TRADE AND TRADE AND

DEVELOPMENT DEVELOPMENT

National Seminar on the WTO National Seminar on the WTO and the DDAand the DDA

Raúl Torres, Development DivisionRaúl Torres, Development Division

Elements in the moduleElements in the module

Trade and DevelopmentTrade and Development– Why is trade important for Why is trade important for

development?development?– Challenges and how to meet themChallenges and how to meet them

Work Programme on Small Work Programme on Small EconomiesEconomies

Special and differential treatmentSpecial and differential treatment– Historical evolution and current state of Historical evolution and current state of

the negotiationsthe negotiations

What do we know about trade?What do we know about trade?

Trade can be a powerful source of growth & Trade can be a powerful source of growth & development;development;

Trade can expand markets, facilitate competition Trade can expand markets, facilitate competition and disseminate knowledge, raise productivity and disseminate knowledge, raise productivity and facilitate assimilation and exposure to new and facilitate assimilation and exposure to new technologiestechnologies

No country has developed by turning its back on No country has developed by turning its back on trade and long-term capital flows;trade and long-term capital flows;

At the same time trade liberalization will not At the same time trade liberalization will not automatically lead to growth and development;automatically lead to growth and development;

GATT OBJECTIVESGATT OBJECTIVES

Raising standards of livingRaising standards of living Ensuring full employmentEnsuring full employment Ensuring large & steadily growing Ensuring large & steadily growing

volume of income & effective volume of income & effective demanddemand

Developing full use of global Developing full use of global resourcesresources

Expanding production and trade in Expanding production and trade in goodsgoods

The Uruguay RoundThe Uruguay Round

Basic principles were to provide certainty and predictability Basic principles were to provide certainty and predictability

in global tradein global trade

Development becomes an important subject with S&D Development becomes an important subject with S&D

provisions in almost all areasprovisions in almost all areas

Recognition that trade must lead to developmentRecognition that trade must lead to development

Sustainable development introduced as primary objective Sustainable development introduced as primary objective

Equity is also reflected in the consensus and the one Equity is also reflected in the consensus and the one

Member one vote principleMember one vote principle

Marrakesh Agreement-PreambleMarrakesh Agreement-Preamble

Recognized ”... need for positive Recognized ”... need for positive efforts designed to ensure that efforts designed to ensure that developing countries, and especially developing countries, and especially the least developed among them, the least developed among them, secure a share in growth in secure a share in growth in international trade commensurate international trade commensurate with the needs of their economic with the needs of their economic development”. development”.

Trade and DevelopmentTrade and Development

What is development?What is development?– Economic or social?Economic or social?– Is development part of the scope of the Is development part of the scope of the

WTO?WTO?– Is the WTO a developmental agency?Is the WTO a developmental agency?– Who is a developing country?Who is a developing country?

Complex Nature of the Nexus Complex Nature of the Nexus between Trade and Developmentbetween Trade and Development

The relationship between trade and development The relationship between trade and development is complex and largely dependent on both is complex and largely dependent on both internal and external factors;internal and external factors;

The causal link between different influencing The causal link between different influencing factors is not clear;factors is not clear;

Complexity of the issue is compounded by Complexity of the issue is compounded by peculiar features of developing countries peculiar features of developing countries economies;economies;

Trade liberalization alone may not lead to growth Trade liberalization alone may not lead to growth and development.and development.

How To Make Trade Work For DevelopmentHow To Make Trade Work For Development

How to overcome these constraints?How to overcome these constraints?

How to help developing countries maximise How to help developing countries maximise

the benefits from the multilateral trading the benefits from the multilateral trading

system?system?

3 areas to explore:3 areas to explore: Institutional IssuesInstitutional Issues

Issues to be addressed by the Trading PartnersIssues to be addressed by the Trading Partners

Domestic IssuesDomestic Issues

Institutional IssuesInstitutional Issues

Objective:Objective: --Favourable international environment that Favourable international environment that

facilitates trade and leads to development;facilitates trade and leads to development;

-Key ingredients; predictability & certainty; but-Key ingredients; predictability & certainty; but -Must also ensure a favourable & equitable -Must also ensure a favourable & equitable

outcome;outcome;

-One that takes into account the concerns and -One that takes into account the concerns and constraints of developing countries.constraints of developing countries.

Institutional IssuesInstitutional Issues

How can this be ensured: How can this be ensured:

Full participation ( physical & proactive)Full participation ( physical & proactive)

Transparent and inclusive decision making Transparent and inclusive decision making

processprocess

Appropriate and effective S&D treatment Appropriate and effective S&D treatment

provisionsprovisions

Technical Assistance & Dom. Policy SpaceTechnical Assistance & Dom. Policy Space

What can be done by trading partnersWhat can be done by trading partners

Respect principle of non-reciprocityRespect principle of non-reciprocity

Convert assurances into actual trade Convert assurances into actual trade opportunities & gainsopportunities & gains

Respect capacity constraints - refrain from Respect capacity constraints - refrain from overloading the agendaoverloading the agenda

Acknowledge differences amongst developing Acknowledge differences amongst developing countries – issue of domestic policy space countries – issue of domestic policy space flexibilityflexibility

Domestic IssuesDomestic Issues

Domestic policies that mainstream trade in to Domestic policies that mainstream trade in to development strategies are essential;development strategies are essential;

Strong institutional infrastructure; competent Strong institutional infrastructure; competent financial institutions; and transparent legal financial institutions; and transparent legal frameworkframework

Important to generate a ‘strong’ ownership of Important to generate a ‘strong’ ownership of national reform process; Possible only by national reform process; Possible only by maximizing gains from trade liberalizationmaximizing gains from trade liberalization

However, reforms need a strong and committed However, reforms need a strong and committed political leadershippolitical leadership

Domestic IssuesDomestic Issues

Supply side capacity

Strong administrative & organisational base;

Appropriate financial institutions; and

Transparent legal framework

All of which will require reforms in domestic All of which will require reforms in domestic

policiespolicies

SummarySummary

A development friendly and conducive A development friendly and conducive multilateral environment can lead to multilateral environment can lead to increased trading opportunities;increased trading opportunities;

For these opportunities to be converted For these opportunities to be converted into actual gains trading partners may into actual gains trading partners may have to look beyond mercantilist gains;have to look beyond mercantilist gains;

Even more importantly, the global Even more importantly, the global community would need to work together community would need to work together to help dc’s overcome supply-side to help dc’s overcome supply-side constraints and capacity buildingconstraints and capacity building

Summary Summary (continued)(continued)

For trade to lead to development the dc’s For trade to lead to development the dc’s would need to adopt matching domestic would need to adopt matching domestic policies;policies;

Institutional development and innovation Institutional development and innovation would be one of the more important would be one of the more important elements of such development strategies;elements of such development strategies;

Multilateral trade rules should, therefore, Multilateral trade rules should, therefore, provide flexibility and policy space to dc’s provide flexibility and policy space to dc’s to pursue appropriate development to pursue appropriate development priorities.priorities.

ConclusionsConclusions TradeTrade can lead to can lead to economic growtheconomic growth, provided there , provided there

is a conducive multilateral environment; is a conducive multilateral environment;

Multilateral trade rules should ideally provide Multilateral trade rules should ideally provide flexibility to countries to pursue appropriate flexibility to countries to pursue appropriate development priorities, development priorities,

In turn In turn economic growtheconomic growth can lead to can lead to developmentdevelopment, , provided countries adopt appropriate domestic provided countries adopt appropriate domestic policies and overcome supply side constraints;policies and overcome supply side constraints;

But But developmentdevelopment may not automatically lead to may not automatically lead to poverty alleviationpoverty alleviation – adoption of redistributive – adoption of redistributive policiespolicies

Developmental Issues Developmental Issues in the DDAin the DDA

The DDA mandateThe DDA mandate

Paragraphs 1,2 ,3 and 6Paragraphs 1,2 ,3 and 6– International trade can play a major role in the International trade can play a major role in the

promotion of economic development and the promotion of economic development and the alleviation of poverty. alleviation of poverty.

– The majority of WTO members are developing The majority of WTO members are developing countries. We seek to place their needs and countries. We seek to place their needs and interests at the heart of the Work Programme interests at the heart of the Work Programme adopted in this Declaration. adopted in this Declaration.

– Enhanced market access, balanced rules, and Enhanced market access, balanced rules, and well targeted, sustainably financed technical well targeted, sustainably financed technical assistance and capacity-building programmes assistance and capacity-building programmes have important roles to play. have important roles to play.

Small EconomiesSmall Economies

CTD – Dedicated SessionCTD – Dedicated Session

CTD – Dedicated Session on Small CTD – Dedicated Session on Small EconomiesEconomies– Para. 35 Doha MD mandatePara. 35 Doha MD mandate– HK MD Para. 41HK MD Para. 41

Proposals in CTDProposals in CTD– Decision on regional bodies for TBT,SPS and TRIPS Decision on regional bodies for TBT,SPS and TRIPS

Monitoring proposals in other bodiesMonitoring proposals in other bodies

SVEs Doha Mandate SVEs Doha Mandate

““We agree to a work programme, under We agree to a work programme, under the auspices of the General Council, to the auspices of the General Council, to examine issues relating to the trade of examine issues relating to the trade of small economies.small economies.

The objective of this work is to frame The objective of this work is to frame responses to the trade-related issues responses to the trade-related issues identified for the fuller integration of identified for the fuller integration of small, vulnerable economies into the small, vulnerable economies into the multilateral trading system, multilateral trading system, and not to and not to create a sub-category of WTO Memberscreate a sub-category of WTO Members

Who are the SVE proponents?Who are the SVE proponents?

Antigua and Barbuda, Barbados, Belize, Antigua and Barbuda, Barbados, Belize, Dominica, Fiji, Haiti, Jamaica, Mauritius Dominica, Fiji, Haiti, Jamaica, Mauritius Papua New Guinea, Solomon Islands, Sri Papua New Guinea, Solomon Islands, Sri Lanka, St. Kitts and Nevis, St. Vincent Lanka, St. Kitts and Nevis, St. Vincent and the Grenadines, Trinidad and and the Grenadines, Trinidad and TobagoTobago

Bolivia, Mongolia, ParaguayBolivia, Mongolia, Paraguay Cuba, Dominican Republic, Guatemala, Cuba, Dominican Republic, Guatemala,

Honduras, Nicaragua, El Salvador Honduras, Nicaragua, El Salvador

Characteristics and problemsCharacteristics and problems

1.1. Physical isolation, geographical dispersal Physical isolation, geographical dispersal and distance from the main markets. and distance from the main markets.

2.2. Minimal share of total world trade.Minimal share of total world trade.3.3. Small, fragmented and highly imperfect Small, fragmented and highly imperfect

markets. markets. 4.4. In general, very open economies. In general, very open economies. 5.5. Domestic markets with imperfect and Domestic markets with imperfect and

highly polarized structures. highly polarized structures. 6.6. Minimal or no export diversification. Minimal or no export diversification.

7.7. Low supply of export services. Low supply of export services. 8.8. Dependent upon very few export Dependent upon very few export

markets. markets. 9.9. Inadequate Infrastructure.Inadequate Infrastructure.10.10. High degree of vulnerability. High degree of vulnerability. 11.11. Low competitiveness. Low competitiveness. 12.12. Low levels of productivity and Low levels of productivity and

insufficient supply. insufficient supply.

13.13. Economic rigidity with high adjustment Economic rigidity with high adjustment costs. costs.

14.14. Unable to sustain diversified Unable to sustain diversified productions. productions.

15.15. Considerable difficulties to attract Considerable difficulties to attract foreign investment. foreign investment.

16.16. Lack of adequate market access Lack of adequate market access opportunities to place their few export opportunities to place their few export products. products.

17.17. High transport and transit costs. High transport and transit costs.

The two-track process The two-track process

Proposals in the CTD-DSProposals in the CTD-DS– Regional bodies for TBT, SPS + TRIPS Regional bodies for TBT, SPS + TRIPS

WT/COMTD/SE/W/15-16 and 18 (Revs.1)WT/COMTD/SE/W/15-16 and 18 (Revs.1) – Recommendation adopted by CTD Recommendation adopted by CTD

WT/COMTD/SE/5WT/COMTD/SE/5– Approved by General Council in October Approved by General Council in October

20062006– Other D’g countries can also use the Other D’g countries can also use the

same mechanismsame mechanism

Monitoring SE proposals in the Monitoring SE proposals in the negotiating bodiesnegotiating bodies

Document WT/COMTD/SE/W/22/Rev.1 Document WT/COMTD/SE/W/22/Rev.1 to serve as basis.to serve as basis.

W/22/Rev.1 is a compilation prepared W/22/Rev.1 is a compilation prepared by the Secretariatby the Secretariat

Includes proposals and latest draft Includes proposals and latest draft modalitiesmodalities

SE proposals in the negotiating SE proposals in the negotiating bodiesbodies

AgricultureAgriculture NAMA NAMA Rules (fisheries subsidies)Rules (fisheries subsidies) ServicesServices Services Domestic regulation Services Domestic regulation

Subsidies – G/SCM/W/535Subsidies – G/SCM/W/535

Decision on SCMA Art. 27.4 Decision on SCMA Art. 27.4 extensionsextensions

Adopted by GC in G/L/679Adopted by GC in G/L/679 Extension of the transition periods for Extension of the transition periods for

certain export subsidies of some small certain export subsidies of some small d’g countriesd’g countries

Not all are in the SVE groupNot all are in the SVE group May grant subsidies until 2015May grant subsidies until 2015 Some conditions: notifications, action Some conditions: notifications, action

plan, stand still, mid-term reviewplan, stand still, mid-term review Commitment that this is last requestCommitment that this is last request Some Annex VII(b) countries reserved Some Annex VII(b) countries reserved

rights in case of graduation rights in case of graduation

CTD – Special SessionCTD – Special Session

S+D negotiationsS+D negotiations– Para 44 of Doha MD mandatePara 44 of Doha MD mandate– Different ChairDifferent Chair– Reports to the TNCReports to the TNC

Special and Differential Special and Differential TreatmentTreatment

Introduction Introduction

GATT established in 1947 ( 23 CPs)GATT established in 1947 ( 23 CPs)

No formal recognition of any difference between No formal recognition of any difference between the CP’s.the CP’s.

Fundamental principle of GATT was that all Fundamental principle of GATT was that all rights and obligations should be applied rights and obligations should be applied uniformly.uniformly.

Even though 11 out of the original 23 CP’s Even though 11 out of the original 23 CP’s would today be classified as developing would today be classified as developing countries, they participated as equal partnerscountries, they participated as equal partners

GATT Review Session, 1954-55GATT Review Session, 1954-55 First occasion First occasion whenwhen provisions were adopted to address provisions were adopted to address

the needs of developing countriesthe needs of developing countries,, as a group within GATT. as a group within GATT. Permitted dc’s to derogate from their scheduled tariff Permitted dc’s to derogate from their scheduled tariff

commitmentscommitments, and included, and included

– Article XVIII(B), to allow countries at an Article XVIII(B), to allow countries at an ‘‘early stage ofearly stage of

developmentdevelopment’’ to use QR’s for BoP purposes. to use QR’s for BoP purposes.

– Article XVIII(C), to allow countries that could only support Article XVIII(C), to allow countries that could only support

‘‘low levels of living standardslow levels of living standards’’ to impose trade to impose trade

restrictions to support infant industriesrestrictions to support infant industries

Introduction of Part IV - 1964Introduction of Part IV - 1964

Basic objective : dBasic objective : dc’sc’s should not be expected to take should not be expected to take on obligations inconsistent with their levels of on obligations inconsistent with their levels of development (development (Non-ReciprocityNon-Reciprocity))

In 1964 the GATT adopted a specific legal framework In 1964 the GATT adopted a specific legal framework to address to address the concerns of developing countries.the concerns of developing countries.

Three new Articles, XXXVI to XXXVIII were introduced Three new Articles, XXXVI to XXXVIII were introduced in Part IV of GATT dealing specifically with Trade and in Part IV of GATT dealing specifically with Trade and Development. Development.

What did Part IV provide?What did Part IV provide?

The measures introduced includedThe measures introduced included provision ofprovision of more favourable market access more favourable market access

conditions to products of export interest to dc’sconditions to products of export interest to dc’s

introduction of the concept of non-reciprocityintroduction of the concept of non-reciprocity; ;

elimination of restrictions which differentiate elimination of restrictions which differentiate unreasonably between primary and processed unreasonably between primary and processed productsproducts

establishment of the CTD to review the application establishment of the CTD to review the application of Part IV and to of Part IV and to consider any changes to these consider any changes to these provisions to strengthen the objectives of trade provisions to strengthen the objectives of trade & & development.development.

The Tokyo Round–1973-79The Tokyo Round–1973-79

The main focus continued to be tariff reductions The main focus continued to be tariff reductions

However, many products of export interest to However, many products of export interest to dc’s were either exempted from reduction cuts dc’s were either exempted from reduction cuts or were subject to lower reductions or were subject to lower reductions

First time an attempt to address NTBs.First time an attempt to address NTBs.

Still limited participation of dc’sStill limited participation of dc’s; ; developed developed countries often negotiated exceptions amongst countries often negotiated exceptions amongst themselves.themselves.

The Enabling Clause - 1979The Enabling Clause - 1979 Enabling Clause introduced during the Tokyo Enabling Clause introduced during the Tokyo

RoundRound

Preferential treatment by developed countries Preferential treatment by developed countries for goods originating from dc’s in the for goods originating from dc’s in the

flexibility in the formation of RTA’s between flexibility in the formation of RTA’s between dc’s;dc’s;

Preferential treatment for dc’s in other GATT Preferential treatment for dc’s in other GATT rules dealing with non-tariff barriers; rules dealing with non-tariff barriers;

special treatment to LDCs in the context of special treatment to LDCs in the context of specific measures for developing countriesspecific measures for developing countries

S&D Treatment in the UR S&D Treatment in the UR CertainCertain basic underlying conceptual premises related basic underlying conceptual premises related

to S&D treatment emerged during the URto S&D treatment emerged during the UR, namely , namely thatthat

dc’s were intrinsically disadvantaged in their dc’s were intrinsically disadvantaged in their participation in international tradeparticipation in international trade; ;

trade policies that maximised sustainable trade policies that maximised sustainable development in dc’s were not the same as those in development in dc’s were not the same as those in developed economies;developed economies;

any multilateral agreement needed to take any multilateral agreement needed to take account of these weaknesses & differences when account of these weaknesses & differences when specifying rights and obligationsspecifying rights and obligations

S&D Treatment in the URS&D Treatment in the UR These underlying conceptual premises These underlying conceptual premises

resulted in S&D provisions in 6 groupsresulted in S&D provisions in 6 groups

a)a) provisions aimed at increasing trade provisions aimed at increasing trade opportunities opportunities

b)b) provisions which call upon WTO Members to provisions which call upon WTO Members to safeguard the interest of dc’s safeguard the interest of dc’s

c)c) provisions offering flexibility of commitments provisions offering flexibility of commitments

d)d) transitional time periods transitional time periods

e)e) provisions related to technical assistance provisions related to technical assistance

f)f) provisions in favour of least developed provisions in favour of least developed countries countries

Concerns withConcerns with S&DS&D

AAfter a few years dc’s felt that in many cases most of fter a few years dc’s felt that in many cases most of the S&D provisions were: the S&D provisions were:

non-bindingnon-binding

‘‘best endeavour clauses’best endeavour clauses’

apparently mandatory, yet de-facto non-apparently mandatory, yet de-facto non-bindingbinding

only a few provisions were mandatory and binding only a few provisions were mandatory and binding provisionsprovisions

Doha Ministerial DeclarationDoha Ministerial Declaration

Ministers at Doha, recognizing that problems Ministers at Doha, recognizing that problems existed with respect to S&D treatment set out a existed with respect to S&D treatment set out a work programme in para 44 of the Declaration, work programme in para 44 of the Declaration, whichwhich

– reaffirmed that S&D is an integral part of the WTOreaffirmed that S&D is an integral part of the WTO

– noted that there are concerns about the noted that there are concerns about the implementation of S&D provisionsimplementation of S&D provisions

– directed that all S&D provisions should be directed that all S&D provisions should be reviewed to reviewed to strengthen them and to make them strengthen them and to make them moremore precise, precise, effective and operational,effective and operational, and and

– linked this work to the Decision on Implementation linked this work to the Decision on Implementation related issues and concernsrelated issues and concerns

S&D Work ProgrammeS&D Work Programme A very large number (finally 88) Agreement A very large number (finally 88) Agreement

specific proposals were submitted by dc’s, specific proposals were submitted by dc’s, primarily by the African Group and the LDC’s.primarily by the African Group and the LDC’s.

Developed countries also made submissions Developed countries also made submissions and raised a number of systemic issues and raised a number of systemic issues including those related to principles and including those related to principles and objectives of S&D, definition, utilisation, objectives of S&D, definition, utilisation, graduation, universal vs. differentiated graduation, universal vs. differentiated treatment.treatment.

In its report to the General Council, initially in In its report to the General Council, initially in July’02, and then in December’02, the CTD (SS) July’02, and then in December’02, the CTD (SS) could only agree on 4 proposals. CTD sought could only agree on 4 proposals. CTD sought guidance from GC.guidance from GC.

What happened at Hong KongWhat happened at Hong Kong Annex F on measures in favor of LDCs was Annex F on measures in favor of LDCs was

the most important achievement in HKthe most important achievement in HK– Waivers: positive consideration and a decision Waivers: positive consideration and a decision

taken within 60 days, similar for waivers in taken within 60 days, similar for waivers in favor of LDCsfavor of LDCs

– DFQF: Duty free quota free access (97%) DFQF: Duty free quota free access (97%) to markets of developed and d’g to markets of developed and d’g countries in a position to do socountries in a position to do so

– No conditionalities on loans, grants and official No conditionalities on loans, grants and official development assistance that are inconsistent development assistance that are inconsistent with WTO Agreements with WTO Agreements

– TRIMS: Maintain 1 measure for 7 years, new TRIMS: Maintain 1 measure for 7 years, new measures for 5 yearsmeasures for 5 years

– TA to implement the agreementTA to implement the agreement

Current StatusCurrent Status

Agreement specific proposalsAgreement specific proposals– 16 remain in CTD (8 Cat. I & 8 Cat. III)16 remain in CTD (8 Cat. I & 8 Cat. III)– 6 are being discussed, other 10 positions still 6 are being discussed, other 10 positions still

too far aparttoo far apart– Discussion on implementation of DFQFDiscussion on implementation of DFQF

Forum CTD regular or SS?Forum CTD regular or SS? Coverage and Rules of originCoverage and Rules of origin Self declaration of developing MembersSelf declaration of developing Members

– Cat. II proposals still in the negotiating bodiesCat. II proposals still in the negotiating bodies Cross-cutting issuesCross-cutting issues

– Being discussedBeing discussed– Monitoring mechanism for S+D provisionsMonitoring mechanism for S+D provisions

88Total no. of proposals

submitted in the Special Session 38

Proposals referred to other bodies

(Cat II)50

Proposals in the Special

Session(Cat I + Cat

III)

168 are from Cat I and 8 are from Cat

III.11 are by the African Group & 5 by

other dc

23Proposals

remaining in the Special

Session

8Remaining Category III

proposals (6 African Group & 2 other dc's)

8Remaining Category I Proposals(5 African Group & 3 other dc's)

27Agreed to in principle as part of pkg of 28

proposals

5LDC

proposals agreed to in

HK18Proposals remaining

with the Sp. Session

2Proposals

on the ATC