ASIAN DEVELOPMENT BANK TAR:TRA 37123 TECHNICAL ASSISTANCE (Financed by the Japan Special Fund) FOR CAPACITY BUILDING ON SELECTED WTO ISSUES November 2003 ABBREVIATIONS ADB – Asian Development Bank APEC – Asia-Pacific Economic Cooperation DMC – developing member country ERD – Economics and Research Department GATT – General Agreement on Tariffs and Trade GSP – generalized system of preferences TA – technical assistance TRIPS Agreement – Agreement on Trade-Related Aspects of Intellectual Property Rights UNCTAD – United Nations Conference on Trade and Development WCO – World Customs Organization WTO – World Trade Organization NOTE In this report, "$" refers to US dollars. This report was prepared by T. Ujiie, Economics and Research Department . I. INTRODUCTION 1. The Doha Ministerial Declaration highlighted the importance of capacity building in integrating developing countries into the multilateral trading system. International trade plays a key role in reducing poverty through faster economic growth, development, and creation of employment. In view of the global economic slowdown, the World Trade Organization (WTO) launched a new WTO round (Doha Development Agenda) to revitalize the world economy by expanding trade. International institutions have an important role in helping developing countries meet the capacity-building challenges of the Doha Development Agenda. Two developing member countries (DMCs) of the Asian Development Bank (ADB)—Cambodia and Nepal, both least developed countries—became WTO members in September 2003 at the Fifth WTO Ministerial Conference in Cancun, Mexico. However, no agreement was reached on the framework and modalities of negotiations. 2. ADB in its reorganization in January 2002 created a governance, finance, and trade division in each regional department to strengthen its services in trade matters. In addition, ADB and WTO concluded a memorandum of understanding in May 2002 to cooperate on joint technical assistance (TA) programs in WTO-related issues in Asia and the Pacific. ADB launched Capacity Building for DMCs on the WTO Trading System in June 2002, a capacity- building program comprising a high-level meeting on the WTO trading system and three intensive courses on trade facilitation, the WTO Customs Valuation Agreement, and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). 3. The proposed capacity-building program is directly linked to ADB’s overarching objective of poverty reduction. It will strengthen the framework for liberalization and facilitation of international trade under the WTO trading regime to hasten economic growth as income level increases. It will also enhance DMCs’ capacity to formulate national external trade policies. The TA directly supports the program.1 Appendix 1 gives the TA framework. II. ISSUES 4. Since the launch of a new WTO round in November 2001, negotiations on trade in goods and services have accelerated. Among ADB’s DMCs are 22 WTO members and 10 WTO applicants, all of which are participating in the new round. While there are many important items on the trade agenda, many DMCs are concerned with two areas: the so-called Singapore issues and WTO rules and regulations. 5. The Singapore issues are new areas on which the Fifth WTO Ministerial Conference in Cancun, Mexico, in September 2003 reached no agreement on whether to include in the negotiating agenda. The Singapore issues are (i) trade and investment, (ii) trade and competition policy, (iii) trade facilitation, and (iv) transparency in government procurement.2 In addition, the issue of environment and trade is a new area for negotiation. WTO has been undertaking relevant studies on the first three items since the first WTO Ministerial Conference in Singapore in 1996. As an effort to include the Singapore issues in the negotiating agenda is being made and new international rules on them will have an impact on the trade patterns in DMCs, capacity-building activities are necessary for the new areas. 1 The TA first appeared in ADB Business Opportunities in March 2003. 2 In a strict sense, government procurement is not a new area for negotiation, as a WTO agreement on this area— the Agreement on Government Procurement—already exists. 2 6. The second area is WTO rules and regulations, in particular, antidumping duty and rules of origin. Antidumping duty is widely used as a trade remedy measure under WTO by developed members of WTO, such as Australia, Canada, European Union, and United States, and also by several developing members. Antidumping action is taken on exports from the ADB region. The antidumping rules need clarification and elaboration. No precise international agreement on rules of origin is applicable to specific product categories or products, although the Uruguay Round concluded a framework agreement that provides discipline, and requests the World Customs Organization (WCO) to develop detailed rules. Rules of origin are mainly used for trade statistics, application of the most-favored nation rate of duty, and antidumping and countervailing duty actions. Any free trade agreement and generalized system of preferences (GSP) contains preferential rules of origin. Since rules of origin are currently based on national laws, some disputes occur. The application of particular rules to each product is complicated. Capacity-building activities focusing on these rules will greatly help trade officials in DMCs. 7. The Economics and Research Department (ERD) is studying regional integration and trade, including the Singapore issues. The TA will provide an opportunity to present outcomes from the study, particularly, on investment. Annex I of the Memorandum of Understanding with WTO enumerates “potential areas for cooperation,” and the areas covered by the TA are all contained in the Annex. WTO is expected to provide experts as resource persons in the capacity-building program. III. THE TECHNICAL ASSISTANCE A. Purpose and Output 8. The main objective of the TA is to encourage DMCs’ full integration into the WTO multilateral trading system through (i) increased awareness of new areas to be covered by the Doha Development Agenda for policy formulation, and (ii) assistance in providing technical inputs and sharing the results of studies with DMCs so that they can fully participate in the new WTO round. B. Methodology and Key Activities 9. The capacity-building program has four components: (i) a high-level meeting for DMC negotiators on key Doha Development Agenda issues, (ii) an intensive course on investment, (iii) an intensive course on antidumping, and (iv) an intensive course on rules of origin. In implementing the four activities, ERD will consult with Asia-Pacific Economic Cooperation (APEC), United Nations Conference on Trade and Development (UNCTAD), WCO, WTO, and other relevant organizations. Target participants will be actual DMC negotiators (e.g., officials in charge of the Doha Development Agenda) for the high-level meeting, and senior government officials (e.g., officials in charge of one of the three areas covered) for the three intensive courses. 10. High-Level Meeting on WTO Key Doha Development Agenda Issues, June 2004, Osaka. As no agreement on the framework and modalities of Doha Development Agenda negotiations was reached at the Cancun Conference in September 2003, there is a need to reaffirm the importance of an open, rule-based multilateral trading system under WTO, and for assessing and reviewing the Doha Development Agenda negotiations and policy implications for DMCs for their further advancement. A three-day high-level meeting for actual DMC negotiators 3 will give them the opportunity to examine the policy aspects of key Doha Development Agenda issues, such as agriculture, market access, and the new areas. With a view to contributing more to WTO-related capacity-building activities, the Government of Japan will make additional financial and in-kind contributions to the high-level meeting in Osaka. 11. Intensive Course on Antidumping, February/March 2004, Hanoi. Antidumping duty is one of the trade remedy measures under the General Agreement on Tariffs and Trade (GATT) against unfair trade practices in exporting countries. Traditionally, Australia, Canada, European Union, and United States were the major users of the duty, and major targets included the ADB region (e.g., People’s Republic of China, Japan, and Republic of Korea). Recently, DMCs started using this measure against other DMCs. There is a growing concern and a general recognition among DMCs that the current rules should be reviewed, and— wherever necessary—modified. The 5-day course will review current trends and developments, examine major emerging issues and current rules that should be modified or created, and evaluate the policy implications for DMCs of possible modifications of the rules and creation of new ones. 12. Intensive Course on Rules of Origin, September 2004, Bangkok. The aim of non- preferential rules of origin is to determine a country of origin, for trade statistics, application of a most-favored nation rate of duty, and application of antidumping duties and other trade remedy measures. Customs valuation, commodity classification (or nomenclature), and rules of origin are the three basic customs laws. The WTO Customs Valuation Agreement and the WCO Harmonized System are international agreements, but no such globally agreed upon detailed product standards exist for rules of origin. Because national laws regulate rules of origin, disputes arise as rules differ from one