Bridges Weekly Trade News DigestVolume 16Number 26 • 4th July 2012

WTO Sub-Committee Clinches Preliminary Deal on Accession Guidelines for Poorest Countries


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WTO members have reached a preliminary agreement updating the accession guidelines for least developed countries (LDCs), according to Geneva-based delegates. The 29 June draft recommendations, prepared by the LDC Sub-Committee, were reportedly still awaiting formal approval from some member capitals as Bridges went to press on Wednesday evening; if and when the confirmation is received, the guidelines will be forwarded to the General Council - the WTO’s highest decision-making body outside of the ministerial conference - for adoption later this month.

The draft guidelines - available as a working document on the WTO website - are the result of a December decision by trade ministers at the Eighth WTO Ministerial Conference to “further strengthen, streamline, and operationalise the 2002 LDC accession guidelines,” with the inclusion of benchmarks, particularly in the area of goods. Members were also urged to explore benchmarks in the area of services, with July’s General Council meeting set as the deadline for finalising all of the recommendations.

The document agreed in 2002 had urged WTO members to exercise restraint in the demands made of LDCs during the accession negotiations.

However, least developed countries have long complained that their trading partners routinely ask them to take on commitments beyond what they are capable of during their bidding process to join the WTO, as seen in the cases of the five most recent LDCs to accede. These commitments, they argue, were also well beyond those that were required from LDCs that had previously joined the organisation.

When the WTO was founded in 1995, 30 LDCs joined the organisation. Since then, only five LDCs have joined the global trade body, with ten currently negotiating to join the 155-member group. Of these ten, Laos and Yemen are in the final stages of accession, and are widely expected to complete the negotiating process this year.

July date in the background

Since the December ministerial, trade officials have stressed in various contexts - including the Paris trade ministers’ meeting in April - the need to quickly conclude the negotiations for the new LDC accession guidelines.

“It’s not a part of our Doha mandate, but it is an area where we can demonstrate that we can come together and do something we haven’t done, frankly, [in] the last ten years,” US Trade Representative Ron Kirk said in April after the Paris trade ministers’ meeting. (See Bridges Weekly, 30 May 2012)

However, the difficulty of the discussions in Geneva had raised questions in some circles over whether meeting the July General Council deadline would be feasible.

“The negotiations [for the revised guidelines] were long, and quite hard,” one developing country official commented to Bridges.

“Had things not worked out by July… The momentum would have gone by the wayside and there would have been a lot of bitterness in the July Council,” the official continued. “If we could not do something as simple for LDCs, then there would have been questions regarding the virtues of the system.”

“In an organisation where no negotiation seems to end, this is something we could do in time,” another developing country official commented.

“While there was a push to delay [by some], it was not clear that there would have been a better deal that way.”

Goods debate

Market access in goods took centre stage during the accession guidelines discussions, with talks focusing on the level of binding coverage - in other words, how many tariff lines acceding LDCs will have to bind upon joining the WTO - and what average bound rates should be (i.e. the average maximum tariff rate agreed to by each WTO member), along with the implicit trade-off between the two.

“While comprehensive binding coverage is a fundamental objective, flexibilities shall be provided to acceding LDCs consistent with their individual development, financial, and trade needs,” the draft text reads.

All agricultural tariff lines will be bound under the new benchmarks, as required by all WTO members in the organisation’s Agreement on Agriculture. The average bound rate of these lines will be 50 percent, the new accession guidelines text reads.

The debate on non-agricultural market access was particularly contentious, delegates commented to Bridges. While some developed country members lobbied for 100 percent binding coverage on the grounds that this would ensure predictability of the system, many LDCs argued that some tariff lines should be left unbound, should problems arise with lines that are especially sensitive.

Another issue that was raised was whether the conditions for entry for the first 30 LDCs to accede to the WTO - which did so under less stringent binding coverage and average bound rates - or for the five most recent LDCs, which had tougher terms, should be used as a basis of comparison, or if some average between the two should be used.

Members on Friday at the LDC Sub-Committee ultimately agreed on binding 95 percent of tariff lines for non-agricultural products, at an average bound rate of 35 percent, with the latter number reflecting a middle ground between the average bound rate for the 30 original LDCs to accede - at an average bound rate of 44.4 percent - and the five recently acceded LDCs, with an average bound rate of 23 percent.

While some developing countries had pushed for the remaining five percent of unbound tariff lines to be open for self-selection, sources told Bridges, a footnote in the draft text explains that those lines will ultimately be subject to negotiation, “and will include tariff lines that take into account the sensitivities of acceding LDCs.”

Notably, acceding LDCs that wish to take on comprehensive bindings of non-agricultural tariff lines can do so, in exchange for “proportionately higher overall average rates than provided for [above], with the precise level of bindings and average rates to be agreed between the acceding LDC and the members.” Those LDCs would also be entitled to transition periods “of up to 10 years for up to 10 percent of their tariff lines.”

The draft text also emphasises the uniqueness of each accession process, stating that the tariff concessions to be offered by the acceding LDC may vary depending on individual circumstances. “Establishing benchmarks on average bound rates does not prejudge the right of members to negotiate the level of bound rates in individual lines of interest to them,” the text reads. “At the same time, this offers an opportunity to acceding LDCs to determine the bound rate suitable to each tariff line.”

“The benchmarks proposed for the goods negotiations are a step forward,” said Nicolas Imboden, Executive Director of the Geneva-based IDEAS Centre, an organisation that that works to help low-income countries integrate into the world trading system. “They are clearly a compromise between what LDCs wanted and what the other WTO members were willing to give. The merit is that the two parties could agree on a common denominator that puts clear and enforceable limits to potential unreasonable demands on LDC acceding countries.”

Services

Unlike the goods section, the services section of the preliminary text does not include quantitative benchmarks. Rather, it outlines a series of qualitative benchmarks, noting that there shall be “flexibility for LDCs for opening fewer sectors, liberalising fewer types of transactions, and progressively extending market access in line with their development situation.”

In addition, LDCs bidding to join the global trade body will not be expected to offer full national treatment, or to take on additional commitments under Article XVIII of the WTO’s General Agreement on Trade in Services on regulatory issues “which may go beyond their institutional, regulatory, and administrative capacity.”

Under the draft recommendations, these LDCS will also not be required to undertake services sector and sub-sector commitments “beyond those that have been committed by existing WTO LDC members, nor in sectors and sub-sectors that do not correspond to their individual development, financial, and trade needs.”

“The services section was very difficult, as the [goods] concept of benchmarks would not apply,” one developing country official said. However, the final result is “quite helpful in guiding negotiations for LDC accession. It puts certain limits on what can and cannot be done.”

The lack of detail in the proposed services benchmarks, however, has been criticised by some trade observers, who note that more might be needed to ensure LDCs not face overly stringent requests in that area.

“The proposed benchmarks on services are a missed opportunity,” Imboden commented. “The proposed text… clearly shows that no serious effort has been made to show either the importance of services for the development of the countries concerned or to find some common ground on what would be a reasonable approach to services negotiations.”

Transparency, S&D, and technical assistance

The text also includes sections on transparency, special and differential (S&D) treatment, and technical assistance.

Part of WTO accession negotiations involves bilateral talks between current and prospective members to reach bilateral deals, a process that has been criticised by some for allowing members to potentially make disproportionate demands of acceding LDCs.

To that end, the draft text on transparency includes a clause that says that “the Accession Working Parties will continue to provide the forum for Members and acceding LDCs to collectively review the bilateral market access negotiations on goods and services.”

The preliminary text also reaffirms that S&D treatment, as outlined in the WTO agreements, ministerial decisions, and other relevant WTO legal instruments, shall be applicable to all LDCs in the process of joining the WTO.

The WTO Secretariat will also prepare technical assistance framework plans built on input provided by acceding LDCs, with the goal of achieving “greater coordination and effective delivery at all stages of the process,” according to the recommendations. Such plans, the draft text says, will be “demand-driven” and will be modified over time depending on changes in the needs of these acceding countries.

More information

The draft decision (WT/COMTD/LDC/W/55/Rev.2) is available at  http://docsonline.wto.org. Bridges will provide further updates should any changes appear in the final version if and when capital officials approve the document.

ICTSD reporting.

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