DUTY-FREE AND QUOTA-FREE (DFQF) MARKET ACCESS

FOR LEAST DEVELOPED COUNTRIES

REPORT BY THE SECRETARIAT^[1]

1  introduction

1.1.  The Sixth Ministerial Conference (MC6) held in Hong Kong, China in December 2005 adopted a decision on Duty-Free and Quota-Free (DFQF) market access for least developed countries (LDCs) (Annex F, WT/MIN(05)/DEC). Among others, the decision stipulated that the Committee on Trade and Development (CTD) shall annually review the steps taken to provide DFQF market access to the LDCs, and report to the General Council for appropriate action.

1.2.  In the context of further implementation of the decision taken at MC6, the Ninth Ministerial Conference (MC9) held in Bali in December 2013 adopted a decision (WT/L/919) on DFQF market access for LDCs (hereafter, the Bali DFQF Decision), which reiterates that the CTD shall continue to annually review the steps taken to provide DFQF market access to the LDCs, and report to the General Council for appropriate action. To aid in the CTD's annual review, the Bali DFQF Decision also mandates the WTO Secretariat to prepare, in close coordination with Members, a report on Members' DFQF market access for LDCs, at the tariff line level, based on their notifications.

1.3.  This report is the second of its kind prepared to facilitate the CTD's annual review of steps taken to provide DFQF market access to the LDCs. It builds upon, and updates, the previous report issued in November 2014 and circulated in document WT/COMTD/W/206.

2  METHODOLOGY

2.1.  This report is prepared based on Members' notifications to the WTO, pursuant to the Transparency Mechanism for Preferential Trade Arrangements (hereafter, PTA Transparency Mechanism). For the purposes of this report, duty-free coverage of tariff lines is derived on the basis of data furnished by Members to the WTO's Integrated Database (IDB). The duty-free coverage denotes the percentage of tariff lines that are duty free for LDCs in relation to each preference-granting country's total national tariff lines. The duty‑free lines for LDCs also include MFN duty‑free tariff lines.

3  BACKGROUND on notification procedures

3.1.  It may be noted that non-reciprocal DFQF or preferential market access schemes of Members in favour of LDCs are dealt with by different legal instruments in the WTO. Developed Members implement DFQF market access to LDC products, mainly through their autonomous GSP programmes – which secures legal cover through the Enabling Clause adopted in 1979 (The Decision on "Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries"). The Enabling Clause notifications are vested in the CTD.

3.2.  Developing Members' DFQF/preferential schemes for LDCs are authorized through a Waiver Decision initially adopted by Members in 1999 (WT/L/304), and extended until 30 June 2019 (WT/L/759). The initial notification body for developing countries' preferential schemes is the Council for Trade in Goods (CTG).^[2]

3.3.  In addition to the above, as per the procedure set out in the PTA Transparency Mechanism, a dedicated session of the CTD is envisaged to take up each PTA notified in the CTD, with a view to enhancing its transparency.

4  Dfqf Coverage for LDCs, at the tariff line level

4.1  Developed Members

4.1.  All developed Members of the WTO offer DFQF market access to the LDCs, and have notified specific GSP schemes for them. Most of these developed Members had notified their DFQF schemes prior to the adoption of the PTA Transparency Mechanism.

4.2.  The number of dutiable lines in developed markets for LDC products is rather limited, since most developed Members already provide full or significant DFQF coverage to the LDCs. Hence, the scope for additional progress in many developed markets is rather limited. Nevertheless, since the last report, there has been some progress towards improving existing DFQF coverage in certain developed Members. For instance, at the CTD meeting on 23 September 2015, the delegation of the United States (US) reported that necessary legislative steps have been taken to eliminate duties for LDCs for five tariff lines of upland cotton covering out-of-quota quantities of these products. This would be in addition to the seven tariff lines of upland cotton which were designated for duty-free treatment under GSP for LDCs in 2012. At the same meeting, the delegation of Montenegro informed Members that legislation was being prepared to grant DFQF market access to LDCs, the scope of which would be synchronised with Montenegro's negotiations with the European Union.

4.3.  A summary of developed Members' DFQF coverage is provided below in Table 1. The number of dutiable lines is somewhat higher for Iceland (91.8%) and the US (82.6%). The Russian Federation's GSP sub-scheme for LDCs allows duty-free access to 36.3% of its tariff lines.

Table 1: DFQF access in GSP schemes of developed Members, 2015 or latest available year

a             These tariff lines may vary from year to year due to change in national tariff nomenclature.

b                 Switzerland and Liechtenstein form a Customs Union.

Source:       WTO Integrated Database

4.4.  It may be noted that a few Members maintain multiple non-reciprocal market access schemes benefitting LDCs. For example, the US African Growth and Opportunity Act (AGOA) offers non‑reciprocal market access to eligible countries in Sub-Saharan Africa, which includes a large number of LDCs. The US provides 97.5% DFQF access for African LDC beneficiaries under AGOA. In addition, Haiti benefits from DFQF market access in the US through the Caribbean Basin Trade Partnership Act (CBTPA).

4.5.  The review of developed Members' tariff schedules schemes indicate a relatively small number of tariff lines subject to Tariff-rate Quotas (TRQs) for imports from LDCs. TRQs indicated in the Canadian tariff schedule spread over some 140 tariff lines (e.g. dairy, egg, poultry and meat products). There are some 132 tariff lines (e.g. meat, dairy products sugar, cocoa, tobacco) subject to TRQs indicated in the US tariff schedule. It may be noted that while beneficiaries of the US GSP scheme other than LDCs may face automatic limits on the quantity or value of any one product imported under the scheme, the LDCs are not subject to this restriction.

4.2  Developing Members

4.6.  Developing Members, namely: Chile, China, India, Korea, Chinese Taipei and Thailand, have so far, notified their DFQF schemes put in place in favour of LDCs. Developing Members are permitted to phase-in their DFQF commitments for LDCs. They have also been accorded flexibility in the coverage of such commitments. The scope and coverage of preferences granted by these developing Members vary from one scheme to another.

4.7.  Most of these developing Members grant a significant degree of DFQF access to the LDCs; a number of them have reached or are in the process of attaining comprehensive DFQF coverage for LDCs. For instance, Chile provides nearly full DFQF coverage to the LDCs, with 99.5% DFQF access to the LDCs.

4.8.  Since the last report, continuous progress has been noted in providing DFQF access to LDCs. Thailand notified its DFQF scheme in favour of LDCs (WT/COMTD/N/46) in July 2015, which provides DFQF market access on 73.2% of its tariff lines. At the CTD meeting of 16 March 2015, China informed Members that it had expanded its DFQF scheme for LDCs, and since 1 January 2015, it has been according LDCs DFQF market access on 97% of its tariff lines. At the same meeting, India reiterated that it had increased DFQF coverage to LDCs for around 96% of its tariff lines (at the aggregated 6-digit level) since 1 April 2014 as well as preferential access on an additional 2.2% of its tariff lines (WT/COMTD/M/93).

4.9.  Three developing Members, namely the Kyrgyz Republic, Tajikistan and Turkey, have provided preferential tariff data to the IDB, though they are yet to make a notification pursuant to the PTA Transparency Mechanism. In 2013, the Kyrgyz Republic provided nearly complete duty‑free market access to products originating from LDCs. Data provided by Tajikistan indicates some duty-free tariff lines for LDCs in 2014, along with preferential treatment on a large number of tariff lines. The duty-free coverage of Turkey for LDCs stood at 79% in 2013.

4.10.  A summary of developing Members' DFQF coverage is provided below in Table 2. The DFQF coverage indicated in the Table is based on data provided to the IDB.

Table 2: DFQF access under selected developing Members' LDC preference schemes, 2015 or latest available year

a                 This Table has no implications for any matter relating to the level of development of WTO Members.

b                 These tariff lines may vary from year to year due to change in national tariff nomenclature.

c                 China has reported that it has expanded DFQF coverage for LDCs to 97% of its tariff lines, as of 1 January 2015. 

Note:          Thailand has notified its DFQF scheme for LDCs, according to which it grants DFQF access on 73.2% of its tariff lines. Upon submission of requisite data, the Secretariat will be able to include appropriate data in this Table.

Source:       WTO Integrated Database

4.11.  In addition to the above developing Members, Brazil had announced at the WTO Ministerial Conference in 2009 that it would grant DFQF access for products from LDCs. It may be noted that, like some developed Members, a number of developing Members also accord preferences to LDCs through regional or bilateral channels.^[3] Morocco notified in 2001 (G/C/6) that it exempted some products originating from African LDCs from import duties. Some 1.4% of its tariff lines have been estimated to be duty-free for these LDCs.

4.12.  The review of developing Members' tariff schedules also indicates a low number of tariff lines subject to TRQs for imports from LDCs. In the case of China, LDCs enjoy preferential market access for some 47 tariff lines within the quota limits. TRQs are also identified in Korea's tariff schedule for only 4 tariff lines, though these are not specific for LDC beneficiaries.

5  conclusion

5.1.  Continuous efforts are being made to advance DFQF market access for LDC products.  DFQF market access remains a standing item on the CTD's agenda. A special CTD meeting was held on 23 September 2015 allowing Members an opportunity to have an in-depth exchange of views on issues surrounding the implementation of DFQF market access for LDC products. Members continue to take actions to work towards improving market access opportunities for LDCs.

5.2.  The above review shows that nearly all developed Members provide either full or significant DFQF market access to LDC products. The exceptions to duty-free treatment relate to a few sectors, and to a limited number of developed Members. The Bali DFQF Decision stipulates that: "Developed-country Members that do not yet provide duty-free and quota-free market access for at least 97% of products originating from LDCs, defined at the tariff line level, shall seek to improve their existing duty-free and quota-free coverage for such products, so as to provide increasingly greater market access to LDCs, prior to the next Ministerial Conference".

5.3.  Developing Members, namely: Chile, China, India, Korea, Chinese Taipei and Thailand have notified their individual DFQF schemes to the WTO. Some of these Members provide comprehensive DFQF access to LDCs. In addition, three developing Members (the Kyrgyz Republic, Tajikistan and Turkey) offer DFQF market access to LDCs. The Bali DFQF Decision stipulates that: "Developing-country Members, declaring themselves in a position to do so, shall seek to provide duty-free and quota-free market access for products originating from LDCs, or shall seek to improve their existing duty-free and quota-free coverage for such products, so as to provide increasingly greater market access to LDCs, prior to the next Ministerial Conference".

5.4.  It is recommended that Members introducing or improving DFQF market access for LDCs provide detailed information to the WTO, pursuant to the PTA Transparency Mechanism. This would enhance transparency on preferences being accorded by Members to the LDCs and would allow this to be included in any future reports by the Secretariat.

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