This week is the last busy week for global leaders as trade ministers and negotiators are now gathering in Nairobi, the Kenyan
capital, to put their final efforts for reaching a minimum consensus on future course of action on multilateral trade regime. The outcome of their effort will be reflected in the formal declaration of the 10th Ministerial Conference (MC10) of the World Trade Organisation (WTO) scheduled for December 15-18 in Nairobi. There is no consensus among the heavyweight members of the organisation in some major areas so far. Thus, the conference is going to kick-off with a uncertainty.
Against the backdrop, poor countries, officially termed as Least Developed Countries (LDCs), are finding themselves marginalised as their trade interests have little place in the ongoing negotiation although they are subject to be shielded by global trade rules under the framework of the WTO.
FINDING THE BASELINE: As rifts among country blocs are quite high creating big uncertainty for a deal in Nairobi, many believe that by agreeing a deal or package for the LDCs, the members of the WTO can at least make a 'face saving' effort. This optimism is, however, not very realistic. Firstly, without having a broader consensus for some of the contentious issues like agriculture export subsidy and public stockholding of foods, any commitment for LDCs will be non-binding. Secondly, the current state of the play in the WTO indicates that LDCs are also not in a position for curving out a package for their own mainly due to lack of consensus among the group. Thus Bangladesh, the coordinator of the LDC group in WTO, is now in a very challenging position. Probably, that is why, Bangladesh commerce minister Tofayel Ahmed asserted that the country has nothing to lose, if there is no deal in Nairobi.
At present, there are 48 countries on the list of LDCs designated by the United Nations. Of them, 34 countries are now members of the WTO. Two more LDCs-- Afghanistan and Liberia-- will get formal membership in the Nairobi Ministerial. Six more LDCs -- Bhutan, Comoros, Equatorial Guinea, Ethiopia, Sao Tome & Principe and Sudan -- are preparing to join the multilateral trade body.
The baseline for the LDCs to get something in Nairobi is in line with 'Bali Package' agreed in the 9th Ministerial Conference of the WTO in 2013. Bali package asked the developed and developing countries to address: duty-free quota-free (DFQF) market access, preferential rules of origin, operationalisation of the LDC services waiver and cotton related issue for the LDCs. Since Bali, some progress has been made in these areas and it is strongly suggested that LDCs keep combined pressure for meaningful implementations of the decisions.
DFQF LIMBO: The demand for 100 per cent or commercially meaningful DFQF market access is a core demand of the LDCs in general. In the Bali package, WTO members were asked to improve their DFQF coverage, as agreed in the Hong Kong Ministerial Conference in 2005, for LDC products. Hong Kong declaration asked developed countries and developing countries 'in a position to do so' to implement DFQF market access for LDCs products with an option of providing DFQF access for 97 per cent of LDC products initially.
Regarding 100 per cent DFQF, some LDC members, mostly from Africa, have clear reservations. They fear the possibility of "preference erosion." These countries have been enjoying non-reciprocal preferences granted primarily by developed countries to them. DFQF to all LDCs would definitely result in some least developed countries' losing their current competitive advantages.
Interestingly, WTO members at a dedicated session of the organisation's Committee for Trade and Development agreed that the WTO secretariat would conduct a study on the implementation of the Hong Kong ministerial decision on DFQF market access by mid-November 2015. But, they failed to reach a consensus on the parameters of the study. There is also a proposal of the LDC Group to resolve the DFQF issue for all LDCs by conducting a tariff line analysis with regard to clothing. It is a striking move against the already agreed DFQF decision on implementation and particularly damaging for Bangladesh as the country is the third largest clothing exporter of the world.
There are few studies already done in this regard. One study done by Vinaye Dey Ancharaz of International Trade Centre (ITC) examined the so-called 'carve-out approach' which asks some safeguard for the selected countries by excluding their key exports from duty-free treatment in a future DFQF scheme by the United States. The objective is to determine which tariff lines should be included under DFQF while preserving preferences under the US' AGOA and the Cotonou Partnership Agreement involving the EU.
In this study, crave-out approach is defined as 'sorting imports by tariff line and identifying products with import values greater than $5 million.' According to Ancharaz: "The analysis shows that excluding 27 tariff lines at the 8-digit level in a future US DFQF scheme would shelter the bulk of apparel exports to the US by Haiti and AGOA beneficiaries. These tariff lines 'protect' 95 per cent each of Lesotho's and Haiti's apparel exports, and about 87 percent of Mauritius's and Kenya's exports. But, the 27 tariff lines would also exclude 76 per cent and 57 per cent of Bangladesh's and Cambodia's imports respectively into the US DFQF treatment. The top 10 of the 27 tariff lines represented 72 per cent of Bangladesh's exports to the US in 2014. Cambodia would still benefit from additional duty-free coverage on 43 per cent of its apparel exports to the US; but at 24 per cent additional coverage, gains to Bangladesh would be much smaller, though not insignificant. Finally, it matters little whether the non-LDCs (Kenya and Mauritius) are included in the safeguard group since there are only three tariff lines specific to them."
Thus, the so called crave-out approach will not be beneficial to Bangladesh and Cambodia. Moreover, agreeing on such kind of arrangement will be a distortion of development achieved so far.
LDC group or any of its members has yet to table any specific textual proposal on DFQF.
SERVICE WAIVER, ROO & COTTON: The Bali decision has asked the developed and developing countries to provide preferential access to LDCs on service trade in general. After submission of the LDCs' collective request on the preferential treatment, they wanted to see their service exports. So far, 20 members of the WTO have notified their preferential measures.
In a submission in September, Bangladesh requested a dedicated session of the WTO Council for Trade in Services (CTS) to examine the results emerging from the Bali decision on the operationalisation of the services waiver for LDCs. At the same time, LDCs requested an extension of 15 years for services waiver from the date of the notification by any member. This is misleading as many argued that duration of the services waiver is permanent for LDCs as mandated in the GATS Agreement.
Regarding rules of origin (ROO), LDCs are demanding inclusion of binding elements in the Bali decision. A critical aspect is determining the 'threshold level of value addition' as it would define the amount of foreign inputs allowed to manufacture a product's value to qualify for preferential treatment. The proposed threshold level varies between 60 per cent and 75 per cent.
Cotton issue is very much relevant to four West African countries-- Benin, Burkina Faso, Chad and Mali. These cotton exporting countries are suffering for long as developed countries, especially the United States has denied to reduce subsidising its own cotton production and so causing huge losses to these poor countries. Few LDCs, however, have hesitation on the Cotton issue in apprehension that they may no more enjoy imports of cotton at lower prices from the global market.
PACKAGE FOR LDCs: There are some other issues like special and differential (S&D) treatment which has significant implication for the LDCs as well as developing countries. But, LDCs, as a group, have lost some momentum due to trade alliance of several members with different developed and advanced developing countries. The internal rift is also visible. There is thus the possibility of a 'compromised' LDC package which will hardly address the trade interests of the poor countries.
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