South Asia Watch on Trade, Economics & Environment (SAWTEE)

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Hong Kong Ministerial: Current negotiations and LDCs

The Doha Round of trade negotiations initiated after the Fourth World Trade Organisation (WTO) Ministerial in Doha in 2001 has not made progress on major issues. Therefore, the Sixth WTO Hong Kong Ministerial in December 2005 will be a milestone for the Doha Round, more so in the backdrop of the failure of the Fifth WTO Ministerial in Cancún in 2003.

The General Council (GC) meeting of the WTO on 27-29 July confirms the delay in reaching even preliminary agreement among members. In view of the slow progress of the negotiations, WTO members want to keep their expectation rather low than to be disappointed by the outcomes later. This implies that discussions on major issues will continue till the last minute and will gear up until December. Some of the issues may even be presented in Hong Kong itself for important political decisions.

Although most issues included in the Doha Round are being discussed in the trade negotiation committees, some issues have gained more importance than others. Agriculture, non-agricultural market access (NAMA), services, trade faciliation and ‘development dimension’ have received the major attention after the adoption of July Package (JP) in 2004.

Developing countries emphasise breakthrough in agricultural liberalisation while developed countries want ‘progress in tandem’ in all areas. A number of issues in agriculture still remains unresolved, including export subsidies, market access, tariff reduction formula, modalities for sensitive products, special products and special safeguard measures for developing countries. Though members have agreed on market access, agreement has remained elusive on the method of reducing tariff on agricultural products. For doing so, non-ad valorem duties have to be converted into ad valorem equivalents (AVEs). Least developed countries (LDCs) – especially those that are net food importers – are worried of the incidence of the withdrawal of export subsidies in the agricultural products of developed countries since this will lead to price increase. They may also face pressure on their balance of payments through a likely negative impact on their export potentials due to erosion of tariff preference on export of agricultural commodities from their countries.

Discussions on NAMA lag behind agriculture. Progress has not been made on the issue of formula for tariff reduction, sectoral liberalisation, AVEs and non-tariff barriers (NTBs). Although members are in favour of a deeper cut in case of high tariffs and a lower cut in case of low tariffs, developing countries are asking for a lower cut compared to developed countries, and unbound tariff on certain products. Developed countries have reiterated that they would agree to only one of these two demands. Though LDCs do not have to commit themselves for tariff reduction, it is expected that they will also take commitments to bind non-bound industrial tariffs. It is quite understandable that LDCs cannot come out of the Doha Round negotiations without meeting this expectation, specially when some of the LDCs have already bound their tariff rates on most of their goods.

LDCs have to undertake preparations taking into account the level of operative tariffs and strategic export interest. Their offensive strategy is to ensure that items of their export interest do not get into sectoral tariffs. If sectoral tariffs include items such as textiles, leather and fisheries, it will erode their preferences under the Generalised System of Preferences (GSP) schemes.

The JP laid down that some sectors would be opened through zero tariff if sufficient number of countries agree. Until now, there has not been enough response in favour of this proposal. Developing countries want that the issue of sectoral tariff should be voluntary and tariffs should not be bound. Some LDCs fear that the facilities under GSP would be reduced due to bound tariffs. Preference erosion is a major concern for LDCs as they would be net losers. In order to recoup such losses, LDCs demand duty free access to developed country markets. Developed countries do not want to commit on zero tariff access for all products from LDCs as they are in favour of a voluntary approach. Industrialised nations have also suggested that developing countries such as India, Brazil and China should also provide market access to LDCs. However, advanced developing countries are averse to this idea and want to discuss this at the meetings of regional trade agreements (RTAs). LDCs are uncomfortable with this proposal since they do not want such initiatives to hamper unity among the developing world as a whole. On the other hand, LDCs are also not too optimistic about extracting any benefit from RTAs.

Negotiations on trade in services have also not progressed except for a few regulatory issues on temporary movement of natural persons (TMNPs) under General Agreement on Trade in Services (GATS) Mode 4. Issues such as economic needs test, mutual recognition, transparency in TMNP related information and classification of services are being discussed. LDCs have marginal participation in the offer and request process. Mode 4 under GATS is an opportunity for countries with surplus labour (mostly unskilled) and high levels of unemployment in their domestic economies. Most developed countries are unwilling to open their markets for workers from developing countries and LDCs. The move by developed countries to provide temporary movement of workers considers only skilled labour and leaves less skilled workers out of their purview. LDCs should submit requests on Mode 4 at the earliest. Given the less optimistic outcome in agriculture and NAMA, Mode 4 could be the only area for LDCs to offset the losses from the Doha Round.

The proposals on special and differential (S&D) treatment for LDCs do not have much meaning, as most of the clauses are of ‘best endeavour’ nature. Progress has been slow due to the disagreement over specific issues as well as cross-cutting issues such as the principles and objectives of S&D treatment, and eligibility to receive it. Discussions on proposals by LDCs reveal that S&D treatment were not articulated in a clear and concise manner, and often failed to address the concerns and needs of LDCs. Countries should consider redrafting the proposals to reflect their needs with the help of experts as well as the WTO Secretariat.

Many LDCs also have interests in the negotiations on rules, particularly in view of anti-dumping cases against them. LDCs should articulate proposals to the effect that anti-dumping duties are not imposed on items of their export interest, particularly on textiles and clothing in view of the difficulties emanating from Agreement on Textiles and Clothing phase-out. Problems of LDCs as regards their infant industries should be clearly articulated keeping in consideration the implications of various anti-dumping measures.

As the deadline for the completion of Doha Round of trade negotiations is approaches, there is little chance for LDCs to gain unless they prepare a clear and coherent agenda. The LDC Trade Ministers’ meeting at Livingstone, Zambia on 25-27 June 2005 has been instrumental in consolidating their collective positions on various issues in the run up to the forthcoming WTO Ministerial. However, if history is any guide, there is little chance that their positions would be taken into consideration. LDCs also need larger political support from the global community, particularly the Group of Eight industrialised nations. Efforts should also be made to convince developed countries at the highest level of international fora such as the United Nations General Assembly to be held in mid-September 2005.

(Dr Khatun is Research Fellow at Centre for Policy Dialogue, Dhaka)

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