TWN Info Service on WTO and Trade Issues (Jul17/05)
11 July 2017
Third World Network
G90 demand fruitful outcome on S&DT at MC11
Published in SUNS #8497 dated 7 July 2017

Geneva, 6 Jul (D. Ravi Kanth) - A large majority of developing and least-developed countries have demanded a "fruitful outcome" at the World Trade Organization's eleventh ministerial conference in Buenos Aires in December on 25 revised agreement-specific proposals for strengthening special and differential flexibilities for promoting "inclusive and sustainable industrialization."

In a restricted document, reviewed by the SUNS, Guyana - on behalf of the ACP (Africa, Caribbean, and Pacific) group, the African Group, and the LDC group - has raised the demand for renewed industrialization under the United Nations Sustainable Development Goal No. 9 which calls for promoting inclusive and sustainable industrialization.

In a job document Job/Dev/47 circulated on Wednesday (5 July), the three groups have called for an outcome on the "25 revised agreement specific proposals on a priority basis" for enabling least-developed countries and developing countries to overcome constraints for promoting their "much needed industrialization, structural transformation, and diversification of their economies for raising the standard of living of their population, the prime objective of the WTO and integration into the multilateral trading system."

The three groups, in their document, have suggested that S&DT flexibilities were conceived in the multilateral trading system to enable the developing countries to overcome their varying stages/levels of economic, social, financial, and technological developments.

While the developing and least-developed countries faced numerous difficulties in availing the S&DT provisions, the developed countries continued to maintain trade-distorting subsidies including domestic supports in agriculture, during the period of the Uruguay Round.

These countries were allowed to maintain those trade-distorting supports in the form of aggregate measurement of support without any time limit, Guyana argued.

"When the Uruguay Round was concluded, most of the developing countries did not have measures in place on which they had to undertake commitment [and] this was the case then and now because developing countries could not afford such subsidies and lacked capacities to administer measures other than tariff and import restrictions to promote their industries," the three groups argued.

Further, the industrialized countries did not undertake any commitment in the Uruguay Round "to further enhance the export opportunities for developing countries, let alone enhanced market access."

The industrialized countries failed to adhere to the "technical assistance provisions, which form the integral part of various agreements".

Consequently, the technical assistance provisions remained only "best endeavour in nature and therefore are not legally enforceable."

The three groups expressed sharp concern over the manner in which attempts to improve the existing S&DT provisions as per the decision on implementation issues and concerns as well as on paragraph 44 of the Doha Ministerial Declaration - "which mandates to review all special and differential provisions with a view to strengthening them and making them more precise, effective, and operational" - have been jettisoned time and time again.

Citing the Trade and Development Report 2016 issued by the United Nations Conference on Trade and Development (UNCTAD), the three groups said: "there is renewed interest in industrialization which has surfaced in light of the rationale underpinning SDG 9, which calls for promoting inclusive and sustainable industrialization."

Five factors contributed to the revival of interest in industrialization, according to the nine-page proposal. The factors include:

* First, many developing countries have failed to deepen and diversify their existing industrial capacity in an increasingly more challenging global economy. Indeed, several of them have experienced a premature decline in the share of manufacturing in their gross domestic product (GDP).

* Second, there is a perception that export-led growth strategies in developing countries face more constraints than in the past, in particular due to the slower growth of global demand, especially from industrialized countries.

* Third, many developing countries continue to remain vulnerable to external trade and financial shocks.

* Fourth, and related to the latter point, there has been an end to the enormous windfall gains from primary exports generated by the commodity price boom during the first decade of the 2000s, which saw accompanying growth and investment spurts.

* And fifth, further de-industrialization processes can be observed in several developing countries and this may impose harsher downward pressures on wage incomes and demand in the context of "race to the bottom" logic.

The proponents said the LDCs faced "acute" problems as "during the period between 1995 and 2015, while global exports of LDCs increased from US$25 billion to US$159 billion, their share in global exports remains very low at 0.98%."

Despite drastic reduction in oil prices, fuel and mining represents a significant share in LDC's global exports, which was 38% in 2015.

"On the other hand, during the same period global imports of LDCs increased from US$32 billion to US$229 billion," the three groups suggested.

"As a result, trade deficit of LDCs in manufacturing has increased from US$18.8 billion to US$101.6 billion during this period, which clearly indicates an imbalance in growth of manufacturing in LDCs," the groups argued.

The LDCs are more vulnerable to external shocks due to continued volatility in prices of primary commodities, on which LDCs and many African countries have relatively high reliance.

The proponents referred to the Istanbul Plan of Action (IPoA) that "aims to enable half of the LDCs to meet the criteria for graduation, achieving structural transformation through increasing the productive capacity and doubling the share of the LDCs' exports by 2020, supporting manufacturing in LDCs shall substantially contribute to reach the objectives and targets of the IPoA."

They expressed sharp concern over the manner in which attempts since 2001 to improve the existing S&DT provisions were jettisoned time and time again.

"Despite rigorous efforts by WTO members, the Tenth WTO Ministerial Conference could not deliver any outcome on S&DT for developing and least-developed countries," the three groups maintained.

Against this backdrop, "as a first step towards achieving the target of paragraph 44 of the Doha Ministerial Declaration," the G90 countries demanded "the following revised agreement on specific proposals on a priority basis in order to enable least-developed countries and developing countries facing constraints" in promoting much needed industrialization.

The proposals among others include:

1. Agreement on Trade-Related Investment Measures (TRIMs): Notwithstanding Articles 4 and 5 of the TRIMs Agreement and Articles III and XI of GATT, Members agree that developing countries shall be free to deviate temporarily from the provisions of Article 2 of the TRIMs Agreement, and introduce new investment measures related to trade in goods, in accordance with the following provisions:

(a) Measures notified by developing countries under this provision shall be effective for an initial period that does not extend beyond 15 years or up to the time these objectives have been met (whichever is shorter), provided the selected measures fulfil one of the objectives stipulated below:

i. Accelerate industrialization and achieve socio-economic transformation;

ii. Upgrade and modernize the domestic manufacturing capabilities of small and medium enterprises and their contribution to employment generation;

iii. Promote domestic manufacturing capabilities in high value-added sectors or technology intensive sectors;

iv. Stimulate and facilitate the transfer or indigenous development of technology;

v. Promote domestic competition and/or correct restrictive business practices;

vi. Promote purchases from disadvantaged regions in order to reduce regional disparities within their territories and support the development of geographically disadvantaged regions;

vii. Stimulate environment-friendly methods or products and contribute to sustainable development;

viii. Increase export capacity in cases where structural current account deficits would cause or threaten to cause a major reduction in imports;

ix. Close the digital divide in industrial production.

(b) If upon the conclusion of the initial period, the objectives of the measure are not fulfilled, a developing country Member that is referred to in paragraph 1, shall be enabled to renew the measure subject to a review and decision by the Council for Trade in Goods. The Council for Trade in Goods shall, upon duly motivated request by a developing country member, accord extensions of this period.

(c) LDCs shall be allowed to introduce and maintain measures that deviate from their obligations under the TRIMs Agreement. Members agree that least-developed country Members shall not be obliged to implement, apply or enforce the provisions of the TRIMS Agreement as long as they remain LDCs.

Developing countries that are referred to in paragraph 1 shall notify new investment measures related to trade in goods to the Council for Trade in Goods no later than six months after their adoption.

2. Article XVIII-B of GATT: Notwithstanding the current provisions in Article XVIII-B and the Understanding, developing countries in balance of payments difficulties shall be enabled to take measures to address their BOP difficulties, including impose quantitative restrictions and tariffs until such time these difficulties have been overcome.

3. Agreement on the Application of Sanitary and Phytosanitary measures: to make operational and effective Article 9.2 and Article 10, developed countries shall provide reasonable time of 180 days on their newly notified SPS measures to developing countries and least-developed countries to comment.

4. Agreement on Technical Barriers to Trade: Developed countries shall provide developing and least-developed countries a 180-day comment period before the adoption of the measures.

5. Agreement on Subsidies and Countervailing Measures: Recognizing that subsidies play an important role in industrialization and economic development programmes of developing country Members, Members agree that subsidies granted by least developed countries and developing countries facing certain constraints described in 6.2, with a view to achieving development goals, including regional growth, technology research and development funding, production diversification and development and implementation of environmentally sound methods of production, provided these subsidies fall under Article 8 of the Agreement, shall be treated as non-actionable subsidies for a period of 10 years for LDCs, and 8 years for the developing country members facing certain constraints, from the date of adoption of this decision.

6. Agreement on Customs Valuation and decision on minimum values: Considering least developed country Members continue to lack the necessary capacity to implement the relevant provisions of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 ("Customs Valuation Agreement"), the least developed country Members shall be allowed to use minimum or reference values up to 10% of their tariff lines when they are in difficulty utilizing the rest of valuation techniques to addressing the issue of import under-invoicing.

7. Decision on differential and more favourable treatment, reciprocity and fuller participation of developing countries (Enabling Clause): In formulating schemes under paragraphs 2(a) and (d) of the Enabling Clause as well as other non-reciprocal preference schemes, developed-country Members shall take into account the needs of developing and least-developed country Members by consulting with them, with a view to ensuring that their products of export interest are accorded meaningful market access. The Committee on Trade and Development will annually review the progress made in this regard and report to the General Council.

8. Transfer of Technology: Developing and Least Developed countries continue to struggle with industrialisation because many are still far behind technologically. There are many pronouncements about supporting these countries to bridge the technological divide which must be made operational and effective.

Sustainable Development Goal 17.6-8 encourages international cooperation on and access to technology and innovation, including the promotion, development, transfer, dissemination and diffusion of technologies to developing countries.

A number of provisions in the WTO agreements mention the need for the transfer of technology to take place between developed and developing countries. As becomes apparent, technology transfer goes beyond the mere import or purchase of machines and other hardware at commercial rates and includes the building of local capacity so that people and institutions in Developing and Least Developed countries can design and make technologies which can be diffused into the domestic economy. Against this background, specific measures need to be taken within the WTO to encourage such flows of technology.

9. Accession of LDCs: The WTO Agreement recognizes the need for a positive effort to ensure developing countries, especially the least-developed countries, secure a share in the growth of international trade commensurate with their level of economic development. Though the special provisions are applicable to LDCs accession, experience showed that the limited human, institutional, financial and administrative capacity of LDCs makes LDCs accession more challenging.

To facilitate a speedy and smooth integration of LDCs into the multilateral trading system based on the principles of universalizing the multilateral trading system, that is, no-one is left out of the system, and help LDCs secure a share in the growth of international trade and benefit from the system in a balanced term consistent with their level of development and achieve the SDGs, LDCs need special & differential treatment in their accession process.

In effect, the G90 countries brought the much delayed improvements in the S&DT proposals to the centre stage.

The developed countries walked away after pocketing the Trade Facilitation Agreement, and kept their export programs - barring export subsidies - for agricultural products intact.

But the developing and least-developed countries were denied the "developmental" outcomes in the Doha agriculture package, as well as the improvements in the S&DT provisions for the past 16 years.

In conclusion, the G90 countries face a make-or-break prospect at the WTO's eleventh ministerial meeting in Buenos Aires in less than six months.

If the developing and least-developed countries fail to secure credible outcomes in the Doha agriculture and S&DT improvements at Buenos Aires, they will forever remain marginalized and inconsequential at the WTO, according to several people familiar with the proposal.