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TWN
Info Service on UN Sustainable Development (May20/04) Geneva, 12 May (D. Ravi Kanth) – The World Trade Organization, in a report released on 8 May, has highlighted the “trade impacts of LDC (least-developed country) graduation” based on the existing commitments in the WTO rule-book. The WTO secretariat’s new report, posted on the WTO website, comes amidst the COVID-19 pandemic, with “far-reaching implications for all countries, especially the most vulnerable,” but based on pre-pandemic data for these countries. The pandemic has already claimed more than 270,000 lives with over 4 million COVID-19 cases. The Sars-Cov- 2 virus, resulting in the COVID-19 pandemic, is yet to show any signs of slowing down. Even as countries are unable to assess what the new normal in the global trading system will be after the Covid- 19 pandemic is brought under control, the WTO secretariat has chosen to release a report that highlights the “expected impact” on LDCs following their graduation. In its report, titled “Trade Impacts of LDC Graduation,” the secretariat has argued that “the architecture of the international support measures for the LDCs, in particular, in the area of trade, can be expected to persist in the aftermath of COVID-19 pandemic.” However, developments after the Covid-19 pandemic suggest that there has been little support and inadequate assistance to the LDCs. The WTO’s report has admitted that international support measures “is vital to helping LDCs recover from the ongoing downturn and export volatility.” It says that the WTO secretariat is closely monitoring developments in LDCs and intends to undertake COVID- 19 impact analysis for graduating LDCs. The WTO secretariat could have waited until it had completed the COVID-19 impact analysis. However, in publishing the report now, it would appear to be subtly nudging graduation of LDCs based on pre-COVID-19 parameters, said trade envoys, who asked not to be quoted. In his foreword to the report, the WTO director-general Roberto Azevedo has acknowledged that “the release of this report comes amid the COVID-19 health crisis, which is threatening the lives and livelihoods of people around the world, and having an enormous impact on economies large and small.” Based on the figures released by the WTO economists in April about a steep fall in trade in 2020, Azevedo said “the economic dislocation threatens to reverse hard-won socioeconomic development gains in LDCs, and could potentially delay graduation for some countries.” He said that it is important to keep a close eye on the evolving situation in graduating LDCs, suggesting that “the analysis in this paper focuses on how graduation will affect LDCs’ trade relations, whether that graduation happens as planned or at a later date.” According to Azevedo, “one of the key findings of this study is that the graduating LDCs have diverse economic profiles, with marked differences in export structure, as well as in their utilization of – and reliance on – preferential market access.” He argues that “their (LDCs’) terms of entry into the WTO are similarly varied” and “graduation will thus affect different graduating LDCs differently.” Clearly, Azevedo knows that countries like Yemen, which completed their accession during his tenure, paid a huge price for acceding to the WTO. In fact, many LDCs took more onerous commitments than some of the developed countries, according to several studies. On top of the accession commitments, Azevedo has suggested that “nevertheless, for most of them (LDCs), the scope and the magnitude of the impact of graduation appears to be rather limited.” In the same vein, the WTO report says that “there are a few instances where preference erosion may affect existing export ties, or where the graduating government would need to take certain steps to comply fully with the WTO Agreements.” Azevedo has claimed that “the cause of graduating LDCs has received due attention from the international community, and governments at the United Nations and in other fora are exploring measures to assist graduating LDCs to ensure smooth transitions.” But, in reality, the LDCs have repeatedly argued in different international forums that they were not delivered the much-promised support by the international community, according to several reports and studies. While it is true that “the LDC Group in the WTO is pursuing proposals in relevant WTO bodies”, and “there are instruments and procedures available under WTO rules that offer graduating LDCs paths to engage with members and seek recourse should they face any difficulty in their participation in the WTO,” the actual outcomes from this engagement are few and far between, according to trade envoys, who asked not to be quoted. The DG said the LDCs will continue to receive technical assistance from the WTO Secretariat after graduation. In the new COVID-19 lingo where “solidarity” is constantly being chanted like a mantra, the DG has also said: “as graduating LDCs cross an important development milestone and begin to enter a more competitive environment, solidarity and partnership from the international community will be vital.” “Trade has significantly contributed to enabling the graduating LDCs to reach the development (or WTO’s onerous commitment) thresholds set for graduation, and we all have a shared responsibility to ensure that they sustain this growth momentum,” the DG said. The report, according to the authors, was prepared at the request of the group of least-developed countries at the WTO. LDC graduation, according to the report, is “an overarching objective of the international community” and “it is seen as an important milestone in the development path of each LDC.” Further, graduation “demonstrates strong performance in key macroeconomic indicators and broad-based social developments.” However, “the phasing-out of benefits associated with the LDC status could present challenges for graduating LDC governments to integrate into [the] global economy,” the report argued. According to the report, “at present 12 LDCs are at different stages of their path to graduation from LDC status.” Five LDCs are recommended to graduate over the next five years. They include Vanuatu in 2020, Angola in 2021, Bhutan in 2023, Sao Tome and Principe, and Solomon Islands in 2024. Three countries – Bangladesh, the Lao People’s Democratic Republic (Lao PDR) and Myanmar – met the graduation criteria for the first time in 2018 and are envisaged to graduate in 2024, the report has suggested. The other LDCs on the graduation path are Kiribati, Nepal, Timor-Leste and Tuvalu. According to the report, the decision regarding graduation from LDC status is taken by members at the UN at the recommendation of the Committee for Development Policy, an advisory body of the United Nations Economic and Social Council (ECOSOC). The report says that seven of the graduating LDCs are WTO members, and three are in the process of accession to the WTO. Angola, Bangladesh, Myanmar and Solomon Islands represent the original LDC members (they joined in 1995). According to the report, “Lao PDR, Nepal and Vanuatu are among the group of recently acceded members that underwent the accession process under Article XII of the Marrakesh Agreement Establishing the WTO and undertook higher levels of commitments than the original LDC members.” The report says that “trade is one of the key areas where LDCs enjoy exclusive preferences, both in the context of market access as well as in the implementation of WTO rules and disciplines.” Due to graduation from the LDC category, they are bound to lose “special treatment.” The report notes that “the impact of graduation will be different for each graduating LDC, both in scope and in magnitude – be it participation in the WTO, market access opportunities or development cooperation.” According to the report, “Bangladesh stands out among all graduating LDCs as the largest economy and exporter, and as the graduating LDC that is likely to confront more challenges than others.” Close on the heels of the recent proposal from the United States that sought differentiation/graduation for availing special and differential treatment among developing countries, the WTO report has also suggested that the “disparity among graduating LDCs suggests that support should be tailored to the needs and development strategy of each country.” Among the LDC graduation and matters related to WTO agreements, the report notes that “the main trade-related challenges in LDC graduation may stem from a loss of preferences and reduced flexibility in the implementation of WTO rules.” According to the report, “the multilateral trade agreements (MTAs) governed by WTO contain several types of special and differential treatment (S&DT) provisions for LDCs, which are over and above the flexibilities accorded to developing countries, such as market access, transition periods, and exemptions from certain rules.” Further, “since the establishment of the WTO in 1995, WTO members have taken important decisions to facilitate market access for both goods and services originating in LDCs (i.e. decisions on duty-free and quota-free market access, decisions on preferential rules of origin for LDCs, and decisions on LDC Services Waiver and its operationalization.” According to the report, “graduation does not result in changes to the level of concessions and commitments made by the graduating LDCs.” The report argues that “the transition periods enjoyed by the LDCs to delay the implementation of the TRIPS Agreement have been a defining feature of LDC flexibility in the WTO.” At present, LDCs benefit from a general transition period (until 1 July 2021) as well as a transition period for patents and undisclosed information for pharmaceutical products (until 1 January 2033). The report notes that the “graduated LDCs would not be covered by these decisions, which expressly provide for the transition period to end earlier in the event of such members ceasing to be LDCs, though general WTO processes would allow graduated LDC members to seek a waiver of certain obligations. Most LDC members have at least some intellectual property (IP) laws in place or are covered by regional IP regimes.” Also, “loss of preferences under LDC schemes of developed and developing country members has been one of the concerns of graduating LDCs, though the impact on market access for a large majority of graduating LDCs is rather limited.” In short, it appears odd and somewhat untimely for the WTO secretariat to issue a report on graduation for LDCs, as they continue to be wrecked by the COVID-19 heath crisis and the resultant depression on the economic front.
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