Regional Consultation In Preparation for the WTO MC12: HARNESSING TRADE FOR SUSTAINABLE DEVELOPEMNT WITH FOCUS ON GRADUATING ASIAN LDCs

Organised by United Nations Economic and Social Commission for Asia And The Pacific (UNESCAP)

“WTO MC12 and Trade Interests of Graduating LDCs”

Presentation by Mustafizur Rahman Distinguished Fellow, CPD

2-3 December 2019, UNCC, Bangkok Presentation Structure

Section I: Context of WTO MC12 Section II: MC 12 and Interests of LDCs Section III: MC 12 and Interests of Graduating LDCs Section IV: MC 12 Elements of a Support Package for Graduating LDCs Section V: Concluding Remarks Section I: Context of WTO MC12 Ministerial Conferences: 1995-2019

Establishment of WTO 1995

Singapore Geneva 1996 1998

Doha Seattle Doha Development 1999 2001 Round Cancun Hong Kong 2003 2005

Geneva Geneva 2009 2011

Bali Nairobi December, 2013 December, 2015

Buenos Aires December, 2017 Nur Sultan June, 2020 PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 3 Section I: Context of WTO MC 12 • The Twelfth WTO Ministerial meeting is going to take place at a distinctive juncture in the backdrop of the MC 11 in Buenos Aires where no Ministerial Decision could be agreed upon • In view of the upcoming WTO Ministerial Conference to be held in Nur Sultan in Kazakhstan in June 2020, there is a need for the LDCs to strategise their collective stance at MC 12. • The MC 12 is important from a number of perspectives: ➢ The attack on multilateralism ➢ Uncertainty as regards the future of the Doha (Development) Round which was launched in Doha at MC 4 • The Doha Round came to be known as the Doha Development Round with an ambitious agenda covering the built-in, ongoing and new issues. • Five Clusters of Negotiating Issues under the DDR i.Agricultural Market Access ii.Non-agricultural Market Access (NAMA) iii.Services (GATS) iv.Rules and Trade Facilitation v.“Development” Provisions • There was an optimism and willingness to facilitate global integration of the LDCs through a set of targeted support measures • Regrettably, the WTO is in a state of paralysis and the DDR agenda appears to have been all but abandoned. Nonetheless, for the LDCs a rule-based multilateral trading system is in their economic interest and they have a keen interest in the development dimensions of the DDR PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 4 Section I: Context of WTO MC 12

➢ The rise of the Plurilaterals ➢ The implications of mega-regionals ➢ The global economic slowdown and its implications for the LDCs ➢ The need to develop a package of proposals in view of the upcoming LDC V in 2021 where a decadal programme of actions for the LDCs will be adopted • The upcoming MC 12 is also of particular interest for the LDCs in view of the large number of graduating LDCs ➢ 12 of the 47 LDCs are slated for graduating out of the LDC group in near- term future ➢ There is an urgent need to design a programme of support towards smooth Graduation, Graduation with Momentum and Sustainable Graduation of the Graduating LDCs • At WTO MC 12, the graduating LDCs will be required to keep three perspectives in the purview: ➢ As current LDCs ➢ As graduating LDCs ➢ As future developing countries

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 5 Section II: MC 12 and Interests of LDCs

LDCs as a group, Graduating LDCs included, must not let the DDR agenda go out of focus at MC 12 Key Milestones in DDR MC-6 in Hong Kong • The DF-QF market access in ‘developed and developing countries in a position to do so’ in view of NAMA negotiations • Elimination of export subsidies on cotton and reduction of domestic subsidies on cotton • Services market access for LDCs • Safeguarding the interests of NFIDs • Fisheries subsidies and LDC interests • TRIMS extension for another 7 years, till 2013

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 6 Section II: MC 12 and Interests of LDCs Bali LDC Package and Post-Bali Negotiations MC-9 at Bali held in December 2013 adopted an LDC package • DF-QF Market Access: reiterated Hong Kong Commitment and talked of meaningful market access for LDCs • Services Waiver: operationalization of services waiver through High Level Signaling Conference • S&D Monitoring Mechanism – Decided to set up S&D MM to strengthen implementation of S&D treatment provisions in favour of developing countries and LDCs • Cotton – Talked of greater market access for export of cotton from the LDCs (C-4) • Preferential Rules of Origin for LDCs • Aid for Trade: Reiterated resolve to provide greater financial and technical assistance through Aid for Trade (AfT) and Enhanced Integrated framework (EIF) window of the WTO towards supply-side capacity-building and strengthened global integration of the LDCs • Public Food Stockholding: Peace clause as regards subsidy calculation unless a permanent solution was found Trade Facilitation Agreement was Adopted at the Bali MC-9: Category A, B and C initiatives for the LDCs

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 7 Section II: MC 12 and Interests of LDCs

Post-Bali Developments in Geneva • NAMA: Commercially meaningful implementation of the DF-QF Decision: Work to end the deadlock and address intra-LDC conflicts of interest • Services Waiver negotiations – Offer and Request Lists ➢ LDC submission for removal of restrictions and provisions of preferential access/procedures favouring LDCs suppliers over non-LDC suppliers • Cotton: Some progress as regards market access aspects • Ratification of TFA which came into force in February 2017 • Agriculture – Negotiations on three pillars – Market Access, domestic support, export subsidy - progress was very slow • Plurilaterals in some sectors made progress – ITA • Other issues: Rules –some progress made • TRIPS and Pharmaceuticals: TRIPS council decision to extend LDC special treatment for another 17 years (till 2033). The decision was endorsed at MC 10

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 8 Section II: MC 12 and Interests of LDCs

MC-10 in Nairobi (2015): An Assessment of Key Elements

• The Nairobi Ministerial Declaration revealed major differences as regards approaches as to how to address the negotiations: ➢ Many members reaffirmed Doha Development Agenda and the Declarations and Decisions adopted at Doha and MCs held since then and reaffirmed full commitment to conclude Doha on that basis ➢ On the other hand, some members did not reaffirm the Doha mandate as they felt that new approaches were necessary to achieve meaningful outcomes in multilateral negotiations ➢ MC-10 Declaration observed that Members had different views on how to address the negotiations. This was regressive step

This was seen as a major setback for multilateralism

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 9 Section II: MC 12 and Interests of LDCs Key Decisions of Interest to the LDCs Preferential Rules of Origin for LDCs

▪ When applying an ad-valorem percentage criterion to determine substantial transformation, preference granting members shall allow ‘use of non-originating materials upto 75% of the final value of the product’

▪ When applying a change in tariff heading, as a general principle, allow for a simple change of tariff heading or change of tariff sub-heading. Cumulation : Cumulation to be allowed → : With respect to other LDCs : With respect to Preference-granting Members : Cumulation with GSP beneficiaries : Cumulation with developing countries forming part of a regional group to which the LDCs is a party Documentary Requirements : Minimise documentary requirements for preferential access This was seen as a major achievement for the LDCs PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 10 Section II: MC 12 and Interests of LDCs

Services Waiver ▪ Due to the extended period between the adoption of the Waiver in December 2011 and the notification of preferences in 2015, the Waiver was extended until 31 December 2030. Preferences notified were to be extended accordingly ▪ Developed and developing Members, in a position to do so, that have not notified preferences under the Waiver were urged to redouble efforts to promptly notify preferences which have commercial value and promote economic benefits to LDCs ▪ Members shall give special priority to addressing regulatory barriers of interest to LDCs ▪ Members are encouraged to undertake specific technical assistance and capacity building measures to orient LDC service suppliers to preference benefits available so that such suppliers can utilize the preferences granted No real progress was made as regards operationalisation of the services waiver particularly with respect to implementation of the preferential market access through flexible administrative procedures, visa-free regime, easier commercial presence, degree equivalence, recognition of accreditation certification

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 11 Section II: MC 12 and Interests of LDCs

S&D Provision

▪ Monitoring mechanism (MM): A forum for monitoring S&D issues and to improve beneficiaries’ ability to utilize S&D provisions. However, MM does not have a negotiating function

Aid for Trade

▪ EIF: a dedicated window for aid for trade for the LDCs

▪ Total request over 2016-2021 → 280-320 million USD. But pledge of 90.0 million USD only

▪ Aid for Trade Facilitation – No concrete number for A4TF

➢ Pledge not enough; No mention of financial needs of the LDCs in view of Diagnostic Trade Integration Study

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 12 Section II: MC 12 and Interests of LDCs

WTO MC 11: Buenos Aires, Argentina (2017) ▪ No Ministerial decision could be agreed upon ▪ Rise of plurilateral discussions

✓ Negotiating Group on Fisheries Subsidies

✓ Work Programme on E-Commerce

✓ Informal Working Group on Micro and SMEs

✓ Joint statement on Investment Facilitation

▪ There is a need to keep the earlier decisions in support of the LDCs alive. MC 12 is an opportunity for LDCs to recall and reignite interest in the decisions of earlier MCs. ▪ MC 12 as an opportunity for early harvests. LDCs had concerns about introducing new issues in the discussion agenda. Only some LDCs signed on the discussions; some others have joined later.

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 13 Section III: MC 12 and Interests of Graduating LDCs

▪ The Istanbul Programme of Action (IPoA: 2011) had set a target of halving the number of LDCs (then 48) by 2020 ▪ However, many of the actions in the IPoA was not followed-up to the needed extent. For example, IPoA talked of assisting the LDCs to double their share in global exports by 2020 ▪ This was also reiterated in SDG 17 ▪ A large number of LDCs are slated for graduation. As of now 12 ▪ Many LDCs are graduating with structural and other embedded vulnerabilities ▪ One reason for such a large number of graduating LDCs is the change in the rules of the game: HAI and EVI thresholds have been fixed at higher than 66 and lower than 32 respectively

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 14 Section III: MC 12 and Interests of Graduating LDCs

Table 1: List of Graduating LDCs

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 15 Section III: MC 12 and Interests of Graduating LDCs Graduation Diversity • LDC eligibility as per income criteria only (e.g. Angola; Timor-Leste) • LDC graduation without meeting the income criteria (Nepal) • Land-locked LDCs (e.g. Nepal, Bhutan, Lao PDR) • LDC eligibility as per two out of three criteria (e.g. Lao PDR; Bhutan; Myanmar) • WTO-Acceding LDCs (e.g. Lao PDR, Timor-Leste, Bhutan) • SID-LDCs (e.g. São Tomé and Príncipe, Kiribati, Solomon Island, Vanuatu, Tuvalu, Timor-Leste) • LDC graduation meeting all the three criteria (Bangladesh) • Graduating LDCs with Middle Income Graduation (almost all, barring Nepal) • Graduating LDCs with Debt-distress (e.g. IMF: Lao PDR: High Debt Risk; Timor-Leste and Bhutan: Moderate Risk • World Bank Harmonised List of Fragile States: more than half of the LDCs apprehended to be fragile states in 2024

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 16 Section III: MC 12 and Interests of Graduating LDCs • The ex-ante vulnerability assessments undertaken by the CDP reveals that many graduating LDCs are not adequately prepared for: ➢Smooth graduation ➢Graduation with Momentum ➢Sustainable Graduation • The CDP reports underline the need for targeted support for graduating LDCs towards sustainable LDC graduation • LDC Motivation: LDCs slated for graduation are willing to embark on graduation journey. Graduation testifies to their success in terms of socio- economic development. However, the apprehension is that they will not be able to address the adverse consequences of graduation without targeted support measures towards sustainable graduation. This has prompted half of the graduating LDCs to request for deferment of graduation (e.g. Angola, Tuvalu, Vanuatu, Nepal, Timor-Leste and Bhutan)

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 17 Section III: MC 12 and Interests of Graduating LDCs

• Likely adverse Implications of LDC Graduation: ➢Preference erosion consequent to LDC Graduation ➢Non-eligibility for S and D treatment in the WTO upon graduated ➢Loss of international support measures upon graduation

• Three Considerations: ➢Actualising LDC preferential treatment (built-in agenda) ➢Support for graduating LDCs (package of new initiatives) ➢Future as a developing country (ongoing discussions; new issues)

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 18 Section III: MC 12 and Interests of Graduating LDCs

LDC Graduation: Diversity of Implications

• In view of Agreement-specific implications in the WTO through loss of S and D measures favouring the LDCs • In view of Non-reciprocal Initiatives notified in the WTO (e.g. EU-EBA; LDC schemes of China, India and other countries) • In view of Regional Initiatives: Memberships in RTAs, FTAs (e.g. LDC track in SAFTA, ASEAN-FTAs) • In view of International Support Measures (e.g. loss of aid and support measures for LDCs, UN, IMF, Global Fund) • In view of Middle Income Graduation (loss of soft loan windows)

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 19 Section III: MC 12 and Interests of Graduating LDCs Special Attention needed:

• Graduating LDCs trading more with the developed countries of the North to be more adversely affected (e.g. Bangladesh) compared to graduating LDCs with high share of intra-regional trade where market access is mostly under regional FTAs (e.g. ASEAN, RCEP for Lao PDR, Myanmar) or bilateral FTAs (e.g. Indo-Bhutan, Indo-Nepal BFTAs) • Graduating LDCs benefitting from LDC schemes in RTA will no longer be eligible for preferential market access available under the two-track route(e.g. India’s LDC scheme in SAFTA) • Acceding Graduating LDCs: ➢If graduation takes place prior to accession, support for acceding LDCs will no more be available to the Graduating LDCs ➢The Acceding Graduating LDCs are taking additional commitments/ obligations (e.g. notification, obligation in services)

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 20 Section IV: MC 12 Elements of a Support Package for Graduating LDCs • Graduating LDCs will continue to benefit from WTO provisions for the developing countries. • Developing countries in the WTO are provided support in the WTO in the form reduced tariff commitment, allowable limits for subsidies, incentives given to producers and exporters (124 S & D provisions for the Developing countries) • However, they will need extension of LDC-specific support to help them take adequate preparation for sustainable LDC Graduation • Graduating LDCs have been undertaking various steps in anticipation of graduation and towards sustainable graduation: ➢ Setting up Task Forces to asses likely implications ➢ Designing Graduation Strategies ➢ Ensuring alignment of graduation challenges with National Development Plans ➢ Undertaking selective and targeted steps to ensure WTO compliance in view of future as Developing Country Member in the WTO

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 21 Section IV: MC 12 Elements of a Support Package for Graduating LDCs

• 2005 UN Resolution to Support Graduating LDCs

➢EU-EBA: Extension of benefits by an additional three years following Graduation ➢EIF: Benefits for an additional five years following Graduation ➢Technology Bank for LDCs: Benefit for an additional five years following Graduation

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 22 Section IV: MC 12 Elements of a Support Package for Graduating LDCs Extension of WTO Provisions ➢NFIDS: Allowed to provide certain subsidies under AoA till 2030. Need to resolve the interpretative ambiguity as regards 2015 decision in favour of the graduating LDCs ➢SCMS: Export Subsidy provision (Article 27.2): Endorse LDC submission to allow eligibility for exemption for countries with per capita GNP of US$ 1000 in 1990 terms. ➢TRIPS implementation for the LDCs: Extend for a specific period ➢TRIPS and Public Health: Grant Graduating LDCs exemptions till the current extended timeline of December, 2032 ➢GATS LDC Services Waiver (extended till 2030): Graduating LDCs should be eligible for preferential treatment for five years following operationalization of the waiver

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 23 Section IV: MC 12 Elements of a Support Package for Graduating LDCs

• A commitment by developed countries to extend benefits of LDC-specific preferential market access programmes for a specified period (as is the case with the EU-EBA) • Extension of LDC-track in RTAs for LDCs to be adversely affected by preference erosion, for a specified period • The LDCs fund in view of climate change: ➢Extend for a specific period for graduating LDCs

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 24 Section IV: MC 12 Elements of a Support Package for Graduating LDCs • Time-bound extension of LDC schemes: ➢Unilateral schemes: China extended LDC-specific market access to Samoa after graduation. This can be offered by other countries ➢RoO: Change the current GSP RoO for apparels for graduating LDCs (one stage conversion instead of two stage) ➢Change of eligibility criteria in the EU-GSP Plus Scheme: Currently discussion is going on for the new EU-GSP scheme to be launched in 2023. Raise current threshold from the 6.6 per cent of total access under GSP scheme by a single country.

• Fisheries Subsidies, E-commerce, MSMEs: ➢In case of Fisheries Subsidies time-bound extension of flexibilities to LDCs to be granted to graduating LDCs ➢Needs and concerns of Graduating LDCs to be factored into the discussion to address attendant concerns in respect of E-commerce and MSME ➢Keep an eye on the stance of developing WTO members since the obligations, derogations and commitments of developing members will be applicable to graduating LDCs in the near term future (following their graduiation)

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 25 Section V: Concluding Remarks At the upcoming MC 12 LDCs will need to be actively involved in the discussions. At the same time Graduating LDCs will need to do the needed homework • Keep focus on the discussions agendas in the WTO from the perspective of LDCs and Graduating LDCs • Doha Round Decisions: Pick issues with highest potentials • Assess the implications of losing S & D provisions • Press for compliance with the UN resolution on smooth graduation • Push for commitments in view of RTAs towards sustainable LDC graduation • Call for changed eligibility rules for GSP plus • Build new coalitions of support for Graduating LDCs • Reformulate negotiating stance in view of what is left of the DDA and in light of demands resulting from new issues • Build strengthened negotiating capacity to play the role of (future) developing country • Prepare adequately as future developing countries • Take advantage of S & D provisions for developing members by seeking support in order to reap the benefits • Remain involved and engaged in WTO reform proposals PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 26 Thank You

PMR (2019): WTO MC12 and Trade Interests of Graduating LDCs 27