TWN Info Service on WTO and Trade Issues  (Dec09/06)
16 December 2009
Third World Network

Developing Countries move forward with GSTP
Published in SUNS #6827 dated 3 December 2009

Geneva, 2 Dec (Kanaga Raja) -- Developing-country parties to the Global System of Trade Preferences Among Developing Countries (GSTP) on Wednesday adopted a decision on "modalities" for cutting tariffs on trade among the parties.

The decision paves the way for the 22 participating countries to offer reductions of at least 20% on tariffs that apply to some 70% of the goods exported within the group. A time-line was also set for intensive negotiations next year to conclude the agreement by the end of September 2010.

The participating countries include Algeria, Argentina, Brazil, Chile, Cuba, Democratic People's Republic of Korea, Egypt, India, Indonesia, Iran, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Paraguay, Republic of Korea, Sri Lanka, Thailand, Uruguay, Vietnam, and Zimbabwe.

The Ministerial meeting took place at the United Nations, on the sidelines of the seventh WTO Ministerial Conference.

The negotiations, known as the "Sao Paulo Round", were launched in 2004 on the occasion of the UNCTAD XI quadrennial conference in Sao Paulo, Brazil.

Under the Ministerial Decision on Modalities, participants agree to apply an across-the board, line-by-line cut of at least 20 percent on their dutiable tariff lines, to be combined with request-and-offer and/or sectoral negotiations on a voluntary basis.

Participants agree to assume commitments on at least 70 percent of their dutiable tariff lines. Exceptionally, Participants with duty-free tariff lines accounting for more than 50 percent of their total national tariff lines may apply the linear cut described in the preceding paragraph for a product coverage equivalent to at least 60 percent of their dutiable tariff lines.

The linear cut will be applied on the valid MFN tariff applied on the date of importation. Exceptionally, Participants may apply the linear cut on MFN tariffs applied on the date of the conclusion of the Third Round of negotiations (base rates).

Participants shall notify the Committee of Participants through the secretariat sufficiently in advance, or immediately thereafter, of the introduction of any changes to the MFN tariffs applied and adjust the base rates accordingly. The margin of preference shall be implemented on those base rates.

According to the Decision, Participants recognize the special situation of Algeria and the Islamic Republic of Iran who are in the process of acceding to the World Trade Organization.

Participants agree to accord a differential treatment and flexibilities to these Participants within the market access modalities agreed upon.

With respect to the GSTP rules of origin, the Negotiating Committee shall intensify its examination of proposals to revise Rule 3 of Annex II of the GSTP Agreement with a view to concluding negotiations no later than the end of September 2010.

According to the Decision, Participants will submit their offers by way of draft schedules of tariff concessions by the end of May 2010 at the latest. They will have four months to verify their draft schedules of concessions.

During this period, Participants may engage in consultations and request and offer negotiations with a view to supplementing the outcome of the basic modalities on market access.

Participants will notify the GSTP Secretariat no later than the end of 30 September 2010 of their finalized schedules of concessions, which will be an integral part of the Final Agreement of the Sao Paulo Round.

The implementation of concessions will start upon the domestic ratification of the Final Agreement and the deposit of the respective instruments by a number of Participants to be defined.

The Decision said that in order to ensure that the Sao Paulo Round achieves the objective of promoting and sustaining mutual trade, Participants commit to undertake a thorough review of its results no later than two years after the start of the implementation of the concessions.

In the course of the review, they will consider inter alia, increasing the margin of preference and the product coverage, as well as the operation and revision of the GSTP rules of origin, including an examination of the tariff classification criteria and the current value-added rule.

At a media briefing at the WTO Ministerial Conference venue, Jorge Taiana, Minister of Foreign Affairs and International Trade of Argentina, who chaired the ministerial session, said that the developing-country parties of the GSTP adopted the decision on modalities for concluding the Sao Paulo Round of GSTP.

This decision is "a very, very important step" in South-South cooperation and in trade agreements, he said.

He added that these modalities based on tariff cuts across the board represent a major difference between the Sao Paulo Round and preceding negotiations of the GSTP system which was based on a request-and-offer approach and was more limited in scope.

The Minister from Argentina said that this is a clear demonstration that the developing countries are willing to continue working to strengthen South-South trade and the process of liberalization compatible with development.

He expressed hope that this will give a fresh impulse for negotiations at the multilateral level in other fora. It is also a way to show the increasing importance of South-South trade and South-South cooperation.

He underscored that the problem in trade liberalization and trade negotiations is not in developing countries.

"We can reach agreement, we can work together, we can advance our agenda, and I think it shows that the developing countries have the will and the capability to reach agreement."

Brazilian Foreign Minister Celso Amorim told journalists that this (the occasion) in many ways speaks for itself.

He had noted that he did not see after the first day of the WTO Ministerial Conference, one single piece of news in any of the major newspapers about the Conference, but today at least there were a lot of people (journalists) here, "which is already very significant."

Noting that this was an important first step in these negotiations, he said that the GSTP countries represent 13% of the world GDP (those participating in the negotiations), 38% of the world's population, 15-18% of world trade, 43% of the world production of agriculture and 16% of world industrial production.

So, its not insignificant, it's a very important chunk of production and trade in the world, he said.

Indian Commerce and Industry Minister Anand Sharma, welcoming the decision, said that it demonstrates the commitment of the countries of the South to work together in the spirit of South-South cooperation.

He further said that the agreement demonstrates that the countries of the South are now converting the earlier ideals of cooperation into tangible and concrete instruments. In the present economic crisis, when the countries' economies across continents had been adversely impacted - some more and some less - countries of the South are destined to play an important role by engaging with each other in commerce.

The trade minister of Iran said that the modalities for the GSTP is a very important measure to foster South-South economic cooperation. He expressed hope that this would strengthen the promotion of the trade relationship of developing countries.

Egypt, represented by Ambassador Hisham Badr, also strongly welcomed the agreement which he said is a very timely one. It sends a few important messages today. First, it is a message of hope among the lack of clarity of what is happening in other round of the WTO.

Second, he said, it is a strong message of South-South cooperation. At a time of the economic and financial crisis, which has come from the developed countries, "it shows that we in the South are not waiting for solutions to come from heaven, but sometimes the solutions can come from the South through this agreement to help liberalize trade."

Dr Supachai Panitchpakdi, the Secretary-General of the UN Conference on Trade and Development (UNCTAD), said that the emergence of the GSTP agreement is as significant as the emergence of different groups of developing countries in the negotiating process, such as the G20, the NAMA-11 and the G33.

In response to a question about recent remarks made that the GSTP is not the same as the Swiss formula in NAMA and that it also falls short of what is being discussed in the Doha Round, Minister Amorim said that these are different negotiations.

He explained that the Swiss formula in the Doha Round was a demand by the rich countries and developing countries accepted that in the context of a global pact in which concessions mainly in agriculture would be made.

This (the GSTP) is a horizontal negotiation among countries of similar level, and the very interesting thing here is that it is on applied tariffs. This will be an important cut of real significance that will create trade immediately among countries of a similar level of development.

Supachai estimated that a 20% cut in tariffs could lead to about $8 billion more in trade among the participating countries. +