TRADE AND DEVELOPMENT

1. TRADE AND DEVELOPMENT National Seminar on the WTO and the DDA Raúl Torres, Development Division

2. Elements in the module • Trade and Development • Why is trade important for development? • Challenges and how to meet them • Work Programme on Small Economies • Special and differential treatment • Historical evolution and current state of the negotiations

3. What do we know about trade? • Trade can be a powerful source of growth & development; • Trade can expand markets, facilitate competition and disseminate knowledge, raise productivity and facilitate assimilation and exposure to new technologies • No country has developed by turning its back on trade and long-term capital flows; • At the same time trade liberalization will not automatically lead to growth and development;

4. GATT OBJECTIVES • Raising standards of living • Ensuring full employment • Ensuring large & steadily growing volume of income & effective demand • Developing full use of global resources • Expanding production and trade in goods

5. The Uruguay Round • Basic principles were to provide certainty and predictability in global trade • Development becomes an important subject with S&D provisions in almost all areas • Recognition that trade must lead to development • Sustainable development introduced as primary objective • Equity is also reflected in the consensus and the one Member one vote principle

6. Marrakesh Agreement-Preamble • Recognized ”... need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in growth in international trade commensurate with the needs of their economic development”.

7. Trade and Development • What is development? • Economic or social? • Is development part of the scope of the WTO? • Is the WTO a developmental agency? • Who is a developing country?

8. Complex Nature of the Nexus between Trade and Development • The relationship between trade and development is complex and largely dependent on both internal and external factors; • The causal link between different influencing factors is not clear; • Complexity of the issue is compounded by peculiar features of developing countries economies; • Trade liberalization alone may not lead to growth and development.

9. How To Make Trade Work For Development • How to overcome these constraints? • How to help developing countries maximise the benefits from the multilateral trading system? • 3 areas to explore: • Institutional Issues • Issues to be addressed by the Trading Partners • Domestic Issues

10. Institutional Issues • Objective: -Favourable international environment that facilitates trade and leads to development; -Key ingredients; predictability & certainty; but -Must also ensure a favourable & equitable outcome; -One that takes into account the concerns and constraints of developing countries.

11. Institutional Issues • How can this be ensured: • Full participation ( physical & proactive) • Transparent and inclusive decision making process • Appropriate and effective S&D treatment provisions • Technical Assistance & Dom. Policy Space

12. What can be done by trading partners • Respect principle of non-reciprocity • Convert assurances into actual trade opportunities & gains • Respect capacity constraints - refrain from overloading the agenda • Acknowledge differences amongst developing countries – issue of domestic policy space flexibility

13. Domestic Issues • Domestic policies that mainstream trade in to development strategies are essential; • Strong institutional infrastructure; competent financial institutions; and transparent legal framework • Important to generate a ‘strong’ ownership of national reform process; Possible only by maximizing gains from trade liberalization • However, reforms need a strong and committed political leadership

14. Domestic Issues • Supply side capacity • Strong administrative & organisational base; • Appropriate financial institutions; and • Transparent legal framework • All of which will require reforms in domestic policies

15. Summary • A development friendly and conducive multilateral environment can lead to increased trading opportunities; • For these opportunities to be converted into actual gains trading partners may have to look beyond mercantilist gains; • Even more importantly, the global community would need to work together to help dc’s overcome supply-side constraints and capacity building

16. Summary (continued) • For trade to lead to development the dc’s would need to adopt matching domestic policies; • Institutional development and innovation would be one of the more important elements of such development strategies; • Multilateral trade rules should, therefore, provide flexibility and policy space to dc’s to pursue appropriate development priorities.

17. Conclusions • Trade can lead to economic growth, provided there is a conducive multilateral environment; • Multilateral trade rules should ideally provide flexibility to countries to pursue appropriate development priorities, • In turn economic growth can lead to development, provided countries adopt appropriate domestic policies and overcome supply side constraints; • But development may not automatically lead to poverty alleviation – adoption of redistributive policies

18. Developmental Issues in the DDA

19. The DDA mandate • Paragraphs 1,2 ,3 and 6 • International trade can play a major role in the promotion of economic development and the alleviation of poverty. • The majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration. • Enhanced market access, balanced rules, and well targeted, sustainably financed technical assistance and capacity-building programmes have important roles to play.

20. Small Economies

21. CTD – Dedicated Session • CTD – Dedicated Session on Small Economies • Para. 35 Doha MD mandate • HK MD Para. 41 • Proposals in CTD • Decision on regional bodies for TBT,SPS and TRIPS • Monitoring proposals in other bodies

22. SVEs Doha Mandate • “We agree to a work programme, under the auspices of the General Council, to examine issues relating to the trade of small economies. • The objective of this work is to frame responses to the trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, and not to create a sub-category of WTO Members

23. Who are the SVE proponents? • Antigua and Barbuda, Barbados, Belize, Dominica, Fiji, Haiti, Jamaica, Mauritius Papua New Guinea, Solomon Islands, Sri Lanka, St. Kitts and Nevis, St. Vincent and the Grenadines, Trinidad and Tobago • Bolivia, Mongolia, Paraguay • Cuba, Dominican Republic, Guatemala, Honduras, Nicaragua, El Salvador

24. Characteristics and problems • Physical isolation, geographical dispersal and distance from the main markets. • Minimal share of total world trade. • Small, fragmented and highly imperfect markets. • In general, very open economies. • Domestic markets with imperfect and highly polarized structures. • Minimal or no export diversification.

25. Low supply of export services. • Dependent upon very few export markets. • Inadequate Infrastructure. • High degree of vulnerability. • Low competitiveness. • Low levels of productivity and insufficient supply.

26. Economic rigidity with high adjustment costs. • Unable to sustain diversified productions. • Considerable difficulties to attract foreign investment. • Lack of adequate market access opportunities to place their few export products. • High transport and transit costs.

27. The two-track process • Proposals in the CTD-DS • Regional bodies for TBT, SPS + TRIPS WT/COMTD/SE/W/15-16 and 18 (Revs.1) • Recommendation adopted by CTD WT/COMTD/SE/5 • Approved by General Council in October 2006 • Other D’g countries can also use the same mechanism

28. Monitoring SE proposals in the negotiating bodies • Document WT/COMTD/SE/W/22/Rev.1 to serve as basis. • W/22/Rev.1 is a compilation prepared by the Secretariat • Includes proposals and latest draft modalities

29. SE proposals in the negotiating bodies • Agriculture • NAMA • Rules (fisheries subsidies) • Services • Services Domestic regulation • Subsidies – G/SCM/W/535

30. Decision on SCMA Art. 27.4 extensions • Adopted by GC in G/L/679 • Extension of the transition periods for certain export subsidies of some small d’g countries • Not all are in the SVE group • May grant subsidies until 2015 • Some conditions: notifications, action plan, stand still, mid-term review • Commitment that this is last request • Some Annex VII(b) countries reserved rights in case of graduation

31. CTD – Special Session • S+D negotiations • Para 44 of Doha MD mandate • Different Chair • Reports to the TNC

32. Special and Differential Treatment

33. Introduction • GATT established in 1947 ( 23 CPs) • No formal recognition of any difference between the CP’s. • Fundamental principle of GATT was that all rights and obligations should be applied uniformly. • Even though 11 out of the original 23 CP’s would today be classified as developing countries, they participated as equal partners

34. GATT Review Session, 1954-55 • First occasion when provisions were adopted to address the needs of developing countries, as a group within GATT. • Permitted dc’s to derogate from their scheduled tariff commitments, and included • Article XVIII(B), to allow countries at an ‘early stage ofdevelopment’ to use QR’s for BoP purposes. • Article XVIII(C), to allow countries that could only support ‘low levels of living standards’ to impose trade restrictions to support infant industries

35. Introduction of Part IV - 1964 • Basic objective : dc’s should not be expected to take on obligations inconsistent with their levels of development (Non-Reciprocity) • In 1964 the GATT adopted a specific legal framework to address the concerns of developing countries. • Three new Articles, XXXVI to XXXVIII were introduced in Part IV of GATT dealing specifically with Trade and Development.

36. What did Part IV provide? • The measures introduced included • provision of more favourable market access conditions to products of export interest to dc’s • introduction of the concept of non-reciprocity; • elimination of restrictions which differentiate unreasonably between primary and processed products • establishment of the CTD to review the application of Part IV and to consider any changes to these provisions to strengthen the objectives of trade & development.

37. The Tokyo Round–1973-79 • The main focus continued to be tariff reductions • However, many products of export interest to dc’s were either exempted from reduction cuts or were subject to lower reductions • First time an attempt to address NTBs. • Still limited participation of dc’s; developed countries often negotiated exceptions amongst themselves.

38. The Enabling Clause - 1979 • Enabling Clause introduced during the Tokyo Round • Preferential treatment by developed countries for goods originating from dc’s in the • flexibility in the formation of RTA’s between dc’s; • Preferential treatment for dc’s in other GATT rules dealing with non-tariff barriers; • special treatment to LDCs in the context of specific measures for developing countries

39. S&D Treatment in the UR • Certain basic underlying conceptual premises related to S&D treatment emerged during the UR, namely that • dc’s were intrinsically disadvantaged in their participation in international trade; • trade policies that maximised sustainable development in dc’s were not the same as those in developed economies; • any multilateral agreement needed to take account of these weaknesses & differences when specifying rights and obligations

40. S&D Treatment in the UR • These underlying conceptual premises resulted in S&D provisions in 6 groups • provisions aimed at increasing trade opportunities • provisions which call upon WTO Members to safeguard the interest of dc’s • provisions offering flexibility of commitments • transitional time periods • provisions related to technical assistance • provisions in favour of least developed countries

41. Concerns withS&D After a few years dc’s felt that in many cases most of the S&D provisions were: • non-binding • ‘best endeavour clauses’ • apparently mandatory, yet de-facto non-binding • only a few provisions were mandatory and binding provisions

42. Doha Ministerial Declaration • Ministers at Doha, recognizing that problems existed with respect to S&D treatment set out a work programme in para 44 of the Declaration, which • reaffirmed that S&D is an integral part of the WTO • noted that there are concerns about the implementation of S&D provisions • directed that all S&D provisions should be reviewed to strengthen them and to make them more precise, effective and operational, and • linked this work to the Decision on Implementation related issues and concerns

43. S&D Work Programme • A very large number (finally 88) Agreement specific proposals were submitted by dc’s, primarily by the African Group and the LDC’s. • Developed countries also made submissions and raised a number of systemic issues including those related to principles and objectives of S&D, definition, utilisation, graduation, universal vs. differentiated treatment. • In its report to the General Council, initially in July’02, and then in December’02, the CTD (SS) could only agree on 4 proposals. CTD sought guidance from GC.

44. What happened at Hong Kong • Annex F on measures in favor of LDCs was the most important achievement in HK • Waivers: positive consideration and a decision taken within 60 days, similar for waivers in favor of LDCs • DFQF: Duty free quota free access (97%) to markets of developed and d’g countries in a position to do so • No conditionalities on loans, grants and official development assistance that are inconsistent with WTO Agreements • TRIMS: Maintain 1 measure for 7 years, new measures for 5 years • TA to implement the agreement

45. Current Status • Agreement specific proposals • 16 remain in CTD (8 Cat. I & 8 Cat. III) • 6 are being discussed, other 10 positions still too far apart • Discussion on implementation of DFQF • Forum CTD regular or SS? • Coverage and Rules of origin • Self declaration of developing Members • Cat. II proposals still in the negotiating bodies • Cross-cutting issues • Being discussed • Monitoring mechanism for S+D provisions

46. 88 Total no. of proposals submitted in the Special Session 38 Proposals referred to other bodies (Cat II) 50 Proposals in the Special Session (Cat I + Cat III) 27 Agreed to in principle as part of pkg of 28 proposals 23 Proposals remaining in the Special Session 5 LDC proposals agreed to in HK 18 Proposals remaining with the Sp. Session 2 Proposals on the ATC 16 8 are from Cat I and 8 are from Cat III. 11 are by the African Group & 5 by other dc 8 Remaining Category III proposals (6 African Group & 2 other dc's) 8 Remaining Category I Proposals (5 African Group & 3 other dc's)