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TRADE AND DEVELOPMENT

TRADE AND DEVELOPMENT. National Seminar on the WTO and the DDA Raúl Torres, Development Division. Elements in the module. Trade and Development Why is trade important for development? Challenges and how to meet them Work Programme on Small Economies Special and differential treatment

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TRADE AND DEVELOPMENT

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  1. TRADE AND DEVELOPMENT National Seminar on the WTO and the DDA Raúl Torres, Development Division

  2. Elements in the module • Trade and Development • Why is trade important for development? • Challenges and how to meet them • Work Programme on Small Economies • Special and differential treatment • Historical evolution and current state of the negotiations

  3. What do we know about trade? • Trade can be a powerful source of growth & development; • Trade can expand markets, facilitate competition and disseminate knowledge, raise productivity and facilitate assimilation and exposure to new technologies • No country has developed by turning its back on trade and long-term capital flows; • At the same time trade liberalization will not automatically lead to growth and development;

  4. GATT OBJECTIVES • Raising standards of living • Ensuring full employment • Ensuring large & steadily growing volume of income & effective demand • Developing full use of global resources • Expanding production and trade in goods

  5. The Uruguay Round • Basic principles were to provide certainty and predictability in global trade • Development becomes an important subject with S&D provisions in almost all areas • Recognition that trade must lead to development • Sustainable development introduced as primary objective • Equity is also reflected in the consensus and the one Member one vote principle

  6. Marrakesh Agreement-Preamble • Recognized ”... need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in growth in international trade commensurate with the needs of their economic development”.

  7. Trade and Development • What is development? • Economic or social? • Is development part of the scope of the WTO? • Is the WTO a developmental agency? • Who is a developing country?

  8. Complex Nature of the Nexus between Trade and Development • The relationship between trade and development is complex and largely dependent on both internal and external factors; • The causal link between different influencing factors is not clear; • Complexity of the issue is compounded by peculiar features of developing countries economies; • Trade liberalization alone may not lead to growth and development.

  9. How To Make Trade Work For Development • How to overcome these constraints? • How to help developing countries maximise the benefits from the multilateral trading system? • 3 areas to explore: • Institutional Issues • Issues to be addressed by the Trading Partners • Domestic Issues

  10. Institutional Issues • Objective: -Favourable international environment that facilitates trade and leads to development; -Key ingredients; predictability & certainty; but -Must also ensure a favourable & equitable outcome; -One that takes into account the concerns and constraints of developing countries.

  11. Institutional Issues • How can this be ensured: • Full participation ( physical & proactive) • Transparent and inclusive decision making process • Appropriate and effective S&D treatment provisions • Technical Assistance & Dom. Policy Space

  12. What can be done by trading partners • Respect principle of non-reciprocity • Convert assurances into actual trade opportunities & gains • Respect capacity constraints - refrain from overloading the agenda • Acknowledge differences amongst developing countries – issue of domestic policy space flexibility

  13. Domestic Issues • Domestic policies that mainstream trade in to development strategies are essential; • Strong institutional infrastructure; competent financial institutions; and transparent legal framework • Important to generate a ‘strong’ ownership of national reform process; Possible only by maximizing gains from trade liberalization • However, reforms need a strong and committed political leadership

  14. Domestic Issues • Supply side capacity • Strong administrative & organisational base; • Appropriate financial institutions; and • Transparent legal framework • All of which will require reforms in domestic policies

  15. Summary • A development friendly and conducive multilateral environment can lead to increased trading opportunities; • For these opportunities to be converted into actual gains trading partners may have to look beyond mercantilist gains; • Even more importantly, the global community would need to work together to help dc’s overcome supply-side constraints and capacity building

  16. Summary (continued) • For trade to lead to development the dc’s would need to adopt matching domestic policies; • Institutional development and innovation would be one of the more important elements of such development strategies; • Multilateral trade rules should, therefore, provide flexibility and policy space to dc’s to pursue appropriate development priorities.

  17. Conclusions • Trade can lead to economic growth, provided there is a conducive multilateral environment; • Multilateral trade rules should ideally provide flexibility to countries to pursue appropriate development priorities, • In turn economic growth can lead to development, provided countries adopt appropriate domestic policies and overcome supply side constraints; • But development may not automatically lead to poverty alleviation – adoption of redistributive policies

  18. Developmental Issues in the DDA

  19. The DDA mandate • Paragraphs 1,2 ,3 and 6 • International trade can play a major role in the promotion of economic development and the alleviation of poverty. • The majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration. • Enhanced market access, balanced rules, and well targeted, sustainably financed technical assistance and capacity-building programmes have important roles to play.

  20. Small Economies

  21. CTD – Dedicated Session • CTD – Dedicated Session on Small Economies • Para. 35 Doha MD mandate • HK MD Para. 41 • Proposals in CTD • Decision on regional bodies for TBT,SPS and TRIPS • Monitoring proposals in other bodies

  22. SVEs Doha Mandate • “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 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

  23. Who are the SVE proponents? • Antigua and Barbuda, Barbados, Belize, Dominica, Fiji, Haiti, Jamaica, Mauritius Papua New Guinea, Solomon Islands, Sri Lanka, St. Kitts and Nevis, St. Vincent and the Grenadines, Trinidad and Tobago • Bolivia, Mongolia, Paraguay • Cuba, Dominican Republic, Guatemala, Honduras, Nicaragua, El Salvador

  24. Characteristics and problems • Physical isolation, geographical dispersal and distance from the main markets. • Minimal share of total world trade. • Small, fragmented and highly imperfect markets. • In general, very open economies. • Domestic markets with imperfect and highly polarized structures. • Minimal or no export diversification.

  25. Low supply of export services. • Dependent upon very few export markets. • Inadequate Infrastructure. • High degree of vulnerability. • Low competitiveness. • Low levels of productivity and insufficient supply.

  26. Economic rigidity with high adjustment costs. • Unable to sustain diversified productions. • Considerable difficulties to attract foreign investment. • Lack of adequate market access opportunities to place their few export products. • High transport and transit costs.

  27. The two-track process • Proposals in the CTD-DS • Regional bodies for TBT, SPS + TRIPS WT/COMTD/SE/W/15-16 and 18 (Revs.1) • Recommendation adopted by CTD WT/COMTD/SE/5 • Approved by General Council in October 2006 • Other D’g countries can also use the same mechanism

  28. Monitoring SE proposals in the negotiating bodies • Document WT/COMTD/SE/W/22/Rev.1 to serve as basis. • W/22/Rev.1 is a compilation prepared by the Secretariat • Includes proposals and latest draft modalities

  29. SE proposals in the negotiating bodies • Agriculture • NAMA • Rules (fisheries subsidies) • Services • Services Domestic regulation • Subsidies – G/SCM/W/535

  30. Decision on SCMA Art. 27.4 extensions • Adopted by GC in G/L/679 • Extension of the transition periods for certain export subsidies of some small d’g countries • Not all are in the SVE group • May grant subsidies until 2015 • Some conditions: notifications, action plan, stand still, mid-term review • Commitment that this is last request • Some Annex VII(b) countries reserved rights in case of graduation

  31. CTD – Special Session • S+D negotiations • Para 44 of Doha MD mandate • Different Chair • Reports to the TNC

  32. Special and Differential Treatment

  33. Introduction • GATT established in 1947 ( 23 CPs) • No formal recognition of any difference between the CP’s. • Fundamental principle of GATT was that all rights and obligations should be applied uniformly. • Even though 11 out of the original 23 CP’s would today be classified as developing countries, they participated as equal partners

  34. GATT Review Session, 1954-55 • First occasion when provisions were adopted to address the needs of developing countries, as a group within GATT. • Permitted dc’s to derogate from their scheduled tariff commitments, and included • Article XVIII(B), to allow countries at an ‘early stage ofdevelopment’ to use QR’s for BoP purposes. • Article XVIII(C), to allow countries that could only support ‘low levels of living standards’ to impose trade restrictions to support infant industries

  35. Introduction of Part IV - 1964 • Basic objective : dc’s should not be expected to take on obligations inconsistent with their levels of development (Non-Reciprocity) • In 1964 the GATT adopted a specific legal framework to address the concerns of developing countries. • Three new Articles, XXXVI to XXXVIII were introduced in Part IV of GATT dealing specifically with Trade and Development.

  36. What did Part IV provide? • The measures introduced included • provision of more favourable market access conditions to products of export interest to dc’s • introduction of the concept of non-reciprocity; • elimination of restrictions which differentiate unreasonably between primary and processed products • establishment of the CTD to review the application of Part IV and to consider any changes to these provisions to strengthen the objectives of trade & development.

  37. The Tokyo Round–1973-79 • The main focus continued to be tariff reductions • However, many products of export interest to dc’s were either exempted from reduction cuts or were subject to lower reductions • First time an attempt to address NTBs. • Still limited participation of dc’s; developed countries often negotiated exceptions amongst themselves.

  38. The Enabling Clause - 1979 • Enabling Clause introduced during the Tokyo Round • Preferential treatment by developed countries for goods originating from dc’s in the • flexibility in the formation of RTA’s between dc’s; • Preferential treatment for dc’s in other GATT rules dealing with non-tariff barriers; • special treatment to LDCs in the context of specific measures for developing countries

  39. S&D Treatment in the UR • Certain basic underlying conceptual premises related to S&D treatment emerged during the UR, namely that • dc’s were intrinsically disadvantaged in their participation in international trade; • trade policies that maximised sustainable development in dc’s were not the same as those in developed economies; • any multilateral agreement needed to take account of these weaknesses & differences when specifying rights and obligations

  40. S&D Treatment in the UR • These underlying conceptual premises resulted in S&D provisions in 6 groups • provisions aimed at increasing trade opportunities • provisions which call upon WTO Members to safeguard the interest of dc’s • provisions offering flexibility of commitments • transitional time periods • provisions related to technical assistance • provisions in favour of least developed countries

  41. Concerns withS&D After a few years dc’s felt that in many cases most of the S&D provisions were: • non-binding • ‘best endeavour clauses’ • apparently mandatory, yet de-facto non-binding • only a few provisions were mandatory and binding provisions

  42. Doha Ministerial Declaration • Ministers at Doha, recognizing that problems existed with respect to S&D treatment set out a work programme in para 44 of the Declaration, which • reaffirmed that S&D is an integral part of the WTO • noted that there are concerns about the implementation of S&D provisions • directed that all S&D provisions should be reviewed to strengthen them and to make them more precise, effective and operational, and • linked this work to the Decision on Implementation related issues and concerns

  43. S&D Work Programme • A very large number (finally 88) Agreement specific proposals were submitted by dc’s, primarily by the African Group and the LDC’s. • Developed countries also made submissions and raised a number of systemic issues including those related to principles and objectives of S&D, definition, utilisation, graduation, universal vs. differentiated treatment. • In its report to the General Council, initially in July’02, and then in December’02, the CTD (SS) could only agree on 4 proposals. CTD sought guidance from GC.

  44. What happened at Hong Kong • Annex F on measures in favor of LDCs was the most important achievement in HK • Waivers: positive consideration and a decision taken within 60 days, similar for waivers in favor of LDCs • DFQF: Duty free quota free access (97%) to markets of developed and d’g countries in a position to do so • No conditionalities on loans, grants and official development assistance that are inconsistent with WTO Agreements • TRIMS: Maintain 1 measure for 7 years, new measures for 5 years • TA to implement the agreement

  45. Current Status • Agreement specific proposals • 16 remain in CTD (8 Cat. I & 8 Cat. III) • 6 are being discussed, other 10 positions still too far apart • Discussion on implementation of DFQF • Forum CTD regular or SS? • Coverage and Rules of origin • Self declaration of developing Members • Cat. II proposals still in the negotiating bodies • Cross-cutting issues • Being discussed • Monitoring mechanism for S+D provisions

  46. 88 Total no. of proposals submitted in the Special Session 38 Proposals referred to other bodies (Cat II) 50 Proposals in the Special Session (Cat I + Cat III) 27 Agreed to in principle as part of pkg of 28 proposals 23 Proposals remaining in the Special Session 5 LDC proposals agreed to in HK 18 Proposals remaining with the Sp. Session 2 Proposals on the ATC 16 8 are from Cat I and 8 are from Cat III. 11 are by the African Group & 5 by other dc 8 Remaining Category III proposals (6 African Group & 2 other dc's) 8 Remaining Category I Proposals (5 African Group & 3 other dc's)

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