LLDC ministers stress pivotal role of trade in achieving SDGs

4 July 2016

Ministers and government representatives from landlocked developing countries (LLDCs), gathering in Geneva on 23-24 June 2016 for the Fifth meeting of trade ministers of LLDCs, highlighted the essential role that trade can play in achieving the aspirations of the 2030 Sustainable Development Agenda, including its set of 17 Sustainable Development Goals.

The meeting, which was jointly hosted by the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and the Small Island Developing States (UN-OHRLLS) and the WTO, provided LLDCs with an opportunity to discuss how best the potential of trade can be leveraged to support economic transformation and sustainable development in those economies.

“The 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda acknowledge that international trade contributes to the promotion of sustainable development and is vital for inclusive economic growth and poverty reduction”, emphasised Gyan Chandra Acharya, UN Under-Secretary-General and High-Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.

Ministers from the LLDCs adopted a political declaration, reiterating their countries’ development needs and identifying potential options for trade to more effectively contribute to the realisation of their development objectives.

A challenging situation

LLDCs’ lack of access to the sea constitute a serious constraint on their economic development endeavours. Due to their remote situation, they usually face significantly higher transit and trade costs (more than twice as high as those of coastal countries), making it very difficult for them to become competitive on global markets and reap the potential benefits of international trade.

“LLDCs face very high trade costs due to their geographical characteristics. This can hit their ability to use trade as a tool for growth,” indicated WTO Director-General Roberto Azevêdo in his opening statement.

As a consequence, LLDC economies continue to occupy a marginal position in global trade, representing only around 1 percent of total goods exports. They are also typically less able to attract foreign direct investment.

Enhancing their ability to use trade as a development tool thus stands high on LLDCs’ agenda, as noted by Raymond Mpundu, Deputy Minister of commerce, trade and industry of the Republic of Zambia and Chair of the LLDC Group. “For our countries, enhancing trade is one of the key priorities to unlock the development potential of our economies and to ensure that no LLDC is left behind”, he noted.

In a bid to contribute improving these prospects for LLDCs, the ministerial meeting allowed participants to engage in a substantial exchange on how best to bolster LLDCs’ currently limited trading capacity and connect them better to global markets.

“We wish to turn the landlocked countries into land-linked countries with cooperation of transit countries, development partners and UN and other international and regional organisations”, said UN Under-Secretary-General Acharya.

TFA implementation key

During the meeting, various participants underlined the crucial importance of the WTO’s work in order to help LLDCs to more fully realise their trade potential. Roberto Azevêdo noted that the global trade body could keep contributing to this objective “in a number of ways.”

The declaration adopted by LLDC ministers calls, in particular, for swift ratification and implementation of the WTO’s Trade Facilitation Agreement (TFA). If properly implemented, the TFA could lead to substantial benefits for landlocked countries, owing to its disciplines for transparent and efficient transit procedures.

“We expect that, when fully implemented, the Agreement could reduce trade costs in LLDCs by over 15 percent on average. That's over 19 percent for manufactured products, and over 11.5 per cent for agricultural products,” said Azevêdo.

For those potential gains to materialise, the declaration urges WTO members “to continue to provide technical, financial and capacity building assistance to LLDCs, on a sustainable basis, for the effective implementation of the Agreement,” while also calling for the creation of dedicated support facilities and programmes by international organisations, as was done with the WTO’s Trade Facilitation Agreement Facility.

The document also calls on transit countries to cooperate productively for the rapid application of the agreement’s provisions, in order to effectively lower transit time and costs.

In his remarks, the Chair of the LLDC Group Raymond Mpundu noted, however, that the TFA’s implementation alone could prove not to be enough, and thus needs to be complemented “by initiatives aimed at addressing infrastructure related challenges for tangible results and impact.”

Towards a WTO work programme for LLDCs?

Ministers also reiterated in their declaration their call for the establishment of a specific work programme for LLDCs at the WTO, which would “address the special needs, challenges and vulnerabilities of LLDCs in order to increase their participation in the Multilateral Trading System”.

In December 2015, LLDCs ministers had issued a communique during the WTO’s Tenth Ministerial conference in Nairobi, in which they had already asked for the creation of such a work programme.

“We stress the importance to have a specific Work Programme for LLDCs by the 11th Ministerial Conference”, states the declaration, further indicating that key areas of work should include trade facilitation, agriculture, aid for trade, services, accession, among others.

The document also touches upon more general WTO matters, notably insisting on the need for the post-Nairobi discussion and negotiations to be fair and balanced while putting the development dimension at the centre.

In particular, LDCs ministers stressed the importance of the special and differential treatment principle which, according to them, constitutes one of the cornerstones of the WTO’s legal regime. “The reaffirmation of this principle should be an integral part of WTO's work, as well as, any future agreements and decisions,” says the declaration.

On agriculture specifically, the document underlines that the area is of crucial importance for LLDC economies, and while calling for the swift implementation of MC10 decisions on export competition and cotton, indicates that LLDCS “attach importance to the continuation of the reform process in order to promote market access, and reduce or eliminate all distortive domestic support measures.”

Need for support and finance

Throughout the meeting and the declaration, ministers also emphasised LLDCs’ need for adequate support and finance in order to be able to leverage trade for structural transformation and sustainable development.

Recalling international pledges contained in the 2030 Sustainable Development Agenda and the Addis Ababa Action Agenda, UN Under-Secretary-General Acharya noted that “it is critical that landlocked developing countries harness these commitments to strengthen productive capacity, build trade-related infrastructure and ensure unhindered and efficient transit facilities for their products in global markets.”

For this to happen, the declaration indicates that official development assistance (ODA) will remain critical, as it constitutes the most significant source of international financing for a number of LLDCs. ODA should thus act as a catalyst, by helping LLDCs to better integrate into the global economy and encouraging the diversification of their production structure.

LLDC ministers mentioned specifically a number of initiatives in the declaration, including the WTO-led Aid for Trade Initiative, which aims at mobilising financial support to tackle the trade-related constraints faced by developing countries, including LLDCs.

The document indicates that Aid for Trade should take LLDCs’ special needs into account, “including capacity-building for the formulation of trade policies, participation in trade negotiations and implementation of trade facilitation measures, development of trade-related infrastructure as well as the diversification of export products and strengthening of productive capacities with a view to increasing the competitiveness of LLDCs’ products in export markets.”

Despite this heavy focus on ODA, LLDCs ministers also recognised the important “complementary and catalytic” role played by long-term cross-border capital flows, in particular in the form of foreign direct investment.

“We commit to continue promoting conducive policies to attract foreign direct investment that leads to promote trade as well as sustainable development of LLDCs”, reads the declaration.

ICTSD reporting.

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