Introduction
In view of the upcoming twelfth WTO Ministerial Conference (WTO-MC12), to be held in the week starting November 29, 2021 in Geneva,the need for articulating the stance of the Least Developed Countries(LDCs) at the Ministerial has assumed heightened importance. As is known, the ongoing pandemic has disrupted the holding of this biennial Conference, resulting in to its deferment by one year. Also, as may be recalled, MC12will be taking place in the backdrop of the MC11 in Buenos Aires which concluded without any Ministerial Declaration.
The discussions at MC11 had exposed deep divide among WTO members. The mandate and role of the WTO itself have come under serious scrutiny. Questions have been raised as regards systematic issues in the WTO, decision-making modality embedded in the single undertaking principle and working of the dispute settlement mechanism (DSM) of the WTO.
Although WTO has been under considerable pressure in recent years, LDCs have a keen interest in a rule-based multilateral system. There is a widespread recognition that market access provisions of the WTO favouring the LDCs, special and differential treatment (S&DT) accorded to the LDCs as part of various WTO Agreements in the form of derogations, protracted implementation period and various flexibilities, and the aid for trade and technical assistance provided by the WTO have contributed significantly to strengthened global integration of the LDCs.
The upcoming Ministerial Conference is important also because in a few years a significant number of LDCs are slated for graduation from the LDC group. Graduation will entail losing of the benefits accruing from the various S & D provisions in the WTO particularly earmarked for the graduating LDCs. In this backdrop, initiatives to address imminent loss of international support measures for the LDCs, by designinga set of trade-related initiatives towards sustainable graduation of the graduating LDCs warrants urgent attention in view of the upcoming MC12.
Distinctive Context of MC12
Interests of LDCs, including graduating LDCs, in the context of MC12, are informed by several important developments concerning the WTO specifically, and global trading scenario in general. Some of the attendant concerns have been flagged in the following discussion.
Lack of Progress in WTO Negotiations:Regrettably, the initial enthusiasm generated at the time of the adoption of the Doha Development Agenda had subsequently lost traction.The Hong Kong MC6 decision relating to the DF-QF market access,following some progress as regards its operationalisation, has lost momentum. There was no significant departure in the context of other initiatives in favour of the LDCs envisaged under the Doha Round and atfollowing MCs, includingthe Bali LDC package at MC9 and at Nairobi MC10. No tangible progress has been made in connection with the promised and much hyped expeditious and effective operationalisation of the LDC services waiver and its periodic review. As LDCs move towards MC12, there is a need to revisit what had been agreed upon at earlier MCs, examine the progress in view of this, if at all, and spell out the needed concrete actions to take the agendas forward.
Slow Global Economic Recovery Exacerbated by the Ongoing Pandemic:Tepid global recovery following economic and financial crises of 2007-2008 resulted in a slowdown in the growth of global trade which had consequent negative implications for export performance of the LDCs. Global GDP growth was yet to reach the pre-crises level before the Covid pandemic hit the world. The pandemic has further exacerbated the difficulties with its adverse implications in areas of health, economics and humanitarian arena. Many years of gains made by the LDCs have been wiped out, with higher poverty, increasing income inequality and rising unemployment rates. Exports of LDCs have suffered significant losses. GDP forecasts by the World Bank and IMF indicate unprecedented slowdown in global growth with consequent adverse impacts onLDC trade and economic performance in 2020.
The Rise of Mega Regionals:In recent years there has been a visiblerise in the number ofregional trading arrangements (RTAs)and mega-RTAs.These RTAs are havingadverse implications, in varying degrees, for market access of the excluded LDCs.Also, if key trade interests of members are served through the RTAs, the appetite for actively engaging in multilateral negotiations in the WTO gets diminished to that extent. LDCs which are not members of these RTAswill face significant disadvantage because they do not enjoymarket access preferences offered to member countriesthrough such trading and economic groupings.
Emerging Global Uncertainties:LDCs are facing additional challenges in view of the emerging uncertainties that have negative implications for their participation in international trade. To name a few, these include uncertainties associated with Brexit, ongoing trade dispute between USA and China, and protectionist policies pursued by many countries in view of the pandemic.
Trade Issues and the SDGs:MC12 will be taking place at a time when WTO members will have crossed one -third of the time earmarked for implementation of the SDGs. As is known, the SDGs have recognised trade as an importantmeans ofimplementation. SDGs have articulated number of concrete targets including the target of doubling the share of the LDCs in global exports, helping to raise remittance flows to LDCs by reducing the cost of sending money through key corridors, promotinginvestment and technology flow and raising innovation capacity of the LDCs. MC12should help LDCs to attainthese SDG targetsby leveraging trade opportunities.
Leveraging LDC V in 2021:A new Programme ofActions in support of the LDCs will be adopted at the fifth UN Conference on the LDCs (UNLDC V) to be held in Doha, Qatar during 21-25 March, 2021. As may be recalled, it was at LDC IV that the ambitious target of halving the number of LDCs was adopted. MC12 should provide inputs for the new decadal Programme of Action in support of the LDCs to be adopted at LDC V.
New Issues: Several new and in-built issuesweremooted at MC11 for plurilateral discussions.Joint statements were issued and working groups were proposed as regards E-Commerce, Investment Facilitation, Micro and Small and Medium enterprises (MSMEs) and Gender and Domestic Regulations in Services. While a large number of WTO members, mostly developed and developing countries, signed on to those, only a few LDCs had indicated an interest in pursuing trade-related issues outside of the ambit of the WTO. While some LDCs have subsequently joined the discussions, concerns continue to persist as to whether these new rules will safeguard LDC interests.
LDC Graduation and MC12:MC12 will be taking place at a time when an unprecedent large number of LDCs have been slated for graduation. 12 LDCs have now attained eligibility for LDC graduation in near future; majority of these, including Bangladesh, belong to the Asia-Pacific region. The adverse impacts of loss ofinternational support measures (ISMs) following graduationis expected to be significant. In the context of the MC12 a new demand has emerged – theneed to design a package of support to help the graduating LDCs towards sustainable graduation.
Implications of LDC Graduation
As is known, over the years, a formidable array of support has been put in place in the WTO towards strengthened global integration of the LDCs which they will lose upon graduation. It is increasingly felt that in view of such large number of LDCs having been slated for graduation,issues of sustainable graduation of graduating LDCs should feature prominently at MC12to help address specific challenges that they will be facing. To note, three of the four LDCs in South Asia are graduating LDCs – Bangladesh, Nepal, and Bhutan.
Followings are some of the key channels through which the negative impacts will be feltmost.
Preference Erosion:For the majority of the graduating LDCs the most important adverse implications will be by way of loss of the preferences providedexclusively for the LDCs. Extent of such preference erosion will, however, vary across these countries,depending on export structure,MFN tariff rates in place, tariffs faced as LDCs,tariff applicable for developing countries under various standard GSP schemes and membership in RTAs.For example, average tariffs facing Bangladesh’s export will rise by 9.0 per cent; export losses to the country originating from preference erosion is estimated to be equivalent to about 14 per cent of its global export.
Loss of S & D Treatment:LDCs enjoy wide ranging preferential treatment under various special and differential provisions stipulated in different WTO Agreements. These number 148 including 14 provided exclusively for LDCs. These provisions are aimed at (a) increasing trade opportunities, (b) safeguarding the interests of LDCs, (c) providing flexibilities in view of commitments, actions and use of policy instruments, (d) allowing transition period in implementing WTO Agreements and (e) providing trade-related technical assistance. While LDCs will continue to enjoy benefits accrued from S & D provisionsfor the developing countries, they will lose those provided exclusively forthe LDCs.
Dual Graduation:Many graduating LDCs are undertaking a parallel second graduation journey – transition from lower income country (LIC) to lower middle-income country (LMIC) status. This would mean that they are no longer eligible for the highly concessional loans, with longer loan repayment and grace periods. There is, thus, a need for enhanced support under Aid for Trade (AfT) and Enhanced Integrated Framework (EIF)in support of sustainable graduation of LDCs.
Elements of A package of Support for Graduating LDCs
In view of the challenges facing the LDCs and graduating LDCs, MC12 should be seen as an opportunity for coming up with concrete measures to address the attendant challengesin areas of offensive and defensive interests of graduating LDCs. Some elements of the package of support could be the followings.
Implement UN Decisions Favoring the LDCs:With a view to support LDCs to address the challenges of graduation, the UN General Assembly passed a resolution in 2005 inviting ‘development and trading partners to consider extending to the graduated country trade preferences previously made available as a result of LDC status, or reducing them in a phased manner in order to avoid their abrupt reduction’.It is in this backdrop that the EU had come up with the decision to extend market access under the EBA for an additional three years following graduation. Similar resolutions were also passed by the UN General Assembly in 2018 and 2019.MC12 needs to be guided by the spirit of these decisions which were adopted with agreement of all UN members.
Extend Support Accorded under Market Access Initiatives:To help adjust to preference erosion, LDCs may request countries which offer LDC-specific market access to extend suchbenefits for a specified time-bound period, followinggraduation. Preference schemes for LDCs operated by the EU, Canada, Australia, USA and other developed countries are of crucial importance for market access and export competitiveness of the LDCs. LDCs may cite the example of the extension (of three years) offered by the EU and seek similar market access commitment on the part of other preference-giving countries. Such extension may also be sought from developing countries which offer preferential access under dedicated LDC-specific preferential schemes.
Make RoOFlexible: Under the standard GSP schemesfor developing countries, graduated LDCswill have to deal with more stringent RoO. For example, under the EBA the RoO for LDCs require single transformation in case of export of apparels, while under standard GSP, for some apparels items, a two-stage transformation is required. For agri-items, for example, the RoO (in domestic value addition terms) call for higher value addition under the standard GSP. RoO for graduated LDCs should be similar to the LDCs, for a certain period.
Extension of Time Lines for S & D Provisions:For currentlygraduating LDCs, graduation will take place prior to expiry of important S & D provisions. For example, although S & D treatment for pharmaceutical sector provided under TRIPS and Public Health decision of the WTO has been extended till January 2033,the 12 LDCs will be graduating before this timeline expire. Graduating LDCs have floated a proposal asking that they be allowed to enjoy benefits under the provision till the end period in case their graduation precedesthe cut off timeline.
Provide Additional Aid and TechnologySupport towards Post-graduationAdjustments:Additional financial and technical support should be provided to graduating LDCs to help them build the requiredtrade-related capacities.Such supports are critically important to enablethese countries to addressthe adverse implications of the loss of ISMs and to be able to make successful transition to non-LDC developing country status. Such support may be provided in line withNational Smooth Transition Strategythat graduating LDCs are expected to design.
Be Guided by Developing Country Perspectives in Future Negotiations: Both LDCs and graduating LDCs will need to remain actively engaged and involved in the discussions at MC12 by keeping in the perspective issues of concern and interest to the developing countries. Graduating LDCs in particular, and LDCs in general, should be cognisant of their future as developing country members of the WTO. In view of this, they must take an active interest in various negotiations and closely examine obligations, commitmentsand flexibilities in view of the various discussions in this connection.
Mobilise Support Favouring LDC Submission in the WTO
LDCs have recently floated a proposal in the WTO for extending the special and differential treatment, including preferential market access, for an additional twelve years, following graduation. This proposal was to be discussed in the WTO at a sessionon December 16, 2020. If there is enough support for the proposal, it will be placed at MC12 for consideration by the Ministers. In view of this, the singular importance of the upcoming MC12 cannot be overemphasised.
Concluding Remarks
LDCs will need to mobilisevoice ofthe various broad-based groups in the WTO (e.g.G-90, ACP which include both LDC and non-LDC members) if they are to ensure that they have the critical mass in supportof MC12 for issues of interest to LDCs and graduating LDCs. Here the strategy of LDCs at MC12 should be four-fold: (a) mobilising solidarity in favour of graduating LDCs by convincing that this is in the interest of all LDCs, and sustainable graduation of the LDCs is in the interest of all WTO members; (b) garnering issue-specific support through targeted coalition-building; and (c) participating in discussions by keeping in the perspective their post-LDC future as developing countries.Indeed, the stance of the graduating LDCs at MC12 discussions should be informed by their multiple identities: (a) as current LDCs, since a number of graduating LDCs will continue to enjoy the benefits, as LDCs, for some more years until the time they finally graduate out of the group; (b) as graduating LDCs which will need additional support towards sustainable graduation and (c) as future developing countries when they will be eligible only for S & D provisions in place for the developing countries. At MC12, LDCs must vigorously pursue the proposal floated in the WTO submitted on behalf of all LDCs by Chad, calling upon members toextend all S & D provisions enjoyed by the LDCs for an additional twelve years. LDCs must do the needful to garner support of WTO members at MC12 in favour of this proposal.
