WTO 20^th Anniversary Event – least developed countries

"Twenty years of supporting the integration of Least Developed Countries into the Multilateral Trading System"

12 October 2015

Report by the Chairman of the Sub-Committee on Least Developed Countries

1.1.  As part of the commemoration of the WTO's 20^th Anniversary, the WTO Secretariat organized a Least Developed Country (LDC) event titled "Twenty Years of Supporting the Integration of Least Developed Countries into the Multilateral Trading System". The event took place in the morning of 12 October 2015 under the aegis of the Sub-Committee on LDCs. It was chaired by Ambassador Roderick Van Schreven (Netherlands), Chairman of the Sub-Committee on LDCs. On this occasion, the Secretariat prepared a Note (WT/COMTD/LDC/W/61), which, inter alia, traced the 20-year relationship between the WTO and LDCs, in particular the key developments and decisions taken in favour of LDCs, the institutional support provided and the trade capacity-building initiatives put in place.

1.2.  The event consisted of an opening session with the WTO Director-General and the UNCTAD Secretary-General, followed by two substantive sessions: Session 1 reviewed the progress made in integrating LDCs into the multilateral trading system (MTS) over the past 20 years, while Session 2 took a forward-looking perspective on how the WTO could help LDCs overcome the remaining challenges.

1.3.  The event was well attended. A summary of the discussion of the sessions is provided below.

Opening Session

1.4.  The opening session was addressed by WTO Director-General Roberto Azevêdo and UNCTAD Secretary-General Mukhisa Kituyi. Prior to the start of the LDC event, they had signed a joint declaration on increased cooperation between the WTO and the UNCTAD in the area of trade and development, which reflected the common goal of the two organizations of helping developing countries, and especially the LDCs, integrate into the global economy. The declaration reaffirmed the collaboration between WTO and UNCTAD to keep on promoting trade as a tool for development.

1.5.  In his opening statement, WTO Director-General Azevêdo reiterated his personal commitment to support the integration of LDCs into the MTS. Salient points of his statement included: (i) WTO agreements and decisions adopted over the past 20 years contained flexibilities and special provisions that take into account the specific needs of LDCs; (ii) LDCs experienced higher trade growth than the rest of the world during the period 1995-2013, with a rise in the share of exports of goods and services; (iii) the LDC Group had become very active over the years, gradually enhancing their participation in different bodies and committees of the WTO; (iv) LDCs were involved in about 45% of WTO's technical assistance activities each year; (v) since  the launch of the Aid-for-Trade Initiative, Aid-for-Trade (AfT) commitments to LDCs had doubled, reaching US$18 billion in 2013; and (vi) the important role played by the LDCs in the success of the Bali Ministerial Conference and that work is ongoing to advance each of the Bali decisions. He underlined that a successful Pledging Conference of the Enhanced Integrated Framework (EIF) would be a significant outcome of the Tenth WTO Ministerial Conference (MC10). He urged the LDCs to submit textual proposals for MC10 as soon as possible so that dedicated negotiations could begin.

1.6.  In his opening statement, UNCTAD Secretary-General Kituyi recalled how UNCTAD had recommended the creation of the LDC category in the early 1970s, subsequently leading to the categorization of the group. He pointed to the continuing challenge of over-dependency of a large number of LDCs on primary commodities and that the share of manufacturing products in total LDC exports had declined in recent years. The stalling of the negotiations in the WTO was considered a worrying sign – as trade rules were being developed in forums where LDCs were not necessarily involved. Moreover, the mega-regional trade deals threatened to wipe out the preferences accorded to LDCs. The LDC exporters also faced daunting challenges in penetrating markets as private standards, set by chains of a few dominant retailers, were increasingly becoming a common place. He also underlined the importance of regional integration to enhance the competitiveness as well as to enter global value chains (GVCs). The contribution of the MTS to the development of LDCs would be measured against the objectives of the UN Istanbul Programme of Action (IPoA) and the 2030 Agenda for Sustainable Development. He stressed that a new momentum would be needed if LDCs are to reach a 2% share of world trade by 2020, as envisaged by the IPoA. He urged WTO Members to deliver on core issues at Nairobi, including a substantial package for LDCs, so that the post-Nairobi Agenda could take in new issues such as e‑commerce.

Session 1: LDCs and the WTO – An Overview of 20 Years Integration into the Multilateral Trading System

1.7.  The panel of Session 1 comprised the following speakers: (i) H.E. Mr. Shameem Ahsan, Ambassador of Bangladesh (LDC Coordinator); (ii) H.E. Ms. Yvette Stevens, Ambassador of Sierra Leone (Chairperson of the EIF Board); (iii) H.E. Mr. Marc Vanheukelen, Ambassador of the European Union; and (iv) Professor Alan Winters, University of Sussex.

1.8.  Ambassador Shameem Ahsan highlighted key developments achieved over the past 20 years, including on duty-free quota-free (DFQF) market access, preferential rules of origin, the LDC services waiver, extensions of transition periods to implement the TRIPS Agreement, flexibilities in the Doha Round negotiations, LDC accessions to the WTO, institutional support to the LDCs by the WTO Secretariat, and capacity-building initiatives such as the EIF, which had all played an important role towards further integrating LDCs into the MTS. He thanked Members for their efforts to help improve LDCs' participation in world trade and acknowledged that progress had been made.

1.9.  He pointed to a number of remaining challenges and steps to be taken, including at MC10. He highlighted that all LDCs faced the common challenge of a lack of export diversification. He noted that the world was moving ahead with trade arrangements that held implications for LDCs, including preference erosion, particularly in light of regional trade agreements such as the Trans‑Pacific Partnership. He mentioned that Members' commitments concerning LDCs were often weakened since such commitments were conditioned on the overall progress of the Doha Round. Furthermore, it was difficult to advance LDC interests in a give-and-take setting, since LDCs had not much to offer. He called for the implementation of Ministerial Decisions and Declarations underlining in particular the need for DFQF market access to create demand for LDC goods, liberal preferential rules of origin and preferential market access under the LDC services waiver, in particular with respect to GATS mode 4. In order to enhance the capacity of LDCs to participate in the work of the WTO, he also suggested that each LDC mission in Geneva should receive one intern on a yearly basis.

1.10.  Ambassador Yvette Stevens, the Chairperson of the EIF Board, focused on the importance and achievements of the EIF for the LDCs. She recalled important milestones such as the High‑Level Meeting on LDCs in 1997 which led to the establishment of the Integrated Framework, the predecessor to the EIF, as well as the 2005 Hong Kong Ministerial Conference during which the Aid-for-Trade Initiative was launched. She characterized the EIF as uniquely placed to help LDCs use trade as a tool for sustainable development and that it stood out due to a number of factors and activities, including through the Diagnostic Trade Integration Studies (DTIS) which helped LDCs elaborate their trade needs and priorities; support to trade-related policy and institutional capacity building; support to mainstream trade into national development programmes; support to coordinate AfT needs at the country level; and support to feasibility studies as well as small scale priority projects as a catalyst to leverage additional AfT resources.

1.11.  She also highlighted the achievements of the EIF since its establishment, including the support of 23 donors to enable 136 projects in 51 countries across Asia, the Pacific and Africa. Pledges for the first phase of the EIF totalled US$252 million of which US$202 million had actually been received. She mentioned that the evaluation of the first phase of the EIF Programme had recognized that it provided value for money and had recommended its extension for a second phase. She recalled the second phase of the EIF (2016-2022) with a budget target of US$250‑320 million and the importance of the Pledging Conference, which would take place at the outset of MC10.

1.12.  She underlined that the global commitment to increase Aid for Trade for LDCs and the mentioning of the EIF in the 2030 Agenda for Sustainable Development reflected the recognition that the EIF had been instrumental in helping LDCs develop their trade policies, identifying trade priorities and deriving benefits from AfT support and the MTS. Referring to the Third Financing for Development Conference and the 2030 Agenda for Sustainable Development, she highlighted the importance of trade as a tool for development and for the achievement of the Sustainable Development Goals.

1.13.  Ambassador Marc Vanheukelen emphasized how LDCs had remained marginalized in the MTS due to a lack of productive capacity, limited diversification, inadequate infrastructure and, in some cases, poor governance. He drew on the past two decades and stressed that the European Union (EU) and its member States had been at the forefront of initiatives to help LDCs integrate further into the global economy. He mentioned that the EU and its member States had been pioneers behind granting DFQF market access to LDC exports. He also recalled the EU's Everything But Arms (EBA) scheme adopted in 2001, and that the EU was the top destination for agricultural products and manufactures from LDCs.

1.14.  Furthermore, he mentioned how positive discrimination remained important for LDCs and that a one-size-fits-all approach in the design of flexibilities under special and differential treatment (S&D) would dilute the differential advantages of LDCs, since countries at different stages of development often encountered different challenges. Therefore, he expressed some concern with a number of G90 proposals on S&D, which lacked differentiation among developing countries of different income levels. He further elaborated that the ultimate goal of S&D was to help LDCs develop their economies and graduate from LDC status in order to take on normal WTO obligations. He recalled that the EU and its member States were the largest providers of Aid for Trade. The EU was currently aligning its Aid for Trade with a focus on LDCs, which had already resulted in an increase of AfT commitments to LDCs reaching EUR 2.6 billion in 2013, which constituted 24% of the total. He expressed the EU's commitment to work with the LDCs and other Members to build a meaningful LDC package for MC10.

1.15.  Professor Alan Winters recalled a number of achievements for LDCs in the WTO. He raised the question of allocative efficiency, which examined the efficiency of the system by examining whether the right things had been done as opposed to whether things had been done right. He mentioned that Aid for Trade, trade facilitation and the DTISs of the EIF had provided evidence of allocative efficiency. On market access, he was of the view that 97% DFQF market access might not allow LDCs the intended benefits. Preferential access to emerging economies was considered to promise the highest returns, as preference margins would be higher than in developed economies due to higher most-favoured nation tariffs in emerging economies. He also mentioned that due to the liberalizing functions and nature of the WTO, preferences could inevitably erode.

1.16.  In his view, few important issues had not been addressed at the WTO. He noted that the lack of progress with respect to GATS mode 4 (movement of natural persons) represented a missed opportunity. Moreover, in terms of rule-making, he highlighted two points. Firstly, he expressed concern that mega-regional trade agreements were going to create rules which would be imposed on other countries and that the rule-making process of mega-regionals should be made more inclusive. Secondly, he pointed out that negotiating complex trade rules in the MTS took away resources from LDCs, which might better be used in other policy areas; and that ways should be found to represent the interests of LDCs in the rule-making process in a less resource‑intensive way. He concluded by underlining the importance of LDCs' own trade policy complementing international efforts such as Aid for Trade or the Trade Facilitation Agreement (TFA). Since trade was a necessary rather than a sufficient condition for growth, he reiterated his call to make trade policies simpler and transparent so that LDCs could focus on other important policy areas such as education.

Session 2: LDCs and the WTO – Looking Ahead

1.17.  The panel of Session 2 comprised the following speakers:  (i) H.E. Mr. Deepak Dhital, Ambassador of Nepal; (ii) H.E. Mr. Nathan Irumba, former Ambassador of Uganda; (iii) H.E. Mr. Harald Neple, Ambassador of Norway; and (iv) Emeritus Professor Jaime de Melo, University of Geneva and Foundation for International Development Study and Research (Ferdi).

1.18.  Ambassador Deepak Dhital reminded participants that Nepal, together with Cambodia, was the first LDC to accede to the WTO under Article XII in 2004. Like other accessions, Nepal made significant commitments, higher than that of original WTO LDC Members. He recommended that the Accession Guidelines be further simplified for LDCs. He noted that LDCs faced a number of challenges, including supply-side constraints, high trade costs and inadequate productive capacity. He underlined the importance of full DFQF market access, relaxation of preferential rules of origin, operationalization of the LDC services waiver, implementation of the TFA, S&D, removal of cotton subsidies, and the need for a TRIPS waiver for pharmaceutical products linked to LDC status. He also encouraged Members to address non-tariff measures (NTMs), which constituted barriers for LDCs to take advantage of the preferences granted to them. He also underlined the importance of capacity building initiatives for LDCs such as the Aid-for-Trade Initiative, the EIF, the Standards and Trade Development Facility and the TFA Facility and looked forward to a successful pledging conference for the second phase of the EIF.

1.19.  He expressed hope that Members would help LDCs develop a meaningful and substantive package for MC10, which could mark another important step to use trade as a tool for development. He concluded by emphasizing that trade should be used as an engine for growth, particularly in the context of the 2030 Agenda for Sustainable Development and the IPoA for the LDCs for the Decade 2011-2020.

1.20.  Ambassador Nathan Irumba highlighted that whilst DFQF market access had been a welcoming outcome, market access would only be meaningful when market penetration would be possible. He also added that the concentration of LDCs in primary commodities had increased their structural vulnerabilities. He stressed the need to add value to LDC exports and to move up the value chain. He urged for an initial focus on regional value chains in order to subsequently benefit from GVCs. He highlighted the importance of agriculture for LDCs and hoped for progress in agriculture at MC10. Furthermore, he opined that the global economy had failed to advise on a mechanism for transfer of technology to LDCs. Members should, therefore, operationalize Article 66.2 of the TRIPS Agreement.

1.21.  He suggested that LDCs should keep track of developments taking place under mega‑regional trade agreements, and not feel obliged to make hastened decisions at the multilateral level that could impinge on their policy space. He concluded by highlighting that the biggest obstacles to LDC trade were not tariffs but NTMs, such as standards and technical regulations. Since the mega-regionals were likely to increase the level of standards, he stressed the need for technical assistance to help LDCs meet those standards.

1.22.  Ambassador Harald Neple started by agreeing with other speakers that the LDCs' share in world trade was too low. He mentioned that the LDCs needed to overcome a number of trade and non-trade related challenges to fully benefit from trade and that the international community and the individual LDC had a shared responsibility to address these challenges. Trade policies needed to be developed and implemented in conjunction with other domestic policies, including on gender, poverty alleviation, education, governance and investment frameworks.

1.23.  Besides supply-side constraints such as inadequate infrastructure and weak productive capacities, he pointed to governance, transparency and anti-corruption policies, institutional capacity, workforce skills, investment frameworks and private sector involvement as remaining challenges for LDCs. Trade should be seen as an instrument in development policy. He indicated that reducing trade costs in LDCs was indispensable to integrate into world trade; thus, it was crucial to implement the TFA. Furthermore, South-South trade and trade with neighbouring countries should be the first step to trading with the rest of the world.

1.24.  He encouraged LDCs to make better use of the WTO consultation processes, as well as of the Trade Policy Review Mechanism to address particular trade issues identified in that process. He emphasized that non-implementation of WTO commitments and obligations was not the way forward if the objective was to integrate into the MTS, though he recognized that LDCs needed more time and assistance to put such policies into place. He mentioned that the implementation procedures of the TFA could be a model for future agreements. He characterized the EIF as an efficient tool to help LDCs integrate into the MTS and highlighted the need to forge partnerships under the EIF to leverage targeted assistance within each LDC.

1.25.  Professor Jaime de Melo pointed out that the LDCs' share of global trade would have in fact stagnated if oil was excluded from the equation. He noted that trade costs for LDCs had fallen less rapidly than that of the rest of the world. He opined that preferential rules of origin were still complex and that simplifying rules of origin was the easiest trade policy prescription that would provide the largest gains for LDCs. Giving an example, he proposed that if preferential margins were not high, preference granting countries could eliminate the requirement of rules of origin.

1.26.  He recommended the preparation of regional DTIS, considering the emerging importance of regional integration, in particular for African countries. On regional integration, he furthermore posited that deeper integration with few parties could be more meaningful than shallow integration with a larger membership. He suggested that the Aid-for-Trade Initiative, which had become increasingly complex, could be refocused through the TFA. The TFA had the potential to contribute to lower trade costs in LDCs.

Conclusion

1.27.  Overall, there was an interactive dialogue between the panellists and the audience. Some themes which emerged during the discussion included the fact that the implementation of the TFA would be a potential instrument to reduce trade costs in LDCs. Special and Differential Treatment provisions in the TFA were regarded as a possible model for the future S&D architecture in the WTO. Simplified rules of origin, improved DFQF access for LDC products and measures to enhance LDC services exports were seen as potential deliverables at MC10 that could provide benefits to the LDCs. Also the importance of an outcome on cotton at MC10 was underlined. Though considered difficult, mode 4 under GATS was highlighted as an area offering great potential to the LDCs. It was also highlighted that, while S&D remained important, LDCs should be more proactive in order to dispel the perception that they did not have a lot to offer in the framework of give-and-take negotiations. Regarding policy making and technical-assistance activities, it was mentioned that the areas of trade and development should be more connected.

1.28.  Some closing remarks were made by the LDC Facilitator, Ambassador Steffen Smidt, who made three appeals: firstly, WTO Members should continue showing readiness in responding to the needs of LDCs; secondly, LDCs should articulate specific proposals, which are realistic and doable, taking into account the time available before MC10; and lastly, the LDC Group should work in cohesion, which had been the cornerstone of their success over the past years and which would be the only way to secure outcomes in favour of them.

1.29.  In conclusion, the Chairman thanked Members, speakers and other participants for actively taking part in the discussion. He also expressed appreciation to WTO Director-General Azevêdo and UNCTAD Secretary-General Kituyi for their participation in the event.

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