South must define contents of ‘Development Round’

by Chakravarthi Raghavan

Geneva, 24 July 2001 - While others may help, ultimately it is for the developing countries themselves, and the Least Developed Countries (LDCs) in particular, to define what would necessary for a round of trade negotiations to be described as a truly genuine ‘Development Round’, UNCTAD secretary-general Rubens Ricupero said Monday in Zanzibar, at the Ministerial Conference of Least Developed countries.

The meeting has been organised and hosted by Tanzania, coordinator of the LDC group at the WTO, to prepare for the Doha ministerial meeting. A copy of Mr.  Ricupero’s statement, which he reportedly prepared himself, was made available here.

Mr. Ricupero noted that more than ever before, there were widely echoed calls for a “Development Round” or, for those uncommitted to a round, at least for placing development at centre stage of the trading system.

Though he did not mention it, among those promoting a new round, and calling it a development round are the Director-General of the WTO and the UN Secretary General, both of whom used the pulpit of the ECOSOC High-Level meet earlier this month to again advocate it. No one, said Ricupero had perhaps, tried to define what a “development round” might mean more concretely and more persistently than Ms. Clare Short, Secretary of State for International Development of the United Kingdom, and quoted extensively from the UK government’s December 2000 White Paper on “Eliminating World Poverty: Making Globalization Work for the Poor” as well as her address to the UNCTAD Trade and Development Board.

The white paper accepted that there are “substantial inequities” in the existing international trading system and that despite progress over the last 50 years, developed countries maintain significant tariff and non-tariff barriers against the exports of developing countries in areas of key importance, such as agriculture, textile and clothing, while the use and threat of ‘trade defence’ instruments (e.g. anti-dumping) creates further obstacles.” The paper defined as a genuine Development Round one resulting in substantial cuts in high tariffs and in trade-distorting subsidies, particularly for those sectors of most importance to developing countries, and gave also gives other examples of areas demanding liberalization.

In a more detailed speech at UNCTAD (on 2 March 1999), Mrs. Short had proposed that everyone should work to make the next round a ‘Development Round’, and address [the] “challenges of implementation and participation now, as we prepare for a new round, [because] if we do not, further trade negotiations simply will not deliver the results we want”. She called for breaking the impasse on implementation and put forward sensible ideas on capacity-building and extension of deadlines, in order “to give technical assistance time to work”.

On the assumption that not all the new Agreements in the Uruguay Round got it absolutely right the first time, before they could be tested in reality, she accepted that the process of built-in reviews should be used to look seriously at whether the Agreements were working as intended., and that where difficulties had arisen, there should be a willingness to remedy them, this not being a question of negotiation but rather of “making what we have already negotiated work in practice”. She also cautioned that implementation was not just a developing country issue, and that strict adherence to the timetable of the Multi-fibre Agreement would be a key element.

“These are all fine criteria against which the results of the discussions on implementation should be evaluated,” Ricupero said. With such an evaluation now taking place at the WTO, “I will refrain from passing judgement and will simply remind you of the criteria that might help you make up your minds,” he added. In her speech, Mrs. Short had also said that the issue of participation includes “working to secure the accession, on the right terms, of those countries which remain outside the WTO”, and the need for “particular efforts to bring least developed countries into the WTO.”

“Unfortunately,” said Ricupero, “not much progress has been achieved in this regard... Of the eight LDCs currently in the negotiating stage, none has been allowed to join the WTO since its establishment in 1995. The proposal advanced by the EU (when Sir Leon Brittan was the trade commissioner) for adoption of facilitated procedures for the LDCs is sound, moderate and strikes the right balance. It remains, however, to be endorsed by other influential WTO member countries and to be given practical application in the pending cases. As long as no satisfactory solution is reached in this case, a significant number of LDCs will continue to be deprived of the pre-condition to taking advantage of the multilateral trading system: admission to the WTO.

As this was hardly a matter for the give-and-take of a round, asked Ricupero, “why not take this decision in favour of facilitated procedures at Doha? What objections could be raised, if any?” A crucial assertion in the UK White Paper was that in a new Round, the UK and its EU partners would support an approach that recognizes more explicitly that WTO members are at different stages of development. To help countries manage their commitments, “we will press for special and differential provisions to be real and binding, and for any new WTO rules to reflect countries’ implementation capacity. In the longer term, the WTO needs to consider a more workable set of country categories to take better into account different levels of development”.

This was also the gist of the World Bank’s statement during the trade debate at the LDC-III Conference in Brussels last May: that trade negotiations should not be conducted solely on the basis of legal aspects but should also be based on differences of economic structure.

All those points went to the heart of the debate on the imbalances of the trading system, namely, that the only way of redressing those imbalances is to take full account of structural economic differences. “Are WTO member countries ready and willing to include paragraphs such as I have just quoted among the Doha conclusions?” asked the UNCTAD head. “ I hope so,” he said, “although some caution should be exercised here because, as the White paper points out, ‘Developed countries have long preached the virtues of openness: but practice lags behind the rhetoric’.”

Referring to the recent adoption of the EBA (“Everything But Arms”) initiative by the EU and of the African Growth and Opportunity Act by the USA, constituting significant advances in the preferences given to the LDCs, Ricupero noted the concerns about the “predictability and stability of these regimes and the low rates of utilization of the tariff preferences,” and of the need to ensure the predictability of the preferences by giving them a contractual status, so as to prevent any temporary withdrawals and to give investments in export activities guaranteed stability. While these were valid concerns, he pointed out that the risk of withdrawals of preferences stem more from the graduation criteria and from different non-tariff obstacles than from unilateral decisions to withdraw preferences than to the legal instrument on which they are based, on some of the most fundamental obstacles to the effective integration of the LDCs into the global trading system, and are relevant to the overall discussion of the development content of the multilateral trade agenda.

First, the current preferential schemes have different time-frames and different product coverage, and above all they have different rules of origin. As Mrs Short recognized in her speech, addressing this problem could bring major trade gains to developing countries, and there was a need “to simplify, harmonize and liberalize the existing network of rules, and create a system which enables developing countries to realize the theoretical benefits available to them... a system, designed to make it easier to get goods into markets, not easier to keep them out.”

This task could be accomplished, said Ricupero, by drawing upon the work carried out by the World Customs Organization and UNCTAD in this field, and should be supported by strengthened technical assistance aimed at maximizing the utilization of preferences.

Many of these problems in the utilization of the preferential market access regimes, he sais, were due to a departure from the original principles of the Generalized System of Preferences as it was adopted in the 1960s, i.e., the principles of generality, non-reciprocity and non-discrimination. These principles have not been fully translated in practice, and there are increasing differences among the preferential instruments adopted by the developed countries as well as non-tariff obstacles that seriously diminished the original objective of free market access. This had many practical implications, all of them relevant when aiming at the development of the LDCs’ export potential. “We find unrealistic economic requirements imposed on the LDCs’ industries, as well as customs procedures that complicate and frustrate their efforts.”

In the wake of significant improvements on market access for the LDCs, this might be the right time to examine how an effective utilization of the preferential regimes could be ensured for all the beneficiaries, including non-members of the WTO, beyond the possibility of a multilateral contractual instrument.

A realistic and pragmatic way forward, Ricupero advised the LDCs, would be to work together with the developed countries towards a uniform duration of the schemes; a harmonization of criteria for country graduation; agreed phase-out programmes to eliminate all the remaining exceptions to duty-free treatment; and ensuring that all LDCs enjoy the same treatment in all the schemes.” UNCTAD was ready to contribute to this technical work.

But the sustainable impact of trade provisions in favour of the LDCs will not come from duty-free access alone, or from the elimination of all non-tariff barriers and simplification of the rules of origin. Although market access problems are very real indeed, in many cases supply constraints and the lack of capacity to offer a diversified range of competitive goods and services are as decisive if not more so than obstacles to access.

“It would be misleading and excessive to expect a trade negotiating forum like the WTO to provide solutions for broadening and improving the supply capacity of the LDCs and of developing countries in general. Liberalization of trade is the core development issue that has to be dealt with at the WTO, by taking into account, as was previously stressed, the imbalances and differences in levels of development among its members. In this context, consideration could be given to adopting a “standstill” clause to avoid any new trade barrier while progress is being negotiated in the framework of the implementation review, the ongoing built-in agenda or future negotiations at the WTO. “

Given the threats posed to the multilateral trading system by a renewed protectionism, it is urgent to defend and consolidate the liberalization that has already been achieved, particularly in three areas: (1) progress on those market access obstacles that must still be removed, particularly in agriculture, textiles and the sensitive products where all developing countries have specific interests; (2) adequate and differential implementation of the existing disciplines; and (3) exercising due restraint in the use of defence measures, such as antidumping, where LDC exports could be affected “when they are cumulated” with the exports of other countries in the calculation of dumping but where the LDCs are unable to defend their local industries against dumped or subsidized imports. One option could be to simplify the procedures for LDCs to invoke such defence instruments if and when necessary.

As a general principle, trade remedies should not be applied to LDC exports because that would have the effect of penalizing their very limited and fragile successes. It was important to review and increase the existing de minimis thresholds for activating investigations applicable under the Anti-Dumping, Subsidies and Safeguards Agreements. The EU’s initiative to forgo the use of AD measures in relation to LDCs was welcome and should be adopted by other developed countries.

Underscoring the need for capacity-building measures, similar to the issue of LDC supply capacity, the UNCTAD head said, “the content of the trade negotiations should be seen in parallel with complementary actions in the area of capacity-building that go beyond the sphere of the trade disciplines,” entailing multi-institutional efforts, such as that initiated under the Integrated Framework, and for multifaceted capacity-building actions, taking account of all the aspects that need to be encompassed in order to make the benefits of trade liberalization effective, for e.g., strengthening technical assistance for the implementation of trade obligations, strengthening the negotiating capacity of the developing countries and, their capacity to defend the rights provided for by the trade disciplines.

Ricupero said he had extensively on the UK White Paper and Clare Short’s speech because I know of no other texts originating in a developed country that captured so well, and with such fairness, many of the elements fundamental to making the trading system work for development. On many of the specific issues he saw no reason to alter the documents’ formulation, as it would be hard if not impossible to improve upon their language. On other aspects, he had attempted to offer some opinions or technical inputs.

“They constitute a modest but I hope useful contribution to what remains basically a question that only you can properly address. Others may help, but ultimately it is for the developing countries themselves, and the LDCs in particular, to define what would be necessary from your perspective for a round of trade negotiations to be described as a truly genuine ‘Development Round’, including what they would like to see decided during the preparatory process or in the Doha deliberations: how, when and where to deal with accession and the identified implementation rules; the positive measures of one nature or another that could be taken immediately in order to create good will, promote confidence-building and generate a favourable climate.“

On all these fronts, work is in progress, and I suppose that you will wish to follow developments in Geneva leading to the “reality check” of late July and beyond.

On the procedural or tactical aspects as, much more than the substantive questions, they very much depend on judgements, evaluations, constraints and aspirations of specific countries faced with specific situations. The only advice he would give was “that all options should be examined from a cost-benefit perspective, with a spirit of responsibility that seriously considers what the possible and realistic alternatives are to the path which one might prefer at first glance.” – SUNS4944

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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