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| Kathmandu, Friday February 07, 2003 Magh 24, 2059. |
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Trade
S & D with Singapore issues
That the World Trade
Organisation (WTO) provides special and differ ential (S&D) treatment for the
developing countries is an oft-repeated argument made by the developed countries in most
of the international fora dealing with economic issues. This was one of the hotly debated
issues in the run up to Doha Ministerial Conference of the WTO and during the immediate
aftermath of Doha. However, there has not been any progress towards making them
operational and effective, as mandated by Paragraph 44 of the Ministerial Declaration.
Whatever may be the
level of progress achieved so far during discussion in Geneva, this is likely to become a
contentious issue both in the run up to and during the fifth Ministerial Conference of the
WTO to be held in Cancun in September this year. However, what they mean in practice is
not something many of us have looked into. For this we have to go back to history.
Analysts are divided on
whether or not S&D treatment is the right policy to facilitate the integration of
developing countries into the multilateral trading system. Some feel that the continued
insistence of developing countries on S&D treatment and their reluctance to take part
in the negotiations held under the aegis of the General Agreement on Tariffs and Trade
(GATT) as equal partners were the main reasons for their marginalisation from the global
economy. As per them, if these countries had opened up their markets as done by the
developed countries, catching up would not have been difficult for them.
Another set of analysts
feel that countries that have achieved long-term economic growth have usually combined the
opportunities offered by world markets with a growth strategy that mobilises the
capabilities of domestic institutions and investors. Therefore, as the saying goes,
well-designed, effective, enforceable and time-bound S&D treatment is necessary for
the successful integration of relatively developing countries into the multilateral
trading system.
This notion is more
than reinforced by the fact that some developing economies which are now well integrated
into the global economy, were major users of the preferential market access opportunities
in the past and some of them (such as Thailand, South Korea and Brazil) are reluctant to
‘graduate’ to a higher status.
The "Enabling
Clause" of 1979 agreed during the Tokyo Round of GATT negotiations provided the basis
for S&D treatment to the developing countries. This allowed developing countries to
take lesser commitments and even stay out of some of the negotiations altogether. However,
the Uruguay Round of GATT negotiations, which established the WTO, changed all this due to
the "single undertaking" principle followed – as per which GATT Agreements
were to be considered as a package deal and nothing could be considered as agreed unless
everything was agreed. This has resulted in severe dilution to the concept of S&D
treatment after the establishment of the WTO. However, some of the S&D provisions are
still in existence.
As things stand today,
there are five types of S&D provisions in the various WTO Agreements. They include:
(a) provisions aimed at increasing trade opportunities of the developing countries; (b)
provisions that require WTO Members to safeguard the interests of developing countries;
(c) provisions relating to technical assistance; d) provisions permitting developing
countries to assume lesser obligations; (e) provisions relating to transitional time
periods. Out of them, only two i.e., (d) and (e) are legally binding and currently
operational, others are nothing more than "best endeavour" clauses.
For the sake of better
understanding, it is necessary to highlight some of the S&D provisions, which are/were
operational in letter and to some extent in spirit too. For example, Article 65 of Trade
Related Aspects of Intellectual Property Rights (TRIPS) Agreement allows five years
transitional period for the developing countries and 11 years for the least developed
countries to implement the agreement, whereas developed countries were required to
implement the same within one year from the date of WTO Agreements coming into force.
Similarly, a higher transition period is also provided for in Trade Related Investment
Measures (TRIMS).
Likewise, Agreement on
Agriculture (AoA) allows developing countries to undertake lower reduction commitments on
tariffs and subsidies. Moreover, LDCs have no reduction commitment at all. Similar
provisions are included in the Subsidies and Countervailing Measures (SCM) Agreement as
well.
Since the real
objective of incorporating S&D provisions ever since GATT era was to facilitate the
process of developing countries’ integration into the global trading system, their
effectiveness should be critically examined in the light of the following questions:
Firstly, are the
commitments for preferential market access and treatment offered by developed countries
meaningful relative to the constraints these countries face while integrating themselves
into the world trading system? The main problem with the preferential market access has
been that they do not provide secure and predictable markets to the developing
countries’ entrepreneurs due to the unilateral nature of preference, which can be
changed at the whim and fancy of the importing country.
Secondly, is the
international technical assistance in support of LDCs, for example, adequate and
effective? The answer to this question is negative, because there has not been any known
instance of technical assistance being instrumental in addressing the supply side
constraints of the LDCs.
Thirdly, does the
flexibility offered to these countries in meeting their WTO commitments contribute to
their long-term trade and development objectives? There is no satisfactory answer to this
question either, because the time-bound derogation at the first place is arbitrary and has
no logical basis, let alone economic rationale.
Developed countries
too, have been provided de-facto S&D treatments by two Agreements, namely AoA and
Agreement on Textile and Clothing (ATC). In the case of both the Agreements, they have
been provided with fairly liberal time frame to remedy the trade distorting measures. On
top of that they have also been given the opportunity to decide as to what modality would
they like to adopt for phasing out these measures.
Since developed
countries have been effectively utilising all the de-facto S&D treatment provided to
them, they have no reason to complain. On the other hand, developing countries are using
only a few of the de-jure S&D provisions and know pretty well that other S&D
provisions will never be implemented – if left at the mercy of the developed
countries. Therefore, they have every reason to demand justice. The only way they could do
so at the WTO is tie up the negotiations on S&D provisions with that of Singapore
issues (competition, investment and transparency in government procurement), which are of
significance to the developed countries. At a bare minimum they should demand full and
faithful implementation of all the S&D provisions contained in the WTO Agreements.
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