Special and differential treatment ( S&D) for developing countries and trade negotiations

1. Special and differential treatment (S&D) for developing countriesand trade negotiations C. O. Bartel

2. Overview • Background and concepts • Important Benchmarks in MTS • Evolution of the concept • The desired goal • WTO and S&D • DOHA and S&D • Trade negotiations: where we stand

3. What triggered S&D? • the accession of a number of newly independent developing countries to the GATT in the1950's. • 103 of 132 WTO membership by September 1998. • Challenge to the rules-based, non-discriminatory multilateral trading system • No level-playing field • Competition not realistic

4. IDEAS BEHIND THE CONCEPT OF (S&D): • There are structural imbalances between developing and developed countries in terms of: • share of world trade; • access to financing; • access to technology; • infrastructure weaknesses; • supply side • institutional capacity and human resources.

5. GATT 1947:MFN for all members, exc. art.XVIII which allows for flexibility and for tariff protection and QRs in case of balance of payments crisis GATT PART IV (1964): the principle of “non- reciprocity” is introduced ENABLING CLAUSE (1979):allows for GSPs, trade agreements among developing countries, S&D for LDCs TOKYO ROUND (1978): plurilateral codes as a way to implement S&D URUGUAY ROUND (1994): the “single undertaking” does not allow for opt-in/opt-out rules DOHA MIN.DECL.(2001): paras. 44 on S&D, 42-43 on LDCs, and 35 on small economies (plus the Decision on Implementation Issues) SOME BENCHMARKS IN THE HISTORY OF S&D IN MULTILATERAL TRADE RULES

6. GATT: Article XVIII • recognized the need for additional flexibility (Review Session (1954-55). • recognized the structural nature of balance-of-payments problem • requirement of prior approval to promote industry was relaxed (Article XVIII:C). • These amendments to Article XVIII introduced for the first time the concept of differential treatment of developing countries.

7. GATT 1947:MFN for all members, exc. art.XVIII which allows for flexibility and for tariff protection and QRs in case of balance of payments crisis GATT PART IV (1964): the principle of “non- reciprocity” is introduced ENABLING CLAUSE (1979):allows for GSPs, trade agreements among developing countries, S&D for LDCs TOKYO ROUND (1978): plurilateral codes as a way to implement S&D URUGUAY ROUND (1994):the “single undertaking” does not allow for opt-in/opt-out rules DOHA MIN.DECL.(2001):paras. 44 on S&D, 42-43 on LDCs, and 35 on small economies (plus the Decision on Implementation Issues) SOME BENCHMARKS IN THE HISTORY OF S&D IN MULTILATERAL TRADE RULES :

8. GATT: Part IV • Contains a special section, "Trade and Development“; • Developed countries to take a number of best endeavour commitments; • According high priority to the reduction and elimination of barriers, customs duties and other restrictions;

9. GATT 1947: MFN for all members, exc. art.XVIII which allows for flexibility and for tariff protection and QRs in case of balance of payments crisis GATT PART IV (1964): the principle of “non- reciprocity” is introduced ENABLING CLAUSE (1979): allows for GSPs, trade agreements among developing countries, S&D for LDCs TOKYO ROUND (1978): plurilateral codes as a way to implement S&D URUGUAY ROUND (1994):the “single undertaking” does not allow for opt-in/opt-out rules DOHA MIN.DECL.(2001):paras. 44 on S&D, 42-43 on LDCs, and 35 on small economies (plus the Decision on Implementation Issues) SOME BENCHMARKS IN THE HISTORY OF S&D IN MULTILATERAL TRADE RULES :

10. THE DESIRED GOAL OF SDT • Unique problems of developing countries are addressed; • availability of safeguards to minimise or eliminate structural imbalances; • Policy space • to achieve structural transformation, diversification and international competitiveness, • overcoming supply-side constraints;

11. 40 Years 0n.... • The trade liberalisation does not automatically imply development nor equitable welfare gains. • Lack of capacity to take advantage of the opportunities created by trade liberalisation.

12. WTO: S&D for Developing Countries • Provisions aimed at increasing trade opportunities • important sectors remains excluded • Provisions under which WTO Members should safeguard the interests of developing country Members • generally weak • Flexibility of commitments, of action, and the use of policy instruments • normally through longer transitional time periods • Provision of technical assistance • Provisions relating to LDCs

13. S&D Working Hypotheses Variations/Additions Reduction formula (i) Least-developed countries to be exempt from undertaking reduction commitments. (i) The [net food-importing developing countries] [countries with subsistence farming] shall be exempt from further reduction commitments [during a transitional period.] (ii) Developing countries to undertake lower reduction commitments implemented over longer timeframes than developed countries. (ii) Tariff reductions for developing countries shall be implemented from final bound tariffs in equal annual instalments over a 9-year period according to the following schedule: (a) initial tariffs falling in the range of 0-50 per cent inclusive shall be reduced using the Swiss formula with a coefficient of 50; (b) initial tariffs falling in the range 50-250 per cent shall be reduced by 50 per cent; (c) initial tariffs that exceed 250 per cent shall be reduced to 125 per cent. (iii) Uruguay Round formula: Lower simple average cuts and lower minimum average cut per product shall apply in the case of developing countries, in equal annual instalments. Tariffs

14. S&D Working Hypotheses Variations/Additions Product coverage (i) Developing countries shall designate the primary agricultural products that constitute the predominant staple in their traditional diet. These agricultural products shall not be subjected to the [market access modalities]/[reduction commitments.] (ii) Developing countries shall have the flexibility to exclude from the tariff reduction modalities any primary agricultural product in respect of which one or more of the following conditions apply: (a) the product in question is a predominant staple in the traditional diet of the developing country [and is not exported]; (b) the exclusion of the product in question reflects a food security, rural development, [product diversification] [poverty alleviation] concern; (c) substantial trade liberalization has already been undertaken for the product concerned, either as part of a structural adjustment programme sponsored by a multilateral agency, or as part of the WTO accession process. (iii) The products in respect of which new tariff bindings have been negotiated under GATT XXVIII shall not be covered by these modalities. (iv) Developing countries shall define a list of agricultural products that will be subject to further reduction commitments. Tariffs

15. Yes… but.. • Lack of anticipated benefits to many DCs • Asymmetries in the world economy • Decline in commodity prices, inability to diversify, supply side constraints • Limited market access • agriculture, textiles, movement of persons • Problems arising from implementation • adjustment costs • Inadequate participation in decision making • heavy workload and lack of capacity

16. POSSIBLE NEW APPROACHES TO S&D • Focus on the “positive” measures and not only on the “negative” ones • Preserve “policy spaces” in the trade rules • Look for the “commercial value” of S&D (for ex. in agriculture, fisheries, textiles, rules of origin) • Assess the quality of the technical assistance provided and link it to the new obligations • Elaborate “development benchmarks” or “development needs tests” issues-based rather than country-based • Enlarge the mandate of the WTO-Committee on Trade and Development to monitor the S&D provisions.

17. GATT 1947: MFN for all members, exc. art.XVIII which allows for flexibility and for tariff protection and QRs in case of balance of payments crisis GATT PART IV (1964): the principle of “non- reciprocity” is introduced ENABLING CLAUSE (1979):allows for GSPs, trade agreements among developing countries, S&D for LDCs TOKYO ROUND (1978): plurilateral codes as a way to implement S&D URUGUAY ROUND (1994): the “single undertaking” does not allow for opt-in/opt-out rules DOHA MIN.DECL.(2001): paras. 44 on S&D, 42-43 on LDCs, and 35 on small economies (plus the Decision on Implementation Issues) SOME BENCHMARKS IN THE HISTORY OF S&D IN MULTILATERAL TRADE RULES

18. Doha Ministerial: Issues for DCs • Doha agenda larger agenda than the UR (19 different areas) • Complex and difficult issues involved (for instance: services/environment; agriculture/geographical indications, agriculture/environment; IPRs/technological transfer; AD/competition ect.) • Requires human resources and technical expertise that DCs might not have

19. Until the Tokyo Round: The trade agenda focused on border barriers(mainly tariffs): S&D was meant to avoid these barriers through preferences. S&D was conceived as a development tool to help the exports of developing countries During and after the Uruguay Round: The trade agenda focused on« within the border » barriers (domestic measures) and trade-related obligations: S&D was meant to fulfill them. S&D conceived as anadjustment tool to fulfill the new rules The evolution of the concept of S&D

20. Doha Mandates Reaffirmed S&D provisions Proposal: framework Agreement on S&DT (WT/GC/W/442). Review, strength make precise, effective and operational “Resurrection” of S&D, seeking to make “best endeavors” contractual The evolution of the concept of S&D Post Doha focus on POLICY SPACE Development is furthered by flexible and responsive set of rules rather than a strict beyond the border agenda.

21. Operationalizing S&D SPS - S&D DEBATE Canadian proposal on transparency To enhance transparency of S&D treatment within the SPS Agreement, Requires members to engage in bilateral consultations if exporting country identified significant difficulties in complying with proposed regulations The notifying Member to inform the WTO of S&D requested S&D provided or reasons why S&D was not granted Discussions on S&D not finalised by Committee on SPS Malaysia objections onus placed on developed countries instead Jamaica, Nicaragua Cuba, Peru, Brazil and the US -- urged Malaysia to join the consensus