Bridges Weekly Trade News DigestVolume 15Number 8 • 9th March 2011

Stumbling Blocks Appear in Negotiations on UN LDC Summit


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As governments prepare for an important United Nations summit on promoting development in the world’s poorest countries, preliminary negotiations on the agreement to be adopted there have been marked by differences on issues as fundamental as the meeting’s objectives and its  general outcome, as well as follow-up processes and institutional arrangements, and how they will be monitored and evaluated.

UN members are set to meet in Istanbul from 9-13 May for the Fourth United Nations Conference on the Least Developed Countries (UNLDC-IV). They have set themselves the task of assessing the plan of action adopted at the last such conference, in Brussels in 2001, and to adopt new strategies to support the sustainable development of LDCs.

As the conference draws near, the New York-based inter-governmental preparatory committee for the conference has stepped up the pace of discussions. LDC governments, the EU, the US, Japan, Switzerland and a group composed of Canada, Australia and New Zealand (CANZ) have taken the lead in submitting proposals, which have come to constitute the current draft negotiating text.

The record of the three previous UN LDC conferences has been unimpressive. In the years since the first summit in 1981, the number of LDCs, instead of shrinking, has grown from 25 to 48. Qualification as an LDC is based on low income (less than $745 per person per year), weak human resources (measured by indicators of nutrition, child mortality, school enrolment, and adult literacy rate), and high economic vulnerability (measured by population size, remoteness, diversity of goods exported, share of agriculture etc.). Only Botswana (1994), Cape Verde (2007), and Maldives (2011) have graduated from LDC status.  The rapid economic growth seen in much of the developing world in recent years has been unevenly distributed; many LDCs have missed out, and are likely to fall short of internationally agreed developmental objectives such as the Millennium Development Goals.

The Istanbul conference was supposed to be different. It was to create an international framework to facilitate LDCs’ achievement of human development goals. Concrete policies adopted there were to help foster a structural transformation of LDC economies in order to facilitate their rapid graduation. But as the conference draws closer, it has become clear that significant differences separate key governments in the negotiations.

Preparatory talks for the Istanbul meeting have revolved around topics including trade, development financing, investment, the effects of the food and economic crisis and the identification of strategies to foster economic and social resilience to future shocks, along with the challenges posed by climate change.

On trade, the discussions have centered on issues including duty- and quota-free market access for LDC exports, Aid for Trade (AfT), and regional cooperation. Securing unrestricted market access for their exports has been a major priority for some LDC governments in recent years - particularly for Asian LDCs vis-a-vis the US market, where they do not benefit from preferences that Washington offers to African LDCs. At the WTO’s Hong Kong Ministerial Conference in 2005, governments agreed that “developed-country Members shall (…) provide duty-free quota-free market access on a lasting basis, for all products originating from all LDCs” - albeit with a potential exception for up to 3 percent of tariff lines. LDCs such as Bangladesh complain that their undiversified export baskets mean that this exception could cover all of the small number of products in which they are internationally competitive. While the EU provides duty- and quota-free access to all LDCs, the US and Japan do not, because of import sensitivities in sectors such as textiles and clothing, and fish.

In their proposals reflected in the draft text after the first Preparatory Committee meeting in January, LDCs, the EU, and CANZ call for duty- and quota-free access for all products from all LDCs in line with the Hong Kong Ministerial Declaration (Australia and New Zealand offer unrestricted access to all LDC exports; Canada does to nearly all). In contrast, Japan commits itself simply to “make the best effort” to provide such access. The US, for its part, did not mention duty- and quota-free market access in its proposals. Developing countries, which were mandated by the Hong Kong declaration to provide similar access to LDCs if they deemed themselves in a position to do so, are yet to table any proposals on the subject in the UNLDC negotiations.

With regards to Aid for Trade, LDCs have been calling for a significant increase in aid to enhance their trade competitiveness. They want this increase, intended to remedy their infrastructure bottlenecks and other supply side constraints, to go beyond already-planned flows of Official Development Assistance (ODA). Thus far, the draft text for Istanbul does not reflect this request for additionality in Aid for Trade funding. CANZ suggested implementing AfT in a manner consistent with donor commitments and recipient needs; the EU emphasised that AfT should be given more consideration in recipients’ own national planning.  The EU called for exploring why AfT flows to LDCs are lower than those to other countries, and proposed changing this in favour of LDCs. Japan’s proposal, for its part, said that maximum use should be made of Aid for Trade “to mainstream trade activities driven by the private sector.”  The US proposal did not mention AfT or so-called ‘additionality’ beyond planned ODA.

Regional integration, including ‘South-South’ cooperation among developing and least-developed countries, was only marginally mentioned in the recent draft. The US and EU texts mentioned the importance and benefits trade with developing countries could bring to LDCs. With regards to the long-struggling Doha Round of multilateral trade talks at the WTO, both said that a swift conclusion would foster development for LDCs.

In addition, the draft text calls for LDC services suppliers to be granted more favourable market access. Such preferential access is currently the subject of a ‘waiver’ being negotiated at the WTO. Other subjects covered by the Istanbul draft text include rules of origin, which it says should be simple, transparent, harmonised, and predictable for all LDC products and services. The EU suggested that the G-20 group of leading economies could play a strong role in providing greater market access for LDCs along with simpler and more development friendly rules of origin.

LDC delegates said that the new text so far provides little hope for major improvements upon the Brussels Program of Action (BPoA). One delegate mentioned that the Brussels plan as such was good, but it lacked monitoring and evaluation mechanisms. This need was yet to be reflected in the new text, prompting concern among some LDC officials. With regards to trade, said one, “what is really needed is a Hong Kong-plus agreement”, since the Istanbul text will probably set the development agendas for LDCs for the next 10 years.

Divisions over the draft text suggest that intensive negotiations will be necessary if governments are to agree on a new development strategy for LDCs in time for the conference in Istanbul. The next meeting of the Intergovernmental Preparatory Committee will be held in New York, 4-8 April.

“The ideas are there, but its implementation into action is missing so far.” said one LDC delegate.

ICTSD reporting.

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