TWN Info Service on WTO Issues (Jun04/12)

19 June 2004

Third World Network

South Leaders launch GSTP new round in optimistic mood

Leaders of developing countries have a new round of negotiations to promote South-South trade, amid hopes that it would increase the collective self reliance of developing countries.

The Third Round of GSTP negotiations was launched at a ministerial meeting of members of the Global System of Trade Preferences among Developing Countries (GSTP), as a side event during UNCTAD XI.  All members of the G77 and China, and NGOs and media were also invited to the meeting.

The launching had attained a high profile during the UNCTAD XI week as the importance of South-South trade and in particular the GSTP new round had been highlighted at the UNCTAD XI inaugural session by President Lula of Brazil, the Thai Prime Minister Thaksin Shinawatra and the UN Secretary General Kofi Annan.

Attached is a TWN report of the event.

With best wishes

Martin Khor



South Leaders launch GSTP new round in optimistic mood

TWN Report by Martin Khor, Sao Paulo, 17 June 2004

Third World leaders launched in Sao Paulo on 16 June a new round of negotiations to promote South-South trade, amid hopes that it would increase the collective self reliance of developing countries.

The Third Round of GSTP negotiations was launched at a ministerial meeting of members of the Global System of Trade Preferences among Developing Countries (GSTP), in a room packed with Ministers and officials.  All members of the G77 and China, and NGOs and media were also invited to the meeting.

Although it was not part of the official agenda of the United Nations Conference on Trade and Development 11th session (UNCTAD XI) taking place here this week, and was a “side event”, the meeting was the most eagerly anticipated, and perhaps the most important event, during the UNCTAD XI week. 

“We are extending our political support to making the GSTP and South-South trade work so that our producers, farmers and citizens of the South can have better income,” said Argentinian Economy Minister Robert Lavagna, who presided over the event.  Argentina is president of the GSTP Committee of Participants, which at its meeting in Geneva on 28 May, had decided to launch the third round and had drawn up the draft declaration for the Ministers.

The GSTP is a scheme in which developing countries provide trade preferences for products originating from other developing countries.  They do not have to extend the concessions and benefits to developed countries, and thus the GSTP encourages the growth of South-South trade.

Initiated in 1986 in Brasilia, and concluded in 1988 (at Belgrade), the GSTP now has 44 member states.

Under the rules of the World Trade Organisation and para 2 ( c) of the GATT 1979 Enabling Clause developing countries can derogate from the WTO’s MFN clause, and enter into regional or global arrangements for mutual reduction or elimination of tariffs and, in accordance with criteria that may be prescribed by the GATT Contracting Parties (and now by the WTO), mutual reduction or elimination of non-tariff measures. This means the developing countries, through regional or global arrangements, can exchange preferential concessions among themselves without having to extend it to the developed countries.

Several leaders at the GSTP launch stressed that the GSTP complements and does not substitute for the WTO.

“Progress in GSTP negotiations can take place parallel to the multilateral trade negotiations,” said Lavagna. “The GSTP system contributes to the gradual liberalization of world trade and also enhances the special and differential treatment concept inherent in the rules of the game of the multilateral system.” Tracing the history of the GSTP, he said that the decision to launch a third round came after a review of the scheme’s functioning by the committee of participants, which began in November 2003 and ended in May 2004.  “We are extending our political support and commit ourselves to make the GSTP effective,” the Argentine Economy Minister said.

UNCTAD Secretary-General Rubens Ricupero told the meeting that the launch of the third round represented a rekindling of a new sense of purpose by the South’s leaders.  It has come at an opportune time as developments are favourable for South-South trade. The trade growth in the South was twice that of the world average, and the trade of developing countries among themselves had risen from 24% of their total trade in 1960 to 43% in 2003.

“We are witnessing trends in South-South trade that must be accelerated in a new geography of trade and economics,” said Ricupero. The South is an important market for other countries of the South;  many developing countries have become major promoters of growth in their region; and developing countries had become a significant source of imports.

“When these trends are put in the GSTP context, there can be the building of export diversification across the three regions of the South,” Ricupero said.  The GSTP could constitute the foundation for South-South cooperation with the scheme acting as an integrating mechanism.

Ricupero remarked that the GSTP was rightfully focussing on market access, whereas other trade fora had seen the extension of the trading system to extraneous issues which had only a distant and indirect relation with trade.

“That was the case with IPRs.  This is the case with attempts to have rules on investment which are not related to trade,” he said.  The argument given for promoting this tendency is that supposedly we have already reached the limits of what the system can do regarding border issues, which are traditional to trade rules.

But those who use this argument know that “we have yet to deal with the two most traditional products of trade, agriculture and textiles and clothing.” For more than 50 years the system had avoided facing this problem and finally the world has to face up to this problem, and this is why the negotiations are not going the way that had been expected.

“How can we say that the potential for trade liberalization is something that is behind us?  We have to give priority to this and not the so-called new issues. These are extraneous issues which have nothing to do with trade,” he said.

Ricupero also criticized those who argued that the commodities issue does not require special action, when in fact commodities are at the center of trade. “We have to argue against these trends that have no economic logic.”

He warned against having rules that affect developing countries in limiting national sovereignty and policy space.

In this context, said Ricupero, the GSTP initiative is of great relevance as it involves promotion of trade. For the GSTP to flourish,  shared responsibility must go together with shared benefits. “The time has come to go beyond traditional negotiations and the menu has to be mutually beneficial.”

Argentina’s Ambassador Alfredo Chiaradia, President of the GSTP Committee of Participants in Geneva, said the efforts made to launch a third round had been successful and “we will now get to work to give it concrete content.”  He expressed appreciation to UNCTAD for its valuable support.

Chiaradia recalled that shortly after the GSTP’s entry into force in 1989, came the 1990s which were a great challenge for the GSTP.  There were may changes in the global trade structure due to bilateral and regional trade agreements, and to the Uruguay Round. These posed a great challenge, when GSTP participants were in the process of implementing the system.

In 1998 the second round was concluded but there were limits caused  by circumstances, so the negotiations of concessions could only partially meet the expectations.  A review of the GSTP took place in 2001 but it was only at the end of 2003 - when the committee took on more ambitious objectives to give the scheme more vitality - the conclusion was reached that a new round would be the best way to make the GSTP more effective.

The committee in May had decided to launch the third round, to establish a negotiating group, and invited all members of the G77 and China to accede and take part in the third round, which would start in November and end in November 2006.

Chiaradia said the proper implementation of the principle of mutuality of  benefit was the key, and the rules have to ensure the contribution of all participants. There should be attention to revision of provisions of the agreement.

He added that developing countries are benefiting in trade arrangements among themselves at regional level, so the main value of the GSTP is represented by its potential in intra-regional level involving Asia, Latin America and Africa. The GSTP would deepen trade cooperation among the three regions.

Underscoring the main points to keep in mind, Chiaradia said the GSTP does not replace but complements other processes; it uses the important provisions regarding LDCs to highlight the principle of solidarity. “The best is yet to come for the GSTP,” he concluded.

The Sri Lanka Trade Minister Jeyarai Fernandopulle said that South-South trade would be important economically but also to enhance the South’s bargaining power.  Between 1980 and 2000 the volume of exports of developing countries rose six-fold.  However the bulk of South-South trade is among a handful of countries, with ten countries of the South involved in 70% of South-South trade.  This can however be addressed by the GSTP, which is having a “new beginning that we fully support.”

The Nigeria Commerce Minister Adamu Waziri  said a proper GSTP scheme is the answer to those who demand that the South must reduce tariffs among themselves.  Although the second round could not be built on this foundation, “we should ensure success of the third round.  The crucial issues have to be dealt with so the third round does not suffer the fate of the second round.”  He added that the free rider problem had to be overcome and there should be meaningful concessions.

India’s Ambassador to the UN in Geneva, Hardeep Puri, said India was extremely pleased with the Sao Paulo Declaration which was an important and long overdue step. The relevance of GSTP can be placed in the context of international trade.  It was conceived as a cornerstone of South-South commitment to collective self reliance.  The GSTP can be used to counter the inequalities in world trade.  “We need a new generational instrument,” he said, adding that deeper and more meaningful concessions will be the way forward and we have to appreciate mutual links for mutual benefits.  The GSTP can also draw in countries that have benefited little from regional agreements, while the broadening of trade would also bring benefits of increased investment flows.

The Thai representative said through the GSTP, the South countries could complement one another. The new round should address inherent difficulties of the past two rounds. The principle of mutual benefit is important, which he hoped could be worked out.

Representing the NGOs, the Third World Network representative congratulated the member-countries for launching the third round. The NGOs had been concerned with the arguments put forward by developed countries in the WTO  that developing countries should drastically lower their tariffs in the WTO on the grounds that this would increase South-South trade and thus be beneficial.

However, if the developing country tariffs are lowered in the WTO context, it is probable that it would be the developed countries that would gain, as their big companies have more capacity to compete.

The GSTP was a better solution to South-South trade as the preferences would be available only to developing countries, so the benefits would accrue to them, whilst the threat posed by cheaper imports would be less.

He said a joint NGO statement on this occasion hailed the GSTP as a concrete expression of South-South cooperation, and urged all developing countries to seriously consider joining the scheme. The statement also supported the principle of special treatment for least developed countries under the GSTP framework, where LDCs benefit from the concessions while not being required to make concessions on a reciprocal basis.

The statement said the industrial countries who had been espousing the benefits of South-South trade and they should actively support this endeavour. Developing countries were urged to intensify cooperation among themselves, and South-South unity should also be extended to the current WTO negotiations.

Concluding the session, Brazilian Foreign Minister Celso Amorim said the GSTP was designed 20 years ago to promote collective self reliance, and although perhaps “we were too timid” to realize the aims, these objectives are still valid today.  The third round would be a landmark. Not only would South-South trade arrangements lower tariffs, it would also send a political message to our producers. Today there are better conditions that can turn the objectives into reality.

The Ministerial meeting of the committee of participants adopted a “Sao Paulo Declaration on the launching of the GSTP’s third round of negotiations within the GSTP”.

The Ministers said they “envisage a package of substantial trade liberalization commitments on the basis of mutuality of advantages in such a way as to benefit equitably all GSTP participants.”  It added that an ambitious package of commitments would promote economic complementarities among participants especially at the interregional level.

The declaration pledged to work towards developing concrete preferential measures in favour of LDC participants in accordance with provisions of the agreement. The Ministers underscored the need to broaden participation in the GSTP and extended an invitation to all members of the G77 and China to accede to the agreement.

The negotiations, under a GSTP negotiating committee, will start in November and is scheduled to end in November 2006.

The GSTP talks were launched  in 1986, and the agreement was concluded in 1988 and came into force in 1989. There has been two previous rounds of negotiations, but they did not yield the expected results because of certain problems and the proliferation meanwhile of other trade agreements at regional and multilateral levels.

There seems to be increased political will among many Third World leaders to revitalize the GSTP, through the third round.

On Monday, Brazilian President Luiz Lula da Silva hailed the advent of a “new global trade geography” which stressed the role of South-South trade and cooperation in a globalizing world.  Thai Prime Minster Thaksin Shinawatra also called for “the reduction of our overwhelming dependence on markets of developed countries and diversify our risks through South-South trade.”

Supporting this call, the UN Secretary General Kofi Annan said that if developing countries can reduce tariff margins to one another by 50%, this will generate an extra US$15.5 billion in trade.

However, several developing country delegations were disappointed and even disturbed by the message that the WTO Director-General, Dr. Supachai Panitchpakdi seemed to direct towards the developing countries on the GSTP, when he spoke at the opening of UNCTAD-XI.

Supachai had then said: “I welcome the efforts made by UNCTAD XI to further South-South trade liberalization. It is long overdue. I also appreciate the efforts that are being made to revive the General System of Trade Preferences (GSTP) scheme.  As much as I commend the efforts to revive the GSTP, let us not lose sight that the greatest gains are still to be made in the successful completion of the Doha Development Agenda round of global trade negotiations. The GSTP was designed to be complementary to WTO global trade negotiations and not a substitute. History has shown that it is only with the critical mass of trade offs that can best be achieved in a global “single undertaking” round that we will obtain tangible market access improvements in North-South trade, as well as South-South trade.”

Some Third World ambassadors and diplomats who have been among the active participants in the recent GSTP preparatory process for the launch of the third round, took Supachai’s message to be an attempt to “dampen” and downgrade the new GSTP initiative and the GSTP scheme itself.

“I’m afraid that the WTO DG is not familiar with the GSTP and its benefits,” said a diplomat. “It even shows in the mistake he made in the name of the GSTP (i.e. calling it ‘General’ instead of the ‘Global’ System...).”

Several Ministers and ambassadors at the GSTP launching meeting made it a point, in their speeches, to prominently remark that in their view the GSTP negotiations were indeed meant to be complementary and not a substitute to multilateral negotiations. This is believed to be their response to any challenges made, or would be made, to denigrate the value of the new GSTP initiative.

“We are very concerned that the DG of WTO would seem to be displeased with the development of the GSTP, which after all is WTO-consistent and which the South countries are initiating as part of S and D treatment to help themselves collectively,” one diplomat said.

Another diplomat also disputed Supachai’s claim that only the “single undertaking” under multilateral negotiations would result in tangible market access improvements.

He pointed out that the Uruguay Round with its single undertaking and ‘trade-offs’ had resulted in major imbalances; and it was well known and accepted  that the developing countries did not get the benefits promised and were still awaiting tangible results in market access to the markets of developed countries, especially in agriculture, despite the great promises and claims made about the gains they would get when the Uruguay Round concluded.

NOTE:  This article was published in the South North Development Monitor 18 June 2004.  The chief editor of SUNS is Chakravarthi Raghavan.