Examining How to Reinvigorate Talks on Supporting Developing Countries' Role in Global Trade

30 November 2017

Sixteen years ago, WTO members kicked off the Doha Round of trade negotiations, also known as the Doha Development Agenda, with the goal of rewriting global trade rules in a way that creates better conditions for developing countries to play a greater role in world trade. Although WTO members disagreed at the Nairobi ministerial conference in 2015 on whether to reaffirm the Doha mandate, development remains at the centre of multilateral trade talks and negotiating dynamics.

While virtually all topics related to global trade rules can have significant developmental implications, WTO members have also been weighing more specifically on how to ensure that multilateral rules better fit developing countries’ specific needs and priorities. The adoption of the Sustainable Development Goals (SDGs) in late 2015 has given further political impetus to these discussions, with the goals of eradicating poverty and ending hunger by 2030, among a host of other targets with a trade and development dimension.

Notably, SDG 17.1 also calls for “doubling the least developed countries’ share of global exports by 2020,” a challenging goal given recent trade statistics (see Figure 1) and target 17.10 calls specifically for bringing the Doha Round talks to a close. A separate target under SDG 14 on ocean conservation and sustainable use, along with calling for enacting bans to harmful fisheries subsidies, also refers to the role of appropriate special and differential treatment (S&DT) for developing countries, to give another example.

Over the years, WTO members have agreed on various decisions specifically aimed at helping least developed countries (LDCs) better integrate into the global economy and improve their prospects through global trade. This LDC focus has made it easier for members to reach agreement by consensus and important outcomes have materialised, notably in the context of the Bali and Nairobi LDC “packages.”

However, one of the outstanding challenges within the WTO negotiations has been fulfilling a 2001 mandate to review S&DT provisions to make them more effective. These provisions give developing countries special rights, including preferences exempte from the most favoured nation principle, lower levels of commitments, derogations from various provisions, longer implementation periods, and technical assistance.

Ahead of the WTO’s Eleventh Ministerial Conference (MC11) in Buenos Aires, discussions have continued on this topic, although a negotiated result seems unlikely at press time. The question of defining which members would be able to benefit from the proposed provisions remains a key stumbling block, as developed countries are unwilling to grant emerging economies the same rights they would grant LDCs.

Yet with LDCs’ trade on an inconsistent trend since 2014 (Figure 1) and with an uneven path to diversification over the past decade (Figure 2), further efforts on LDC-specific issues remain important, although no new negotiating proposal has been circulated by LDCs on these topics, except regarding cotton, which has been treated in a separate proposal by four West African LDCs. (For more on cotton, see agriculture briefing)

Special and differential treatment once again on the table

The concept of special and differential treatment is a central element of ongoing WTO negotiations, both in their own right and within subject specific talks, such as those devoted to disciplining harmful fisheries subsidies. The S&DT concept recognises that countries at different stages of development may require flexibilities in various forms to address specific vulnerabilities and foster their integration into the multilateral trading system.

Ministers agreed in 2001 that all S&DT provisions contained in WTO agreements should be reviewed, with a view to strengthening them and making them more precise, effective, and operational. Since then, however, consensus on most of these issues has remained elusive. Out of an original set of 88 proposals tabled by developing countries and LDCs in the WTO’s Committee on Trade and Development (CTD), members have only reached agreement on five LDC-specific ones, including a 2005 decision on duty-free quota-free (DFQF) market access for LDCs.

Other issues have been incorporated under specific negotiating streams but largely remain unresolved. WTO members also established at the Bali ministerial conference a Monitoring Mechanism to serve as focal point for the monitoring of S&DT provisions, based on written input from members and other WTO bodies. So far, however, limited written submissions have slowed substantive discussion in that framework.

In the run-up to Buenos Aires, negotiations have focused on a new G90 submission circulated on behalf of the African, Caribbean, and Pacific (ACP) Group, LDCs, and African Group. This submission is filed under the heading JOB/DEV/48 – JOB/TNC/60, and is currently a restricted document. The submission builds on previous attempts at narrowing down the scope of the 88 original proposals. Before Nairobi, the G90 had already highlighted 25 proposals for agreement in a submission (JOB/TNC/51) which was subsequently revised twice to accommodate concerns of other members.

With no consensus reached in Nairobi, the new submission prioritises 10 proposals, including eight which have already been discussed, on issues such as the Agreement on Trade-Related Investment Measures (TRIMS), the General Agreement on Tariffs and Trade (GATT), non-tariff barriers, and subsidies. There are also two new ones on technology transfer and LDC accession.

On TRIMS, the submission envisages exemptions for developing countries for up to 15 years if a proposed measure fulfils certain development objectives related to industrialisation, socio-economic transformation, economic upgrading, environmentallyfriendly production, or closing the digital divide.

On GATT Article XVIII.A and C, the proposed disciplines would allow developing countries, in particular LDCs or developing country members facing “constraints,” to temporarily modify or withdraw concessions through a simplified and faster process, with no obligations to compensate or allow affected parties to suspend similar concessions for a five year-period. As with the TRIMS proposal, this flexibility would only apply for achieving certain objectives, such as infant industry protection, industrial upgrading, or recovering from natural disaster.

On sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBT), the proposal seeks to operationalise certain technical assistance and S&DT provisions, including defining what is a “reasonable time” for LDCs and developing countries to make comments on new SPS/TBT measures or allowing a “longer time frame for compliance.” It also proposes a system of compensatory adjustments to allow developing countries to maintain their market share and adjust to new measures.

On subsidies, the G90 proposes that some subsidies related to various development goals, including research and development, diversification, regional development, or environment protection should be considered as non-actionable for a certain period. This was originally envisaged under Article 8 of the WTO’s Agreement on Subsidies and Countervailing Measures (ASCM), though that provision has since expired. To use these flexibilities, beneficiaries would need to demonstrate that they face certain challenges – for example lack of diversification, decline in commodity prices or in manufacturing, or the digital divide. It also envisages certain exceptions to the prohibition on subsidies which are contingent on local content requirements.

On customs valuation, the proposal suggests different valuation techniques for LDCs facing difficulties in establishing the true value of an imported good, until implementation capacity has been acquired through technical cooperation.

On market access, the proposed disciplines would oblige trade preference-granting countries to take into account the needs of developing countries and LDCs when designing their preferential schemes to ensure that their products of export interest are provided meaningful preferences.

On transfer of technology, the proposal calls for measures to allow effective access to technology on fair, non-discriminatory, and reasonable terms. Developed countries shall establish a “Publicly Owned Technology inventory” making available information concerning technologies that receive at least half of their funding from public bodies.It also calls for technical assistance to help LDCs improve their technological base and innovation capacities.

Finally, on LDC accession, the proposal states that members shall fully implement the benchmarks for goods and services concessions agreed in the 2012 General Council decision, which updated the accession guidelines for the WTO’s least developed country members. It also calls for disciplining the fast track accession procedure recently used in LDC accessions.

The G90 submission has been intensively discussed in the CTD’s Special Session. Overall, members have remained deeply divided. Australia, Canada, the EU, and Japan have raised questions regarding the rationale for the proposed amendments, the specific challenges faced by developing countries, and how such proposals would apply in practice. Ongoing divisions on “differentiation,” in other words on whether higher and lower-income developing countries should be treated the same way under these provisions, have also been raised.

Keeping the ball rolling on LDC issues

Since the beginning of the Doha Round, a series of LDC issues have gained traction, resulting in LDC packages adopted at the Bali and Nairobi ministerial conferences in 2013 and 2015, respectively. These were articulated around core issues such as a services waiver, duty free quota-free market access, preferential rules of origin, and cotton. Although no substantial negotiations have taken place on LDC-specific issues ahead of MC11, further progress does not necessarily require new rules at the multilateral level, but could instead be advanced through further work on implementing existing decisions.

DFQF market access

In 2005, WTO ministers in Hong Kong agreed that “developed country members shall […] provide duty-free and quota-free market access on a lasting basis, for all products originating from all LDCs.” However, another provision toned down the scope of the decision, stating that “members facing difficulties […] shall provide duty-free and quotafree market access for at least 97 percent of products originating from LDCs,” while taking steps to progressively achieve full coverage.

To date, many developed members provide either full or nearly full DFQF market access to LDC products, with some sectoral exceptions related to their respective markets. A number of developing countries have also notified their DFQF market access schemes for LDCs to the WTO. Recently, members agreed to ask the WTO secretariat to examine the implementation of the DFQF market access decision for LDCs in order to inform future discussions.

Preferential rules of origin for LDCs

Rules of origin (RoOs) set the criteria for determining the national source of a product. As LDC exports benefit from preferential and DFQF access to the market of various countries, being able to vouch for the LDC origin of a product by complying with RoOs is crucial to make effective use of these preferences, hence the importance of having simple and preferential RoOs in place for LDCs.

At the 2013 Bali ministerial, WTO members took a significant step by adopting the first-ever set of multilateral guidelines on this topic. Two years later, in Nairobi, they adopted another ministerial decision on preferential rules of origin for LDCs, building on the previous Bali decision and providing additional guidance on specific aspects.

Although no new negotiating proposal has been submitted on preferential RoO ahead of Buenos Aires, important technical work mandated by the Nairobi decision has been conducted since its adoption. In particular, WTO members agreed in March 2017 on a common template for notifying preferential RoO schemes for LDCs, with the objective of improving transparency and comparability between requirements. Fifteen WTO members have since submitted notifications using the new template, highlighting how they are seeking to help LDCs benefit from preferences through less stringent RoOs.

Services waiver

Efforts to operationalise in a commercially meaningful way the LDC services waiver decision, which grants preferential treatment to services and services suppliers originating from LDCs, have been ongoing since its adoption in 2011. The Nairobi ministerial decision on this issue extended the duration of the waiver until 31 December 2030, and encouraged both developed and developing members “in a position to do so” “to redouble efforts” to notify preferences in line with the collective request submitted in July 2014.

To date, 24 members have submitted notifications regarding the preferential treatment they would like to grant to LDC services and services suppliers, and the LDC Group has reiterated the need for additional aid and further discussions in order to take full advantage of these notifications.

Looking ahead

While some stakeholders might be concerned about the absence of an outcome at MC11 on development-specific topics such as S&DT and LDC issues, this does not mean that Buenos Aires will be unimportant from a development standpoint. The discussions on S&DT could help inform the broader efforts among the membership to craft a work programme for the post-Buenos Aires era, and the importance of addressing developing country needs is spurring creative, if challenging, discussions in areas ranging from fisheries subsidies prohibitions to domestic regulation in services.

As ministers consider the next chapter for the global trade body, the importance of the WTO’s development dimensions will remain a central concern, particularly given that the organisation remains the one existing forum where nearly all of global trade is covered, and where countries across the development spectrum all have a voice at the negotiating table.

The direction and momentum provided from the SDG process also mean that the WTO’s 164 members will need to consider how best to draft new trade rules and implement existing ones in order to support the global effort to meet these sustainable development objectives.

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