Doha Development Agenda under WTO and Nepal’s Concern

1. Doha Development Agenda under WTO and Nepal’s Concern Purushottam Ojha Secretary, Ministry of Industry, Commerce and Supplies, Government of Nepal

2. Background • The Uruguay round of the General Agreement on Tariffs and Trade (GATT) led to the establishment of the World Trade Organization (WTO), with the membership of the original 123 GATT member-countries. The current WTO membership stands at 152 countries, with 32 Least-developed countries (LDCs). • Nepal was the first LDC to become a member of the WTO through the accession process on April 2004. • WTO membership provides Nepal a seat at WTO negotiations, and the opportunity to negotiate issues of interest to the country.

3. Background………. • The agenda for the present round of negotiations under WTO were set in Doha in 2001, during the Fourth WTO Ministerial Conference. The Ministerial adopted the 'Doha Development Agenda' (DDA), which for the first time promised to address the interests of developing countries, especially LDCs. The Doha Declaration also states "special and differential treatment for developing countries shall be an integral part of all elements of the negotiations.“ • Unfortunately, the implementation of DDA is very slow, thus the developing countries are feeling that developed countries are not committed to the Doha Round and the development agenda remains to be mere lip service. • The WTO Ministerial Meeting held in September 2003 - in Cancun (Mexico) collapsed without agreement on the way forward, due to rifts between developed and developing countries.

4. Background……… • The General Council Decision of 1 August 2004 (also called the “July Package”) and the Sixth Ministerial Conference held in Hong Kong in 2005 sought to bring the DDA back in track. • The Hong Kong Ministerial agreed to complete the Doha Work programme and conclude negotiations launched in Doha by 2006. The DDA negotiations continued, albeit with dismal performance. • But, on 24 July 2006, the DDA was suspended due to wide gaps that remained between key players. • It is important to revive WTO negotiations, as developed countries are pushing developing countries for bilateral agreements with WTO plus commitments. These bilateral arrangements reduce the policy space created by the WTO and undermine the multilateral trading system. It is important for Nepal to understand the negotiation issues under the WTO and establish a negotiation position that recognizes Nepal’s LDC status and strengthens Nepal’s development goals.

5. Major Negotiation Issues and Nepal’s Interest • Major negotiation issues, of Nepal’s interest, under DDA are: • Agriculture, • Non-agriculture Market Access (NAMA), • Services • Trade Facilitation • Special & Differential Treatment (S&DT) • Duty Free Market Access to LDCs products. • Aid for Trade (Trade Related Technical Assistance)

6. Major Negotiation Issues (I) • Agriculture: • Mainstay of Nepal’s economy (40% of GDP, 2/3 of employment opportunities and most important sector for poverty alleviation). • Under WTO, the Agreement on Agriculture (AoA), provides international rules governing trade in agriculture sector. • As agriculture is directly related to food security and livelihood issues, it has been a matter of heated debates. • Agriculture negotiations have been at the centre of WTO negotiations, and a major source of discord between developed and developing countries and the suspension of the Doha round of negotiations. • LDCs like Nepal should actively participate in WTO agriculture negotiations, to ensure their interests are taken into account and special and differential treatment is granted.

7. Agriculture….. • Agriculture negotiations are taking place in two major issues: market access and domestic support. • Market access: Reduction in tariffs has remained a contentious issue during WTO negotiations. Developed countries have been pushing for tariff reductions, seeking to access developing country markets while protecting their own agriculture industry through tariffs and subsidies. • A majority of developing countries want market access to developed countries. Developing countries are also unwilling to cut tariff rates at the level demanded by the US and other developed countries, as agriculture is closely linked to food and livelihood issues. • As an LDC, Nepal is not required to make commitments regarding market access in the present round. It would be in Nepal's interest to first identify market access barriers (both tariff and non-tariff barriers) it faces on its agro-exports in the international market, and then negotiate to reduce or remove these barriers.

8. Agriculture….. • Export subsidies: A decision made at Hong Kong for parallel elimination of all forms of export subsidies and disciplines on export measures by the end of 2013. • The US, EU and Japan account for over 90 percent of global agriculture domestic subsidies. • Developed world funnels nearly US$ 1 billion a day on trade distorting agriculture subsidies. A high level of subsidies leads to overproduction and drives down world food prices. • Thus, the presumption is that removal of agriculture subsidies in developed countries will benefit poor countries. However, it should be noted that a majority of low-income countries, especially LDCs are net food-importers (FAO). Thus, the removal of subsidies and the increase in world food prices are expected to have a negative impact on them resulting in increased poverty and weakening food security. • For a net food-importing countries like Nepal, it would be better to take a more defensive approach advocating additional levels of support and protection for developing countries, while also seeking reduction in subsidies and protection in industrialized countries.

9. Major Negotiation Issues (II) B. NAMA • NAMA refers to all those products that are not covered by the Agreement on Agriculture such as: manufacturing products, fuels and mining products, fish and fish products, and forestry products. NAMA account for almost 90 percent of the worlds merchandise exports. • The methodology for tariff reduction is at the core of NAMA negotiations. • Previously, tariffs were cut on a selective product-by-product basis through requests and offers made between member countries. • However, subsequently WTO members decided to use formulas to cut tariffs across-the-board. Member countries have realized that adopting a formula approach for tariff reductions provides transparency, efficiency, equity and predictability. • Countries remain divided over the extent to which tariff reductions should be carried out.

10. B. NAMA…… • The Swiss formula, which has been advocated by developed countries such as the US, EC countries, Norway and Japan, proposes to cut tariffs steeply without taking account of the existing tariff profile of a country. The developing countries support the modified Swiss formula, which takes into account the tariff profile of the countries while carrying out tariff reductions. • The Hong Kong Ministerial adopted a Swiss Formula with coefficients at level which shall inter alia reduce or as appropriate eliminate tariffs including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, in particular on products of export interest to developing countries. • The importance of special and differential treatment and less that full reciprocity in reduction commitments for developing countries is recognized as an integral part of the modalities. • A non-linear mark up approach to establish base rates for commencing tariff reductions was adopted for the purpose.

11. B. NAMA • Members expect a substantial increase in binding commitments from LDCs. However, as Nepal has already bound 99.3 percent of tariff lines at the time of accession to the WTO, Nepal will not need to take additional commitments. • Thus, Nepal's interest lies in market access for manufacturing products to both developed and developing countries. In this regard, Duty Free Quota Free (DFQF) market access for LDC products in developed and countries is important for Nepal.

12. Major Negotiation Issues (III) C. Services • As an LDC, Nepal is not required to undertake any new commitments in the services sector. Nepal has comparative advantage in Mode 4; remittances currently account for over 12 percent of GDP. Therefore it is in Nepal's interest to seek to liberalize Mode 4 services, especially for unskilled and less-skilled workers. We also realized that in the long run it will be in Nepal's benefit to reduce its dependence on remittances.

13. Major Negotiation Issues (IV) D. Trade Facilitation • NGTF meeting in progress in Geneva. • TF negotiations focuses on customs facilitation, SPS/TBT issues, transport and transit,(transit right-GATT Article-V) upgrading port facilities, simplifications of documents and procedures (fees and formalities-VIII), publication of trade rules (GATT Article-X), EDI in trade transaction. • TF issues are very much crucial in order to achieve competitiveness of trade. However, LDCs need capacity enhancement measures in order to fulfill their obligations. TACB is being advocated by the LDC group for undertaking the commitment of TF.

14. Major Negotiation Issues (V) E. Special & Differential Treatment • Developing countries, particularly LDCs would be given less onerous recourse in implementing the provisions of various WTO agreements. • Measures on relegating the possible negative effects of the AoA on LDCs and net food importing countries through (i) food aid (ii) technical and financial assistance to improve agricultural productivity and infrastructure (iii) financing normal level of commercial imports of basic foodstuffs and (iv) review of follow up.

15. Major Negotiation Issues (V) E. Special & Differential Treatment • Take into account the special needs of LDCs and allow longer time frame for compliance of the SPS measures, encourage and facilitate the active participation of developing country members in the relevant international standards ( Article-10 of SPS agreement). • Elimination of quota under ATC, consideration before initiating the investigations of anti-dumping. • Take into account the special difficulties of developing countries in formulating the technical standards and regulations and the technical support to improve their capacity.

16. Major Negotiation Issues (V) • E. Special & Differential Treatment • SDT provisions are enshrined in implementation of GATT-1994, Agreement on Rules of Origin, Agreement on Subsidies and Counterveiling Measures and Agreement on TRIPS.

17. Major Negotiation Issues (VI) F. Aid for Trade Objective is to meaningfully integrate the developing and least developed countries in the international trade through: • Capacity building and technical assistance. • Mainstreaming trade in the national development agenda/PRSP. • Integrated framework. • Enhanced integrated framework (EIF).

18. Thank You