What does the Bali package mean for the LDCs?

9 April 2014

What kind of homework will LDCs need to do if they are to take advantage of the WTO MC9 decisions?

For the Least Developed Countries (LDCs), the Ninth Ministerial Conference of the WTO (MC9) held in Bali, Indonesia on 3-7 December, 2013 was of high importance on several counts. Firstly, MC9 was able to infuse a new life into the stalled Doha Round of negotiations of the WTO and in a way that helped salvage the WTO. For relatively weaker countries a multilateral trading system is a more preferred option since it provides them with a rule-based policy platform to negotiate flexibilities, waivers and special and differential treatment. This was rather difficult to accomplish, on a non-reciprocal basis, through bilateral or plurilateral trade negotiations.  Secondly, the Bali Package, with its three pillars of trade facilitation, agriculture and cotton, development and LDC issues, concerned a number of areas where LDCs had both offensive and defensive interests. Thirdly, in line with the work programme agreed in Bali, subsequent negotiations in Geneva will require a proactive engagement on the part of LDCs. The Bali decision, thus, obligates the LDCs to do the necessary homework and pursue and advance their interests through future negotiations.

From the above perspective, the present article attempts to examine the Bali Package to capture the implications of MC9 decisions for the LDCs and tries to anticipate some of the needed follow-up initiatives in this regard.

Trade Facilitation

Trade facilitation emerged as a key deal maker/breaker in Bali. Major objectives of the TF agreement were to accelerate customs procedure, reduce costs, bring clarity, efficiency and transparency in customs dealing, reduce bureaucracy and corruption and promote use of modern tools and technology at customs clearance points. The deal was estimated to generate about one trillion US dollars worth of gains globally. MC9 decision stipulated that, LDCs will be required to undertake commitments to the extent these were commensurate with their capacities. Both developed and developing country members were asked to provide capacity-building support to the LDCs.

In view of the MC9 decision, LDCs should remain actively engaged in the work of the Preparatory Committee envisaged under the TF agreement. LDCs should put emphasis on the followings: (a) identification of needs and gaps in areas of infrastructure development, regulatory reforms areas and technical support; (b) estimation of costs involved to undertake the needed TF measures; (c) identification of sources of funds including the support promised under the ambit of the WTO; (d) monitoring of the implementation of the action plans; (e) coordination of the work of relevant agencies; (f) being engaged with future WTO negotiations to safeguard LDC interests in the context of TF.

Agriculture and cotton

Major focus of the negotiations here concerned the issue of public stockholding for food security and elimination of cotton subsidy. The challenge was to identify ways to allow developing countries some flexibility from earlier commitments. In the end, MC9 decided that, under certain conditions, developing countries would not be challenged legally even when level of trade-distorting domestic support exceeded the permissible limit. However, this solution was to be an interim one until a permanent solution was reached and members committed themselves to set up a work programme to find a permanent negotiated outcome before MC11 in 2015.

The MC9 decision in this regard could have significant implications for food prices and food availability in the global market. It will, thus, be important to examine how the decision could affect the interests of net-food importing LDCs, as well as food-surplus ones. On a similar vein, cotton importing LDCs will also need to examine the impact of MC9 decision as regards elimination of domestic and export subsidies on cotton. LDCs will need to identify appropriate measures if their interests are adversely affected.

Four issues were discussed in Bali as part of the LDC package: DFQF market access for the LDCs, preferential rules of origin, LDCs waiver in the services sector and monitoring mechanism on Special and Differential Treatment.

DFQF market access for the LDCs

Commercially meaningful market access through duty-free, quota-free (DFQF) treatment for all goods originating from all LDCs was a key demand of the LDCs. The DF-QF decision of the Hong Kong Ministerial (MC6 in 2005) in this regard was certainly a major progress. However, the decision allowed developed countries and other members having difficulty in providing duty-free access for all products to start with a 97 percent list. LDCs were interested to know upfront about tariff lines included in the 97 percent list and were keen to have a concrete time line for inclusion of the three per cent exclusion list. However, some of the LDCs also voiced concern that their exports could be adversely affected if the Hong Kong decision was implemented.

In the event, MC9 asked members to improve their existing DFQF coverage so as to provide increasingly greater market access to the LDCs. Members were also asked to notify their respective DFQF schemes for the LDCs.  Periodic reviews were to be undertaken to examine how the DFQF decision was being implemented. MC9 also asked for the preferential rules of origin to be simple and transparent. However, no time-bound commitment came out of Bali as regards granting for DFQF treatment to all products originating from all LDCs. LDCs will need to continue their fight in this regard (DFQF treatment)  in the course of subsequent negotiations in Geneva.

LDCs waiver in the services sector

The WTO ministerial conference in 2011 adopted a services waiver for the LDCs which made way for preferential treatment of the services export from the LDCs. LDCs had earlier proposed that a Signalling Conference be held in July 2014 for members to indicate sectors and modes of supply with respect to which they would seek preferential treatment. LDCs interests in this context were in several areas: (a) expeditious and effective operationalisation of the LDC services waiver to allow meaningful preferential access to LDC services and service suppliers; (b) increased technical and financial assistance to strengthen domestic services capacity of LDCs to take advantage of the preferences; (c) convening of a High Level Meeting as early as possible in 2014 to address the attendant issues; (d) elimination of all economic needs test for services and suppliers from LDCs; (e) information on steps members were taking in view of the services waiver decision.

In this context MC9 decision noted that no WTO member had yet made use of the waiver since its adoption in 2011. Ministers instructed the Council for Trade in Services (CTS) to initiate a process to promote expeditious and effective operationalisation of the LDC services waiver, with provisions for periodic review. CTS was asked to convene a high-level meeting six months after the submission of a collective request from the LDCs which would identify sectors and modes of supply of particular export interest to LDCs. Members were also asked to provide technical assistance and capacity building support to the LDCs in view of this. LDCs will need to prepare the aforesaid ‘collective request' which will require significant work. Since LDCs have special interest in Mode-4 (movement of natural persons) and Mode-3 (commercial presence), detailed request lists will have to be designed to articulate their concrete interests in this regard keeping in view the possible offer lists of members.

Monitoring mechanism on Special and Differential Treatment

Special and Differential Treatment (S&D) provisions in support of the developing countries and LDCs have faced criticism in the past for being weak in terms of implementation and enforcement. In view of this, a Monitoring Mechanism for review and implementation of the S&D provisions was perceived to be of high interest to the LDCs. LDCs felt that the mechanism should have the ability to make recommendations to the appropriate technical body to make particular S&D provisions more effective.

MC9 adopted the decision to establish such a Monitoring Mechanism on S&D Treatment which was to serve as a focal point to analyse and review the implementation of the S&D provisions. In tune with what LDCs had asked for, the Mechanism was empowered to make recommendations to the relevant WTO body for (a) consideration of actions to improve implementation of the particular S&D provision or (b) initiate negotiations aiming at the above. The decision, however, does not mention any time-bound commitment. LDCs should try to make best use of this new window (of Monitoring Mechanism) to ensure that appropriate actions are taken towards operationalisation and enforcement of S&D measures.

Conclusion

The post-Bali Work Programme adopted at MC9 will require the LDCs to focus on four areas: Firstly, they should do the needed homework - e.g. prepare the collective request list in view of the high Level meeting on services waiver; Secondly, they should closely examine the implications of various MC9 decisions - e.g. impact of the decision as regards food security and that of cotton. Thirdly, they should identify their technical and financial needs in view of the decision on trade facilitation and bring this to the attention of the relevant WTO body. Fourthly, LDCs should be proactively engaged in future negotiations in Geneva to safeguard their interests in the context of the Doha Development Round.

Author: Mustafizur Rahman is an Executive Director at the Centre for Policy Dialogue (CPD), Bangladesh.

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