing the WTO, the main functions of the WTO are to: administer the trade agreements between its Members; serve as a forum for trade negotiations; settle trade disputes; review Members' trade policies; cooperate with relevant international organizations; and, provide technical assistance (TA) to developing and least-developed Members. ADMINISTRATION OF THE WTO AGREEMENTS The first function of the WTO is to facilitate the implementation, administration and operation, as well as further the objectives of the WTO Agreements. The administration and monitoring of these Agreements is carried out by the different WTO Bodies and Councils, which consist of all WTO Members (explained below). FORUM FOR NEGOTIATIONS The WTO provides a permanent institutional forum for multilateral negotiation and cooperation on trade-related policies among its Members. Although the WTO is specifically charged with providing the forum for negotiations on matters already covered by the WTO Agreements, Members may decide, through negotiations, to extend the scope of multilateral trade rules to be disciplined by WTO Agreements. As mentioned above, the WTO is currently hosting negotiations under the Doha Development Agenda, which was launched in SETTLEMENT OF TRADE DISPUTES The WTO acts as a forum for the settlement of disputes between its Members in accordance with the disciplines and procedures elaborated in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). A dispute arises when a Member believes another Member is acting in a manner that is inconsistent with its WTO obligations. When Members are unable to reach a mutually agreed solution to a dispute arising under one of the Agreements covered by the DSU, they may have recourse to the dispute settlement procedure. 17

30 SURVEILLANCE OF NATIONAL TRADE POLICIES This function underscores the role of the WTO with regard to the Trade Policy Review Mechanism (TPRM). All WTO Members are subject to review under the TPRM, but the frequency of each Member s reviews varies according to its share of world trade. The regular surveillance of national trade policies through the TPRM provides a means of encouraging transparency both domestically and at the multilateral level. COORDINATION WITH RELEVANT INTERNATIONAL ORGANIZATIONS This function identifies the "coherence mandate" as one of the objectives of the WTO. Cooperation with the International Monetary Fund (IMF) and the World Bank, as well as their affiliated agencies, is essential and is an important factor that WTO Members need to consider when they enter into negotiations to design an international regulatory framework related to economic policy. Cooperation with other international organizations would allow the WTO to achieve ''greater coherence in global economic policymaking''. TECHNICAL ASSISTANCE (TA) At the Doha Ministerial Conference in November 2001, Members confirmed that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system (MTS). The delivery of WTO technical assistance shall be designed to assist beneficiary Members to adjust to WTO rules and disciplines, implement obligations and exercise the rights of membership, including drawing on the benefits of an open, rule-based MTS. I.E. WTO ORGANIZATIONAL STRUCTURE WTO Members established a working structure for the WTO to allow them to monitor the implementation of the Agreements and the development of the WTO. 18

31 Figure 1: Organizational Structure of the WTO I.E.1. THE MINISTERIAL CONFERENCE The Ministerial Conference is the topmost decision-making body in the WTO. It is composed by representatives of all the Members and shall meet at least once every two years. The Ministerial Conference may take decisions on all matters under all Multilateral Trade Agreements, in accordance with the decision-making procedures contained in the Agreement Establishing the WTO. The Doha Declaration, adopted during the Fourth Ministerial Conference, in Doha, Qatar, will be explained later on, while introducing the Doha Development Agenda (DDA). 19

32 I.E.2. THE GENERAL COUNCIL The General Council which constitutes the second tier in the decision-making structure of the WTO and is also formed by representatives from all Members, usually Ambassadors or Permanent Representatives, based in Geneva, who periodically elect a Chairperson to organise the work of the Council. It meets to adopt decisions, on behalf of the Ministerial Conference, when the Conference is not in session. The General Council also meets as: The Dispute Settlement Body (DSB), with a different Chairperson to administer the rules in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). The Trade Policy Review Body (TPRB,) with a different Chairperson, to carry out trade policy reviews as mandated by the Decision on the Trade Policy Review Mechanism. The Trade Negotiations Committee (TNC) The General Council has authority over the Trade Negotiations Committee (TNC), which is in charge of the negotiations mandated under the Doha Development Agenda (DDA). The TNC is chaired by the Director- General of the WTO. It was set up by the Doha Ministerial Declaration (paragraph 46), which assigned it to create subsidiary negotiating bodies to handle different subjects, including the Special Sessions of various Committees or Councils that have a mandate to negotiate. I.E.3. THE COUNCILS & SUBSIDIARY BODIES Three subsidiary councils Council for Trade in Goods, Council for Trade in Service and Council for Trade- Related Aspects of Intellectual Property Rights operate under the general guidance of the General Council and carry out the functions assigned to them by their respective agreements and by the General Council. As their names indicate, the three councils are responsible for the workings of the WTO Agreements dealing with their respective areas of trade. They consist of all WTO Members. The Goods and Services Councils also have subsidiary bodies, normally called ''Committees'' or ''Working Groups'' where work on specific subjects is conducted. The three subsidiary councils are (see also the organizational chart above): The Council for Trade in Goods (normally referred to as the ''Goods Council'' or CTG ) oversees all the issues related to the Agreements on trade in goods. The Goods Council has Committees working on specific subjects. The Council for Trade in Services (normally referred to as the ''GATS Council'') oversees all issues related to the GATS Agreement. The GATS Council has subsidiary bodies. The Council for Trade-Related Aspects of Intellectual Property Rights (normally referred to as the ''TRIPS Council'') oversees issues related to the TRIPS Agreement. 20

33 I.E.4. OTHER SUBSIDIARY BODIES Several other subsidiary bodies, which focus on specific issues, report to the General Council. The scope of their coverage is smaller, so they are "Committees" or ''Working Parties/Groups''. They cover issues such as trade and environment, trade and development, regional trading arrangements (RTAs) and accessions. They also consist of all WTO Members. I.E.5. THE WTO SECRETARIAT The Secretariat of the WTO (''the Secretariat'') is headed by a Director-General, appointed by the Ministerial Conference. Since decisions are taken by Members only, the Secretariat has no decision-making powers. The Secretariat is located in Geneva and has around 700 regular staff who are nationals from WTO Members and cannot seek or accept instructions from any government or any other authority external to the WTO in the discharge of their duties. Its main duties include to supply technical and professional support for the various councils and committees and to provide technical assistance for developing countries. The Secretariat also provides legal assistance in the dispute settlement process and advises governments wishing to become Members of the WTO. I.F. DECISION-MAKING AT THE WTO CONSENSUS The WTO continues GATT's tradition of making decisions by consensus, i.e. not by voting. Consensus is defined in footnote 1 to Article IX of the Agreement Establishing the WTO, which states that "the body concerned shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting when the decision is taken, formally, objects to the proposed decision". VOTING... IF CONSENSUS NOT REACHED Where consensus is not possible the WTO Agreements allow for voting. Article IX of the Agreement Establishing the WTO provides that "except as otherwise provided, where a decision cannot be arrived at by consensus, the matter at issue shall be decided by voting". Article IX of the Agreement Establishing the WTO states that at meetings of the Ministerial Conference and the General Council, each Member of the WTO shall have one vote 1. Decisions of the Ministerial Conference and 1 Where the European Communities exercise their right to vote, they shall have a number of votes equal to the number of their member States which are Members of the WTO. 21

34 the General Council shall be taken by a majority of the votes cast, unless otherwise provided in that Agreement or in the relevant Multilateral Trade Agreement. Formal and Informal Meetings Since generally decisions are made by consensus, without voting, informal consultations within the WTO play a vital role in bringing a diverse membership to an agreement. More difficult issues may be addressed in smaller groups. A common recent practice is for the chairperson of a negotiating group to attempt to forge a compromise by holding consultations with delegations individually, in twos or threes, or in groups of of the most interested delegations. These smaller meetings have to be handled with sensitivity. The key is to ensure that everyone is kept informed about what is going on (the process must be transparent ) even if they are not in a particular consultation or meeting, and that they have an opportunity to participate or provide input (it must be inclusive ). Informal consultations in various forms play a vital role in allowing consensus to be reached. At the end, decisions are taken by all members and by consensus. 22

35 II. OVERVIEW OF THE WTO AGREEMENTS The WTO Agreements are the result of the Uruguay Round of negotiations, signed at the Marrakesh Ministerial Meeting in April What are these Agreements? The WTO Agreements cover trade in goods, trade in services and trade-related aspects of intellectual property rights. They spell out the main principles of trade liberalizations and the permitted exceptions. The Agreements also include individual countries' commitments to lower customs duties and other trade barriers. Moreover, they provide a procedure for settling trade disputes among the Members, as well as special and differential treatment for developing and least-developed country Members. THE ''FINAL ACT'' The Final Act, signed in Marrakesh in 1994, could be seen as a cover note to all the WTO Agreements. THE MARRAKESH AGREEMENT ESTABLISHING THE WTO After the Final Act follows the Marrakesh Agreement Establishing the World Trade Organization (the Agreement Establishing the WTO), which serves as an umbrella agreement. The Agreement Establishing the WTO includes provisions on scope, functions and structure of the WTO. It defines the WTO relationship with other organizations, its Secretariat, budget and contributions, decision-making and amendment procedures. In also includes provisions on accessions. Many provisions of this Agreement were referred to earlier in this Module. THE ''ANNEXES'' The Agreement Establishing the WTO has four Annexes. Annexes 1, 2, and 3 are called "Multilateral Trade Agreements", while Annex 4 is called "Plurilateral Trade Agreements". While the Multilateral Trade Agreements apply to ALL the Members, the Plurilateral Trade Agreements apply only to those Members that agreed to be bound by them. Annex 1 is divided into three sections: Annex 1A (The Multilateral Agreements on Trade in Goods) Annex 1B (General Agreement on Trade in Services the GATS) Annex 1C (Agreement on Trade-related Aspects of Intellectual Property Rights the TRIPS) 2 It is worth noting that since 1994, negotiations have produced additional legal texts, such as the plurilateral Information Technology Agreement (ITA) and the Protocols of Accession of new Members. 23

36 Annex 2 includes the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Annex 3 contains the Trade Policy Review Mechanism (TPRM) Annex 4 contains the Plurilateral Trade Agreements The Multilateral Trade Agreements (Annexes 1, 2, 3) are applicable to all Members and as such are deemed a "single undertaking" (see below). ''SINGLE UNDERTAKING'' According to the ''single undertaking'' approach, adopted during the Uruguay Round, all Multilateral Trade Agreements concluded during a negotiation round shall be adopted as a whole (i.e. as a single package). As a result, these Agreements have binding effects on all WTO Members. The ''single undertaking'' approach is also being used in the current negotiations under the Doha Development Agenda (DDA). However, despite the single undertaking approach to most WTO Agreements, four plurilateral trade agreements were negotiated during the Uruguay Round. These agreements apply only to those Members who agreed to be bound by them: Agreement on Trade in Civil Aircraft, Agreement on Government Procurement, the International Dairy Agreement and the International Bovine Meat Agreement. The latter two were terminated at the end of IN A NUTSHELL: THE BASIC STRUCTURE OF THE WTO AGREEMENTS Umbrella MARRAKESH AGREEMENT ESTABLISHING THE WTO Goods (Annex 1A) Services (Annex 1B) Trade-Related Aspects of Intellectual Property Rights (Annex 1C) Multilateral Trade Agreements Basic Rules GATT GATS TRIPS Other Agreements/ Other goods Agreements Services Annexes Instruments and Annexes Market access commitments Members' Schedules of concessions Members' Schedules of commitments (and MFN exemptions) Dispute Settlement DISPUTE SETTLEMENT UNDERSTANDING ( Annex 2) Transparency TRADE POLICY REVIEW MECHANISM (Annex 3) Plurilateral commitments PLURILATERAL TRADE AGREEMENTS (Annex 4) Table 1: The WTO Agreements The GATT 1994 sets out the basic principles and disciplines on international trade in goods. The most important component of the GATT 1994 is the original GATT 1947 as rectified, amended or modified up to 1 24

37 January In addition, the GATT 1994 also contains other legal instruments, several Uruguay Round Understandings, and the Marrakesh Protocol. The Schedules of concessions, which also form part of the WTO Agreements, contain Members' specific commitments. For trade in goods, these take mainly the form of an enumeration of the specific binding conditions that a Member commits to apply to the importation of individual goods. 25

38 III. BASIC PRINCIPLES OF THE WTO The WTO Agreements consist of several legal documents covering a wide range of trade-related issues including agriculture, food safety, services and intellectual property. At the heart of all these Agreements are a number of basic principles which constitute the foundation of the multilateral trading system (MTS). The basic principles of the WTO are: MOST-FAVORED NATION (MFN) The MFN principle ensures non-discrimination between trading partners. If a WTO Member grants to a country an advantage, it has to give such advantage to all WTO Members. The "MFN" principle refers to "any country" and not only to WTO Members. In other words, the advantages not only concern those granted by WTO Members to other Members, but also those granted to non-wto Members. Members of the WTO can be seen as Members of a club. One of the fundamental rules of the club is that each Member will grant all other Members the best possible treatment it grants to any trading partner. The MFN principle applies to "like products", concept which is fundamental to the principle. This means that different (or "unlike") products may be treated differently. In general, the MFN principles ensures that every time a WTO Member lowers a trade barrier or opens up a market, it has to do so for the like goods or services from all WTO Members without regard of the Members' economic size or level of development. Example: The MFN rule Assume that in Vanin a WTO Member - applies a 20 per cent duty on imports of oranges coming from all WTO Members. Medatia another WTO Member - is a big exporter of oranges interested in increasing its exports of oranges to Vanin. Imagine that, during a WTO negotiating round, Medatia seeks to negotiate that tariff on oranges with Vanin. After long and difficult bilateral meetings, Vanin agrees to give Medatia duty-free access (0% tariff) for oranges. Would this tariff have to be extended to all WTO Members? Yes. According to the MFN principle, Vanin should extend the 0% tariff on oranges to all WTO Members, because all WTO Members should enjoy the most favourable treatment for oranges granted by Vanin. It is important to note that only WTO Members benefit from the MFN rule. Thus, a WTO Member could give an advantage to products from WTO Members, which it would not need to extend to non-wto Members. Therefore, for trade in goods, the MFN principle requires each Member to extend to all other WTO Members any advantage it accords to like products from any other country - Member or not of the WTO. The MFN principle is laid down in Article I of GATT for trade in goods, Article II of GATS for trade in services and Article 4 of the TRIPS Agreement for trade-related aspects of intellectual property rights. It is worth noting that there are some exceptions to the MFN principle. For example, one exception enables developed 26

39 Members to give unilaterally preferential treatment to goods imported from developing countries and least developed countries (LDCs), without having to extend such better treatment to other Members. This exception is contained in the Enabling Clause, which will be explained in Module 3 (special and differential treatment). NATIONAL TREATMENT The national treatment principle ensures non-discrimination between domestic and foreign products, services or nationals. For trade in goods, it prohibits a Member from favouring its domestic products over the imported like products of other Members once imported products have entered the domestic market. The objective of the national treatment principle is to provide equality of competitive conditions for imported products in relation to domestic products. In the context of trade in services, Members decide in which sectors they would like to accept commitments. The national treatment principle is set forth in Article III of GATT for trade in goods, Article XVII of GATS for trade in services and Article 3 of TRIPS for trade-related aspects of intellectual property rights. MORE OPEN AND PREDICTABLE TRADE Lowering trade barriers is one of the most obvious means of encouraging trade. These trade barriers include customs duties ("tariffs") in the case of goods, as well as import bans or quotas. However, there are also several other measures that could restrict or even impede market access for goods and services. WTO Members have recognized that the substantial reduction of tariffs and other barriers to trade constitutes, together with the non-discrimination principle, a key instrument to achieve the objectives of the WTO. For example, under the GATT/WTO, the use of tariffs is not prohibited; however, Members have committed to carry out multilateral negotiations periodically with a view to substantially reducing the general level of tariffs and other charges on imports and exports. WTO Members had also agreed to bind their tariffs at the reduced levels and to record such tariff bindings in their WTO Schedules of concessions on goods. Besides, WTO Members cannot, as a general rule, apply quantitative restrictions (e.g. bans or quotas) on the goods imported from or exported to another Member. In addition, a number of WTO Agreements set out specific disciplines on non-tariff measures (all measures other than tariffs that may restrict trade). They include, for example, customs fees and formalities, import licensing procedures and sanitary and phytosanitary measures. In general, they impose disciplines on the application of these measures so that they would not constitute unnecessary barriers to international trade. TRANSPARENCY It is important that trade policies and regulations are made accessible to governments and, in particular, traders, as to allow them to know what are the trade rules around the world. Transparency has also a systemic importance since it allows the monitoring of Members trade measures and practices as well as their impact on the multilateral trading system (MTS). For instance, WTO Members are required to notify to other Members, through the WTO Secretariat, about their trade-related policies, laws and measures. Transparency provisions are found throughout the WTO Agreements. 27

40 SPECIAL AND DIFFERENTIAL TREATMENT Trade plays an important role in fostering economic growth and reducing poverty in developing countries. However, many developing Members face particular difficulties in benefiting from trade liberalization. As you will study in this course, the WTO helps these Members to take better advantage of trade liberalization in a variety of ways, including through special and differential treatment (S&D) provisions (e.g. special flexibilities and transitional periods to meet their obligations), capacity building programmes and technical assistance and training. Special and differential treatment provisions are found throughout the WTO Agreements. 28

41 IV. ACCESSION OF NEW MEMBERS WHO CAN BECOME A MEMBER OF THE WTO? Intergovernmental organizations, such as the WTO, are normally made up of states. The vast majority of WTO Members are states. However, besides states, also a separate customs territory which possesses full autonomy in the conduct of its external commercial relations can become member of the WTO. Examples of separate customs territories that became WTO Members are Macao, China and Hong Kong, China. HOW TO JOIN THE WTO? THE ACCESSION PROCESS Governments wishing to become a Member of the WTO have to go through an accession process involving multilateral and bilateral negotiations. Each accession is unique and negotiated on a case-by-case basis. The terms of accession will always depend on the legal and institutional framework of the acceding government and are different for each applicant. Technical assistance plays a key role in helping acceding governments face the challenges of the accession process. In December 2002, recognizing the special needs of acceding LDCs, the General Council adopted Guidelines to facilitate and accelerate negotiations with acceding LDCs. 3 Note If you look for more information on Accession, please refer to the interactive course on accession: 3 See document WT/COMTD/LDC/11. The Guidelines made provisions for simplified and streamlined accession procedures for LDCs 29

42 V. ON-GOING NEGOTIATIONS: THE DOHA DEVELOPMENT AGENDA As you already know, the 4th Ministerial Conference was held in Doha, Qatar, in November In Doha, Members decided to launch a new round of negotiations, and pursuant to their decision, adopted the Doha Development Agenda (DDA) and its accompanying work programme. The DDA includes negotiations and discussions on a wide range of trade issues including agriculture, market access for non-agricultural products, trade facilitation, services, trade and environment, etc. The negotiations take place in the Trade Negotiations Committee (TNC) and its subsidiary bodies. Successive rounds of trade negotiations have greatly reduced impediments to trade. The successful conclusion of the current Round of negotiations is expected to create further economic opportunities for all WTO Members. More open markets will allow Members to improve welfare by expanding export volumes and revenues, and through better access to their markets for imports. WTO Members have placed the needs of developing and LDC Members at the heart of the Doha work programme. In this context, Members have recognized that enhanced market access, balanced rules, and welltargeted, sustainable financed technical assistance and capacity-building programmes have important roles to play. Considerable emphasis is placed on special and differential treatment (S&D) for developing countries (explained in Module 3 ). The principle of S&D is an integral part of the WTO Agreements. All negotiations and other aspects of the DDA work programme are to fully incorporate this principle. According to the ''Doha Declaration'' (paragraph 44 - WT/MIN(01)/DEC/1) and the ''Decision on Implementation-Related Issues and Concerns'' (WT/MIN(01)/17), all S&D provisions are to be reviewed to make them more precise, effective and operational. 30

43 MODULE 2 Introduction to trade and development ESTIMATED TIME: 1.5 hours OBJECTIVES OF MODULE 2 To introduce and explain: the relationship between trade and development; basic issues regarding development in the WTO; the contribution of the WTO to achieving the MDGs; and, recent trade development for developing countries and LDCs. 31

44

45 I. TRADE AND DEVELOPMENT There is an emerging consensus that trade, if well managed, can play an important role in poverty reduction and development. Trade can be a powerful engine for economic growth and development and many countries have achieved rapid economic development through trade expansion. Trade helps global allocation of resources, enhances output and productivity and increases overall welfare gains. Trade allows countries to concentrate on what they can do best and it translates the individual advantage of many countries into maximum productivity for all which in turn leads to development. We must, however, also recognize that the benefits of greater integration and inter-dependency have not reached everyone. There are those that are excluded and left behind. Our capacity to remedy this and extend the reach of improved living standards more widely is crucial to our prospects, as a global community, for continuing to benefit from specialization, exchange and growing prosperity. Globalisation has brought about an increase in the importance that countries, particularly those from the developing world attach to trade. In 2006, the world economy experienced robust growth and vigorous trade expansion, with global GDP growth accelerating to 3.7 per cent, the second best performance since In addition all major regions recorded GDP growth in excess of population growth. More specifically, in the same year, developing countries merchandise exports rose by 20 per cent, to $4.27 trillion, and imports rose by 17 per cent. Their share of world merchandise exports reached an all-time record level at 36 per cent. In the least-developed countries, economic growth continued to exceed 6 per cent for the third year in a row. In addition, the increase in demand from newly industrialised developing countries such as China and India has enabled a number of primary commodity exporting economies to also experience strong GDP growth. While such growth figures have helped to boost economic development in some countries, it has not necessarily enabled these countries to eradicate poverty and hunger. The recent food crisis is evidence of this. Also the growth experienced by many developing countries has not necessarily reduced inequality. In many of these countries, opening to trade (often coinciding with opening to foreign direct investment) has been associated with a certain degree of rising inequality. This is especially so for middle-income countries, notably in Latin America. Efforts need to be made to ensure that economic prosperity has a direct impact in poverty reduction. For this, trade has to become an integral part of a country's development strategy. Developing countries face both external and internal barriers to their trade. Regarding the external barriers, only an ambitious trade liberalization agenda that addresses both tariffs and non-tariff barriers can bring about the increased market access for goods and services for developing and least developed countries that will provide them with much needed opportunities for economic growth and provide the resources needed to achieve the MDGs. While trade liberalization can provide the framework within which significant opportunities arise for developing countries, it may itself not be sufficient to guarantee that these opportunities are realized. The Doha Round of trade negotiations in particular promises great benefits to developing countries, as it will reduce the external barriers to trade that are faced by developing countries in the forms of tariffs and other non-tariff barriers. At the same time, WTO Members have recognized that, for a number of reasons, developing countries in particular LDCs may not be able to immediately benefit from the opportunities that trade liberalization will provide. For example, some countries may not have the productive capacity to take advantage of enhanced market access opportunities. Some may have difficulties adjusting to the new economic environment following trade liberalization. Others may need assistance in diversifying their product base or enhancing their competitiveness. These problems are known as the internal barriers to trade. 33

46 I.A. HOW TO MAKE TRADE WORK FOR DEVELOPMENT? The main questions we have to answer are how to make sure that increased trade leads to economic growth and to development? How can developing countries overcome the internal and external barriers that hinder their trade expansion and also can they maximise the benefits they can derive from the multilateral trading system? There are 3 main areas to explore to give answers to these questions. One is the institutional issues, or what can be done at the multilateral level to help the developing countries. Another area is the issues that need to be addressed by the trading partners, mostly the developed countries. The third and probably most important area concerns the domestic issues, that is the measures that developing countries themselves need to put in place to ensure that they take advantage of the multilateral trade system and that this produces benefits that help them in their development efforts. I.A.1. INSTITUTIONAL ISSUES In order for the Multilateral Trading System to be able to benefit the developing countries it is important for it to be a favourable international environment that facilitates trade and leads to development. The key ingredients in such a system are predictability and certainty in the rules, as well as an, equitable outcome in their application. The MTS must also respect the concerns and constraints of developing countries and translate this into rules that take into account the different levels of development of the Members. How can we make sure that the Multilateral Trading System takes into account the situation of developing countries and allows them to take advantage of the system to foster development? Firstly, it is important to assure the full participation of developing countries, thus the importance of representation in Geneva and an active involvement in the decision making process of the WTO. Secondly, the decision making process must fully respect the principles of transparency and inclusiveness. Of course, in an organization of more than 150 Members this is a challenge but mechanisms need to be put in place that will provide developing countries the opportunity to participate in the decision making process while at the same time preserving its effectiveness. It is also important that in the rules based system of the WTO the capacity constraints of developing countries are taken into account by putting in place appropriate and effective special and differential treatment provisions. Moreover, in order to alleviate these capacity constrains developing countries should be given the necessary Technical Assistance. The rules should also provide developing countries with flexibilities that allow them to put in place certain developmental policies, thus respecting their domestic policy space. I.A.2. WHAT CAN BE DONE BY THE TRADING PARTNERS? The developed countries also have much to contribute in making the multilateral trading system work for development. It is important that the developed countries respect the principle of non-reciprocity. This means that developed countries cannot expect developing countries to enter into the same level of commitments or demand that developing countries enter into obligations that are not compatible with their level of development. Developed countries must also convert market access assurances into actual trade opportunities and gains. It is no use for developed countries to reduce their tariffs in products of interest to the developing countries if at the same time they adopt technical standards that developing countries lack the capacity to comply with. It is therefore very important for developed countries to respect capacity constraints of developing countries. This also involves refraining from overloading the WTO agenda with issues where the developing countries may lack expertise. Moreover, developed countries need to acknowledge differences 34

47 amongst developing countries and give them the flexibility to implement domestic policies that would address their specific developmental concerns. I.A.3. DOMESTIC ISSUES Trade, if well managed can play an important role in poverty reduction and development. Trade can be a powerful engine for economic growth and development and many countries have achieved rapid economic development through trade expansion. However, trade cannot work in isolation and associated domestic measures need to be put in place to accompany trade liberalization so it benefits the majority and has lasting effects. Such measures include sound and stable macroeconomic policies, pro-competitive regulations, good administrative and investment regulations and the rule of law. These policies enhance transparency and predictability fostering private investment that will contribute to build the productive capacity needed to take full advantage of the new trading opportunities. It is also important for developing countries to adopt policies that mainstream trade into their own development strategies. All agencies in the government need to be on board with the economic reforms programme so that there is coherence in the internal policies adopted. Trade can also be more beneficial to the poor if it is accompanied by domestic policies that promote pro-poor growth strategies, providing the social and physical infrastructure required for a growing economy, and directly assisting specific target groups among whom poverty rates are highest in a nation. These types of redistributive policies are necessary to ensure that trade benefits the majority of actors in the economy and that those losers from liberalization receive assistance to re-join the productive economy. If these policies are not put in place there risks being a backlash against trade liberalization that would jeopardize the sustainability of the economic reforms. Also to make reforms last over time a strong committed political leadership is necessary. I.B. BASIC ISSUES REGARDING DEVELOPMENT IN THE WTO Throughout this course we will cover many different issues that relate to the way the different specificities of developing countries are addressed in the multilateral trading system. We will look at the way the WTO is working to help achieve the Millennium Development Goals and also at the patterns of trade for developing countries and LDCs. We will then look at the evolution of the main instrument through which the WTO recognizes the different capacities of developed and developing countries in its rules, namely special and differential treatment or S&D treatment. We will then look at the functioning of the main institutional body in the WTO tasked with surveillance of the developing country issues, the Committee on Trade and Development. We will then look at the work programmes instituted to address the challenges of two groups of developing country members that have specific characteristics, the LDCs and the small, vulnerable economies (SVEs). The course will also cover two issues of particular importance for developing countries, Trade and Transfer of Technology and Aid for Trade. It is important to have a few basic concepts and definitions clear from the beginning the first one which will be frequently referred to is S&D treatment. S&D treatment refers to the special treatment accorded to developing and least developed countries in WTO Agreements as well as the right accorded in these Agreements to other Members to treat developing and least developed countries better and more favourably. But who can benefit from S&D treatment? Obviously the developing countries, but who are they? The WTO works under the principle of self-denomination for developing countries, which means that if a country believes it is a developing country and is accepted as such by the members, it shall enjoy the special and differential 35

48 treatment provided for developing countries in the WTO. Within the developing countries there is a subcategory of Members which are the Least-developed countries or LDCs. In this instance to determine who is an LDC WTO follows the same criteria for LDCs in the United Nations. Therefore if a country is considered an LDC by the UN it will also be an LDC in the WTO. Moreover, if a country graduates from the LDC category in the UN it will also no longer be considered an LDC in WTO. 36

49 II. THE WTO AND ACHIEVING THE MDGS The work of the WTO is relevant to achieving a number of Millennium Development Goals, especially MDG 8, which recognizes that for poorer countries to achieve the other MDGs it is essential to create an enabling international environment. The WTO's contribution to creating a stable multilateral trading system is thus crucial to building a more favourable global environment for developing countries. Since the majority of WTO Members are developing countries, one of the organization's objectives is to ensure that they benefit equitably from international trade along with countries that are better off. A fundamental aim of the Doha Round of trade negotiations is to ensure that developing countries are provided with the trade opportunities that will enhance their growth and development prospects. II.A. THE DOHA ROUND There is widespread consensus that a successful conclusion to the Doha Round will contribute significantly to the achievement of the MDGs. In both the agricultural and the non-agricultural sectors, greater trade openness will provide significant benefits. Similarly, the opening of services trade will also provide new opportunities to developing countries. In April 2011, the Chairman of the Trade Negotiations Committee released a package of documents consisting of negotiating texts in various areas of negotiations, as well as reports from the other negotiating groups. The package comprises more than 600 pages of information and reports, and includes all the market access areas in agriculture, industrial products and services, as well as the entirety of the regulatory agenda. For the first time since the Round was launched nearly ten years ago, participants in the negotiations have been provided an opportunity to consider the Doha package in its entirety. The content of these documents is both heartening and sobering. It is heartening because it represents the significant progress that has been made over the past ten years on many difficult issues. Overall, the package offers many potential benefits. These are evident both in terms of the new market access opportunities and in terms of the improved trade rules that would be more reflective of today's trading realities. Another immense benefit would be to show that the spirit of multilateral cooperation is alive and well. Countries also believe that one of the best ways to tackle complex international challenges remains the multilateral track, with trade being regulated at the multilateral level rather than through a myriad of bilateral arrangements. But the result of the package is also sobering. There remain some wide gaps which are critical to bring the Round to a successful conclusion, including the amount of reduction in industrial tariffs for the Members applying the tariff reduction formula. There are other gaps too, which remain to be bridged, and no deal will be reached without all of them being solved, given that the negotiations operate under the principle of a "single undertaking". This is a serious situation for the Round and for all of the efforts and aspirations it embodies. Government representatives and the academic community have stressed the grave risks of not concluding the Round expeditiously, including the impact on the achievement of the MDGs. From the recent discussions in the WTO, it has become clear that Members are not ready to quit and lose the work done over the last ten years, since the Round was launched in Doha in There is also agreement that a new approach that goes beyond "business as usual" is neededr. Various ideas for such a new approach have been suggested; suggestions need further elaboration and discussion, including at political level. In short, countries are clear about what they do not want and are open to ideas on the way forward. 37

50 II.B. THE AID-FOR-TRADE INITIATIVE At the same time, it has also become clear that some developing countries, especially the LDCs, will need technical and financial assistance from the international community to be able to take advantage of the opportunities that a successful conclusion to the Doha Round would afford. The Aid-for-Trade Initiative, the work on which is led by the WTO, is a crucial element in implementing the gains of trade opening. Its over-riding purpose is to help developing countries, especially LDCs, improve their productive capacities and strengthen their trade-related infrastructure. Since capacity building is an important feature of MDG 8, it is critical that commitments to Aid for Trade are sustained and increased. The Aid-for-Trade Initiative has successfully placed the spotlight on trade as a centrepiece of development. Recently released figures from the OECD Creditor Reporting System database show that resources for Aid for Trade reached US$40 billion in 2009, a 60 per cent increase from the base line period of Many of developing countries have benefitted from this assistance and have made use of these funds to reform their trade policy regulations, to train their officials and to improve infrastructure. For the Third Global Review of Aid for Trade, the WTO issued a questionnaire to donors and recipients, as well as a call for case stories on how Aid for Trade is working and how it is being implemented on the ground. The input received has been remarkable. There is a wealth of information in the 146 questionnaires and the 269 case stories which the WTO and the OECD are now examining. II.C. WTO'S CONTRIBUTION TO OTHER MDGS The WTO is also actively promoting the attainment of Target E of MDG 8, which concerns providing access to affordable medicines on a sustainable basis in developing countries. Countries without sufficient manufacturing capacities can make effective use of compulsory licensing through the so called "Paragraph 6 System", which gives poor countries an additional flexibility under the TRIPS Agreement to gain access to affordable essential drugs. Similarly, Target F of MDG 8 (making available the benefits of new technologies) is also being partly addressed by work in the WTO, to increase flows of technology to developing countries. By identifying technology and innovation as critical drivers of economic growth, the WTO has indicated that technology innovation and its transfer can be critical in facilitating the achievement of the MDGs. WTO Members continue to discuss specific steps that might be taken within the mandate of the WTO to further increase flows of technology to developing countries. WTO's contribution to the achievement of the MDGs goes beyond MDG 8. The WTO's activities are also having an impact on MDG 7, which aims to ensure environmental sustainability and to protect biodiversity. The Agreement establishing the WTO recognizes that Members' economic relations should be conducted in a way that allows "for the optimal use of the world's resources in accordance with the objective of sustainable development". WTO Members are nonetheless involved in negotiations that explore the relationship between trade and the environment, assessing their mutual impact and working to enhance their supportiveness. An issue that is currently being negotiated by WTO Members concerns specific disciplines on fisheries subsidies, which contribute to over-fishing. A significant reduction of such subsidies would have a positive impact on preserving the shrinking fish stocks of our oceans. This outcome will support MDG 7, as will negotiations which are taking place on the trade opening of environmental goods and services, which would help to boost global 38

51 trade in this area. Improving countries' ability to obtain high-quality environmental goods and to disseminate environmental technologies at lower costs would improve access to goods and technologies that can contribute to environmental protection. II.D. CONCLUSIONS AND THE DEVELOPMENT AGENDA BEYOND 2015 The international community has made progress in the achievements of MDG 8; progress has also been made in the Doha Development Round; and in providing Aid for Trade to poor countries. Access to medicines has improved; discussions have progressed in enhancing technological flows to developing countries; but there are still gaps in fulfilling the promise that was made in the context of achieving the MDGs. We need to build on the progress made and ensure that trade remains an engine for growth and a driver in the achievement of the MDGs. Even beyond 2015, the WTO will continue to work on developmental issues. Developing countries constitute a majority of WTO Members and they are increasingly active in setting the agenda of the Organization. The WTO will continue to work towards addressing the concerns of developing countries and expand their participation in the multilateral trading system. Another area where the work of the WTO will continue is in creating a favourable global environment for developing countries to achieve their developmental objectives through trade-led economic growth. The idea of constructing a favourable environment for development is enshrined in the WTO mandate prescribing the pursuit of international coherence in economic policy-making. The original mandate specifically advises cooperation with the International Monetary Fund (IMF) and the World Bank, but over the years the WTO has expanded its scope to include cooperation with the UN system, the Organization for Economic Cooperation and Development (OECD) and other international partners on a wide range of issues. One concrete manifestation of this coherence mandate, and one which will continue beyond 2015, is the work on the Aid-for-Trade Initiative and the Enhanced Integrated Framework (EIF) for LDCs. To use trade as an engine for growth, LDCs need to strengthen their productive capacity. The EIF is the mechanism assisting LDCs to do so. Through the EIF partnership, LDCs combine their efforts with those of EIF donors, EIF core agencies (the IMF, the International Trade Centre, the United Nations Conference on Trade and Development, the United Nations Development Programme, the World Bank and the WTO) and other development partners, to respond together to their trade development needs so that they can benefit from market access openings. Nevertheless, the expansion of any agenda for multilateral developmental cooperation beyond 2015 would very much depend on the end results of the current efforts on achieving the MDGs. The Doha Round needs to be looked at as one of the main deliverables within the MDG process. A successful conclusion of the Doha Round will provide significant benefits, especially to the more vulnerable of countries, and will also reinforce multilateral cooperation. A stalemate in the Doha Round will similarly have a negative impact on the achievement of the MDGs. Development cooperation beyond 2015 will no doubt be multi-dimensional, but trade-led growth, and Aid for Trade, will continue to be integral elements of this multifaceted economic development. 39

52 III. PARTICIPATION OF DEVELOPING COUNTRIES AND LDCS IN THE MULTILATERAL TRADE SYSTEM III.A. RECENT TRADE DEVELOPMENTS FOR DEVELOPING COUNTRIES III.A.1. PATTERN OF TRADE Developing economies' trade expanded steadily and profoundly since the second half of the 1980s. Although commodity prices remain a major determinant, the integration of developing economies into global trade stemmed mainly from the development of solid commercial ties with other countries and economies. They remain, however, particularly vulnerable to external shocks such as the 1998 financial crisis, the burst of the IT bubble in 2001, and the recent food crisis. Between 2000 and 2008, China, India and Brazil emerged as major traders and strengthened considerably their trade with other developing economies. Global manufacturing in which developing economies are particularly involved accelerated. Commodity prices, which were relatively stable over the period, tripled through the subsequent five years. As a result, developing economies' exports and imports soared between 2000 and 2008, and their share in world trade rose at a pace that had never been matched, except during the two oil crises. The contribution of developing economies' exports to world trade in manufactures increased remarkably between 2000 and 2008, as China emerged as a central hub for global manufacturing and export-oriented industries in other developing economies underwent structural changes. While the role of China in world trade expanded in all product categories, the rise was particularly striking in labour-intensive products (office and telecom equipment and clothing), as these industries declined in most other developing economies. At the same time, capital and technology-intensive goods such as iron and steel, chemicals, transportation equipment and other machinery, gained importance in developing economies' manufacture exports. Developing economies remain the world's main suppliers of primary commodities, and the five-year long boom in prices lifted substantially the share of these products in their export basket. The growing integration of developing economies into global trade also took place through their merchandise imports, which significantly increased their share in world trade in all major product categories. The demand from developed countries is still an essential source of income for developing economies, absorbing half of their merchandise exports in South-South trade has however expanded considerably faster over the 2000 to 2008 period, fuelled both by Asia's exports of manufactures to and imports of fuels and other minerals from other developing regions. Merchandise trade among developing economies outside Asia also grew very rapidly. The contribution of developing economies' exports to world trade in commercial services also rose significantly, driven mainly by the growth in transportation and travel receipts. Their exports of other commercial services rose even faster, along with the intensification in global exchanges of these services. Developing economies' 40

53 exports of other commercial services comprise mainly other business services which include, inter alia, traderelated services and business, professional and technical services. Computer and information services (particularly dynamic in recent years) and financial services represented 12 per cent and 10 per cent of developing economies' exports of other commercial services. Anecdotal available information, mainly through mirror statistics, suggests that developing economies accounted for more than a third of developed countries' imports of commercial services in Since few developing economies compile statistics on trade in services broken down geographically within their balance of payments (BOP), it is not possible to conduct a satisfactory review of this aspect of their trade. Likewise, virtually no developing economy compiles indicators of trade in services through the establishment of a commercial presence (mode 3 of the General Agreement on Trade in Services (GATS)), a mode which BOP statistics do not cover. 1 Yet, developing economies' foreign direct investment (inward and outward) in service activities were multiplied by more than 20 in the last 15 years: mode 3 trade in services is now substantial. For developing and developed economies alike, building up the production of statistics on these aspects of trade in services is becoming increasingly crucial. III.A.2. THE PERIOD Over the period food price increases accelerated, affecting populations in a number of net foodimporting developing economies. The sharp rise in prices of fuels and minerals continued. Merchandise exports of Africa and the Middle East were consequently the fastest growing, together with developing Europe. Manufacture-exporting economies in developing Asia also posted strong growth in their merchandise exports. A vast majority of developing economies (119 out of 156 in 2008) have a deficit in their merchandise trade, which commodity prices deteriorated. This exerted considerable pressure on the concerned economies. Over half the developing economies with negative merchandise trade balances had surpluses in commercial services, which in most cases are much lower than the goods deficit. A majority of developing economies also experienced a deterioration in their balance of commercial services between 2006 and World trade in services accelerated markedly in 2007 and slowed down in All developing regions experienced an acceleration in their exports and imports of commercial services over the period. The transportation sector contributed significantly, under the drive of booming merchandise trade flows and fuel prices. Economies which in recent years developed new export-oriented service activities like business process outsourcing or computer services experienced particularly strong export growth. III.A.3. THE CRISIS PERIOD Following financial turmoil in the United States, world merchandise trade began falling in August 2008 and bottomed out in February Developing economies' trade followed developed countries' in an abrupt fall 1 Even among the developed countries only a handful have started compiling Foreign Affiliates Statistics (FATS), a new conceptual framework launched in 2002 which, among other indicators, would provide sufficient information on GATS mode 3. 41

54 that spanned from the third quarter of 2008 to the first quarter of Over this period of time, developing economies' quarterly merchandise exports and imports dropped by about 40 per cent in value terms, whereas those of developed countries decreased by 35 per cent. 2 In response to the crisis, governments in developing Asia, particularly in China and India, raised their spending significantly. China's economic stimulus program resulted in a massive increase in imports which largely contributed to supporting developing economies' trade in the region and beyond. From the first quarter of 2009 onward, developing economies' trade began recovering at a much faster pace than developed countries. Their merchandise exports and imports rose on average by 7.5 per cent in each quarter between April 2009 and June 2011, whereas the corresponding growth for developed countries was 4.5 per cent. (Billion dollars) World exports Developed economies Developing economies Q1 08Q1 08Q2 08Q3 09Q1 10Q1 11Q1 World exports Exports Imports Figure 1: World, developed and developing economies quarterly merchandise trade, When looking at annual results, developing economies' rapid recovery enabled them to register drops in their trade slightly lower than the world average in 2009, and to rebound much faster in The magnitude of the drop and subsequent recovery was considerably larger for merchandise than for commercial services. 2 Hong Kong, China re-exports and imports for re-exports are excluded. 42

55 (Annual percentage change) Merchandise trade Trade in commercial services Developing economies imports Developing economies exports World trade Figure 2: World and developing economies' trade in goods and commercial services, One of the factors that amplified the drop and subsequent increase in merchandise trade compared to trade in services is the particular volatility of fuel and primary commodity prices, which fell by 30 per cent in 2009 and rebounded by 26 per cent in 2010 (see Appendix table 5). Developing economies' merchandise exports, which comprise a large share of primary commodities (35 per cent in 2010), were particularly affected. Global manufacturing is another reason why merchandise trade fluctuated more than trade in commercial services. A service is generally exchanged only once between its producer and final consumer. Conversely, intermediate products are shipped from one country to another as they go through different production stages along fragmented production chains. Thus, while increases in global demand generally triggers larger increases in cross-border movements of goods, the global recession resulted in a sharper drop in international merchandise trade flows. 3 III.A.4. DEVELOPING ECONOMIES' PARTICIPATION IN WORLD TRADE CONTINUED GROWING Before the onset of the global economic crisis, the participation of developing economies in world trade was at historic high. It had risen particularly fast since 2000, thanks to the accelerated growth in global manufacturing, booming commodity prices and the pivotal role played particularly by China, India and Brazil both as sources of supply and demand. From 2000 to 2008, the value of developing economies' trade in goods and commercial services tripled, rising considerably faster than world trade. 3 Official statistics indeed capture "gross" movement of goods across border. There is currently a high interest in assessing trade in value-added, that is, the "net" contribution of each country and economy to the final value of globally-manufactured products. To support the exchange of projects, experiences and practical approaches on this topic, the WTO recently launched the "Made In the World Initiative". For further information see 43

56 While historically developing economies have been relatively more vulnerable to external shocks, the economic impact of this crisis was for the first time less severe for them than for developed economies. Their share in world trade continued rising, gaining 3 to 4 percentage points in the period from 2008 to In 2010, their merchandise exports accounted for over 40 per cent of world trade, 10 percentage points higher than ten years ago. The rapid economic growth in major developing economies resulted in considerable increases of their import's share in both trade in merchandise and commercial services. Although their service sector is still, on average, less developed than in advanced economies, developing economies' exports now account for 31 per cent of the world's international transactions in commercial services. (Percentage) 40 Merchandise exports 41% 38% 38% 35 Merchandise imports 34% 36% Commercial service imports Commercial service exports 32% 28% 31% 20 Figure 3: Share of developing economies in world trade, Developing Asian economies were the engine of growth for developing economies' trade throughout the period from 2008 to The share of the region's exports of goods and commercial services in world trade gained 3.2 percentage points, whereas the corresponding gain for its imports was 3.5 percentage points. China again registered the most impressive performances. It overtook Germany to become the world's leading merchandise exporter in 2009, and expanded the share of its exports of goods and commercial services in world trade from 8.1 per cent in 2008 to 9.5 per cent in The contribution of its imports to world trade rose by 2 percentage points during that period, to reach 8.4 per cent. (Billion dollars and percentage) Exports Imports Value Share in world Value Share in world Developing economies a 7, , Developing Asia a 4, , China 1, , India

57 Other a 2, , Non-Asian developing economies 2, , Brazil Memorandum items Developed countries 10, , Commonwealth of Independent States (CIS) a Excluding Hong Kong, China re-exports or imports for re-exports. Table 1: Developing economies' trade in goods and commercial services between 2000 and 2010: Asian economies lead the expansion 4 Outside Asia, the share of developing economies' exports in world trade decreased by 0.4 percentage points, while that of developed countries shrank by 2.4 points. Non-Asian developing economies' imports however increased their share in world trade by 0.4 percentage points. III.B. RECENT TRADE DEVELOPMENTS FOR LDCS 5 The global economic crisis hit the LDC exports during a phase of dynamic growth, which had outpaced those of other developing and developed countries. The total exports of goods and services of LDCs had increased 30 per cent in After a drop of 24 per cent in 2009, total exports of goods and services rebounded by 26.5 per cent in Overall, these exports grew at an average annual rate of 16 per cent over the period.. LDCs remain heavily dependent on the export of a few products where they enjoy some degree of comparative advantage (primary commodities as far as trade in goods is concerned and tourism for the services exporters). Even when LDCs were able to diversify into manufacturing, the range of exported products was usually limited to a few labour-intensive industries, mostly clothing. On average, almost three quarters of total merchandise exports depended only on three main products (composition varies from LDC to LDC). For instance, in 2009, nine LDCs derived between 95 and 100 per cent of their total export receipts from only three products, showing their dependence on very few goods (usually oil and minerals) whose international prices tend to fluctuate considerably. A number of LDCs rely heavily on services' exports for a sizeable share of their total export receipts (tourism receipts, in particular, represent the main source of export revenues for small islands). 4 Shares provided in tables and charts may not add up to totals due to rounding. 5 Document WT/COMTD/LDC/W/51. 45

58 Between 2000 and 2010, the share of LDCs in world trade (exports plus imports) increased, from 0.6 per cent to 1.1 per cent, a positive development in a decade marked overall by a favourable orientation for total international trade, which increased at an average annual growth rate of 9 per cent during this period. The share of LDC exports in world trade in goods increased from 0.56 per cent in 2000 to 1.08 per cent in 2010On the other hand, while in some services sectors such as tourism and travel services LDCs have witnessed robust growth in the last decade, the share of LDCs in world commercial services generally remained static hovering around half of one per cent in that period ( 0.51 per cent in 2010). A major source of the impressive growth of merchandise exports during the last decade was the increase of international prices of fuels and mining products, which account for more than 60 per cent of total LDC exports today. Clothing is the second category of exports, followed by food products (15 and 10 per cent of total LDC exports, respectively). Export concentration continues to be the distinctive feature of LDC trade. While the export base remained narrow, LDCs have been able to somewhat diversify the market destinations for their products. Indeed, the geographical landscape of exports changed dramatically during the first decade of the 21st century, especially with regard to the top five markets of destination. China moved to the first place, followed by the EU and the US. These three economies clearly dominated as market destinations for LDC exports in 2010, with imports from LDCs ranging from more than US$25 billion each by US and the EU to US$43 billion (China). India's imports from LDCs have been increasing rapidly during the period, placing it in the fourth position in 2010 (US$8.5 billion) 6, while Thailand stands at the fifth position, mainly due to large imports of energy products from Myanmar. The LDC products that feature prominently in the imports of developing countries include mineral fuels, wood products, cotton, copper, as well as some food products such as vegetables and oil seeds. The categories for which developed country markets remain a dominant export destination are that of textiles and clothing, food and beverage products. The last decade has witnessed significant improvements in market access opportunities for LDC exports. In addition to non-reciprocal preferences effected through LDC-specific schemes, such as the EU's Everything But Arms (EBAs) some developed Members have provided market access improvements to a selected group of countries including LDCs (e.g. Africa Growth and Opportunity Act (AGOA), Economic Partnerships Agreement (EPAs)). The developing countries have also taken concrete steps to provide improved market access to the LDCs, through multilateral, regional and bilateral initiatives. Emerging countries like Brazil, China and India now grant or are in the process of granting a significant degree of market access to LDC products. (Document WT/COMTD/N/39 for China's notification of its preferential scheme and WT/COMTD/N/38 for that by India). The review of tariff treatment of LDC exports in selected developed markets indicate that in 2009 the overall duty free imports of developed markets from LDCs was 80 per cent (excluding arms and oil). Petroleum and ores imports from LDCs were duty free. In 2009, ninety-three per cent of agricultural imports originating from the LDCs was duty-free. Of interest is to compare that figure with the 2009 DF percentage for textiles, 74 per cent, and clothing 67 per cent. The trends in average tariff (trade weighted) on merchandises indicate a significant preference margin for agricultural products. Tariff escalation is less significant in preferential tariffs than under MFN, indicating that preferences are granted across a wide spectrum of products figure. 46

59 Developing countries have been providing preferential access to LDC products, including a significant degree of duty-free access, through a variety of channels - bilateral, regional and non-reciprocal multilateral schemes. Despite the progress, statistical information on preferences effectively received by LDC exports in developing economies is still sparse. In addition, some preferential schemes, although announced, are still not implemented. The information provided in this section is therefore partial. 7 As a result, the Table below has indicators available for only two years, 2005 and Average tariffs a Agriculture Textile 10 8 Clothing Preference Margin b Agriculture 1 2 Textile 2 2 Clothing 3 4 a Weighted average of best tariff applicable, based on imports of seven developing economies: Brazil, China, India, Mexico, South Africa, Chinese Taipei and Turkey; excluding oil and arms. b As compared to MFN tariffs. Source: Based on CAMAD compiled by ITC, UNCTAD and WTO. Table 2: Tariff treatment on merchandises imported by selected developing countries, 2005 and 2009 (percentages) As can be observed from the Table, tariffs paid by LDCs to other developing countries are still close to their MFN levels, even if the margin of preference has been increasing between 2005 and The best preference margin is noted for clothing products, largely due to preferences granted by China, India, South 7 The indicators have been produced thanks to a joint effort by ITC, UNCTAD and WTO Secretariats. In order to minimize the endogeneity bias affecting weighted averages (the lower the tariff, the higher the volume of trade, other things being equal), national tariffs have been weighted by a standard LDC export structure, based on their total exports to developing economies. The same procedure was applied for market access to developed countries. 47

60 Africa and Turkey. In the case of agriculture and textile products, LDCs tended to concentrate their exports in the tariff lines with the lowest tariffs, which are also those with the lower degrees of processing. 8 The rapid conclusion of the Doha Round could further improve market access opportunities for LDC products, including through the full implementation of the DFQF market access for LDC products. At the same time, improvements in the area of preferential rules of origin are required, which available evidence suggests to be one of the hindrances for full exploitation of the preferences granted to the LDCs. Another area that warrants immediate attention is trade transaction costs which reduce the competitiveness of LDC exports in the world market. And, most importantly, in order to make qualitative improvement, LDCs need to diversify production and export base for which the Enhanced Integrated Framework and the Aid for Trade Initiative could provide the much needed platform for a tangible contribution in LDCs' trade capacity. In summary, both the trends and the composition of LDC exports are strongly influenced by the developments in international prices for commodities. The rising demand for commodities, especially from emerging countries, has had a strong influence on their prices. The export structure of LDCs remains concentrated, with fuels and minerals representing 60 per cent of all LDC exports in Food and agriculture (including raw materials) accounted for 15 per cent of all LDCs' merchandise export revenues in 2010, while clothing represented 12 per cent. Exports of services have been increasing, albeit from a low initial base; in many LDCs, tourism has become one of the top three sources of export revenues. The economic crisis, which principally affected demand from developed countries, reinforced the importance of LDCs' exports to developing countries. In 2010, China was LDCs' main export destination, with imports rising to US$43 billion in 2010, followed by the EU and the US (more than US$25 billion each). India's imports from LDCs increased rapidly during the period, placing it in the fourth position in 2010 (US$8.5 billion). LDC exports to developing and developed markets are nevertheless very differentiated. Developing economies have become the major destination for LDC exports of mineral fuels, copper, wood products, cotton and some food products like vegetables and oil seeds. Interestingly, these products, where South-South trade has become particularly important for LDCs, are also those where international prices have been increasing in the past decade. On the other hand, developed economies remain largely a dominant export destination for manufactured articles such as clothing, where changes in prices have been much more moderate. Developed country markets are also the main destination of exports for some agricultural and food products such as fish and crustaceans, beverages and tobacco. Whether in terms of tariff lines or in terms of import value, most of the developed Members of the WTO grant close to 100 per cent DFQF access to LDC products. The duty-free coverage by the US to all LDCs was 82.4 per cent in This coverage is higher for the LDCs in Africa as they could benefit from AGOA provisions, which offer duty-free access over and above the GSP coverage. The US has reiterated its commitment to implement the Hong Kong Decision on DFQF market access to LDCs with the final results of the Doha negotiations. Concrete progress has been made in the area of preferential rules of origin as one of the top trading partners of LDCs - the EU- has made a number of simplifications and relaxations in its rules of origin associated with its 8 The simple average of best tariffs in agriculture granted to LDCs exports is 20 per cent, and 12 per cent for textiles. The respective weighted average shown in Table 10 for these products is significantly lower, indicating that the export structure was concentrated in low tariffs. 48

61 GSP scheme. This is expected to further enhance LDC exports to the EU markets as well as increase the preference utilization rate of the LDCs. Emerging countries, in particular China and India have made incremental progress in providing preferential market access including duty-free access to LDC products. India became the first developing country to notify its preference scheme for the LDCs since the launch of the Doha negotiations in The DFTP scheme by India will cover 85 per cent of its tariff lines under duty free access by China, which has been granting duty-free coverage to 60 per cent of its tariff lines to the LDCs, has indicated its intention to expand this dutyfree coverage to 97 per cent. It is also worthwhile to mention that these developing countries are also improving market access opportunities for LDCs, through bilateral and regional channels. Given the continued concentration of LDCs' export structure, enhanced market access opportunities for the LDCs is of significant value to them. Any decisions taken to increase preferential market access for LDCs, will help increase their share of trade; integrate them more fully into the multilateral trading system; and help them in their economic growth and developmental efforts. 49

62

63 MODULE 3 Special and differential treatment ESTIMATED TIME: 2 hours OBJECTIVES OF MODULE 3 To explain: the concept of special and differential treatment (S&D) and its evolution in the WTO; the main S&D provisions, including Part IV of the GATT and the Enabling Clause; and, S&D in the Doha Development Agenda (DDA). 51

64

65 I. INTRODUCTION In the WTO, Special and Differential Treatment (S&D) refers to the special treatment accorded to developing and least developed countries in WTO Agreements as well as the right accorded in these Agreements to other Members to treat developing and least developed countries better and more favourably. S&D can therefore be said to reflect a recognition of the asymmetry in the economic strengths of WTO Members through seeking to ensure that economic gains from the trading system are well distributed among all Members. Additionally, it is a recognition that similar commitments cannot be expected of countries at varying and different levels of development. The issue of flexibility is as old as the establishment of the multilateral trading system-and has also been a core interest for developing countries since the establishment of the WTO in The Preamble to the Marrakesh Agreement recognizes "that there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development". Just as development can mean different things to different Members, so is the aim of S&D. For many developing countries, special and differential treatment should aim to address and resolve the imbalances between developed and developing-country Members and support developing and least-developed country Members in undertaking any adjustments that may be associated with fulfilling their obligations as set out in WTO Agreements. The general position among these Members is that assuming the same types and levels of obligations as undertaken by developed Members has prevented them from addressing their development challenges and participating meaningfully in the multilateral trading system. In addition, there are some developing-country Members who believe that S&D should help them secure market access that will facilitate their economic development. Some also hold the view that S&D provisions should allow them room (policy space) from the rules to pursue their national development plans. On the other hand, developed Members view the aim of S&D as to further integrate developing and least-developed countries into the multilateral trading system which will in turn, together with a conducive national environment, lead to development. Whichever argument one chooses to make, all Members agree on the need for S&D and therefore negotiations to either strengthen the existing S&D provisions or to agree to new provisions featuring prominently in the negotiations. 53

66 II. EVOLUTION OF S&D II.A. S&D IN THE GATT II.A.1. THE GATT REVIEW SESSION The GATT, as negotiated in 1947 did not recognise differences among the then 'Contracting Parties'. In fact almost half of the 23 original Contracting Parties would today be considered developing countries. 1 This lack of recognition of a separate developing country category meant that all the Contracting Parties took on the same rights and obligations. While no principles applying to developing countries existed in the GATT at the time of its inception, an amendment was made to the GATT in 1948 reflecting a provision contained in the draft Charter of the International Trade Organisation (ITO). This Charter never came into being. This provision, Article XVIII entitled "Government Assistance to Economic Development and Reconstruction", allowed contracting parties to use protective measures for the establishment, development or reconstruction of particular industries contrary to their obligations, provided they obtained permission from the other CONTRACTING PARTIES. At the Review Session held in , Article XVIII of the GATT was overhauled, revising two sections of the Article i.e. sections B and C, with a view to giving certain countries additional flexibilities in their obligations. In addition, the title of the Article was changed from "Government Assistance to Economic Development and Reconstruction" to "Government Assistance to Economic Development", removing reference to reconstruction. From then, only a CONTRACTING PARTY defined as "the economy which can only support low standards of living and is in the early stages of development" could have recourse to Sections A, B and C of the revised Article. Section A of Article XVIII enabled contracting parties supporting low standards of living as well as those in early stages of their development, to modify or withdraw scheduled tariff concessions, in order to promote the establishment of a particular industry, giving them an additional avenue over Article XXVIII for the renegotiation of schedules. Section B of Article XVIII was revised, recognizing the long-term nature of developing countries' balance-ofpayments problems and this provided additional flexibility for the use of quantitative restrictions over that provided in Article XII (both in terms of the conditions for introducing measures, and the frequency of consultation on the measures). 1 Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, South Africa, United Kingdom and the United States. 54

67 Section C of Article XVIII was revised to allow, subject to notification, prior consultation and, in some cases, concurrence of the full Membership - the CONTRACTING PARTIES to impose trade restrictions, both tariffs and quantitative restrictions, to support infant industries with a view to raising living standards. In addition, a new Article XXVIII (bis) was introduced at the Review Session, providing for periodic rounds of multilateral negotiations. It was agreed that these negotiations should be conducted on a basis that would take into account the needs of developing countries for a more flexible use of tariff protection to assist their economic development as well as their special needs to maintain tariffs for revenue purposes. II.A.2. INTRODUCTION OF PART IV OF THE GATT In the period between 1957 and 1964, a large number of initiatives were taken in favour of developing countries leading up to the addition of Part IV to the GATT, which is a dedicated chapter to trade and development. In 1957, in particular, an expert panel, headed by Professor Gottfried Haberler, was established by the Ministerial Session to examine trends in international trade with particular reference to "the failure of the trade of less-developed countries to develop as rapidly as that of industrialized countries, excessive shortterm fluctuations in prices of primary products, and widespread resort to agricultural protectionism". Subsequently, in December 1961 the CONTRACTING PARTIES adopted a Declaration on the Promotion of Trade of Less-developed Countries. This Declaration, which was part of a larger "Programme for Expansion of International Trade" covering tariff reductions and obstacles to trade in agricultural products, inter alia called for preferences in market access for developing countries not covered by preferences in customs unions, free trade areas or preferential tariff systems. This was the first mention of what was later to become the Generalised System of Preferences for developing countries. The May 1963 Ministerial Meeting, while laying down the principles for what was later to be known as the Kennedy Round, agreed that "in the trade negotiations, every effort shall be made to reduce barriers to exports of the less-developed countries, but that the developed countries cannot expect to receive reciprocity from the less-developed countries." Following this Ministerial Decision, the Committee on Legal and Institutional Framework of GATT in Relation to Less-Developed Countries worked on a chapter on Trade and Development. This chapter, added by an amending Protocol as Part IV in 1964, came into effect de facto in early 1965 and formally on 27 June UNCTAD was created in 1964 as a result of lobbying by developing countries partly because they felt that their concerns were not being effectively addressed in the GATT. It was to be dedicated exclusively to trade and development. The introduction of Part IV of the GATT was, in part, an attempt to respond to the creation of UNCTAD, to offer a more pro-trade approach than the import substitution industrialization model that was being followed by many developing countries. II.A.3. PART IV OF THE GATT Part IV of the GATT contained three new Articles: Article XXXVI, Article XXXVII and Article XXXVIII. Article XXXVI entitled 'Principles and Objectives', recognized the need for a conscious and purposeful effort on the part of contracting parties, individually and jointly, to improve access to world markets for primary, processed and manufactured products currently or potentially of particular interest to developing countries. 55

68 The concept of non-reciprocity, already recognized in practice since 1963, was formulated in paragraph 8 of the Article, which states that "The developed contracting parties do not expect reciprocity for commitments made by them in trade negotiations to reduce or remove tariffs and other barriers to the trade of lessdeveloped CONTRACTING PARTIES". An interpretative note added that it was understood that the phrase "do not expect reciprocity" meant that the less-developed contracting parties should not be expected, in the course of trade negotiations, to make contributions inconsistent with their individual development, financial and trade needs. Article XXXVII entitled 'Commitments' introduced provisions for CONTRACTING PARTIES to take certain actions in respect to the trade interests of developing countries. However, these provisions did not constitute clear-cut obligations. Thus the developed CONTRATING PARTIES were required, "to the fullest extent possible", to accord high priority to the reduction and elimination of barriers differentiating unreasonably between primary and processed products and to maintain a standstill on other barriers to actual or potential exports from developing countries. Article XXXVIII on 'Joint Action' mandated the CONTRACTING PARTIES to take action, inter alia, through international Agreements to improve access to world markets for primary products of interest to developing countries, and to devise measures for stabilizing and improving the conditions of world markets for such products. The Committee on Trade and Development was established in 1964 to: review the application of the provisions of Part IV, carry out any necessary consultations, and consider any extensions or modifications suggested to Part IV with a view to furthering the objectives of trade and development. Also in 1964, the GATT CONTRACTING PARTIES agreed to establish trade information and trade promotion advisory services in the framework of GATT, resulting in the creation of GATT International Trade Centre (which later became a joint agency of UNCTAD and GATT: The International Trade Centre) with the aim of promoting trade of developing countries. II.A.4. THE TOKYO ROUND In the years following the introduction of Part IV of the GATT, there were developments both within and outside the GATT of interest to developing countries. In 1968, the Generalised System of Preferences was established under the auspices of UNCTAD. However, GATT contracting parties could not agree that Part IV gave general permission for the introduction of such preferences. While the provision of preferences under this system were not legally binding under the GATT, the GATT introduced a waiver in 1971, initially for ten years, under which the schemes introduced by developed countries were covered. 56

69 GENERALIZED SYSTEM OF PREFERENCES: Decision of 25 June 1971, BISD 18S/24 The CONTRACTING PARTIES to the General Agreement on Tariffs and Trade, Recognizing that a principal aim of the CONTRACTING PARTIES is promotion of the trade and export earnings of developing countries for the furtherance of their economic development; Recognizing further that individual and joint action is essential to further the development of the economies of developing countries; Recalling that at the Second UNCTAD, unanimous agreement was reached in favour of the early establishment of a mutually acceptable system of generalized, non-reciprocal and non-discriminatory preferences beneficial to the developing countries in order to increase the export earnings, to promote the industrialization, and to accelerate the rates of economic growth of these countries; Considering that mutually acceptable arrangements have been drawn up in the UNCTAD concerning the establishment of generalized, non-discriminatory, non-reciprocal preferential tariff treatment in the markets of developed countries for products originating in developing countries; Noting the statement of developed contracting parties that the grant of tariff preferences does not constitute a binding commitment and that they are temporary in nature; Recognizing fully that the proposed preferential arrangements do not constitute an impediment to the reduction of tariffs on a most-favoured-nation basis, Decide: (a) That without prejudice to any other Article of the General Agreement, the provisions of Article I shall be waived for a period of ten years to the extent necessary to permit developed contracting parties, subject to the procedures set out hereunder, to accord preferential tariff treatment to products originating in developing countries and territories with a view to extending to such countries and territories generally the preferential tariff treatment referred to in the Preamble to this Decision, without according such treatment to like products of other contracting parties Provided that any such preferential tariff arrangements shall be designed to facilitate trade from developing countries and territories and not to raise barriers to the trade of other contracting parties; (b) That they will, without duplicating the work of other international organizations, keep under review the operation of this Decision and decide, before its expiry and in the light of the considerations outlined in the Preamble, whether the Decision should be renewed and if so, what its terms should be; (c) That any contracting party which introduces a preferential tariff arrangement under the terms of the present Decision or later modifies such arrangement, shall notify the CONTRACTING PARTIES and furnish them with all useful information relating to the actions taken pursuant to the present Decision; (d) That such contracting party shall afford adequate opportunity for consultations at the request of any other contracting party which considers that any benefit accruing to it under the General Agreement may be or is being impaired unduly as a result of the preferential arrangement; (e) That any contracting party which considers that the arrangement or its later extension is not consistent with the present Decision or that any benefit accruing to it under the General Agreement may be or is being impaired unduly as a result of the arrangement or its subsequent extension and that consultations have proved unsatisfactory, may bring the matter before the CONTRACTING PARTIES which will examine it promptly and will formulate any recommendations that they judge appropriate. 57

70 The Declaration that launched the Tokyo Round of Multilateral Trade Negotiations provided that the negotiations aim to "secure additional benefits for the international trade of developing countries". In the area of tariffs, a number of developed countries, granted to the developing countries, non-reciprocal concessions on tropical products. Developing countries also benefited from the considerable reduction of MFN tariffs largely negotiated by developed countries among themselves. But many products of export interest to them i.e. agriculture products and textiles - were either exempted or subjected to lower than formula cuts. On their part, developing countries made limited "contributions" to tariff liberalization in the Tokyo Round, explained in part because many of the developing countries felt their interests were better addressed through UNCTAD. We can see that from the time of the Review Session which took place in 1955 to the end of the Tokyo Round in 1979, a number of provisions were adopted in an attempt to assist developing countries in participating in as well as benefiting from the GATT. However, the reality remained that developing countries were not benefiting as much or as expected, from the system, as were their developed country counterparts. First, there was a steady increase in protection and support for temperate zone agricultural products in developed countries. Second, in the area of textiles and clothing, a multilateral framework was adopted, in derogation of GATT rules, for imposition of discriminatory restrictions on low-cost imports causing market disruptions. This began in 1961 as the "Short-Term Arrangement Regarding International Trade of Cotton Textiles" and was followed in 1962 by the "Long-Term Arrangement Regarding International Trade in Cotton Textiles". These instruments were initially designed to stagger the impact of sudden loss of comparative advantage in industrialized countries. Over the years the framework was progressively enlarged to cover more products and its operation became more restrictive and discriminatory. II.A.5. THE ENABLING CLAUSE When launching the Tokyo Round, Ministers recognized "the importance of the application of differential measures to developing countries". One of the major Decisions emerging from the Round and adopted by the CONTRACTING PARTIES on 28 November 1979, was the Decision on 'Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries', more commonly known as the 'Enabling Clause'. As reflected in its formal name, the Enabling Clause established the principle of differential and more favourable treatment, reciprocity and full participation of developing countries. It provided a legal basis for countries to provide favourable treatment to developing countries when deviating from obligations under Article I of GATT. This favourable treatment included preferential market access for developing countries to developed country markets on a non-reciprocal, non-discriminatory basis (consolidating the earlier 1971 GSP waiver), favourable treatment for developing countries with respect to other GATT rules and instruments dealing with non-tariff measures, and the introduction of regional or global arrangements entered into by developing contracting parties. In addition, least developed countries were to be provided even more special treatment in the context of measures taken in favour developing countries. In dealing with the question of non-reciprocity by developing countries, the Enabling Clause simply reproduced paragraph 8 of Article XXXVI of GATT. However, it was made clear that least-developed countries would be treated on a different footing and those contributions, if any, asked from them would be minimal. The Enabling Clause did not in fact introduce any new binding obligations to the multilateral trading system. Instead, it turned the 1971 waiver for GSP and trade preferences among developing countries into a permanent waiver. It must also be noted that since the Enabling Clause was adopted under the GATT, it only 58

71 relates to trade in goods. The GATS contains its own provisions on S&D and has its own recently adopted Ministerial Decision to waive obligations for the benefit of LDCs contained in WTO Document WT/L/847. The scope of the Enabling Clause was expanded in 1999 with the introduction of a waiver entitled 'Preferential Tariff Treatment For Least-Developed Countries' authorizing developing countries to offer tariff preferences to imports from least-developed countries. Preferential tariff treatment for Least-developed countries; Decision on Waiver, Adopted on 15 June Considering that the Parties to the World Trade Organization Agreement have recognized the need for positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth in international trade commensurate with the needs of their economic development; Considering the statements contained in the Comprehensive and Integrated WTO Plan of Action for the Least-Developed Countries adopted at the Singapore Ministerial Conference on 13 December 1996 and in the Ministerial Declaration of 20 May 1998 concerning integration of least-developed countries into the world trading system and providing predictable and favourable market access conditions for the products of such countries; Considering the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries and the 1994 Decision on Measures in Favour of Least Developed Countries, and without prejudice to rights of Members to continue to act pursuant to the provisions contained in those Decisions; Desiring to provide an additional means for developing country Members to offer preferential tariff treatment to products of least-developed countries notwithstanding the obligations of paragraph 1 of Article I of the General Agreement; Having regard to the Guiding Principles to be followed in considering applications for waivers adopted on 1 November 1956, the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994, and paragraphs 3 and 4 of Article IX of the Marrakesh Agreement Establishing the World Trade Organization (the "WTO Agreement"); Members, acting pursuant to the provisions of paragraph 3 of Article IX of the WTO Agreement, 2 Adopted in accordance with the Decision-Making Procedures under Articles IX and XII of the WTO Agreement agreed by the General Council (WT/L/93). 59

72 Decide that: 1. Subject to the terms and conditions set out hereunder, the provisions of paragraph 1 of Article I of the GATT 1994 shall be waived until 30 June 2009, to the extent necessary to allow developing country Members to provide preferential tariff treatment to products of least-developed countries, designated as such by the United Nations, without being required to extend the same tariff rates to like products of any other Member. 2. Developing country Members wishing to take actions pursuant to the provisions of this Waiver shall notify to the Council on Trade in Goods the list of all products of least-developed countries for which preferential tariff treatment is to be provided on a generalized, non-reciprocal and nondiscriminatory basis and the preference margins to be accorded. Subsequent modifications to the preferences shall similarly be notified. 3. Any preferential tariff treatment implemented pursuant to this Waiver shall be designed to facilitate and promote the trade of least-developed countries and not to raise barriers or create undue difficulties for the trade of any other Member. Such preferential tariff treatment shall not constitute an impediment to the reduction or elimination of tariffs on a most-favoured-nation basis. 4. In accordance with the provisions of paragraph 4 of Article IX of the WTO Agreement, the General Council shall review annually whether the exceptional circumstances justifying the Waiver still exist and whether the terms and conditions attached to the Waiver have been met. 5. The government of any Member providing preferential tariff treatment pursuant to this Waiver shall, upon request, promptly enter into consultations with any interested Member with respect to any difficulty or any matter that may arise as a result of the implementation of programmes authorized by this Waiver. Where a Member considers that any benefit accruing to it under GATT 1994 may be or is being impaired unduly as a result of such implementation, such consultation shall examine the possibility of action for a satisfactory adjustment of the matter. This Waiver does not affect Members' rights as set forth in the Understanding in Respect of Waivers of Obligations under GATT This waiver does not affect in any way and is without prejudice to rights of Members in their actions pursuant to the provisions of the 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries. II.B. S&D IN THE URUGUAY ROUND AGREEMENTS THE URUGUAY ROUND The Uruguay Round saw an expansion of the negotiating agenda, resulting in a strengthening of the multilateral system which led to the establishment of the World Trade Organization on 1 January Together with the quasi-judicial dispute settlement mechanism, three Agreements previously not covered by GATT disciplines and of particular interest to developing countries were introduced. The first was the introduction of the Agreement on Agriculture which initiated a reform process through the negotiation of 60

73 commitments on support and protection and through the establishment of strengthened and more operationally effective GATT rules and disciplines. The fact that Agriculture had not been under GATT disciplines, had provided developed countries with the possibility of maintaining import barriers on agricultural goods and subsidising their exports in a trade distorting way. Secondly, it was agreed to phase out discriminatory restrictions on textiles and clothing and progressively integrate the sector into GATT, with the Agreement being terminated on 1 January Third, it was provided that emergency safeguard action must be temporary and normally non-discriminatory and grey-area measures such as "voluntary export restraints" and "orderly marketing arrangements" were prohibited. The introduction of the concept of the 'Single Undertaking' during the Uruguay Round meant that S&D measures underwent a substantial change. Developing countries accepted as a single undertaking all the three major Agreements which constituted the WTO Agreement, namely the multilateral Agreements on Trade in Goods, the General Agreement on Trade in Services and the Agreement on Trade-Related Aspects of Intellectual Property Rights. Greater participation by developing countries in the multilateral trading system was also reflected in the specific commitments they undertook in goods and services. Unlike in the past, every WTO developing country Member now has schedules in goods and services. Each developing country has bound all its agricultural tariffs and some have bound their entire industrial tariff schedules, with minor exceptions. The coverage of bound tariffs on industrial imports into developing countries rose from 14 to 59 per cent by virtue of the commitments made in the Uruguay Round. II.C. S&D TREATMENT IN THE WTO AGREEMENTS Before the Uruguay Round, flexibility in the trade rules focused mainly on the protection of infant industries and non-reciprocity in trade liberalisation (such as through GSP schemes). However, S&D in the WTO Agreements focused mainly on additional categories including, transitional time periods, provisions in favour of least developed countries and provisions relating to technical assistance. The provision of longer time periods for developing countries to implement obligations reflected recognition that these countries lacked sufficient capacity to implement the WTO Agreements. This lack of capacity was to be addressed through the provision of technical assistance. Today in the WTO, S&D provisions can be classified in six main groups. Each of these is treated below. II.C.1. PROVISIONS AIMED AT INCREASING TRADE OPPORTUNITIES These provisions relate to actions to be taken my Members to increase the trade opportunities for developing countries. The majority of these provisions are voluntary in nature and most often than not are couched in 'best endeavour' language. Among these provisions is the 'Enabling Clause' which permits developed Members to grant preferential treatment to developing countries, and also allows developing country Members to enter into regional or global arrangements among themselves for mutual reduction or elimination of trade barriers. Articles IV:1 and 2 of the GATS also aim at increasing trade opportunities for developing countries with the former stipulating that increasing the participation of developing country Members in world trade shall be facilitated through the negotiation of specific commitments, including the liberalization of market access in sectors and modes of supply of export interest to them. Other provisions of this sort include Articles XVIII.2(c), XXXVI.2-5, XXXVII.1(a) & 4 of GATT

74 II.C.2. PROVISIONS WHICH CALL UPON WTO MEMBERS TO SAFEGUARD THE INTERESTS OF DEVELOPING COUNTRIES These provisions relate to actions that are either to be taken or avoided by Members in order to safeguard the interests of developing country Members. For example, Article 12.2 of the TBT Agreement provides that in the preparation and application of technical regulations, standards and conformity assessment procedures, Members must take account of the special development, financial and trade needs of developing country Members. Similarly, Article 10.1 of the SPS Agreement provides that in the preparation and application of sanitary and of phytosanitary measures, Members must take account of the special needs of developing country Members. In addition, Article 15 of the Agreement on Implementation of Article VI of the GATT 1994 (Anti-Dumping Agreement) stipulates that constructive remedies provided for by the Agreement must be explored before applying anti-dumping duties where they would affect the essential interests of developing country Members. Article 9.1 of the Agreement on Safeguards calls for the non-application of safeguard measures on imports from developing country Members if the import share is less than prescribed percentages. Similar provisions of this type include among others: paragraphs 3(i)-(ii), 4, and 5 of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least Developed and Net Food- Importing Developing Countries; Articles 1.2, 3.5(a)(iv)(j) of the Agreement on Import Licensing Procedures; and Articles 4.10, 8.10, 12.10, 12.11; 21.2, 21.7 and 21.8 of the Understanding on Rules and Procedures Governing the Settlement of Disputes. II.C.3. PROVISIONS OFFERING FLEXIBILITY OF COMMITMENTS These provisions offer flexibility to developing countries in their commitments including, allowing them, under certain circumstances and to a certain extent, flexibilities in the application of disciplines or commitments that would otherwise apply to all Members. The majority of these provisions are found in the Uruguay Round Agreements. An integral part of the results of the Uruguay Round was a large increase in the level of tariff bindings for both agricultural and industrial products. In this context, an important provision offering flexibility to developing Members was the acceptance that they could bind tariffs at ceiling levels, often significantly higher than autonomously applied rates. Ceiling bindings give trading partners the security that a maximum level of duty cannot be exceeded, while at the same time giving the developing country concerned the possibility of raising applied rates, if necessary, without contravening their commitments. The Agreement on Agriculture offers flexibilities to developing countries by allowing them lower tariff and subsidy reductions than other Members. For example, Article 6.2 of the Agreement on Agriculture gives developing countries the flexibility to maintain investment subsidies generally available to agriculture and agricultural input subsidies for resource poor farmers. In the case of agricultural export subsidies, Article 9.4 of the Agreement on Agriculture stipulates that developing countries are not required to undertake commitments in respect of subsidies for marketing costs as well as internal transport and freight charges on export shipments during the implementation period. Paragraph 3 of Annex 2 of the Agreement provides flexibility in respect to public stockholding for food security purposes and domestic food aid. With respect to non-agricultural subsidies, Article 27.2(a) of the Agreement on Subsidies and Countervailing Measures recognizes that subsidies may play an important role in economic development programmes of developing countries; in this connection, LDCs and other poor developing countries (a specific list of Members 62

75 with per capita income levels lower than US$1,000) have been exempted from the prohibition on export subsidies. In addition, GATT 1994 incorporates all the provisions on non-reciprocity in trade negotiations existing in the GATT while in Article XIX.2 of the GATS, developing country Members are permitted to open fewer sectors and liberalise fewer types of transactions, while progressively extending market access in line with their level of development. 3 Developing country Members also have the flexibility to attach conditions to the establishment of Foreign Service suppliers. Similar provisions offering flexibility of commitments include among others: Articles XVIII and Article XXXVI.8 of the GATT 1994; Paragraphs (b) and (c) of the Enabling Clause; Article 12.4 of the TBT Agreement; Article 4 of the Agreement on Trade-Related Investment Measures; Article 9.2 of the Agreement on Safeguards. II.C.4. TRANSITIONAL TIME PERIODS These provisions relate to time bound exemptions from obligations otherwise generally applicable to Members. Longer time periods for implementation of obligations by developing countries were provided for in the majority of WTO Agreements, with the exception of two Agreements - the Agreement on the Implementation of Article VI (Anti-dumping) and the Agreement on Pre-shipment Inspection. However most of these transitional periods would have expired now. In some cases, some of the provisions in addition to providing additional time periods for compliance, include modalities through which extensions can be sought. Transitional time periods were introduced during the Uruguay Round reflecting the recognition that implementing some of the WTO Agreements and accompanying reforms could give rise to transitional costs. These costs could either result from the levels of human and institutional capacity required to implement certain Agreements or changes that may need to be made in output and employment as a result of phasing out protection. These costs would vary depending on the Agreement and individual country circumstances. Examples of provisions offering longer time frames for compliance include: Article 15.2 of the Agreement on Agriculture; Articles 10.2 and 10.3 of the SPS Agreement; Article 12.8 of the TBT Agreement; Article 5.2 of the Agreement on Trade-Related Investment Measures; Articles 65.2 and 65.4 of the TRIPS Agreement. II.C.5. PROVISIONS RELATED TO TECHNICAL ASSISTANCE These provisions reflect the recognition that developing countries required assistance in order to fulfil their obligations and tend to feature prominently in those Agreements whose implementation requires significant levels of capacity. The provision of technical assistance is either by developed country Members on a bilateral basis or through the WTO Secretariat or other relevant international organisations. In general, WTO technical assistance seeks to increase the knowledge base of developing country governments about their rights and 3 The point has been made that "few developing countries have matched the generally restriction-free environment for investment in developed and transition economies in sectors covered by their commitments may accentuate rather than diminish the already substantial differences between developed and developing countries in terms of their attractiveness to foreign investors" (WTO, 1999). 63

76 obligations in WTO Agreements and help build their capacity in implementing the Agreements as well as improving their participation in the WTO. In light of the nature of WTO Agreements, WTO technical assistance is becoming increasingly technical and specialized, often using expert consultants or delivered in cooperation with other relevant agencies/organizations. The CTD oversees all issues relating to technical assistance in the WTO except those related to budget; which are addressed in the Committee on Budget and Finance. It is in the CTD that Members consider and adopt the Technical Assistance Plans. In addition, the CTD carries out regular reviews and evaluations of the technical assistance plans. The importance attached to trade-related technical assistance is significant, since it is a mechanism by which developing countries can be assisted to improve their participation as well as reap further benefits from the multilateral trading system. Examples of provisions relating to technical assistance include: Article 9 of the SPS Agreement; Article 11.1, 11.3, 11.4, 11.5, 11.6, of the TBT Agreement; Article 67 of the TRIPS Agreement; Article 27.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes; Article XXV:2 and paragraph 6 of the Annex on telecommunications of the GATS. II.C.6. PROVISIONS IN FAVOUR OF LEAST-DEVELOPED COUNTRIES (LDCS) WTO Provisions for differential and more favourable treatment of developing country Members are all applicable to least-developed country Members as designated by the UN. However, many provisions contain special treatment targeted specifically to LDCs or providing greater flexibility to them compared to that which is accorded to developing countries. For example, the Enabling Clause provides for special treatment of LDCs in the context of any general or specific measures in favour of developing countries. In the provisions on nonreciprocity in trade negotiations in GATT 1994 as well as in the GATS, greater emphasis is laid on not seeking contributions from LDCs. Following the entry into force of the WTO Agreement, a number of new initiatives in favour of least-developed countries were agreed. At the first WTO Ministerial Conference held in Singapore in 1996, Ministers adopted the WTO Action Plan for least-developed countries. Among others, the Plan aims to improve the trade opportunities of LDCs and their integration into the multilateral trading system. In pursuance of this Action Plan, six core agencies the IMF, ITC, UNCTAD, UNDP, the World Bank, and WTO - decided to join forces and established the Integrated Framework for LDCs (the Integrated Framework and its successor the Enhanced Integrated Framework are addressed in more detail later in this chapter). Following the Doha Ministerial Conference in 2001, a WTO Work Programme for LDCs was launched. The implementation of this Programme led to the adoption by the General Council of the Guidelines for the Accession of LDCs in December In the Guidelines, Members agreed that negotiations for the accession of LDCs to the WTO should be facilitated and accelerated through simplified and streamlined accession procedures, with a view to concluding these negotiations as quickly as possible. (Issues relating to the least developed countries will be addressed in more detail later in the component). Examples of provisions in favour of least developed countries include: Articles 15.2, 16.1 and 16.2 of the Agreement on Agriculture; Paragraphs 2(d), 6 and 8 of the Enabling Clause; Article 11.8 of the TBT Agreement; Article 5.2 of the TRIMs Agreement, Articles 66.1 and 66.2 of the TRIPS Agreement; Articles 24.1 and 24.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes. 64

77 III. SOME CONCERNS WITH S&D Despite efforts made to ease obligation requirements of developing countries in the Agreements, by the end of the Uruguay Round, most developing countries still felt that more needed to be done to enhance the effectiveness and operationalization of S&D provisions which for them had so far been largely ineffective. One of the main concerns expressed was that S&D provisions were contained in best endeavour language and merely encouraged Members to take certain actions in favour of developing countries, rather than making these actions mandatory and binding. For example, it was asserted that, notwithstanding the relevant provisions of the SPS and TBT Agreements, Members were not adequately taking account of the special needs of developing countries when preparing and applying sanitary and phytosanitary measures, technical regulations, standards and conformity assessment procedures. Below are some examples reflecting these concerns: PARAGRAPH 1 OF THE ENABLING CLAUSE "Notwithstanding the provisions of Article I of the General Agreement, contracting parties may accord differential and more favourable treatment to developing countries1, without according such treatment to other contracting parties." ARTICLE 9 OF THE SPS AGREEMENT "Members agree to facilitate the provision of technical assistance to other Members, especially developing country Members, either bilaterally or through the appropriate international organizations..." As is evident from the two examples above- some S&D provisions employ purely discretionary language such as "may accord", which implies that developed countries have no strong legal obligation to do so, while others are using best endeavour clauses such as agree to facilitate which are also not legally binding. Sometimes, even when the words contained in provisions seem to be legally binding, de facto they are not. This is shown in the two following examples: 1. Article 10.1 of the SPS Agreement "In the preparation and application of sanitary and phytosanitary measures, Members shall take account of the special needs of developing country Members, and in particular of the least-developed country Members." 2. Article 15 of the Agreement on Implementation of Article VI of the GATT 1994 "It is recognised that special regard must be given by developed country Members to the special situation of developing country Members when considering the application of anti-dumping measures under this Agreement. Possibilities of constructive remedies provided for by this Agreement shall be explored before applying anti-dumping duties where they would affect the essential interests of developing country Members." Both examples use words that indicate a binding commitment such as 'shall' and 'must'. However, the obligation is to 'take into account' or 'give special regard' to the situation of developing countries but there is no consequence if the measure put in place does not reflect the situation/need of a developing country. Article 15 of the Agreement on Implementation of Article VI of the GATT 1994 provides for the possibility of 65

78 constructive remedies to be 'explored' but once this has been done it does not mandate any further action by the investigating authority. To review all S&D provisions contained in the results of the Uruguay Round, you may refer to document WT/COMTD/W/77/Rev.1 and its addenda. In addition, a more up to date compilation of all existing S&D provisions can be found in document JOB(09)/94. These documents are available under the link section and can also be retrieved from the WTO website. S&D IN THE DDA As a result of developing country concerns about the ineffectiveness and lack of operationality of S&D provisions, Ministers at the Doha Ministerial Conference in 2001 reaffirmed that "provisions for special and differential treatment are an integral part of the WTO Agreements" and directed that "all special and differential treatment provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational." 4 Ministers also endorsed the Work Programme on special and differential treatment set out in paragraph 12 of the Decision on Implementation-Related Issues and Concerns. This Decision is available in WTO document WT/MIN(01)/17 of 20 November KEY ASPECTS OF THE DECISION ON IMPLEMENTATION ISSUES 12. Cross-cutting Issues 12.1 The Committee on Trade and Development is instructed: (i) to identify those special and differential treatment provisions that are already mandatory in nature and those that are non-binding in character, to consider the legal and practical implications for developed and developing Members of converting special and differential treatment measures into mandatory provisions, to identify those that Members consider should be made mandatory, and to report to the General Council with clear recommendations for a decision by July 2002; (ii) to examine additional ways in which special and differential treatment provisions can be made more effective, to consider ways, including improved information flows, in which developing countries, in particular the least-developed countries, may be assisted to make best use of special and differential treatment provisions, and to report to the General Council with clear recommendations for a decision by July 2002; and (iii) to consider, in the context of the work programme adopted at the Fourth Session of the Ministerial Conference, how special and differential treatment may be incorporated into the architecture of WTO rules. The work of the Committee on Trade and Development in this regard shall take fully into consideration previous work undertaken as noted in WT/COMTD/W/77/Rev.1. It will also be without prejudice to work in respect of implementation of WTO Agreements in the General Council and in other Councils and Committees. 4 Paragraph 44 of the Doha Ministerial Declaration. 66

79 12.2 Reaffirms that preferences granted to developing countries pursuant to the Decision of the Contracting Parties of 28 November 1979 ("Enabling Clause") should be generalised, non-reciprocal and non-discriminatory. 67

80 IV. WORK PROGRAMME ON S&D Paragraph 44 of the Doha Ministerial Declaration read along with paragraph 12.1 of the Decision on Implementation-Related Issues and Concerns provides the basis for the work that is being carried on S&D since the Doha Ministerial Conference. In the Special Session of the Committee on Trade and Development (Special Session), a total of 88 Agreement-specific proposals were tabled, mainly by the LDCs and the African Group. These proposals which span the majority of the Agreements seek to make S&D provisions existing in WTO Agreements more precise, effective and operational through, among others, changing non-mandatory provisions to mandatory ones by replacing, where it appears, the word 'should' with 'shall'; making transitional time periods open ended; introducing self-declared exemptions from those rules that are not considered development friendly and making technical and financial assistance mandatory. To review the proposals see documents TN/CTD/3/Rev.2; TN/CTD/W/4 and TN/CTD/W/4/Add.1; TN/CTD/W/5 and its Addenda; TN/CTD/W/6; TN/CTD/W/7; TN/CTD/W/8. The Special Session undertook an analysis and examination of these proposals. However despite the mandate contained in paragraph 12 of the Decision on Implementation Related Issues and Concerns for Members "to report to the General Council with clear recommendations for a decision by July 2002", Members could not bridge their differences by that time. They were however, able to agree on the need to set up a Monitoring Mechanism on S&D. The proposal for the establishment of a Monitoring Mechanism was initially tabled by the African Group which envisaged a Monitoring Mechanism that would carry out the regular evaluation of the utilization and effectiveness of S&D provisions and provide a framework for initiating and considering recommendations. The Decision was taken in the General Council on 31 July 2002, to establish a Monitoring Mechanism for S&D and the Special Session was instructed to elaborate the functions, structure and terms of reference of such a Mechanism. For submissions tabled on the Monitoring Mechanism refer to TN/CTD/W/3/Rev.2, TN/CTD/W/9, TN/CTD/W/11, TN/CTD/W/14, TN/CTD/W/15, TN/CTD/W/19, TN/CTD/W/20, TN/CTD/W/21, TN/CTD/W/22, TN/CTD/W/23, TN/CTD/W/26. Failure to meet the July 2002 deadline led to the extension of the deadline to 31 December Lack of agreement on the majority of the Agreement-specific proposals and on the 'way forward' by December resulted in the deadline being further extended to February During the analysis and examination of the proposals, some cross-cutting issues were introduced, including issues relating to the principles and objectives of S&D; definition of a developing country; a single or multitiered structure of rights and obligations, coherence; universal vis-à-vis differentiated treatment; and graduation. The developed-country Members felt that these were important and fundamental issues that needed to be examined in greater depth and that an improved understanding on them would facilitate consensus on the Agreement-specific proposals. However, developing countries did not share this view particularly when it came to the issues of differentiation and graduation. They were generally of the view that the cross cutting issues were not within the mandate of the Doha Ministerial Declaration nor the Decision on Implementation-Related Issues and Concerns. In addition, if they were to be discussed, then that could only happen once work on the Agreement-specific proposals was completed. See the box below for some of the concerns raised with respect to a number of the cross cutting issues. For submissions tabled on the cross cutting issues refer to TN/CTD/W/13, TN/CTD/W/14, TN/CTD/W/20. 68

81 EXCERPTS ON SOME DEVELOPED COUNTRY CONCERNS RELATING TO CROSS CUTTING ISSUES Analysis of the overall objectives of S&D treatment in WTO rules: As a first step, the EC suggests that the CTD analyse the overall objectives of S&D treatment. Such analysis should build on the useful work carried out by the WTO Secretariat in WT/COMTD/W/77/Rev.1 and include both immediate and longer-term perspectives of S&D treatment provisions in existing and future agreements. Work should also consider the expectations of developing countries with respect to S&D treatment supporting their integration into the multilateral trading system: how can S&D treatment lead to integration and not exclusion? In this context, the EC recalls the principle of common but differentiated responsibility, and the need for all Members to participate in and contribute to the multilateral trading system, whether it be by demonstrating political will in the assumption of commitments, by providing and implementing technical assistance, or further market opening, or by carrying out appropriate domestic policies, in order to maximise the benefits for all Members. A clearer definition and understanding of the overall objectives of S&D treatment can help assess the effectiveness of alternative S&D treatment measures and identify the most effective instruments to meet those objectives, and focus attention on areas and countries, where these instruments are most needed. In this context, attention should be given to the current utilisation by developing countries. This broader analysis of S&D treatment objectives can help point to means of fundamentally improving the present approach, as indicated by the African Group in their submission. The exercise would also be useful in identifying cases where provisions have been implemented, but where the expectations in terms of result have not been met because of other circumstances. In particular, and as the African Group points out in their communication, the development needs of developing and least-developed countries require special domestic policies, measures and laws as well as assistance. The EC believes that recommendations flowing from this broader exercise should go beyond the "provision by provision" approach, which has been pursued so far, thus addressing the broader concept, objective and mechanism of S&D treatment in WTO agreements. Communication from the European Communities, TN/CTD/W/13, 1 August 2002 From the outset, a number of developed countries were of the view that a common understanding on the principles and objectives of S&D would facilitate the work of making the existing provisions more precise, effective and operational. On the other hand, a number of developing countries pointed out that the principles and objectives of S&D treatment were clearly laid out in the existing Agreements, such as Part IV of the GATT 1994 and the Enabling Clause. There is a feeling among some Members, largely developed Members, that there is a need to make a further distinction among developing countries, in other words a need to differentiate amongst them. According to the developed countries, while they acknowledge the need for developing countries to be accorded special treatment, some countries may need flexibilities in fulfilling specific obligations which others may not need. As a result, discussing differentiation would be useful in identifying ways to strengthen S&D in a more precise manner. There have been a few developing countries which have acknowledged that real differences exist among developing countries and as a result support S&D that will be targeted to the specific needs of groups of countries, specific sectors, or even individual countries. Like developed countries, these countries do not believe that a one-size-fits-all approach has been or will be effective. However, the majority of developing- 69

82 country Members have argued that there is no clear criteria to distinguish between one developing country and another. Even developing countries with large economies can have a large portion of their population living below the poverty line. During discussions on differentiation, the issue of graduation was also raised. It is generally understood that all Members should be making efforts within their capacity to fulfil the obligations laid down in the WTO Agreements, regardless of their level of development with the goal of becoming more developed. According to developed countries, the provision of S&D should not be granted automatically nor should it be open-ended. Once it has served its purpose, it no longer needs to be provided. As a result they believe a flexible approach to S&D, in line with the individual needs of Members, is necessary and appropriate to strengthen the level of fulfilment of obligations and thus strengthen the MTS. Some developing countries have however argued that graduation processes have been based on criteria which could be described as spurious and therefore has no place being addressed in the WTO. Despite efforts to reach an agreement on the Agreement-specific proposals, by the February 2003 deadline, by that time, Members had only been able to reach an in-principle agreement on 12 Agreement-specific proposals. Lack of progress was largely due to differences in perception on the mandate. On the one hand, developing country Members felt that making the existing provisions more precise, effective and operational would, in some cases, include amending the existing language of those provisions. However, on the other hand developed country Members felt that this would alter Members existing rights and obligations which was not acceptable to them. As a result, in its report to the General Council (TN/CTD/7), the Special Session recommended that the General Council provide clarification, as it considered appropriate, regarding the mandate contained in paragraph 44 of the Doha Ministerial Declaration and paragraph 12 of the Decision on Implementation-Related Issues and Concerns, and the legal and practical means to give effect to it. In the interim, it was suggested that the General Council instruct the Special Session to suspend further work. Since there was no consensus on providing an interpretation of the mandate, it was agreed that the Chairman of the General Council in coordination with the Chairman of the Special Session, undertake consultations on how to take the process forward. In pursuance of this mandate, the Chairman of the General Council held consultations on the basis of which, he circulated an approach paper. The paper was based on two fundamental premises; namely that all the Agreement-specific proposals remained on the table and would be addressed; and that an informal categorization of the proposals was essential in order to address them in an efficient manner. Accordingly, the 88 Agreement-specific proposals were divided into three broad categories. Category I contained 38 proposals comprised of the proposals on which Members had agreed in- principle and proposals on which there appeared to be a greater likelihood of making recommendations. Category II comprised of 38 proposals which were to be referred to other WTO bodies and Category III contained 12 proposals on which there appeared to be a wide divergence of views, and on which progress did not seem possible without a certain degree of redrafting of the original text. From the outset, the proponents were against any referral of the S&D proposals to other bodies because they felt that their capacity constraints would prevent them from actively following these proposals in the different WTO bodies. However, notwithstanding these concerns, 38 proposals (Category II) were referred to negotiating and other WTO bodies. After lengthy and protracted consultations, Members were able to make 27 recommendations (one recommendation related to two proposals) by the end of the Cancún Ministerial Conference in These recommendations are contained in Annex C of the Cancún draft Ministerial text (JOB(03)/150/Rev.2), which like the draft text, was not adopted, owing to the failure of this Ministerial Conference. 70

83 During 2004, Members considered different alternatives to taking the work on S&D forward. But they were unable to make concrete progress in terms of adding more proposals to the package of 28 proposals agreed to in-principle at Cancún. In the August 2004 Decision of the General Council, the Special Session was again mandated to expeditiously complete the review of all the outstanding Agreement-specific proposals and report to the General Council, with clear recommendations for a decision, by July The Special Session was also instructed to address all other outstanding work, including on the cross cutting issues, the Monitoring Mechanism and the incorporation of S&D into the architecture of WTO rules. The other WTO bodies to which proposals had been referred were also directed to address them expeditiously and make clear recommendations for a decision no later than July While unable to meet this deadline, at the Hong Kong Ministerial Conference held in December 2005, Ministers adopted Decisions on five LDC proposals contained in Annex F of the Hong Kong Ministerial Declaration. The Decisions, indicated in the box below, include a Decision simplifying the waiver process for LDCs; another allowing LDCs to maintain, on a temporary basis, existing measures that deviate from their obligations under the TRIMs Agreement; and three Decisions on Measures in Favour of Least-Developed Countries, two of which seek to improve coherence with other international organizations and the other relating to the provision of duty-free quota-free (DFQF) market access for products originating from LDCs. ANNEX F: Hong Kong Ministerial Declaration 23) Understanding in Respect of Waivers of Obligations under the GATT 1994 (i) We agree that requests for waivers by least-developed country Members under Article IX of the WTO Agreement and the Understanding in respect of Waivers of Obligations under the GATT 1994 shall be given positive consideration and a decision taken within 60 days. (ii) When considering requests for waivers by other Members exclusively in favour of least-developed country Members, we agree that a decision shall be taken within 60 days, or in exceptional circumstances as expeditiously as possible thereafter, without prejudice to the rights of other Members. 36) Decision on Measures in Favour of Least-Developed Countries We agree that developed-country Members shall, and developing-country Members declaring themselves in a position to do so should: (a)(i) Provide duty-free and quota-free market access on a lasting basis, for all products originating from all LDCs by 2008 or no later than the start of the implementation period in a manner that ensures stability, security and predictability. (ii) Members facing difficulties at this time to provide market access as set out above shall provide duty-free and quota-free market access for at least 97 per cent of products originating from LDCs, defined at the tariff line level, by 2008 or no later than the start of the implementation period. In addition, these Members shall take steps to progressively achieve compliance with the obligations set out above, taking into account the impact on other developing countries at similar levels of development, and, as appropriate, by incrementally building on the initial list of covered products. (iii) Developing-country Members shall be permitted to phase in their commitments and shall enjoy appropriate flexibility in coverage. 71

84 (b) Ensure that preferential rules of origin applicable to imports from LDCs are transparent and simple, and contribute to facilitating market access. Members shall notify the implementation of the schemes adopted under this decision every year to the Committee on Trade and Development. The Committee on Trade and Development shall annually review the steps taken to provide duty-free and quota-free market access to the LDCs and report to the General Council for appropriate action. We urge all donors and relevant international institutions to increase financial and technical support aimed at the diversification of LDC economies, while providing additional financial and technical assistance through appropriate delivery mechanisms to meet their implementation obligations, including fulfilling SPS and TBT requirements, and to assist them in managing their adjustment processes, including those necessary to face the results of MFN multilateral trade liberalisation. 38) Decision on Measures in Favour of Least-Developed Countries It is reaffirmed that least-developed country Members will only be required to undertake commitments and concessions to the extent consistent with their individual development, financial or trade needs, or their administrative and institutional capacities. Within the context of coherence arrangements with other international institutions, we urge donors, multilateral agencies and international financial institutions to coordinate their work to ensure that LDCs are not subjected to conditionalities on loans, grants and official development assistance that are inconsistent with their rights and obligations under the WTO Agreements. 84) Agreement on Trade-Related Investment Measures LDCs shall be allowed to maintain on a temporary basis existing measures that deviate from their obligations under the TRIMs Agreement. For this purpose, LDCs shall notify the Council for Trade in Goods (CTG) of such measures within two years, starting 30 days after the date of this declaration. LDCs will be allowed to maintain these existing measures until the end of a new transition period, lasting seven years. This transition period may be extended by the CTG under the existing procedures set out in the TRIMs Agreement, taking into account the individual financial, trade, and development needs of the Member in question. LDCs shall also be allowed to introduce new measures that deviate from their obligations under the TRIMs Agreement. These new TRIMs shall be notified to the CTG no later than six months after their adoption. The CTG shall give positive consideration to such notifications, taking into account the individual financial, trade, and development needs of the Member in question. The duration of these measures will not exceed five years, renewable subject to review and decision by the CTG. Any measures incompatible with the TRIMs Agreement and adopted under this decision shall be phased out by year

85 88) Decision on Measures in Favour of Least-Developed Countries Paragraph 1 Least-developed country Members, whilst reaffirming their commitment to the fundamental principles of the WTO and relevant provisions of GATT 1994, and while complying with the general rules set out in the aforesaid instruments, will only be required to undertake commitments and concessions to the extent consistent with their individual development, financial and trade needs, and their administrative and institutional capabilities. Should a least-developed country Member find that it is not in a position to comply with a specific obligation or commitment on these grounds, it shall bring the matter to the attention of the General Council for examination and appropriate action. We agree that the implementation by LDCs of their obligations or commitments will require further technical and financial support directly related to the nature and scope of such obligations or commitments, and direct the WTO to coordinate its efforts with donors and relevant agencies to significantly increase aid for trade-related technical assistance and capacity building. The LDCs would have liked to keep certain elements relating to the DFQF market access Decision such as rules of origin, under consideration in the Special Session. However a number of Members were of the view that the Decision had been adopted and was no longer up for negotiation. As a result, LDCs are pursuing issues related to the implementation of the Decision, such as the need for transparency on the products to be covered in the initial 97 per cent, in the Negotiating Group on Market Access (NGMA) and the Special Session of the Committee on Agriculture. Additionally, they are pursuing a simplification of rules of origin in the NGMA. For more details on the submissions tabled by the LDCs please revert to documents TN/CTD/W/30 and 31. For further information on the status of the implementation of the Decision please revert to the section on the work of the Regular Session of the Committee on Trade and Development in which Members are to notify any schemes relating to the implementation of the Decision. Also see further information on market access for LDCs under the section relating to LDCs. In addition to adopting the five LDC proposals, the Special Session was instructed to complete the review of all the outstanding Agreement-specific proposals and report to the General Council, with clear recommendations for a decision at the latest by December The Special Session was also instructed to resume work on all other outstanding issues, including on the cross cutting issues and report on a regular basis to the General Council. The bodies to which the Category II proposals were sent were also instructed to complete consideration of those proposals and report periodically to the General Council, with the objective of ensuring that clear recommendations for a decision are made no later than December There is no progress on these proposals at the current stage. In pursuance to the Hong Kong mandate, Members have been continuing their consideration of the remaining Agreement-specific proposals and possible elements of a Monitoring Mechanism on S&D. On the proposals, Members have engaged in text based discussions on six of the 16 remaining Agreement-specific proposals. On the six Agreement specific proposals, discussions in the Special Session remained divided on the status of the last language considered. Some developed countries do not view the language considered on 19 May 2010 as accurately reflecting the divergences existing amongst them. They call the Chair to reflect these divergences by appropriately bracketing other parts of the text. Some developing countries believe this language of 19 May 2010 is a proper reflection of the work that has been done by Members and that what is left is for Members to close the remaining gaps reflected in the two brackets in the text. 73

86 The language of 19 may 2010 is reflected in the box below: 19 May 2010 SPECIAL AND DIFFERENTIAL TREATMENT Agreement-specific Proposals (24-25) SPS Agreement Article 10.3 The General Council agrees that with a view to ensuring that developing country Members are able to comply with the provisions of the SPS Agreement, they shall be eligible for specified, time-limited exceptions in whole, or in part, from the obligations under this Agreement. Any developing country with difficulties to comply with the provisions of the SPS Agreement may request such exceptions to the SPS Committee. In this regard, the SPS Committee shall give [positive and] expeditious consideration to such a request and take a decision [as appropriate] no later than at the third meeting at which the request is considered and in any case within 12 months, on any request made by such Members under Article 10.3 of the Agreement, taking into account their individual financial, trade and development needs. Furthermore, Members shall facilitate the provision of technical assistance either bilaterally or through the appropriate international organisations, if requested by a developing country Member in relation to its request for a specific time-limited exception. (28-30) Agreement on Import Licensing Procedures Article 3.5 While all Members shall endeavour to provide import statistics with respect to products subject to import licensing for the purpose of enhanced transparency, the General Council agrees that for purposes of subparagraph (a)(iv) of Article 3.5, developing country Members shall not be expected to do so in cases where this will cause them additional administrative or financial burden beyond their capacity. The General Council further agrees that: (a) Article 3.5(j) of the Agreement implies [mandatory and] non-discretionary obligations on the part of the Members; and (b) In the allocation of licenses, special consideration shall be accorded to existing and new importers of products originating in developing, and in particular least-developed country Members. (79) Proposal by India on Article 10.2 of the SPS Agreement Where the appropriate level of sanitary or phytosanitary protection allows scope for the phased introduction of new sanitary or phytosanitary measures, longer time-frames for compliance, not less than six months, shall be accorded, upon request, on products of interest to developing country Members so as to maintain opportunities for their exports. For a more detailed description of the state of play on the Agreement specific proposals, see the Chairman's report to the 21 April TNC available in document TN/CTD/26. Due to the divergences that exist on the remaining ten proposals, the Chairman decided that these proposals be set aside until Members put forward new ideas or texts in order to take the process forward. Discussions on elements of a Monitoring Mechanism have focused on fine tuning the scope, structure, and functions of this Monitoring Mechanism. Discussions on these elements have built on the common elements 74

87 that had already been identified in a non-paper tabled by the Chairman in April 2007-whose latest revision appears as an Annex in the Chairman's Report mentioned above (TN/CTD/26). While Members are yet to agree on these elements, the basic aim of the Mechanism would be to monitor the implementation and effectiveness of S&D provisions in the existing WTO Agreements, General Council and Ministerial Decisions, as well as any S&D elements that may arise out of the Doha Round negotiations. In addition, it is expected to be simple, practical, efficient and to compliment other existing mechanisms in the WTO. For more information on existing monitoring processes/mechanisms currently in place in the WTO see JOB(07)/215. For more details on the current language being considered in negotiations on the Monitoring Mechanism, see here below: THE MONITORING MECHANISM PREAMBLE Recalling the General Council Decision of July 2002 on establishing a Monitoring Mechanism 5 1. Members hereby agree to establish the Monitoring Mechanism (hereinafter referred to as the Mechanism) with the following: Scope, Functions/Terms of Reference, Operations and Reappraisal. SCOPE 2. The Mechanism will apply to all Special and Differential Treatment (S&D) provisions contained in multilaterally agreed WTO Agreements, Ministerial and General Council Decisions. FUNCTIONS/ TERMS OF REFERENCE 3. The Mechanism shall act as a focal point within the WTO to analyse and review the implementation of S&D provisions. 4. Through a bottom-up, horizontal and transparent process enabling information sharing, the Mechanism shall regularly evaluate the utilization and effectiveness of S&D provisions with a view that they are effectively and better implemented to facilitate integration of developing and least developed Members into the multilateral trading system. 5. Following discussions amongst Members, the Mechanism, shall propose actions, as appropriate, including to the General Council, to strengthen and improve the implementation of the S&D provisions The Mechanism will be a simple, practical, efficient and transparent one which complements, not replaces, relevant review mechanisms in other bodies of the WTO. 7. The Mechanism is not a negotiating body. However, this does not preclude recommendations or proposals for initiating negotiations in other WTO Bodies on S&D provisions reviewed in the Mechanism. 5 Two textual proposals on the Preamble have been tabled, which Members continue to discuss. 6 There is general understanding among Members that the formulations in paragraphs 4 and 5 may be merged into one paragraph - two textual proposals have been tabled, which Members continue to discuss. 75

88 8. The review procedure under this Mechanism shall not prejudge the legal nature of the S&D provision(s) under consideration nor affect Members' rights and obligations under the WTO Agreements, in any way. 7 OPERATIONS 9. The Mechanism shall operate in dedicated sessions of the Committee on Trade and Development (CTD DS) and shall convene its sessions periodically, at least twice a year and follow the same rules and procedures applied by the Committee on Trade and Development. 10. Monitoring of S&D provisions in the Mechanism shall be undertaken on the basis of inputs/submissions made by Members, as well as on the basis of reports received from other WTO Bodies to which inputs/submissions by Members could also be made. 11. Prior to each session of the Mechanism, the WTO Secretariat shall compile a factual background document, based on, as appropriate, inputs/submissions made by Members and WTO bodies, including information relating to operation, utilization and implementation of S&D provisions. REAPPRAISAL OF THE MECHANISM 12. The Mechanism will be reviewed three years after its entry into force and thereafter, when necessary, taking into account its actual functioning and evolving circumstances. 7 This paragraph also continues to be discussed as reflected in my report. 76

89 V. S&D PROVISIONS RESULTING FROM THE 8TH WTO MINISTERIAL CONFERENCE V.A. ACCESSIONS A Ministerial Decision on LDC Accessions was adopted. 8 It directs the Sub-Committee on LDCs to develop recommendations to further strengthen, streamline, and operationalize the 2002 Guidelines on LDC Accession, notably by including benchmarks in the area of goods and by exploring such possibility in the area of services. The Decision also calls for transparency in the accession negotiations, the need for special and differential treatment for LDCs, as well as technical assistance and capacity building for completing the process of LDCs still in accession to the WTO. The Sub-Committee is mandated by this Decision to make recommendations to the General Council no later than July These negotiations are meant to improve the 2002 Guidelines on LDC Accession, themselves an instrument of flexibility for LDCs in Accession. At this moment, ten Members of the LDC Consultative Group are at varying stages of the accession process. 9 Another two; Samoa and Vanuatu have completed their accession process and are expected to formally join the WTO in 2012, after their national ratification processes., present an opportunity for LDCs to shape the outcome. V.B. SERVICES A Ministerial Decision on Preferential Treatment to Services and Service Suppliers of Least-developed countries was adopted at MC8. 10 This is a significant step in the history of the multilateral trading system as it extends preferences, comparable to those in trade in goods under the Enabling Clause, to trade in services. The waiver creates the permissive environment allowing willing WTO Members to give LDCs more favourable access than that given to other WTO Members (developing and developed countries) V.C. INTELLECTUAL PROPERTY: A Ministerial Decision was adopted on the 'Transition period for Least Developed Countries under Article 66.1 of the TRIPS Agreement' which extends the deadline for LDCs to comply with the TRIPs Agreement. 11 Ministers invite the TRIPS Council to give full consideration to a duly motivated request from Least Developed Country Members for an extension of their transition period under Article 66.1 of the TRIPS Agreement, and report thereon to the WTO Ninth Ministerial Conference. The current extension is to expire on 1 July It is contained in WTO Document WT/L/ Afghanistan, Bhutan, Comoros, Equatorial Guinea, Ethiopia, Lao People s Democratic Republic, Liberia, Sao Tomé and Principe, Sudan, Yemen. 10 Contained in WTO Document WT/L/ Contained in WTO Document WT/L/

90 VI. FUTURE OF S&D IN THE WTO It is important to note that the work being carried out in the Special Session is only a small part of the overall work being carried out in the WTO on S&D. S&D cuts across the different negotiating areas and as such is being addressed in the specific negotiating bodies. The result of such work is likely to be targeted as it enables countries to raise specific concerns relating to fulfilling their obligations in specific negotiating areas, as a result enabling the negotiated S&D provisions to be specific to the needs of particular countries in fulfilling particular obligations. Strengthening and operationalizing existing S&D provisions, which is the concern of the CTD Special Session remains important. Ensuring that these provisions and any future S&D provisions actually help developing countries fulfil their obligations and further integrate into the multilateral trading system makes work on developing a Monitoring Mechanism on S&D very important. Not only will it help to keep under review the implementation and effectiveness of S&D provisions and provide recommendations where necessary, to improve this, it will also form an important part of the overall surveillance system of the WTO. 78

91 MODULE 4 The work of the CTD ESTIMATED TIME: 1 hour OBJECTIVES OF MODULE 4 To introduce and explain: the role of the Committee on Trade and Development (CTD) in the WTO; and, the work carried out by the CTD. 79

92

93 I. INTRODUCTION The Committee on Trade and Development (CTD) was first established in the GATT system following the inclusion of Part IV. When establishing the WTO, Members similarly agreed to have a Committee dealing with development-related issues. Thus, the Marrakesh Agreement specifically mentioned a Committee on Trade and Development as one of the bodies to be established in the new organization. It should be kept in mind that the terms of reference (TOR) of the WTO's CTD differ from those of its predecessor, perhaps due to the much broader scope of the WTO as an organization relative to what was the GATT. In particular, while the TOR of the original CTD focused very much on the review and application of Part IV, those of the WTO's CTD agreed to on 31 January 1995 in a decision by the General Council start with a broad mandate for the Committee to serve as a focal point for the consideration and coordination of work on development in the WTO. This clearly covers a large area, and indeed the issues that the CTD deals with do vary, in particular as Members are free to suggest for inclusion on the CTD's agenda whatever topic they may feel is relevant. What follows is an overview of some of the recent work of the Committee. TERMS OF REFERENCE OF THE CTD 1 (a) To serve as a focal point for consideration and coordination of work on development in the World Trade Organization (WTO) and its relationship to development-related activities in other multilateral agencies. (b) To keep under continuous review the participation of developing country Members in the multilateral trading system and to consider measures and initiatives to assist developing country Members, and in particular the least-developed country Members, in the expansion of their trade and investment opportunities, including support for their measures of trade liberalization. (c) To review periodically, in consultation as appropriate with the relevant bodies of the WTO, the application of special provisions in the Multilateral Trade Agreements and related Ministerial Decisions in favour of developing country Members, and in particular least-developed country Members, and report to the General Council for appropriate action. (d) To consider any questions which may arise with regard to either the application or the use of special provisions in the Multilateral Trade Agreements and related Ministerial Decisions in favour of developing country Members and report to the General Council for appropriate action. (e) To provide guidelines for, and to review periodically, the technical cooperation activities of the WTO as they relate to developing country Members. 1 Taken from document WT/L/46 General Council Decision of 31 January

94 II. THE WORK OF THE COMMITTEE ON TRADE AND DEVELOPMENT (CTD) SOME EXAMPLES II.A. CONSIDERATION OF NOTIFICATIONS UNDER THE ENABLING CLAUSE The Committee on Trade and Development (CTD) has traditionally been the forum for Members' consideration of notifications under the Enabling Clause (the contents of the Enabling Clause were summarized above). These include notifications by developed countries of their GSP schemes, as well as notifications by developing countries of regional trade agreements (RTAs) among them. Up to early 2007, the CTD's practice in considering both GSP schemes and RTAs among developing countries was essentially based around the relevant notification and related documents provided by the notifying Member or Parties. Questions on the notification could then be posed by other Members, orally or in writing. Following this practice was, however, not without its problems in the CTD, in particular as Members occasionally differed in their interpretation of the type and the extent of information that needs to provided when a notification is made under the Enabling Clause. Issues of this nature arose in the context of GSP notifications as well as in the context of notifications of RTAs among developing countries. The CTD has experienced cases of notifications remaining on the CTD's agenda over several meetings because of such differences in views. In December 2006, the General Council took a decision to establish a Transparency Mechanism for RTAs. 2 The Mechanism lays out a procedure by which all RTAs notified to the WTO, including those under the Enabling Clause, are to be considered by Members. While the CTD continues to be the forum for the consideration of RTAs under the Enabling Clause, the procedures stipulated in the Mechanism to consider these RTAs are the same as for RTAs notified under other provisions. 3 For example, each notified RTA is to be considered on the basis of a "factual presentation" of that RTA, prepared by the WTO Secretariat. In addition, as a rule a single formal meeting is to be devoted to consider each notified RTA. It should also be noted that the CTD has been instructed to meet in dedicated sessions to consider RTAs in the context of the Transparency Mechanism. Clearly, therefore, the establishment of the Transparency Mechanism for RTAs has significantly altered the way in which RTAs notified under the Enabling Clause are considered by Members. At the time of writing, four agreements had been considered by the CTD according to the new procedures. More recently, in December 2010, the General Council took a decision to establish a Transparency Mechanism for Preferential Trade Arrangements (PTAs). 4 In this context, PTAs are taken to mean non-reciprocal 2 Decision of 14 December 2006 Transparency Mechanism for Regional Trade Agreements (WT/L/671). At the time of writing, this Transparency Mechanism is being applied on a provisional basis. 3 RTAs notified under GATT Article XXIV and GATS Article V are considered in the Committee on Regional Trade Agreements. 4 Decision of 14 December Transparency Mechanism for Preferential Trade Arrangements (WT/L/806). This Mechanism, like the RTAs Transparency Mechanism, is being applied on provisional basis. 82

95 preferential schemes. The new Transparency Mechanism lays out a procedure, similar to what is laid out in the RTAs Transparency Mechanism, by which PTAs notified under the Enabling Clause (which essentially means GSP schemes) are to be considered by the CTD. It should be added that, under the provisions of the Transparency Mechanism for PTAs, the CTD is not only tasked with the consideration of GSP schemes, but also other PTAs notified to the WTO. These would include preferential schemes offered by developed countries that have been granted a waiver to the non-discrimination principle by the General Council, as well as the preferential schemes offered by some developing countries to the products of LDCs. The new Transparency Mechanism has therefore brought a whole new layer of responsibility to the CTD. II.B. DEVELOPMENTAL ASPECTS OF THE DOHA ROUND Paragraph 51 of the Doha Declaration instructs the CTD and the Committee on Trade and Environment, within their respective mandates, to each act as a forum to identify and debate developmental and environmental aspects of the negotiations, in order to help achieve the objective of having sustainable development appropriately reflected. The CTD's discussion on the basis of paragraph 51 has focused on the developmental aspects of the Doha negotiations. It is particularly worth mentioning that, since 2005, the Committee has undertaken its discussion on the basis of a paper that the Secretariat was requested to prepare on the subject. The paper looks separately at each of the negotiating areas in order to identify the parameters of the development dimension in that area, the specific issues of interest to developing countries and the possible gains to them from the conclusion of the negotiations. The paper has been updated on a number of occasions to take into account developments in the negotiations. 5 Members have generally welcomed the paper as a document that provides a useful overview of the negotiations, and what is at stake for developing countries. II.C. COMMODITIES The problems faced by commodity-dependent developing countries have long been an issue of discussion for the international community. Several international organizations have been working for decades to find longterm solutions and ways forward for these countries. Among the challenges these countries face, one could mention volatility in commodity prices, an observed long-term downward trend in prices over several decades, difficulties in moving up the value chain and difficulties in diversifying out of commodities in their primary form. Concerns relating to tariffs and tariff escalation, non-tariff barriers and agricultural subsidies put in place by some countries have been cited as particular issues that need to be addressed. In 2003, three African countries Kenya, Uganda and Tanzania brought commodities onto the agenda of the CTD. In their submission to the Committee, 6 they laid out some of the problems that commodity-dependent 5 The most recent version of the paper can be found in document WT/COMTD/W/143/Rev.5. 6 WT/COMTD/W/

96 countries faced, and requested the CTD to take action to address these problems. Discussion ensued in the CTD as to how best to respond to the request. It was agreed that, in order to get a sense of the extent of the problem, the Committee should hear from international organizations working on commodity issues. The CTD's approach to dealing with the commodities issue was noted by Members at the Hong Kong Ministerial Conference in December In paragraph 55 of the Ministerial Declaration, Ministers instructed the CTD, within its mandate, to intensify its work in cooperation with relevant international organizations. In its consideration of the issue thus far, the CTD has heard from the Common Fund for Commodities, the Food and Agriculture Organization (FAO), the International Trade Centre UNCTAD/WTO (ITC), the International Coffee Organization, the International Cocoa Organization and the United Nations Conference on Trade and Development (UNCTAD). With regard to UNCTAD, the important commodities mandate given to this organization at its 2008 conference in Accra, Ghana, has been recognized by the CTD. Part of the trade-related solution to the commodities problem may be found in the context of the Doha negotiations. Indeed, after the discussion started in the CTD, specific negotiating proposals were put forward by some African countries, and the draft modalities text by the Chair of the agriculture negotiations 7 makes specific mention of commodities. That being said, the commodities problem is not just a trade issue, but is also a broader development issue. Efforts are required at both the national level and the international level to help lift millions of poor farmers dependent on commodities out of poverty. It is in this broader context that governments, international organizations and others must work together to find long-term solutions to the commodities problem. II.D. HONG KONG MINISTERIAL DECISION ON DUTY-FREE AND QUOTA-FREE MARKET ACCESS FOR LDCS At the Hong Kong Ministerial Conference in December 2005, Ministers took a decision concerning market access for products from LDCs. In particular, it was agreed that developed country Members would provide duty-free and quota-free (DFQF) market access for at least 97 per cent of products from LDCs, by 2008 or at the start of the implementation period of the Doha Round. It was further agreed that developing countries declaring themselves in a position to do so should also provide DFQF market access to LDCs, though it is stipulated that this group of countries will be permitted to phase in their commitments and have appropriate flexibility in coverage. For purposes of this section, it is particularly worth noting that Members are to notify the implementation of the schemes adopted under this decision every year to the CTD, which is to annually review the steps taken to provide DFQF market access to the LDCs and report to the General Council for appropriate action. Members agreed in early 2006 that a standing item would be placed on the CTD's agenda concerning DFQF market access for LDCs. Under this agenda item, Members have provided information on the steps they are taking, or have already taken, to provide DFQF market access to LDCs. The LDCs have taken the floor during the meetings to call on Members to comply with the provisions of the DFQF decision. It should be noted that most developed countries now provide 97 per cent or more DFQF market access to products from LDCs. A number of developing countries have provided information on the initiatives they are taking in the context of 7 The latest version can be found in document WT/AG/W/4/Rev.4 of 6 December

97 the DFQF decision. implementation of the decision. To date, the CTD has undertaken five of its mandated annual reviews of the II.E. TECHNICAL ASSISTANCE As was seen above, the CTD's TOR specifically mention the Committee's role with regard to technical cooperation/assistance for developing countries. In practical terms, the most important part of the CTD's work in this regard arises when it considers the technical assistance plan of the WTO, which the Secretariat now prepares on a biennial basis. It is for Members in the CTD to comment on the plan, and for the Committee to eventually adopt it. Only after the plan has been adopted by the CTD can it be implemented. Other issues relating to technical assistance are also discussed in the CTD. For example, the Secretariat reports regularly on the status of the various technical assistance activities of the WTO. Since technical assistance has become very important in the context of the WTO's work, a separate section below explains in more detail what the organization is doing in this regard. 85

98

99 MODULE 5 The least-developed countries and the WTO ESTIMATED TIME: 2 hours OBJECTIVES OF MODULE 5 To introduce and explain: the special status of the LDCs in the WTO; the work programme for the LDCs; a number of WTO studies and reports on LDCs; the DDA and the LDCs; and, LDCs and TRIPS. 87

100

101 I. INTRODUCTION The least-developed countries (LDCs) category was established in 1971 by the UN as a special group of developing countries characterized by a low income level and structural impediments to growth. Since the establishment of the category, the Committee for Development Policy (CDP) an expert body under the UN ECOSOC has been responsible for undertaking a review of the LDC list every three years on the basis of which it advises the ECOSOC regarding countries that should be added to or those that could be graduated from the list. The CDP identified a list of 25 LDCs in 1971 based on a set of criteria (per capita income, share of manufacturing in GDP and adult literacy). While the specific benchmarks have evolved over the past years, these criteria currently are based on three indicators: a low income, as measured by the gross national income per capita; weak human resources, as measured by a composite index; 1 and a low level of economic diversification, as measure by another composite index. 2 In almost four decades, only three countries have graduated from LDC status 3 : Botswana (1994); Cape Verde (2007); and Maldives (2011). However, the number of LDCs has nearly doubled from 25 in 1971 to 48 in The 48 LDCs comprise roughly 11 per cent of the world's population, but account for close to 1 per cent of the world's GDP. The LDCs contribute around 1 per cent of global trade in goods and half of one per cent of global trade in commercial services. Thirty-three LDCs are in Africa, 14 are in the Asia-Pacific and one in the Caribbean. The LDC category often overlaps with other structural categories of developing countries. Sixteen LDCs are landlocked developing countries (LLDCs) while ten LDCs are small island developing states (SIDS). LDC economies are characterized by their limited productive capacities, export dependence on a limited number of products (often primary products), poor infrastructure, low levels of productivity that limit the level, diversity, and quality of economic output in these countries. WTO uses the UN list to identify which countries are LDCs in the WTO. Out of 48 LDCs, 31 were Members of the WTO at the end of WTO LDC Members represent one fifth of WTO Membership (153). Samoa and Vanuatu completed their accession process in 2011 and are expected, after national ratification, to officially join the WTO in 2012, increasing the number of LDC WTO Members to 33. This reduces to ten, the number of LDCs which are at various stages of their accession process in the WTO, representing 40 per cent of acceding governments. The acceding LDCs enjoy observer status in the WTO. 1 The Human Assets Index is based on indicators of life expectancy at birth, per capita calorie intake, combined primary and secondary school enrolment, and adult literacy. 2 The Economic Vulnerability Index is based on the share of manufacturing in gross domestic product, the share of the labor force in industry, annual per capita commercial energy consumption, and the merchandise export concentration index reported by the United Nations Conference on Trade and Development. 3 The graduation criteria were first introduced in The CDP at that time determined that countries with a population exceeding 75 million should not be considered for inclusion in the list of LDCs. The concept of a smooth transition was introduced in the graduation procedures in 2004, which stipulates a three-year transition period following a decision by the UN General Assembly of a particular LDC's graduation. 89

102 II. SPECIAL STATUS OF LDCS IN THE WTO The LDCs are granted special recognition in the WTO, and enjoy special flexibilities in the implementation of WTO Agreements, including through Special and Differential Treatment (S&D) Provisions. S&D provisions can generally be classed in five main groups: provisions aimed at increasing trade opportunities through market access; provisions requiring WTO Members to safeguard the interest of developing countries; provisions allowing flexibility to developing countries in rules and disciplines governing trade measures; provisions allowing longer transitional periods to developing countries; and provisions for technical assistance. LDCs are accorded special S&D treatment over and above that given to other developing countries. For instance, the Agreement on Agriculture, negotiated during the Uruguay Round, exempted LDCs from undertaking reduction commitments, even though the average tariff reduction that developing countries were required to make was 24 per cent. The average binding level for the LDCs is around 78 per cent, with a number of them having bound rates above hundred per cent. 4 Another example of unique flexibility given to the LDCs is that under the Agreement on Subsidies and Countervailing Measures, the LDCs are exempted from prohibition of export subsidies on non-agricultural products this derogation is not allowed to any other WTO Member. Many WTO Agreements provide transition periods to the LDCs so as to implement those Agreements in a gradual manner. One such example is the TRIPS Agreement. The LDCs are given ten years of transition period to implement the TRIPS Agreement, with the possibility to extend this period further. The LDCs have been allowed further extensions of this transition period (see section F: LDCs and TRIPS). Out of 48 LDCs, 31 are Members of the WTO, two more are expected to formally join the WTO in 2012, and 10 are negotiating their accession to the organization. WTO takes the LDC list as decided by the UN. LDCs benefit from a wide range of S&D provisions of WTO Agreements and Decisions. The degree of flexibility is over and above that provided to other developing countries. A summary of S&D provisions are provided in document TN/CTD/W/33. 4 Bound tariffs are like a maximum ceiling that could be applied for any tariff line, thereby providing certainty and market security to exporters and investors alike. Applied tariffs normally cannot exceed these bound rates that are indicated in every countries schedule to the WTO. 90

103 III. IMPLEMENTATION OF THE WTO WORK PROGRAMME FOR THE LDCS 5 LDCs receive special attention by WTO Members. Issues of importance to LDCs can be addressed across all WTO Committees, depending on the nature of the issue. In order to give particular attention to issues of specific interest to LDCs, the Sub-Committee on LDCs (hereafter "the Sub-Committee") was established in July 1995 as a subsidiary body to the Committee on Trade and Development (CTD). The Sub-Committee is the only dedicated platform to address all issues of interest to the LDCs by WTO Members. Following a directive from Members at the Doha Ministerial Conference, a WTO Work Programme (hereafter the "Work Programme") for the LDCs was adopted in Since then, the Sub-Committee has been focusing on the implementation of this Work Programme. 6 The Work Programme has been designed to address issues of systemic importance and relevance to the LDCs, and seeks to add value to the work carried out in other Committees in the WTO. The Sub-Committee meets three to four times a year, and at each meeting it takes up two to three of the seven core issues identified in the Work Programme: (i) examining market access issues for LDCs; (ii) monitoring trade-related technical assistance and capacity-building initiatives for LDCs; (iii) supporting agencies assisting with the diversification of LDCs' production and export base; (iv) mainstreaming trade-related elements of the Programme of Action for the LDCs for the decade , into WTO's work; (v) reviewing the participation of LDCs in the multilateral trading system; (vi) monitoring the accession of LDCs to the WTO; (vii) reviewing measures taken by Members in fulfilment of WTO Ministerial Declarations/Decisions. (i) Market Access for LDCs Examination of LDCs' market access is a central feature of the Work Programme. At the Sub-Committee, Members examine market access initiatives taken in favour of LDCs, under the Enabling Clause. 7 The LDCs use this forum to seek clarifications or additional information on market access measures/initiatives taken by Members. For instance, since the Doha Ministerial Conference, the Sub-Committee has considered market access initiatives notified by Australia, Canada, Japan and Switzerland. The Work Programme mandates an annual review of market access for LDC exports. In order to assist this review by the Sub-Committee, the Secretariat undertakes comprehensive analysis on LDC trade and market access conditions faced by them in their export markets. Such documents also contain information on LDCs' export profile, major products, major markets, tariff treatment of LDC exports and track improvements made in the market access situation of LDCs. The latest note in this regard is contained in WT/COMTD/LDC/W/51 (October, 2011).The review of the market access situation of LDCs each year reveals that LDC exports are characterized by a highly concentrated export profile. This concentration is manifested in the composition of 5 Document WT/COMTD/LDC/11. 6 This section focuses on the implementation of the WTO Work Programme for the LDCs. 7 In 1979, GATT Contracting Parties adopted the decision on "Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries" (the so-called Enabling Clause"), a derogation to the MFN principle, which allows developed country Members to give differential and more favourable treatment to developing countries and forms the legal basis for the GSP. 91

104 their exports as well as in their export destinations. Oil and minerals dominate the aggregate LDC exports. However, there are substantial variations or differences in individual trade performances among the LDCs. While these can be attributed to a mix of domestic and external factors, the major challenge for LDCs remains that of addressing supply-side constraints and diversification of their export base. The market destination of LDC exports has also been limited. In 2010, China moved to the first place as market destination for LDCs exports, followed by the EU and the US. These three economies clearly dominate as market destinations for LDC exports Non-reciprocal preferential schemes have played an important role in promoting LDC exports, in particular, in developed country markets, many of which today provide 100 or near 100 per cent duty free and quota free (DFQF) market access. An example is the EU's Everything but Arms scheme (EBA). In addition, developed Members have been providing preferences to LDCs under various multilateral, regional and bilateral channels. The African Growth and Opportunity Act (AGOA) and Haitian Hemisphere Opportunity through Partnership Encouragement Act (HOPE-II) are illustrations of initiatives taken by the developed countries to promote imports from LDCs. The developing countries have also started to adopt preferential market access schemes for LDCs. Brazil, China and India today offer a significant degree of DFQF market access to LDC products. A number of decisions have been taken by WTO Members to provide opportunities for improved market access for LDCs. In 2009, the General Council adopted the extension of the waiver concerning preferential tariff treatment to merchandise trade from LDCs, originally granted in June 1999 (WT/L/304), for a further ten years i.e. until 30 June This waiver extension, contained in WT/L/759, continues to allow the developing country Members to provide preferential tariff treatment to products of LDCs without being required to extend the same tariff rates to like products of any other Members. The extension of the Waiver is hoped to encourage developing countries to establish preferential schemes for LDCs, and to further strengthen South- South cooperation in trade. In 2009, the General Council also adopted, among others, two waivers for US trade preference programmes, namely the AGOA and the Caribbean Basin Economic Recovery Act (CBERA). The Waiver Decision concerning AGOA (WT/L/754), which will remain valid until 30 September 2015, allows the US to provide duty-free treatment to eligible products originating in beneficiary sub-saharan countries which include a large number of LDCs. The Waiver concerning the CBERA (WT/L/753) was renewed until 30 December 2014, allowing the US to provide preferential tariff treatment to eligible products originating in designated beneficiary countries, including an LDC namely Haiti. Every year the WTO Secretariat prepares factual studies on the market access situation of LDCs. These studies reveal that most LDCs continue to depend upon a very small range of export products, with on average, the top three export commodities for each LDC accounting for over 70 per cent of each country's total merchandise exports. Oil and minerals account for a significant share of total LDC exports. The year-to-year variations in aggregate LDC exports are mainly attributed to the fluctuations in the prices of petroleum products. Nevertheless, the share of LDC exports in world merchandise trade has seen a gradual improvement which stood at slightly above one per cent in 2010 (1.08 per cent).. On the other hand, while in some sectors such as tourism and travel services LDCs have witnessed robust growth, the share of LDCs in global services trade remained static hovering around less than half of one per cent in the last decade ( 0.51 per cent in 2010). 92

105 (ii) Accession of LDCs to the WTO The Work Programme for the LDCs attaches high importance to the accession of LDCs to the WTO. The Sub- Committee on LDCs monitors the progress in the accession of LDCs, including based on periodic Secretariat reports on the state of play of LDC accessions. The Chairpersons of LDCs' Accession Working Parties occasionally come to the Sub-Committee to brief Members on the progress made in their respective Working Parties. In so doing, the Sub-Committee serves as a forum where acceding LDCs and Members exchange views and share experiences. Since 2009, regular dialogues, in particular under the aegis of the Sub- Committee, are held between acceding LDCs and WTO Members to deepen engagement on LDCs' accessions and to build on efforts for strengthened transparency. 8 Accession is a complex and time consuming exercise. It requires considerable human and institutional capacity to effectively participate in the accession process. Given the cumbersome and onerous procedures, the acceding LDCs have sought a more streamlined process of accession, under terms consistent with their development, financial and trade needs and commitments not higher than those of LDC Members in the WTO. As a result, and pursuant to the calls made at the Doha Ministerial Conference in 2001, WTO Members in 2002 adopted the Guidelines on LDC Accessions, which are aimed at accelerating and facilitating the accession of LDCs, and sets out Guidelines with respect to: (i) market access; (ii) WTO rules; (iii) the process; and (iv) trade-related technical assistance and capacity building. Specifically, the WTO Members are called upon to exercise restraint in seeking concessions and commitments on trade in goods and services from acceding LDCs, provide them with full benefits of special and differential treatment, grant transitional periods foreseen under specific WTO agreements to enable the acceding LDCs to effectively implement their commitments and obligations, and not seek commitments to accede to any of the plurilateral trade agreements or participate in any optional sectoral market access initiative as a precondition for accession to the WTO. 9 As a clear illustration of the importance the WTO membership attaches to the accession of LDCs to the WTO, WTO Ministers, during the 8th WTO Ministerial Conference in December 2011 adopted a Decision on Accession of LDCs, to operationalize further the 2002 Guidelines on LDC Accessions, in particular introducing the concept of benchmarking, as well as including elements on transparency, S&D and technical assistance and capacity building. 10 The 2002 Guidelines provided new impetus to LDC accessions, including the adoption of the accession packages for Cambodia and Nepal by WTO Members at the Fifth Ministerial Conference held in Cancún, Mexico, in September They became the first two LDCs to complete their accession under Article XII of the WTO Agreement. The Guidelines have also activated accessions of other LDCs which are at various stages of the process. In December 2007, Cape Verde concluded the accession negotiation before its graduation from the LDC status and became a full member in July In 2011 much progress was made in the area of accessions of LDCs, with Samoa and Vanuatu both completing their accession process, reducing the number of acceding LDCs to ten. The Sub-Committee on LDCs played an instrumental role in developing the The 2009 dialogue report is contained in document WT/COMTD/LDC/15. The report of the dialogue held in 2010 can be seen in document WT/COMTD/LDC/M/56. 9 The 2002 LDC Accession Guidelines are contained in document WT/L/ Document WT/L/ Cape Verde graduated from the LDC status effective 1 January

106 Guidelines on LDC Accessions and does so again in following up on the 2011 Ministerial Decision to operationalize them further. The Sub Committee on LDCs, through the Work Programme, regularly monitors the implementation of the Guidelines. Some of the challenges faced by the LDCs in accession process and the steps taken in response to these challenges are highlighted in document WT/COMTD/LDC/W/44. Efforts have been made to facilitate and streamline the accession process for LDCs. For example, the number of formal Working Party meetings - the forum where the accession negotiations are conducted has been reduced as much as possible for acceding LDCs, compared to other accessions. For non-resident delegations, formal or informal Working Party meetings are often scheduled on the margins of Geneva Week, a biannual briefing event organized by the WTO Secretariat which brings all non-resident delegations to Geneva. This pragmatic approach is aimed at placing greater emphasis on focused informal consultations between interested Members and the acceding LDC with the possibility of the Secretariat acting as a proxy in the negotiations. This has been done with a view to accelerating the accession process and lessening the financial and human resource burdens on the acceding LDCs. The Guidelines on LDCs' Accession emphasize the importance of technical assistance and capacity building in all aspects of the accession process. Most LDCs in the process of accession have joined the Enhanced Integrated Framework (EIF) or are currently seeking to be included in the programme. The preparation of the Diagnostic Trade Integration Studies (DTIS) as part of the EIF process has been found to stimulate domestic debate on trade reform reinforcing the potential synergy between the EIF and the accession process. Concretely, LDCs have the possibility to use the diagnostics phase of the EIF in support of trade reform and mainstreaming trade policy into their national development strategies and to request financial support for assistance to their accession process. Despite efforts to facilitate the accession of LDCs, their accession process is subject to a number of challenges including human and institutional capacity constraints. The WTO Members as well as the Secretariat recognize these difficulties. The 2011 Ministerial Decision on LDC Accession is proof of Members' willingness to act on this. The good offices of the Director-General, periodic (annual) reports on LDC accessions, regular dialogues on LDC accessions including the review of the implementation of the 2002 LDC Accession Guidelines and reports by the LDC Working Party Chairs are expected to further advance the LDC accessions in the WTO. 12 Each accession process involves negotiations between the acceding country and interested WTO Members. LDC accessions receive priority in the organization. LDC Accession Guidelines were adopted in 2002, calling upon Members to exercise restraint in seeking commitments and concessions from acceding LDCs. The Secretariat has taken a number of steps to facilitate and accelerate LDC accessions. Regular dialogues between Members and the acceding LDCs are being held. The acceding LDCs continue to urge for full and faithful implementation of the Accession Guidelines, which led WTO Ministers in 2011 to adopt a Decision to further operationalize these Guidelines to make LDC accession less onerous. 12 The 2011 annual report by the Director-General is contained in document WT/ACC/15. 94

107 (iii) Trade-Related Technical Assistance (TRTA) and Capacity Building Initiatives for LDCs TRTA and Capacity-building initiatives are an integral part of the Work Programme and regularly feature on the agenda of the Sub-Committee meetings. WTO's TRTA, the implementation of the EIF, of the Standards and Trade Development Facility (STDF), as well as technical assistance provided by other agencies are regularly reviewed at the Sub-Committee. LDCs are the primary beneficiaries of the WTO's TRTA, which aims at assisting developing countries adjust to WTO rules and disciplines, implement obligations and exercise the rights of membership, including drawing on the benefits of an open, rules-based multilateral trading system. The delivery of TRTA is based on a Biennial Technical Assistance and Training Plan, adopted by Members. 13 The plan accords special priority to LDCs. Specific products have also been developed for LDCs, in recognition of the particular challenges faced by LDCs in the multilateral trading system. For example, three-week introduction courses for the LDCs are organized two times a year (one for the Anglophone LDCs while another one for the Francophone). Moreover, a two-week advanced course for LDCs is to start in In delivering national TRTA activities, the Secretariat has allocated three activities to each LDC per year, compared to two activities for other developing countries. Other TRTA activities involving LDCs include two or three - months training courses (Geneva and regions), specialized training courses, the Reference Centre Programme, Geneva Week for non-resident Members and Observers, trainee and internship programmes and support provided during the Trade Policy Reviews. In addition, financial support is provided to LDCs to participate in WTO Ministerial Conferences. The number of TRTA activities delivered by the WTO Secretariat has reached 450 to 500 per year. On average, LDCs are associated with 40 to 45 per cent of those activities, if not more. Furthermore, whenever possible, priority is also given to LDCs for Geneva based training courses and for specialized training on a particular subject matter. 14 The Secretariat provides a number of trainee and internship programmes, which include the Mission Internship Programme (MIP) and the Netherlands Trainee Programme (NTP). These internship programmes enable officials from LDCs to enhance their knowledge of the multilateral trading system, strengthen their understanding of the WTO, and support their Permanent Representations to the WTO in participating more actively in the daily activities at the WTO, and thereby facilitating the implementation of Members' commitments in the WTO. The WTO also funds interns to assist the rotating coordinator of regional groupings, including of the WTO LDCs' Consultative Group. Steps have been taken by the WTO to meet the special challenges faced by the Non-residents and to enhance their participation in the multilateral trading system. [Thirteen] LDCs do not have resident Missions in Geneva. In order to ensure that non-residents are kept abreast of developments in the WTO, the Secretariat organizes "Geneva Week" twice a year. In addition to the organization of Geneva Week, the Secretariat regularly sends briefing notes and news summaries to the non-residents. The Reference Centre Programme is another way 13 The latest Biennial Plan is contained in document WT/COMTD/W/180 ( ). 14 Advanced Trade Policy Courses of twelve weeks each are annually organized at the WTO headquarters. In addition, the Secretariat organizes Regional Trade Policy courses of two months each in five different regions - the Caribbean, English-speaking Africa, French speaking Africa, Asia and the Pacific, and Latin America, to which LDCs are also invited to participate. 95

108 through which the Secretariat disseminates trade related information and documents to Members through an electronic link to the WTO. Most of the LDC Members are covered under the Reference Centre Programme. WTO's core competence in TRTA lies in strengthening human and institutional capacity in developing countries and LDCs. The WTO cannot, on its own, meet the full complexity of the trade and development challenges faced by LDCs in their integration into the multilateral trading system. One such challenge is associated with their supply-side constraints. In recognition of the need for a broad based assistance for LDCs, WTO collaborates with other multilateral institutions equipped with appropriate technical expertise and financial resources. Some of WTO's partnership arrangements are: the EIF, the STDF, with as the umbrella, the Aid for Trade Initiative. The EIF: The six core Agencies - the IMF, the ITC, UNCTAD, UNDP, the World Bank, and the WTO established the first version of the IF in 1997, with a view to building trade capacity in the LDCs. The programme has since been constantly improved which has led to the current Enhanced Integrated Framework (EIF) The EIF is an international partnership of LDCs and their development partners (bilateral, regional and multilateral) to support the LDCs to be more active players in the global trading system thereby making trade a real engine of growth and a tool to implement their national development strategy. The EIF is aid trade in action for LDCs as it provides the concrete tools to LDCs to generate funds over and above those available in the EIF's Trust Fund. 15 At the Hong-Kong Ministerial Conference in 2005, WTO Members endorsed the enhancement of the IF, which comprises three elements: (i) provide increased, predictable, and additional funding on a multi-year basis; (ii) strengthen the IF in-country, including through mainstreaming trade into national development plans and poverty reduction strategies; more effective follow-up to Diagnostic Trade Integration Studies (DTISs) and implementation of action matrices; and achieving greater and more effective coordination amongst donors and IF stakeholders, including beneficiaries; (iii) improve the IF decision-making and management structure to ensure an effective and timely delivery of the increased financial resources and programmes. The EIF became de-facto operational in2008. An Executive Secretariat (ES) has been established, housed in the WTO, which, inter alia, provides day-to-day support to the EIF beneficiaries. The United Nations Office for Project Services (UNOPS) plays an active role as EIF's Trust Fund manager. The EIF is currently helping 47 LDCs. Twenty-three donors have so far made contributions to the Multi-Donor EIF Trust Fund. An important aspect of the EIF is the preparation of a DTIS which assesses the competitiveness of the country's economy and identifies impediments to effective integration into the multilateral trading system and global economy. Based on the findings of the DTIS, an Action Matrix is developed with a view to feeding traderelated priorities into their PRSPs and donors' financing fora. The EIF is a mechanism for the LDCs to access broader Aid for Trade funding. The STDF: The STDF, which was formally launched in 2002, assists developing countries in enhancing their expertise and capacity to analyse and implement international sanitary and phytosanitary (SPS) standards, improving their human, animal and plant health situation, and hence their ability to gain and maintain market access. In doing so, it raises awareness on the importance of SPS issues, coordinates among technical cooperation providers, mobilizes funds, and facilitates the exchange of experiences and dissemination of good practice in relation to SPS-related technical cooperation. 15 For further details, please refer to the EIF website: 96

109 The STDF aims to devote at least 40 per cent of project grant resources to LDCs and other Low Income Countries. Since its inception in 2002, the STDF has consistently met this target by operating in synergy with other initiatives in the WTO, notably Aid for Trade and the EIF. Various projects have been developed and funded by the STDF in LDCs based on SPS needs identified in the DTISs prepared under the EIF process. For more information on the STDF, including its structure, on-going activities and projects, visit the STDF website ( Aid for Trade: The EIF and STDF are concrete examples of aid for Trade. The Aid-for-Trade initiative was launched in 2005 at the Hong Kong Ministerial Conference. The Hong Kong Ministerial Declaration states that: "Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade. Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access." 16 The Aid-for-Trade is the trade-related component of official development assistance (ODA). It includes assistance for (i) trade-related infrastructure; (ii) building productive capacity; (iii) formulating trade policy and regulations; (iv) trade-related adjustment; and (v) any other trade related assistance. Aid for Trade has placed a spotlight on the nexus between trade, growth, aid and development. It is not a new concept, neither it refers to a new global development fund. The Aid-for-Trade initiative encourages the better utilization of existing mechanisms and channels to consolidate support for trade capacity building. WTO's role in the Aid-for-Trade Initiative is that of advocacy, analysis and debate, using its convening power and monitoring functions to mobilize Aid-for-Trade financing, to highlight the needs of its Members and Observers, and to showcase effective implementation. Since the launch of this Initiative, WTO has facilitated three Global Reviews of Aid for Trade (2007, 2009 and 2011). The Third Global Review, held in 2011 showed that Aid for Trade is achieving results. The Aid for Trade activities are being carried out on the basis of a Work Programme..The most recent Aid for Trade Work Programme, entitled "Deepening Coherence" is in document WT/COMTD/AFT/W/30. Technical assistance continues to be important in enhancing LDCs integration into the multilateral trading system. Work on technical assistance and capacity building initiatives has taken into account the constraints faced by the LDCs in the multilateral trading system. LDCs are accorded special priority in the delivery of WTO's TRTA, and every year the LDCs are associated with 40 to 45 per cent of TRTA undertaken by the WTO Secretariat. The focus of WTO's TRTA is to build human and institutional capacity in the LDCs to assist them to effectively integrate into the multilateral trading system. In collaboration with other agencies, WTO seeks to address supply-side and other capacity constraints of LDCs in trade. The focus on Aid for trade, the EIF (which is Aid for Trade in action for LDCs) and STDF are just a few examples of WTO's collaboration with other partners. 16 See document WT/AFT/1. 97

110 (iv) Participation of LDCs in the multilateral trading system The Work Programme for the LDCs attaches importance to enhancing the participation of LDCs in the multilateral trading system. The WTO Secretariat has accorded special attention to the needs and concerns of LDCs' participation in the multilateral trading system. This is reflected in, inter alia, (i) the creation of a dedicated LDC Unit in the WTO Secretariat; (ii) day-to-day support provided to the WTO LDCs' Consultative Group; (iii) priority accorded in the delivery of WTO technical assistance and training; and (iv) the partnership arrangements with other institutions to meet supply-side challenges of LDCs. The LDC Unit was established in February 2003 with a view to bringing coherent attention and approaches to LDC-issues dealt within the WTO Secretariat. Housed within the Development Division, the Unit is the focal point for LDC issues in the Secretariat, serving dedicated bodies for LDCs such as the Sub-Committee on LDCs and the WTO LDCs' Consultative Group (and the African Group), as well as representing the organization at the EIF meetings. The participation of LDCs in the work of the WTO has seen a gradual improvement over the last decade, especially since the launch of the Doha negotiations in The WTO LDCs' Consultative Group in Geneva, commonly called the LDC Group, was set up in January The Geneva-based LDC delegations, often joined by trade officials from capitals, meet on a regular basis at the WTO. The Group meets at experts/trade officials' level several times a week, often on a daily basis at the WTO. In addition, the Group meets at an Ambassadorial level, generally once a week. The Coordinatorship function of the Group rotates, generally every six months. At all formal, informal, and "green room" meetings of the WTO, the Coordinator of the LDC Group speaks on behalf of the LDCs. The Group provides a platform to identify LDC interests, brainstorm, coordinate and articulate their positions. Today, the Group has become the key base for LDCs' participation in the DDA negotiations or other work in the WTO, initiating the Group's proposals and statements, as well as forging alliances with other groups on issues of common interest. The Group plays an instrumental role in organizing and servicing the periodic LDC Trade Ministers' meetings. The first LDC Trade Ministers' meeting was held in 2001 in Zanzibar, Tanzania. Since then, the LDC Trade Ministers are meeting at least every two years, normally preceding the WTO Ministerial Conference. The Declarations adopted in these meetings provide the overarching guidelines to the LDC negotiators in Geneva. Greater efforts are being made by the WTO Secretariat to help LDCs participate effectively in the multilateral trading system. The LDC Unit in the Secretariat serves as the Institution's focal point for addressing the needs of LDCs. The launch of the DDA negotiations in 2001 witnessed the rise of the LDCs to the centre stage of the decision making process of the WTO. The LDC Group in the WTO is one of the most active informal groups in the WTO. (v) Diversification of LDCs' Production and Export Base The Work Programme calls for the Sub-Committee to consider proposals for technical assistance and capacitybuilding programmes consistent with WTO's mandate, and to support the work of other agencies, to assist in the diversification of LDCs' production and export base. Pursuant to this call, the Sub-Committee regularly 17 For more information about the activities of the LDC Group, see website: 98

111 invites multilateral agencies such as the ITC, UNCTAD and UNIDO, to share with WTO Members their initiatives and activities undertaken to assist in the diversification of LDCs' production and export base. The Sub- Committee thus provides a forum for information sharing and discussion on assistance given to the LDCs by other agencies and contribute to the information flows and coordination of TRTA provided by those agencies. (vi) Mainstreaming Trade-related Components of the UN LDC-III Brussels Programme Of Action (decade ), and the LDC-IV Istanbul Programme of Action (decade ) into the Work of the WTO The Work Programme for LDCs includes the monitoring of the WTO-relevant aspects of the Brussels Programme of Action for the LDCs for the Decade (BPOA), adopted at the Third UN Conference on LDCs (LDC-III) in Brussels in Adapting it to more recent developments, there are suggestions in the Sub Committee on LDCs to update the LDC Work Programme, to instead refer to the Istanbul Programme of Action for the Decade (IPOA), adopted by the Fourth United Nations Conference on Least Developed Countries (LDC IV), held at Istanbul in May, In 2001, at the same year the BPOA was adopted, the Doha Ministerial Declaration called on Members to consider means of implementing the traderelated elements of the BPOA into the work of the WTO. Since the adoption of the Work Programme for the LDCs, the Sub Committee has monitored the implementation of the trade-related elements of the BPOA. In the decade , the measures taken in the WTO have significantly contributed to achieving the goals and objectives of the BPOA. During the mid-term review of the Programme of Action in September 2006, the WTO Director-General submitted a report which provided information on the implementation of commitments in the area of trade. The report is contained in document WT/COMTD/LDC/13. In 2010, the DG submitted a Report covering the full decade , contained in document WT/COMTD/LDC/17, which is also available as a WTO Brochure. The report was an input into the preparations for LDC-IV. UN LDC-IV was held in Istanbul in May 2011, undertook an assessment of the results of the ten year action programme contained in the BPOA, and adopted the Istanbul Programme of Action for the decade , containing new measures and strategies for the next decade. The IPOA's main goal is to halve the number of LDCs by 2020 through a combination of strong economic growth, greater gender equality, decreased vulnerability to economic shocks and natural disasters and better governance. Trade proved to be one of the most difficult issues in the negotiations leading to the adoption of the IPOA. The Programme calls for a "timely implementation of Duty-Free Quota-Free (DFQF) market access on a lasting basis for all LDCs in line with the Hong Kong Ministerial Declaration" and "the abolition or reduction of arbitrary or unjustified trade barriers". Measures taken in the WTO in favour of LDCs over the past decade have significantly advanced the goals of the BPOA, in particular addressing the trade-related commitments contained in it therein. For example, the momentum generated at Brussels in 2001 in providing DFQF market access to LDC products has culminated into a concrete decision in the WTO in The Sub-Committee regularly monitors and discusses the implementation of the elements of the BPOA in so far they fall within the competence of the WTO. Given that the BPOA has been replaced in 2011 by the Istanbul Programme of Action for the Decade , the Sub-Committee will from 2012 onwards monitor the WTOrelevant aspects of the IPOA. Market access and productive capacity building are among the highlights of the IPOA. 99

112 (vii) Follow up to WTO Ministerial Decisions/Declarations The Work Programme for the LDCs invites Members to report on measures taken in fulfilment of WTO Ministerial Decisions/Declarations. The results of the Uruguay Round negotiations recognized the need to ensure LDCs' effective participation in the world trading system and to take measures to improve their trading opportunities. "The Decision on Measures in Favour of Least-Developed Countries", taken by the GATT contracting parties in 1993, which is an integral part of GATT 1994, inter alia, stipulates that, to the extent possible, most-favoured-nation (MFN) concessions on tariff and non-tariff measures agreed in the Uruguay Round on products of export interest to the LDCs could be implemented autonomously, in advance and without staging, and consideration would be given to further improving GSP schemes and other schemes for products of particular export interest to LDCs. It was also agreed to keep under review the specific needs of the least-developed countries and to continue to seek the adoption of positive measures which facilitate the expansion of their trading opportunities. The first WTO Ministerial Conference held in Singapore in 1996 adopted a comprehensive and integrated Plan of Action for the LDCs 18 aimed at providing a set of measures to facilitate implementation of the Decision on Measures in Favour of LDCs. The Plan of Action calls for "closer cooperation" between the WTO and other multilateral agencies. It aims to improve market access for exports of products originating in LDCs including through additional multilateral action and coordination. It also asked WTO to develop, in cooperation with relevant agencies, a comprehensive approach to build trade capacity in the LDCs. The Singapore Ministerial Declaration as well as the Plan of Action for the LDCs reiterates the importance of improving market access for LDC products and invite Members to explore the possibility of granting preferential duty-free access to LDC products. The Ministerial Conference in Singapore in 1996 also agreed to organize a high-level meeting to foster an integrated approach to help LDCs enhance their trading opportunities. 19 Pursuant to that mandate, the High- Level Meeting on Integrated Initiatives for Least-Developed Countries' Trade Development (HLM) was organized by the WTO with the support of other agencies in October This meeting included specific measures to improve market access, to support human and institutional capacity building, and to improve participation of LDCs in the multilateral trading system. It was at this meeting that the first version of the IF was adopted. 20 The high-level meeting was the first of its kind in the WTO and the first initiative to bring together the six agencies in a common endeavour to support LDCs in their trade and trade-related activities. The Second WTO Ministerial Conference held in Geneva in 1998, emphasized the need for effective implementation of the Decision on Measures in Favour of LDCs and urged Members to implement the market access commitments that they had undertaken at the High Level Meeting in Members also committed to improve LDCs' market access conditions on a broad and liberal basis. The WTO Membership reaffirmed its commitment to improving market access conditions for products originating in LDCs, and urged for the implementation of commitments in this regard, undertaken at the High Level Meeting. 18 The Plan of Action is contained in WT/MIN(96)/ The Ministerial Declaration is contained in document WT/MIN(96)/DEC. 20 WT/LDC/HL/1/Rev The Ministerial Declaration is contained in WT/MIN(98)/DEC/1. 100

113 At the Doha Ministerial Conference in November 2001, Ministers recognized the particular vulnerability of the LDCs and committed themselves to "addressing the marginalization of the least developed countries in international trade and to improving their effective participation in the multilateral trading system". 22 The Doha Ministerial Declaration explicitly recognized the particular needs, interests and concerns of LDCs in 21 different paragraphs. 23 Many of the concerns and needs referred to in these paragraphs are being addressed in the on-going Doha Round of negotiations. WTO Ministerial Declarations and Decisions contain provisions calling on Members to take measures to improve LDCs' trading opportunities. The Decision on Measures in Favour of Least-Developed Countries adopted during the Uruguay Round and the Comprehensive and Integrated WTO Plan of Action for the Least-Developed Countries adopted in 1996 are some of the initial instruments which call on Members to undertake measures for the expansion of LDCs' opportunities in the multilateral trading system. Members, through the Doha Declaration, committed to build on these commitments to improve the effective participation of LDCs in the multilateral trading system. 22 The Doha Ministerial Declaration is contained in WT/MIN(01)/DEC/1. 23 These are paragraphs 2, 3, 9, 15, 16, 21-22, 24-25, 26, 27, 28, 32-33, 36, 38-39, 42-43, 44 and

114 IV. SPECIAL STUDIES/REPORTS UNDERTAKEN TO ENHANCE THE UNDERSTANDING OF LDCS AND TO ADVANCE ISSUES OF INTEREST TO LDCS IN THE WTO A number of special studies/reports have been undertaken by the WTO Secretariat upon request by the members since the adoption of the Work Programme, demonstrating the responsiveness of Members towards the cause of the LDCs. Supply-side constraints: The issue of supply-side constraints is frequently referred to by the LDCs in various bodies of the WTO. In this regard, a note was prepared by the Secretariat entitled "Assistance to address supply-side constraints" (WT/COMTD/LDC/W/33). The paper shows how the WTO which recognizes the issue but does not have the competence to address supply-side constraints directly - is working with other partner institutions to meet this challenge. A follow up to the paper (WT/COMTD/LDC/W/33/Add.1) looks at the implementation of the actions identified in the Action Matrices of the DTIS under the IF in so far as these actions relate to strengthening of supply side capacity and identifies factors impeding progress in their implementation. Textile and Clothing: The Agreement on Textiles and Clothing (ATC) expired on 1 January In view of the termination of the ATC and to examine ways to help LDCs in the post-atc period, the Sub-Committee facilitated a study by the Secretariat. The study entitled "Options for LDCs to improve their competitiveness in textiles and clothing business" (WT/COMTD/LDC/W/37) inter alia throws light on the programmes of the IMF and the World Bank related to the textiles and clothing sector and suggests ways to improve non-reciprocal preference schemes extended to LDCs. It also lists other options for LDCs to improve their competitiveness in this sector. Non-tariff measures: Market access for LDCs is determined by both tariff and non-tariff measures. Hence, the Secretariat prepared a note on non-tariff measures (NTMs) on products of export interest to the LDCs (WT/COMTD/LDC/W/39). The note inter alia identifies the types of NTMs faced by LDC merchandise exports and discusses possible avenues by which some of the NTMs could be addressed. Services trade: LDCs as a group represent less than one half of one per cent of world exports of commercial services. However, a number of LDCs rely heavily on services activities. High levels of services activities (and exports) from LDCs often correspond to heightened activity in tourism and transportation services, and remittances from workers abroad. In order to better gauge the situation of LDCs in services trade, following a request from the Sub-Committee, the Secretariat compiled information on the global integration of the services sectors of LDCs. Information on services trade flows as well as service sector reforms have been provided in that compilation (JOB(07)/148). Food crisis: Many LDC exporters of agricultural and food products have been experiencing deficits in their trade balance for a long time. Moreover, food price inflation had produced challenges for the LDCs, especially in 2007 and In view of the importance of the subject matter, at the request of the Sub-Committee, the WTO Secretariat prepared a paper highlighting the price trends in food and agricultural products and their causes, factors affecting production and trade of food and agricultural products in the LDCs, domestic and international trade policy issues associated with the food crisis and the interface between food security and trade in the LDCs. The paper has been issued as document WT/COMTD/LDC/W/

115 As an input into the UN LDC-IV Conference, the WTO Director-General submitted a report providing an analysis of the measures taken in the WTO over the decade towards the attainment of the goals and objectives set out in Brussels Programme Of Action, in particular under Commitment 5, entitled "Enhancing the role of trade in development". The report is contained in document WT/COMTD/LDC/17, also available as a WTO Brochure. The Sub-Committee on LDCs has been responsive to the cause of the LDCs, including by undertaking analytical work to advance issues of interest to LDCs in the WTO. In addition to the regular work as per the mandate of the Work Programme, special studies have been undertaken to enhance the understanding of LDCs on some of the topical as well as systemic issues. 103

116 V. THE DOHA DEVELOPMENT AGENDA AND THE LDCS The Doha Development Agenda (DDA), launched in 2001, has taken a number of decisions in favour of LDCs. Issues of interest to LDCs are being addressed in all areas of the negotiations under DDA. The Work Programme keeps track of the progress made in the negotiating agenda of the LDCs. Some of the major decisions concerning LDCs are summarized below. On 1 August 2004, the WTO General Council adopted a decision commonly referred to as the "July framework agreement". 24 The decision provides a framework for establishing modalities in the negotiations on agriculture and on non-agricultural market access (NAMA) and launches negotiations on trade facilitation. The modalities for both the negotiations on agriculture and NAMA exempt LDCs from reduction commitments, implying that LDCs will not be required to reduce their bound tariffs in either agricultural or non-agricultural products. Similarly, the modalities for negotiations on Trade Facilitation also seek to protect the interest of LDCs and to provide flexibility for undertaking commitments with separate provisions. For instance, it was agreed that LDCs would be required to undertake only those commitments consistent with their individual development, financial and trade needs or their administrative and institutional capabilities. The DDA attaches particular importance to the increased participation of LDCs in services trade. In September 2003, WTO Members adopted the modalities for the special treatment for LDC Members in the negotiations on Trade in Services (TN/S/13). The modalities ensure maximum flexibility for LDCs in undertaking commitments; at the same time, it asks Members to develop mechanisms to provide effective access of LDCs' services and service suppliers. At the Hong Kong Ministerial Conference in 2005, WTO Members agreed to developing methods for the full and effective implementation of the modalities, including appropriate mechanisms for according special priority to sectors and modes of supply of export interest to LDCs. Pursuant to this, at the 8th WTO Ministerial Conference in December 2011, WTO Ministers adopted the Decision on "Preferential Treatment to Services and Service Suppliers of LDCs" ("the Waiver", in document WT/L/847). It enables a derogation from MFN treatment so as to facilitate the extension of preferential market access to LDCs services and service suppliers without having to extend the same treatment to all other WTO Members on an MFN basis. At the Hong Kong Ministerial Conference in 2005 Members also agreed that LDCs are not expected to undertake new commitments in the DDA services negotiations. One of the major outcomes at Hong Kong was the adoption of the five LDC Agreement-specific proposals. These five agreed proposals have strengthened three Special and Differential (S&D) provisions contained in two WTO Agreements and one Decision. The most significant decision among those is the agreement to provide LDCs with duty-free and quota-free market access on a lasting basis for all products originating from them. Apart from that, some key decisions, inter alia, include the following: Requests for waivers by LDCs shall be given positive consideration and a decision taken within 60 days. Moreover, a decision needs to be taken within 60 days upon requests for waivers by other Members exclusively in favour of LDCs; 24 See document WT/L/

117 LDCs have been given new transition period of seven years to maintain existing measures that deviate from their obligations under the TRIMs Agreement. Moreover, LDCs are allowed to introduce new measures that deviate from their obligations under the TRIMs Agreements for a duration of five years. 25 All measures, however, should be phased out by Achieving DFQF market access to developed countries has been the single most important demand of the LDCs in the DDA negotiations. A concrete decision has been taken at the Hong Kong Ministerial Conference which stipulates that developed-country Members shall, and developing-country Members declaring themselves in a position to do so should, provide duty-free and quota-free market access on a lasting basis, for all products originating from all LDCs by 2008 or no later than the start of the implementation period in a manner that ensures stability, security and predictability. It was also agreed that Members facing difficulties at this time to provide so shall provide duty-free and quota-free market access for at least 97 per cent of products originating from LDCs by 2008 or no later than the implementation period. Members have been urged to set out by the end of 2006 the means by which they will implement this decision. Members also agreed to ensure that preferential rules of origin applicable to imports from LDCs are transparent and simple, and contribute to facilitating market access. 26 As a result of the active engagement of the LDC Group in the DDA negotiations, the LDCs have been able to secure a number of concrete decisions in the DDA. Five LDC Agreement-specific proposals were adopted at the Hong Kong Ministerial Conference in The most significant decision among those is the agreement to provide LDCs with DFQF market access on a lasting basis for all products originating from LDCs. The momentum in favour of LDCs continued in 2011 culminating in the 8th Ministerial Conference where three LDCs-specific Decisions were taken: Accession of LDCs, the " Services Waiver" and a TRIPS-related Decision in favour of LDCs. 25 The Agreement on Trade-Related Investment Measures (TRIMs) contains rules on certain investment measures that have a distorting effect on trade in goods. WTO Members are obliged to eliminate those measures that are inconsistent with the Agreement. For LDCs, the elimination was to take place within seven years of the date of entry into force of the Agreement. 26 For the full text of the Decision, see Annex F of the Hong Kong Ministerial Declaration (WT/MIN(05)/DEC). 105

118 VI. LDCS AND TRIPS Since 2001, a number of important decisions have been taken in the context of the Agreement on Traderelated Intellectual Property Rights (TRIPS), which are summarized below: In November 2005, following a request from the LDCs, WTO Members agreed to extend the transition period under Article 66.1 of the TRIPS Agreement for LDCs until 1 July Moreover, at the 8th Ministerial Conference in December, 2011, Ministers decided " to invite the TRIPs Council to give full consideration to a duly motivated request from LDCs for an extension of their transition period under Art of the TRIPs Agreement, and report thereon to the WTO Ninth Ministerial Conference" ( 2013), doc. WT/L/845. The decision essentially allows LDCs more time to provide protection for trademarks, copyrights, and other intellectual property under the TRIPS Agreement. The decision also reiterates developed countries commitment to provide technical and financial cooperation to help LDCs implement the TRIPS Agreement. It is to be noted that in 2002, pursuant to the Doha Declaration, the transition period for LDCs for certain obligations with respect to pharmaceutical products was extended until 1 January The Decision, inter alia, exempts LDCs from providing patent protection (both products and processes) to pharmaceutical products, until 1 January In addition, in December 2005, WTO Members approved an amendment to the TRIPS Agreement the first amendment in a multilateral WTO Agreement- making it easier for poorer countries including LDCs to obtain cheaper generic versions of patented medicines. 29 The decision facilitates exports of pharmaceutical products under compulsory licenses to countries that are unable to produce them. 30 The amendment completes a process that began with the declaration on TRIPS and Public Health that Ministers made at the Doha Ministerial Conference in November In 2003, the TRIPS Council adopted a decision on the "Implementation of Article 66.2 of the TRIPS Agreement", which, inter alia, asks the developed country Members to submit annual reports on actions taken or planned in pursuance of their commitments under Article 66.2, i.e. to promote and encourage technology transfer to LDCs in order to enable them to create a sound and viable technological base. 31 Since then the TRIPS Council has been conducting annual reviews, based on reports from developed countries. Regular activities, including workshops, are being organized by the WTO Secretariat to help LDCs better understand the reports submitted by developed countries pursuant to Article 66.2 of the TRIPS Agreement and enable them to participate more actively in the discussion on this issue. 27 IP/C/ IP/C/ WT/L/ Article 31(f) of the TRIPS Agreement says that production under compulsory licenses must be predominantly for the domestic market. 31 IP/C/

119 Annex Table 1: List of LDCs LDCs WTO Geneva-based Brussels-based Members/Observers Angola M Angola Afghanistan O Afghanistan Bangladesh M Bangladesh Benin M Benin Bhutan O Bhutan Burkina Faso M Burkina Faso Burundi M Burundi Cambodia M Cambodia Central Afr.Rep. M Chad M Chad Comoros O Comoros Congo DR M Congo DR Djibouti M Djibouti Equatorial Guinea O Eritrea No status Ethiopia O Ethiopia Gambia M Gambia Guinea M Guinea 107

120 Guinea Bissau M Haiti M Haiti Kiribati No status Laos P.D.R O Lesotho M Lesotho Liberia O Madagascar M Madagascar Malawi M Malawi Mali M Mali Mauritania M Mauritania Mozambique M Mozambique Myanmar M Myanmar Nepal M Nepal Niger M Niger Rwanda M Rwanda Samoa O Samoa Sao Tome & Principe O Sao Tome & Principe Senegal M Senegal Sierra Leone M Sierra Leone Solomon Islands M Solomon Islands Somalia No status Sudan O Sudan 108

121 Tanzania U.R. M Tanzania U.R. Timor Leste No status Togo M Togo Tuvalu No status Uganda M Uganda Vanuatu O Vanuatu Yemen O Yemen Zambia M Zambia Africa= 33, Asia=9, Pacific=5, Caribbean=1 Total=48, WTO - Members=31, WTO WTO Members=31 WTO Observers=12 109

122 Table 2: Simple Average Bound Tariff Rates of LDCs LDC Member Total Agriculture Non-Agriculture Angola Bangladesh Benin Burkina Faso Burundi Cambodia Central Afr. Rep Chad Congo DR Djibouti Gambia Guinea Guinea Bissau Haiti Lesotho Madagascar Malawi Mali Mauritania Mozambique Myanmar

123 Nepal Niger Rwanda Senegal Sierra Leone Solomon Islands Tanzania U.R Togo Uganda Zambia

124 Table 3: Specific WTO References to Decisions/Declarations in Favour of LDCs ( ) 1. Ministerial decisions and declarations Ministerial decisions and declarations Reference Decision on Measures in Favour of Least-Developed Countries The Legal Texts of the WTO Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries The Legal Texts of the WTO Singapore Ministerial Declaration, adopted on 13 December 1996 WT/MIN(96)/DEC, paragraphs 5, 6, 7, 13, 14, 15 and 22 Comprehensive and Integrated WTO Plan of Action for the Least-Developed Countries WT/MIN(96)/14 Geneva Ministerial Declaration, adopted on 20 May 1998 WT/MIN(98)/DEC/1, paragraphs 5, 6 and 9(c) Doha Ministerial Declaration, adopted on 14 November 2001 WT/MIN(01)/DEC/1, paragraphs 2, 3, 9, 15, 16, 21, 22, 24, 25, 26, 27, 28, 32(i), 33, 36, 38, 39, 42, 43, 44, 50 and 51 Doha Decision on Implementation-Related Issues and Concerns WT/MIN(01)/17, paragraphs 2.2, 3.5, 3.6, 4.4, 5.3, 5.4, 6.2, 8.2, 10.5 and 12.1(ii) WT/MIN(05)/DEC, paragraphs 6, 11, 26, 36, 47, 48, 49, 50, 51, 55, 57, 59; Annex C (paragraphs 3, 9 and 10); and Annex F 2011 Ministerial Decision on Transition period for least-developed countries under article 66.1 of the TRIPs agreement WT/L/ Ministerial Decision on Accession of leastdeveloped countries WT/L/ Ministerial Decision on Preferential treatment to services and service suppliers of least-developed countries WT/L/

125 2. Decisions of the General Council and other bodies Decision Reference Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (the "Enabling Clause") of 28 November L/4903 paragraphs 2(d); 6 and 8 The Enabling Clause provides permanent legal cover for the Generalized System of Preferences, for S&D provisions under GATT agreements, for certain aspects of regional or global preferential agreements among developing countries, and for special treatment for least-developed countries. Waiver for Preferential Tariff Treatment of Least-Developed Countries (15 June 1999), which allows developing country Members to offer preferential tariff treatment for products from LDCs. WT/L/304 WTO Work Programme for Least-Developed Countries WT/COMTD/LDC/11 Guidelines on the Accession of Least-Developed Countries WT/L/508 Extension of the Transition Period Under Article 66.1 of the TRIPS Agreement for Least-Developed Country Members for Certain Obligations with respect to Pharmaceutical Products IP/C/25 2. Decisions of the General Council and other bodies(cont'd) Least-Developed Country Members Obligations Under Article 70.9 of the TRIPS Agreement with respect to Pharmaceutical Products WT/L/478 Implementation of Article 66.2 of the TRIPS Agreement IP/C/28 Extension of the Transition Period under Article 66.1 for Least-developed Country Members IP/C/40 113

126 Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health WT/L/540, paragraphs 1(b), 2(a)(ii), 4, 6(i) and 7; and Annex Modalities for the Special Treatment for Least- Developed Country Members in the Negotiations on Trade and Services TN/S/13 Modalities for the Treatment of Autonomous Liberalization TN/S/6, paragraph 14 Guidelines and Procedures for the Negotiations on Trade and Services S/L/93, paragraph 2 The Doha Work Programme WT/L/579, paragraphs 1(d), 24 and 45; Annex B, paragraphs 4, 9, 10 and 14; Annex C, paragraph (c); and Annex D, paragraphs 2, 3, 4, 5 and 6 114

127 Table 4: List of LDC Submissions in the DDA Negotiations ( ) Negotiating Group/Committee Title/issue WTO reference (Date) Agriculture: Special Session of the Committee on Agriculture LDCs proposal on Rules of Origin TN/CTD/W/30/Rev.1 TN/MA/W/74/Rev.1 TN/AG/GEN/20/Rev.1 10 February 2011 Cotton TN/AG/GEN/12 TN/AG/SCC/GEN/3 16 February 2006 Duty-Free and Quota-Free Market Access: Implementation of the Decision on Measures in Favour of LDCs of Annex F of the Hong Kong Ministerial Declaration of December 2005 TN/AG/GEN/23 TN/MA/W/78 TN/CTD/W/31 30 June 2006 Special products and Special Safeguard Mechanism TN/AG/GEN/17 11 May 2006 (Joint submission G33, African Group, ACP and LDC) Food Aid TN/AG/GEN/13 6 March 2006 (Joint submission by the African and LDC Groups) Poverty reduction: Sectoral initiative in favour of cotton TN/AG/GEN/4 16 May 2003 (Joint Proposal by Benin, Burkina Faso, Chad and Mali) 115

128 Negotiating Group/Committee Title/issue WTO reference (Date) NAMA: Negotiating Group on Non-Agricultural Market Access List of Products JOB(07)/167 Enjoying Non-Reciprocal Preferences 2 November 2007 Non-Tariff Barriers Proposal on Procedures for the Facilitation of Solutions to NTBs TN/MA/W/88 23 July 2007 (Joint submission by the African Group, Canada, EC, LDC Group, NAMA -11, New Zealand, Norway, Pakistan and Switzerland) Duty-Free and Quota-Free Market Access: Implementation of the Decision on Measures in Favour of LDCs of Annex F of the Hong Kong Ministerial Declaration of December 2005 TN/MA/W/78 TN/AG/GEN/23 TN/CTD/W/31 30 June 2006 LDCs' Proposal on Rules of Origin TN/MA/W/74 TN/AG/GEN/20 TN/CTD/W/30 12 June 2006 Modalities that could be adopted for the participation of the LDCs in the on-going negotiations for the improvement of market access for non-agricultural products TN/MA/W/22 8 January

129 Negotiating Group/Committee Title/issue WTO reference (Date) Services: Special Session of the Council on Trade in Services Draft text for a waiver Decision JOB/SERV/18 29 June 2010 LDC Group Request on Mode 4 JOB(06)/ May 2006 Implementation of the Modalities for the Special Treatment for Least Developed Country Members in Trade in Services Negotiations: Key Questions for Discussion JOB(05)/ June 2005 A Mechanism to Operationalize Article IV: 3 of the GATS TN/S/W/59 28 March 2006 Draft Modalities for the Special Treatment for Least developed Country Members in the Negotiations on Trade in Services TN/S/W/13 7 May 2003 Draft Modalities for the Special Treatment for Least developed Country Members in the Negotiations on Trade in Services JOB(02)/205 6 December 2002 Proposal under the GATS Article XIX:3 for the Modalities for the Special Treatment for Least Developed Country Members under the Provision of Paragraph 3 of Article IV JOB(02)/30 21 March

130 Negotiating Group/Committee Title/issue WTO reference (Date) Trade Facilitation: Technical assistance and Capacity Building TN/TF/W/ July 2007 (Joint submission by the Core Group of Developing Countries, the ACP, African and LDC Groups) S&D: Special Session of the Committee on Trade and Development Duty-Free and Quota-Free Market Access: Implementation of the Decision on Measures in Favour of LDCs of Annex F of the Hong Kong Ministerial Declaration of December 2005 TN/CTD/W/31 TN/AG/GEN/23 TN/MA/W/78 30 June 2006 LDCs' Proposal on Rules of Origin TN/CTD/W/30 TN/AG/GEN/20 TN/MA/W/74 12 June 2006 Special and Differential Treatment Provisions TN/CTD/W/4 24 May 2002 TN/CTD/W/Add.1 1 July 2002 Special Session of the Dispute Settlement Body Supplementary Communication concerning the Text for LDC Proposals JOB(03)/70 9 April April 2003 Text for LDC Proposal on Dispute Settlement Understanding Negotiations TN/DS/W/37 22 January 2003 Negotiations on the Dispute Settlement TN/DS/W/17 118

131 Understanding 9 October 2002 TRIPS Council Doha Work Programme the Outstanding Implementation Issue on the Relationship between the TRIPS Agreement and the Convention on Biological Diversity WT/GC/W/564/Rev.2/ Add.6 TN/C/W/41/Rev.2/ Add.6 IP/C/W/474/Add.6 16 November 2007 Request for an Extension of Transitional Period under Article 66.1 of the TRIPS Agreement IP/C/W/ October 2005 Implementation of Article 66.2 of the TRIPS Agreement IP/C/W/ November 2002 Mechanism for Ensuring the Monitoring and Full Implementation of the Obligations under Article 66.2 of The TRIPS Agreement in Accordance with Paragraph 11.2 of the Doha Decision on Implementation-Related Issues and Concerns IP/C/W/357 5 July 2002 Aid for Trade Task Force Aid for Trade An LDC Perspective WT/AFT/W/22 29 June

132 Table 5: Declarations by LDC Trade Ministers ( ) Title WTO reference (Date) Sixth LDC Trade Ministers' Meeting, October 2009: Dar Es Salaam Declaration WT/L/ October 2009 Fifth LDC Trade Ministers' Meeting, February 2008: Maseru Declaration WT/L/ March 2008 Fourth LDC Trade Ministers' Meeting, June 2005: Livingstone Declaration WT/L/614 7 July 2005 Third LDC Trade Ministers' Meeting, 4-5 May 2004: Dakar Declaration WT/L/ May 2004 Second LDC Trade Ministers' Meeting, 31 May- 2 June 2003: Dhaka Declaration WT/L/ June 2003 First LDC Trade Ministers' Meeting, July 2001: Zanzibar Declaration WT/L/409 6 August

133 MODULE 6 The work programme on small economies (WPSVES) ESTIMATED TIME: 1.5 hours OBJECTIVES OF MODULE 6 To introduce and explain: the genesis of the work programme on small economies (WPSVES); the SVEs characteristics and problems; and, proposals and decisions on SVEs. 121

134

135 I. GENESIS OF THE WPSVE The genesis of the development interests and concerns of Small and Vulnerable Economies (SVEs) in the WTO Doha Round can be traced back to at least three initiatives in other international institutions and processes. The first is the United Nations where group of developing countries called Small Island Developing States (SIDS) has been quite active in presenting their special development challenges and interests. The second is the Commonwealth Secretariat where the request by a group of former British colonies led to the examination of their specific development situation which pointed out that the Commonwealth countries with populations smaller than 1.5 million had particular economic development challenges that could be addressed by special trade rules. The third is the Free Trade Agreement of the Americas where since its beginning has had a Working Group on Small Economies to look at the particular problems these countries face in their regional trade integration. These processes together with ample economic literature have resulted in a generalized view that the small economies have certain characteristics and face particular challenges that could require a separate treatment under the Multilateral trading System. The main concerns of the small economies relate to what they consider is their high vulnerability, concentration of exports in a few products, high transportation costs to reach their main markets, and a general lack of capacity. Small economies are a group of Members which are not considered to constitute a separate subcategory of developing countries in the WTO. Therefore, during the Uruguay Round small economies undertook the same type of commitments as other developing countries and were not subject to any specific special and differential treatment. In several aspects the small economies consider that their situation is more akin to that of the LDCs than to most of the other developing countries. Accordingly, small economies would like to receive treatment that is comparable to that which is given to LDCs, that have seen their policy space reduced to a lesser extent. Small economies have felt that their loss of policy space has not been compensated by the gains accrued to them in the WTO, mainly due to a lack of capacity to benefit from increased market access and for some countries due to the erosion of the trade preferences they have enjoyed in the markets of certain developed countries. With the above considerations in mind the small economies pushed for special recognition of their situation in the WTO. During the 1998 Geneva Ministerial conference there was a first reference to the small economies in the Ministerial Declaration. On this occasion Ministers expressed deep concern "over the marginalization of least-developed countries and certain small economies." The main countries behind the small economies initiative are: Antigua and Barbuda, Barbados, Belize, Cuba, Dominica, Dominican Republic, El Salvador, Fiji, Grenada, Guatemala, Honduras, Jamaica, Mauritius, Nicaragua, Papua New Guinea, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Solomon Islands, and Tonga. 123

136 II. THE DOHA MANDATE AND THE CTD IN DEDICATED SESSION The launch of a new round of negotiations in Doha, and a round which would have development at its heart, provided the small economies proponents with an excellent opportunity to have a distinct work programme within the WTO to address their development interests and concerns. The Doha Ministerial declaration in Paragraph 35 establishes a Work Programme on Small Economies which was launched as part of the Doha Development Agenda. The objective of this Work Programme is to "frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members." 35. We agree to a work programme, under the auspices of the General Council, to examine issues relating to the trade of small economies. The objective of this work is to frame responses to the traderelated issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members. The General Council shall review the work programme and make recommendations for action to the Fifth Session of the Ministerial Conference. As mandated in the Doha Ministerial Declaration the Work Programme on Small Economies would be done under the auspices of the General Council. In March 2002 the General Council instructed the CTD to have a Programme of Work on Small Economies which will be conducted in dedicated sessions of the CTD. It also instructed the CTD to report regularly to the General Council on the progress of work in the dedicated sessions, and for this purpose the Work Programme on Small Economies is a standing item on the agenda of the General Council. 124

137 III. THE SVES CHARACTERISTICS AND PROBLEMS The first phase of the work of the CTD Dedicated Session focused on whether the SVEs had specific characteristics and trade-related problems that warranted a separate type of S&D treatment provisions. In a submission to the CTD Dedicated session the small economies proponents identified the following as their characteristics and problems: 1. Physical isolation, geographical dispersal and distance from the main markets. Many are Small Island or landlocked developing countries. 2. Insignificant participation in the multilateral trading system and a minimal share of total world trade. 3. Small, fragmented and highly imperfect markets. 4. In general, very open economies. 5. Domestic markets with imperfect and highly polarized structures: either a multitude of small and micro enterprises, or cartels/monopolies. 6. Minimal or no export diversification: concentration of exports on very few products (especially commodities, traditional products and low value added goods). 7. Low supply of export services. 8. Dependent upon very few export markets. 9. Inadequate Infrastructure. 10. High degree of vulnerability. 11. Low competitiveness. 12. Low levels of productivity and insufficient supply. 13. Economic rigidity with high adjustment costs. 14. Unable to sustain diversified productions. 15. Considerable difficulties to attract foreign investment. 16. Lack of adequate market access opportunities to place their few export products. 17. High transport and transit costs. Other developing countries have argued that they also suffer from the characteristics and problems that were highlighted by the small economies and that therefore they should not receive any special treatment. The small economies counter these arguments by saying that due to their smallness the characteristics and problems outlined have a much stronger cumulative incidence on their economies. After much discussion in the CTD Dedicated Session it was not possible to achieve a consensus on the characteristics and problems that affect the SVEs and on any definition thereof. 125

138 IV. THE HONG KONG MINISTERIAL DECLARATION Given the blockage in the discussions on the characteristics and problems of the SVEs, the CTD Dedicated Session decided to adopt a two-track process whereby the Dedicated Session would continue to examine certain specific proposals and would monitor progress on other proposals made in the negating and other WTO bodies, in an attempt to frame responses to the problems of the SVEs. This approach is thus reflected in Paragraph 41 of the Hong Kong Ministerial declaration. 41. We reaffirm our commitment to the Work Programme on Small Economies and urge Members to adopt specific measures that would facilitate the fuller integration of small, vulnerable economies into the multilateral trading system, without creating a sub-category of WTO Members. We take note of the report of the Committee on Trade and Development in Dedicated Session on the Work Programme on Small Economies to the General Council and agree to the recommendations on future work. We instruct the Committee on Trade and Development, under the overall responsibility of the General Council, to continue the work in the Dedicated Session and to monitor progress of the small economies proposals in the negotiating and other bodies, with the aim of providing responses to the trade-related issues of small economies as soon as possible but no later than 31 December We instruct the General Council to report on progress and action taken, together with any further recommendations as appropriate, to our next Session. 126

139 V. PROPOSALS AND DECISIONS IN THE CTD-DS A first breakthrough in the Work Programme on Small Economies came in 2006 when the CTD's Dedicated Session adopted a report to the General Council on the use of regional bodies to help small economies meet their obligations under the Agreements on SPS Measures, TBT and TRIPS (W/COMTD/SE/5). The General Council took note of the report at its 10 October 2006 meeting and agreed to the recommendations. The report sets out some recommendations that call for the General Council to recognize that small economies are allowed to use regional bodies to assist them in the implementation of their obligations under the SPS, TBT and TRIPS Agreements. It also recommends that Members and the WTO, within its competence, when providing technical and financial assistance to support small, vulnerable economies in fulfilling their rights and obligations under the agreements concerned, shall consider the advantages of providing that assistance to the regional body where such exists. 127

140 VI. DECISION ON THE EXTENSION OF CERTAIN EXPORT SUBSIDIES Another issue that is of great importance to the small economies, and that addresses directly the loss of policy space due to the obligations in the Uruguay Round Agreement, concerns the extension of the transition period to comply with the export subsidy prohibition in the Agreement on Subsidies and Countervailing Measures (SCM Agreement). The special and differential treatment provisions in Article 27 of the SCM Agreement provide developing countries a transition period of eight years from the entry into force of the Agreement, to comply with the export subsidy prohibition in Article 3.1(a). However, Article 27.4 also recognizes the possibility of extensions beyond the eight-year period, on a yearly basis and following a decision by the SCM Committee. Article 27.4 also provides that Members who received an extension shall phase out their remaining export subsidies within two years from the end of the last authorized period. In 2001, near the end of the initial eight-year transition period, a group of developing countries, many of them small economies, were of the view that some export subsidy programmes were still necessary to achieve their development objectives. They also believed that the yearly extension process in Article 27.4 created too much uncertainty for their investors and sought a longer extension that would provide more predictability. In the light of this difficulty, the SCM Committee adopted a special fast-track mechanism for extensions to be applied to certain programmes from certain developing countries. This decision was adopted on November 2001 and circulated as document G/SCM/39. Members meeting the requirements of the decision obtained an extension of their transition period until end 2007, subject to annual reviews, transparency and standstill commitments. In July 2007 the SCM Committee agreed that the beneficiary countries would be given an extension until However, the trade-off was that there could be no further requests and that the export subsidy component of these programmes had to be phased out by There were also strengthened provisions on technical assistance to the beneficiaries; the obligation to inform companies of this decision by end of 2009 and enhanced notification procedures including a mid-period road map due in 2010 which would illustrate how the export subsidy component would be phased out. At its meeting in July 2007 the General Council adopted the recommendation from the SCM Committee and circulated as document WT/L/

141 VII. PROPOSALS AND TREATMENT OF THE SVES IN THE NEGOTIATING BODIES In the DDA negotiations most of the efforts of the small economies have been concentrated in the areas of Agriculture and NAMA. Both of the proposals by the small economies in Agriculture and NAMA are defensive in nature and seek to obtain lesser tariff reduction commitments than those accepted by the other developing countries, as well as, additional flexibilities in the number and treatment of Special Products in Agriculture. This would limit the impact that new commitments in these areas would have on the policy space enjoyed by the small economies. VII.A. AGRICULTURE In the area of Agriculture the SVEs have been mostly concerned with obtaining flexibilities in their tariff reductions. In this context the latest revision of the Chairman's Draft Agriculture Modalities provides that the SVEs have a choice of either: (a) Applying the tiered formula cuts specified for developing countries plus an additional 10 ad valorem points in each band; or (b) not applying the formula but reduce certain tariffs so that an overall 24 per cent average in their bound tariffs is reached, tariffs not subject to reduction would, in effect, be treated as special products and not subject to minimum tariff cuts or guided by the indicators. The methodology provided in the draft modalities to determine the Members which would be eligible for SVE flexibilities. These flexibilities would apply to Members that in the period 1999 to 2004 had an average world share no greater than: 0.16 per cent of merchandise trade, 0.1 per cent of NAMA trade and 0.4% of Agriculture trade. (See Annex List). SVEs have also asked to receive special treatment when applying the Special Safeguards Mechanism. In this case the draft modalities specify that SVE's, may apply the maximum remedy provided for developing countries even if this would otherwise entail breach of a pre-doha bound tariff, provided that the maximum increase over a pre-doha bound tariff does not exceed 20 ad valorem percentage points or 20 per cent of the current bound tariff, whichever is higher, for up to a maximum of (10-15) per cent of tariff lines in any given period. This would be provided that all other relevant conditions for application of the measure have been met. Regarding offensive interests in Agriculture the draft modalities provide that: "Developed country Members and developing country Members in a position to do so shall provide enhanced improvements in market access for products of export interest to Members with small, vulnerable economies." VII.B. NAMA In NAMA the methodology for determining access to the SVE flexibilities has been set as those Members with a share of world NAMA trade of less than 0.1 per cent for the period

142 The latest draft NAMA modalities provides for a tiered formula to determine the average tariff cuts to be made by each Member based on their current average bound levels of tariffs, in the following manner: Current bound tariff average Target tariff average 50% 30% 30% > 50% 27% 20% > 30% 18% AND > 20% Minimum 5% reduction line-by-line on 95% of all tariff lines at the overall average that would result from that line-by-line reduction or bind These reductions are to be implemented in 11 equal rate reductions. Bolivia, Fiji and Gabon will receive special treatment, as well as, the SVE recently acceding Members. Unlike Agriculture there is no provision in the NAMA modalities that would attempt to reflect the offensive interest of the SVEs. SVEs have also jumped into the discussions on NTBs with a couple of submissions mostly asking questions on other Members' proposals on the horizontal mechanism for review of NTBs and liberalization of remanufactured goods. In the first instance it is clear that SVEs would like inclusion of flexibilities for SVEs in the proposed mechanism, particularly with respect to technical assistance and capacity building. In the second case they would like the inclusion capacity building measures in this area and also retaining the possibility of safeguarding their markets from the eventual risks to heath and the environment such goods may pose. VII.C. RULES FISHERIES SUBSIDIES The SVEs have been very active in the fisheries subsidies negotiations and have made various submissions to the Negotiating Group on Rules (RNG). Initially SVEs were concerned about issues of artisanal and small scale fisheries, S&D treatment, technical assistance and access rights. Once the architecture of the agreement became clear with the Chairman's draft (TN/RL/W/213) their focus shifted to the more concrete issue of obtaining a carve-out from disciplines on vessel construction subsidies and operating costs subsidies. The Chairman's draft contemplates a complex architecture for S&D treatment. Under this architecture operating cost subsidies (subsidies for fuel, ice, bait, gear, social charges, etc.) and subsidies for vessel construction, repair and modernization would normally be prohibited. However, under the S&D provisions for developing countries these subsidies would only be prohibited for decked vessels exceeding 10m/34ft, in addition in the case of construction subsidies, for vessels fishing outside the EEZ of the subsidizing country. The SVEs argue that due to their smallness, low impact on fish stocks, and low capacity to subsidize they should be allowed to provide subsidies for operating costs and vessel construction to all types of boats, regardless of size and where the fishing takes place. The definition to be used to determine who is an SVE 130

143 would be countries with no more than 0.1 per cent share of world NAMA trade and whose percentage share of global marine wild capture is not more than 1 per cent. SVEs also make the moral argument that the disciplines should be more stringent on those countries who have extensively used fisheries subsidies in the past and who have contributed more to global over fishing and over capacity, which they argue is not the case for the SVEs. The SVEs have already indicated that they would be flexible on the issue of whether the SVE list is static or dynamic. The SVEs have also accepted the other disciplines on fisheries subsidies proposed in the Draft Chair's Text, including enhanced transparency disciplines, an actionability clause and even the concept of the proposed Article I.2. In addition, the SVEs have accepted the principle of conditioning Special and Differential Treatment exemptions on a core set of fisheries-management related criterion easily enforceable in developing countries. VII.D. SERVICES In the area of services the SVEs have also made some submissions which call for developing country participation in services trade to be facilitated through the liberalisation of market access in sectors and modes of supply of export interest to them, as reflected in their specific requests. They also believe that the process of services liberalisation shall take into account the level of development of individual Members both in overall and individual sectors, and accord developing countries the flexibilities provided in Article XIX of the GATS for opening fewer sectors, liberalising fewer transactions and extending market access in line with their development situation. In the early stages of the services negotiations CARICOM made a group proposal outlining its views on how the negotiations should proceed, since then most of their views have been voiced through the SVE coalition. The SVEs have also made contributions to the Working Party on Domestic Regulation and these have been taken into account in the Chairman's draft text. VII.E. TRADE AND ENVIRONMENT The SVEs have also made a proposal in the framework of the CTE negotiations on the reduction and elimination of tariffs and non-tariff barriers to environmental goods and services. In this context the SVEs are interested in ensuring that any outcome in this negotiation effectively strikes a balance between market access, environmental benefits and the legitimate objective of Members to maintain policies that allow sustainable development. They also argue that due recognition should be given to the fact that many developing countries, including SVEs, contribute least to the degradation of the environment, but suffer most of its negative consequences. The SVEs expressed opposition to any sectoral type market access approach to the negotiations on trade and environment, particularly to those concerning the reduction and elimination of tariffs and non-tariff barriers to environmental goods and services. In this respect, the SVEs want to preserve the flexibilities that have been agreed for SVEs in other negotiating areas of the Doha Development Agenda, such as in NAMA and Agriculture. SVEs also stressed the importance of technical assistance, capacity building and transfer of technology in these negotiations. 131

144 VII.F. TRADE FACILITATION In the area of trade facilitations the SVEs have made a proposal on regional approaches to trade facilitation. This proposal intends to obtain recognition of the possibility for the SVEs and other developing countries to pool together their resources on a regional basis to assist in the implementation of the obligations arising from a possible agreement in trade facilitation. This proposal is in the same vein as the decision in taken in the CTD which recognizes this regional approach to implementation in the areas of TBT, SPS and TRIPS. The secretariat of the WTO has produced a compilation document with all of the proposals by the small economies, their treatment under the draft modalities and any decisions taken so far under the Work Programme, this document can be found under WT/COMTD/SE/W/22/Rev

145 VIII. THE WPSE AND MC8 The Eighth Ministerial Conference took a decision concerning the Work Programme on Small Economies which is contained in document WT/L/844. This decision instructs the Committee on Trade and Development (CTD) to continue its work on small economies, including on the identification and effects of non-tariff measures on Small Economies. The CTD in Dedicated Session is also instructed to continue monitoring the progress of the SVE proposals in WTO bodies and negotiating groups with the aim of providing responses, as soon as possible, to the trade-related issues identified for their fuller integration in the multilateral trading system. 133

146 IX. IMPLICATIONS AND FUTURE OF THE WPSE One of the most important aspects of the Work Programme on Small Economies is that it opens the door for developing countries which have a particular set of characteristics and problems to get specific S&D treatment provisions under the WTO. Paragraph 35 of the Doha Ministerial Declaration was very clear in its mandate not to create a separate sub-category of Members. The way that the different draft modalities and texts in the negotiations have so far been able to get around this obstacle is by having specific definitions of what is a small economy under each of the modalities and texts. It would be expected that in the future we will see more ad hoc treatment for the different situations of developing countries in the multilateral trading system. 134

147 Annex SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports World Albania Antigua and Barbuda Armenia Barbados Belize Bolivia

148 SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports Botswana Brunei Darussalam Cameroon Cuba Dominica Dominican Rep Ecuador El Salvador Fiji

149 SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports FYR Macedonia Gabon Georgia Ghana Grenada Guatemala Guyana Honduras Jamaica

150 SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports Jordan Kenya Kyrgyzstan Macao, China Mauritius Moldova Mongolia Namibia Nicaragua

151 SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports Panama Papua New Guinea Paraguay Saint Kitts and Nevis Saint Lucia Saint Vincent and the Grenadines Sri Lanka Suriname Swaziland

152 SMALL, VULNERABLE ECONOMIES IN THE AGRICULTURE DRAFT MODALITIES Share of total merchandise trade (%) Share of world agriculture (AOA) trade (%) Share of non-agriculture (NAMA) trade (%) Total Total Total WTO Member (exports Exports Imports (exports Exports Imports (exports Exports Imports + imports + imports + imports Trinidad and Tobago Uruguay Zimbabwe

153 MODULE 7 Trade and transfer of technology ESTIMATED TIME: 1.5 hours OBJECTIVES OF MODULE 7 To introduce and explain: the relationship between trade and transfer of technology; the provisions relating to trade and transfer of technology in the WTO Agreements; and, the working group on trade and transfer of technology. 141

154

155 I. INTRODUCTION The impact of technology on economic growth and development in this increasingly interdependent world is well recognized. As knowledge increasingly becomes a key strategic resource for national economic development, technology has assumed a key role for job and wealth creation, income generation, value addition, achieving economies of scale and competitiveness, and for shared prosperity. Overall technological advancement has an enormous developmental effect on national economy of country. This developmental impact of technology and innovation on national development strategies results from a long and complex process involving the interaction of both national and international actors, including governments, businesses, academia and international institutions and their interaction. As knowledge increasingly becomes a key strategic resource for national economic development, there may be a need to identify means to facilitate the transfer of technology to the presently technology-poor developing countries. I t is generally viewed that appropriate national policies and international guidelines and understandings may have the potential to facilitate efficient and effective generation, application and transfer of technology. Issues related to transfer of technology on the one hand and, international trade liberalization and foreign direct investment, on the other, are closely interlinked. Acquisition, adaptation, and diffusion of technology improve competitiveness in the traditional manufacturing sectors, agriculture as well as in the services sectors which are the mainstay of many developing country economies. Technology is also a major contributor to higher value addition in manufacturing. Technological improvement is an important vehicle for developing countries to improve their terms of trade in traditional manufacturing exports and to find their way out of low value-added production and exports. Technological advancement can have major impact in overall productivity of agricultural produce. Services sectors form the backbone of all production and supply chain processes. Therefore, the importance of know-how, management skills and skilled human resource has become even greater in this sector where innovation and informatics play a critical role. Developing country participation in the production, supply, and export of competitive services is quite limited and will remain so without access to relevant technologies and information networks. Since technological capability is key to developing countries' efforts to integrate in the global economy, therefore, for these countries technology transfer/acquisition will be a key element for pursuing any development strategy. The fact that generation and innovation of technology, its acquisition, adaptation and application is a long and a complex process which involves a host of national and global actors, requires that the debate on transfer of technology must be based on a holistic rather than a narrow view of the technology transfer process. In this regard lessons drawn from the success stories and national experiences of those countries that have rapidly developed present a good model. The module focuses on highlighting the crucial role of technology as an important factor of production in achieving competitiveness, economies of scale and improving quality. Learning from a number of success stories the module content will centre around the importance of technology in product and market development, securing export markets and hence its role in achieving developmental goals. The module will, therefore, first focus on the theoretical debate on the importance of technology and its generation, in identifying various modes and channels of technology transfer, the process of technology transfer and the crucial actors in the process. In highlighting good practices adoption of which have resulted in successful diffusion and absorption of technology across national economies the module will shed light in finding possible answers to the questions such as; ''What is the importance of technology and its transfer to developing countries?'' ''How issues related to technology transfer have been addressed by the international trading system?'' 143

156 I.A. TRANSFER OF TECHNOLOGY AND THE WTO The Marrakech Agreement that established the World Trade Organization (WTO) recognizes the need for special efforts designed to ensure that developing countries, and particularly the least developed among them, secure a share in the growth in international trade commensurate with the needs of economic development. The achievement of this goal may be facilitated by narrowing down the technology gap between developed and developing countries. Accordingly various WTO Agreements contain a number of provisions relating to transfer of technology to developing and least developed countries. Some of these, among others, can be found in the General Agreement on Trade in Services (GATS), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Agreement on Technical Barriers to Trade (TBT), Agreement on Sanitary and Phytosanitary (SPS) Measures. Based on the monitoring work and reports from the relevant WTO bodies, the module will discuss these provisions. A brief summary of these provisions, prepared by the Secretariat at Members' request is also available in document (JOB/DEV/10 of 19 November 2010). I.B. PROVISIONS RELATING TO TRADE AND TRANSFER OF TECHNOLOGY IN THE WTO AGREEMENTS I.B.1. TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS (TRIPS) The TRIPS Agreement contains standards that affect transfer of technology and a number of provisions related to directly transfer of technology. The stated objectives of the Agreement include that the "... protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology...". Similarly, the Article on Principles states that Members may adopt measures to promote technological development provided these measures are consistent with the provisions of the TRIPS Agreement. The TRIPS Agreement also stipulates that "developed-country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base". Preamble Recognizing also the special needs of the least-developed country Members in respect of maximum flexibility in the domestic implementation of laws and regulations in order to enable them to create a sound and viable technological base; Article 7 (Objectives) The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. 144

157 Article 8 (Principles) 2. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology. Article 40 (Section 8: Control of Anti-competitive Practices in Contractual Licences) 1. Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology. 2. Nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member. 3. Each Member shall enter, upon request, into consultations with any other Member which has cause to believe that an intellectual property right owner that is a national or domiciliary of the Member to which the request for consultations has been addressed is undertaking practices in violation of the requesting Member's laws and regulations on the subject matter of this Section, and which wishes to secure compliance with such legislation, without prejudice to any action under the law and to the full freedom of an ultimate decision of either Member. The Member addressed shall accord full and sympathetic consideration to, and shall afford adequate opportunity for, consultations with the requesting Member, and shall cooperate through supply of publicly available non confidential information of relevance to the matter in question and of other information available to the Member, subject to domestic law and to the conclusion of mutually satisfactory agreements concerning the safeguarding of its confidentiality by the requesting Member. Article 66 (Least-Developed Country Members) 2. Developed country Members shall provide incentives to enterprises and institutions in their territories for the purpose of promoting and encouraging technology transfer to least-developed country Members in order to enable them to create a sound and viable technological base. 145

158 I.B.2. AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY (SPS) MEASURES The relevant Article in the Agreement on SPS Measures promises the provision of necessary technical assistance to developing countries, including in the areas of "processing technologies, research, and infrastructure". Article 9 (Technical Assistance) 1. Members agree to facilitate the provision of technical assistance to other Members, especially developing country Members, either bilaterally or through the appropriate international organizations. Such assistance may be, inter alia, in the areas of processing technologies, research and infrastructure, including in the establishment of national regulatory bodies, and may take the form of advice, credits, donations and grants, including for the purpose of seeking technical expertise, training and equipment to allow such countries to adjust to, and comply with, sanitary or phytosanitary measures necessary to achieve the appropriate level of sanitary or phytosanitary protection in their export markets. 2. Where substantial investments are required in order for an exporting developing country Member to fulfil the sanitary or phytosanitary requirements of an importing Member, the latter shall consider providing such technical assistance as will permit the developing country Member to maintain and expand its market access opportunities for the product involved. I.B.3. AGREEMENT ON TECHNICAL BARRIERS TO TRADE (TBT) The Agreement on TBT recognizes "the contribution which international standardization can make to the transfer of technology from developed to developing countries". Preamble Recognizing the contribution which international standardization can make to the transfer of technology from developed to developing countries; Recognizing that developing countries may encounter special difficulties in the formulation and application of technical regulations and standards and procedures for assessment of conformity with technical regulations and standards, and desiring to assist them in their endeavour in this regard; 146

159 Article 11 (Technical Assistance to Other Members) 11.3 Members shall, if requested, take such reasonable measures as may be available to them to arrange for the regulatory bodies within their territories to advise other Members, especially the developing country Members, and shall grant them technical assistance on mutually agreed terms and conditions regarding: the establishment of regulatory bodies, or bodies for the assessment of conformity with technical regulations; and the methods by which their technical regulations can best be met Members shall, if requested, advise other Members, especially the developing country Members, and shall grant them technical assistance on mutually agreed terms and conditions regarding the steps that should be taken by their producers if they wish to have access to systems for conformity assessment operated by governmental or non-governmental bodies within the territory of the Member receiving the request. I.B.4. GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) The GATS recognizes that increasing participation of developing countries in world trade in services needs to be facilitated. This will require the strengthening of the capacity and competitiveness of their services sectors, inter alia, through access to technology on a commercial basis. The GATS also obliged developed countries to establish contact points for the availability of services technology. The GATS contains an obligation in Article IV paragraph 2 as follows: developed countries to establish contact points to facilitate the access of developing country members' service suppliers to information related to their respective markets concerning the availability of services technology. Article IV (Increasing Participation of Developing Countries) 1. The increasing participation of developing country Members in world trade shall be facilitated through negotiated specific commitments, by different Members pursuant to Parts III and IV of this Agreement, relating to: (a) the strengthening of their domestic services capacity and its efficiency and competitiveness, inter alia, through access to technology on a commercial basis; (b) the improvement of their access to distribution channels and information networks; and (c) the liberalization of market access in sectors and modes of supply of export interest to them. 147

160 2. Developed country Members, and to the extent possible other Members, shall establish contact points within two years from the date of entry into force of the WTO Agreement to facilitate the access of developing country Members' service suppliers to information, related to their respective markets, concerning: (a) commercial and technical aspects of the supply of services; (b) registration, recognition and obtaining of professional qualifications; and (c) the availability of services technology. Article XIX (Negotiation of Specific Commitments) 2. The process of liberalization shall take place with due respect for national policy objectives and the level of development of individual Members, both overall and in individual sectors. There shall be appropriate flexibility for individual developing country Members for opening fewer sectors, liberalizing fewer types of transactions, progressively extending market access in line with their development situation and, when making access to their markets available to foreign service suppliers, attaching to such access conditions aimed at achieving the objectives referred to in Article IV. 3. For each round, negotiating guidelines and procedures shall be established. For the purposes of establishing such guidelines, the Council for Trade in Services shall carry out an assessment of trade in services in overall terms and on a sectoral basis with reference to the objectives of this Agreement, including those set out in paragraph 1 of Article IV. I.B.5. GATS ANNEX ON TELECOMMUNICATIONS 6. Technical Cooperation (c) In cooperation with relevant international organizations, Members shall make available, where practicable, to developing countries information with respect to telecommunications services and developments in telecommunications and information technology to assist in strengthening their domestic telecommunications services sector. (d) Members shall give special consideration to opportunities for the least developed countries to encourage foreign suppliers of telecommunications services to assist in the transfer of technology, training and other activities that support the development of their telecommunications infrastructure and expansion of their telecommunications services trade. 148

161 I.B.6. AGREEMENT ON AGRICULTURE Domestic support measures that meet the criteria of Annex 2 of the Agreement on Agriculture are exempt from reduction commitments. There are some specific provisions in Annex 2 dealing with transfer of technology: ANNEX 2 DOMESTIC SUPPORT: THE BASIS FOR EXEMPTION FROM THE REDUCTION COMMITMENTS 2. General services Policies in this category involve expenditures (or revenue foregone) in relation to programmes which provide services or benefits to agriculture or the rural community. They shall not involve direct payments to producers or processors. Such programmes, which include but are not restricted to the following list, shall meet the general criteria in paragraph 1 above and policy-specific conditions where set out below: (a) research, including general research, research in connection with environmental programmes, and research programmes relating to particular products;... (c) training services, including both general and specialist training facilities; (d) extension and advisory services, including the provision of means to facilitate the transfer of information and the results of research to producers and consumers;... (g) infrastructural services, including: electricity reticulation, roads and other means of transport, market and port facilities, water supply facilities, dams and drainage schemes, and infrastructural works associated with environmental programmes. In all cases the expenditure shall be directed to the provision or construction of capital works only, and shall exclude the subsidized provision of on-farm facilities other than for the reticulation of generally available public utilities. It shall not include subsidies to inputs or operating costs, or preferential user charges." In the Uruguay Round, a Ministerial Decision was adopted on "Measures Concerning the Possible Negative Effects of the Reform Programme on Least-Developed and Net Food-Importing Developing Countries". While the Decision is not formally part of the Agreement on Agriculture, its implementation and follow-up is mandated in the Agreement on Agriculture and is conducted in the Committee on Agriculture. Paragraph 3(iii) of the Decision specifically focuses on technical and financial assistance to least-developed and net foodimporting developing countries. 149

162 Article 16 Least-Developed and Net Food-Importing Developing Countries 1. Developed country Members shall take such action as is provided for within the framework of the Decision on Measures Concerning the Possible Negative Effects of the Reform Programme on Least- Developed and Net Food-Importing Developing Countries. 2. The Committee on Agriculture shall monitor, as appropriate, the follow-up to this Decision. "DECISION ON MEASURES CONCERNING THE POSSIBLE NEGATIVE EFFECTS OF THE REFORM PROGRAMME ON LEAST-DEVELOPED AND NET FOOD-IMPORTING DEVELOPING COUNTRIES 3. Ministers accordingly agree to establish appropriate mechanisms to ensure that the implementation of the results of the Uruguay Round on trade in agriculture does not adversely affect the availability of food aid at a level which is sufficient to continue to provide assistance in meeting the food needs of developing countries, especially least-developed and net food-importing developing countries. To this end Ministers agree:... (iii) to give full consideration in the context of their aid programmes to requests for the provision of technical and financial assistance to least-developed and net food-importing developing countries to improve their agricultural productivity and infrastructure." 3. There are two other provisions in the Agreement on Agriculture which permit Members to provide investment support to their agriculture sectors. These support measures are used by Members, inter alia, for carrying out farm mechanization programmes (capital machinery etc.) and building farm infrastructure. Support measures under both of these provisions are exempt from reduction commitments provided the relevant criteria are met: Article 6 Domestic Support Commitments In accordance with the Mid-Term Review Agreement that government measures of assistance, whether direct or indirect, to encourage agricultural and rural development are an integral part of the development programmes of developing countries, investment subsidies which are generally available to agriculture in developing country Members and agricultural input subsidies generally available to lowincome or resource-poor producers in developing country Members shall be exempt from domestic support reduction commitments that would otherwise be applicable to such measures, as shall domestic support to producers in developing country Members to encourage diversification from growing illicit narcotic crops. Domestic support meeting the criteria of this paragraph shall not be required to be included in a Member's calculation of its Current Total AMS." 150

163 ANNEX 2 DOMESTIC SUPPORT: THE BASIS FOR EXEMPTION FROM THE REDUCTION COMMITMENTS Structural adjustment assistance provided through investment aids (a) Eligibility for such payments shall be determined by reference to clearly-defined criteria in government programmes designed to assist the financial or physical restructuring of a producer's operations in response to objectively demonstrated structural disadvantages. Eligibility for such programmes may also be based on a clearly-defined government programme for the re-privatization of agricultural land. (b) The amount of such payments in any given year shall not be related to, or based on, the type or volume of production (including livestock units) undertaken by the producer in any year after the base period other than as provided for under criterion (e) below. (c) The amount of such payments in any given year shall not be related to, or based on, the prices, domestic or international, applying to any production undertaken in any year after the base period. (d) The payments shall be given only for the period of time necessary for the realization of the investment in respect of which they are provided. (e) The payments shall not mandate or in any way designate the agricultural products to be produced by the recipients except to require them not to produce a particular product. (f) The payments shall be limited to the amount required to compensate for the structural disadvantage. I.C. WORKING GROUP ON TRADE AND TRANSFER OF TECHNOLOGY (WGTTT) In July 2001, a group of developing countries tabled a proposal in the WTO General Council that proposed that the 4th WTO Ministerial Conference to be held at Doha, Qatar establish a Working Group on Trade and Transfer of Technology (WT/GC/W/443 of 18 September 2001). The demandeur argued that technology was a driver of economic growth and development and that enhanced technological intensity can potentially transform the production systems into high yield and high quality sectors. They proposed that the Working Group, among others, explore the relationship between trade and transfer of technology, collect and assess information on existing flows of technology to developing countries, examine legal and administrative frameworks particularly in technology exporting countries as well as existing financing mechanisms and carry out technology related assessment needs of developing countries. 151

164 Ministers agreed to establish Working Group in Paragraph 37 of Doha Ministerial Declaration and mandated it to undertake the: examination of the relationship between Trade and Transfer of Technology; and based on that work to see if Members could make any possible recommendations on steps that might be taken within the mandate of the WTO to increase flows of technology to developing countries. At its 4th Session the Working Group on Trade and Transfer of Technology (WGTTT) adopted a Work Programme and has since focused on the examination of the relationship between trade and transfer of technology. In 2003, Members also began an examination of the recommendations contained in a joint submissions (WT/WGTTT/W/6), made shortly before Cancún Ministerial, by a group of developing countries. A large number of issues have been touched upon during discussions on the various submissions, presentations and background papers. These include the following: (i) Definition of Transfer of Technology Members have expressed two views on the definitional aspect of technology and its transfer. One group of countries which includes the EU, Japan, Canada and some others have argued in favour of a broad and inclusive definition of technology transfer. They believe that a narrow definition of technology transfer would risk excluding relevant factors and processes that hinder developing countries in their efforts to making use of the opportunities that the access to and the use of technology offers. The other group comprising mainly of countries like India, Pakistan, Brazil, Cuba, Egypt and others have argued that the WGTTT should avoid duplication and benefit from a large body of available literature on this aspect. In their view getting caught up in the definitional aspect would only deviate Members' focus from their work. (ii) The Enabling Environment Members have discussed the vital role of domestic policy and framework in the generation, transfer and diffusion of technology. There is a recognition that development of human capital, infrastructure, legal framework, macroeconomic conditions and the level of indigenous skill of workers and the domestic education system are key elements in creating a suitable enabling environment for the flow and diffusion of technology. A number of presentations have also emphasized the role of absorptive capacity in deriving economic gains from transfer of technology. (iii) Role of Home and Host Country Measures Underlying the importance of partnership in technology transfer and for it to be a win-win situation, the evolving discussions seem to recognize that both home and host countries measures are important factors in facilitating transfer of technology. Members share the understanding that transfer of technology is a two-way process but have somewhat different views on the relative importance of home and host country measures. The developed countries feel that the regulatory framework and other supportive measures in the host country to attract technology are of crucial significance in creating an enabling environment. On the other hand the developing countries continue to hold the view that home country measures, including financing for transfer of technology, incentives to stimulate FDIs with a technology transfer component, incentives for Small and Medium Enterprises seeking partners in developing countries, simplification of rules of origin and the establishment of a database to ensure the flow of all relevant information on technology are much more important in facilitating technology transfer. 152

165 (iv) The role of Intellectual Property Rights Discussions have suggested that though the empirical evidence on the subject is mixed, an appropriate IPR regime could play a crucial role in technology transfer as an inducement to direct investment; as a stimulus to innovation; and as a source of inexpensive technological know-how. However views have also been expressed that one cannot be precondition for the other. A number of Members have stated that it is only after a developing country has acquired sufficient national scientific and technological capacity that the protection of intellectual property becomes an important element in the transfer of technology. (v) The role of Foreign Direct Investment (FDI) The discussions in the WGTTT have underscored the importance of FDI as a critical mechanism for technology transfer. Some Members (e.g., the EU, USA, Switzerland, Canada, Japan) have held the view that role of FDI in technology transfer has been reinforced by the attributes which it brings with it, including, passive (through import of technologically advanced machinery and equipment) and active (technical know-how) knowledge spill-overs, increased interaction among foreign and local firms, establishment of backward and forward linkages and positive demonstration effects. Another group of countries (India, Cuba, Egypt, Pakistan, etc.) are of the view that although FDI could result in the technology transfer but much actually depended on the nature of FDI (whether it was vertical or horizontal FDI or a portfolio investment) and that its importance should not be overstated. (vi) Provisions relating to technology transfer in WTO Agreements A group of developing countries has highlighted the importance of examining the existing WTO provisions relating to technology transfer and the extent to which these have been effectively implemented. In their view most WTO provisions related to technology transfer are of a "best endeavour" nature, rather than binding obligations. In this context a number of provisions relating to TRIPs and TRIMs, SPS, TBT and Services Agreements relating to technology transfer have been cited.. Some of the developed country Members hold the view that the WTO provisions are underpinned by several priorities such as integrating countries into world trade, protecting IPRs, increasing the flow of investment and promoting sustainable development and that transfer of technology cannot override these objectives. These Members have also not been willing to introduce any element of negotiation into the Working Group. (vii) The role of Technical Assistance The discussions have acknowledged the role of training and capacity building in the transfer of technology. The proponents believe that as production becomes increasingly knowledge and technology intensive, issues of technology transfer and technological capacity building will become even more important for achieving sustained growth and development. They have felt that enhancing the effectiveness of the relevant WTO instruments for transfer of technology and capacity building in developing countries will be important. The role of technological capacity and learning in any development strategy with the aim of keeping up with rapidly advancing technological frontiers and successful efforts to remain competitive will remain important. Members have also found it useful to invite other intergovernmental organizations to make share their work in the area of innovation and technology transfer. So far, the discussions in the Working Group have benefited from useful contributions by the World Bank, IMF, UNCTAD, FAO, OECD, UNIDO, the Institute for New Technologies of the United Nations University etc. A number of national experts have shared their country's experience and perspectives on Research and Development, innovation, technology generation and its transfer, such as Brazil, Canada, Switzerland, the Philippines. These contributions/presentations have highlighted the 153

166 role of various modes and actors in the technology transfer process besides underscoring the importance of national regulatory and investment regime, the enabling environment and the assimilation and absorptive capacity. Sometime ago the Secretariat, at the request of Members, had prepared a summary note that captured the essence of discussions in the Working Group - JOB(09)/18). It might be useful for the trainees to glance through this document. The work in the Working Group has shown that the relationship between trade and transfer of technology is complex and of a multifaceted nature. Since technology and innovation is a powerful tool for development, the work in the Working Group has a continuing relevance and importance, in particular for the developing countries. The discussion held thus far has shown that a host of factors play an important role in technology generation and its transfer. A better comprehension of the nexus between trade and technology transfer can be facilitated only if the issue is viewed in holistic manner. Members seem to broadly acknowledge the fact that both private and public sectors in the home and host countries play a crucial role in this process through cohesive partnerships. Based on a few non papers by the proponents, Members also continue to examine any possible recommendations on steps that might be taken within the mandate of the WTO to increase flows of technology to developing countries. 154

167 MODULE 8 Aid for trade ESTIMATED TIME: 2 hours OBJECTIVES OF MODULE 8 To introduce and explain: the objectives, scope and guiding principles of the Aid for Trade initiative; the Aid for Trade task force; the role of the WTO in the Aid for trade imitative; and, the Global Reviews and the main achievements so far. 155

168

169 I. BACKGROUND I.A. HONG KONG MINISTERIAL CONFERENCE The Aid-for-Trade Initiative was launched at the Hong Kong Ministerial Conference in December In Hong Kong, Ministers invited the WTO Director-General to create a Task Force to provide recommendations "on how to operationalize Aid for Trade" and to consult on "appropriate mechanisms to secure additional financial resources". Hong Kong Ministerial Declaration Paragraph 57 "We welcome the discussions of Finance and Development Ministers in various fora, including the Development Committee of the World Bank and IMF, that have taken place this year on expanding Aid for Trade. Aid for Trade should aim to help developing countries, particularly LDCs, to build the supplyside capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade. Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access. However, it can be a valuable complement to the DDA. We invite the Director-General to create a task force that shall provide recommendations on how to operationalize Aid for Trade. The Task Force will provide recommendations to the General Council by July 2006 on how Aid for Trade might contribute most effectively to the development dimension of the DDA. We also invite the Director-General to consult with Members as well as with the IMF and World Bank, relevant international organizations and the regional development banks with a view to reporting to the General Council on appropriate mechanisms to secure additional financial resources for Aid for Trade, where appropriate through grants and concessional loans". The WTO is not a financing agency. The role of the WTO is anchored in the functioning of the multilateral trading system and through its coherence mandate its responsibilities and activities are evolving to assist developing countries and LDCs to reap greater, practical, trade benefits from their market access opportunities. I.B. AID FOR TRADE TASK FORCE Following the invitation made by Ministers to the Director-General at the Hong Kong Ministerial Conference, an Aid for Trade Task Force was formed on 7 February The Task Force was chaired by Ambassador Mia Horn af Rantzien of Sweden and was composed of thirteen WTO Members representing difference regions and regional groupings: Barbados, Brazil, Canada, China, Colombia, the European Union, Japan, India, Thailand, the United States, and the coordinators of the ACP, African and LDC Groups of WTO Members (at that time Mauritius, Benin, and Zambia, respectively). In July 2006, the Task Force submitted its recommendations to the General Council (WT/AFT/1). At its meeting in October 2006, the WTO General Council took note of the 157

170 Task Force report and endorsed its recommendations - recommendations which have subsequently defined the objectives, scope and guiding principles of Aid for Trade. The 2006 Task Force stated that: "Aid for Trade is about assisting developing countries to increase exports of goods and services, to integrate into the multilateral trading system, and to benefit from liberalized trade and increased market access. Effective Aid for Trade will enhance growth prospects and reduce poverty in developing countries, as well as complement multilateral trade reforms and distribute the global benefits more equitably across and within developing countries." The Aid-for-Trade Task Force recommended that: "Projects and programmes should be considered as Aid for Trade if these activities have been identified as trade-related development priorities in the recipient country's national development strategies." It stated that Aid for Trade should be defined in a way that is both broad enough to reflect the diverse trade needs identified by countries, and clear enough to establish a border between Aid for Trade and other development assistance of which it is a part. Importantly, the Task Force located Aid for Trade within existing official development assistance (ODA). To permit reliable global monitoring of flows, the Task Force recognized the following categories of assistance as encompassing Aid for Trade: (1) Trade policy and regulations; (2) Trade development; (3) Trade-related infrastructure; (4) Building productive capacity; (5) Trade-related adjustment; and (6) Other trade-related needs The Taskforce further underscored the distinction made in the Hong Kong Ministerial Conference Declaration between Aid for Trade and the Doha Development Agenda negotiations. The Task Force stated that Aid for Trade was a necessary and increasingly important complement to the DDA but is not a substitute for trade liberalization and does not depend on the conclusion of the DDA. Aid for Trade is part of overall ODA (in the form of grants and loans). It is not a new concept but, rather, a new focus. No new financing mechanism or Trust Fund has been created at WTO. It is complementary to the DDA. The Aid for Trade Task Force states that: "Projects and programmes should be considered as Aid for Trade if these activities have been identified as trade-related development priorities in the recipient country's national development strategies." To enable global monitoring, six categories of ODA were recognized as encompassing Aid for Trade: trade policy and regulations; trade development; trade-related infrastructure; building productive capacity; trade-related adjustment; and other trade-related needs. 158

171 II. GUIDING PRINCIPLES The Aid for Trade Task Force stated that Aid for Trade should be guided by the Paris Declaration on Aid Effectiveness 1, applicable to all parties involved (donors, agencies and beneficiaries), including key principles such as country ownership, mutual accountability, aligning aid to national development strategies, effective donor coordination, harmonization of donor procedures, use of programme-based aid modalities, managing for results, transparency, and predictable and multi-year commitments, which should be built into all programming. Aid for Trade should be rendered in a coherent manner taking full account, inter alia, of the gender perspective and of the overall goal of sustainable development. 1 See: 159

172 III. IMPLEMENTATION WTO's role in Aid for Trade is that of advocacy, analysis and debate, using its convening power and monitoring function to mobilize Aid-for-Trade financing, to highlight the needs of its Members and Observers, and to showcase effective implementation, including through regular reviews. Operationalization of Aid for Trade lies in the hands of developing countries, regional economic communities and their development partners. Implementation of Aid-for-Trade programmes is multi-faceted, encompassing a diverse range of delivery mechanisms and development partner organizations including, inter alia, bilateral donors, international financial institutions (including the World Bank Group and regional development banks) and multilateral agencies. No new mechanism at WTO was established to deliver Aid for Trade. Instead, the focus since the inception of the Initiative has been placed on making existing mechanisms work better. The Aid for Task Force identified various ways in which this could be achieved: Financing: "Additional, predictable, sustainable and effective financing is fundamental for fulfilling the Aid-for-Trade mandate." Strengthening the "demand side" by strengthening processes for mainstreaming trade into national development strategies; Strengthening donor "response" by giving more attention to trade issues in their aid programming; Strengthening the bridge between "demand" and "response" through various actions at national, regional and global level, including through greater involvement of the private sector; Strengthening monitoring and evaluation through reports from partners, donors, regional organizations, and multilateral organizations and the private sectors as well as global periodic reviews. One delivery component of the Aid-for-Trade Initiative is trade capacity building. The WTO contributes to trade capacity building by way of it Trade-Related Technical Assistance (TRTA) activities and programmes which are financed through the TRTA Global Trust Fund. The TRTA activities are geared towards sustainable trade capacity-building in beneficiary countries and are based on a core set of principles that are essential prerequisites in realizing the developmental goals that help provide an enabling environment for poverty reduction by strengthening human and institutional capacity which, in turn, help developing countries - and in particular the LDCs - to integrate into the Multilateral Trading System. The Standards and Trade Development Facility (STDF) is a joint initiative in capacity building and technical cooperation aimed at raising awareness on the importance of sanitary and phytosanitary (SPS) issues, increasing coordination in the provision of SPS-related assistance, and mobilizing resources to assist developing countries enhance their capacity to meet SPS standards. The STDF is a coordination and resource mobilization mechanism and acts as a forum for information sharing on SPS-related technical cooperation activities. The STDF assists developing countries in enhancing their expertise and capacity to analyze and to implement international SPS standards, improving their human, animal and plant health situation, and thus their ability to gain and maintain market access. The Enhanced Integrated Framework (EIF) embodies for LDCs what the Aid for Trade Initiative seeks to achieve and is the concrete process available for LDCs to mainstream trade and access broader Aid-for-Trade funding. While the EIF and Aid for Trade are distinct initiatives, they are not two competing process existing in parallel. They are mutually reinforcing and have the same objectives; one (EIF) helps access to the other (AfT). The EIF process not only assists LDCs in mainstreaming trade into their national development 160

173 strategies, but also provides LDCs the platform to access such Aid for Trade (ODA) funding from their development partners to translate their trade-related diagnostics requiring assistance into funded projects and to implement the projects. 161

174 IV. MONITORING AND EVALUATION FRAMEWORK The value of the monitoring framework lies in creating incentives - through enhanced transparency, scrutiny and dialogue (i.e. by shining a spotlight on progress) - to strengthen synergies between trade and complementary policies in developing countries, as well as between Aid for Trade and overall development strategies of partner countries and donor agencies. Since the launch of the Aid-for-Trade Initiative in 2005, three joint monitoring and evaluation exercises have been undertaken by the OECD and WTO. Information collected has been analysed and published in the Aid for Trade at a Glance publications which have formed the centrepiece of the Three Global Reviews held in 2007, 2009 and Furthermore, in addition to the joint OECD-WTO research, a growing number of organizations are engaging in research and publishing their findings on Aid for Trade. The monitoring framework for assessing the Aid-for-Trade Initiative uses a logical framework based on four main elements identified by the WTO Task Force: 1. demand (i.e. mainstreaming and prioritising trade in development strategies); 2. response (i.e. aid-for-trade projects and programmes); 3. outcomes (i.e. enhanced capacity to trade); and 4. impacts (i.e. improved trade performance and reduced poverty). The monitoring framework relies on both qualitative and quantitative information provided by partner countries and donor agencies. In 2011, the monitoring exercise was extended to examining outcomes and impacts. Qualitative information about "demand" is drawn from partner-country self-assessments sent to all WTO Members and Observers in the form of an OECD/WTO questionnaire. These assessments gather details about aid-for-trade objectives, priorities, strategies, mainstreaming, dialogue, delivery and financing. Similar qualitative information about the aid-for-trade response is also drawn from donors (bilateral and multilateral) and providers of South-South co-operation self-assessment based on their replies to an OECD/WTO questionnaire. Quantitative data on Aid-for-Trade flows using the OECD's Creditor Reporting System which collects information on ODA going to developing countries reported by members of the OECD Development Assistance Committee multilateral institutions and a number of non-dac donors. A baseline of average flows of assistance over the period in the six categories cited by the Task Force has been established. 2 2 There is a time lag in reporting on Aid- for-trade flows since the data is based on detailed project level data which takes time to collate and submit. For more information see Aid for Trade Q&A: 162

175 Harvesting information on outcomes and impacts is an evolving discipline. An important step in this direction was made with the launch of a case story exercise in the 2011 monitoring exercise. The case story exercise shows Aid for Trade "in action", providing a narrative on its successes as well as its failures. WTO's role WTO's role in Aid for Trade is that of advocacy, analysis and debate, using its convening power and monitoring function to mobilize Aid-for-Trade financing, to highlight the needs of its Members and Observers, and to showcase effective implementation, including through regular reviews. Operationalization of Aid for Trade lies in the hands of developing countries, regional economic communities and their development partners. Monitoring and evaluation The monitoring framework creates incentives to strengthen synergies between trade and complementary policies in developing countries, as well as between Aid for Trade and overall development strategies of partner countries and donor agencies. Since 2005, three joint OECD/WTO monitoring and evaluation exercises have been undertaken as part of the Global Reviews held in 2007, 2009, and An analysis of the information collected has been published in the Aid for Trade at a Glance publications which form the centrepiece of the Global Reviews. A growing number of organizations are also engaging in research and publishing their findings on Aid for Trade. The monitoring framework is based on four main elements identified by the WTO Task Force - demand; response; outcomes; and impacts - and relies on qualitative and quantitative information provided by partner countries and donor agencies. 163

176 V. GLOBAL REVIEWS OF AID FOR TRADE The Aid for Trade Task Force recommended that global periodic reviews of Aid for Trade be convened by a monitoring body in the WTO, based on reports from several different sources, to be published if feasible on the WTO web page: from the country level; from donors; from the regional level; from relevant multilateral agencies; and from the private sector. Since the launch of the Aid-for-Trade Initiative in 2005, three Global Reviews have taken place, in 2007, 2009, and A biennium Aid-for-Trade work programme was prepared after each Global Review setting out steps envisaged to take carry forward the work of the Aid-for-Trade Initiative. The First Global Review and General Council Annual Debate on Aid for Trade provided Members the opportunity to discuss the results of the WTO monitoring process to date, and also served to provide political guidance on future directions. The Second Global Review of Aid for Trade provided an opportunity to give added impetus to the mandate on Aid for Trade by evaluating progress made on implementation of Aid for Trade, mainstreaming trade in national and regional development strategies, on sustaining aid flows during the global economic downturn, and on assessing the effectiveness of Aid for Trade. The Review also examined how Aid for Trade was being operationalized on the ground. In his closing remarks, the Director-General highlighted the need to focus on strengthening regional dimensions of Aid for Trade, on further evaluating the implementation of Aid for Trade, on fostering the role and contribution of the private sector and on encouraging South-South cooperation in Aid for Trade. The key objective of the Third Global Review was to showcase outcomes and impacts of Aid for Trade. It provided an opportunity to evaluate progress since the Second Global Review and highlighted that concrete positive results had been achieved. 164

177 VI. RESULTS VI.A. MOBILIZATION OF RESOURCES In 2009, Aid-for-Trade commitments reached US$40 billion, up 60% compared to the baselines. Since the launch of the Aid-for-Trade Initiative in 2006 a total US$137 billion has been committed with 44% going to building productive capacities, 53% to economic infrastructure and the remainder to trade policy and regulations and trade-related adjustment. The share of Aid for Trade in sector allocable ODA declined from 35.6% to 33% from 2008 to a fact which also underlines that the increase in Aid for Trade since 2006 has been additional, i.e. not at the expense of aid to other sectors. Aid for Trade to sub-saharan Africa increased by almost 40% to reach US$16 billion (Figure 1). Africa now receives the largest share of total Aid for Trade among the different regions. Commitments to the Americas increased by almost 60% to reach US$3 billion. Aid for Trade to other regions declined: by 18% in Asia, 34% in Europe and 28% in Oceania, respectively, compared to Driving this shift in regional distribution is the increased focus of Aid for Trade on low-income countries, which saw their share of commitments increase by 26% in In contrast, the share of middle-income countries declined by 29%, although non-concessional trade-related flows (of which 90% go to middle-income countries) doubled, between , to reach US$51 billion. Half of all Aid for Trade is provided in grant form, mainly to the poorest developing countries. Disbursements have been growing at a constant growth rate of between 11 12% for each year since 2006 reaching US$29 billion in 2009 indicating that past commitments are being met. Against a backdrop of uncertain global economic conditions and fiscal pressures in key donor countries, a key challenge is to sustain current levels of financing. Monitoring by the OECD and WTO as part of the selfassessment exercise for the Third Global Review indicates that the outlook for Aid for Trade appears stable, although the previously high growth rates have declined. Aid for Trade flows grew by 2% between ; as compared with the annual rates of increase of 10% in the period Source: OECD/WTO 2011 Figure 1: Regional and sectoral distribution of Aid for Trade 165

178 The commitment made by G20 leaders as part of the Multiyear Action Plan on Development to at least maintain levels of Aid-for-Trade expenditure that reflect the average of expenditure is fundamental in this regard. The Seoul G20 Multiyear Action Plan on Development also stated that leaders "resolved to strengthen the role of South-South trade cooperation and to reinforce the involvement of the private sector". VI.B. IMPROVING COHERENCE BETWEEN TRADE AND DEVELOPMENT POLICY The necessity of integrating trade into national and regional development planning and implementation lies at the heart of the Aid-for-Trade Initiative. Harnessing the power of trade in support of economic development and poverty reduction is the intellectual foundation on which the Initiative rests. Mobilization of financing and developing country ownership of the Aid-for-Trade Initiative is intrinsically tied to the mainstreaming processes. Without effective national and regional dialogues, governments and regional economic communities face problems in setting clear priorities. Without clear priorities, development partners face difficulties in responding appropriately to demand-driven requests. Mainstreaming trade is essential for coherence in development planning and for assuring coherence between trade and other broader objectives, such as, inter alia, food security, gender empowerment, poverty reduction, sustainable development, energy and green growth. Deepening coherence requires an on-going commitment to trade mainstreaming which seeks to operationalize it across the broad spectrum of policy areas with which trade interacts. Both the Second and Third Global Reviews of Aid for Trade underlined the progress in mainstreaming trade in national planning processes. Partner countries are getting better at articulating, mainstreaming and communicating their trade-related objectives and strategies, notably LDCs. In turn, this has had a positive impact on the alignment of assistance. The monitoring exercise also found that country ownership of Aid for Trade has advanced and there is also evidence of broader consultations among public organisations and, increasingly, also the private sector and civil society. Donors continue to work towards harmonising their procedures and aligning their support around partner countries trade-related objectives, priorities and strategies. Joint OECD-WTO monitoring has highlighted various factors driving changes in Aid-for-Trade priorities among partner countries, including new development strategies, national trade policies and the strengthened role of the Enhanced Integrated Framework in LDCs. The economic crisis also appears to have sharpened partner countries focus on competitiveness, export diversification and resilience to economic shocks. The self-assessment exercise underscored that progress is being made in bringing trade considerations into planning frameworks, consultations with national stakeholders and dialogue with donors. Furthermore, the quality of these dialogues is improving resulting in greater national ownership. In turn, ownership has a close, positive correlation with effectiveness; national ownership was the most frequently cited factor for success mentioned in Aid-for-Trade case stories. Although significant progress has been made in mainstreaming, more can be done. Research by UNDP, the Aid-for-Trade analysis in Trade Policy Reviews (TPRs), the replies to the joint OECD-WTO questionnaire, and the case stories highlight that further improvements are necessary to support effective mainstreaming processes. Mainstreaming is an on-going challenge, and continued attention and support is needed to promote dynamic processes across developing countries at all levels of development. Support to the development of national Aid-for-Trade strategies offered by the Inter-American Development Bank is one practical example in this regard. On-going focus on mainstreaming lies at the heart of the Aid for Trade work programme. 166

179 VI.C. SUPPORTING REGIONAL PROCESSES OF TRADE INTEGRATION One of the recommendations of the Aid for Trade Taskforce in 2006 was the need to devote more attention to regional, sub-regional and cross-border issues. The response from the Aid-for-Trade community has been noteworthy. The joint OECD-WTO "Aid for Trade at a Glance" 2011 report underscores the impact which the Aid-for-Trade Initiative has had on funding for regional programmes. In 2009, US$7 billion was committed to multi-country programmes; more than triple the amount allocated during the baseline period of The Aid-for-Trade Initiative has proven effective in catalyzing support for trade integration processes at regional level. Donors, notably multilateral development banks, have increased their capacity to respond to rising demand for regional Aid for Trade. Most of both bilateral and multilateral donors surveyed, as part of the joint OECD-WTO monitoring and evaluation exercise, reported an increase in demand for regional Aid for Trade across all Aid-for-Trade categories of support an observation also repeated by South-South partners. WTO has helped raise the profile of regional needs through a series of regional reviews, in collaboration with key implementing partners, notably the African Development Bank and UN Economic Commission for Africa, the Asian Development Bank, the Inter-American Development Bank and the Islamic Development Bank. The World Bank Group is also a key partner and has actively contributed to these activities. The Third Global Review highlighted the on-going need for regional Aid for Trade across all regions, and noted the particular constraints faced in regional trade integration in Africa. Particular emphasis is placed within the new Aid-for- Trade work programme on encouraging further attention to supporting regional trade integration among national and regional partners, including the regional economic communities, bilateral donors and international financial institutions. VI.D. ENGAGING THE PRIVATE SECTOR The Third Global Review was the first to engage substantively the private sector. Outreach activities undertaken by the World Bank and WTO in advance of the Third Global Review were important in galvanizing interest among large firms. The complementary case story exercise led by the World Bank highlighted the increasingly active role of multinational business in Aid-for-Trade activities. Furthermore, whereas in the past these activities have been channeled through private sector foundations, they are becoming more established features of corporate strategies in new markets. In addition to the activities being undertaken by the private sector itself, the IaDB highlighted the value of public-private partnership at the Third Global Review in stimulating foreign direct investment and creating new opportunities for female entrepreneurs. Outreach activities with multinational business complements the on-going activities of the International Trade Centre with trade support institutions and small- and medium-sized enterprises in developing countries and LDCs. Of particular note in this regard are the ITC surveys undertaken in Kenya, Mauritius, Rwanda and Uganda on "Aid for Trade and Export Performance - A Business Perspective" as well as ITC's work on export strategies and women in trade. The growing work of the World Bank on competitiveness strategies is also relevant in this regard. One key message emerging from the Third Global Review of Aid for Trade is that the private sector is an essential partner in ensuring the sustainability of ODA projects (e.g. by ensuring that new value chains remain after the end of a project), and an increasingly active participant in private capacity building initiatives. In addition to offering an opportunity to leverage additional funding, the engagement of the private sector can help bring value-added in monitoring and evaluation (as demonstrated by the World 167

180 Bank partnership with the private sector in the trade facilitation area) and are integral to successful mainstreaming at national and regional level. VI.E. SHOWING RESULTS AND EVALUATING EFFECTIVENESS The framework established by OECD and WTO, the three joint reports "Aid for Trade at a Glance", the regional analyses of the case stories, and other research from UN agencies, civil society and academia have generated a high degree of transparency in the monitoring and evaluation of Aid for Trade. The Aid-for-Trade community enthusiastically embraced the third Aid-for-Trade monitoring and evaluation exercise, submitting a total of 275 case stories and 140 self-assessment questionnaires. A strong and vibrant narrative emerges of Aid-for-Trade building long-term capacity, along with a rich and varied picture of the impacts of Aid-for-Trade implementation activities on the ground. Collectively, they reveal the many efforts of governments and the international community to promote trade. Although not always easy to attribute cause and effect, the case stories show clear results of how aid-for-trade programmes are helping developing countries build the human, institutional and infrastructure capacity that they require to integrate into regional and global markets and to benefit from trade opportunities. Results reported range from increased export volumes to more employment, to faster customs clearance times and impacts on poverty (see Figure below). Export growth Regional trade integration Employment creation Foreign investment mobilised Domestic investment Gender empowerment Poverty reduction Economic growth MDGs Source: OECD/WTO, case story database Number of case stories Figure 2: Impacts reported in Aid for Trade case stories 168

181 Achievements since the launch of the Aid-for-Trade Initiative More Aid-for-Trade resources mobilized Improved coherence between trade and development policy Progress made in mainstreaming Strengthened country ownership Strengthened support of regional trade integration processes Greater harmonization efforts by donors Engagement of private sector 169

182 VII. AID-FOR-TRADE WORK PROGRAMME The Aid-for-Trade Work Programme 3, which was issued under the CTD Chair's own responsibility, is focused around five headings: resource mobilization, mainstreaming, regional dimension, private sector, and monitoring and evaluation of implementation and development effectiveness. The Work Programme aims to promote deeper coherence and an on-going focus on Aid for Trade, notably on showing results, which will generate continued impetus to the implementation process. It is complemented by an annex setting out an indicative list of activities planned to implement the Programme. The CTD Chair submitted the Work Programme to the November 2011 General Council for onward transmission to the Eighth Ministerial Conference. The Work Programme envisages a Fourth Global review of Aid for Trade in WT/COMTD/AFT/W/

183 Annex Overview of aid-for-trade activities ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Hong Kong Sixth Ministerial Conference e/min05_e.htm e/aid4trade11_e.htm Task Force on Aid for Trade plementing_par57_e.htm GLOBAL REVIEWS First Global Review of Aid Aid for Trade at a Glance: 1 st for Trade bal_review_e.htm Global Review 4t_e/global_review07_e.htm November 2007 Mobilizing Aid for Trade: Focus Africa - Report and 4t_e/africa_e.pdf Recommendations Mobilizing Aid for Trade: Focus Asia and the Pacific - Report and 4t_e/asia_pacific_e.pdf Recommendations 171

184 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Mobilizing Aid for Trade: Focus Latin America and the Caribbean 4t_e/latin_american_e.pdf - Report and Recommendations Second Global review of Aid for Trade at a Glance 2009: Aid for Trade bal_review09_e.htm Maintaining Momentum e/aid4trade09_e.htm 6-7 July 2009 Aid for Trade in Asia and the Pacific: An Update - Report to 4t_e/asian_devel_bank_report_e.pdf the Second Global Review Implementing Aid for Trade in Latin America and the Caribbean 4t_e/iadb_report09_e.pdf - The National and Regional Review meetings African Development Bank - Activities t_e/afdb_activities0809_e.pdf UNECA - Issues and State of Implementation in Africa: Does 4t_e/uneca_issues_e.pdf Supply Meet Demand 172

185 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Summary Report of the Second WT/COMTD/AFT/W/15 Global Review Third Global Review of OECD-WTO Aid for Trade at a Aid for Trade bal_review11_e.htm Glance 2011: Showing Results e/aid4trade11_e.htm July Aid for Trade and LDCs: Starting Aid for Trade and LDCs to Show Results WTO/UNESCAP/OECD Caribbean- Asia-Pacific Pacific Case Stories: A Snapshot of Aid for Trade on the Ground WTO/IaDB/OECD Latin American Latin America and Caribbean and Caribbean Case Stories: A Snapshot of Aid for Trade on the Ground WTO/UNECA/AfDB/OECD African Case Stories African Case Stories: A Snapshot of Aid for Trade on the Ground WTO-OECD 173

186 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Compendium of Aid-for-Trade Case Stories (WT/COMTD/AFT/W/26 Add.1) and Islamic Development Bank - Report to the Third Aid for Trade Global Review OECD - Strengthening Accountability in Aid for Trade 7.pdf OECD - Estimating the Constraints to Trade of Developing Countries Estimating the Constraints to Trade of Developing Countries Summary Report of the Third Global Review WT/COMTD/AFT/W/28 REGIONAL REVIEWS Focus Latin America and the Caribbean - Regional Review of Aid for Trade en&id= t_e/latin_american_e.pdf 174

187 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Lima, Peru 13 and 14 September 2007 Focus Asia and the Pacific - Regional Review of Aid for Trade 4t_e/asia_pacific_e.pdf Manila, Philippines 19 and 20 September 2007 Focus Africa - Regional Review of Aid for Trade 4t_e/africa_e.pdf Dar es Salaam, Tanzania 1 and 2 October 2007 COMESA-EAC-SADC North-South Corridor Review Lusaka, Zambia 6 and 7 April

188 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Latin America and Caribbean Regional Review Montego Bay, Jamaica en&id=524 en&id=539 7 and 8 May 2009 Regional Meeting for ASEAN member states Siem Reap, Cambodia 28 and 29 May 2009 ECOWAS Review Aid-for-Trade Abuja, Nigeria 27 and 28 January 2010 Review of Aid for Trade for SPECA countries AfTBaku2010/welcome.html Baku, Azerbaijan 1 and 2 December

189 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Second Regional Review of Aid for Trade for Central Africa Libreville, Gabon 25 and 26 May 2011 Regional Review Meeting on Aid for Trade Jakarta, Indonesia 14 June 2011 NATIONAL REVIEWS National Review - Lima, Peru en&id=589 3 March 2009 National Review - San Pedro, Honduras 4 May

190 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK OTHER AID-FOR-TRADE RELATED MEETINGS Second meeting of the AfDB Technical Working Group Tunis, Tunisia 30 January 2009 First meeting of the AsDB Regional Technical Group (RTG) Manila, Philippines 3 March 2009 Preparatory and Consultative meeting on Aid-for-Trade Roadmap for SPECA countries Bishkek, Kyrgyz Republic 25 and 26 March

191 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Second meeting of the AsDB RTG Bangkok, Thailand 12 and 13 November 2009 High-Level dialogue "Global Financial Crisis, Export-Led Growth and Aid for Trade: Focus on the ASEAN Experience Siem Reap, Cambodia 29 May 2009 First Consultative Meeting on Initiative on Aid-for-Trade Roadmap for UNESCWA sp?referencenum=1220e Beirut, Lebanon 10 and 11 January

192 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Third meeting of the AsDB RTG Tokyo, Japan 10 and 11 May 2010 Central African Aid-for- Trade Preparatory Meeting Douala, Cameroon 30 June and 1 July 2010 OECD Expert Meeting on Indicators: Measuring Aid-for-Trade Results at the Country Level 22 October 2010 Training event for Asian Economies: Trade and Development, with a special focus on Aid for Trade 180

193 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Hanoi, Viet Nam 9-11 November 2010 Training event for Anglophone Africa Johannesburg, Africa South 16 and 17 November 2010 Training event for Latin American Countries: Trade and Development with a special focus on Aid for Trade Quito, Ecuador 20 November-2 December 2010 Training event for Pacific Island Countries 181

194 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Nadi, Fiji 9 and 10 December 2010 Training event for the Caribbean - Aid for Trade: Facilitating Development through Trade in the Caribbean releases/ /idb-trade-and- integration,9079.html Barbados 25 and 27 January 2010 Training event for West African Region Abuja, Nigeria January 2011 Launch of Belize's National Aid-for-Trade Strategy Belize City, Belize 21 January

195 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK D=5760&lang=1&m=20295&info0not February 2011 Fourth meeting of the AsDB RTG Manila, Philippines 27 and 28 April 2011 ACP High-Level Meeting on Aid for Trade 22 June 2011 UNCTAD Expert Meeting on International Cooperation: South- South Cooperation and Regional Integration 3rd-global-review-aid-for-trade Third Roundtable Meeting Nadi, Fiji 28 April 2011 level-meeting-on-aid-for-trade-in-preparation-for-wto- _content&view=article&id=141:third-pacific-acp-aid-fortrade-meeting-28-april-2011-tanoa-internationalnadi&catid=19:media-release&itemid=101 Launch of Jamaica's National Aid-for-Trade 183

196 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Strategy 27/jamaicas-national-aid-for-trade-strategy,9651.html Kingston, Jamaica 27 October 2011 WORKSHOPS AND SYMPOSIA Symposium on Monitoring and Evaluation - Identifying Indicators for Monitoring Aid for Trade 15 and 16 September mp_sept08_e.htm Results of the Symposium on Monitoring and Evaluation - Background Note by the Secretariat WT/COMTD/AFT/W/9 Workshop on Aid-for- Trade needs assessments in the SPECA countries Bishkek, Kyrgyz Republic 10 and 11 March 2010 EIF Regional Pacific Workshop

197 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Port Vila, Vanuatu March 2010 Workshop on Aid for Trade and Agriculture 17 March ar10_e.htm Mainstreaming Aid for Trade at a Thematic level - Workshop on Aid for Trade and Agriculture - Background Note by the Secretariat WT/COMTD/AFT/W/17 Joint ITC/WTO Seminar - Connecting West African Farmers to the Market 17 March 2010 Expert Group Meeting and Workshop on Aid for Trade and Africa's Trading Capacity: Supply, Demand and Performance ommunique.pdf Addis Ababa, Ethiopia 185

198 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK 31 May and 2 June 2010 Informal Workshop Aid-for-Trade Nairobi, Kenya 6 April 2010 Workshop on Aid for Trade and Development Finance 27 May 2010 High-Level Workshop on Aid for Trade for EAC Countries Dar es Salam 14 and 15 June 2010 Workshop on Monitoring and Evaluation of Aid for Trade shop_july10_e/wkshop_july10_e.htm 19 July

199 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Workshop on Aid for Trade and Mainstreaming 26 October shop_oct10_e/wkshop_oct10_e.htm Joint ITC-WTO Expert Roundtable meeting on Gender Dimension of Aid for Trade 26 October Rountable.htm Background Note WT/COMTD/AFT/W/24 Communication from the International Trade Centre - Report and Recommendations arising from the Joint ITC-WTO Expert Roundtable Meeting on the Gender Dimension of Aid for Trade WT/COMTD/AFT/W/24/Add.1 EIF Regional Workshop for Central and West Africa and Haiti 187

200 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Bamako, Mali 8-10 December 2010 EIF Regional Workshop for Eastern and Southern Maseru, Lesotho February 2011 Workshop on Small, Vulnerable Economies (SVEs) and Aid for Trade shop_feb11_e/wkshop_feb11_e.htm 16 February 2011 OECD Experts Workshop on Implementation of Aid for Trade 665_ _1_1_1_1,00.html March 2011 Workshop on Aid for Aid for Trade and LDCs: Starting Trade Case Stories 4trade_e.htm to Show Results 4t_e/a4t_ldcs_e.pdf 22 June

201 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK WTO/UNESCAP/OECD Asia - Pacific Case Stories: A Snapshot of Aid for Trade on the Ground 4t_e/asia_pacific_case_stories_e.pdf WTO/IaDB/OECD Latin American and Caribbean Case Stories: A Snapshot of Aid for Trade on the Ground 4t_e/latin_am_caribbean_case_stories_e.pdf WTO/UNECA/AfDB/OECD African Case Stories: A Snapshot of Aid for Trade on the Ground in Africa 4t_e/african_case_stories_e.pdf WTO-OECD Compendium of Aidfor-Trade Case Stories (WT/COMTD/AFT/W/26 Addenda) and CTD Aid for Trade meetings The CTD has held 22 dedicated sessions on Aid for Trade. Reports of the meetings are produced in WT/COMTD/AFT/M/1 through WT/COMTD/AFT/M/22 189

202 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK [Background documents prepared by the Secretariat in advance of the CTD-AfT meetings are produced in WT/COMTD/AFT/W/18 and Addenda] ROADMAP / WORK PROGRAMMES Aid for Trade Roadmap for 2007 Room document dated 20 February 2007 WTO Work Programme on Aid for Trade - Background Note prepared by the Secretariat, December 2008 WT/COMTD/AFT/W/ Aid-for-Trade Roadmap WT/COMTD/AFT/W/ Annotated Aid-for-Trade Roadmap WT/COMTD/AFT/W/11/Rev.1 190

203 ACTIVITIES PUBLICATIONS / DOCUMENTS TITLE WEB LINK TITLE WEB LINK Aid-for-Trade Work Programme WT/COMTD/AFT/W/16 Aid-for-Trade Work Programme WT/COMTD/AFT/W/30 GENERAL COUNCIL Annual Debate on Aid for Trade WT/GC/M/ November July 2009 WT/GC/M/ October 2010 WT/GC/M/ July 2011 WT/GC/M/

204

205 MODULE 9 WTO Technical Assistance and Training ESTIMATED TIME: 1 hour OBJECTIVES OF MODULE 9: To introduce: WTO technical assistance and training; and, to provide an overview of the different WTO technical assistance activities and programmes. 193

206

207 I. WTO TECHNICAL ASSISTANCE AND TRAINING Technical assistance and training are core elements of the development dimension of the Multilateral Trading System (MTS), as confirmed by Ministers at Doha (December 2001). The bulk of WTO technical assistance and training is directed towards helping government officials from beneficiary countries to better understand WTO rules so that they can better exercise their rights of membership, negotiate more effectively with their trading partners and reap the benefits of an open, rules-based MTS. The WTO's technical assistance and capacity building efforts are one of main delivery components in the Aid for Trade work programme. It contributes to multilateral efforts to enhance the delivery of Aid for Trade to developing countries and to improve the impact of this initiative. Technical assistance programmes are designed with a view to gradually and progressively moving to higher levels of learning. The objective is to achieving cumulative and sustainable capacity building by enhancing the efficiency and impact of technical assistance and training in beneficiary countries. Annually, the WTO Secretariat organizes around 400 technical assistance activities, in Geneva and in WTO Member countries and regions, training several thousands of officials. In line with the Doha Declaration, priority attention is given to LDCs. Outreach technical assistance and training activities include work with parliamentarians and universities. Trade capacity-building is a core function of the WTO Secretariat as a whole. Within the Secretariat, the Institute for Training and Technical Co-operation (ITTC) is responsible for the coordination of WTO technical assistance and training activities. The regular WTO body overseeing technical assistance activities is the CTD. The WTO is implementing Results Based Management (RBM) in the design, management and delivery of WTO's trade capacity building programmes. The objective is to strengthen the effectiveness, efficiency and accountability of such programmes. Doha Ministerial Declaration (para. 38): Technical cooperation and capacity building "We confirm that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system, and we welcome and endorse the New Strategy for WTO Technical Cooperation for Capacity Building, Growth and Integration. We instruct the Secretariat, in coordination with other relevant agencies, to support domestic efforts for mainstreaming trade into national plans for economic development and strategies for poverty reduction. The delivery of WTO technical assistance shall be designed to assist developing and least-developed countries and low-income countries in transition to adjust to WTO rules and disciplines, implement obligations and exercise the rights of membership, including drawing on the benefits of an open, rules-based multilateral trading system. Priority shall also be accorded to small, vulnerable, and transition economies, as well as to members and observers without representation in Geneva. We reaffirm our support for the valuable work of the International Trade Centre, which should be enhanced." 195

208 I.A. WHO BENEFITS FROM WTO TECHNICAL ASISSTANCE AND TRAINING? The main beneficiaries of the WTO Secretariat's trade capacity building are government officials from developing, least developed and economies in transition Members and Observers. WTO's technical assistance activities are primarily geared towards government officials responsible for WTO-related issues, including the implementation of WTO Agreements and the Doha Round of Negotiations. Efforts are being channelled to gradually reach a broader audience, including academia, civil society, parliamentarians and private sector representatives. Some technical assistance activities and programmes are directed specifically towards these groups. I.B. THE TECHNICAL ASSISTANCE AND TRAINING PLAN The WTO seeks to enhance coherence in the design and the implementation of the WTO technical assistance and training activities by exploiting synergies among its various training products and programmes. In order to achieve those objectives, ITTC prepares a biennial Technical Assistance and Training Plan ("The TA Plan"), which provides the WTO Secretariat's backbone for the delivery of technical assistance and training activities. The TA Plan features the types of activities delivered by the WTO Secretariat and sets out the objectives for the planning and delivery of such activities for the period concerned (see Documents: WT/COMTD/W/*). The TA Plan is adopted by the CTD. I.C. THE PROGRESSIVE LEARNING STRATEGY (PLS) Since 2010, the Secretariat has put in place a Progressive Learning Strategy (PLS) aimed at promoting higher levels of learning, with a view to building and sustaining the long-lasting human and institutional capacity of beneficiary countries to participate more effectively in the MTS. The WTO "Progressive Learning Strategy" (PLS) is the progressive, multi-modular sequencing of products in order to improve the delivery of WTO technical assistance and training, with a view to gradually and progressively moving to higher levels of learning. It seeks to enhance coherence in the design and the implementation of the WTO Secretariat's technical assistance and training activities, exploiting synergies among its various training products and programmes. The WTO Secretariat has identified two broad categories of capacity-building participants, namely, "generalists" and "specialists: "Generalists" are those government officials who need a broad knowledge of the WTO to conduct their work, such as capital-based officials dealing with WTO issues or delegates posted to Geneva missions with general responsibility for WTO affairs. "Specialists" are those government officials that require in-depth knowledge in a specific area, such as those officials working on a specific issue in a particular Ministry in their capital (for example, those who are dealing with technical barriers to trade, agriculture or sanitary and phytosanitary measures issues). 196

209 On the basis of this distinction, two broad training paths have been identified, one for "generalists" and another for "specialists". Each training path consists of a sequence of three training levels. PLS Level 1 - Basic level: relies principally on the online E-learning Introduction course. This is the starting point for all those going through the various training paths, whether generalists or specialists. It provides a basic introduction to the WTO including its objectives, functions, structure, basic principles and disciplines. In addition, there is a Geneva-based Introduction course for LDCs. PLS Level 2 - Intermediate level: following completion of the first level of training, the paths for generalist and specialists diverge. Level 2 courses aim at deepening the understanding of the WTO Agreements in general (generalists), or of a specific Agreement or trade-related subject (specialists). PLS Level 3 - Advanced level: following completion of the second level of training, the participants may apply to more advanced training. Level 3 also comprises two paths (generalists and specialists). These courses seek to consolidate and broaden the knowledge acquired in level 2. Figure 1: WTO Progressive Training Paths The first stage in the learning process consists mainly of E-Learning, where levels of knowledge of participants can be enhanced, tested and synchronized. On the generalist path, the next level is achieved through E-Learning or through the intermediate level training such as RTPCs, which address WTO issues from a regional perspective. Emphasis is put on interactive learning, case studies and sharing of knowledge and experiences between participants at the regional level. On the specialist path, a range of E-Learning and face-to-face activities are available. Once these two initial steps have successfully been completed, the participants are eligible for the highest level of learning, i.e. advanced thematic courses on particular topics (e.g. dispute settlement, trade-related aspects of intellectual property rights (TRIPS), sanitary and phytosanitary measures (SPS), agriculture, rules) as well as the comprehensive Geneva-based advanced trade policy course (ATPC), which has been re-designed so as to fulfil this purpose. 197