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NOT-SO-LEVEL A PLAYING FIELD AT WTO


Drawing attention to the fact that trade liberalisation under
the aegis of GATT and its successor body, the WTO, has been an
inequitable process, UNCTAD's Trade and Development Report
calls for a 'positive trade agenda' to redress the grievances
of developing countries.


by Chakravarthi Raghavan




LOW average tariffs resulting from the Uruguay Round have led
some to the belief that a level playing field is being rapidly
established in the international trading system, but that is
far from being the case, according to UNCTAD's Trade and
Development Report 1999.

Trade liberalisation in developed countries was a gradual
process which unfolded over eight rounds of multilateral trade
negotiations (MTNs) under GATT auspices and through their
participation in regional trade agreements and customs unions.
Exceptionally strong growth in the postwar period underpinned
that process.

By contrast, the large and active participation of developing
countries in recent MTNs occurred at times of sluggish growth,
when many of them were implementing difficult adjustment
programmes to address payments difficulties associated with
the debt crisis of the 1980s. These programmes involved
extensive liberalisation measures, notably the removal or
relaxation of quantitative restrictions (QRs) and exchange
controls, as well as significant reductions in tariffs, which
were to a large extent bound in their concessions in the
Uruguay Round. Whereas for the developed countries tariff
bindings increased from 94% to 96% under the Uruguay Round,
for the developing countries they increased from 14% to 59%.
At the same time, negotiations in many areas of interest to
developing countries did not advance very far.

While average most-favoured-nation (MFN) tariffs of major
advanced industrial countries should fall to between 3.7% (US)
and 7.1% (Canada) once the negotiated concessions are fully
implemented, both the level and frequency of tariffs remain a
matter of concern in many areas of key interest to developing
countries.

Over 10% of the tariff universe of the Quad (Canada, the EU,
Japan and the US) made up of 4,000 tariff lines will continue
to face peak tariffs - in excess of 12% ad valorem. One-fifth
of peak tariffs of the US, 30% of those of Japan, one-quarter
of those of the EU and one-seventh of Canada's exceed 30%.
'Even after all concessions are fully implemented, frequent
tariff peaks and significant tariff escalation will continue
to provide high levels of import protection for a sizeable
cross-section of northern producers.'

Among agricultural tariffs (according to an UNCTAD/WTO study),
excessively high rates of over 70% are applied to products
recently tariffied. They include frozen bovine meat, grape
juice, fresh bananas, milk, maize and raw sugar cane (in the
EU); stemmed tobacco, shelled or roasted peanuts and peanut
butter in the US; milled rice, shelled peanuts, milk and
prepared pork hams in Japan; and dairy products in Canada -
all products offering potential for export diversification by
developing countries.

As for non-tariff measures, while some trade measures are
losing importance as barriers, the threat of market
penetration by southern producers has prompted northern
industries to seek other protectionist measures, and such
measures could have a significant impact on market access.
The TDR cites a recent study to the effect that the true
average protection rate of European industry rises from 5.1%
if only tariffs are included, to 9% if tariff and non-tariff
measures are taken together.

Also important are loopholes and imbalances in agreements such
as on anti-dumping. Though many actions are against
industrialised countries, a majority of cases are against
developing countries, and some by other developing countries.
The effect of agricultural support has been to allow
agricultural products to be sold on domestic and world markets
at below the cost of production. The impact on developing
countries is such that they not only are precluded from
entering developed-country markets, but also face unfair
competition (from subsidised exports) in their own or
third-country markets.

In a section on 'The International Trade Agenda for 1999 and
Beyond', TDR-99 notes that though a consensus seems to be
gradually emerging on launching a new round of MTNs at
Seattle, there remain substantial differences among countries
over the content of such negotiations.

Three immediate concerns

The positions of developing countries reflect three immediate
concerns: firstly, the Uruguay Round and its implementation
process has done little to improve market access for their
exports of goods and services; secondly, the WTO rules are
unbalanced in several important development-related areas such
as protection of intellectual property rights (IPRs) and use
of industrial subsidies, while the special and differential
(S&D) treatment accorded by the Uruguay Round has been
inadequate; and thirdly, insufficient human and financial
resources and weak institutional capacities have restricted
their ability to exploit the opportunities open to them under
the WTO, particularly in the dispute settlement mechanism and
their own ability to comply with contractual obligations.

In calling for a 'positive trade agenda', TDR-99 says that
while setting priorities is an integral part of any
negotiating process, access to northern markets for developing
country exports remains the single most important theme around
which to build any 'positive agenda.'

Pointing to the very high tariffs and tariff peaks and tariff
escalation facing exports of developing countries, TDR-99 says
removal of such protection should be given priority to ensure
credibility and broad-based political support for any
negotiations. There should be duty-free access to all exports
of least developed countries (LDCs). Another key area is
restraint on use of anti-dumping actions and other trade
contingency measures by industrialised countries in specific
sectors of export interest to the developing world.

In agriculture, where developing countries' exports are
severely hampered by domestic support and export subsidies of
industrialised countries, significant cuts in tariffs,
domestic support and export subsidies should be the firm goal.
At the same time, the continued reform of agricultural trade
should take into account non-trade concerns such as food
security, specific problems of net food-importing countries
and the varying social impact of agricultural trade
liberalisation.

While the agriculture negotiations should move in the
direction of integrating agricultural trade into normal WTO
rules, they should ensure that developing countries,
particularly those with predominantly rural agrarian
economies, maintain adequate flexibility so that concerns such
as food security and rural employment can be addressed.
In services, the General Agreement on Trade in Services (GATS)
provides flexibility to developing countries in the timing and
choice of sectors to be opened up, and enables them to attach
conditions to market access to ensure their ability to
increase participation in international trade in services. The
agreement also recognises the use of performance requirements
and other measures such as joint ventures as legitimate tools
of development policy. However, there is need for further work
to be done under Art.XIX of GATS. Also needed is further work
to improve data on trade in services.

On outstanding and new issues, TDR-99 views as important the
reviews of the TRIPS and TRIMs Agreements.

Requiring urgent consideration in the TRIPS Agreement are
issues relating to:
* comprehensive empirical assessment of links between IPRs and
economic development;
* elevating the objective of promoting technological
innovation and transfer and dissemination of technology to a
central place in the new disciplines governing IPRs;
* measures by the industrialised countries to provide
incentives to their enterprises and institutions to promote
and encourage technology transfer to LDCs;
* extension of transition periods to provide additional time
for domestic industries to adjust;
* technical and financial support to formulate IPRs rules
adapted to a country's domestic circumstances and stage of
development;
* adoption of specific measures to facilitate use of
compulsory licensing to ensure transfer of technology
(including environmentally sound technologies) and meet public
health concerns;
* measures to bring the TRIPS Agreement into conformity with
the Convention on Biological Diversity; and
* inclusion of new provisions relating to protection of
traditional and indigenous knowledge and works of folklore;
provisions to prevent any restrictions on parallel imports;
and clarifications aimed at explicitly prohibiting any rules
and practices amounting to unilateral retaliation.
As for the TRIMs Agreement, the review should address whether
it should be supplemented by provisions on investment and
competition policy.

But the emphasis should be on whether or not it has helped
developing-country enterprises to compete on world markets for
goods and services and, in this light, on reconsideration of
certain parts of the Agreement.

Any extension of TRIMs disciplines to some of the currently
WTO- permitted measures such as export performance could
constrain the use of policy instruments available to
developing countries to promote sectors and industries of
export potential, TDR-99 warns.

Equally, it adds, the importance of investment performance
requirements for their development programmes and the right to
impose such requirements should be recognised. The possibility
that the rules in some areas such as domestic content
requirements, are harmful to the interests of developing
countries should be examined. The investment incentive
programmes of developed countries that have had a
trade-distorting impact on developing countries should also be
examined.

Also requiring WTO attention is the 'merger mania' sweeping
across the world economy and which justifies the position of
developing countries during the Uruguay Round for symmetry
between investment and competition policy.

In terms of systemic policies, the ability of developing
countries to take certain measures as part of their
development strategy acquires importance as pressures continue
to extend the 'frontiers' of the trading system.

Rather than relying on arbitrary and artificial time-frames,
unrelated to need and performance, S&D treatment should be
linked to specific economic and social criteria, and should
involve examination of policy questions on, among others:

* basic rights of developing countries under Art.XVIII and the
Enabling Clause, and extending the Enabling Clause to allow
developing countries to give preferences to LDCs;
* adequacy of transition periods that terminate in 2005 or
earlier in some WTO agreements;
* revision and improvement of S&D provisions in WTO
agreements, and elaboration of additional provisions with
emphasis on supply-side measures to foster the development of
internationally competitive export supply; and
* linkage of further trade liberalisation to transfer of
technology.

There is also a need to address the systemic issue of
accession, especially of LDCs, where current applicants are
facing substantial difficulties in seeking to benefit from S&D
treatment and where major industrialised countries are
strongly resisting negotiation of transition periods. - (Oct/Nov 99)

The above article first appeared in the South-North
Development Monitor (SUNS' issue no. 4512) of which
Chakravarthi Raghavan is the Chief Editor.

 


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