( ) Page: 1/43 MARKET ACCESS FOR PRODUCTS AND SERVICES OF EXPORT INTEREST TO LEAST DEVELOPED COUNTRIES NOTE BY THE SECRETARIAT 1

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1 19 September 2017 ( ) Page: 1/43 Sub-Committee on Least Developed Countries MARKET ACCESS FOR PRODUCTS AND SERVICES OF EXPORT INTEREST TO LEAST DEVELOPED COUNTRIES NOTE BY THE SECRETARIAT 1 Contents 1 EXECUTIVE SUMMARY INTRODUCTION LDCS' TRADE PROFILE Trends in Goods and Commercial Services Merchandise Trade Developments Overall trend Commodity price movements Major LDC traders Trends in product composition Major markets of LDCs Services Trade Developments MARKET ACCESS FOR PRODUCTS OF EXPORT INTEREST TO LDCS Trends in market access for products of export interest to LDCs Duty-free market access granted by selected Members Recent initiatives to improve market access for LDCs...31 ANNEX This document has been prepared under the Secretariat's own responsibility and is without prejudice to the positions of Members or to their rights and obligations under the WTO.

2 - 2 - List of Tables Table 1: Trends in LDC exports of goods and commercial services, Table 2: LDCs and world trade in goods and commercial services, Table 3: LDCs' top 20 export products in terms of increase in world market share, 2005 and Table 4: LDCs' top ten export markets, 2005 and Table 5: Average tariffs applied by developed Members on key products from LDCs, Table 6: Duty-free market access under LDC schemes in selected Members, Table 7: Notifications under the LDC Services Waiver...32 List of Charts Chart 1: Evolution of LDC exports of goods and commercial services, Chart 2: LDCs' total trade balance, 2005 and Chart 3: Development in merchandise trade volume of LDCs and developing economies, Chart 4: LDCs' shares in world exports, Chart 5: Merchandise trade of LDCs, Chart 6: Merchandise trade balance of LDCs, Chart 7: Merchandise exports of LDCs by product specialization, Chart 8: Export prices of primary commodities, Chart 9: Top ten LDC exporters and importers, 2005 and Chart 10: Evolution of merchandise export structure of LDCs, 2005 and Chart 11: Top ten products of LDC merchandise exports, 2005 and Chart 12: Top 20 products of LDCs' exports with the highest shares in world export market, Chart 13: LDCs' trade in commercial services, Chart 14: LDCs' share in world exports and imports of commercial services, Chart 15: LDCs' exports of commercial services by LDC region, Chart 16: Leading LDC traders of commercial services, Chart 17: LDCs' travel exports and international tourist arrivals, Chart 18: LDCs: Travel exports, and exports of agricultural products, manufactured goods, and fuels and mining products, Chart 19: LDCs: GDP by selected economic activities Chart 20: LDCs in Asia and in Africa: International tourist arrivals by region of origin and travel exports, Chart 21: LDCs' export growth of other commercial services by sector, Chart 22: Digital divide between developed economies and LDCs, Chart 23: GDP by main economic activity in LDCs, Chart 24: GDP by main economic activity in LDCs, Chart 25: Proportion of tariff lines worldwide with zero duty applied to products from developing countries and LDCs, 2005, 2010 and List of Boxes Box 1: The contribution of services to GDP in LDCs...26

3 - 3 - List of Annex Tables Annex Table 1: Merchandise exports and imports of LDCs by selected country grouping, Annex Table 2: Export prices of primary commodities, (Q2)...35 Annex Table 3: Imports from LDCs by major markets and product groups, Annex Table 4: Top 50 exported products of LDCs in Annex Table 5: Exports and imports of commercial services of the LDCs, Annex Table 6: Major multilateral non-reciprocal LDC preference schemes undertaken by Members, 2017 or latest available year a...42

4 - 4-1 EXECUTIVE SUMMARY 1.1. Over the period , LDC exports of goods and services grew by an annual average of 6.4%, slightly more than the exports of other developing economies (6.1% average). Most of this average growth, however, stems from distinctly higher growth rates in the first part of the period. During , average annual export growth of LDCs' exports was even slightly negative (-0.02%) In 2016, LDC exports of goods and services decreased by 3.9% to US$187 billion. The share of LDCs in world exports of goods and commercial services stood at 0.91% in 2016, compared to 0.93% in Merchandise exports of the LDCs decreased by 6% in value terms in 2016, declining more than world exports which fell by 3%. The share of LDCs in world merchandise exports stood at 0.94% in 2016, dropping further from 0.97% in the previous year The LDCs continued to record a sizable trade deficit, which reached US$92.9 billion in 2016, representing a nine-fold increase compared to the trade deficit in On the positive side, the sharp reduction of prices of primary commodities in 2015 had almost come to a halt in 2016, with the exception of energy prices. The stable prices of food and beverages have helped agricultural exporters to somehow arrest negative export growth In 2016, the top merchandise exporter within the LDCs was Bangladesh (share of 24%), followed by Angola (17%) and Myanmar (8%). While the top ten exporters represented almost 80% of LDCs' exports in 2005, this share went down to around 76% in 2016 indicating a slight decrease in terms of country concentration among the LDCs The share of primary products in total exports of LDCs continued to decrease in 2016 from 73% in 2005 down to 49% in This was mostly due to the lower value of exports of petroleum products (HS 27.09, and 27.10), which constituted more than half of all LDC exports in 2005, but accounted for only about a quarter (26%) of LDC exports in In contrast, the share of manufactured products in LDC exports increased from 21% in 2005 to 40% in This was mainly due to a higher share of clothing products in LDC merchandise exports, which increased from 13% in 2005 to 29% in In 2016, the European Union was the top destination for LDCs' merchandise exports (share of 31%), followed by China (21%) and the United States (11%). The top 10 importers accounted for 88% of LDCs' total exports in 2016, which was slightly higher than the respective share of 87% in In the period , LDCs' services exports expanded by 12% on average per year, compared to 8% in other developing economies and 5% in the developed group. Following a decade of sustained growth, LDCs' exports of commercial services have slowed down since This downward trend accentuated in 2016, when services exports fell by 4% to US$32 billion. In 2016, LDCs' participation in global exports of commercial services stood at 0.7%, up from 0.4% in Services trade in LDCs remained concentrated within a few economies, an unchanged pattern since In 2016, the top ten leading exporters (e.g. Myanmar, Cambodia, Tanzania, Ethiopia) accounted for almost 70% of the group s services receipts. Imports were equally concentrated with the first five importers, led by Angola, representing around half of LDCs' total commercial services payments Over recent years, the number of international tourist arrivals to LDCs multiplied, rising from over 10 million arrivals in 2005 to more than 28 million in Increasing inflows of foreign tourists and their purchase of goods and services in the countries they have visited has boosted LDCs' travel revenue. In 2016, travel revenue reached US$17 billion compared with US$5 billion in As a result, LDCs' share of world travel exports has doubled in ten years, reaching 1.4% in Progress has continued in advancing market access opportunities for the LDCs. From a global perspective, the proportion of duty-free tariff lines has risen from 49% in 2005 to 65% in

5 for LDCs, which signifies the commitment of Members to grant preferential market access to the LDCs. Average tariffs levied by developed Members on products originating in LDCs are close to 0%, with the exception of clothing and textiles Most of the developed Members accord either full or nearly full duty-free and quota-free (DFQF) market access to LDC products. A number of developing Members have significantly expanded their DFQF coverage over the last decade and now offer almost comprehensive DFQF market access to LDC products. Notable progress has been made in the implementation of the Nairobi Decision on Preferential Rules of Origin for LDCs. There has also been an incremental progress in the number of notifications regarding preferential treatment for services and services suppliers from LDCs. By the end of September 2017, a total of 24 Members have submitted notifications pursuant to the LDC Services Waiver.

6 - 6-2 INTRODUCTION 2.1. This Note prepared by the Secretariat responds to paragraph 8 of the WTO Work Programme for the Least Developed Countries, which mandates annual reviews of market access for products originating from LDCs (WT/COMTD/LDC/11/Rev.1). It builds on previous Secretariat studies by updating the information on trends in LDCs' trade and market access conditions The Note is divided into two main chapters, in addition to the executive summary and the introduction. Chapter 3, on trade profile, provides a description of the recent trends of LDCs' trade flows, both in goods and commercial services. Chapter 4 contains information on trends in market access conditions for LDC exports, including duty-free market access for LDC products and recent initiatives undertaken by Members to improve market access for LDCs, mainly based on Members' notifications. The Note does not attempt to be comprehensive in covering all aspects that condition market access for LDC products. It should therefore be read in conjunction with previous Secretariat notes prepared on this topic, to gauge the different factors that determine market access for LDCs Despite improvements in the production of national data, the statistical coverage of LDCs remains incomplete. The Secretariat has been using reported national figures whenever available. In many instances, it was still necessary to rely on mirror statistics i.e. data reported by LDCs' trading partners. The disadvantage of using mirror data is that it does not allow taking into consideration trade among the LDCs, as well as trade with non-reporting developing economies The definition of geographical and other groupings in this report serves only statistical purposes; it does not imply an expression of opinion by the Secretariat concerning the status of any country or territory, the delimitation of its frontiers, nor the rights and obligations of any WTO Member in respect of WTO agreements. 2 2 Even though Equatorial Guinea graduated from the group of LDCs in June 2017, it is still treated as LDC member in this Note, which refers to 2016 as most recent year of reference for statistical analysis.

7 - 7-3 LDCS' TRADE PROFILE 3.1 Trends in Goods and Commercial Services 3.1. Over the period , LDC exports of goods and services grew by an annual average of 6.4%, slightly more than the exports of other developing economies (6.1% average). Most of this average growth, however, stems from distinctly higher growth rates in the first part of the period. The rapid increase in the total value of goods and services exported by LDCs during the early 2000s came to an abrupt halt in 2008, in the wake of the global financial crisis. During , average annual export growth of LDCs' exports was even slightly negative (-0.02%) while the respective figure for other developing economies stood at +2.1% per year. The LDCs, which depend more on commodity exports than the other developing economies, were adversely affected by the unfavourable developments in the price of commodities. Chart 1: Evolution of LDC exports of goods and commercial services, (Index, 2005 = 100; BOP/BPM6) WTO Secretariat. Table 1: Trends in LDC exports of goods and commercial services, (Billion dollars and percentage; BOP/BPM6) Value ($bn) Annual percentage change (%) Exports Total goods and commercial services Goods Commercial services Imports Total goods and commercial services Goods Commercial services WTO Secretariat In 2016, LDC exports of goods and commercial services decreased by 3.9%, down to US$187.0 billion, while LDC imports fell by 6.5% to US$297.9 billion (see Table 1). However, in comparison to 2015 (exports -20.9%; imports -10.0%), these negative growth rates were significantly less pronounced. In value terms, goods exports dominate services exports. In 2016, LDC commercial services exports amounted to US$31.9 billion, which constituted only 17% of LDC goods and commercial services exports. In contrast, services constituted 23% of world total exports in 2016.

8 In terms of trade balance (see Chart 2), the LDCs recorded an overall trade deficit of US$92.9 billion in Imports exceeded exports by US$60.0 billion in the case of goods and by US$32.9 billion in the case of commercial services. The trade deficit of LDCs in 2016 was more than nine times higher than in 2005 (US$9.8 billion), when high commodity prices had led to a surplus in LDC goods trade. Chart 2: LDCs' total trade balance, 2005 and 2016 (Billion dollars; BOP/BPM6) WTO Secretariat Price fluctuations significantly impact the value of LDC trade. In order to better understand the physical level of trade, Chart 3 shows developments in the volume of merchandise trade for LDCs and other developing economies. In 2016, LDC merchandise exports grew by 7.5% in volume terms, while their imports expanded by 1.0%. This positive growth in trade volumes contrasts the decline in trade values, which are, inter alia, driven by price developments. In comparison to 2005, the export volume increased by more than 1.8 times while the import volume more than doubled. LDCs' total trade volume (turnover, i.e. exports plus imports) increased by 4.5% in 2016 while the volume of total trade of other developing economies decreased by 1.8%. Chart 3: Development in merchandise trade volume of LDCs and developing economies, (Indices, 2005 = 100) WTO Secretariat. LDCs' data are computed based on deflators sourced from UNCTAD.

9 Chart 4 shows the development of LDCs' share in world exports from 2005 to The share of LDCs in world exports of goods and commercial services stood at 0.91% in Following a more or less gradual increase from 0.74% in 2005 to 1.07% in 2013, the LDCs' share in world exports decreased in the years This recent decrease reflected lower values of goods, due to falling prices of commodities, particularly fuels. Chart 4: LDCs' shares in world exports, (Percentage shares; BOP/BPM6) WTO Secretariat Table 2 contains the respective shares for total trade, exports and imports for all years since 2005, including the values for world and LDC trade used for the calculation of the shares.

10 Table 2: LDCs and world trade in goods and commercial services, (Billion dollars and percentage; BOP/BPM6) Value (US$bn) Annual percentage change Total trade in goods and commercial services a World 12,666 14,545 16,933 19,509 15,541 18,506 21,989 22,352 22,982 23,395 20,739 20, LDC Share in world Total trade in goods a World 10,104 11,664 13,500 15,629 12,092 14,733 17,746 17,966 18,318 18,386 16,023 15, LDC Share in world Total trade in commercial services a World 2,563 2,881 3,433 3,879 3,449 3,773 4,243 4,387 4,665 5,009 4,716 4, LDC Share in world Goods exports World 10,175 11,779 13,661 15,777 12,250 14,934 17,982 18,227 18,629 18,667 16,220 15, LDC Share in world Commercial services exports World 2,597 2,932 3,510 3,948 3,521 3,847 4,328 4,451 4,743 5,078 4,790 4, LDC Share in world Goods imports World 10,032 11,549 13,339 15,481 11,934 14,532 17,510 17,704 18,006 18,105 15,826 15, LDC Share in world Commercial services imports World 2,528 2,831 3,355 3,811 3,377 3,699 4,158 4,322 4,587 4,939 4,642 4, LDC Share in world a World total trade is calculated as the average of world exports and imports, according to the BOP presentation (BPM 6). Total LDC trade in this table is approximated as the sum of their exports and imports. Total trade shares are calculated in relation to the corresponding world exports plus imports. WTO Secretariat.

11 Merchandise Trade Developments Overall trend 3.7. Merchandise exports of the LDCs decreased by 6% in 2016, declining more than world exports which fell by 3%. This was a relative improvement as compared to 2015, when LDC exports had dropped by 24% (see Chart 5) The negative performance in 2016 is mostly linked to the high dependence of LDCs on exports of fuels and mining products which continued to be hit by low prices and declining demand (although less marked than in 2015). LDC imports decreased by 3% compared with a 10% decline in Chart 5: Merchandise trade of LDCs, (Billion dollars and percentages) WTO Secretariat The LDCs' share of world merchandise exports remained under 1%, falling to 0.94% from 0.97% in This continuing decline is also linked to LDCs' dependence on fuel and mining products. Price fluctuations for these products have a greater impact on LDCs' overall export performance than is the case for economies with more diversified export base. LDCs' share of world merchandise imports remained at the same level as in 2015, namely at 1.4%. Among developing economies, LDCs' share stayed at 2.2% for exports, the same percentage as in 2015, while for imports it increased from 3.5% to 3.6%. The share of LDCs exports of manufactures in world exports of this product group remained at 0.5% The LDCs merchandise trade deficit slightly increased from US$81 billion in 2015 to a new record level of US$83 billion in 2016 (see Chart 6). LDC oil exporters experienced a US$11 billion deficit in 2016, almost four times higher than the previous year (2015). The biggest deficit was registered by LDC exporters of agriculture (US$33 billion), followed by LDC exporters of manufactured goods (US$22 billion). LDC exporters of non-fuel minerals recorded a negative trade balance of US$13 billion in 2016, a 36% increase on the previous year. 3 Differences between BOP (BPM6) and International Merchandise Trade Statistics are explained in the International Merchandise Trade Statistics: Compilers Manual, Revision 1 (IMTS 2010), Chapter XXIV Section B "Goods to be recorded differently in IMTS and BPM6/national accounts" (p. 288). (

12 Chart 6: Merchandise trade balance of LDCs, (Billion dollars) WTO Secretariat The only group of LDCs to achieve growth in 2016 were the "exporters of manufactured goods", which increased by 9% (see Chart 7). Agriculture exporters recorded a slightly negative growth rate (-1%), which was however a much better performance than the 13% decline in Stable prices for food and beverages certainly played an important role in this. "Other LDCs" (Djibouti, Senegal and Tuvalu) experienced a 3% decline in exports in 2016, while "exporters of non-fuel minerals" recorded a decline of 18%. "LDC oil exporters" experienced the highest decrease (-21%). Annex Table 1 provides details on the value and growth of exports and imports for individual LDCs. Chart 7: Merchandise exports of LDCs by product specialization, (Billion dollars) WTO Secretariat.

13 Commodity price movements Chart 8 shows developments in the export prices of primary commodity groups (see Annex Table 2 for prices of individual commodities). The strong reduction of commodity prices of the previous year had almost come to a stop in 2016, with the exception of energy prices. The export prices of all major commodity groups except of "food and beverages" still showed slight decreases, but on a smaller scale than back in Prices for food and beverages registered a small increase of 1% in 2016 mostly due to unfavourable weather conditions in several parts of the world. Minerals and non-ferrous metals were subject to an overall annual price decrease of 5% in 2016, but some commodities such as tin (+12%), zinc (+8%), lead (+4%) and iron ore (+4%) became more expensive. Uranium (-28%), nickel (-19%) and copper (-12%) still showed a negative change in terms of prices. Energy prices fell by 18% in 2016, with the highest declines observed for natural gas (-34%). While prices for crude petroleum fell by 18%, coal prices went up by 14%. Chart 8: Export prices of primary commodities, (Indices, 2005 = 100) World Bank Major LDC traders Chart 9 illustrates the top ten individual exporters and importers of the LDC group for both 2005 and Angola was the top exporter in 2005, accounting for almost 30% of merchandise LDC exports, followed by Bangladesh (11%) and Equatorial Guinea (9%). In 2016, the top exporter was Bangladesh (share of 24%), followed by Angola (17%) and Myanmar (8%). While the top ten exporters represented almost 80% of LDCs' exports in 2005, this share went down to around 76% in 2016 indicating a slight decrease in terms of country concentration among the LDCs. Nevertheless, the fact that the remaining (non-top ten) 38 LDCs accounted for only 24% of LDC merchandise exports in 2016 illustrates that exports are still concentrated on a relatively few LDCs The three leading importers in 2005 were Bangladesh (share of 16%), Angola (10%) and Sudan (8%). Eleven years later, the top three consisted of Bangladesh (18%), Angola (8%) and Myanmar (7%). The top ten importers covered around two thirds of total LDC imports in 2016 (up from 47% in 2005). Hence, the country concentration for imports of the top ten increased distinctly.

14 Chart 9: Top ten LDC exporters and importers, 2005 and 2016 (Percentage shares) WTO Secretariat Trends in product composition The evolution in the commodity mix of the LDCs between 2005 and 2016 is presented in Chart Due to a lower value of fuel exports, the share of primary products in total exports of LDCs continued to decrease in 2016 from 73% in 2005 down to 49% in In contrast, the share of manufactured products increased from 21% in 2005 to 40% in This was mainly due to a higher share of clothing products in LDC merchandise exports, which increased from 13% in 2005 to 29% in Furthermore, the share of agricultural products (agricultural raw materials and food) in LDC exports increased from 11% in 2005 to 13% in Data for 2016 are preliminary estimates based on mirror data from the UN Comtrade database. 5 These shares are derived from the WTO network of LDCs by product and destination compiled according to the United Nations Standard International Trade Classification (SITC). According to this classification, diamonds and non-monetary gold are not part of mineral products as opposed to the Harmonized System (HS). As a result, the shares of fuels and mining product in total LDCs' exports derived from the LDC network differ from the shares of exporters of fuels and mining products presented in the annex of this report.

15 Chart 10: Evolution of merchandise export structure of LDCs, 2005 and 2016 (Percentage shares) WTO Secretariat (2005), WTO estimates based on UN Comtrade (2016) Chart 11 shows the evolution of the top ten products and their respective shares exported by LDCs between 2005 and 2016 (Annex Table 4 provides statistics on the top 50 export products). Petroleum products (HS 27.09, and 27.10) clearly dominated exports in 2005 with a share of more than half (52%) of all LDC exports. However, these three products accounted for only about a quarter (26%) of LDC exports in While crude petroleum (HS 27.09) was still the top 1 export product, the other two types of petroleum products fell down to positions 11 (HS 27.11) and 33 (HS 27.10). At the same time, the share of clothing products within the top ten increased from 11% in 2005 to 21% in While back in 2005, diamonds (HS 71.02) still held a share of 2% in LDCs' exports (top 7 product), they fell out of the top ten products in 2016 (down to 13 th position with a share of 1%). In 2016, gold (HS 71.08) was of higher importance reaching a share of 4% in LDCs' exports (top 6 product). Refined copper (HS 74.03) held its 2005 share of 2% also in 2016, but in 2016 a second copper product (HS 74.02; unrefined copper) entered the top 10 (top 8 product behind refined copper). Unwrought aluminium (HS 76.01) had disappeared from the top ten in 2016 (10 th position in 2005; 35 th in 2016).

16 Chart 11: Top ten products of LDC merchandise exports, 2005 and 2016 (Percentage shares with corresponding HS codes) UN Comtrade database (mirror data) Table 3 highlights the 20 top products (among the LDCs' main 50 export products) for which the LDCs achieved the highest increases in world market shares between 2005 and For the top product "tin ores and concentrates" (HS 26.09), the LDCs increased their world market share by 69.7 percentage points up to almost 80% in However, this product represented only a share of 0.6% in LDCs' total exports in 2016 (up from 0.03% in 2005). The product with the second-highest increase in terms of market share was "unrefined copper; copper anodes for electrolytic refining" (HS 74.02), which gained almost 43 percentage points in terms of market share (up to 43.5% in 2016). As a result, this product now appeared in the list of top 10 export

17 products of LDCs (see Chart 11). LDCs were also in a position to extend their world market share for "cobalt mattes and other intermediate products of cobalt metallurgy" (HS 81.05) between the two years by more than 22 percentage points, reaching a world market share of almost 40% in Table 3: LDCs' top 20 export products in terms of increase in world market share, 2005 and 2016 (Million dollars and percentages) HS code Commodity description Value 2005 ($mn) Value 2016 ($mn) Increase in market share (% points) Market share 2016 (%) Share in LDC exports (2005, %) Share in LDC exports (2016, %) 2609 Tin ores and concentrates Unrefined copper; copper anodes for electrolytic refining Cobalt mattes and other intermediate products of cobalt metallurgy Babies' garments and clothing accessories, knitted or crocheted Men's or boys' suits, ensembles, jackets, blazers, trousers , , , , Men's or boys' shirts 1, , Other oil seeds and oleaginous fruits , T-shirts, singlets and other vests, knitted or crocheted Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts Men's or boys' underpants, briefs, nightshirts, pyjamas, bathrobes Women's or girls' slips, petticoats, briefs, panties, nightdresses 1, , , , Men's or boys' shirts, knitted or crocheted , Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace... Garments, made up of fabrics of heading 56.02, 56.03, 59.03, or , , Vanilla Jerseys, pullovers, cardigans, waist-coats and similar articles, knitted or... 3, , Dried leguminous vegetables, shelled , Waste and scrap of precious metal or of metal clad with precious metal Men's or boys' overcoats, car-coats, capes, cloaks, anoraks , Note: Calculations based on the 50 products with the highest export values of LDCs. UN Comtrade database (mirror data).

18 While the previous table showed the top LDC products in terms of increase in world market share between 2005 and 2016, Chart 12 provides the top LDC products in terms of world market share in The highest share with almost 97% was reached by "Yarn of jute or of other textile bast fibres of heading " (HS 53.07); thus almost all world trade of this product originated from LDCs. Also for "Cobalt ores and concentrates" (HS 26.05) share of 96% in world exports and "Jute and other textile bast fibres [ ]" (HS 53.05) share of 94%, LDCs were dominating world export markets. "Cloves (whole fruit, cloves and stems)" (HS 09.07) and "Tin ores and concentrates" (HS 26.09) still reached market shares of around 80% each, followed by vanilla (HS 09.05) with a market share of 71%. In other words, for five out of around 1500 HS-4-digit codes, LDCs represented more than half of world exports in Chart 12: Top 20 products of LDCs' exports with the highest shares in world export market, 2016 (Percentage shares with corresponding HS codes) UN Comtrade database (importer data) Major markets of LDCs LDCs' top ten markets by product groups for both 2005 and 2016 are listed in Table 4 (Annex Table 3 shows trade statistics for a greater number of destination markets). The European Union was the top destination for total LDC merchandise exports in both 2005 (share of 26%) and 2016 (share of 31%). China, which had been the top destination for LDC exports since 2009, secured the second place in 2016 (share of 21%). The top 10 importers accounted for 88% of LDCs' total exports in 2016, which was slightly higher than the respective share of 87% in Regarding agricultural products, the European Union was the main destination of LDCs' exports in both 2005 (share of 32%) and 2016 (27%). China, on position two, doubled its market share for LDC agricultural products from 10% in 2005 to 20% in India and the United States were on positions three and four, just as in The top ten destinations accounted for 81% of LDC exports of agricultural products in 2016 (up from 76% in 2005).

19 WT/COMTD/LDC/W/ China was the most important destination for LDC exports of fuels and mining products in 2005 and 2016, expanding its share in LDC exports to almost 50% in 2016 (up from 29% in 2005). The United States dropped from second position in 2005 to fourth position in 2016 (share of 26% in 2005 and of 8% in 2016). In both years, the top 10 destinations imported more than 90% of all LDCs' exports of fuels and mining products The European Union and the United States were the most important destinations for LDC exports of manufactured goods in both 2005 and In 2016, the European Union imported more than half (51%) of LDC manufacturing exports (up from 49% in 2005). While growing in absolute terms, the share of LDC exports of manufactures to the United States decreased from 30% in 2005 to just below 20% in Japan was the third most important destination for LDC manufacturing exports in 2016, reaching a share of 5% (up from 2% in 2005). The share of the top 10 destinations in LDC exports of manufactures remained unchanged at 90% between 2005 and Table 4: LDCs' top ten export markets, 2005 and 2016 (Billion dollars and percentage shares) Total trade Agricultural products Value (US$bn) Fuels and mining products Manufactures EU (28) 21.4 EU (28) 3.6 China 14.0 EU (28) 10.3 USA 19.5 China 1.2 USA 12.5 USA 6.3 China 15.3 India 1.1 EU (28) 7.3 India 0.7 Thailand 3.6 USA 0.6 Thailand 2.8 Canada 0.6 Japan 3.5 Thailand 0.6 Japan 2.6 Japan 0.4 India 2.0 Japan 0.5 Chinese Taipei 1.6 Hong Kong, China 0.3 Chinese Taipei 1.8 Saudi Arabia 0.4 Chile 1.2 Turkey 0.1 Canada 1.6 Viet Nam 0.3 Korea, Rep. of 1.0 Mali 0.1 Chile 1.2 Pakistan 0.2 Zimbabwe 0.9 Singapore 0.1 Korea, Rep. of 1.1 Zimbabwe 0.2 Canada 0.7 South Africa 0.1 Sum of above 70.9 Sum of above 8.7 Sum of above 44.5 Sum of above 19.0 Share of top 10: 86.8 % Share of top 10: 75.7 % Share of top 10: 92.4 % Share of top 10: 90.3 % Value (US$bn) EU (28) 47.2 EU (28) 5.5 China 25.6 EU (28) 32.6 China 32.7 China 4.0 EU (28) 8.8 USA 11.2 USA 16.5 India 3.5 India 4.3 Japan 3.3 United Arab Emirates 10.6 USA 0.9 USA 4.2 Canada 2.2 India 10.1 Japan 0.7 South Africa 2.2 China 2.0 Switzerland 4.6 Pakistan 0.5 Korea, Rep. of 1.8 India 1.6 United Arab Japan 4.5 Korea, Rep. of 0.4 Chinese Taipei 1.6 Emirates 1.5 United Arab Korea, Rep. of 3.3 Emirates 0.4 Japan 0.5 Korea, Rep. of 1.0 United Arab South Africa 3.0 Malaysia 0.3 Emirates 0.5 Turkey 1.0 Canada 2.6 Indonesia 0.3 Indonesia 0.4 Australia 0.8 Sum of above Sum of above 16.6 Sum of above 50.0 Sum of above 57.3 Share of top 10: 88.1 % Share of top 10: 81.0 % Share of top 10: 94.6 % Share of top 10: 89.5 % UN Comtrade (importer data). 3.3 Services Trade Developments In the period , LDCs' commercial services exports expanded by 12% on average per year, compared to 8% in other developing economies and 5% in the developed group. Following a decade of sustained growth, LDCs' exports of commercial services slowed down since This downward trend accentuated in 2016, when services exports fell by 4% to US$32 billion. The pattern was similar on the import side, with a more pronounced drop in 2016, by 6%, to US$65 billion (see Chart 13 and Annex Table 5 for country detail).

20 Chart 13: LDCs' trade in commercial services, (Annual percentage change) WTO-UNCTAD-ITC estimates In 2016, the share of LDCs in global exports of commercial services stood at 0.7%, up from 0.4% in The LDCs' share in world services imports decreased to 1.4% in 2016, which was lower than in 2015 (1.5%) but higher than in 2005 (1.0%) (see Chart 14). Chart 14: LDCs' share in world exports and imports of commercial services, (Percentage shares) WTO-UNCTAD-ITC estimates.

21 LDCs' performance in services exports varied significantly by region in 2016 (see Chart 15). Exports of LDCs in Africa accounted for more than half of LDCs' total commercial services in 2016 and grew on average by 10% between 2005 and Rapid export growth over the years was fuelled by transport services, with Ethiopia's rise as air transport exporter, as well as by the thriving tourism sector especially in Tanzania and Uganda However, in 2016, LDCs in Africa saw sharp declines, with services exports falling by 5% and imports by 11%. Transport exports declined by 4%, as Ethiopia's and Tanzania's exports stagnated. Other commercial services were the most affected (-9% on both exports and imports). Falling commodity prices reduced revenues of LDC oil exporters, limiting their capacity to import services, in particular business, professional, and technical services, which fell by 11%. Chart 15: LDCs' exports of commercial services by LDC region, (Billion dollars) WTO-UNCTAD-ITC estimates In the period , LDCs in Asia recorded the most rapid export growth expanding by 14% on average per year thanks to the significant performances of Cambodia and Myanmar as leading tourism destinations, and Bangladesh and Nepal as information and communication technology (ICT) exporters. Similarly, commercial services imports expanded more rapidly in LDCs in Asia (+12% on average per year) than in other LDC regions In 2016, LDCs in Asia saw a 3% decline in exports, largely due to falling exports of "other commercial services" (-12%), while imports continued to recorded double-digit growth (+10%). Travel exports grew by 3%, despite a slowdown in foreign tourists visiting Myanmar, the third largest tourism exporter in the LDC group, the second among LDCs in Asia In LDC islands, average annual growth of services exports reached 10% between 2005 and Tourism, which accounts for more than two-thirds of services exports, was thereby the leading sector. In the Solomon Islands, travel earnings expanded by 38% on average per year and by 23% in Sao Tome and Principe. In 2016, however, according to preliminary estimates, LDC islands experienced a modest growth of 2% for their services imports and a decline of 6% for their exports Services trade in LDCs remains concentrated within a few economies, an unchanged pattern since 2005 (see Chart 16). In 2016, the top ten leading exporters accounted for almost 70% of the group's services receipts. According to Secretariat estimates, Myanmar was the largest exporter of services among the LDCs, boosted by rising travel exports. Imports are equally concentrated with the first five importers, led by Angola, representing around half of LDCs' total commercial services payments.

22 Chart 16: Leading LDC traders of commercial services, 2016 (Percentage shares) WTO-UNCTAD-ITC estimates Over recent years, the number of international tourist arrivals to LDCs multiplied rising from over 10 million arrivals in 2005 to more than 28 million in 2015 (see Chart 17). Increasing inflows of foreign tourists and their purchase of goods and services in the countries they have visited has boosted LDCs' travel revenue. In 2016, revenue reached US$17 billion compared with US$5 billion in As a result, the LDCs' share of world travel exports has doubled in ten years, reaching 1.4% of global travel receipts in Chart 17: LDCs' travel exports and international tourist arrivals, (Billion dollars and million arrivals) WTO estimates based on UNWTO data and WTO-UNCTAD-ITC estimates Travellers' expenditure in LDCs brings revenue to a variety of sectors, such as accommodation, food and beverages, transport, retail, recreation and cultural activities, creating employment opportunities in both urban and rural areas. In addition, tourism fosters the development of other sectors, such as agriculture (e.g. food supply to hotels and restaurants), construction, communications, utilities (e.g. the supply of electricity and water to hotels), and conference and events management. Travel exports in LDCs have expanded more rapidly than exports of manufactured goods and fuels and mining products, their most traded products (see Chart 18).

23 Chart 18: LDCs: Travel exports, and exports of agricultural products, manufactured goods, and fuels and mining products, (Index 2005 = 100) WTO-UNCTAD-ITC estimates Secretariat estimates based on national accounts statistics of 42 LDCs for the period , the latest available year, confirm the swift growth of the accommodation sector in LDCs compared to other sectors of the economy as well as other commercial services activities 6 (see Chart 19). Chart 19: LDCs: GDP by selected economic activities (Index 2005 = 100) WTO estimates on the basis of National Accounts statistics of 42 LDCs International tourism in LDCs is essentially intra-regional, according to WTO Secretariat estimates based on UNWTO data. In 2015, around 85% of foreign tourists visiting LDCs in Asia originated from neighbouring economies, up from 59% in In Myanmar, for example, foreign tourists in 2015 came almost exclusively from Asia, with almost half of them from China and more than one-third from Thailand. Tuvalu. 6 Estimates do not cover the following countries: Chad, Eritrea, Haiti, Somalia, South Sudan, and

24 In Cambodia, the share of tourists from Asia stood at 77%, with China accounting for 15% and Viet Nam for 21%. China was the main source of foreign tourists to Bhutan (19%) while in Lao People's Democratic Republic half of the tourists came from Thailand. In total, some 4 million Chinese travellers visited LDCs in Asia in 2015, an increase of 52% on average per year since The increase in travel receipts for LDCs in Asia matches closely the growth of tourist arrivals from Asia in the last ten years. Fuelled by rising intra-regional tourists, travel exports of LDCs in Asia have risen faster than the exports of LDCs in Africa and LDC islands (see Chart 20). Consequently, LDCs in Asia increased their share in total LDCs' travel exports to 40%, up from 26% in Chart 20: LDCs in Asia and in Africa: International tourist arrivals by region of origin and travel exports, (Million arrivals and million dollars) WTO estimates based on UNWTO data and WTO-UNCTAD-ITC estimates Intra-regional tourists are also the main source of tourists for LDCs in Africa, representing around 63% of travellers to Africa in recent years. Tourists from Europe represented on average just over 20% of total arrivals. Although LDCs in Africa comprise more than 30 countries and a population twice as high as LDCs in Asia, their travel exports were not significantly higher in LDCs in Africa are not yet benefiting as much as LDCs in Asia from the inflows and travel expenditure of Chinese tourists, the largest and predicted tourism source market. Although the number of Chinese tourists is on the rise, in 2015 they accounted for only 2% of foreign tourists in Tanzania and Zambia and 1% in Uganda Between 2005 and 2016, LDCs' other commercial services exports expanded by 10% on average. All sectors recorded rapid growth with the exception of intellectual property related services (charges for the use of intellectual property, n.i.e), which saw declines (see Chart 21). Personal, cultural and recreational services which include artistic services such as the live performance of artists in concerts, etc. were the most dynamic during the entire period, even though the exported amounts were small. The ICT sector recorded the second-highest growth, although a digital divide remains in LDCs with respect to access to and use of information technology.

25 Chart 21: LDCs' export growth of other commercial services by sector, (Annual percentage change) WTO-UNCTAD-ITC estimates According to ITU estimates, by the end of 2017, less than 15% of LDCs' households will have access to the Internet at home, compared with 84.4% in developed economies (see Chart 22). Similarly, in LDCs only 17.5% individuals will use the Internet, while in developed economies they will reach 81% Infrastructural constraints, low rates of access to the Internet, poor connectivity, as well as lack of technological knowledge hinders the integration of LDCs, especially African LDCs, in world trade in ICTs services. In 2016, a negligible 0.1% of global exports of computer and information services originated from LDCs. Finally, the persistence of such a digital divide prevents LDCs from entering fully into new ways of trading goods and services, such as e-commerce and to participate in global value chains. Chart 22: Digital divide between developed economies and LDCs, (Percentage) Note: * Data for 2017 are estimates. International Telecommunications Union (ITU). The aggregate "developed economies" follows ITU's definition. Data for 2017 are estimates.

26 Box 1: The contribution of services to GDP in LDCs The lower participation of LDCs in services exports (0.7% of world trade) reflects a smaller domestic supply base. According to Secretariat estimates, the share of commercial services (excluding public administration and defence and compulsory social security) in total GDP in LDCs averaged 41% in 2014, significantly less than in higher-income economies (above 70%) and in middle-income economies (over 50%). The value of commercial services (see Chart 23) produced by LDCs in 2014 is estimated by the Secretariat at US$354 billion 7, of which US$212 billion produced by LDCs in Africa (including islands), and US$142 billion by LDCs in Asia (including islands). Services production in the entire LDC group is 5 to 6 times lower than in individual developed economies such as France and Germany. Chart 23: GDP by main economic activity in LDCs, (Billion dollars) WTO estimates on the basis of National Accounts statistics of 42 LDCs. LDCs' economies remained dominated by the primary sector, accounting for almost one third of GDP. Agriculture, hunting, forestry and fishing accounted for 21.4%, and mining and quarrying for an additional 10.2%, predominantly due to LDCs in Africa where the share stood at 13.9%. Manufacturing contributed on average for 11.2% of LDCs' GDP, with the manufacturing share being highest in LDCs in Asia (16.4%), double the share of LDCs in Africa. A closer look at the sectoral services breakdown reveals that the hotels and restaurants sector contributed the most to LDCs' GDP, at 8.2%, inasmuch as wholesale and retail trade. While the hotels and restaurants sector accounted for 10% of GDP in LDCs in Africa, the respective share in LDCs in Asia was 5.2%. Transport and storage stood at 6.2% and communications at 2.8%. Financial intermediation activities represented 2.7%, whereas it represented 6% of world's leading financial services traders. Similarly, value added from real estate, renting and business activities totalled 6.3% in LDCs compared to 22% in the European Union. The contribution of education, health and social work and other community, social and personal services accounted for 6.4%. Construction, not included under services in national accounts, represented alone 8% of total GDP. Tuvalu. 7 Estimates do not cover the following countries: Chad, Eritrea, Haiti, Somalia, South Sudan, and

27 Chart 24: GDP by main economic activity in LDCs, 2014 (Percentage shares) WTO estimates on the basis of National Accounts statistics of 42 LDCs.

28 MARKET ACCESS FOR PRODUCTS OF EXPORT INTEREST TO LDCS 4.1 Trends in market access for products of export interest to LDCs 4.1. This section discusses the market access conditions for LDC exports in terms of proportion of tariff lines receiving duty-free treatment, as well as in terms of average applied duties in key sectors. These two indicators are included in the set of indicators used to measure the implementation of the UN Sustainable Development Goal (SDGs) The UN SDGs recognise trade as an engine for inclusive economic growth and poverty reduction. This recognition is reflected in Goal 10 ("Reduce inequality within and among countries") and its Target 10.a to "implement the principle of special and differential treatment for developing countries, in particular least developed countries, in accordance with WTO agreements". The SDG indicator used to measure the implementation of Target 10.a is defined as the proportion of tariff lines with zero duty applied to products from LDCs and developing countries (Chart 25). Being part of Goal 17 ("Strengthen the means of implementation"), SDG Target calls for a "timely implementation of DFQF market access on a lasting basis for all LDCs, consistent with WTO decisions ". Average tariffs faced by the LDCs are used as indicator to measure the implementation of Target (Table 5) As shown in Chart 25, the LDCs and developing countries have benefitted from a continuing increase in duty-free market access over the last decade. From a global perspective, in 2015, the international trading community granted to LDCs duty-free market access on 65% of tariff lines, which is considerably higher than the respective share of 50% in the case of developing countries. Chart 25 also reveals that worldwide, the proportion of duty-free tariff lines has risen from 49% in 2005 to 65% in 2015 for LDCs, which confirms the commitment of Members to grant preferential market access to the LDCs. Chart 25: Proportion of tariff lines worldwide with zero duty applied to products from developing countries and LDCs, 2005, 2010 and 2015 (Percentage shares) ITC/UNCTAD/WTO Table 5 shows average tariffs applied by developed Members on key products from LDCs. LDC exports to developed Members benefit from low duties or - to a large extent - from duty-free treatment. In 2015, LDC faced average tariffs of 0.9% for agricultural products, 0.3% for manufactures (other than minerals and oils, textiles and clothing products), and 0% for fuels and minerals. However, on textiles and clothing products, the average duty was higher at around 3.2% and 6.5%, respectively. Table 5 furthermore shows that average tariffs levied on exports from LDCs to developed countries remained largely stationary over the period The complete list of SDG indicators are provided in Annex III of the Report of the Inter-agency and Expert Group on SDG Indicators (E/CN.3/2017/2). Available at: