Why and What S & D Treatment for LDCs in the WTO?

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1 Why and What S & D Treatment for LDCs in the WTO? Presentation by Fahmida Khatun, PhD Research Director Centre for Policy Dialogue (CPD), Bangladesh 25 September 2013: Dakar, Senegal CENTRE FOR POLICY DIALOGUE (CPD) B A N G L A D E S H a c i v i l s o c i e t y t h i n k t a n k

2 Why S&DT for LDCs? Special and Differential (S&D) Treatment describes preferential provisions in the WTO agreement for Developing Countries (DCs) and Least Developed Countries (LDCs). This is in view of LDCs major bottlenecks to take advantage of the global trading systems. Marginalisation of weaker economies in the context of globalisation Lack of technical capacity Lack of financial resources Weak capacity to participate in WTO-system Weak capacity to take advantage of the opportunities emanating from WTO system 2

3 Why S&DT for LDCs? Trade liberalisation does not automatically lead to development and welfare gains. Lack of capacity to take advantage of the opportunities created by trade liberalisation. LDCs participation in global trade has increased over the years (Figure 1 on export volumes) 3

4 Why S&DT for LDCs? Figure 1: Exports of LDCs during (in USD mln) 4

5 Why S&DT for LDCs? However, the distribution of growth has not been equal across regions. consists of around 12% of world population has a share of less than 2 % in world GDP accounts for about 1% of global trade in goods (WTO 2011) 5

6 Why S&DT for LDCs? Figure 2: Share of LDCs in World Trade and GDP Source: Calculated on the basis of data from UNCTAD, UNCTAD stat. 6

7 What S&DT for LDCs? S&DT provisions for LDCs Longer time periods for implementing agreements and commitments Measures to increase trading opportunities Support to help LDCs build the infrastructure 7

8 WTO Agreements & S&D Provisions for LDCs Agreement on Agriculture LDCs are exempt from undertaking reduction commitments Sanitary and Phytosanitary Measures LDCs had the possibility of delaying implementation for up to 5 years Agreement on Textiles and Clothing more favorable treatment than other groups in the application of the transitional safeguard Agreement on Technical Barriers to Trade Particular account to be taken of LDCs in the provision of technical assistance and in the preparation of technical regulations. 8

9 WTO Agreements & S&D Provisions for LDCs Trade-related Investment Measures LDCs had a seven-year transitional period to eliminate TRIMS Agreement on Import Licensing special consideration to be given to importers who import products from LDCs Agreement on Subsides and Countervailing Measures LDCs are exempted from prohibition on export subsidies Prohibition on subsidies that are contingent upon export performance is not applicable to LDCs for 8 years 9

10 WTO Agreements & S&D Provisions for LDCs General Agreement on Trade in Services (GATS) Special priority given to LDCs in implementing Article IV of GATS particular account to be taken of the difficulties encountered by LDCs in accepting negotiated commitments, owing to their particular needs Special consideration is given to LDCs with regard to encouraging foreign suppliers to assist in technology transfers, training and other activities for developing telecommunications Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) Delay for up to 10 years in implementing most of TRIPS obligations Possibility of extension following duly motivated request Members to provide incentives for encouraging the transfer of technology to LDCs. 10

11 WTO Agreements & S&D Provisions for LDCs Disputes Settlement (DS) Particular consideration should be given to the special situation of LDCs in all stages of a dispute involving an LDC Members to exercise due restraint in raising matters involving an LDC LDCs may request use of the good offices of the Director- General or the Chairman of the DSB. Trade Policy Review Mechanism (TPRM) Greater flexibility given to LDCs concerning the frequency of their reviews Particular attention given to LDCs in the provision of technical assistance by the Secretariat 11

12 WTO Agreements & S&D Provisions for LDCs Time-Lines in Various WTO Agreements WTO Agreements Developed Countries (under GATT UR Decision) Developing Countries (under GATT UR Decision) Least Developed Countries (under GATT UR Decision) DDA, July 2004 Framework and Hong Kong Ministerial Agriculture 6 years 10 years Exempt Exemption from undertaking reduction ATC SPS - 2 years 5 years commitment in AoA and NAMA T&T TRIPs 1 years 5 years 10 years Developing country Members continue to benefit TRIMs 2 years 5 years 7 years from the AoA for five years after the end-date for elimination of all forms of export subsidies Import Licensing - 2 years - TRIPs & Public Health (derogation up to 2016) Safeguards Up to 8 years Up to 10 years - Extension of TRIPs up to 2013 Domestic Input - 5 years 8 years Exemption from TRIMs obligation Subsidies GATS-LDC Modality Export Subsidies - 2 to 8 years 8 years Extension on Removal of export subsidies till 2013 Under Swiss formula, coefficients of 8-9 for developed countries and for developing countries proposed. LDCs not asked to undertake reeducation commitments but expected to bind more of their items. 12

13 Doha Development Agenda & S&DT Doha Mandate (2001) for S&D: Paragraph 44 We reaffirm that provisions for SDT are an integral part of the WTO Agreements. We note the concerns expressed regarding their operation in addressing specific constraints faced by developing countries, particularly least-developed countries. In that connection, we also note that some members have proposed a Framework Agreement on SDT (WT/GC/W/442). We therefore agree that all SDT provisions shall be reviewed with a view to strengthening them and making them more precise, effective and operational. In this connection, we endorse the work programme on SDT set out in the Decision on Implementation-Related Issues and Concerns. 13

14 Doha Development Agenda & S&DT Cancun Ministerial 2003 Members included 28 agreement-specific S&D Provisions in the Annex C of Draft Ministerial Text Eventually these provisions were not adopted due to the conference s failure to agree on a number of other issues Hong Kong Ministerial (2005): Members agreed to 5 S&D provisions for LDCs. DFQF access by 2008 Preferential RoO Right to undertake measures for their development Trade preferences not be conditional loans, grants and ODA inconsistent with LDCs development Allowed to deviate from obligation in the TRIMS agreements 14

15 Doha Development Agenda & S&DT Geneva Ministerial (2011): Extension of preferential treatment for service trade for another 15 years A Draft Decision on the expansion of Intellectual Property Rights transition period Some ministers suggested the review and monitoring of S&D Provisions in the WTO Other members expressed support for the S&D monitoring mechanism & the adoption of Annex C of the Draft Cancun Text which focuses on S&D Ministers agreed to expedite work towards finalizing the Monitoring Mechanism for S&D Ministers agreed to take stock of the 28 Agreement-specific proposals in Annex C of the draft Cancun text with a view to formal adoption of those agreed 15

16 S&D Issues in Bali Ministerial 2013 Major issues Bali Ministerial Conference (MC9) Adoption of 28 S&D Provisions WTO members never formally adopted 28 proposals relating to various S&D provisions in WTO Agreements proposed in Cancun though MC8 agreed to take a stock of these proposals Subsequent developments in various ministerial after Cancun may have affected the relevance of some texts in the provisions. There is a need to revise some of the texts Revisions of the texts could potentially lead to the demand to review or open the others 16

17 S&D Issues in Bali Ministerial 2013 Monitoring Mechanism The special session of the CTD is discussing an appropriate monitoring mechanism The purpose is to analyze and review the implementation of all S&D provisions contained in WTO Agreements and Decisions If such mechanism is adopted it will be a forum of LDCs where they can raise issues and flag difficulties encountered by them in implementing S&DT provisions. 17

18 Current Concerns on S&DT Implementation of DFQF Market Access Meaningful & enhanced market access for LDCs differences amongst Asian and African LDCs Effective market access of LDCs after S&D in the US is negative & in the EU is positive but negligible because of: 3% of tariff line excluded from DFQF market access make up a huge share of LDCs exports Complicated RoO in EU market (Carrere and de Melo 2009) DFQF access for LDCs from 97% to 100% of tariff line will rise LDCs export to developed countries by $4.2 billion (Vanzetti and Peters 2012) 18

19 Current Concerns on S&DT Rules of Origin (RoO) RoO requirements differ from country to country, but in the process it excludes major portion of LDCs product from GSP Product specific rules LDC proposal: across the board RoO based on a percentage criterion Lack of Capacity to Utilize the Opportunities For example, LDCs have lack of capacity in utilizing service waiver. Waiver was given for 15 years 2 years are being passed LDCs should identify modes & sectors 19

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