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Special and Differential Treatment SDT under the Doha Work Programme Workshop on the main issues and challenges in the

Outline. BackgroundSDT under WTODoha Work Programme on SDTConcluding remark. What is SDT?. SDT is a modality whereby more favourable treatment is provided only to developing countries under trade negotiations and agreements;SDT is not ?flexibility? as such, as WTO provides certain flexibility to

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Special and Differential Treatment SDT under the Doha Work Programme Workshop on the main issues and challenges in the

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    1. Special and Differential Treatment (SDT) under the Doha Work Programme Workshop on the main issues and challenges in the multilateral trading system Dhaka, 9-12 July 2007

    2. Outline Background SDT under WTO Doha Work Programme on SDT Concluding remark

    3. What is SDT? SDT is a modality whereby more favourable treatment is provided only to developing countries under trade negotiations and agreements; SDT is not flexibility as such, as WTO provides certain flexibility to all Members. DCs are entitled for greater degree of flexibility and rights through SDT.

    4. Rationale for SDT Iequality in size, market, capacity, income and poverty level between trading partners ? fairness, equity and moral imperative; Limited export capability of DCs to effectively compete in international markets ? preferencial treatment Level of economic development and poverty ? proactive government policies. Higher adjustment costs given DC economies structural weakness, government finance and lack of social safety nets ? adjustment facility; Limited institutional and human capacities and resources ? transition period and TA/FA

    5. Arguments against SDT SDT is based on outdated economic thinking favuoring import-substitution and government intervention superceded by current globalization processes; SDT hinders the integration of DCs into world trade on competitive terms; Preferences have distorted trade, increased inefficiency and commodity-dependence, and delayed development in DCs; SDT undermines non-discrimination principles and weaken WTO disciplines, leading to two-tier system; Diversity among DCs makes the uniform SDT less relevant;

    6. Arguments in favour of SDT (1) WTO are inherently biased against DCs: Liberalization faster for sectors of export interst for DDCs and slow for those of DC interest (agri, textiles, mode 4); DDCs themselves have used proactive industrial policies that are now prohibited under WTO (industrial subisides, TRIMs); Similarly trade distorting measures that tend to be used by DDCs are allowed (e.g. agricultural subsidies); Speical interests are overrepresented (TRIPS); Costs of implementation of some agreements are prohivitively high (CV, TBT/SPS, TRIPS);

    7. Arguments in favour of SDT (2) DDCs themselves recognize and implement adjustment policies and assistance (e.g. US Trade Adjustment Assistance); SDT enables DCs to accept those agreements that could not otherwise be accepted by them; Thus, SDT is instrumental for viability and inclusiveness of MTS, progressinve liberalization and trade reform of DCs and economies of developed countries.

    8. History of SDT

    9. Importance of SDT under WTO

    10. Evolution of SDT In the GATT era, SDT was designed for trade expansion (less-than-full reciprocity, GSP) and development (GATT XVIII, Part IV) purposes; While Tokyo Codes enabled opt-out for DCs, WTO expanded its scope, reach and disciplines, thereby constraining DCs policy autonomy and option (policy space); SDT in this context has become transitional adjusment tool with which DCs are expected to later abide by the same rules and standards as DDCs

    11. SDT provisions in WTO Agreements Total 155 provisions, of which: 16 SCM, TBT 15 GATS 14 Agriculture 8 Customs Valuation, GATT XXXVI, XXXVII 5 SPS 1 Anti-Dumping, 0 Preshipment Inspection, Rules of Origin.

    12. Typology of SDT under WTO (1) Provisions aimed at increasing trade opportunities of DCs (14); Provisions under which WTO members should safeguard the interests of developing countries (50) Flexibility of commitments, of action, and use of policy instruments (33) Transitional time periods (19); Technical assistance (14) Provisions relating to LDCs (24)

    13. Typology of SDT under WTO (2)

    14. LDC specific SDT 24 provisions across agreements SDT provisions only for LDCs: Increased trade opportunites 6 Safeguards trade interets 10 Lesser obligations 1 Transition peirods 3 Technical cooperation - 2

    15. Example (1) ATC 2.18: For small suppliers meaningful improvement in access for their exports shall be provided through advancement by one stage of the growth rates; (2) SPS 10.1: In the application of SPS measures Members shall take account of the special needs of DCs and LDCs; (3) AoA 6.2: The development programme (rural development etc) of DCs shall be exempted from .. Reduction commitments;

    16. Example (2) (4) AoA 15.1: DC members shall have the flexibility to improlement reduction commitments over a period of up to 10 years (6 years for DDCs); (5) TRIPS 67: DDC Memebres shall provide, on request and on mutually agreed terms and conditions, technical and financial cooperation; (6) TRIPS 66.2: DDC Members shall provide incentives to enterprisesfor the purpose of promoting and encouraging technology transder to LDCs.

    17. Problem with SDT provisions (1) As regards (A) actions by DDCs = (1) (2)&(5) Most SDT provisions are best endeabour not legally enforceable; Thus, not fully implemented by DDCs; Particularly those involving resource transfer (TA, FA, ToT); There is thus need to make them legally binding and enforceable with specific commitments by DDCs.

    18. Problem with SDT provisions (2) As regards (B) actions by DCs = (3)&(4) DCs faced difficulty in implementating some agreements due to: the high costs of implementation, technical and capcity constraints (SPS/TBT, CV, TRIPS); inadequate/insufficient SDT (TRIMs, SCM, TRIPS) And existing SDT is being overriden by: Accession negotiations; Regional Trade Agreements (North-South); Structural adjustment programmes (IFIs).

    19. DWP on SDT (1) DMD 44, Decision on Implementation 12 All SDT provisions to be reviewed with a view to strengthening them and making them more precise, effective and operational; The CTD to: Identify those SDT provisions to be made mandatory (by July 2002); Consider additional ways to make SDT more effective; Consider how SDT may be incorporated into the architecture of WTO rules.

    20. DWP on SDT (2) Special Session of the CTD; The African Group and LDC proposals; Some 26 submissions by 14 counties/groups; Cross-cutting issues, monitoring mechanism, 88 agreement-specific proposals, technical and financial assistance; Monitoring Mechanism agreed but its function to be determined; Deadlock with 3 deadlines missed in July 2002-March 2003 ? No agreement at Cancun

    21. Major Bottlenecks Interpretation of the Doha mandate: How to achieve the SDT review with a view to strengthening them and making them more precise, effective and operational; Amending legal texts to make them mandatory? Preserving the balance of rights and obligations?; Relationship with other specific negotiating mandate/forum (AoA, GATS etc); Question of principle: Differentiation and graduation.

    22. Definition, differentiation, graduation of DCs under WTO Under GATT/WTO, DC status based on self-designation, and never formally defined; The only formally recognized category is LDCs (economies in transition, NFIDCs, SE, small suppliers) Enabling Clause included evolutionary notion of SDT that DCs would expect to participate more fully in (GATT) with their progressive development, hence fuller participation (graduation and differentiation implemented under GSP schemes, e.g. EU-GSP); DDCs: more effective SDT would require differentiation among DCs (graduation of the most advanced) based on objective criteria. (cf. EU offer for G90)

    23. Categorization of 88 Agreement-specific proposals (April 2003) Category I (38):Proposals on which agreement appears likely to be recommended for adoption at Cancun; Category II (38): Proposals with overlapping mandate with other negotiating bodies (AoA, services etc) Category III (12): Proposals with divergence of views among Members.

    24. Key Issues in the Categories Category I: Status quo and limited value Proposals on TA to be matched with resources; To what extent original proposals are retained in the final language Category II: How negotiations are organized in which forum and by when; Category III: How to be dealt with for a way forward.

    25. Cancun Outcome Cancun draft text (Derbez Text) included 27 proposals (of which 16 are LDC proposals) for harvest, mainly from category I. Little development value as: Language was significantly weakened from the original proposals; Only reconfirmed status quo.

    26. Example (1) GATT XVIII:C (Gov assistance for development): Proposal: Members shall exercise restraint in seeking compensation from LDCs ? Outcome: The MC instructs the CTG to develop and adopt procedrues for recourse to GATT XVIII:C. The concerns rased by DCs and LDCs shall be addressed.

    27. Example (2) GATT XXXVII (Trade and Development) Propsoal: The commitments set out shall be fully implemented ?Outcome: The MC agrees that any member may initiate dicussions in the CTD on the basis of GATT XXXVII and decides taht a Member shall, upon request, provide a detailed explanation

    28. Example (3) AoA 15.2: The MC confirms that LDC Members remain exempt from reduction commitments as provided under AoA 15.2; DSU 8.10: Pursuant to DSU 8.10, the MC agrees that in dipustes between DCs and DDCs, at least one panelist shall be from developing country Member; Enabling Clause: The MC confirms that the terms and conditions of the En. Cl. Shall apply when action is taken by Members under the provisions of this Clause

    29. Post-Cancun Developments SDT not addressed on a priority basis; Little progress in CTD; CTD Chair suggested to harvest 28 proposals (including 16 LDC proposals) included in Derbez text as part of July Package; African Group& LDCs (Bangladesh) expressed concerns as they consider those propsoals not having commercial value and that 88 proposals should be treated as broader package.

    30. Conclusion: Issues of Importance to Bangladesh (1) SDT to be recognized as a fundamental principle of an MTS for fairer and more equitable treatment of DCs to overcome inequality in economic size and capacities, and to be applicable to all DCs; Predictability, operationability and development value of SDT provisions; Corresponding national capacity to utilize and benefit from them; Level of commitment of partners in implementation;

    31. Conclusion: Issues of Importance for Bangladesh (2) Costs of implementation and adjustment to agreements to be addressed in any future agreement (e.g. SPS, TBT, TRIPS); Consistency between WTO SDT provisions and obligations under other RTAs (e.g. North-South RTAs); Interface between SDT and coherence in policy advice (e.g. IFI).

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