LDCs OUTLINE PRIORITIES, AS WTO MEMBERS TRY ONCE AGAIN FOR DOHA DEAL

The world's poorest countries have set out a common set of priorities for a global trade accord, as WTO Members gear up for another attempt to strike a deal in the long-running Doha Round trade talks.

Trade ministers from the group of least-developed countries (LDCs) met in Maseru, Lesotho from 27-29 February in an attempt to promote their interests, in the event that the ongoing push for a WTO agreement is successful.

At the forefront of the LDCs' concerns was access for their exports in overseas markets, both in terms of expanded access to developed and developing country markets, and minimising the effects of the erosion of the trade preferences currently enjoyed by their very limited number of exports. Cotton subsidy reform in rich countries, protection against agricultural import surges, and biopiracy also featured prominently, as did the need to start implementing already-promised trade-related assistance.

According to the United Nations' definition, least developed countries have a combination of a low gross national income (generally below $750 per capita), poor health and education levels, and high vulnerability to economic fluctuations and natural disasters.

Paradoxically, the world's poorest countries are relatively expensive places to do business. Poor infrastructure and other supply side constraints mean that it is often cheaper for companies to base production in China or other low-cost centres. Despite a variety of trade preference schemes in major markets, the fifty LDCs account for a minuscule share of global trade, not even one-hundredth of the world total.

LDCs wielding influence

Nevertheless, many LDCs have made trade part of their development strategies, in an attempt to move beyond the confines of their tiny domestic markets. The group counts 32 of the WTO's 152 Members, with ten more in the process of accession, and thus cannot be ignored in the global trade body. And despite major constraints on their participation in negotiations at the WTO - even when LDCs have trade missions in Geneva, they are notoriously overstretched - the group is wielding this influence with increasing savvy.

The Maseru Declaration adopted by ministers in Lesotho was the latest sign of this, said many longtime trade observers who attended the conference, including WTO Director-General Pascal Lamy.

The declaration identified several specific desired negotiating outcomes based upon the current state of the Doha Round talks, which have seen incremental progress but no agreement-enabling breakthroughs since last year. Although LDCs will not be required to cut tariffs or subsidies as part of the Doha Round - leaving them outside the principal tradeoffs being haggled over - the group pinpointed a series of objectives.

For instance, WTO Members agreed in 2005 that developed countries should remove all tariffs and quotas on LDC exports of 97 percent of all types of merchandise, with an exhortation to extend this to all products. At the time, LDCs noted that the 3 percent exclusion might be enough to cover the handful of items that they produce competitively.

In the Maseru Declaration, the group called on rich countries to ensure "commercially meaningful" unrestricted market access for at least 97 percent of products from all LDCs by the end of 2008. They asked developed countries to identify the remaining 3 percent in their draft commitment schedules (due to be produced by the end of the year), and to remove duties and quotas on them by the end of the Doha Round implementation period. "A larger number" of non-LDC developing countries "declaring themselves in a position to do so" were also asked to provide similar access.

The LDCs stressed that nominally unrestricted access would mean little unless accompanied by simplified rules of origin, which determine how much of a product's 'value added' would have to occur in an LDC for it to qualify. They asked for WTO Members to base the new rules of origin on the group's own proposal, which would make it easier for goods to qualify as being from an LDC.

LDCs are a diverse group, sharing vulnerability (and to a lesser extent, poverty) more than anything else. Some, like Chad, are landlocked; others are small islands so remote that sheer distance is a barrier to full participation in the globalised economy.

The joint demand for duty- and quota-free access for products from all LDCs demonstrated the extent to which the group succeeded at bridging different interests to develop a common agenda.

Several LDCs have no interest in such access - simply because they produce nothing exportable, except perhaps oil and other minerals that do not face tariff barriers anyway. Others, notably in Africa, already receive preferential access to the US market (all LDCs already get nearly unrestricted access to the EU market). Their textile exports would risk being affected negatively if Washington were to extend unrestricted market access to Asian LDCs such as Bangladesh and Cambodia.

LDC officials also had to overcome differences before agreeing that governments should be allowed to sell food aid to raise money for purposes they deem fit.

Cotton the "human face" of Doha

Other issues posed no such dilemmas, such as the Maseru Declaration's demand for all LDCs to have "full access" to the agricultural 'special safeguard mechanism (SSM)' to address import surges and price declines. Contrary to potential options set out in a draft deal issued by the chair of the agriculture negotiating committee last month, the LDCs said that there should be no cap on the level of additional tariffs that they are allowed to levy in order to arrest import surges.

The LDCs also called for rapid, deep cuts to rich country cotton subsidies along with assistance to the cotton farmers in LDCs whose livelihoods have been affected by distortions resulting from billions of dollars of payments. The issue, championed by four West African countries, has become a rallying point for LDCs. "To our mind, cotton remains the human face of the Doha Development Round," Debapriya Bhattacharya, Bangladesh's ambassador to the WTO, told the meeting in Maseru. Without a satisfactory resolution of the cotton question, the Doha Round cannot be concluded, he said.

In informal talks last week in both Geneva and Maseru, US officials provided clearer hints that Washington could agree to deeper-than-standard cuts for cotton, sources report. However, they maintained that this could only occur after an overall framework deal on cutting tariffs and subsidies was agreed. Nor did they suggest precisely how far they might go. The US cotton industry has expressed opposition to a mathematical formula proposed by the so-called 'cotton four', which would ensure that cotton subsidies face heavy cuts even if the overall level of farm subsidy reduction is modest.

Preference erosion major concern

While the LDCs' position on cotton has been easy for non-LDC developing countries to support, some of the group's other demands may affect the latter's commercial interests, giving them the potential to be more contentious.

In particular, 'trade solutions' to address preference erosion in the modalities on agriculture and non-agricultural market access (NAMA) would entail either lower tariff cuts on certain products, or longer periods for implementing tariff reduction. Both would mean diminished commercial opportunities for more competitive exporters. Some of these competitive exporters have previously suggested that preference erosion would best be addressed through 'non-trade' solutions, such as aid to affected workers and countries.

The LDCs asked for the US and the EU to be allowed to phase in tariff cuts on certain products, mostly textiles and clothing, over 15 years (around three times longer than the standard period). This would extend the period during which LDC exports in these markets, presumably entering duty-free, would enjoy a meaningful margin of preference over products from elsewhere in the world.

Many LDCs also warned that sector-specific liberalisation initiatives in the industrial goods negotiations risked completely eliminating the margin of preference that LDC exports now receive. The elimination of tariffs on fish and fish products by major markets - a proposal currently under discussion - could be devastating for some coastal LDCs. The Maseru Declaration specified that "the sectoral initiatives of the NAMA negotiations shall not harm the export interests of LDCs due to erosion of their preferences."

In the agriculture talks, some Latin American countries have been demanding deep tariff reduction for some of the same tropical products, such as sugar and banans, for which African, Caribbean, and Pacific countries have long received trade preferences. They have met with heated opposition from the ACP group, which includes many LDCs, as well as from the preference-granting EU.

It is undeniable that despite multiple declarations of political solidarity and common cause between LDCs and non-LDC developing countries (the latter remain home to the majority of people living on less than $2 a day), the two have some differences of interest when it comes to market access issues.

For instance, if LDCs receive duty- and quota-free market access from developed countries, they stand to benefit if rich nations then do not cut tariffs deeply, since this would leave products from other industrialised and developing countries relatively more expensive. Furthermore, LDCs would stand to gain if developing countries slashed tariffs by a substantial margin (at least for countries that opted not to grant LDC exports duty- and quota-free access).

EU Trade Commissioner Peter Mandelson was not shy about making this point when addressing the ministers in Maseru on 29 February. He said that the LDCs would have the EU's support on "very many issues," emphasising that Brussels' demands for deep industrial tariff cuts targeted developing countries such as Brazil, China, India, and South Africa - and not LDCs. These demands, he said, would reduce barriers to South-South trade, giving "least developed countries a new foothold in the booming markets of the rapidly growing economies."

The Maseru Declaration did say that developing countries in customs unions with LDCs should be given "special consideration" with regard to tariff reduction commitments. Otherwise, if South Africa were required to lower tariffs sharply, Lesotho, a fellow member of the Southern African Customs Union, would either have to accept similar cuts, or compromise the union's common external tariff.

LDC ministers also called for additional technical assistance, including immediate steps to get the 'Enhanced Integrated Framework' and the WTO's aid for trade initiative up and running.

"LDC-specific priorities are now well known to everybody," said WTO Director-General Pascal Lamy in his address to the meeting in Maseru. He said that the LDCs would now have to defend these priorities in the negotiations, along with its allies in the ACP bloc and the African Group.

Lamy added that the LDC's increased leverage in the talks meant that that duty- and quota-free access would be part of the Doha Round - if the round is successfully concluded.

The same could be said about much of the rest of the Maseru Declaration: for it to become more than a list of priorities, all WTO Members will need to be able to strike a deal. It remains to be seen whether they will manage to do so.

ICTSD reporting.