Hong Kong - South Asia Watch on Trade, Economics and ... Kong: Expectations and Realities REGIONAL...

Hong Kong: Expectations and Realities

REGIONAL ADVISORY BOARDBangladesh

Dr Debapriya BhattacharyaIndia

Dr Veena JhaNepal

Dr Posh Raj PandeyPakistan

Dr Abid SuleriSri Lanka

Dr Saman Kelegama

CHIEF EDITORNavin Dahal

EDITORKamalesh Adhikari

EXECUTIVE EDITORShyamal Krishna Shrestha

STAFF CONTRIBUTORDr Hemant Dabadi

DESIGNIndra Shrestha

ILLUSTRATIONAbin Shrestha

PRINTED ATModern Printing Press

Kathmandu

PUBLISHED BYSouth Asia Watch on Trade,Economics & Environment

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THE 148 Members of the World Trade Organisation (WTO) are meet-ing in Hong Kong during 13-18 December 2005, in a bid to bridge thegap between them to complete Doha Round negotiations by the endof 2006. However, the Draft Ministerial Text issued on 26 Novemberindicates that the Hong Kong Ministerial will fall far short of expec-tations.

Divergent positions exist among Members on the five issues beingnegotiated under the July Package (JP). In particular, there are sharpdifferences between the developing countries led by G-20 and G-33,and the developed countries, mainly the European Union (EU) andthe United States (US). The bone of contention is the reluctance of thedeveloped countries to open their agricultural markets for the devel-oping countries. The haggling on the specifics of the formula for re-duction in domestic support and market access is an attempt of thedeveloped countries to continue to protect their markets and distortagricultural trade. The disagreement on the coverage of products thatwill be allowed to be considered “sensitive products” and exemptedfrom tariff reduction commitments is also a reflection of their protec-tionist intent.

While the interest of the developed countries in agriculture is toprotect their markets, their main interest in non-agricultural marketaccess (NAMA) is to open the developing country markets for theirindustrial products. The very fact that the Draft Ministerial Text talksabout tariff reduction under Swiss formula in the case of industrialproducts and a linear formula in the case of agricultural productsexposes the “intention” of the developed countries. The debate on“less than full reciprocity for the developing countries” also reflectsthis. The Draft Text itself indicates that Members are far away fromachieving full modalities on NAMA.

Services is another area where progress has been tardy. It is un-likely that the Hong Kong Ministerial will be able to finalise the datefor submission of final draft schedules and an end date for negotia-tions. Negotiations on trade facilitation (TF) seem to be the least con-troversial of the five issues being negotiated. The assurance of tech-nical assistance to the least developed countries (LDCs) for imple-menting TF measures makes it the least resistant issue for the LDCstoo.

Special and differential treatment (S&DT) provisions are yet tomove beyond rhetoric. The Draft Text acknowledges that substantialwork still remains to be done to make the S&DT provisions “precise,effective and operational”. The Text reveals that WTO Members areyet to look into different proposals, including five from the LDCs thatseek to strengthen Agreement specific S&DT provisions. This is iron-ic since the Doha Round of negotiations is called the “Doha Develop-ment Round”.

Though it is laudable that Members are considering binding duty-free and quota-free market access for LDC exports, the lack of commit-ment for strengthening their supply-side constraints and partial cov-erage of products are likely to dampen the benefits of preferentialmarket access. The failure of the Integrated Framework (IF) to addresssupply-side constraints has been identified and the Text recommendsan enhanced IF. Rhetoric apart, it is difficult to see how the new IF isgoing to be more effective than the old one.

These developments in the negotiations are worrying for the de-veloping countries as the Hong Kong Ministerial is unlikely to helpthe Doha Round to become truly “developmental”. If the Ministerialfails, Members will have a difficult task ahead to complete the DohaRound by December 2006. n

December 2005

Contents Trade Insight • Vol.1, No.4, 2005

Will HONG KONGaddress LDC concerns?

LDC FOCUS 8

What willHONG KONGachieve?Will the Hong Kong Ministerialsucceed in moving the DohaRound forward?

COVER FEATURE 13

Will the Hong Kong Ministerial trulyaddress the “development dimension”?As matters stand today, the “road to Hong Kong” looks as bumpy asthe “road to Cancún” as far as development dimension is concerned.

DEVELOPMENT DIMENSION 30

The views expressed in the articles published in Trade Insight are thoseof the authors and do not necessarily reflect the official position ofSAWTEE or its member institutions.

In order to negotiate as a bloc in the Hong Kong Ministerial, theLDCs have adopted a “common LDC agenda” but it remains to beseen whether or not their concerns would be addressed.

READERS’ FORUM 4

TRADE WINDS 5

VIEWPOINT 10Liberalisation in Nepal: Bridgingthe Geographical Hierarchy

AID REFORM 11Trilateral Development Cooperation:A Way Forward for Aid Reforms

AGRICULTURE 19Agriculture Negotiations: Implicationsfor LDCs

NAMA 22NAMA: A Mixed Bag for SouthAsian Countries

SERVICES 25Services Negotiations in DohaRound and South Asia

TRADE FACILITATION 28Trade Facilitation: South AsianPerspective

TRIPS 33TRIPS Review: Divergence inDeveloping Country Positions

BOOK REVIEW 36South Asia after the Quota System:Impact of the MFA Phase-out

NETWORK NEWS 37

BANGLADESH1. Associates for Development Initiatives

(ADI), Dhaka2. Bangladesh Environmental Lawyers

Association (BELA), Dhaka

INDIA1. Citizen Consumer & Civil Action Group

(CAG), Chennai2. Consumer Unity & Trust Society (CUTS),

Jaipur3. Development Research & Action Group

(DRAG), New Delhi4. Federation of Consumer Organisation of

Tamilnadu & Pondichery (FEDCOT),Thanjavur

NEPAL1. Society for Legal & Environmental

Analysis & Development Research(LEADERS), Kathmandu

2. Forum for Protection of Public Interest(Pro Public), Kathmandu

PAKISTAN1. Journalists for Democracy & Human

Rights (JDHR), Islamabad2. Sustainable Development Policy Institute

(SDPI), Islamabad

SRI LANKA1. Law & Society Trust (LST), Colombo

SAWTEE NETWORK

4 • Trade Insight • Vol.1, No.4, 2005

Many countries have been able to usetrade as a means for rapid andbalanced economic growth andpoverty reduction. Therefore, peoplemust be well-informed about issuesrelating to linkage between trade,economic growth and povertyreduction. In the absence of goodquality publications that deal withsuch linkage in South Asia, theinitiative taken by SAWTEE to publisha regular magazine Trade Insight ispraiseworthy.

Puspa Sharma, Programme Officer,Forum for Protection of Public Interest(Pro Public),Kathmandu

I enjoyed reading the third issue,especially the piece on regional tradearrangements. The South Asiancountries are opening up theireconomies for accelerating economicgrowth through enhanced regionaltrade and investment. Attempts havealso been made to encourage intra-regional trade through South AsianFree Trade Area (SAFTA). Despitegreater attention on regional tradeexpansion, there has been littleprogress: intra-regional trade is only 5percent of total trade. Moving theprocess of regional economic integra-tion forward requires reduction intrade barriers, harmonisation ofcustoms procedures and tariffstructures, improving transparency oftrade and investment policies,collectivism, and effective implemen-tation of SAFTA.

Dr Musleh-ud Din, Chief of Research,Pakistan Institute of DevelopmentEconomics, Islamabad

Congratulations! Trade Insight is aquality publication. When regionaltrade arrangements (RTAs) continueto proliferate, the cover feature onRTAs was timely. Today, RTAs haveemerged as vital avenues of tradeliberalistion. However, you have toimprove the distribution and market-ing system of the magazine. Anindicative price, proper distributionalong with increased quality andcoverage will not only help sustain itbut also make it accessible.

Shiv Raj Bhatt, Programme Officer,Nepal Window II Trade Related CapacityBuilding Project,UNDP, Kathmandu

Trade Insight is one of the morepromising trade publications to haverecently passed my way. The topicsare timely and relevant, the writing iscohesive and fluid, and the layout –while needing some improvement – isconsistent with what one wouldexpect from a good regional publica-tion. For future issues, I suggest toinclude more brief news and op-eds,using relevant graphs and tables. Ithink these changes will make theadvocacy of Trade Insight stronger inthe future.

Mac Glovinsky, Trade & InvestmentResearch Assistant, UNDP Regional Centre,Colombo

In the third issue, most articles provedto be interesting food for thought – inparticular, the articles on the regionaltrade arrangements, South-SouthCooperation and North-South bilateraltrade arrangements. It is also insightfulto learn your view on a two-track

approach of regionalism andmultilateralism. I found the article onMillennium Development Goal 8 alsouseful.

Maaike de Loor, Programme Officer,South Asia, Novib/Oxfam Netherlands,The Hague

I read the third issue and found itvery interesting. In particular, Iliked the Trade Disputes section,which carried a lucid account of thetextiles dispute between China, theEuropean Union and the UnitedStates. It provided useful facts andfigures. This section should bemade a permanent feature. Isuggest you to look at some legaldimensions of the dispute/casecurrently existing in the WorldTrade Organisation.

Prabhash Ranjan, Research Officer,Centre for Trade and Development(Centad), An Oxfam GB Initiative,New Delhi

READERS’ FORUM

Vol.1, No.4, 2005 • Trade Insight • 5

TRADE WINDS

Sixth WTO Ministerial HONG KONGDELEGATES from 148 Members ofthe World Trade Organisation (WTO)are convening in Hong Kong during13–18 December 2005 for the SixthMinisterial Conference. However,they are not expected to make a break-through on most agreements due tocontinued differences over modalitiesof the issues being negotiated.

WTO Director General PascalLamy summed up the existing scenar-io in the Draft Ministerial Text on 26November. The Text is based on theReports by the Chairs of the respec-

tive negotiating groupsto the Trade Negotia-tions Committee (TNC).Earlier, he told heads ofdelegations on 10 November that in-formal meetings of a number of min-isters in recent weeks had not beenable to bridge differences, thus requir-ing Members to “recalibrate” their ex-pectations from the Hong Kong Min-isterial Conference. He stressed theneed to maintain the ambition of theDoha Round, and for Hong Kong tomark a step forward in successfully

UNITED States (US) TradeRepresentative Rob Port-man and Chinese Ministerof Commerce BoXilaisigned a pact in Washing-ton on 8 November thatwill place quotas on Chi-nese textiles and clothing(T&C) exports to the USuntil the end of 2008.

The agreement, whichwill enter into force on 1January 2006, was the re-sult of five months andseven rounds of negotia-tions during 2005. The US alreadyhas put in place import limits on19 types of Chinese T&C productsunder the “textile-specific safe-guard” clause that is part of Chi-na’s terms of accession to the WorldTrade Organisation (WTO). Theclause allows countries to restrainthe annual growth of T&C importsfrom China to 7.5 percent if they arefound to be causing market disrup-tion. The new agreement covers 34product categories, including the19 currently subject to safeguardquotas. Furthermore, the US suc-cessfully retained the right to usethe safeguard mechanism for T&Ccategories not covered by the agree-ment, so long as it ”exercises re-

tection, the extent of im-port growth now allowedin 2006 is actually lowerthan the 7.5 percent in-crease that would havebeen permissible hadsafeguards been re-newed, while for 2007 thelevel is about the sameand for 2008 slightlyhigher.

The accord providesfor avoiding overship-ments – a source of greatconfusion during the Eu-

ropean Union's imposition of lim-its on some Chinese textile exports– by giving US retailers two monthsto prepare for the new quotas. USmanufacturers, US retailers andChinese producers have hailed theagreement. However, some sectionsof the US industry are apprehensivethat the agreement does not solvethe problem but only postpones it.They have urged the US and othertextile exporters to “come together”on the issue in the ongoing DohaRound trade talks at the WTO.Trade in T&C came under WTO dis-ciplines on non-agricultural marketaccess since 1 January 2005, whentextiles quotas expired (BWTND,9.11.2005). n

US and CHINA reach TEXTILES pact

completing the talks by December2006.

The Draft Reports by the Chairsof the Committees on Agriculture,

Non-AgriculturalMarket Access, Ser-vices, Trade Facilita-tion, DevelopmentDimension andRules were submit-ted to the TNC on21–22 November.

These Reports take a stock on theprogress made hitherto and suggestthat further progress is entirely de-pendent upon Members, some of whohave suggested a meeting early in2006 to move the Doha Round for-ward (WTO, 24.11.2005; BWTND,25.11.2005; WTO, 29.11.2005). n

straint” in doing so.The deal is expected to address

concerns of retailers, consumers, andproducers in both countries by bring-ing predictability to the market, andthus avoiding the disruption that canbe caused by unilateral safeguardquotas. The agreement broadly limitsgrowth in Chinese clothing importsto 10 percent in 2006, 12.5 percent in2007 and 15 percent in 2008, thoughthe growth limits vary for differenttypes of clothing. For textile products,the rates are 12.5 percent in 2006 and2007 and 16 percent in 2008. The UShad originally asked for the limits tobe 7.5 percent for the duration of theagreement. Notably, for the 19 prod-ucts currently under safeguard pro-

in


TRADE WINDS

A World Bank report highlights thatSouth Asian economies are becomingmore open and business-friendly ina bid to attract foreign companies butmost countries in the region still needto cut a lot of red tape.

Doing Business in 2006 was re-leased on 13 September and ranks155 economies worldwide — a firstby the Bank — based on the opennessof their business environment. Thereport tracks a set of regulations onstarting and operating a business,rules for trading in goods and servic-es and the time and cost of meetingvarious government requirements.However, it does not track macroeco-nomic policy, quality of infrastruc-ture, currency volatility, investor per-ceptions or crime rates. The rankingsof the South Asian economies (in as-cending order) are: The Maldives (31),Nepal (55), Pakistan (60), Bangladesh(65), Sri Lanka (75), Bhutan (104), andIndia (116).

In another report, the World Bankhas forecast low growth for South

Asia for 2006. In its annual Global Eco-nomic Prospects report for 2006, theBank estimates gross domestic prod-uct (GDP) growth in South Asia at 6.9percent in 2005, up from 6.8 percentin 2004. For 2006, regional GDP is ex-pected to slow to 6.4 percent. Theslowdown is due to the increased po-litical instability in Bangladesh andNepal; flooding in Bangladesh; theafter-effects of the tsunami in theMaldives and Sri Lanka and the Oc-tober earthquake in Pakistan.

This year’s Global Economic Pros-

South Asian economiesMORE OPEN but SLOW GROWTH

pects under the theme “The EconomicImplications of Remittances and Mi-gration” also forecasts that economicgrowth in developing countries willslowdown to 5.9 percent in 2005, andto 5.7 percent in 2006, down from 6.8percent in 2004. Developing econo-mies will continue to grow at histori-cally very high rates, and more thantwice as fast as high-income econo-mies.

At the global level, high oil prices,capacity constraints and graduallyrising interest rates are the key fac-tors that have been dampening theglobal expansion. In South Asia,where government budgets have ab-sorbed much of the shock of higheroil prices, the financial burden is ex-pected to be passed to consumers inthe form of higher prices and taxes.

The report also forecasts SouthAsia to receive US$ 32 billion in re-mittances in 2005. The report statesthat international migration can gen-erate substantial welfare gains for mi-grants and their families, as well astheir origin and destination coun-tries, if policies to better manage theflow of migrants and facilitate thetransfer of remittances are pursued(THT, 17.11.2005; AP, 14.9.05). n

TRADE experts from seven Southand South East Asian countries be-longing to Bay of Bengal Multi-Sec-toral Technical and Economic Coop-eration (BIMSTEC) have narroweddown differences on rules of originand decided to lower the negative listto 20 percent of total tradable itemsfrom earlier agreed 25 percent.

In the eighth meeting of the TradeNegotiations Committee (TNC),which concluded in Dhaka in the sec-ond week of October, Members alsoagreed on setting up a permanenthigh-level body to oversee and reviewthe enforcement of the accord once itis finalised. The specific mechanismsas to who will be represented in thebody and how will it function are stillto be decided. Differences exist onproviding derogation on general ruleof value addition and special dero-

gation to specified list of products forthe least developed country Mem-bers, viz., Bangladesh, Bhutan, theMaldives and Nepal.

The group has finally agreed toexchange the list of products, whichthey will subject to fast track of tariffliberalisation. Although such ex-change was scheduled before theeighth round, it has not still happeneddue to additional time sought by fewof the Members.

The TNC also decided to hold aseparate sub-group meeting for tradefacilitation and customs cooperationin future negotiations. As for the neg-ative list, in which products will beexempted from the tariff liberalisationprogramme, the TNC decided not toallow it to exceed 20 percent of totaltradable items. The TNC – the techni-cal body of BIMSTEC – has been as-

signed to finalise the frameworkagreement for trade in goods by theend of 2005, so that it could come intoeffect from July 2006.

Besides envisaging a free tradearea (FTA) on trade in goods, Mem-bers have agreed to enforce the FTAagreement on trade in services andinvestment from July 2007. The FTAon trade in goods would be imple-mented under the “fast track”and “normal track” of trade liberali-sation. Under the fast track, Memberswould slash the tariffs directly in arange of 0 percent to 5 percent asagreed upon, while in the “normaltrack”, they will follow a gradual tar-iff liberalisation programme. BIM-STEC Members include Bangladesh,Bhutan, India, Myanmar, Nepal,Sri Lanka and Thailand (TKP,18.10.05). n

BIMSTEC narrows down differences


TRADE WINDS

THE twelfth round of meetings of theCommittee of Experts (CoE) on theSouth Asia Free Trade Area (SAFTA)has resolved all outstanding issues,paving the way for implementationof the pact from 1 January 2006 forSouth Asian Association for Region-al Cooperation (SAARC) MemberStates. The CoE, which met in Kath-mandu during 29 November - 1 De-cember 2005, was able to resolve thethree issues – sensitive list, rules oforigin and revenue compensationmechanism. SAARC nations have agreed to anaverage of 13 percent to 20 percent oftotal trading products for the devel-oping Member States under the sensi-tive list. On the rules of origin, theyagreed for “regional cumulation” pro-visions under general rules of origin,while the developing Member Stateswill provide derogation of 10 percentto the least developed country (LDC)Member States for products identifiedunder the product specific rule. Un-der the regional cumulation provi-sion, Member States decided that thegoods must have 20 percent local or50 percent regional content to be con-sidered as produced in the region. Inrevenue compensation mechanism for

the LDCs, they agreed to retain thisflexibility only for the first four yearsof SAFTA enforcement. It is reportedthat the formula to calculate revenueloss and ways of compenssation havebeen agreed upon. The issue of tech-nical assisatance to the LDCs was re-solved during the eleventh round ofCoE in Kathmandu in October 2005.The CoE will forward the finaliseddraft to the Ministerial Councilthrough SAARC Secretariat for finalendorsement.

Adopted in January 2004 at theTwelfth SAARC Summit in Islama-bad, SAFTA seeks to cut tariffs onlyon goods and phase-out most tariffbarriers by 2016. The agreement pro-vides for India, Pakistan and Sri Lan-ka to slash customs duties to 0 per-cent to 5 percent by the beginning of2009 to exports from Bangladesh,Bhutan, the Maldives, and Nepal, theorganisation’s LDC Members.

The original seven Member Statesare Bangladesh, Bhutan, India,Maldives, Nepal, Pakistan and SriLanka. During the Thirteenth Sum-mit held in November in Dhaka, Af-ghanistan’s accession was also ap-proved (THT, 14.11.2005 and02.12.2005; TKP, 02.12.05). n

SAFTA issues resolved

THE World Trde Organisation’s(WTO) General Council concluded,on 11 November 2005, negotiationswith Saudi Arabia on the terms ofits membership. Saudi Arabia willbe formally admitted as the theWTO’s 149th Member in the HongKong Ministerial in December 2005.

However, Vietnam is unlikely tojoin the WTO at the forthcomingMinisterial, according to the coun-try’s ambassador to the WTO, NgoQuang Xuan. Vietnam has metmost of the WTO’s accession re-quirements and has concluded ne-gotiations with 21 WTO members— including the European Union,Japan and Canada — but it still hasto finish talks with other Members,including the United States.

Vietnam, which had set a tar-get of joining WTO by the end ofthis year, now hopes to join theworld trade body before the con-clusion of the Doha Round negoti-ations, expected to be completed by2006 (BWTND, 09.11.2005; AP,23.10.2005). n

LEADERS from Asia Pacific Econom-ic Cooperation (APEC) countrieswrapped up their two-day sum-mit in Busan, South Koreaon 19 November, adopt-ing two joint state-ments, including onewhich calls for con-certed efforts to facili-tate free trade.

Regarding free glo-bal trade, the 21 APECleaders issued a spe-cial stand-alone state-ment, urging WorldTrade Organisation(WTO) Members to resuscitatethe stagnating Doha Round and con-clude them by the end of 2006. On 18November, the leaders called on the

European Union (EU) to make con-cessions on the issue of farm subsi-

dies to help move forwardthe WTO’s stagnant

Doha Round talks.The leaders wantthe EU to offerbigger cuts intariffs on agri-cultural prod-ucts and indi-vidual Europe-

an countries toreduce or elimi-

nate agriculturalexport subsidies.

The APEC leaders alsoagreed on the so-called “Busan Road-map to the Bogor Goals”, which out-lines key priorities and frameworks

WTO membership:Saudi Arabiaand Vietnam

APEC summit calls on EU to make concessions

NEWS SOURCES

AP: Associated PressBWTND: Bridges Weekly Trade News DigestTKP: The Kathmandu PostTHT: The Himalayan TimesWTO: World Trade OrganisationYN: Yonhap News

for high-quality regional trade andfree trade agreements. The BogorGoals specify the APEC objectives foreliminating developed Members’trade and investment barriers by2010, and those of developing Mem-bers by 2020. Under the roadmap,APEC Members are to further lift tradebarriers and reduce trade transactioncosts by an additional 5 percent by2010 (YN, 21.11.2005). n


The 148 Members of the World Trade Or-ganisation (WTO) will be meeting in Hong

Kong during 13-18 December for the SixthMinisterial Conference. The Ministerial is be-ing held to discuss the Doha Round issuestaken up by the July Package (JP), which wasadopted by WTO members in August 2004.The five issues taken up for negotiations un-der JP are: agriculture, non-agricultural mar-ket access (NAMA), services, trade facilitationand development dimension.

As agreed under JP, the present timetableto accomplish the Doha Round is the end of2006. Currently, Members are engaged in hec-tic negotiations to come to agreements onthese issues. However, progress has been tar-dy and speculations have been made that the

Hong Kong Ministerial will fail to establishconsensus among Members on all the issuestaken up for negotiations. In the light of suchspeculations, the concern is: whether Mem-bers can reach consensus on some of these ifnot in all issues in the Hong Kong Ministeri-al? They must be aware of the fact that if theyfail to come to agreements on any issue, theMinisterial will meet the fate of the CancúnMinisterial, which was inclusively conclud-ed in September 2003.

The Cancún Ministerial made it explicitthat the power to set the rules of multilateraltrade is no more merely with the developedcountry Members. It is encouraging that thedeveloping and least developed countries aregradually asserting themselves and are com-ing to negotiate as a block. They have beenmore actively pursuing their interests in thenegotiations by forming groups/alliancesand putting their positions as a block. Exam-ples are the declarations of the G-20 and leastdeveloped country (LDC) Trade Ministers. Itis obvious that these groups will not make iteasy for the developed countries to push theiragenda on any issue unless benefits to themfrom such agenda are assured.

In order to negotiate as a bloc in the HongKong Ministerial, the LDCs, in particular, havealready adopted a common position on LDCagenda in the Fourth LDC Trade MinistersMeeting in June 2005 in Livingstone, Zam-

Failure of theHong KongMinisterial toaddress the LDCissues will notonly marginalisethe LDCs but willalso raise aquestion on thepromises of theDoha Round.

LDC FOCUS

Will HONG KONGAddress LDCCONCERNS?


bia. They have clearly stipulated their posi-tions on the five issues taken up for negotia-tions under JP, keeping in consideration theHong Kong Ministerial.

With regard to market access, the LDCshave asked for binding commitment on duty-free and quota-free market access for all theirproducts to be granted and implemented im-mediately, on a secure, long-term and predict-able basis, with no restrictive measures intro-duced. If WTO Members, including the devel-oped and developing, are concerned aboutbetter integration of the LDCs into the multi-lateral trading system, there should not beany disagreement for such binding. Also, theissue of market access has been recognisedby the global community in the MillenniumDeclaration of 2000. The Declaration, in theMillennium Development Goal 8, has clearlymentioned that there should be concrete ef-forts for securing and enlarging market ac-cess opportunities for the LDCs if their sharein international trade has to be increased.

In the case of agriculture, they have calledfor “a credible end-date for the elimination ofall forms of export subsidies and significantreduction of all forms of trade distorting do-mestic support, while taking into account allSpecial and Differential Treatment (S&DT)provisions and recognising the need for tran-sitional measures that will offset the negative,short-term effects of removal of subsidies interms of reducing or removing LDCs' prefer-ential margins into the markets of developedcountries”.

In the case of services, the LDCs have de-manded that there should be full market ac-cess and national treatment to the LDCs inthe sectors and modes of supply of export in-terest to them, including less-skilled and non-professional services providers under Mode4 of General Agreement on Trade in Serviceson a temporary and contractual basis. Theyhave also called for easing the procedures forthe movement of natural persons, includingin the case of qualifications and visa require-ments, administrative practices and econom-ic needs tests.

With respect to S&DT, they have asked forthe full implementation of the S&DT provi-sions, and to make them “more precise, effec-tive and operational”. They have also calledfor the adoption of new special and differen-tial measures to take into account the prob-lems encountered by the LDCs and addressmeaningfully the S&DT proposals.

Indicating that there is a need for “Aidfor Trade” as an additional, substantial andpredictable financial mechanism for them,

the LDCs have expressed their commitmentto put their house in order. Such aid is in-deed important for the LDCs to strengthentheir supply-side and infrastructure capaci-ty, diversify trade and address adjustmentschallenges and costs for the effective inte-gration of the LDCs into the internationaltrading system.

They have also stipulated that there is aneed to strengthen the effectiveness of the In-tegrated Framework (IF), inter alia, by a signif-icant resource increase, including throughother initiatives. They have mentioned that IFis important not only to build up their sup-ply-side capacity, and technological andphysical infrastructure but also to supportthem to diversify their production and exportbase. Likewise, they have called for bindingcommitments on targeted and substantivetechnical assistance programmes to enhancetheir capacity, inter alia, to meet sanitary andphytosanitary measures, standards require-ments, rules of origin and other non-tariffmeasures in the importing countries.

In the case of trade facilitation, they havedemanded for operationalising the flexibili-ties agreed in the Modalities for Negotiationson Trade Facilitation, which, inter alia, stipu-lates that LDC Members will only be requiredto undertake commitments to the extent con-sistent with their individual development, fi-nancial and trade needs or their administra-tive and institutional capabilities. In this re-spect, they want “full and faithful implemen-tation of the Modalities for Negotiations onTrade Facilitation that ensure adequate finan-cial and technical assistance and capacitybuilding including support for infrastructuredevelopment of the LDCs, through coordinat-ed and sustained flow of funding that alsoaddress cost implications of proposed mea-sures affecting LDCs”.

Besides these interests, there are also otherissues on which the LDCs want agreementsfrom their counterparts. However, at a time,when Members are themselves finding it diffi-cult to come to agreements on issues being ne-gotiated, there is little possibility for the LDCsto see any breakthrough on issues of their in-terest in Hong Kong. Failure of the Hong KongMinisterial to address the LDC issues will notonly marginalise the LDCs but will also raise aquestion on the promises of the Doha Roundand the credibility of the multilateral tradingsystem. n

(Prepared on the basis of the LDCs’ LivingstoneDeclaration and the recent negotiations at theWTO)

LDC FOCUS

When WTOMembers arefinding itdifficult tocome toagreements onissues beingnegotiated,there is littlepossibility forthe LDCs tosee anybreakthroughon issues oftheir interest inHong Kong


The issue is notthe beneficialimpact ofliberalisation butthe limitedextent of it andthe asymmetricgains acrossregions in Nepal.

Devesh Roy

Liberalisation in Nepal:Bridging thegeographical hierarchy

VIEWPOINT

Nepal has the lowest per capita income,highest dependence of population on agri-

culture and second highest income poverty ratein South Asia. How far should policy pundits becomfortable with these realities? At least, the“Washington Consensus” school of thoughtshould be uneasy with a “trailing Nepal”. Ne-pal should be their poster boy; having liberalisedextensively during the 1980s and 1990s on bothdomestic and external fronts. On an average,Nepal has the lowest tariffs in South Asia andhas taken several steps to downsize its publicdistribution system in food and remove subsi-dies. This scenario where the lowest per capita in-come country in South Asia is also the mostliberalised economy makes it an interesting casefor debate, and for researchers, a grave matterfor introspection. The current political turmoilhas definitely accounted for poor outcomes butgiven the long time period since the advent ofreforms, it is imperative that researchers lookfor explanations beyond the insurgency.

The issue is not the beneficial impact of liber-alisation but the limited extent of it and the asym-metric gains across regions in Nepal. It is easy tohide behind the veil of the missing counterfactu-al. Pro-liberalisation pundits might argue theoutcomes could be worse without reforms. At anaggregate level, the outcomes from liberalisationseem to have worked but to a limited extent. Ag-gregate indicators of food sufficiency (for e.g., percapita food availability and extent of malnour-ishment) show improvement since liberalisation.

The key to understanding the outcomes fromliberalisation is a distinctive feature of Nepal:the hierarchical geography. The three geograph-ical regions, viz., the mountains, hills and plains( the Terai), belong to three exclusive economictiers. The concentration of economic activity, themanufacturing base, the level of agricultural pro-duction, and access to markets have all been or-dered with the Terai occupying the highest tierand the mountains, the lowest. In the backdropof this, the government and the donors alike havefailed to appreciate the interplay between “at bor-der” and “within border” policies. The trade

economist’s premise of welfare gains from in-ternational integration has a lurching assump-tion of spatial integration of the domestic mar-kets. International integration implies that theprice signals received by Nepali producers andconsumers are same as their foreign counter-parts. Spatial integration implies that the pricesignal received by the Nepali producers andconsumers is independent of their coordinateswithin the country. Owing to geography and attimes due to policy, perfect spatial integrationis more of a goal than a reality. In Nepal’s case,the lack of spatial integration across these hier-archical regions is colossal. As a result, the fruitsof liberalisation have been shared as unevenlyas the prior distribution of economic well-beingacross different regions. It has also accountedfor miniscule gains for the country as a whole.

A study by John Cockburn (2004) clearlyshows this asymmetric gain across regions. TheTerai reaps the majority of gains while the moun-tains are the worst-off. The study is based on acomputable general equilibrium model wherethe exclusive effect of liberalisation can be fil-tered out. Household surveys reinforce the geo-graphically categorical distribution of poverty.

Having not invested in spatial integration,the fruits of liberalisation that rely on privatesector working efficiently on “true” price sig-nals are not an option for the government. Con-sider the liberalisation related to the downsiz-ing of the Nepal Food Corporation. The privatesector has not assumed the role that the govern-ment had envisioned. The government createda potential for the market but has not support-ed it with spatial integration policies such ascreation of physical and marketing infrastruc-ture.

To critics, the liberalisation process mightseem a case of policy ineffectiveness. The reali-ty is that the limited and asymmetric impactsare themselves a result of government failure inspatially integrating markets. Much of the pol-icy attention from donors has been devoted onreducing policy-induced price distortions andnot on enhancing spatial integration of the do-mestic markets. In a sense, the relative impor-tance of the latter has been undermined in pol-icy. The project on linking the regions by a pul-ley has long been in the pipeline but has notbeen implemented. These policy changes canhave clear first order effects given that Nepalhas set most of its border and many of withinborder policies in order. It is the remaining home-work that donors and policymakers need to doin the future. n

(Dr Roy is a Post-doctoral Fellow at InternationalFood Policy Research Institute, Washington, DC.)


AID REFORM

TrilateralDevelopmentCooperation

Pradeep S Mehta andNitya Nanda

Over the coming decade aid hasthe potential to play a central

role in realising the ambition set outin the Millennium Declaration. But re-alising the potential of aid will de-pend on donors combining increasedsupport with fundamental reforms inaid governance.” Thus observes theHuman Development Report 2005 ,which adopted International Coop-eration at a Crossroads as its themefor the year.

Much of the aid comes through thebilateral route, with a large amountbeing channelled through inter-gov-ernmental organisations (IGOs). An-other mode is through “trilateral de-velopment cooperation” where aidflows through institutions in thirdcountries for being applied to devel-opment projects in poor countries.This can be an important componentof reforms in aid governance.

Trilateral development coopera-tion has its genesis in the BandungConference held in 1955, when lead-ers of 29 developing countries met topromote collective self-reliance as apolitical imperative. A WorkingGroup on Technical Cooperationamong Developing Countries(TCDC) was established by theUnited Nations General Assem-bly in 1972. In 1978, developingcountry leaders gathered at Bue-nos Aires to formulate a Plan ofAction (BAPA), conceptual frame-work and programmatic goals,which the United Nations Gener-al Assembly subsequently en-dorsed.

Trilateral development coopera-tion received a major boost in 1993 atthe Tokyo International Conferenceon African Development (TICAD).Since then, it is known as TICAD pro-cess in which Japanese resources areused to promote exchanges betweenAsian and African countries. In 1999,the eleventh session of the High Lev-el Committee on the Review of TCDCresolved that South-South coopera-tion should be viewed as a comple-ment and not a substitute for North-South cooperation. This effectivelymeans that the committee was of theview that a North-South-South coop-eration was needed. This also led tothe increased recognition of trilateral

brought together OECD memberswith a wide range of non-OECD gov-ernments and institutions involvedin development cooperation andSouth-South initiatives. The Forumagreed that South-South and triangu-lar cooperation could improve aid ef-ficiency and effectiveness in empha-sising ownership and inclusive part-nership.

Trilateral cooperation takes abroad-based approach that promotespartnerships with various actors, in-cluding traditional donors, multilat-eral agencies, private sector, academ-ic institutions and civil society organ-isations. Hence, trilateral cooperationdoes not necessarily mean involve-ment of three partners only. It is a formof partnership where three or moregroups of actors are involved: donors,technical assistance providers and therecipients.

Development cooperation has tra-ditionally been bilateral in nature eventhough the donors very often used ser-vices of private agencies or non-gov-ernmental organisations (NGOs) intheir home countries. This led to theemergence of several large NGOsmainly based in developed countriessuch as CARE, Oxfam and Actionaid,to name a few. Some of them do attractsupport from other donor govern-ments. Thus, a form of trilateral coop-eration started involving developedcountry donor, developed countrytechnical assistance providers anddeveloping country recipients.

This form of cooperation was ex-tended when some developed coun-try donors started involving agencies

and experts from other developingcountries. This was done throughboth involvement of other develop-

ing country governments, private sec-tor or NGOs.

Another form of trilateral coopera-tion takes place when developed coun-try donors engage IGOs for technicalassistance. This ought not to be con-fused with the arrangement when de-veloped country donors channel theirfunds through IGOs. An example inthis regard could be the United Na-tions Conference on Trade and Devel-opment’s (UNCTAD) project on capac-ity building on trade policy issues inIndia supported by the United King-

A WayForward for

AIDReforms?

development cooperation.On 1-2 February 2005, the Devel-

opment Assistance Committee (DAC)of the Organisation for Economic Co-operation and Development (OECD)and the United Nations DevelopmentProgramme (UNDP) jointly organ-ised the Forum on Partnership forMore Effective Development Cooper-ation (FPMEDC) in Paris to promotegreater dialogue and mutual under-standing among the world’s princi-pal providers of development coop-eration. For the first time, the Forum


AID REFORM

dom's (UK) Department for Interna-tional Development (DFID).

Capacity building requirement isnot an issue affecting developingcountries only. There are requirementsfor sensitisation and capacity build-ing in developed countries as well be-cause their stakeholders also need tounderstand developing country per-spectives.

Bilateral assistance programmeshave very often been criticised for theirtied nature. Aid is often tied to the do-nor country’s provision of goods andservices. For example, it has been re-ported that in 1999, 71.6 percent ofUnited States (US) bilateral aid com-mitments were tied to the purchase ofgoods and services from the US. Tiedpurchases of goods and services usu-ally led to recipient countries payinghigher prices. On an average, a devel-oping country expert costs one-thirdof experts at prevalent internationalrates. Trilateral cooperation can thusbe a cost effective way of promotingdevelopment cooperation. The prob-lem can be more complex in the provi-sioning of technical assistance andconsulting services as concerns haveoften been raised that the type of tech-nical assistance or services offeredmay not be appropriate to the recipi-ent country’s needs. Moreover, with anumber of donor countries coming toa country with their own type of tech-nical expertise, it can create problemsfor the recipient country, as there canbe much confusion and duplicity. Tri-lateral cooperation can resolve suchproblems.

Another issue related to tied aid isthat when the donors tie up with local(donor’s home country) technical as-sistance providers, there is a possibil-ity that monitoring by the donors mayget relaxed as they are likely to devel-op alliances. A third country providerof technical assistance is far less likelyto develop such a relationship with adonor and hence monitoring is likelyto be more rigorous. Hence, trilateralcooperation may bring greater ac-countability in implementing develop-ment programmes.

Many successful developmentmodels and tools have been developedin the developing world. Bangladeshis an example of a least developed

country, which has significant exper-tise and experience in micro credit,population and rural development.Such expertise and experience is be-ing utilised in other developing coun-tries through trilateral developmentcooperation. Similarly, BangladeshCentre for Advanced Studies is exe-cuting poverty related projects in In-dia and Afghanistan with the finan-cial support of western donors.

Trilateral development coopera-tion can be an effective way of bring-ing “appropriate intermediate tech-nology” and “appropriate intermedi-ate policy” to developing countrieswhile taking the help of developedcountries in meeting the financial re-source needed.

There may, however, be some pit-falls as well. Trilateralisation of de-velopment cooperation may dilutethe political support base and thusthe interest of the domestic constitu-ency in overseas aid. There are prob-lems even among several developingcountries that might thwart the pro-cess. Moreover, there may be unwill-ingness among certain sections of pol-icymakers and other important stake-holders to accept “intermediate tech-nology” or “intermediate policy”,who may be in favour of leap-frog-ging. The lure of trips to rich coun-tries among sections of bureaucracyand the political establishment mayalso sabotage the process. Neverthe-less, these problems are not insur-mountable and the risks associatedare rather meagre compared to the ex-pected benefits.

Leaders of 106 countries from Af-rica and Asia, representing aboutthree-fourths of humanity, met in In-donesia for the Afro-Asia Summit inApril 2005 to reinvigorate the spiritof the 1955 Bandung Conference.However, the issue of trilateral devel-opment cooperation did not receiveadequate attention. This may be dueto the fact that the leaders were toooverwhelmed by the spirit of Band-ung I when the global reality wasquite different. Despite the fact thatbig Asian countries like China andIndia are taking significant strides inproviding aid to other developingcountries, the need for assistance fromdeveloped countries cannot be ig-nored. One important departure inBandung II was, however, the fact thatthe role of all stakeholders in South-South cooperation has been explicit-ly recognised as against Bandung I,when only government level cooper-ation was envisaged. n

(Mr Mehta and Mr Nanda are SecretaryGeneral and Policy Analyst at CUTSInternational, Jaipur)

CUTS and trilateraldevelopment cooperationConsumer Unity & Trust Society(CUTS) International, a network in-stitution of SAWTEE, which isbased in India, is engaged in capac-ity building on trade, competition,consumer protection and invest-ment issues in several developingcountries under the trilateral devel-opment cooperation framework.CUTS is implementing a project un-der the same framework in severalAfrican countries. The project aimsat building the capacity of stake-holders on competition and regu-latory issues. The Norwegian andBritish governments have support-ed the project. Apart from CUTS,Third World Network is another de-veloping country-based NGO en-gaged in such activities.

In order for sensitisation and ca-pacity building of the stakeholdersin developed countries on issues ofdeveloping countries, CUTS Inter-national is also conducting someprogrammes in the developedworld through trilateral develop-ment cooperation. Sweden has beenassisting CUTS to conduct sensiti-sation seminars in the rich coun-tries on different issues conceringmultilateral trade.

It is well-recognised now that im-porting technologies, policies and le-gal practices from developed countriesmay not be appropriate for most de-veloping countries. It may be better forthem to draw these from advanceddeveloping countries. In fact, ignoringthis reality has cost many developingcountries, especially in Sub-SaharanAfrica, dearly as they implemented the“Washington Consensus” agenda.


COVER FEATURE

Dark clouds hover over the fateof the Sixth World Trade

Organisation (WTO) MinisterialConference, scheduled for 13–18December 2005 in Hong Kong dueto the lack of convergence amongMembers on core issues under theDoha Round, viz., agriculture,industrial tariffs and services,among others.1 Reflecting thesedifferences, WTO Director General(DG) Pascal Lamy has opined thatexpectations from the Ministerialneed to be “recalibrated”.2

Thus, at this current stage, theDoha Round of multilateral tradenegotiations (started at the Fourth

WTO Ministerial in Doha inNovember 2001 to be originallycompleted by December 2005) hasreached an impasse wherein anybreakthrough would depend greatlyupon concessions that Members arewilling to make for the sake of themultilateral trading system. It isparticularly disappointing that theEuropean Union (EU) and theUnited States (US) are not willing toconcede much ground for thedeveloping countries, including theleast developed countries (LDCs), incrucial areas such as agriculture butcontinue to link any reform withreciprocal concessions by the latter

on lowering industrial tariffs.3 Forthe moment, the trade stalematebegs the question as to whether theDoha Round – also known as DohaDevelopment Agenda (DDA) – canbe completed by the extendeddeadline of December 2006.

It is pertinent to recall that theexisting 148 Members were sup-posed to reach “first approxima-tions” of a deal by 31 July 2005, andhaving been unable to do so,resumed talks in September. How-ever, their inability to agree onmodalities subsequently makes itclear that instead of being a mile-stone, the Hong Kong Ministerial

What will

Shyamal Krishna Shresthaachieve?HONG KONG


COVER FEATURE

may prove to be a non-event, savefor some minor issues like accessionof new Members and routinestatements.

Draft Ministerial TextIn accordance with the procedureset out at the General Councilmeeting in October and the meet-ings of the Trade NegotiationsCommittee (TNC) in September andOctober, the WTO DG introducedthe Draft Ministerial Text for theSixth Ministerial Conference at aninformal meeting of heads ofdelegations on 26 November atWTO Headquarters in Geneva.Although the Text is a “first draft”,it reflects the culmination of tradenegotiations undertakensince the GC Decisionof 1 August 2004 or theJuly Package (JP). Thesectoral issues are putin Annexes A – F;which addresse agricul-ture, non-agriculturalmarket access (NAMA),services, rules, tradefacilitation, and specialand differential treatment (S&DT).Although the entire Text highlightscontinuing divergence, it may stillbe worthwhile to note the commit-ment made by Members towardsDeclarations and Decisions adopt-ed at Doha. However, whether thesecommitments will translate intorealities is yet to be seen. Thefollowing sections summarise thenegotiations carried out hitherto,depicting the gaps between ambi-tions and realisations.

AgricultureAfter being virtually neglectedthrough decades of rapid tradeliberalisation, agricultural tradereform package – consisting ofdomestic support, export subsidiesand market access – has become oneof the most contentious issues intrade negotiations. In fact, the lackof progress in agricultural reformhas led to several missed deadlinesin the latest round of negotiations,putting DDA itself at risk. It iswidely recognised that unless thereis significant progress on agricul-

tural negotiations, discussions onother issues are not likely to makeany headway. Annex A of JPcontains modalities for negotiationson agriculture with regard todomestic support, export competi-tion and market access.4 The 22November Draft Text underlies that:“much remains to be done in orderto establish modalities and toconclude the negotiations”.5

Domestic Support: JP includestargets for the reduction of domesticsupport and specifies that Blue Boxlevels (the most trade distorting

subsidies) would be capped.In case the Agreement onAgriculture (AoA) is imple-mented from 2007 onwards,Members would be requiredto reduce their overall trade-

distorting support by 20percent in the first yearitself, comprising the finalbound total aggregatemeasurement of support(AMS), the permitted deminimis levels and thepermitted Blue Box levels.

However, even the 20 percentreduction would not change theexisting levels of support signifi-cantly as the reduction would bemade from bound rather thanapplied levels. The reduction wouldbe made under a tiered formula thatcuts subsidies progressively: higherlevels of trade-distorting domesticsupport being subject to greaterreduction. The Annex also capsproduct-specific AMS at averagelevels, based on a methodology to beagreed, for preventing circumven-tion of obligations through transferof subsidies between differentsupport categories.

Currently, there is agreementwith regard to three bands foroverall cuts by the developedcountries. The thresholds for them(in US$ billion) are 0 – 10; 10 – 60and >60. The cuts would be in theorder of 31 percent – 70 percent forthe first band; 53 percent – 75percent for the second band and 70percent – 80 percent for the thirdband.

On product-specific de minimis

and non-product-specific de mini-mis, there is a zone of engagementfor cuts between 50 percent – 80percent for the developed countries.Members are of the view that thereshould be no cut in de minimis forthe developing countries. However,for those developing countries withno AMS, there should be no cut. Forthose developing countries with anAMS, it should be less than two-thirds of that for the developedcountries.

There is no consensus onreducing Blue Box subsidiesalthough one proposal sought tolimit the current 5 percent ceiling to2.5 percent. Regarding AMS, thereappears to be convergence that thetop tier should be US$ 25 billionand above (subject to between 70percent – 83 percent cut). Diver-gence persists over the ceiling forthe bottom two bands: between US$12/15 billion and US$ 25 billion(subject to 60 percent – 70 percentcut); and below US$ 15 billion/US$12 billion (subject to 37 percent – 60percent cut).

Export Competition: JP reflectsagreement among Members toestablish detailed modalitiesensuring the parallel elimination ofall forms of export subsidies anddisciplines on export measures withequivalent effect by a credible enddate. JP also encompasses exportcredits and credit guarantees orinsurance programmes. Trade-distorting practices of exportingpublic enterprises and the provisionof food aid, not in conformity withoperationally effective disciplines tobe agreed in order to preventcommercial displacement, are alsoto be disciplined.

The Draft Ministerial Text sets2010 as the end date for eliminationof all forms of export subsidies.Members have suggested adoptingthe principle of “front-loading” oraccelerated elimination for specificproducts, particularly cotton.

Market Access: Market Access refersto the gradual reduction andelimination of tariffs on internation-ally traded goods. Members agreed


COVER FEATURE

for certain tariffs lines and perhapsnone for others”.7

The Annex also specified thatflexibilities for the developingcountries would include applying“less than formula cuts” to upto acertain percentage of tariff lines, orkeeping “as an exception, tarifflines unbound, or not applyingformula cuts for upto [ ] percent oftariff lines provided they do notexceed [ ] percent of the total valueof a Member’s imports”. Thebracketed figures are open tonegotiations. The NAMA frame-work stipulated that the non-advalorem duty should be convertedinto ad valorem ones, making tariffprotection transparent for exportingcountries, which face higher level ofprotection when prices of theirexports fall. Since most developingcountries still have a substantialportion of their industrial tariffsunbound, they are expected to bindsubstantial portion of their tarifflines.

Annex B also suggests thatnewly acceded countries may not berequired to undertake any majortariff cuts as they have alreadymade extensive market openingcommitments. Duty-free and quota-free market access to least devel-oped country (LDC) products havebeen left at the discretion of thedeveloped country participants and“other” participants, without anyagreed deadline. The developedcountries maintain around anaverage of 3.8 percent tariff onmanufactured products and thedeveloping countries either main-tain very high bound tariffs or havenot bound a significant portion oftheir tariff lines at all.

Although these recommenda-tions laid down a clear road maptowards industrial trade liberalisa-tion, Members have hitherto beenunable to establish full modalitiesgiven the lack of agreement onvarious elements in the NAMAframework, including the formula,paragraph 8 flexibilities andunbound tariffs.8

The only achievement is that asin agricultural market access, therehas been agreement on converting

to use a tiered formula; classifyingtariffs into various bands forsubsequent reduction from boundrates, with higher tariffs being cutmore than lower ones. The actualmodalities – the number of bands,threshold for defining bands andtype of tariff reductions within eachband – are subject to negotiations,but which must ultimately lead to“substantial improvement” inmarket access for all products.

Members agreed on ad valoremequivalents and have arrived at aworking hypothesis of four bandsfor structuring tariff cuts. The bandsand the range of tariff cuts (inbrackets) are as follows: Band 1 of 0percent – 20/30 percent (20 percent– 65 percent); Band 2 of 20/30percent – 40/60 percent (30 percent– 75 percent); Band 3 of 40/60percent – 60/90 percent (35 percent– 85 percent) and Band 4 of greaterthan 60/90 percent (42 percent – 90percent). Although there has beenconsiderable convergence onadopting a linear-based approachfor reductions within those bands,Members have not yet formallygiven up their divergent positionsso there is a need to narrow theextent of remaining divergence.Further, convergence remainselusive on the issue of sensitiveproducts as proposals extend fromas low as 1 percent to as much as 15percent of tariff lines. Differencesalso persist with regard to whatconstitutes special products and theoperationalisation of SpecialSafeguard Mechanism. However,for the latter, it is agreed that any

such mecha-nism shouldbe of atemporarynature.

Cotton: JPhad called toaddress thecotton issuewithin theagriculturenegotiationsin relation toall trade-distorting

policies affecting the sector in allthree pillars of AoA. The DraftMinisterial Text only reaffirmscommitment to ensure prioritisationof the cotton issue and to establishmodalities, which are in fullconfirmity with the terms of JP. Cotton is a vital crop for manydeveloping economies (especially inAfrica and Latin America) in termsof livelihoods. Developed countriesare blamed for distorting cottontrade through domestic support,export competition and marketaccess.6

Non-agricultural Market AccessNAMA negotiations were conduct-ed in the background of highoverall tariffs prevailing in thedeveloping countries on industrialproducts and high tariffs ondeveloping country exports in thedeveloped countries. The NAMAframework of JP in Annex B sets theframework for the pursuit of tariffcuts according to a non-linearformula and the reduction orelimination of non-tariff barriers(NTBs). Its level of specificity,however, is low reflecting manyissues where progress in thenegotiations has been limited.Members had to continue work ona non-linear formula applied on a‘line-by-line basis’ on non-agricul-tural products. However, it empha-sises the “special needs andinterests of the developing coun-tries, including through less thanfull reciprocity in reductioncommitments, and provision ofleeway to insist on only linear cuts


COVER FEATURE

non ad valorem duties to ad valoremequivalents. Regarding the non-linear formula, there has been someprogress as Members have beenfocusing on a “Swiss formula”although two variations remain: aformula with a limited number ofnegotiated coefficients and anotherwhere the value of each country’scoefficient would depend on theaverage tariff of bound rates of thatMember, thus leading to multiplecoefficients. The two variants of theSwiss formula would also deter-mine how other issues like tariffpeaks, tariff escalation and hightariffs would be reduced. Develop-ing country Members view theformula to affect a key principle ofDDA, which allows them flexibili-ties to undertake “less than fullreciprocity in reduction commit-ments” as laid down in paragraph8 of the NAMA framework. Devel-oped country Members feel suchflexibilities should be exploredthrough means other than tariffreductions; a proposal rejected bydeveloping country Members.

The issue of dealing with theWTO developing Members, whichhave not bound most of their tarifflines, has also become a subject ofintense discussion. There is agrowing consensus that unboundtariff lines should be subject toformula cuts provided there is apragmatic solution for those lineswith low applied rates. SomeMembers have expressed that theirunbound tariff lines with highapplied rates are also sensitive andshould be given due consideration.

ServicesWhen the General Agreement onTrade in Services (GATS) wasprepared during the UruguayRound (UR), Members of theGeneral Agreement on Tariffs andTrade (GATT) were allowed tochoose the sectors for liberalisationas in agriculture. They also agreedthat there would be further liberali-sation in this sector in a progressivemanner. In the run-up to the DohaMinisterial, the notion of reciprocalcommitments emerged. While thedeveloped countries wanted to see

hitherto protected sectors in thedeveloping countries liberalised, thelatter wanted to see hitherto protect-ed mode of service delivery libera-lised. Accordingly, DDA mandatednegotiations on trade in serviceswith a view to promoting theeconomic growth in all tradingpartner countries. Following thismandate, the focus of servicesnegotiations has been on bilateralrequest-offers.

JP too supports this mandateand aims to achieve progressivelyhigher levels of liberalisation withno a priori exclusion of any services

or mode of supply. Since the offerssubmitted is not upto the expecta-tions of Members, JP set the dead-line to submit revised offers to May2005, which passed without anysatisfactory offers being tabled.

Annex C of the Draft MinisterialText addresses services by reiterat-ing the purpose of achieving aprogressively higher level ofliberalisation of trade in serviceswith regard to all Modes (1–4) andwith appropriate flexibility forindividual developing countryMembers.9

In addition to bilateral negotia-tions, Members have agreed that therequest-offer approach should bepursued on a plurilateral basis inaccordance with the principle of theGATS and the Guidelines andProcedures for the Negotiations on

Trade in Services, the results ofwhich it suggests should be extend-ed on a most favoured nation (MFN)basis. Perhaps recognising theexclusionary process of such anapproach, the Text recommendsthat such plurilateral talks shouldbe organised to facilitate the partici-pation of all Members while it alsocalls for due consideration to begiven to proposals on trade-relatedconcerns of smaller economies.Moreover, it is suggested that in thecourse of negotiations, Membersdevelop methods for the full andeffective implementation of the LDCModalities, which is nothing novelas such Modalities are also suggest-ed in various S&DT clauses thatlitter the DDA text. The developingcountries and the LDCs have beenpromised targeted technical assis-tance to be provided through theWTO Secretariat, apparently toensure their effective participationin services negotiations.

Trade FacilitationDespite the potential benefits, thedeveloping countries have beenunable to independently undertaketrade facilitation measures thatcould help them overcome supply-side bottlenecks and enhanceefficiency. The inclusion of thisissue for negotiations in DDA,“subject to explicit consensus on themodalities of negotiations”, hadcreated a sharp division betweenthe North and the South in the run-up to the Cancún Ministerial in2003. Within JP, it is the only“Singapore issue” in which Mem-bers reached an agreement toconclude negotiations as a part of“single undertaking” under DDA.Annex D of JP stated that negotia-tions “shall aim to clarify andimprove relevant aspects of ArticlesV, VIII and X of the GATT 1994 witha view to further expediting themovement, release and clearance ofgoods, including goods in transit”.Substantive negotiations havestarted with several submissionsmade on Articles V, VIII and X byWTO Members. The debate has, sofar, focused on the scope of trans-parency requirements, the scope for

Despite the potentialbenefits, the developingcountries have not beenable to undertake trade

facilitation measures thatcould help them

overcome their supply-side bottlenecks and

enhance efficiency andthis issue remains a major

concern for thedeveloping countries in

the Hong KongMinisterial as well.


COVER FEATURE

S&DT, the costs of trade facilitationand the required technical assis-tance in the case of the developingcountries and the LDCs.

Trade facilitation is covered inAnnex E of the Draft MinisterialText.10 It is revealed that the Negoti-ating Group on Trade Facilitationmet 11 times since its establishmenton 12 October 2004 to undertake themandate contained in Annex D ofJP. Members also made contribu-tions towards all areas covered bythe mandate, both verbally and inwriting. A considerable period wasspent on addressing the negotiatingobjectives of improving and clarify-ing relevant aspects of GATTArticles V, VIII and X.

The Negotiating Group hasrecognised the valuable assistancecurrently being provided in theareas of technical assistance andcapacity building to allow thedeveloping countries and the LDCsto fully benefit from the negotia-tions. Hence, it calls upon devel-oped country Members to intensifytheir support in a comprehensivemanner and on a long-term andsustainable basis, backed by securefunding.

Special and DifferentialTreatmentImplementation-related problemsin relation to the WTO Agreementsand S&DT have been discussedever since DDA was launched butthere has not been significantprogress. JP called for the review ofall outstanding Agreement specificproposals to be reported to the GCfor clear recommendations ondecisions. The Committee on Tradeand Development was instructed toreport to the GC “as appropriate”on all other outstanding works,such as a mechanism to monitorthe implementation of S&DTobligations and the incorporationof S&DT into the architecture ofWTO rules.

Among the issues agreed fornegotiations under JP, tradefacilitation is the only issue thatprovides a leeway to the develop-ing countries not to implementtheir part of commitments in the

absence of technical assistance. Onareas such as agriculture, S&DTprovisions are mostly related tohigher transition period and lowerlevel of reduction coefficients. Thelanguage on S&DT provisions isnon-binding and depicts bestendeavour nature. Moreover,though the LDCs are not requiredto participate in any reductioncommitment, the non-bindinglanguage relating to duty-free andquota-free access has furtherweakened their bargaining posi-tion in their efforts to obtain suchfacility from the developed coun-tries. According to Annex C of JPtitled Recommendations of theSpecial Session of the Council forTrade in Services: “Members shallstrive to ensure a high quality ofoffers, particularly in sectors andmodes of supply of export interestto developing countries, withspecial attention to be given toLDCs”.11 This language is mean-ingless to the developing countriesand the LDCs as there is a vastdifference between “shall strive toensure” (existing text) which is notmandatory and “shall ensure”,which would have been mandato-ry. As far as services are concerned,Members, as per the Text, “note theinterest of develop-ing countries as wellas other members onMode 4, i.e., move-ment of naturalpersons”. However,noting the interestand actually makinga commitment toliberalise the sameare not the samething.

While recognis-ing the progressmade on the LDCAgreement-specificproposals, Annex Fof the Draft Ministe-rial Text categorisesS&DT proposalsinto three maincategories. These relate to: i)Understanding in Respect ofWaivers of Obligations under theGATT 1994; ii) Decisions on

Measures in Favour of LDCs; andiii) Agreement on Trade-RelatedInvestment Measures. In reality(and as the Draft itself states),substantial work remains to bedone with regard to strengthenS&DT and make them “moreprecise, effective and operation-al”.12

Other IssuesThe Draft Ministerial Text alsoaddresses other issues under itsambit such as Implementation;Trade Related Aspects of Intellectu-al Property Rights (TRIPS) andPublic Health; Small Economies;Trade, Debt and Finance; Tradeand Transfer of Technology, TRIPSnon-violation and situationcomplaints; E-commerce; LDCs;Integrated Framework; TechnicalCooperation; Commodity Issues;Coherence, Aid for Trade; andAccessions.

On all these issues, the Textreaffirms commitments to adhere tothe spirit of the Doha MinisterialDeclaration, negotiations andreports by the GC to expediteintended actions in these areas. Itmay be worth noting that there isonly agreement on expanding Aidfor Trade to help the developing

countries, particularlythe LDCs, to build thesupply-side capacityand trade-relatedinfrastructure.

ConclusionThe Draft MinisterialText issued on the eveof the Sixth WTOMinisterial Conferenceunderscores the factthat Members areunlikely to reachsubstantial agreementon priority issues inHong Kong. Neverthe-less, the Ministerialcan be a stepping stonein the right directionprovided the spirit of

the Doha Round is preserved forfurther trade talks after the Ministe-rial. Negotiations conducted, so far,

Implementation-related problemsin relation to the

WTO Agreementsand S&DT havebeen discussedever since the

DohaDevelopmentAgenda was

launched but therehas not been

significantprogress.


COVER FEATURE

reinforce the view that the ambi-tious trade liberalisation agenda ofthe Doha Round, which keeps theinterest of the developing countriesand the LDCs at the forefront, is notlikely to yield results unless thedeveloped countries are willing tomake adequate concessions. Ifnegotiations continue along theircurrent trend, it is doubtful that theso-called DDA will bring tangiblebenefits to the developing countries.

What are the main issues in theDoha Round over which there isconsiderable disagreement? Thenegotiations have witnessed astand-off mainly on agriculturebetween developing countries ledby G-20 and G-33 on the one hand,and with the EU and the US on theother. The former group has beeninsisting that the latter undertakecomprehensive policy reformsinvolving their agricultural sectorsby reducing subsidies and tariffs.Reduction of farm subsidies isparticularly vital as it providessubstantial gains for the develop-ing countries. Developing countryfarmers suffer huge losses in exportearnings as the subsidies in richnations keep international prices ofmajor agricultural commodities atartificially low levels. They havealso been facing adverse terms oftrade for decades. However, the EUand the US have stated that anyconcessions by them on agriculturewould have to be matched byreciprocal concessions on the partof the developing countries byopening their markets vis-à-vissteep tariff reduction for industrialgoods from industrialised na-tions.13 If the developing countrieswere to resist such a deal anylonger, it would seem they were notdoing enough to salvage the DohaRound. However, agreeing to suchan unfair deal would furtherjeopardise their economies. Suchstrategies by the developed coun-tries reflect protectionist intentionsas well as the their renewedattempts at attracting concessionsthrough pressure tactics. Thedeveloping countries would beadversely affected; as they wouldnot witness a rise in their share of

NOTES

6 In March 2003, the WTO DisputeSettlement Body set up a Panel torule on Brazil’s claim that eight USmeasures or subsidies provided tothe US producers, users andexporters of upland cotton havecaused harm to Brazil’s interests. InSeptember 2004, the WTO Panel thatinvestigated the case issued a reportoverwhelmingly in Brazil’s favour.Consequently, the US appealed thecase to the WTO Appellate Body.Brazil also made mainly “conditional”appeals on certain aspects of thePanel ruling. On 3 March 2005 theAppellate Body issued its report onthe appeal, upholding the Panel rulingon all of the critical points of thedispute. (see http://www.agric.gov.ab.ca/$department/deptdocs.nsf/all/psc9805)

7 See WTO. 2004. Above note 4.

8 See WTO 2005. Above note 5.

9 See WTO 2005. Above note 5. Thefour modes of supply in the GATSframework are Mode 1 (Consump-tion abroad), Mode 2 (Cross-bordersupply of services), Mode 3(Commercial presence of servicesproviders) and Mode 4 (Movementof natural persons).


11 See WTO. 2004. Above note 4.


13 As mentioned in above note 2.

14 Chandrasekhar, CP. 2004. "Historyas farce", Frontline. EconomicPerspectives. Vol. 22, No. 24, 19November–2 December 2005.Chennai: Hindu Group of Publica-tions (see http://www.flonnet.com/fl2224/stories/20051202003510700.htm)

15 For a recent comment on the trendsin negotiations on the Doha Roundof the WTO, see Das, BL. 2005."Bumpy Road to Hong Kong",Economic and Political Weekly.October 15. Mumbai.

1 The Economist. 2005. “Dark cloudsover Doha”, 10 November 2005(http://www.economist.com/agenda/PrinterFriendly.cfm)

2 WTO DG Pascal Lamy told a headsof delegation meeting on 10 Octoberthat “there is not a sufficient level ofconvergence among Members onthe level of ambition in the key areasof the negotiations” for the chairs ofthe negotiating groups to puttogether ‘full modalities’, meaning thata text with numbers or parameterson all elements” of the 2004 JulyPackage (WT/L/579). He emphasisedthat this does not mean thatMembers wanted to lower their levelof ambition for the Doha Round as awhole. (See BRIDGES Weekly, 9November 2005, http://www.ictsd.org/weekly/05-11-09/story1.htm)

3 For instance, the US has empha-sised that its reforms on domesticsupport is conditional on reducedfarm tariffs in other developed anddeveloping countries, as well assubstantial trade liberalisation inservices and industrial goods. Thisconflicts with the view of the G-20,composed of 20 developingcountries who opine that suchliberalisation should be unconditional.It is argued that industrialised nationshave taken resort to tariffs and thesame policy space must be made tothe developing countries, especiallythe LDCs. For a perspective ofdeveloping countries in terms ofNAMA negotiations, see Akyuz, Y.2005. The WTO Negotiations onIndustrial Tariffs: What is at Stakefor Developing Countries? Geneva:Third World Network.

4 World Trade Organisation. 2004.Doha Work Programme: DecisionAdopted by the General Council of 1August, WT/l/579, Geneva: WTO.

5 World Trade Organisation. 2005.Preparations for the Sixth Sessionof the Ministerial Conference. DraftMinisterial Text, 28 October,Geneva: WTO.

global agricultural trade nor beable to undertake sustainableindustrialisation.14

It may be reminded that theconcept of “development dimen-sion” is an inherent part of DDA;and unfair terms on developingcountry Members by developedcountry Members defeat thatpurpose. The developing countries,thus, have to make concrete efforts

to ensure that the negotiations areturned into directions that can bebeneficial to them.15 The future ofthe Doha Round hinges entirelyupon whether the developingcountries and the LDCs can get afair deal from the multilateraltrading system. n

(Mr Shrestha is Programme Officer atSAWTEE)


AGRICULTURE

Implications

Posh Raj Pandey

Agriculture Negotiations

LDCsfor

tural sector, which they need for pro-moting employment, enhancing ruraldevelopment and ensuring food se-curity. However, after a decade of theWTO, the progress in these directionsis unsatisfactory.

The Agreement on Agriculture(AoA) has failed to deliver on itspromises. Commitments for reformsin world agricultural trade remainedconfined to rhetoric. During negotia-tions for reforms, developed and de-veloping Members remained indiffer-ent to each other’s positions andcould not introduce measures thatcould have better integrated the LDCs.In fact, nothing significant was doneuntil 2000 and the expectations of theLDCs remain unmet.

When the Doha Round of negoti-ations commenced in November2001, the expectations of the LDCsrose because the Doha DevelopmentAgenda (DDA) brought the issue of“development” at the centre stage ofthe multilateral trading system. TheDoha Declaration came up withpromises that envisaged a fair globaltrading environment for the LDCs.1

The ongoing negotiations on agriculture have the potential torestrict the policy flexibility of the least developed countries thatthey need for developing their agricultural sector.

Ever since the World Trade Organ-isation (WTO) came into being,

one of the fundamental issues for theleast developed countries (LDCs) hasbeen what the multilateral tradingsystem can provide them to developtheir agricultural sector. They expect-ed that the multilateral trading sys-tem, as the WTO intended, would re-duce distortions in global agricultur-al markets, securing enlarged and

predictable export markets inclusiveof trade preferences for their agricul-tural products. They also hoped thatreforms in international trade in ag-riculture would not restrict the poli-cy flexibility to support their agricul-


AGRICULTURE

The expectations of the LDCs, how-ever, were not fulfilled during subse-quent negotiations. Due to this andmany other reasons, the Doha Roundwitnessed a setback following thefailure of the Fifth Ministerial in Can-cún in September 2003.

In August 2004, WTO Membersthen made decisions on the frame-work for the modalities of negotia-tions – known as the July Package(JP). Under JP, a separate annex isdevoted for the Framework Establish-ing Modalities in Agriculture. Theframework does not challenge thefundamental structure of AoA and thereform agenda revolves around orig-inal three pillars of AoA – market ac-cess, domestic support and exportcompetition. However, crucial tech-nical aspects, such as the exact de-gree of tariff reduction (bands andthresholds) and the level of cuts indistorting farm support were left tofuture negotiations. The WTO Gener-al Council has still been working tofinalise the modalities so as to reachan agreement during the Hong KongMinisterial in December 2005.

Against this backdrop, the natu-ral question for the LDCs is how theongoing WTO negotiations on agri-culture will impact on their economyand agricultural policies. Since JPexempts the LDCs from reductioncommitments, they are not requiredto make any commitment on marketaccess, domestic support and exportsubsidies. It means that the outcomesof ongoing negotiations do not con-strain the LDCs to protect their do-mestic farm sector up to the existinglevel. Similarly, the LDCswould not be required tochange their agricultur-al support policy both fordomestic consumptionand exports. Moreover,the outcomes, if it main-tains the spirit of DDA,further explained by JP,have the potential to re-duce distortions in glo-bal agricultural marketsand expand trade oppor-tunities for the LDCs.

Despite these, it can-not be concluded that thenew rules shall not have

any negative impact on the LDCs. Infact, there will be greater chances ofrestrictions in their policy flexibilitythat they need to develop their agri-cultural sector. It may also reduce thevolatility of world prices. Since manyLDCs are net food importing countries,they may also face a rise in world foodprices. It may also result in erosion ofpreferences. In particular, for theLDCs, the outcomes of agriculturalnegotiations will play a critical role inindustrialisation, rural development,food security and more broadly, pov-

erty reduction. In the light of these facts,what should be the agenda of the LDCsduring the ongoing negotiations andthe negotiations during the HongKong Ministerial?

Market AccessThe export baskets of the LDCs areconcentrated in few products and ina few countries. The recent trend inthe destination of LDC exports showsthat the landscape of agricultural ex-port markets has been shifting from

the developed to the developing coun-tries for most LDCs. The exports tothe developed countries are mostlydone on the basis of the unilateralpreferences provided by them. Thus,the focus of the LDCs on market ac-cess should be on opening marketsin the developing countries ratherthan the developed countries. Simi-larly, it should also be noted that ag-gressive tariff reductions may erodethe existing preferences.

Domestic SupportThe issue of the reduction in domes-tic support is a double-edged sword.On the one hand, it provides theLDCs a level playing field to com-pete in the domestic market of thesubsidies providing countries. Onthe other hand, being net food im-porters, it may increase internation-al prices, thereby increasing theirimport bills. Thus, the LDCs need tohave a very cautious approach onthe issues of reduction in domesticsupport. They need to maintain atrade-off between the possibility ofexport expansion due to reductionin distortions in international mar-ket and the potential increase in theimport bills. Similarly, the LDCs,which are exporting processed food,also need to look at the increase inthe prices of raw materials, whichmay result in potential erosion incompetitive edge. In the review pro-cess of “green box” measures, theLDCs need to see that the subsidiesin infrastructure development aswell as land reform are not taken outof “green box” and the “green box”

subsidies are cappedfor them.

Export SubsidiesWTO Members havebeen providing exportsubsidies to most of theproducts of export inter-est to the LDCs. It hasdistorted the globalmarket and is prone todisplace their productsin the export markets.Thus, it is in the interestof the LDCs if exportsubsidies are eliminat-ed in a short duration

The LDCs need tomaintain a trade-off

between the possibilityof export expansion due

to reduction indistortions in

international market andthe potential increase in

the import bills.


AGRICULTURE

with significant downpayment and if it isagreed to standstillcommitment on allforms of export subsi-dies during negotia-tions. However, theLDCs are required topay attention to thepossibility of in-creased import bills. Inaddition to retainingmarketing and trans-port subsidies, exportcredits should be made permissiblefor the LDCs.

Food AidThe Marrakesh Decision establisheda mechanism to secure adequate lev-el of food aid to meet the needs of theLDCs and net food importing devel-oping countries. The proposed mech-anism includes access to financialmechanism to smooth short-term dif-ficulties in financing normal levels ofcommercial imports, and financialand technical assistance to improveproductivity and infrastructure oftheir agricultural sector. The LDCsshould pursue to realise these deci-sions. It is important that the issuesof food aid are not tied up only withexport competition and be pursuedthrough a holistic approach.

Preference ErosionThe preferences provided by the Eu-ropean Union and other developedcountries have contributed to expandthe exports of the LDCs. Erosion ofpreferences should be considered inthe negotiations so that its effect couldbe slowed down. It could be attainedeither through the tariff reduction for-mula that cuts tariffs in the major ex-portable products of the LDCs thatenjoy preferential market access atlower rate or inclusion of these prod-ucts in the sensitive list. Moreover,preference providing Members aresupposed to undertake, as proposedby Harbinson Text, targeted techni-cal assistance programmes and oth-er measures to support preference-re-ceiving countries in efforts to diversi-fy their economies and exports.

Special Safeguard Mechanism

Special SafeguardMechanism (SSM)would provide the req-uisite policy space andflexibility for policy in-terventions needed tosafeguard non-eco-nomic objectives suchas food security, liveli-hood security and ru-ral development needs.More specifically, itshould also insulatethe markets of the de-

veloping countries from negative ef-fects of import surge and declininginternational prices. The available in-formation show that there has beenan increasing tendency in the importsurge of food products in the LDCs.Thus, the issue of SSM is very crucialfor them. SSM should be automatical-ly activated and in addition, the trig-ger mechanism has to be price andvolume based. It should be availableto all agricultural products and thatapplicable remedies have to includeadditional duties and quantitative re-strictions. However, in order to pro-vide predictable market access to theLDCs, some restraints on the use ofSSM on their exports should beshown. The provision of the Agree-ment on Safeguards could be a guid-ing principle in this regard.

Special and Sensitive ProductsJP stipulates that all Members maydesignate an appropriate number oftariff lines to be treated as “sensitiveproducts” for tariff reduction. Simi-larly, it allows developing countriesto designate “special products” basedon the criteria of food security, liveli-hood security and rural developmentneeds. The LDCs need to ensure thatspecial and sensitive products do notadversely affect their market accesssituation.

Duty-free and Quota-freeMarket AccessAccording to paragraph 45 of theAgriculture Framework, the LDCsshould be provided with duty-freeand quota-free market access in de-veloped country markets and in themarkets of the developing countriesin a position to make such conces-

NOTE1 The Doha Round was initiated at the

Fourth WTO Ministerial at Doha in2001. Among others, it aims atcomprehensive negotiations foragricultural reform targeting substan-tial improvements in market access;reduction of, with a view to phasingout, all forms of export subsidies andsubstantial reductions in tradedistorting domestic support.

sions. The LDCs must be given effec-tive market access bound in the WTO,for all their agricultural productsthrough duty-free market access by alltrading partners. Such market accessought to be immediate and predict-able.

CottonIn view of the high intensity distor-tions created by cotton subsidies, anambitious specific cotton related de-cision should be made within AoA.The decision should include the elim-ination of all cotton related subsidies(both domestic and export) no laterthan the Sixth Ministerial as proposedby the African Group. The decisionshould also include duty-free andquota-free market access for all cot-ton and derived products. As a partof development aspects of cotton is-sue, the WTO, in coordination andwith the financial support of othermultilateral and bilateral donor agen-cies, should establish a fund to helpcotton-producing LDCs in modernis-ing the cotton sector.

ConclusionThe above observations indicate thatthe issues on the negotiation tablehave disproportionate impacts for theLDCs. The issues of market sccess,particularly in the developed coun-tries, and the domestic support are notthe priority areas, whereas exportcompetition and the peripheral issuesfor most of the developed and moreadvanced developing countries suchas food aid, preference erosion, SSM,supply capability bear significantimportance for the LDCs. Thus, it isnecessary that the negotiating capi-tal be channelised to form allianceson case-by-case basis. n

(Dr Pandey is President of SAWTEE)

Special SafeguardMechanismshould be

automaticallyactivated and in

addition, thetrigger

mechanism has tobe price and


NAMA

The Fourth Ministerial Conferenceof the World Trade Organisation

(WTO) at Doha in 2001 provided amandate to conduct negotiations on“market access for non-agricultureproducts”. Since then, these negotia-tions have been termed as non-agri-cultural market access (NAMA) ne-gotiations.

The background of NAMA nego-tiations includes addressing the highoverall tariffs on imports prevailingin the developing countries and dis-proportionately high tariffs on anumber of products in the developedcountries of special export interest tomany developing countries. Despitethe recent trade reform measures inthe South Asian countries, the aver-age industrial tariffs in the region areamongst the highest in the world.1

There is also a general recognition ofthe importance of tariffs in promot-ing industrial development in SouthAsian economies.2 In addition, inter-national trade taxes account for alarge share in the government reve-nue budget of these countries.3 There-fore, future tariff reductions may re-sult in reduced public resources, se-riously affecting the sectors/house-holds dependent on the provisioningof the public services. From these con-texts, the outcome of NAMA negotia-tions is likely to have important im-plications for the South Asian coun-tries.

In the Doha Ministerial, Members

agreed to engage in negotiations onthe basis of agreed modalities, to re-duce or as appropriate eliminate tar-iffs – including the reduction or elim-ination of tariff peak, high tariff, andtariff escalation – as well as non-tar-iff barriers (NTBs). The Declarationlaid emphasis on comprehensiveproduct coverage without any a prio-ri exclusion. It was explicitly men-tioned that liberalisation measuresshould particularly consider theproducts that are of export interest tothe developing countries and the ne-gotiations “shall” take fully into ac-count the special needs and interestsof the developing countries and theleast developed countries (LDCs). TheDeclaration also called for includingappropriate studies and capacitybuilding measures to assist the LDCsparticipate effectively in the negotia-tions.4 Based on the Doha Declara-tion, which established the modali-ties of market access for non-agricul-tural products, the July Package (JP)provided some further directions forfuture negotiations.5

Tariff Reduction FormulaIn JP, WTO Members agreed on a non-linear formula applied on a line-by-line basis for future tariff reductions.However, there has been a deadlockwith regard to the choice of the for-mula. Particularly, how the “specialneeds and interests of the developingcountries, including through less

than full reciprocity in reduction com-mitments” are to be taken into con-sideration, has been a matter of con-troversy. The formula, proposed bythe Negotiating Group on Market Ac-cess Chairman’s Draft (NGMA-CD)based on a modified version of theSwiss formula used during the TokyoRound, has drawn a lot of attention.However, it does not indicate any val-ue of a crucial coefficient, which isthe determinant of the extent of tariffcuts. Currently, negotiations are un-derway around a number of alterna-tive formula.

JP exempts the developing coun-tries and the LDCs with less than 35percent non-agricultural bound tar-iffs from making tariff reductions. Italso provides longer implementationperiods for the developing countries,allowing them to apply less than for-mula cuts for up to 10 percent of thetariff lines provided that the cuts areno less than half the formula cuts andthat these tariff lines do not exceed 10percent of the total value of a Mem-ber’s imports.

Binding CoverageThe provision of a comprehensivecoverage has been reiterated in JP. Al-though the LDCs are not required toundertake tariff reduction commit-ments, they are expected to bind 100percent of their tariff lines at an aver-age level that does not exceed the over-all average of bound tariffs of all thedeveloping countries after full imple-mentation of the current concessions.Tariff reductions are to commence fromthe bound rate, while for unbound tar-iff lines, the basis for commencing shallbe [two] times the most favoured na-tion (MFN) applied rate in the base yearof 2001. All non-ad valorem duties willhave to be converted into ad valoremequivalents on the basis of a “method-ology to be determined” and bound inad valorem terms.

Other Issues: SectoralApproach and NTBsApart from the general tariff reduc-tion and increased coverage, elimina-tion and/or harmonisation of tariffsin certain sectors – to be decided dur-ing negotiations – has figured outprominently. The seven sectors listed

A Mixed Bag forSOUTH ASIAN Countries

Mohammad A. Razzaque

NAMAThe outcome of the negotiations on non-agricultural marketaccess is likely to have serious implications for the South Asiancountries but at different levels.


NAMA

in the NGMA-CD for complete elimi-nation of tariffs are fish and fish prod-ucts, leather goods, textiles and cloth-ing, footwear, stones, gems and pre-cious metals, electronics and electri-cal goods, and motor vehicles, partsand components. Possibilities of sup-plementary modalities such as the“zero-for-zero” initiative are also be-ing discussed. Although NTBs con-tinue to affect trade in industrialgoods, directions in JP seem to sug-gest that significant progress on themmay not be achieved in the near fu-ture. JP encourages all participants tonotify NTBs and to proceed with iden-tification, examination, categorisa-tion, and ultimately, negotiations onthem. It is specified that modal-ities for addressing NTBs“should” fully take into ac-count the principle of specialand differential treatment(S&DT) for the developing coun-tries and the LDCs.

Implications for SouthAsian CountriesAs per JP, the South AsianLDCs, viz., Bangladesh, theMaldives and Nepal, are notrequired to undertake any tar-iff reduction commitments onNAMA.6 They have also been exempt-ed from participating in the sectoralapproach to liberalisation.7 However,these countries are expected to sub-stantially increase their level of bind-ing commitments. For the Maldivesand Nepal, the tariff binding cover-age is already very high; 96.6 and 99.3percent of their non-agricultural tar-iff lines are bound. However, the cov-erage for Bangladesh is very low at 3percent, which implies that it mayhave to take commitments to bind asignificant proportion of its industri-al products as part of the currentround of negotiations. This might notcause any serious problem since hav-ing implemented the unilateral tradeliberalisation programme, averagetariffs in Bangladesh have fallen to alow level. In addition, for most devel-oping countries, the bound tariffs aremuch higher than their applied rates,implying that the provision requiringthe bound tariffs to be at an averagelevel not exceeding the overall aver-

age of bound tariffs of all developingcountries might not prove to be verystringent.8 Nevertheless, consideringthe vulnerabilities of these poor coun-tries, the binding of industrial tarifflines should be undertaken on a vol-untary basis by these countries. Forthe developing South Asian coun-tries, viz., India, Pakistan and Sri Lan-ka, the binding coverage rates are 69.8,36.9, and 28.3 percent respectively. Paragraph 6 of JP mentions thatparticipants with a binding coverageof non-agricultural tariff lines of lessthan 35 percent, as an exception,would be exempted from making tar-iff reductions through the formula.This implies that the formula ap-

proach to tariff reductions is applica-ble to India and Pakistan only. Forthese two countries, the choice of tar-iff reduction formula will have impor-tant implications for their future tar-iff regime.

Will the reductions in tariffs resultin significant market access? Current-ly, the MFN tariffs in developed coun-tries average 3.8 percent. Consequent-ly, the market opening effect of fur-ther tariff liberalisation is likely to bequite limited. However, it needs to bepointed out that despite generally lowaverage tariffs, many product lines inthe developed countries are subject totariff peaks and tariff escalations.Such tariff peculiarities are mainlyconcentrated in labour intensivemanufacturing goods (for e.g., appareland footwear) in which the develop-ing countries and the LDCs possesscomparative advantage. Tariff reduc-tion in these sectors may benefit thesecountries substantially. Many devel-oping countries are now growing

markets in which trade preferencesgiven to the LDCs are very limited.Tariff cuts in the developing countriesunder NAMA negotiations wouldbroaden up market opportunities.Nevertheless, the South Asian LDCsmight still face difficulties in takingadvantage of this market liberalisa-tion as they will have to compete withother developing as well as devel-oped countries.

S&DT for the LDCs has so far beennon-binding in nature. JP leaves theduty-free and quota-free access of LDCexports at the discretion of “developedcountry participants and other partic-ipants who so decide” without anyagreed deadline.9

Under various regionaltrade arrangements and gener-alised system of preferenceschemes, the South Asian coun-tries have been enjoying prefer-ential tariff margins. With thefuture tariff cuts, the margin be-tween the MFN and preferen-tial rates could get eroded orcompletely eliminated. This islikely to have serious conse-quences for the South AsianLDCs. It has been estimated thatlosses due to erosion of prefer-ences could be US$ 222 million

for Bangladesh and about US$ 18million for Nepal.10 Accessing tradepreferences has been conditional oncomplying with the rules of origin(ROO) requirements of donor coun-tries. However, complicated ruleshave resulted in very low utilisationof trade preferences reserved for theLDCs.11 Therefore, erosion of prefer-ence along with the continuation ofrestrictive ROO will weaken LDCs’competitive position further.

The South Asian countries havelong been subject to NTBs, prevent-ing them from getting the benefits ofthe liberal trade regime. It is not clearhow the NAMA negotiations can ad-dress the problem of NTBs withoutconflicting and overlapping with themandate of other negotiatinggroups.12

Key Issues at Hong KongSome of the key issues that the SouthAsian countries may wish to put for-ward, negotiate, and pursue in the


WTO Hong Kong Ministerial are asfollows:• Despite the long-recognised need,

completely duty-free and quota-free access of LDC goods in thedeveloped countries has not yetbeen ensured.13 South Asian coun-tries should reiterate this demand,especially when negotiations onfurther reductions in MFN tariffson non-agricultural goods are un-derway. Advanced developingcountries should be urged to pro-vide market access facilities to theLDCs on a non-reciprocal basis.

• While considering the formulaapproach to tariff cuts, S&DT andthe principle of “less than full rec-iprocity for developing countries”must be reflected in the preferredformula. The adopted formulashould be effective in addressingtariff peak and tariff escalation.

• The implications of loss of govern-ment revenue emanating from thetariff-cuts must also be taken intoconsideration in granting longerimplementation period for the de-veloping countries.

• Concrete measures need to be un-dertaken to offset the preferenceerosion as a result of tariff-cutsunder NAMA negotiations. Estab-lishment of a CompetitivenessFund with contributions from thedeveloped and the advanced de-veloping countries in this regardcan greatly help supply-side ca-pabilities of the LDCs and weakdeveloping countries.14

• In the absence of flexible ROO,non-agricultural tariff reductionswill only deteriorate the competi-tiveness of the LDCs. Followingthe Dhaka International Civil So-ciety Declaration 2005, demandfor ROO that are flexible, non-trade restrictive, simplified, andLDC-friendly will be in the bestinterest of the poorest countries.

• Effective trade-related capacitybuilding measures should be con-sidered as an integral part ofNAMA modalities. This compo-nent should be strengthened alongwith the integrated framework ini-tiative of the WTO in order to im-prove the participation of theMembers in the negotiations and

NOTES1 Using the UNCTAD Trade Analysis &

Information System (TRAINS) tradeand tariffs data at the 6-digit HSclassification level, Raihan’s (2005)estimation of a cross-country tradebarrier index (TBI) ranks India as themost closed economy in the world,while Bangladesh, the Maldives, andPakistan are ranked respectively, 8th,9th, and 11th amongst a set of 119countries, for which information isavailable. Sri Lanka turns out to be amuch more open economy with a TBIrank of 76. See Raihan, S. 2005.“Dynamics of Trade Liberalisation inBangladesh”, Unpublished DoctoralThesis, IDPM, University of Manches-ter. Very recently, however, India hasslashed its tariffs further and hasbeen shown to have MFN averagetariffs lower than Bangladesh andPakistan (see, Mehta and Agarwal,2005, pp. 85, the full reference forwhich is given below).

2 Mehta, R and P. Agarwal. 2005. “Non-Agricultural Market Access: ABalancing Act for South Asia”, inMainstreaming Development inTrade Negotiaitons: Run-up to HongKong, South Asian Yearbook ofTrade and Development 2005, pp.81-103. New Delhi: Centre for Trade andDevelopment.

3 It has been shown that while tradetaxes contribute to less than threepercent of the government revenue indeveloped countries, they are in therange of 11-25 percent in the SouthAsian region.

4 Paragraph 16 in the Doha Declaration,WTO, Ministerial Declaration, WT/MIN (01)/Dec/W/1, 14 November2001.

5 “Doha Work Programme: DecisionAdopted by the General Council on 1August 2004”, WTO, WT/L/579, 2August 2004.

6 The other South Asian LDC is Bhutan,which is not a WTO Member.

7 This is clearly stated in paragraph 9of the July Package (JP).

8 The average bound tariff rate forWTO Members is 43 percent.Moreover, since the provision is

specified in terms of overall averagetariff rate, the scope of keeping ratessignificantly higher than the overallaverage on some sectors is retained.

9 This is specified in paragraph 7 of theJuly Package. See Adhikari, R. andSK Shrestha. 2005. From Doha toHong Kong: Issues for South Asia,Briefing Paper No. 1, Kathmandu:SAWTEE.

10 Rahman, M. 2005. “NAMA Negotia-tions in the WTO and PreferenceErosion: Concerns from LDCPerspective”, Paper presented at theRegional Conference on the Agendafor WTO Hong Kong MinisterialChallenges for South Asia, organisedjointly by Research and InformationSystems for the Non-Aligned andOther Developing Economies, GlobalBio-Diversity Forum and Federation ofIndian Chambers of Commerce andIndustry, 11 August 2005.

11 The utilisation rate of trade prefer-ences by LDCs in Canada, theEuropean Union, Japan, and theUnited States (US) has been lessthan 50 percent. In fact, it has beenargued that either preferences givento the South Asian LDCs have limitedproduct coverage or are conditionalon complying with very restrictiveorigin rules. See, Razzaque, MA.2005. Making Trade PreferencesWork for South Asian LDCs, BriefingPaper No. 2, Kathmandu: SAWTEE.

12 Mehta, R and P. Agarwal. 2005. ascited above.

13 The South Asian LDCs continue toface high and discriminatory tariffbarriers. For example, the UnitedStates (US) has excluded them fromits most attractive preferentialschemes. As a consequence, AsianLDC exports of textiles and clothing inthe US market are subject to anaverage tariff peak of 16 percentwith many individual items facingrates as high as 35-40 percent.These incidences of high tariffs onLDC exports are completely againstthe spirit of the Doha Round.

14 Mr Navin Dahal of SAWTEE hasemphasised this point in his variouspresentations on NAMA Negotiationsin the WTO.

NAMA

enhance the supply-side capaci-ties of the LDCs and other devel-oping countries, particularly inthe areas of sanitary and phyto-sanitary measures and technicalbarriers to trade.

• Dealing with NTBs is urgent, oth-erwise, the progress made on tar-

iff cuts can be overshadowed bythe latter’s indiscriminate use.NTBs faced by the LDCs shouldbe addressed on a priority basis.n

(Dr Razzaque is Assistant Professor atDepartment of Economics, University ofDhaka)


SERVICES

icant ratio of exports. About 20 per-cent of the annual global internation-al remittances (close to US$ 100 bil-lion in 2004) flows into South Asia.India alone accounts for 78 percentof this figure, making it the world’slargest remittance receiving country,while Bangladesh accounts for 12percent of South Asian remittances.

Cross-border trade in businessservices, especially the InformationTechnology (IT) services, is among thefastest growing areas of services trade.Traditionally, the developed coun-tries have dominated trade in this cat-egory but the past decade has seenthe emergence of some developingcountries as the most dynamic ex-porters. In India, software exports

have risen from US$ 1.8 billionin 1997-98 to over US$ 7 bil-

lion in 2001-02 – an averageannual increase of 46.3percent per year. Further,there appears to be a majorshift in the exports of ITand business process out-

sourcing (BPO) servicesin terms of the compo-sition and mode of de-livery of exports. Un-like IT, the bulk of BPOservices are processedin India. This has hada major impact on the

mode of delivery of soft-ware exports. In 1993-94, near-

ly 62 percent of all software exportsfrom India were carried out at the cli-

ents’ location, i.e., “on-site”. By 2002-03, “offshore production” became thedominant mode of delivery of soft-ware exports, accounting for 58 per-cent of total exports.

Other Areas of StrengthBesides cross-border trade throughbusiness process outsourcing, remit-tances and movement of natural per-sons, other sectors of comparativeadvantage such as tourism exist. SriLanka, Nepal and India attract thebulk of tourists in the region. Touristarrivals in South Asia are expected togrow at 6.2 percent per year, com-pared to the world average of 4.1 per-cent during 1995-2020. In 2003, tour-ist arrivals reached 6 million and for-eign exchange receipts from tourism

Services negotiations in

Pranav Kumar

and South AsiaDOHA ROUND

The services sector accountsfor 49 percent of South

Asia’s gross domesticproduct. Only India hasimproved its rank amongthe South Asian WorldTrade Organisation(WTO) Members in exportsof commercial services.1 In1995, India was ranked 34th

in the world in exports ofcommercial services; the po-sition improved to 21 st in2003. The WTO 2004 Interna-tional Trade Statistics states thatbarring India, no other SouthAsian nation fall in the top 40 ex-porters of commercial services.

Exports of commercial servicesfrom South Asia increased from US$7.9 billion in 1993 to US$ 29 billion in2003. A large portion (approximatelyUS$ 25 billion) of it originates fromIndia. Exports of commercial servic-es from other four South Asian na-tions, viz., Bangladesh, Pakistan, Ne-pal and Sri Lanka, have either re-mained constant or increased mar-ginally between 1993 and 2003.

The low growth of exports of com-mercial services from other SouthAsian countries may be attributed tosubstantial underestimation of thereal flows as nearly half of the remit-tances are sent through unofficialchannels. It is estimated that 40 per-cent of remittances to Bangladesh aresent through illegal hundi sources, 4.6percent through friends and relatives,

8 percent are carried by migrantsthemselves and 46 percent go throughofficial sources.2 In Pakistan, the realflow of remittances is between US$ 8-10 billion, of which only US$ 1 bil-lion is sent through official channels.

Services Trade: South Asia’sMajor StrengthAlthough South Asia has not beenable to significantly raise its share inglobal services trade, migration fromthis region to both developed and de-veloping countries is increasing rap-idly. The region is the second largestrecipient of remittances in the worldafter the Caribbean. In countries likeBangladesh, India, Pakistan and SriLanka, remittances represent a signif-

For the South Asian countries, Mode 4 is a common area of interestand what is immediately required is the easing of restrictions onexisting commitments.


SERVICES

touched US$ 7 billion.Health tourism has also become

common and covers a broad spectrumof medical services. Many touristscome from the United States (US) seek-ing treatment at cheaper prices. Indiais a recent entrant into this field. Theinflow of foreign patients per year hascrossed 150,000 in India, up from10,000 in 2000. It is estimated thathealth care for foreign patients willdeliver Rs. 100 billion (US$ 2.3 bil-lion) a year to Indian hospitals by2012. The market in 2003 was worthUS$ 333 million.

Market Access: The Major BarrierThe movement of natural persons un-der General Areement on Trade inServices (GATS) Mode 4 is subject toa range of restrictions. These includewage-parity requirement, strict visaprocedures, “economic needs test”,non-recognition of professional qual-ifications, imposition of discrimina-tory standards or burdensome licens-ing requirements, payment of socialsecurity without corresponding ben-efits, and requirements of registrationwith or membership of professionalorganisations. Besides, inthe aftermath of the 9/11 ter-rorist attacks in theUS, security con-cerns have emergedas a prime challengeto immigration pol-icies.

The developedcountries fear thatoutsourcing ofsome kinds of ser-vices to the developing countries willlead to job losses in their own coun-tries. This has promoted governmentsin the developed world to introduceanti-outsourcing bills. Upto March2005, 40 states in the US introduced112 anti-outsourcing bills. In Europe,there were legal norms designed toprotect workers in outsourced dealsknown as Transfer of Undertakingsand Protection of Employees. Allthese could turn into future barriersfor cross-border trade in services. Thecurrent GATS negotiations under theaegis of Doha Round of trade negoti-ations offer a valuable opportunity tosecure openness.

Services Trade Liberalisation: A“win-win” SituationThe services sector is one where tradeliberalisation could result in a “win-win” situation. Greater mobility oftemporary workers, the outsourcingof services, foreign direct investmentand tourism have the potential tobring benefits for both service suppli-ers and recipients’ nations.

Globalisation has created pres-sure on firms to look for various cost-saving methods to enhance competi-tiveness. Enterprises in the developedcountries find outsourcing as one ofthe most convenient ways to savecosts by taking advantage of low-wages. Some studies have attemptedto assess the implications of out-sourcing on a sector and country spe-cific basis. One study shows that, ofthe approximately US$ 1.45 – 1.47 ofvalue derived from every dollar spentoffshore, US firms receive US$ 1.12 –1.14, while supplying firms receive

US$ 0.33 of the value.3 Likewise, sav-ings from outsourcing can be signifi-cant as wages for software develop-ers and data entry agents in India canbe a fraction of that in the rich coun-tries. It enables the preservation ofservices quality and rise in produc-tivity simultaneously.

The case for temporary movementof natural persons arises primarilybecause of changing demographiccomposition in most industrialisednations and low preferences amongthe local population for some low-skilled jobs. It is estimated that thetotal welfare gains to the global econ-omy from Mode 4 liberalisation are

potentially large. Opening of devel-oped country labour markets to tem-porary entry by foreign workers,equal to 3 percent of the current glo-bal workforce, would generate wel-fare gains exceeding those that couldbe attained from full merchandisetrade liberalisation, leading to an ag-gregate gain of US$ 150 billion a year.

The majority of Organisation forEconomic Cooperation and Develop-ment countries face acute shortagesof labour in some professions. Aus-tralia faces a shortage of around 6,000registered nurses while Canada’sshortage of registered nurses isaround 16,000 or 7 percent of thepresent workforce. Indian nurses arein great demand in the US, where thepresent requirement is 126,000 andis expected to reach 200,000 in 2006and cross the 1 million mark by 2015.Every year, thousands of Indian nurs-es go to the US to meet this gap.4 In2004, Australia and New Zealandplaced accounting professionals onan official list of skills that are in shortsupply. These countries are beingurged to relax their visa regulationsfor foreign graduates.

Some organisations areoutsourcing a number of

accounting func-tions, and have es-tablished subsid-iaries in India tohandle their out-flow. In addition toalleviating theskills shortage, thiscuts costs too. Thesearrangements are

likely to become formalised in the fu-ture, with plans for some firms to es-tablish Indian centres that will pro-vide accounting services to Austra-lian companies, as they do now withIT.5

Current Status of ServicesThe Uruguay Round achieved limit-ed liberalisation on trade in services.In Mode 4, where many developingcountries have comparative advan-tage, the commitment level from thedeveloped countries is very low. Re-newed negotiations on services start-ed in 2000 with new approach of “re-quests and offer”. Proposals submit-

Modes of ServicesDelivery Under GATS

Mode: 1Cross-border

supplyservicessuppliedfrom onecountry

toanother

Mode: 2Consumption

abroadConsumers orfirms making

use of aservice inanothercountry

Mode: 3Commercial

presenceA foreign comp-any setting upsubsidiaries or

branches to pro-vide services inanother country

Mode: 4Presence of

natural personsIndividuals trave-

lling from theirown country tosupply services

in anothercountry


ted, so far, reflect a wide variety of am-bitions; from enhancing the transpar-ency of the current regimes to secur-ing market access, including the abo-lition of economic needs test and theintroduction of a GATS visa.

An analysis of the commitmentschedules of Members in the Uru-guay Round shows that the sectoralcoverage is poor and countries weremore willing to open up less sensis-tive sectors and modes of delivery ofservices. A large number of commit-ments were in sectors such as tour-ism while social sectors such ashealth and education received veryfew commitments. Commitments bymodes of supply show that 50 per-cent of WTO Members undertook fullcommitment in Mode 2, 30 percentin Mode 1, 20 percent in Mode 3 andvirtually none of the countries sched-uled sector specific commitments inMode 4.6

Prior to the July Package (JP) of2004, many Members were interest-ed in ensuring that services wouldbe given adequate prominence. TheWTO’s General Council fixed May2005 as a target date for the submis-sion of revised services offers. Mem-bers were urged to make high quali-ty offers, particularly in sectors andmodes of supply of export interest tothe developing countries, with spe-cial attention to be given to the leastdeveloped countries (LDCs).

South Asia’s ApproachIn the Doha Round, the approach ofSouth Asian countries (especially In-dia) towards services negotiations isnow significantly different from theirstance during the Uruguay Round.This change in position resulted fromthe fact that India has experienced arobust growth in the services sectorduring the 1990s. In 2000, India madeone of the most comprehensive sub-missions (WTO Document S/CSS/W/12) on the movement of profes-sionals before the Council for Tradein Services. India has tried to makean assessment of the nature of liber-alisation that has taken place in Mode4 under the existing GATS frameworkand the extent to which the objectivesof Article IV of GATS have been oper-ationalised through liberalisation in

this Mode. In July 2003, India and Pa-kistan, along with some other devel-oping countries, made a first collec-tive proposal (WTO Document TN/S/W/14) on Mode 4, regretting thelack of substantial improvements inthe offer submitted at that time (26 intotal).

The period since the CancúnMinisterial in 2003 has witnessedmore active participation by the de-veloping countries in services nego-tiations. India and Pakistan havemade several joint submissionsalong with other developing coun-tries suggesting ways to acceleratethe GATS negotiations and express-ing the concerns of the developingcountries. These proposals are in-tended to initiate a discussion in theCouncil for Trade in Services in itsSpecial Session about the extent towhich Article IV of the GATS is be-ing implemented in the ongoing ne-gotiations. In February 2005, Indiaand Pakistan – along with 10 otherdeveloping country Members of theWTO – made a submission (WTODocument TN/S/W/31) before theCouncil for Trade in Services SpecialSession, seeking broadening of cov-erage of categories of natural personsunder the horizontal commitments.

Future Negotiating StrategiesThe Doha Round has entered a cru-cial phase. As a large developingcountry, India needs to protect theinterests of a larger group of devel-oping countries. For the South Asiancountries, Mode 4 is a common areaof interest.

On Mode 4, what is immediatelyrequired is the easing of restrictionson existing commitments. Whilemany schemes facilitate the mobili-ty of the highly skilled, relatively fewcover the moderately or low-skilledworkers of developing countries.Keeping this in view, South Asiancountries must ask for expansion ofcommitments in categories delinkedwith commercial presence (Mode 3).Elimination of “economic needs test”will help low-skilled and indepen-dent professionals. Some developedcountries are also raising securityconcerns.

As per JP, the developed countries

NOTES1 Commercial services are defined as

being equal to services minusgovernment services. Commercialservices are further sub-divided intotransport, travel and other commer-cial services, which include commu-nication, construction, insurance,financial, computer and information,audiovisual services, etc.

2 The hundi/hawala system, common inthe Middle East and the Indian sub-continent, is a transfer or remittancefrom an expatriate worker in onecountry to a nominated person in his/her own country of origin without aformal transfer of money or use offormal financial institutions. It usuallyinvolves intermediaries.

3 Chambers of Commerce of the UnitedStates. “Jobs, Trade, Sourcing andthe Future of the American Work-force”, April 2004.

4 “Wanted: 1.26 lakh nurses in US”(see http://in.rediff.com/money/2005/oct/17nurse.htm)

5 “Australia and New Zealand LackAccountants”, Financial Times , 5May 2005.

6 Mukherjee, A. 2005. “DevelopingCountries and GATS Negotiations:The Case of India” in GlobalEconomy Journal , Vol. 5, Issue 2.

were supposed to improve theirMode 4 offers substantially. Howev-er, both the European Union and theUS have disappointed the develop-ing countries by not improving thequality of their offers. Undoubtedly,security concerns are important butsolutions need to be found within theGATS framework. That is why theconcept of GATS visa was proposedby India and other developing coun-tries. It is worth noting that some ofthe legislation pending before the USCongress support the concept of tem-porary workers visa. South Asiancountries may also demand for astand alone agreement on Mode 4having features like short-termGATS visa, no requirement of eco-nomic needs test, strict provisions forreturn migration etc. These provi-sions will address the concerns ofboth the developed countries and thedeveloping countries. n

(Mr Kumar is Policy Analyst at CUTSInternational, Jaipur)

SERVICES


TRADE FACILITATION

Trade facilitation (TF) measureswere first included in the World

Trade Organisation (WTO) agenda asa separate issue at the 1996 SingaporeMinisterial along with three other is-sues, viz., investment, competition andtransparency in government procure-ment. Works on TF were carried onunder the WTO thereafter, thoughthere were divergence in views betweenthe developed and developing coun-tries. The developed countries werelargely in favour of negotiating bind-ing rules while the developing coun-tries were not convinced that bindingrules in the WTO would be necessaryor helpful in this area. The latter havebeen cautious against having new ob-ligations in the WTO, which may ex-ceed their implementation capacities.Nevertheless, an agreement wasreached under the July Package (JP) in2004 wherein TF was the only “Sin-gapore issue” on which Membersagreed to conclude negotiations aspart of “single undertaking” under theDoha Development Agenda (DDA).Annex D of JP that deals with modali-ties on negotiations on TF states thatnegotiations “shall aim to clarify andimprove relevant aspects of Articles V,VIII, and X of the General Agreementon Tariffs and Trade (GATT) 1994 witha view to further expediting the move-

ment, release and clearance of goods,including goods in transit”.

Article V highlights the require-ments that Members should fulfill toensure freedom of transit where themain obligations are to permit free-dom of transit through the most con-venient route; not to subject traffic intransit to unnecessary delays or re-strictions; to ensure that all chargesare reasonable; and that mostfavoured nation (MFN) treatmentshould be afforded for traffic in tran-sit. Article VIII sets out the adminis-trative aspects of trade, in particularfees and formalities connected withimportation and exportation. Themain obligations of WTO Membersinclude: commitments that all feesand charges be limited to the cost ofthe services rendered; desist from im-posing substantial penalties for mi-nor breaches of custom regulations;and simplification of fees and charg-es, import export formalities and doc-umentation requirements. Article Xcalls for the publication of all trade-related laws and regulations. Themain obligations are to promptlypublish all laws and regulations; topublish before enforcement of newmeasures; to enforce uniform and rea-sonable administration of laws; andto ensure prompt review and correc-

tion of administrative action relatingto custom matters.

Negotiations have started withseveral proposals made by WTOMembers. The key issues in the pro-posals based on Article X are relatedto advance rulings, use of electronicmedia, enquiry points, consultativemechanism and appeals. The propos-als on Article VIII relate to the levy offees and charges, provisions to reducedocumentation requirements, settingup of a standard processing time andthe use of international standards.Key proposals based on Article V in-clude measures for non-discrimina-tion between modes of transport, ori-gin and destination, carriers, routesand goods; publication of fees andcharges; use of international stan-dards for transit formalities; a bond-ed transport regime; and simplifiedand preferential clearance treatmentfor perishable goods in transit.

The issues for the South Asiancountries with respect to those propos-als are many and varied. While theSouth Asian countries have undertak-en efforts to improve TF measures bothunilaterally and through regional trad-ing agreements, they have yielded lim-ited results. Issues of transit facilitiesunder Article V is most relevant to In-dia, Bangladesh and Nepal. Transitissues in the sub-continent have beendealt with on a bilateral basis (for e.g.,Indo-Nepal Treaty of Transit). How-ever, India, Bangladesh and Nepal areyet to accede to international transitconventions such as the TIR Conven-tion1 or the ATA Carnet,2 althoughIndia uses the ATA Carnet to a limitedextent.

The status of the South Asian coun-tries with respect to the key proposalsbased on Article VIII indicates thateven though these countries have un-dertaken several computerized sys-tems such as use of ASYCUDA, EASY,EDI, etc., in order to reduce documen-tation requirements in import and ex-port procedures, there are continuingprocedural complexities. In addition,fees and charges in most of these coun-tries are fairly high. According to theavailable information, no official stan-dard processing time has been set inthese countries so far. India and SriLanka have set some basic guidelines

Trade Facilitation

Dushni Weerakoon andJayanthi Thennakoon

South AsianPerspective


TRADE FACILITATION

for their customs stations. Besides,Pakistan, Sri Lanka and Nepal havecommitted to implement internation-al standards while India also has toimplement several reforms to fullymeet international standards.

The current status of the SouthAsian countries with regard to the pro-posals based on Article X reveals thatauthorities in India, Pakistan, Bang-ladesh, Sri Lanka and Nepal dissemi-nate information using electronic me-dia to some extent while they still usethe print media as well. The authori-ties have started to use electronic me-dia with the introduction of severalcomputerised systems. However, in thecase of Bangladesh, Pakistan and Ne-pal, there is still no progress reportedwith regard to advance rulings. Noneof the countries have established a“single window” enquiry point fortraders. In addition, there is no con-sultative mechanism; the Sri Lankan,Indian and Nepalese legislation pro-vide the right of appeal to the affectedparty.

Efficiency and capacity constraintsin South Asia consist of long-stand-ing weaknesses such as low port effi-ciency and less competitive nature,poor port infrastructure, lack of cross-border transit points and road connec-tions across the region, high cost ofroad transport, licensing restrictions,poor railway facilities, poor manage-ment at customs with high monetaryand time cost, administrative prob-lems, non-transparent trade proce-dures, lack of technical equipmentsused in customs administration, re-strictions on information technologyand service sector infrastructure, lackof modern infrastructure networks andproblems in meeting standards andtechnical regulations. In addition, thepolitical will to implement TF mea-sures seems to be lacking.

One of the barriers to TF in thesecountries is widespread bureaucraticpractices at customs and other keygovernment institutions where offi-cials have become accustomed to theexisting systems. Furthermore, the pres-sure from stakeholders to implementTF in most of the South Asian coun-tries is lacking partly because the busi-ness community is not fully conver-sant with the potential benefits of TF.

A key factor inhibiting most develop-ing countries from implementing TFmeasures concerns the costs associat-ed with large-scale improvements intrade infrastructure.

It is evident that the concerns ex-pressed by the developed countries inmultilateral trade negotiations are dif-ferent from those of the developingcountries. While some developedcountry Members have submitted theirproposals for new obligations or clar-ifications of the relevant existing Gen-eral Agreement on Tariff and Trade(GATT) rules, many developing coun-try Members insist on voluntary guide-lines rather than legally binding rule-based agreements. Although the de-veloping countries do not disagreewith TF, they argue that compliancewith binding TF standards would bean additional cost to them. Least de-veloped countries (LDCs), in particu-lar, stress the need for precise, effec-tive and operational special and dif-ferential treatment (S&DT) provisionsand have expressed concerns that theproposals submitted hitherto do notprovide for technical and financial as-sistance by the developed countries.Another submission is that the legaland administrative implications ofproposed measures need to be exam-ined considering the existing institu-tional and administrative capacities ofthe developing country Members andthe LDC Members.

Pakistan has proposed that an as-sessment should be carried out on theneeds and priorities of the developingcountries as the basis for future nego-tiations on TF. Bangladesh, like manyother LDCs, has expressed concernthat the implementation of TF mea-sures requires technical know-howand necessary resources. Technicalassistance alone cannot ensure effec-tive implementation and developingnations have expressed the view thatthe scope of future negotiations on TFshould be within the existing capaci-ty of Members. India too has expressedconcerns on the scope and content ofthe negotiations arguing that someproposals – such as those relating tobinding advance rulings for customspurpose, the obligatory use of Harmo-nised Standard tariff classification, ex-press shipments, etc. – exceed the

mandate for negotiations.The WTO is not viewed as the most

suitable forum for dealing with TF is-sues since other specialised interna-tional organisations or conventionsare in force at present. Negotiations onTF with binding rules are not viewedwith enthusiasm, with a preference formore general incentive based reformcommitments and autonomous imple-mentation. Negotiating strengths dif-fer across South Asia. The smallereconomies are likely to face numerousdifficulties with respect to TF propos-als. They include the ability to followand participate in the negotiations; theability to analyse, synthesise propos-als and submissions and evaluate theimplications of those proposals; thecapacity and ability to develop nego-tiating proposals; and finally the ca-pacity and ability to be able to assessthe cost implications of new commit-ments and obligations. All these fac-tors might reduce the bargaining po-sition of the South Asian countries inthe negotiations.

The priority areas in improving TFfor many South Asian countries areimproving customs procedures andformalities, harmonisation of stan-dards, and removing constraints ontransit procedures, etc. They are, there-fore, likely to call for the scope of cur-rent negotiations on TF under the WTOto be limited to Articles V, VIII and X ofthe GATT 1994. Despite the potentialbenefits of TF, concerns regarding costsassociated with new commitmentsand implementation capacities willmean that provisions of S&DT, tech-nical assistance and capacity build-ing for the developing countries andthe LDCs needs to be prioritised innegotiations. n

(Dr Weerakoon is Deputy Director &Fellow and Ms Thennakoon is ResearchAssistant at Institute of Policy Studies ofSri Lanka, Colombo)

NOTES1 An international transit system for

goods carried by surface transport.

2 Designed to facilitate the importation,irrespective of the means oftransport used, of goods that aregranted temporary duty-freeadmission.


DEVELOPMENT DIMENSION

At the heart of the trade and de-velopment discourse is the real-

isation that trade is not an end itselfbut a means to achieve broader de-velopment goals such as raising liv-ing standards and enhancing thequality of life. There is no disagree-ment that trade can be a powerful in-strument for poverty reduction. How-ever, the prospects of its benefits haveoften been oversold.1 During negotia-tions for signing trade agreements,the developed nations tend to restrictthe policy space or flexibility avail-able to the developing countries topursue their development objectives.Since today's developed nations hadliberally used such flexibilities dur-ing their economic transformationprocess, the developing countrieshave every right in demanding thatthey be allowed to retain such flexi-bilities.2

Prior to the Uruguay Round(UR), flexibilities were reflect-ed in various parts of the Gen-eral Agreement on Tariffs andTrade (GATT), the legal instru-ment. However, after the con-clusion of the UR, which estab-lished the World Trade Organ-isation (WTO) in 1995, the de-veloping countries witnessedthe erosion in such flexibilitiesdue to the “single undertak-ing” principle. As per this prin-ciple, the entire agreements ofthe WTO should be considereda “package” – Members willhave to accept either all ornone. The developing coun-tries, therefore, complained of“development apathy” of theWTO.

This led to a serious intro-spection on the part of WTO

Members to make the multilateraltrading system more “developmentfriendly”. While efforts made duringthe First to the Third Ministerial Con-ferences were rather marginal, the ma-jor boost came during the Fourth Min-isterial Conference, with the launchof the Doha Development Agenda(DDA). Although the DDA received amajor setback due to the failure of theFifth Ministerial Conference held atCancún in 2003, it was brought ontrack in August 2004, after the adop-tion of the July Package (JP). Nothingsubstantial has happened in the tradenegotiating arena since, but it is worthemphasising that the current negoti-ations are going to determine the out-comes of the Hong Kong MinisterialConference during 13-18 December2005. In this context, the issue of de-velopment dimension should be dis-

cussed from three perspectives. First,the pending issue of imbalances, im-plementation-related issues and con-cerns and special and differentialtreatment (S&DT); second, develop-ment dimension in the JP; and third,development dimension outside theJP.

On the first set of issues, negotia-tions are proving largely futile be-cause the imbalances and asymme-tries have not been sufficiently ad-dressed. For example, one of the mostsignificant efforts to address the asym-metry was the Declaration on TRIPSand Public Health issued as a part ofthe DDA. However, continued dead-lock over the amendment of the TradeRelated Aspects of Intellectual Prop-erty Rights (TRIPS) Agreement to ad-dress the concerns of the poor coun-tries (with insufficient or no manu-

Will the Hong Kong Ministerial truly address the

“development dimension”?Ratnakar Adhikari

The ‘‘development dimension”, which should have been put at the heart of multilateral tradenegotiations, is confined to mere rhetoric.



facturing capacity to exercise therights conferred to them by the Decla-ration) shows the apathy on the partof some Members to resolve this is-sue. In fact, some Members have re-neged on their commitments due tothe pressure from their pharmaceuti-cal lobbies not to cede to the demandsof the developing countries on thisissue.

Similarly, as a quid pro quo to re-duce trade barriers on agriculture,most of the protectionist developedcountries are demanding that other(developing) countries provide con-cessions on industrial tariffs and ser-vices. The question arises: whyshould there be any cross-sectorallink, especially when some countriesare being asked to do away withsomething (for example, subsidies)which is inconsistent with the prin-ciples of the WTO? The developingcountries argue that it is unfair to putthem in “double jeopardy” (or makethem pay twice) for creating a levelplaying field on trade in agriculturalgoods.3 This issue was implicitlyraised by several developing coun-tries at the WTO General Council (GC)meeting on 28 October 2005.4

Progress has been extremely lim-ited on implementation-related issues.The JP entrusted the responsibility tothe Director General (DG) to report to

the Trade Negotiations Committeeand the GC no later than May 2005on the progress made on these issuesand the GC was supposed to reviewprogress and take any appropriateaction no later than July 2005.5 How-ever, since these deadlines have al-ready been missed and negotiationson the so-called “major issues” (atleast as categorised by JP) are consum-ing most of the time of Members, theseissues are not likely to be resolvedsoon.

In the case of S&DT, the post-July2004 scenario has been even more dis-turbing for the developing countries,and more so for the least developedcountries (LDCs). The Special Sessionof the Committee on Trade and Devel-opment has not been able to finaliseeven the minimal S&DT related de-mand, reflected in the proposal sub-mitted by the LDCs.6 Out of these pro-posals, the most important one for theLDCs in the present context is thebound duty-free and quota-free mar-ket access. Though a ray of hope hasemerged after the preparation of 2November 2005 Text on this issue bythe Chair of WTO Committee onTrade and Development Special Ses-sion, the Text neither creates a bind-ing and permanent obligations norseems applicable to all the productsof the LDCs.

On the second set of issues, sever-al initiatives were taken for address-ing development concerns but therehas been a major retreat in the post-July 2004 scenario. The JP itself wasnot very supportive of developmentdimension. For example, the lan-guage on duty-free and quota-freemarket access for LDC exports ismuch weaker than what was nearlyagreed during the CancúnMinisterial.7 While a separate annexon providing a roadmap for negotia-tions was prepared for other four is-sues (agriculture, non-agriculturalmarket access, services and trade fa-cilitation) no such annex was issuedfor development dimension. Though“less then full reciprocity” principlehas been recognised on agricultureand non-agricultural market accesstexts, this could be reduced to somenumbers at the time of adopting theformulae for providing concession.Services text is devoid of developmentdimension too. To make mattersworse, the recent proposal for “bench-marking” introduced by a few devel-oped countries promises to take awaythe policy flexibility that the GeneralAgreement on Trade in Services(GATS) offered to its Members in theform of allowing countries to libera-lise only those sectors in which theyare comfortable.

The only major developmentdimension worth highlightingin the JP is the creation of a linkbetween implementation com-mitments of the developingcountries and technical assis-tance in the case of trade facili-tation. For the first time in thehistory of multilateral trade ne-gotiations, such a commitmentappeared in a legally bindingdocument. As per trade facilita-tion text, developing countryMembers are not required to ful-

fil the commitments to beagreed under a possible dis-cipline on trade facilitation, ifthey do not have the capacityto do so. Moreover, commit-

ment to provide technical as-sistance so as to enable themfulfil the obligations isstrong and almost automat-ic, though not open-ended.


NOTES

1 Rodrik, D. 2002. “Trade Policy Reformas Institutional Reform”, in B.Hoekman, A. Mattoo and P. English(eds.) Development, Trade and theWTO. Washington D.C.: The WorldBank; and Stiglitz, J. 2003. “Poverty,globalisation and growth: perspec-tives on some of the statistical links”,in Human Development Report 2003,United Nations Development Pro-gramme. New York: Oxford UniversityPress.

2 For a more descriptive insight on thissubject, see Chan, H. 2002. KickingAway the Ladder: DevelopmentStrategy in Historical Perspective.London: Anthem Press.

3 Due to these illegal subsidies, thedeveloping countries sufferedserious terms of trade loss as well asthreat to the livelihood of their farmersdue to dumped imports. Now, they arebeing asked to make concessions onother areas (such as services and/orindustrial market access), which willinevitably restrict their policy space.

4 The European Union wants, amongothers, deeper cuts in industrial tariff;mandatory, quantitative and qualitativetargets for services liberalisation, andextension of geographical indicationsto all products. See InternationalCentre for Trade and SustainableDevelopment. 2005. BRIDGESWeekly Trade News Digest, Vol. 9,Number 37, 2 November, Geneva.

5 World Trade Organisation. 2004.Doha Work Programme: DecisionAdopted by the General Council on 1August. WT/L/579. WTO. Geneva.

6 These are: a) Understanding inRespect of Waivers of Obligations; b)Duty and Quota-Free Access for theLDCs; c) Coherence betweenInternational Monetary Fund, WorldBank and WTO Measures; d)Exemption from Agreement on Trade-Related Investment Measures, orTRIMs; and e) Measure in Favour ofthe LDCs.

7 World Trade Organisation. 2003. DraftCancún Ministerial Text. 13 Septem-ber, Cancún.

8 Disclosing the source of origin of thebiological resources or traditionalknowledge used in the process ofinvention to the patent authorities.See Adhikari, R. 2005. “EmergingIssues Relating to Conflicts betweenTRIPS and Biodiversity: DevelopmentImplications for South Asia”, in SouthAsian Year Book on Trade andDevelopment. New Delhi: Centre forTrade and Development.

9 See ICTSD. 2005. Above note 4.

10 See ICTSD. 2005. Above note 4.

On the final set of issues,progress has been slow with consid-erably entrenched positions amongthe Members. Two such issues relateto intellectual property rights. Thefirst one relates to access to medicine.The futility of the efforts made by thedeveloping countries to get the TRIPSAgreement amended has been men-tioned earlier. The second one relatesto conflict between TRIPS and Con-vention on Biological Diversity. Themajor proposal of the developingcountries to resolve the conflict andprevent biopiracy as well as misap-propriation of traditional knowledgeis to have “disclosure” requirementincorporated within the TRIPSAgreement as a condition for patent.

8 However, continued divergence ofpositions and failure of the TRIPSCouncil meeting of 28 October 2005to reach consensus on the Draft Textfor the Hong Kong Ministerial couldmean a missed opportunity for thedeveloping countries as a whole.Notwithstanding this, a Deputy DGof the WTO – Rufus Yerxa – has as-sured that he would hold informalconsultation to resolve this issue be-fore the Hong Kong Ministerial.9

Regarding WTO rules, one of themajor demands of the developingcountries (and some developedcountries) to prevent the abuse oftrade remedy measures (particular-ly the most selective instrument suchas anti-dumping) is not likely tomove far enough before the HongKong Ministerial. Other issues suchas trade, debt and finance; trade andtechnology transfer; and technicalassistance and capacity buildinghave not even made a modestprogress worth analysing in thepresent context.

A recent development worth

highlighting here is the proposal ofthe European Union (EU) dated 28October 2005, in which the group-ing has also demanded that theMembers agree, among others, on: a)stricter rules of the use of anti-dump-ing measures; b) duty-free and quo-ta-free market access to developedcountry markets for LDC exports; c)addressing the problem of preferenceerosion “through a combination oftrade-related and supply-side relat-ed responses”; d) 28 proposals onS&DT that were originally preparedfor the Ministerial Conference inCancún as well as the five LDC pro-posals that have been the focus of re-cent negotiations on development inGeneva; and e) commitment to an ex-panded aid-for-trade package inHong Kong in order for it to be inplace by 1 January 2007.10

The EU proposals appear “toogood to be true”. Some observers sus-pect that these proposals have beenprepared by the EU to divert the at-tention of WTO Members from thecurrent agricultural negotiations,which are proving politically diffi-cult for the EU, or even to create adivision within the developing coun-tries.

As matters stand today, the “roadto Hong Kong” looks as bumpy asthe “road to Cancún” as far as de-velopment dimension is concerned.While there has been enough rheto-ric on placing development at theheart of negotiations, nothing muchhas happened in terms of substance.Since development dimension is notonly a negotiating issue in itself,which is of tremendous value to thedeveloping countries, but also across-cutting issue, the failure to ad-dress the same in earnest could jeop-ardise the future of DDA itself. Thisis because DDA itself is a “single un-dertaking” and nothing can be con-sidered as agreed unless everythingis agreed! n

(Mr Adhikari is Programme Specialistat United Nations DevelopmentProgramme — Asia Pacific RegionalCentre, Colombo. The views expressedin this article are those of the authoralone and do not necessarily reflectUNDP or UN policy)


While there has beenenough rhetoric on

placing development atthe heart of negotiations,

nothing much hashappened in terms of

substance.


TRIPS

ditional knowledge (TK).1 The TRIPSreview, however, has resulted in notjust a North-South divide. It has wit-nessed a deep division even amongthe developing countries themselves;two divergent positions have beenadopted making a consensus in theTRIPS review itself difficult.

The review of TRIPS is mandatedby Article 27-3 (b); the review had tooccur four years after the entry intoforce of TRIPS and was confined tothat “sub-paragraph”. It was theDoha Declaration 2001 that enlargedthe review to examine the relationshipbetween TRIPS and the Conventionon Biological Diversity (CBD), theprotection of TK and folklore.

Civil society organisations (CSOs)have called for a more fundamentalreview of TRIPS. They want TRIPS toserve the development needs of theleast developed countries (LDCs) andbring about a better balance betweenthe public interest and private rights,especially in the areas of health-care,agriculture and education. This Arti-cle is confined to a discussion of thereview of Article 27-3 (b) as definedin the Doha Declaration.

The principal proposal of the de-veloping countries with regard to thereview mandated by the Doha Decla-ration is for an equitable intellectualproperty right (IPR) regime that pre-vents misappropriation (biopiracy) ofgenetic resources and TK and the con-servation of biodiversity in compli-ance with CBD.

The efforts of the developing coun-tries at the TRIPS Council have not ledto their intended consequences andthis is to a great degree due to theirfailure to take a common stand on apivotal issue during the TRIPS reviewnegotiations. They have not adopteda common stand in relation to the is-sue of patents on life forms. There areessentially two groups of developingcountries actively engaged in theTRIPS review and their current posi-tions are discussed below.

As soon as the TRIPS review be-gan in 19992 , the African group pro-posed that there should be no patentson all life forms (plants, animals, mi-cro-organisms) and a form of sui ge-neris protection for plant varieties thatprotects farmers’ rights to use and

TRIPS Review

DIVERGENCE inDeveloping Country

Rajeswari Kanniah

Positions

Sensitive issues in the World TradeOrganisation (WTO) invariably

assume a developed vs. developingcountry (or a North vs. South) divide.So it is with the review of the TradeRelated Aspects of Intellectual Prop-erty Rights (TRIPS) Agreement. Pro-posals and counter proposals havebeen made without quite addressing

the concerns raised by either side. Thedivide has prevented a consensusbeing reached before the Sixth WTOMinisterial in Hong Kong in Decem-ber 2005. It even prompted the IndianMinister of Commerce to issue a letterto 31 trade ministers calling for anaggressive strategy to ensure thatTRIPS protects biodiversity and tra-

The efforts of the developing countries at the TRIPS Council havenot led to their intended consequences since they have failed to takea common stand on a pivotal issue during the review negotiations.


TRIPS

share harvested seeds.3 The Africangroup has maintained this position.

Another group of developingcountries comprising Bolivia, Brazil,Cuba, Ecuador, India, Peru, Thailand,and Venezuela do not reject the pat-enting of life forms per se4 . They mere-ly seek to ensure that patent applica-tions provide for disclosure of sourceand country of origin of biological/genetic resource and/or TK, prior in-formed consent (PIC), and access andbenefit sharing (ABS).5

The developed countries (repre-sented by Australia, Canada, the Eu-ropean Union, Japan, Singapore,South Korea, Switzer-land, and the UnitedStates) have arguedthat there is no need forany changes to thecurrent constructionof TRIPS. The conces-sion they are willing tomake is the concerns ofthe developing coun-tries to be addressedoutside the TRIPS sys-tem, i.e., by such meansas national laws, private contractualarrangements, the World IntellectualProperty Organisation Patent Coop-eration Treaty, the Union for the Pro-tection of New Varieties of Plants Con-vention and the CBD.

No Patents on Life FormsThe African group of WTO Members,subsequently backed by other devel-oping countries and many CSOs, havecalled for TRIPS to be amended to pro-vide for no patents on life forms onthe ground that “patents on life formsare unethical” and “contrary to themoral and cultural norms” of manysocieties. The African group proposedthat Article 27-3 (b):

“…be revised to prohibit patentson plants, animals, micro-organisms,essentially biological processes forthe production of plants and animals,and non-biological and micro-biolog-ical processes for the production ofplants and animals.” 6

This position is categorical. Nopatents shall be provided for plants,animals and micro-organisms andprocesses (be they biological, non-bi-ological or microbiological) for the

production of plants and animals.The African group is silent on the

appropriate form of protection (otherthan patents) for life forms but acceptssui generis systems of IPR with respectto plant varieties. In this regard, theAfrican group has proposed that suchsystems:

“…must clearly, and not just im-plicitly or by way of exception, strikea good balance with the interests ofthe community as a whole and pro-tect farmers’ rights and traditionalknowledge, and ensure the preserva-tion of biological diversity”.7

The African group has called forTRIPS, CBD and theInternational Treatyon Plant Genetic Re-sources for Food andAgriculture to be im-plemented in a mutu-ally supportive andconsistent manner andthat the Members re-tain the right in theirdomestic laws to re-quire disclosure ofsources of biological

material and proof of benefit sharing.On TK, the African group is of the

view that TRIPS only provides forminimum standards and does notprevent the Members from adoptingadditional areas of protection. The Af-rican group has drafted a ‘Decisionon Traditional Knowledge’ for adop-tion by the WTO Members as an inte-gral part of TRIPS. The Decision pro-vides a definition of TK and dealswith the rights to be given effect; thedocumentation of TK; and the estab-lishment of a Committee on Tradi-tional Knowledge and Genetic Re-sources.

Disclosure, PIC and ABSThe position adopted by the group ofdeveloping countries that call for dis-closure, PIC and ABS is one thatworks within the patent system. Theyconsequently accept patents on lifeforms but want such patents to begranted after careful and full exami-nation of the criteria for patentabili-ty. The three additional requirementsthey have proposed (disclosure, PICand ABS) need to be conditions forapproving patent rights over biologi-

cal resources and associated TK. Theyhave pointed out the limitations ofrelying only on databases, nationallaws or contracts to ensure that pat-ents over genetic resources and TK aregranted correctly. They see this routeas the means to ensure conformitybetween TRIPS and CBD.

On 2 March 2004, the group ad-dressed the possible technical issuesthat may arise in incorporating theirthree additional requirements forpatent applications.8 Detailed pro-posals were submitted to the TRIPSCouncil on 21 September 2004, 27September 2004, 10 December 2004,and 18 March 2005.9 The followingthree sections present the gist of thearguments.

On Disclosure of Source and Coun-try of Origin: Only a legally bindingobligation will guide patent examin-ers to ensure that all relevant priorart information is available to patentexaminers. Disclosure will assistpatent examiners to determinewhether the claimed invention con-stitutes an invention that is excludedfrom patentability under Article 27-3(b), paragraphs 2 and 3 of TRIPS. Itwould serve as part of a process tosystematise available information ofbiological/genetic resources and TKto build the prior art informationavailable to patent examiners and thegeneral public. It will also be usefulin cases relating to challenges topatent grants or disputes on inven-torship or entitlement to a claimedinvention. It has already been shownthat patent challenges involve hugecost in terms of time and resourcesand are consequently not a suitableoption for developing countries. Inany case, disclosure requirements ofvarious types are already an accept-ed norm in international patent lawpractice.

On Evidence of Prior Informed Con-sent: Article 15 of CBD requires, inrecognition of the sovereign rights ofstates over their natural resources,that access to biological/genetic re-sources shall be subject to PIC of thecontracting party providing such re-sources. IPRs have to be integratedinto such an exercise. Mandatory fur-

It is important tonote that the

disclosurerequirements are

already an acceptednorm in

international patentlaw practice.


nishing of evidence of PIC by patentapplicants would facilitate the moni-toring of Article 15 of CBD and a har-monious construction of TRIPS andCBD. TRIPS and CBD should be seenas two sides of the same system, aimedat promoting a consensual access toand sustainable use of biological/genetic resources. Contractual ar-rangements are unsatisfactory as par-ties to a contract are of vastly unequalbargaining strengths, as would be thecase when traditional or indigenouscommunities and commercial inter-ests are involved.

On Access and Benefit Sharing: Thisis to ensure benefit sharing that isfair and equitable among the parties.Factors that could be used in this de-termination include mutually agreedterms relating to conditions, obliga-tions, procedures, types, timing, dis-tribution and mechanisms of the ben-efits shared; and a reporting obliga-tion on issues relating to patenting/commercialisation, where future ben-efit sharing is contemplated.

To sum up, this group of devel-oping countries calls for the estab-lishment of an international frame-work of protection that permits theuse for commercialisation and/ortaking out of IPRs of biological ma-terial and/or associated TK outsidethe country of origin. This is to bedone only after the competent au-thority in the country of origin certi-fies that the source of origin has beendisclosed, and that PIC and ABS con-ditions have been accepted. TRIPSand the patent system should beadapted to support the objectives ofsuch a framework.

First Principles and CompromisesThe current state of affairs on theTRIPS review is unsatisfactory as thedeveloped and the developing coun-tries have made no headway in con-vincing each other to come to anagreement.

The divergent positions taken bythe two groups of developing coun-tries also make a consensus difficult.The African group refuses to compro-mise on patents on life forms except toagree to a sui generis regime for protec-tion of plant varieties. The other group

of developing countries has compro-mised with the developed countriesand entered into a technical discus-sion on the requirements for disclosure,PIC and ABS in patent applications.

It is a pity that the group of devel-oping countries did not follow the ear-ly lead provided by the African groupand offered a compromise deal instead– an offer that has not dislodged thedogged stand of the developed coun-tries. It was unwise to offer such acompromise. It would also have beenbetter to stick to first principles andfollow through with the logic of thatposition than to compromise and stillfail to achieve a consensus.

The proposal of the African groupand the group of developing coun-tries are still on board and will haveto be addressed along with the pro-posals by the developed countries.The positions of the two groups ofdeveloping countries need to be rec-onciled. A possible approach for anagreement is: (i) to accept that therebe no patents on life forms, and (ii)agree to a sui generis system for lifeforms that requires disclosure, PICand ABS. n

(Ms Kanniah is Acting RegionalDirector of Consumers International —Asia Pacific Office, Kuala Lampur)

TRIPS

NOTES1 “India calls for biodiversity protection

under WTO”, Indo-Asian NewsService, 29 July 2005 (see http://www.eians.com/stories/2005/07/29/29ind.shtml)

2 ‘Review of the Provisions of Article27(3)(b) – Communication fromKenya on behalf of the AfricanGroup’, IP/C/W/163, 8 November1999.

3 In 2000, India also took this positionand called for prohibition on patentingof inventions based on traditionalknowledge or those that violateArticle 15 of the CBD. ‘Communica-tion from India’, IP/C/W/196, 12 July2000. However, it has also joinedother developing countries in callingfor patent applications relating tobiological materials or traditionalknowledge to disclose source orcountry of origin of the biologicalresource and the traditional knowl-edge used in the invention, evidenceof prior informed consent andaccess and benefit sharing.

4 In 2002, China, the DominicanRepublic, Pakistan, Zambia andZimbabwe were part of this group ofdeveloping countries and took up asimilar position. ‘The Relationshipbetween the TRIPS Agreement andthe Convention on Biological Diversityand the Protection of TraditionalKnowledge’, IP/C/W/356, 24 June2002. In 2003, with the exception ofthe Dominican Republic, the othercountries listed here had dropped outof this group of developing countries.‘The Relationship between the TRIPSAgreement and the Convention onBiological Diversity (CBD) and theProtection of Traditional Knowledge’,IP/C/W/403, 24 June 2003. After2003, the Dominican Republic is nolonger a part of this group of

developing countries.

5 This position is also supported byPeru. ‘Article 27-3(b), RelationshipBetween the TRIPS Agreement andthe CBD and Protection of TraditionalKnowledge and Folklore-Communica-tion from Peru’, IP/C/W/447, 8 June2005.

6 ‘Taking Forward the Review of Article27-3(b) of the TRIPS Agreement –Joint Communication from the AfricanGroup’, IP/C/W/404, 26 June 2003.

7 Ibid.

8 ‘The Relationship between the TRIPSAgreement and the Convention onBiological Diversity – Checklist ofIssues’ IP/C/W/420, 2 March 2004.

9 ‘Elements of the Obligation toDisclose the Source and Country ofOrigin of Biological Resource and/orTraditional Knowledge used in anInvention’, IP/C/W/429, 21 September2004; ‘Elements of the Obligation toDisclose the Source and Country ofOrigin of Biological Resource and/orTraditional Knowledge used in anInvention – Revision’, IP/C/W/429/Rev. 1, 27 September 2004; ‘TheRelationship between the TRIPSAgreement and the Convention onBiological Diversity (CBD) and theProtection of Traditional Knowledge– Elements of the Obligation toDisclose Evidence of Prior InformedConsent under the Relevant NationalRegime’, IP/C/W/438, 10 December2004; ‘The Relationship Between theTRIPS Agreement and the Conven-tion on Biological Diversity and theProtection of Traditional Knowledge- Elements of the Obligation toDisclose Evidence of Benefit-Sharing under the Relevant NationalRegime’, IP/C/W/442, 18 March 2005.


BOOK REVIEW

The quota system – represented bythe Multi-Fibre Arrangement

(MFA) and subsequently by theAgreement on Textiles and Clothing(ATC) – which governed global tradeon textiles and clothing (T&C) for thelast four decades expired on 31 De-cember 2004. The T&C trade wasbrought into the ambit of the WorldTrade Organisation (WTO) rules since1 January 2005. The ATC, concludedunder the Uruguay Round (UR), wasmeant to end the prevailing distor-tions in T&C trade and usher in acompetitive milieu.

Trade in T&C is a major issue asmost of the countries embark on in-dustrialisation with the developmentof T&C sector. Although the quotasystem was initially meant to protectthe industries in the developed world,it also fostered the growth of this sec-tor in many developing countries thatwere not necessarily most efficientproducers of T&C products. The endof the quota system has been a con-tentious issue since the conclusion ofthe UR and the establishment of theWTO in 1995. It was expected thatlarger developing countries like Chi-na and India would gain at the costof smaller economies. The issue isabout the extent of gain or loss for thelatter and what adjustments need tobe made for vulnerable economies.

South Asia after the Quota System:Impact of the MFA Phase-out reviews theimmediate aftermath following theend of quotas as well as discusses thelikely long-term and short-term im-pacts. Published by Institute of PolicyStudies (IPS) in cooperation withFriedrich-Ebert-Stiftung (FES), Colom-bo, the book is divided into three parts,viz., introduction, South Asian expe-rience and Sri Lankan case studies.The South Asian experience consistsof the analyses of the likely impact onfive South Asian countries: Bang-

ladesh, India, Nepal, Pakistan and SriLanka.

The quota phase-out has been amixed experience for South Asia. Big-ger economies like India and Pakistanhave maintained their strong positi-tons in the global textiles industrywhile some of the LDCs have been ex-periencing shocks. Nepal has been themost adversely affected in South Asiaas its T&C exports have been steadilydeclining in its major market, viz., theUnited States, in 2005.

The book contains useful analy-sis of emerging market access issuesin the T&C trade; implications for la-bour such as social protection anddecent work; and system of preferenc-es provided under bilateral and mul-tilateral schemes. Initiatives taken bythe governments and business to take

advantage of the quota phase-outand counter the negative impact of thefull integration of the T&C trade inthe WTO regime are also discussed.

One important issue, which stillremains to be analysed is how theT&C sector will perform in each of theSouth Asian countries in the post-MFA era under different scenarios infuture. The challenge is to come upwith reliable quantified gains andlosses under different scenarios. As acollection of articles of various writ-ers, the book does not provide quan-tifiable gains or losses for each coun-try. The authors rely solely on second-ary data, which is probably the big-gest drawback of the book. In the caseof smaller economies such as Nepal,the unavailability of data required forsuch quantification also poses a prob-lem although the two chapters onBangladesh and India attempt toquantify the impact by the researchof the authors themselves. However,as these calculations were done foranother study and the assumptionsare not the same, a suitable compari-son of the impacts does not becomepossible.

It may be derived from this bookthat there cannot be a common SouthAsian outlook on the impact of thequota phase-out. The experience of SriLanka proves that economic size andlack of raw materials do not stand inthe way to develop a niche in the T&Cindustry.

Although the book has been pub-lished after the expiry of the quota re-gime, the analysis (except for Nepal)is mostly based on information priorto the expiry of the ATC. It would suf-fice to state here that the book enhanc-es our understanding about the issuesemerging from the ATC expiry. n

(Dr Dabadi is Research Director atSAWTEE)

The End of the Quota SystemBoon or Bane for South Asia?

Hemant Dabadi

Title: South Asia after the QuotaSystem: Impact of the MFA Phase-out

Edited by: Saman Kelegama

Publishers: Institute of PolicyStudies and Friedrich-Ebert-Stiftung,

ColomboISBN: 955-8708-36-4


NETWORK NEWS

ON 11 November 2005, SAWTEE andPro Public organised the launch meet-ing of the project titled Linkages Be-tween Trade, Development and Pov-erty Reduction. The project willbe implemented in Nepal overthe next four years. The projectaims at helping the govern-ment and the stakeholders, in-cluding the private sector, to re-alise the linkages betweentrade, development and pover-ty reduction so that they couldactively play their part in main-streaming trade into the coun-try’s overall development andpoverty reduction strategies.

At the meeting, partici-pants discussed various as-pects of development and poverty re-duction. They stressed that povertyreduction is not possible withoutstreamlining and linking trade anddevelopment policies with nationalpoverty reduction strategies. Theyviewed that there is a serious needfor Nepal to manifest the policy rele-vance and coherence of internationaltrade on poverty reduction, especial-ly in light of Nepal’s accession to the

World Trade Organisation (WTO).Eminent economist Dr Yubaraj

Khatiwada presented the key find-ings of a preliminary research paper

on Trade, Development and PovertyReduction in the Nepalese Context.The paper points out that trade is-sues should be addressed adequate-ly in documents such as country’sfive year plans and the poverty reduc-tion strategy paper. Further, trade, in-vestment and industrial policies, in-cluding fiscal and monetary policies,have to be devised for meeting the coreobjectives of poverty alleviation as

there have been failures in this regard.The paper also states that there is aneed to devise safety nets for the poorso that they do not get affected from

the country’s trade policies.Also, it is important to makestrategic interventions to buildthe supply-side capacities.

The same project is also be-ing implemented in 14 othercountries in South Asia, SouthEast Asia, Southern Africa,Eastern Africa and Europe bydifferent local organisationsin collaboration with Con-sumer Unity and Trust Society(CUTS), Jaipur, India, which isa network institution of SAW-TEE.

As part of the same project, CUTSorganised, in association with theUnited Nations Non-GovernmentalLiaison Service, the InternationalSymposium on Linkages betweenTrade, Development and Poverty Re-duction on 24 November at Geneva.

The theme of the symposium was“Stakeholder Perceptions on Trade,Development and Poverty Reduc-tion”. n

Mainstreaming Trade into Development andPoverty Reduction Strategies

South Asian Perspective on theJuly PackageSAWTEE organised the NationalConsultation on WTO Doha Roundand South Asia: Linking Civil Soci-ety with Trade Negotiations on 19September 2005 in Kathmandu. Theconsultation was organised to takeinputs from various stakeholderson five issues under the July Pack-age (JP), which Members of theWorld Trade Organisation (WTO)had adopted in August 2004. At theconsultation, researchers from In-dia, Nepal and Sri Lanka present-ed papers on five issues: agricul-ture, non-agricultural market ac-cess (NAMA), services, trade facili-

tation and development dimension.The researchers at the consulta-

tion shared their findings of the re-search papers with the stakeholdersfor comments and suggestions. The

participants provided their inputsto the researchers based on their ex-

pertise and experience.The consultation wasfruitful for the research-ers as many suggestionsfrom the stakeholderswere relevant. After theresearchers finalise theirresearch based on theinputs taken from thestakeholders, a researchbook will be publishedfor distribution at theHong Kong Ministerialin December 2005. The

book will be particularly useful forSouth Asian trade negotiators andother stakeholders as it will capturethe South Asian perspective on fiveissues being negotiated under JP. n


NETWORK NEWS

SAWTEE and Federation of Ne-palese Chambers of Commerce andIndustry – Agro Enterprise Centre –organised the national policy dia-logue titled Promotion of Agribusi-ness in Nepal on 18 November 2005. Participants opined that the govern-ment, in collaboration with the pri-vate sector and other concerned stake-holders, should take adequate mea-sures for quality control, investment,access to the market and cost of com-pliance to strengthen and promoteagribusiness in Nepal. In the contextof Nepal’s membership to the WorldTrade Organisation (WTO), theyviewed that a national strategy tostrengthen and develop a partnershipamong the government, private sec-tor and farmers should be designedso that they could work together andpromote the Nepalese agribusiness inthe globalised era.

CUTS-Centre for International Trade,Economics & Environment (CUTS-CITEE) organised a three-day nation-al consultation in Dhaka during 21-23 November 2005.

The consultation was a part of theproject titled Regional Economic Co-operation in South Asia. CUTS-CIT-EE, Friedrich-Ebert-Stiftung of India,Unnayan Shamannay, Bangladesh,and the Federation of BangladeshChambers of Commerce and Indus-try jointly organised the consultation.

The event was designed to involve

The Sustainable Development Pol-icy Institute (SDPI), Pakistan isholding its Eighth Sustainable De-velopment Conference (SDC) dur-ing 7-9 December 2005 in Islama-bad. The themes for the Conferenceare gender, livelihoods, multilater-al trade and governance, health,peace, people’s rights and child la-

bour.SDPI organises

SDC each year asa forum for shar-ing and exchang-ing ideas and ex-periences on dif-frent issues of sus-tainable develop-ment. Various ac-tors and agencies,including practi-

tioners, civil society and policy-makers of different countries par-ticipate in the Conference.

In December 2004, the SeventhSDC was organised, which coveredissues such as globalisation, migra-tion and urbanisation, food andwater security, health, environ-ment, energy, resource rights, gen-der, human trafficking and litera-ture and development. Some 150panelists from 18 countries hadparticipated in that SDC.

The SDC series has been recog-nised as a major Conference inSouth Asia on sustainable devel-opment issues due to which it at-tracts leading intellectuals and pol-icymakers. SDPI publishes an an-thology on sustainable develop-ment and launches at each Confer-ence.

In the Eighth SDC, the partici-pants will discuss how problemsand issues concerning sustainabledevelopment in South Asia can bedealt effectively at various levels bydifferent stakeholders, includingthe governments and the civil soci-ety. n

Promoting Agribusiness

Presenting his paper “Agribusi-ness Promotion Policy for Multilater-al Trade Competitiveness”, Dr Krish-na Prasad Pant, economist at Minis-try of Agriculture and Cooperatives,Kathmandu, called for exporters to ex-plore market potential of their prod-ucts and also meet the requirementsthat are critical for exporting productsin the international market.

Participants attending the pro-gramme admitted that unless there isresearch and development in the agri-business sector, it would be difficultfor the country to identify its tradecompetitiveness in agriculture,which, in turn, will limit Nepal’s po-tential to derive benefits from WTOmembership. Around 60 participantsrepresenting the government, privatesector, non-government sector, donorsand media participated in the dia-logue. n

business representatives, governmentauthorities, civil society representa-tives and academics from Bangladeshto create an awareness towards re-gional cooperation with a view to in-fluencing the future policy directionon trade and investment promotionwithin the country and amongst oth-er South Asian countries.

The project endeavours to assessthe present status of South Asian As-sociation for Regional Cooperationand analyse the future prospects ofeconomic cooperation. n

Regional EconomicCooperation in South Asia

Eighth SustainableDEVELOPMENTConference


South Asian Civil Society's Perspective on DohaRound

The dicussion will be held from 11:00 - 13:00 hrs on12 December 2005 at Room No. 408. NGO Center,Hong Kong.

The outcome of the Doha Round of multilateral tradenegotiations will have significant implications forinternational trade and national development,including of the developing and least developedcountries. This event will be focusing on the five keyissues of the July Package (JP). The event will come upwith recommendations to WTO Members for con-ducting negotiations on these issues in Hong Kong ina manner that also protects the interests of thedeveloping and least developed countries.

Organisers: Consumer Unity & Trust Society-Centrefor International Trade, Economics & Environment(CUTS-CITEE) and SAWTEE.

Advancing LDC Interests in the Doha Negotiations

The discussion will be held from 10:15 - 12:45 hrs on14 December 2005 at Room 404, Hong Kong Tradeand Development Symposium, Hong Kong.

The focus of the event will be to evaluate how theDoha Development Round will facilitate the leastdeveloped countries to benefit from the multilateraltrading system. In the context of overall developmenttrend and prospects of the least developed countries,particularly in view of the new focus of developmentssuch as Millennium Development Goals and PovertyReduction Strategy Paper, the event will be importantto discuss the interests of the least developed coun-tries.

Organisers: Centre for Policy Dialogue (CPD) Bang-ladesh, Southern and Eastern African Trade Informa-tion and Negotiations Institute (SEATINI) andSAWTEE.

The TRIPS Review Process: ABS, PIC and Disclo-sure Issues

The discussion will be held from 11:00 – 13:00 hrs on15 December 2005 at Room A5, NGO Center, HongKong.

SAWTEE Activities during theHong Kong Ministerial

Article 27.3 (b) of the Agreement on Trade RelatedAspects of Intellectual Property Rights (TRIPS) hadbeen subjected for review four years after the imple-mentation of the Agreement, i.e., 1999. Recently, theIndian Commerce Minister, Mr Kamal Nath haswritten a letter to 31 trade ministers to agree to aproposal submitted by eight countries to the TRIPSCouncil. In this context, the panel discussion is beingorganised to support the proposal of developingcountries and conduct advocacy programmes todefend their interests.

Organisers: SAWTEE along with its network institu-tions – Bangladesh Environment Lawyers Association(BELA), Bangladesh; CUTS Calcutta Resource Center,India; Law & Society Trust, Sri Lanka; Forum forProtection of Public Interest (Pro Public), Kathmandu;and Sustainable Development Policy Institute (SDPI),Pakistan.

Supply Side Constraints of LDCs

The discussion will be held from 10:00 – 12:00 hrs on16 December 2005 at Room A5, NGO Center, HongKong.

It has been realised that market access for the leastdeveloped countries is commercially meaningless ifthey cannot increase their competitiveness in thesectors in which they have preferential market access.The discussion is being organised to facilitate aninformed debate on the supply-side constraints of theleast developed countries and identify the ways totackle them.

Organisers: SAWTEE and Centre for Policy Dialogue(CPD), Bangladesh.

Challenges of Market Access and Compliance underthe WTO: Case Studies from South Asia

The discussion will be held from 16:45 - 19:00 hrs on17 December 2005 at Room 401, Hong Kong Trade andDevelopment Symposium, Hong Kong.

Organisers: Trade Knowledge Network (TNK) SouthAsian Partners: Sustainable Development PolicyInsititute (SDPI) Pakistan; Singapore Institute ofInternational Affairs (SIIA), Singapore and SAWTEE.


Launched in December 1994 at Nagarkot, Nepal by a consortium of South Asian NGOs, South Asia Watch onTrade, Economics & Environment (SAWTEE) is a regional network that operates through its secretariat inKathmandu and member institutions from five South Asian countries, namely Bangladesh, India, Nepal, Paki-stan and Sri Lanka. Registered in Kathmandu in 1999, the overall objective of SAWTEE is to build thecapacity of concerned stakeholders in South Asia in the context of liberalisation and globalisation.

Title: Making Trade Preferences Workfor South Asian LDCsPublisher: SAWTEE

Author: Mohammad A Razzaque

Title: Trade Justice: A South AsianPerspective

Publisher: SAWTEEAuthors: Bharath Jairaj andKirtana Chandrasekaran

Making Trade Preferences Work for

South Asian LDCs

THE Trade Justice movement has become increasingly visible in its roleof highlighting the widening gap beween many of the stated objectives ofthe world trading regime and the global reality of growing inequalities.The remit of the Trade Justice movement is wide and includes severalissues of concerns to developing countries and least developed countries.There are sufficient studies and realities to prove the fact that the benefitsof the international trade system have largely gone to/been felt by thosewho already “have”, while failing to benefit the “have nots”.

This discussion paper looks at five key issues that concern developingcountries, from a “trade justice lens” - (1) agricultural protectionisn; (2)the increasing use of non-tariff barriers; (3) the abuse of trade remedymeasures; (4) the non-application of Special and Differential Treatmentprovisions and; (5) the absence of democratic procecesses in the WorldTrade Organisation, with a view to understanding the potential implica-tions and benefits of implementing trade justice aspects, particularly inthe context of South Asia.

The discussion paper argues that developing countries need to take ac-tive part in the negotiations in order to protect their interests and shouldnot allow themselves to be divided by developed countries. Although theinterests of all developing countries may not always be aligned, they doneed to develop common strategies at least for the purpose of negotia-tions, to pre-empt developed country efforts to continue to deny potentialbenefits from trade. n

Trade Justice:A South Asian Perspective

DEVELOPING countries, including the least developed countries (LDCs),have been granted preferential market access in major industrialised coun-tries for the past three decades. However, the latter enjoy the discretion toapply preferences to some LDCs but not to others. In this respect, manyregional trade agreements exempt South Asian LDCs to enjoy similarfacilities as their LDC counterparts in other regions of the world.

In most cases, preferences are applicable if the LDCs fulfil rules of originrequirements whilst various tariff and non-tariff barriers also underminethe utility of trade preferences. The result is that South Asian LDCs havebeen unable to optimally utilise existing preferences in major developingcountry markets. This briefing paper scrutinises the benefits of such pref-erences in the wake of challenges that continue to hamper sustainabletrading prospects and export growth of South Asian LDCs. n

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