UNCTAD Plan of Action provides critique of WTO agreements

The Plan of Action which was adopted by UNCTAD at Bangkok highlights asymmetries and imbalances in the multilateral trading system under the World Trade Organisation. In calling for the elimination of these inequities, the Plan sets forth some proposals for redressing the grievances of the South.

by Chakravarthi Raghavan

THE World Trade Organisation (WTO) trading system has asymmetries and imbalances against the developing world, and has made 'latecomers' face more stringent policy conditions for industrialisation and development, while the remaining trade barriers have a negative impact on developing countries.

In making this assessment, using some oblique and guarded language, the Plan of Action adopted by consensus on 19 February by the tenth session of the UN Conference on Trade and Development (UNCTAD X) in Bangkok has in effect endorsed the negative view about the WTO system that is gaining increasing currency in the developing world - among governments, and even more among enterprises and civil society.

The document uses some guarded language in the suggestions and proposals for actions, and is weaker still in terms of actual proposals for actions, including on market access for least developed countries (LDCs).

At a press conference at the close of UNCTAD X, the Secretary-General of UNCTAD, Rubens Ricupero, said the document was a compromise among all countries and showed 'the limits of what is possible to put on paper at this moment in Bangkok.'

Indeed, the secretariat's own proposals call for the industrialised countries to provide duty-free and quota-free access to LDC exports into their markets and to bind this in the WTO, as well as for modifying the rules of origin, which are now more of an obstacle than tariffs, he added.

Problems of imbalances and asymmetries perceived by developing countries in the implementation of the WTO agreements, including those due to human, institutional and financial constraints, need to be addressed urgently to ensure that the multilateral trading system results in mutual benefits for all, UNCTAD X says in the Plan of Action.

Reduced policy options

Although developing countries need policy flexibility to support and promote their enterprises, investments in production and marketing, and export expansion and diversification, 'latecomers now face more stringent policy conditions than those which prevailed previously.' The multilateral framework of WTO rules, while contributing to a stable and predictable environment, has in certain cases narrowed the range of policy options for governments, while the commitments undertaken under IMF/World Bank structural adjustment programmes have further reduced the remaining policy options.

Trade policies and trade liberalisation should be made more consistent with overall development objectives, and ways and means need to be sought in developing countries to ensure that trade makes a more decisive contribution to alleviating poverty. Further attention, including monitoring of the developmental impact of multilateral trade agreements, is required on the role of trade for stimulating economic growth, distribution of growth effects, and sectoral policies for agriculture and tourism, and in the longer term for diversification into industry and advanced services.

'There is a similar need for improved policy coherence in developed countries both domestically and internationally, in particular between sectoral, tax and fiscal policies on the one hand and the objectives of their own development policies on the other; and between their own policy conduct and the policy advice extended to developing countries in the context of technical assistance.

'A reduction in tariff levels and a simplification of tariff structures would help raise developing-country exports. Subsidies can affect the relative competitive positions of countries and have a distorting effect on developing countries. Developed countries should consider the effects of their fiscal policy choices on the needs of developing countries. In addition, unilateral measures, including measures with extra-territorial effects, risk having a negative effect on efforts to move towards a truly non-discriminatory and open trading system.'

Conditions for effective implementation

There is a need to ensure conditions necessary for effective implementation of the WTO agreements, particularly in developing countries which consider the existing transition periods (for compliance therewith) have not always been sufficient. 'Any new agreement reached should consider adequate provisions for assistance to the developing countries to enable them to establish the necessary infrastructure and other conditions necessary for the effective implementation of the agreements and to ensure that countries benefit from the opportunities offered by these agreements.'

'It is clear,' says the Plan of Action, 'that while the rules-based system seeks to establish a level playing field, remaining trade barriers have a negative impact, including on developing countries.

'Whilst trade barriers in the main markets are now generally low for most trade of developed countries, there is a lack of equal opportunities for developing countries' exports in the present system.

'Thus, a number of export products of particular interest to developing countries such as textiles are often subject to high import barriers, including non-tariff barriers. Unlike the industrial sector of trade in goods, the multilateral trade rules relating to agriculture permit the payment of large transfers to agricultural producers in some countries.

'This support for agricultural production and exports in developed countries can have significant distorting effects, particularly on developing countries. And high protection for the domestic food industry in some developed countries hampers diversification and value-added production in developing countries.

'WTO rules are stringent with respect to subsidies primarily used by developing countries. Also, anti-dumping measures and countervailing duties are used by many countries in sectors where exporters from developing countries are competitive.

'Finally, there is asymmetry between liberalisation of trade in goods and services on the one hand and labour-intensive services on the other, which particularly affects developing countries.'

The document calls for more focused financial and technical assistance to address problems of food security in net food-importing developing countries, and adoption of concrete measures to ensure implementation of the Marrakesh Ministerial decision on the negative effects of the agricultural reform programme on the LDCs and net food-importing countries. Non-trade concerns such as food security, as well as special and differential treatment for developing countries, should be taken into account in all relevant bodies and organisations.

Another issue requiring attention relates to the fact that many developing countries face problems when trying to diversify into higher value-added and manufactured exports with more dynamic demand prospects. Barriers to entry in sectors where developing countries should have the best chance of exporting, such as textiles, clothing and the food industry, need to be addressed.

Market access conditions for agricultural and industrial products of export interest to LDCs should be improved on as broad and liberal a basis as possible, and urgent consideration should be given to the proposal for a possible commitment by developed countries to granting duty-free and quota-free market access for essentially all exports originating in LDCs and other proposals to maximise market access for LDCs. Consideration should also be given to proposals for developing countries to contribute to improved market access for LDCs' exports.

'All those countries that announced market access commitments at the High-level Meeting on Integrated Initiatives for LDCs' Trade Development in October 1997 are invited to implement these commitments fully and expeditiously,' the document adds.

As many developing countries, including a considerable number of LDCs, are not members of the WTO, their accession process should be facilitated and based on terms that take into account their stage of development and basic principles of special and differential treatment (SDT).

Special and differential treatment

The basic principles of SDT for developing countries are fully recognised and established in various decisions of the UN General Assembly, UNCTAD and the WTO.

Modernisation and operationalisation of SDT, in terms of maintaining and expanding export opportunities for developing countries, may be needed to adapt it to changing international trading conditions and to make SDT a better instrument for development, enabling developing countries, in particular LDCs, to gradually integrate into the multilateral trading system.

'Developing countries should be enabled to make full use of the SDT provisions,' the Plan of Action says.

'Widening gaps between developing-country export performance and international competitiveness call for stronger emphasis on direct policy action in respect of structural production and investment conditions and reinforced international support.

'Price and preferential incentives alone have not brought about a broad turnaround where the production basis was not sufficiently developed to expand exports. Nor have they been sufficient in such cases to attract large-scale foreign investment.

'Attention could be given to a supply-side emphasis for such treatment, providing space in the multilateral trade disciplines for appropriate development policies essential for the development of a competitive supply capacity. SDT in WTO agreements, such as the Agreement on Subsidies and Countervailing Measures, needs consideration in order to better reflect the needs of developing countries.'

The document also calls for implementation, in full and as a matter of priority, of the special and differential measures in favour of LDCs, as contained in the Final Act of the Uruguay Round, especially the Marrakesh Declaration and Ministerial decisions. And new measures for LDCs should also be considered.

New trading opportunities created by improved market access to developed countries within regional or multilateral agreements need to be complemented by operational programmes, technical assistance and development financing. Such measures would make preferential market access more effective.


Stressing the importance of the commodity sector for many developing countries, and agriculture's role as a buffer against economic problems as in the current crisis, the Plan of Action notes that commodity-based diversification offers a major opportunity for change in line with existing comparative advantages.

However, adds the document, actual developments in the commodity sector have lived up to such expectations only in a few countries. Dependence on few commodities has remained high in many developing countries. Tariff escalation has been a major barrier to commodity processing in developing countries. 'Rather than diversification of commodity patterns of trade, in several countries concentration has increased over the past decade. Only a few countries have made tangible progress in diversification, primarily based on agro-business.'

Commodity price instability has remained extremely high, with declining trends for a number of commodities. Wider use of risk management in commodities (a World Bank-proposed remedy) should be evaluated with regard to the usefulness for small producers in many developing countries.

The document also notes that the IMF commodity stabilisation facility has remained unutilised for the past decade, failing to point out though that this non-use relates to the IMF conditionalities.

The high levels of investment in and substantial rationalisation of the commodity sector in many developing countries have resulted mainly in productivity increases benefitting world markets, but only to a small extent in benefits for producers.

The document also notes that many developing countries continue to experience difficulties with sanitary and phytosanitary standards set in their export markets. The dynamism of niche products in the agricultural sector has also faded away after initial success, because of restricted import periods or the application of anti-dumping and countervailing duties.

The existing mechanisms for helping to stabilise commodity export earnings should be improved to meet the real concerns of developing- country producers. The document also calls for measures to enhance the competitiveness of developing countries in international commodity markets, improvement of market transparency and information, and capacities of developing-country exporters to access and use information, particularly in electronic form.

Anti-competitive practices

The liberalisation of trade and investment, inside and outside the WTO, the document notes, has accelerated globalisation and, together with technological progress, has enabled transnational corporations (TNCs) to pursue worldwide strategies. Many TNCs now focus on the entire world market and seek to achieve leading world market positions in their core business through mergers, acquisitions, strategic alliances, investment or trade.

And while dominant market positions are not anti-competitive in themselves, practices employed by companies enjoying such positions can limit international competition and market entry.

'In this situation, some developing countries find it difficult to establish and enforce national competition rules to safeguard market forces and free market entry.'

To enable countries to better address and discipline anti-competitive practices, it is essential for countries with national competition rules to back them up with appropriate systems of enforcement.

In terms of UNCTAD's engagement in the area of international trade, the Plan of Action says that the main objective should continue to be to assist developing countries to integrate themselves more fully into, and derive benefits from, the international trading system. The focus of UNCTAD's work should aim at policy analysis and consensus-building to identify more clearly the parameters of the development dimensions of the multilateral trading system.

Another objective should be to support capacity-building in developing countries so as to enable them to become effective players in the multilateral trading system in terms of deriving full benefits from trade liberalization, enjoying their multilateral rights and complying with obligations.

'UNCTAD should also identify, on the basis of research and empirical evidence, and with development impact assessment, what the implications are of existing and emerging multilateral trade rules for the development prospects of developing countries.'

Another area identified for UNCTAD is facilitating the setting out of a positive agenda for developing countries in future trade negotiations, including in identifying which international trade policy tools are more supportive of development efforts in a globalised world.

In the area of market access, UNCTAD's work should relate to analysis and contribute to consensus-building on:

* reducing tariff and non-tariff barriers in export sectors of interest to developing countries, particularly in developed-country markets;

* maintaining and further improving the level of tariff-free or reduced-tariff access to markets through national Generalised System of Preferences (GSP) schemes for all beneficiaries;

* maximising market access benefits for LDCs by developing countries granting duty-free and quota-free treatment for 'essentially all products' originating in LDCs, and contribution to this from other developing countries, combined with multilateral and bilateral programmes to upgrade LDC production and export capacities; and

* impact of anti-dumping and countervailing duty actions.

In the area of agriculture, UNCTAD should assist developing countries in multilateral negotiations, supporting this by analytical work and technical assistance on:

* ways and means to improve market access for their agricultural products;

* domestic support, including in the context of their efforts to increase productivity and food security; and

* export subsidies and other kinds of export support.

UNCTAD should also analyse the impact on all developing countries of the reform process, as foreseen in Article 20 of the WTO Agreement on Agriculture, with attention paid to concerns of LDCs and net food-importing developing countries.

In its analytical work, UNCTAD should also address the needs of small island developing economies. UNCTAD should further undertake analytical work on major agricultural concerns of developing countries.

In the area of trade in services, UNCTAD should help developing countries in identifying the priority sectors where early trade liberalisation should take place, the main trade barriers faced by developing countries in the services sectors, especially those limiting the ability of developing countries to export their services, and the pre-conditions, at the domestic level, necessary for developing countries to benefit from trade liberalisation in the services sector in general.

In the area of electronic commerce, UNCTAD should contribute to the understanding of proposals made at the international level. And the analytical work should be complemented by capacity-building activities aimed at enhancing the abilities of developed countries to benefit from electronic commerce and to participate actively in international discussions on this issue.

UNCTAD is also asked to provide analytical and technical support to developing countries on the built-in agenda and in other possible areas of negotiations, assist them in their positive agenda, support the capacity-building process, and provide a forum for exchange of views and information.

UNCTAD should also provide assistance to countries acceding to the WTO in order to contribute to their early accession and to universalisation of the multilateral trading system.

In terms of regional integration and the multilateral trading system, UNCTAD's work is to include analysing and identifying options available to particular economic groupings and simulation of effects of regional trade agreements on development of developing countries and on trade flows, taking into account the relationship of regional arrangements and groupings with the multilateral trading system.

UNCTAD should help developing countries in analysing and devising most appropriate mechanisms in the light of WTO rules for identifying new strategies at the regional level to enhance the competitiveness of developing countries including in agreements with developed countries, and to improve their capacity to promote their trade interests in global negotiations; achieving a high level of tariff-dismantling within regional groupings; increasing market access prospects for their goods and services inside and outside the regional groupings; and developing favourable rules of origin.

Other areas identified for further UNCTAD work include on special and differential treatment and ways of linking SDT provisions to economic and development criteria, competition issues including examination of issues relating to competition law and policy of particular relevance to development, and the relationship between competition, competitiveness and trade-related aspects of competition.

The above article first appeared in the South-North Development Monitor (SUNS - issue no. 4613).