1 Development Dimension in July Package : Concerns of South Asia Posh Raj Pandey CUTS, New Delhi 17 September 2005

2 Why Development Dimension? “Open and Liberal Trade Regime” offers enormous opportunities for reducing poverty, narrowing inequality, overcoming economic injustice and attaining overall economic development PROVIDED RIGHT CONDITIONS PREVAIL But reality is: International trade regime is characterized by significant difference in economic power of the major developed countries and relatively minor share of developing countries ( growth in exports of India increased by 10 per cent but the share in global trade is 0.7 per cent, export growth in low technology products and adverse terms of trade) Major distortions in global markets are caused by protectionist policy of developed countries that continue to disadvantage developing countries ( high subsidies in agriculture- support provided by Japan, US and EU to farmers is 56 per cent, 18 per cent and 33 per cent respectively of their agriculture production; high tariff faced by developing and least developed countries- US imposes 1.2 per cent duties to the imports of OECD countries where as it is 4.5 per cent for developing countries and 13.6 per cent for LDCs)

3 Why Development Dimension? (contd..) Many WTO Agreements limit the policy space available to developing countries-Agreement on subsidies prohibits export subsidies, TRIMS prohibits local content requirement, technology transfer, local employment conditions for foreign investor, TRIPS prohibits reverse engineering - Present Developed and high income developing countries used these policy instruments during initial stage of development, Resulted in ‘Kicking away the ladder’ of development Implementation of cost of WTO Agreement is enormous – more than development budget of many LDCs

4 Historical Efforts to incorporate Development in GATT/ WTO ‘Less than reciprocity’ during initial period of GATT ‘- Infant Industry Protection (GATT Article XVII), Balance of Payment Protection (Article XVII (b) Incorporation of Trade and Development Section (Part IV) in joint actions for favourable market access for products of export interest of developing countries Waiver of GSP during Decision on Differential and More Favourable Treatment, Reciprocity and Full Participation of Developing countries during Tokyo Round (Enabling Clause) Uruguay Round : almost all agreements include Special and Differential Treatment for Developing and Least Developed countries Less obligations Longer implementation period Best endeavour clause : Developing countries taking into account of development, trade and financial needs of developing countries in their activities

5 Historical Efforts to incorporate Development in GATT/ WTO (contd..) Technical assistance to build capacity to implement GATT/ WTO Agreements Singapore Ministerial : ‘ We attach high priority to full and effective implementation of WTO agreements…… Implementation thus far has been generally satisfactory, although some Members have expressed dissatisfaction with certain aspects…’ Plan of Action for LDCs- Integrated Framework Doha Development Agenda Declaration on Implement Related Issues: non-fulfillment of commitments in reducing trade barriers and regulation and process at national level of DC Declaration to make Special and Differential Treatment to make PRECISE, EFFECTIVE and OPERATIONAL Inclusion of trade, debt and finance; trade and technology transfer and technical assistance in WTO agenda

6 Development After Doha Special and differential treatment : 88 proposals Category I: accepted with minor changes: 38 proposals Category II: to be discussed in relevant WTO bodies: 38 proposals Category III: Need major changes 12 Consensus reached on 28 of Category I : still debate on which issues to be addressed first : agreement specific or cross cutting issues and issues of early harvesting Implementation issues: disappointingly slow, only 3 issues resolved out of 99 issues; all deadlines missed including DG to report TNC and GC by May 2005 and GC to take decision by July 2005 Capacity building and Technical Assistance : no substantive progress except pledging of Swiss Franc 30 Million to global Trust Fund and continuation of Integrated Framework with US$1 million for each of the LDCs

7 Development Dimension in July Package Reassertion of Special and Differential Treatment as integral part of Doha Development Agenda Agriculture Flexibility to designate an appropriate number of products as Special Products based on food security, livelihood security and rural development needs Special safeguard mechanism for use by developing countries only Developing countries will have lower reduction coefficient and higher implementation for phasing out export subsidies, lesser tariff reduction commitments LDCs are exempted from reduction commitments NAMA Less than full reciprocity in reduction commitments for developing countries Longer implementation period and LDCS are exempted from reduction commitments

8 Development Dimension in July Package (contd..) Services Liberalization without prior exclusions of sectors and mode of supply of interest of developing countries including mode 4 Trade Facilitation Strongly worded technical assistance Developing countries are not required to implement commitments in the absence of technical assistance

9 Negotiating Position for South Asian countries Different for LDCs and Non-LDCs LDCS Enhanced Market Access Binding commitments on duty free and quota free market access without a priori exclusion of products Preservation of existing preference and address preference erosion Moratorium on safeguard measures and antidumping action against the export of LDCs Services Full market access and national treatment to LDCS in the sectors and mode of supplies of export interest to them including mode four Developing and applying domestic regulation discipline including recognition of qualifications, simplification of administrative practices and visa requirements and non application of economic needs test

10 Negotiating Position for South Asian countries (contd…) Flexibility in Rules Complete exemption for LDCs from any reduction commitments Flexibility for LDCs to determine the level of binding commitments of their tariff lines consistent with their trade development and financial needs Trade Facilitation Flexibility to make commitments consistent with their administrative and institutional capabilities Food Security SSM to respond import surge Full implementation of Marakesh Declaration and Ministerial Decisions on Measures concerning Possible Negative Effect of the Reform Programme on LDCs and NFIDCs Technical Assistance Adequate and targeted technical assistance

11 Negotiating Position for South Asian countries (contd…) Non LDCs Market Access and Food Security Provision of ceiling binding Continuation of subsidies to resource poor farmers SSM to respond import surge Export subsidies Continuation of Article 9.4 of AoA Article 27 of Agreement on Subsidies and Countervailing Measures be prevailed over Article 8 of AoA Domestic support Flexibility to provide subsidies to key farm inputs AoA consistent subsidies to be exempted from countervailing duties

12 Negotiating Position for South Asian countries (contd…) Services Full market access and national treatment in the sectors and mode of supplies of export interest to developing countries including mode four Developing and applying domestic regulation discipline including recognition of qualifications, simplification of administrative practices and visa requirements and non application of economic needs test Trade Facilitation Flexibility to make commitments consistent with their administrative and institutional capabilities

13 Thank you for your kind attention