How the ACP proposal on S&DT brought gains for developing countries and LDCs

17 February 2014

Abstract: The agreement on Trade Facilitation concluded at the WTO Ministerial in Bali offers groundbreaking special and differential treatment for developing and least developed countries.  This article analyses key elements in the ACP S&DT proposal that became part of Section II of the new Trade Facilitation agreement, from the perspective of its original drafters.

The successful conclusion of the Ninth WTO Ministerial Conference (MC9) in Bali, Indonesia yielded a decision on an agreement on Trade Facilitation (TF) which contains new binding rules and disciplines to facilitate the flow of goods across borders and mobilize global assistance for developing country and LDC WTO members.  More importantly, however, the agreement contains a groundbreaking framework of S&DT to ensure that implementation of the TF provisions by these countries are dependent on their capacity to do so.

When members agreed in July 2004 on the Annex D modalities to negotiate a TF agreement as part of the Doha Development Agenda (DDA) round, assistance from developed countries for implementation in developing countries and LDCs was critically important. This commitment however, was only secured on a best effort basis in those modalities.  On the other hand, developing countries and LDCs were able to secure in the modalities the principle that they would only be required to implement the disciplines to the extent of acquisition of capacity.

The proposal from the African, Caribbean and Pacific (ACP) Group of States tabled in April 2013 on S&DT was touted by the WTO Director General as having played a pivotal role in arriving at a consensus in the negotiations.  The ACP proposal became the basis of negotiations in Geneva in the run-up to MC9 and for the final agreement reached by Ministers in Bali. The coalition between the ACP Group, LDC Group, and Africa Group was also key to enable final convergence among developing countries before commencement of the Bali Ministerial.

Key achievements on S&DT for developing countries and LDCs based on the ACP proposal

Section II of the TF agreement provides the mechanism for implementing the disciplines contained in Section I by developing countries and LDCs.  More specifically, it is about the timing to notify implementation schemes.  The following highlights key achievements from the ACP proposal found in the agreement.

· Self-designation of transition periods

In a marked departure from the norm in the WTO, members concurred that the TF Agreement would allow developing countries and LDCs to select their own implementation dates within three categories of implementation. [1]  However, this concept came under challenge in the negotiations whereby certain proposals would force review and approval of the provisions and time periods notified by developing countries and LDCs.  The ACP proposal removed those components and the Group’s negotiators put forward arguments to successfully support their position now reflected in the final text.

· Process for the notification of Category C implementation dates

The notification process for Category C implementation dates is the heart of Section II. The TF agreement contains distinct steps for Category C for the notification of definitive implementation dates.  These steps are structured to build confidence and predictability for developing countries and LDCs on the one hand and for developed countries who would provide assistance on the other. While appearing on the surface to be detailed, the ACP process is designed with a built-in binding commitment from donors on assistance that was lacking in earlier draft texts and lacking in the 2004 TF negotiating modalities. This process, calibrated in a partnership approach, was first resisted by a few potential donor member countries.

Three important elements of the ACP Group Category C process are as follows:

1. Binding notification of assistance arrangements with donor members before notification of definitive implementation dates. While developing countries and LDCs would be able to decide their own transition periods, in the case of Category C, concerns remained about notifying such periods if no obligation existed in the text on donor members to provide assistance. Before the ACP proposal was tabled, the onus in the text was solely on developing countries and LDCs to seek out potential donors and notify dates without any matching obligation on assistance agreements. Many developing countries, including some ACP States, suggested a trust fund. Others sought an explicit binding commitment from donors in the text.  Both approaches were opposed by donor members due to issues implicated in their domestic budgetary systems and because only best efforts on provision of assistance was articulated in Annex D.  In any case, a trust fund may not have guaranteed all developing countries access to assistance or obligated donor members to contribute to it.

Surmounting the limitations in Annex D, the ACP negotiators introduced a binding commitment from donor members through a process. The ACP proposal imbedded into the text a requirement that assistance arrangements be notified by donor members and recipients by a date certain before developing countries and LDCs would be obligated to notify definitive implementation dates. This requirement enshrines the notion of a partnership as well.

2. Time for the assistance to be anchored. Developing countries and LDCs also wanted to ensure that assistance arrangements are  mobilized sufficiently in the countries to lay the ground for choosing implementation dates. Donor members demanded the inclusion of provisional dates to enable early planning of assistance. However, notification of definitive dates is binding with consequences if not furnished on time.  Therefore, the ACP proposal mandates a period of up to 18 months after arrangements are notified before definitive dates will be notified. LDCs are allotted a relatively longer period of time.

3. Extension of the deadline to notify definitive dates. The ACP text also provides developing and LDC members the option to request more time to notify definitive dates if a problem arises within the 2.5 years from entry into force of the agreement. Such problems could be a donor lacking or difficulty with assistance.  Prior texts only contained the first rationale for extension.

In sum, the original version in earlier draft TF texts did not contain, among other things, 1) a binding requirement that assistance arrangements by donors be notified before definitive dates are notified, 2) an 18 month cooling off period after arrangements are notified, and 3) an option to request an extension to notify definitive dates where problems in assistance arose.

Early warning mechanism and the safeguard mechanism

Paragraphs 5 and 6 of Section II contain an early warning mechanism (EWM) and what the G90 called the safeguard mechanism, respectively.  Under the EWM, the Committee can extend the implementation dates already notified if a country believes that it may not be able to meet its implementation deadline.  The EWM includes an initial automatic extension, which was secured by the ACP proposal, if the time needed is under a certain period.
Throughout the negotiations, many developing countries were also concerned that the binding principle in Annex D that implementation will not be required if capacity is lacking was in peril. The final agreement now enshrines these principles: a) a general principle found in Paragraph 1.2 of Section II, b) the definition of Category C and c) a new safeguard mechanism found in Paragraph 6 of the final text, which can be invoked where an extension is not granted or available under EWM procedures. The safeguard mechanism underwent intensive and difficult negotiations after the ACP Group and Africa Group worked together and presented a joint proposal to the WTO membership. It preserves a country's self-assessment of capacity to implement after all of the other procedures through to EWM have been exhausted. The assessment will not be subject to any unilateral objection. Instead, the assessment will be submitted to a third party review before deliberation by the TF Committee. LDCs will be able to invoke this procedure at any point in time.

Conclusion

The TF Decision in Bali may be criticized as a win for its original proponents, the developed WTO members.  However, it must be recalled that several proposals were tabled by developing and LDC proponents in the course of negotiations that addressed their interest to be part of making multilateral disciplines to benefit their own export and import realities.   Many proposals were tabled by members on S&DT reflecting a major gulf between developed and developing countries. However, a novel approach to S&DT and assistance to developing countries and LDCs in implementation emerged in the negotiations that had to be secured and become a workable precedence in the WTO.  These results significantly altered the narrative on S&DT in WTO negotiations and provide a template for future solutions to problems in S&DT.   The ACP Category C process found in the text also furnishes a binding component for assistance that was lacking in the 2004 Annex D modalities.

WTO members are mandated by Ministers to take further steps in 2014 and 2015 before the TF agreement can become operative.  In addition to concluding TF negotiations, the TF decision, first seen by members in Bali, establishes a Preparatory Committee on Trade Facilitation, open to all members, to 1) ensure the expeditious entry into force of the Agreement  and 2) prepare for the efficient operation of the agreement upon its entry into force.  Though part of the DDA single undertaking,  a Protocol of Amendment to insert the Agreement into Annex 1A of the WTO Agreement will be drafted.   Paragraph 47 of the Doha Declaration  allows for early agreement to be reached and implemented on a provisional or definitive basis and to be taken into account in assessing the overall balance of the negotiations. The agreement is subject to a “legal review for rectifications … that do not affect the substance of the agreement.”  The first meeting of the Preparatory Committee was held on 31 January 2014 but the only agenda item was to elect the Chairman.   Ministers instructed the WTO General Council  to meet no later than 31 July 2014 to a) annex Category A commitment notifications to the Agreement, b) adopt the Protocol of Amendment, and c) open the Protocol for acceptance until 31 July 2015.  Entry into force of the agreement will be upon acceptance by two-thirds of the membership, in accordance with Article X of the WTO Agreement.   According to the final provisions in the TF agreement itself, if a member accepts the protocol after entry into force, Category B and C definitive date notifications will count from entry into force, not from the date the member accepts.

Independent from the issue of entry into force, countries availing themselves of Section II might wish to begin updating their national needs assessments against the final Section I provisions and determine the Categories for their eventual implementation of the provisions.

Authors:

Alicia D. Greenidge is expert trade advisor to the ACP Group in Geneva funded by a TAF project with the ACP Group.  She is also President, of Summit Alliances International sàrl, a trade advisory practice based in Geneva.  She was formerly a U.S. government trade negotiator for several years both on bilateral and WTO negotiations.


Ricardo M. James is the Chargé d’Affaires of the Organization of Eastern Caribbean States (OECS) Mission in Geneva and a representative of the delegation of Dominica to the WTO.  He is also the ACP Group trade facilitation focal point.  He was formerly Director of Trade for the Government of Dominica.


The authors were the co-drafters of the 2013 ACP trade facilitation proposals adopted at the WTO Ninth Ministerial Conference in Bali Indonesia, December 2013.

(1) Category A are those provisions not requiring a transition period and will be implemented upon entry into force of the Agreement.  Category B are those provisions designated for implementation after a self-selected transition period, and Category C are those provisions that will be implemented upon acquisition of capacity through assistance after a self-selected transition period.

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