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Source: Small Island Developing States

The last meeting of the World Trade Organization’s (WTO) General Council for 2020 saw members review several agenda items related to least developed countries (LDCs). Among these was a proposed ministerial decision for extending some of the support measures LDCs receive for several years after they graduate from LDC status – especially given that some of these countries are expected to undergo that transition in the coming years.

The 16-18 December meeting of the General Council also saw a proposal aimed at supporting the establishment and growth of “cotton by-product industries” in LDCs. Examples of cotton by-products include cotton seed and hulls, with uses ranging from cooking oils to paper production. The proposal was submitted by Burkina Faso, on behalf of the Cotton-4 (C-4) countries (Benin, Burkina Faso, Chad, and Mali) and Côte d’Ivoire.

Also on the General Council’s agenda were reports on the implementation of decisions from the past three ministerial conferences, including some that involve LDC issues. These were part of a much larger agenda, which tackled issues ranging from trade and public health to the future of a long-standing moratorium on duties on electronic transmissions.

Twelve-year Extension?

The WTO agreements feature a series of provisions that set out “special and differential treatment” (S&DT) for developing and least developed country members. The approach to S&DT can vary depending on the agreement, ranging from different limits for certain types of trade-distorting subsidies to transition periods for implementing some of the WTO’s rules.

Some of the S&DT measures apply only to LDCs, which is a status based on the UN classification. Others are available to any WTO member that designates itself as a developing country. This is itself a controversial issue given that some large advanced economies, especially the US, have argued that it is vital for WTO rules and negotiations to differentiate among developing countries of varying economic heft and circumstance, while many developing countries of varying sizes have warned that development challenges manifest themselves in myriad ways and complexities and must be acknowledged.

What happens after an LDC “graduates” from that status, however, is less clear. Chad, on behalf of the LDC Group, presented a communication and a related draft Ministerial Conference decision that, if adopted, would extend “support measures” available to LDCs under the WTO agreements for an additional 12-year period after graduation.

Under the draft decision, support measures are defined as “all special and differential treatment measures and exemptions available to a least developed country under existing and future WTO Agreements, Understandings, Ministerial, General Council and other relevant decisions,” as well as technical assistance, capacity building, and other measures under the WTO system meant for LDCs.

The proponents say ensuring a “smooth transition” is vital, noting that under the UN system there are provisions to support this transition. They also note there is only one mechanism at the WTO – the Enhanced Integrated Framework – that is designed to help in such transitions when it comes to the trading system.

“After leaving the category, graduating countries would normally lose access to all trade-related support measures and flexibilities granted to them, unless they request a waiver which must be approved by the whole membership,” the LDC Group’s communication notes.

The communication also warns that this creates particular challenges for LDCs on the cusp of graduation, citing as examples “their economic vulnerabilities and their limited negotiating capacity,” and noting that losing these support measures amid the devastation wrought by COVID-19 has meant that “several LDCs have been reluctant to graduate.” The Group notes that 12 LDCs are in the pipeline for graduation over the coming four years, with more expected.

While no decision was taken during the General Council meeting, according to trade sources, it drew support from China and India, while others were consulting internally. The EU, for its part, referred to existing procedures that graduating LDCs could use under the WTO system, including the use of waivers, while asking for a clarification on why the 12-year period was chosen and why such support measures should be kept in place for all countries graduating from LDC status.

US Ambassador to the WTO Dennis Shea also raised questions about the 12-year period, asking how this would relate to the existing option available under the UN Committee for Development Policy for LDCs to delay graduation for a maximum of nine years. Another option, he said, would be for LDCs to push for that nine-year period to be extended within the UN context.

Notably, Vanuatu graduated from LDC status in early December. The Pacific island nation is a relatively recent member of the global trade club, having acceded in August 2012.

LDCs at the WTO

There are long-standing concerns over the myriad challenges that LDCs face in engaging in international trade, which have been the subject of several negotiating efforts.

For example, the difficulties that LDCs face in acceding to the WTO, a years-long process that involves negotiating with the entire membership and undertaking significant domestic reforms, prompted the adoption in 2002 of dedicated LDC Accession Guidelines. These non-binding guidelines were later updated in 2012 to include benchmarks in goods and services market access, among other features.

The move to develop revised guidelines was in response to concerns that LDCs face a significant negotiating disadvantage in accession talks, though some trade analysts have warned that the benchmarks could have limited benefits and may limit vital policy space. While 30 LDCs joined the WTO at its inception in January 1995, only six (Afghanistan, Cambodia, Lao People’s Democratic Republic (PDR), Liberia, Nepal, and Yemen) have acceded since, in addition to Vanuatu.

At the Geneva, Bali, and Nairobi Ministerial Conferences in 2011, 2013, and 2015, respectively, WTO members endorsed decisions on select “LDC issues,” extracted from a wider suite of issues being negotiated under the WTO’s Committee on Trade and Development (CTD) in Special Session.

Among the decisions that have been adopted over the years is a decision granting preferential access to services and services suppliers from LDCs, which has been the subject of multiple decisions and follow-up work in Geneva. While over 50 WTO members have notified preferences under the waiver, trade officials and experts say more work needs to be done to ensure the waiver is being used fully, especially given the impact it could have for micro-, small, and medium-sized enterprises (MSMEs).

Another decision, adopted in 2015, with mixed results, relates to preferential rules of origin for LDCs, specifically for imports from LDCs that are not already subject to trade preference schemes. A “Monitoring Mechanism” was adopted in 2013 to review the implementation of S&DT, in response to written submissions, though it has not since been used.

Meanwhile, the decision for developed countries, as well as those developing countries “in a position to do so,” to provide LDCs with access to their markets without subjecting their products to duties and quotas, dates back to 2005. A subsequent decision to advance progress in this area was adopted in 2013, and SDG target 17.12 calls for the “timely implementation” of this decision and related prior ones, along with making reference to the decision on preferential rules of origin.

As 2020 draws to a close, it is worth noting that there is another SDG target that refers specifically to LDCs and their challenges in the trading system. Target 17.11 calls for “significantly [increasing] the exports of developing countries, in particular with a view to doubling the least developed countries’ share of global exports by 2020.”

Data from the SDG Trade Monitor, a joint effort by the WTO, the International Trade Centre (ITC), and the UN Conference on Trade and Development (UNCTAD), suggest that this target will go unfulfilled for both goods and services exports. The fact that this has gone largely unremarked by the international community is profoundly worrisome, as is the fact that many of the long-standing difficulties that LDCs face across multiple dimensions of trade and trade policy remain unresolved.

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This policy brief was written by Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD.

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