5th Sustra Workshop
8 Pages
English
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5th Sustra Workshop

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8 Pages
English

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28 Oct 2005 – institut français des relations internationales. 27, rue de la Procession -75740 Paris Cedex 15 -France -Tél. 33 (0)1 40 61 60 00 -Fax 33 (0)1 40 ...

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International Conference Trade for Development: the Future of Special and Differential Treatment of Developing Countries th IFRI, Paris – October 28 , 2005
* Subject to contractual confirmation
With the Support of the DG Trade* European Commission
institut français des relations internationales 27, rue de la Procession75740Paris Cedex15Tél. France 33 (0)1 40 61 60 00 Fax33 (0)1 40 61 60 60 www.ifri.org      Association de la loi 1901 reconnue d'utilité publique Décret du8/9/1949 Siret784 308 926 00020 
ASN / JMP
BACKGROUND NOTE
1. Since the inception of the multilateral trading system, optimally articulating international trade liberalization commitments with developing countries’ national development strategies has been a central debate.During the 1960s, the principle of “Special and Differential Treatment ” (SDT) of developing countries provided a paradigmatic answer to this question. The work of UNCTAD helped to translate the PrebishSinger theoretical approach of trade for development into Part IV of the GATT. Entitled “Trade and Development”, it was officially adopted in 1965.
In a nutshell, the SDT principle asserts the need to adapt international trade rules to the specific economic situation of developing countries. It also authorizes developed countries to derogate from the GATT’s “most favored nation” principle (nondiscrimination) in granting “nonreciprocal trade concessions ” to developing countries (DC). In practice, the SDT principle has two faces:
(1) For market access commitments (tariff and nontariff barriers), SDT mainly characterizes nonreciprocal trade preferences, rooted in the Generalized System of Preferences (GSP). Initially, marketaccess preferences to developing countries were largely – though not exclusively– inherited from the decolonization process. Their continuous development over the years has made them a constant feature of the international trading system.
(2) For trade rules and disciplines, SDT developed in two major directions: one based on exempting developing countries from implementing multilateral mandatory rules; another giving the rules flexibility, by adjusting their application to the pace of development. The trading system has historically moved between the two schemes. The Tokyo Round (1973 1979) mainly used the exemption method: developing countries were given the possibility of opting out of the disciplines being negotiated in the “codes” (antidumping, subsidies, nontariff barriers). On the other hand, the Uruguay Round (19861995) was based on a “single undertaking” principle, meaning that all GATT members were to adopt the same rules: SDT consequently moved towards flexible implementation for developing countries, particularly through longer transition periods.
2. The “Doha Development Agenda” (DDA)installed the “Trade and Development ” nexus at the very heart of the WTO mission. From this perspective, the DDA can conceptually be read as a search for a new equilibrium in the Special and Differential Treatment of developing countries within the WTO. In the Doha negotiating agenda, SDT covers two major areas.
(1) Existing trade rules. The “implementation” negotiating chapter of the Doha Ministerial Declaration essentially aims at resolving the practical difficulties met by developing countries with respect to the Uruguay Round commitments. The SDT negotiating chapter aims at improving the effectiveness of SDT measures embedded in the existing agreements. It covers a spectrum of 145 SDT measures ranging from improved marketaccess conditions for DCs; special considerations of developing countries’ interests in the disciplines of particular agreements; lower level of rule commitments; transition periods for implementation; “best efforts ” provision committing developed countries to take into account DC’s interests (antidumping) and provide technical assistance to developing countries. On their own, Least Developed Countries (LDCs) exclusively benefit from 22 other specific SDT measures.
(2) Future agreements to be negotiated under the DDA. SDT is a major dimension of the whole Doha negotiating mandate, aimed at integrating developing countries’ needs and interests in the future trade commitments, for market access and trade disciplines.
3. Two major debates currently dominate the trade and development nexus, both in the literature and the empirical approaches of the negotiations.
First debate: SDT seems to have historically failed in delivering development.
First, trade preferences developed since the late 1960s have revealed several limits and underlying weaknesses. Some are systemic (inhibition of the diversification of economies, discriminations between developing countries, rent creation strengthening political oppositions to trade liberalization), others are technical (selective and discretionary tariff concessions, opaque and complex regulations, restrictive rules of origin). As a result, trade preferences tend to be underutilized and have not clearly proved their effectiveness. Nevertheless, the issue of trade preferences plays a key role in the current political economy of the negotiations. Some developing countries, particularly in Africa, fear losing the tariff preferences (preference erosion) that underpin some of their competitive advantage visàvis huge emerging competitors. Some developed countries like France, and to a lesser extent Europe, also argue for maintaining a strong development approach based on deepening and improving trade preferences.
Second, developing countries denounce the weaknesses of SDT measures. The current SDT regime is not considered helpful enough to meet their needs of trade agreements’ implementation (lack of institutional and technical capacities). Trade rules are seen as limiting the autonomy of their national development strategies (intellectual property, investment and industrial policies). Developed countries have not really fulfilled their promises of counterpart with concrete aid and technical assistance. Since the Marrakech Agreements, SDT has thus neither succeeded in balancing “NorthSouth” concessions, nor avoided the trade marginalization of many developing countries.
Second debate: SDT is a “onesizefitsall” regime that does not reflect the economic diversity of developing countries.
According to the “enabling clause”, when a country accedes to the WTO (or the former GATT), it can choose to selfdeclare its status of Developing Country. This status gives the benefit of all the SDT measures. Countries classified as LDCs according to UN criteria can also benefit from special measures specific to their category. As a result, SDT only acknowledges two categories of developing countries. Adding the developed countries, the WTO recognizes three country categories. Developed countries now want new SDT measures to be linked to greater differentiation (graduation) amongst developing countries.
4. The interaction between the two debates largely explains major difficulties and deadlocks in the “Doha Development Agenda” negotiations.
 On the one hand, developing countries tend to conclude that SDT failures stem from insufficient concessions from developed countries under this principle;
 On the other hand, developed countries are not prepared to accept more concessions under SDT unless they are based on a realistic assessment of the developing countries’ economic situation: from such a perspective, for instance, Ghana and Singapore would not deserve identical treatment under SDT. The difficulty of finding a new consensus on differentiation may prove to be a real blocking factor for the Doha Round.
5. Against this backdrop, the conference will focus on two key issues in the development dimension of the Doha negotiations.
The first issue is the future of nonreciprocal preferences: what kind of trade and development strategies and insurance against adjustment shocks can be proposed to the countries (in particular members of the G90) facing the threat of preference erosion? The second issue relates to developing countries’ differentiation: is it possible to craft a new burdensharing of global trade responsibilities between developed and emerging economies (in particular G20 leaders)?
October 28, 2005 – Conference Agenda MORNING – The Future of NonReciprocal Trade Preferences: the Poorest Countries’ Stakes in the Doha Round
The objective of the morning discussions is to assess trade preference regimes and identify possible reform scenarios.
8: 30 Seminar Presentation / Welcome Address by JeanMarie Paugam, Senior Research Fellow, IFRI
8: 40 Opening Speech byMrs Christine Lagarde, French Trade Minister
9: 00  10: 45  Session 1 – The Future of Trade Preferences: What is at Stake for Developing Countries? Chairman:Dani Rodrik, Professor of International Political Economy, J.F.K School of Government, Harvard UniversityThe first session will focus on the economic results of preferential regimes and the consequences of preference erosion. Trade preferences granted to developing countries are an exception to the multilateral trading system’s founding principle of nondiscrimination (most favored nation’s provision). The “enabling clause ” – the legal basis of preferential trade regimes therefore states that nonreciprocal preferences should never contradict the objectives of multilateral liberalization. Thus, by nature, trade preferences should be temporary. However, multilateral tariff reduction can generate adverse distribution effects for some developing countries. The costbenefit assessment of these effects remains unclear for many interested parties, which may lead them to overrate the current status quo of trade preferences against hypothetical benefits of a multilateral trade liberalization.
Stefano Inama, UNCTAD Are Trade Preferences Good for Development? A Theoretical and Empirical Overview of the Economic Impact of Trade Preferences
This presentation will provide an overall view of preferential trade systems. It will recall their historical and political origins (decolonization), discuss their theoretical grounds (UNCTAD, Prebish) and assess their empirical results (proliferation and divergence between systems, selectivity of trade concessions, utilization rates, effective contribution to trade development and growth).
Sébastien Jean, Lionel Fontagne or JeanChristophe Bureau, CEPII –Preference Erosion: Who Wins, Who Loses?
This second presentation will examine the economic modeling results concerning the macroeconomic impact of preference erosion for developing countries. It will identify and assess possible adjustment shocks for shortterm “ losers”.
Hervé Guyomard, Senior Researcher at INRA, Head of the INRA Social Sciences Departement –A Case Study: Selected Agricultural Products in the EU/ACP Relations
As an empirical illustration of the preferential system’s inner logic, this case study aims at highlighting some concrete difficulties met by developing countries facing preference erosion. Redistribution effects linked to the elimination of preferences in this particular sector will be analyzed accordingly.
10: 45 – Coffee Break
11: 00  12: 45  Session 2 – The Future of Trade Preferences: Coping With the Threats of Preference Erosion? Chairman: to be confirmed Bernard Hoekman, World Bank– Combining Trade Preferences Reform with Multilateral Liberalization?
Several scenarios for reform of preferential trade regimes have been sketched since the beginning of the Doha Development Agenda. This presentation will analyze these scenarios and assess their compatibility with the multilateral liberalization dynamic of the Doha Round. Are the various reform scenarios compatible? How are they influencing the prospects for multilateral trade liberalization?
The first scenario is based on an “exit strategy” from asymetrical preferences through Free Trade Agreements. This solution has been adopted by the European Union for the future of its relationship with the ACP countries, and will come into effectfrom 2008. The Cotonou Agreement lays the ground for Economic Partnership Agreements (EPA) based on free trade.
The second scenario relies on reforming the preferential regimes in order to increase their efficiency for LDCs. Based on United Nations’ declaration and the Doha mandate, all developped countries should duplicate the European program “Everything but Arms”, (which grant free market access to LDCs). The Evian G8 Summit otherwise called for improving and strengthening the preferential trade regimes, in particular through easing and harmonizing preferential rules of origin.
A third scenario has been proposed by some emerging countries, particularly Brazil, willing to establish “SouthSouth” trade preferences. South Korea was the first “Developing Country” (according to its WTO status) to set up its own GSP. Morocco also adopted preferential regimes, similar to the EBA initiative, benefiting SubSaharan Africa. Is such a “SouthSouth” strategy a mere political posture or is it rooted in consideration of actual trade flows and prospects for complementary specialization between developing countries? What would be the consequences of such new “South South” preferences for the multilateral trading system?
Serge Perrin, AFD –Preference Erosion: What Role for Aid ?
The implications of trade liberalization and preference erosion require responses from the international community to cushion the adjustment costs that will affect some countries. For example, the IMF has recently set up the Trade Integration Mechanism to assist those member countries experiencing balance of payment shortfalls as a result of trade liberalization. What are the other options for financial support? Do we need new facilities? Compensation schemes can only address temporary shocks, and need to be complemented by multilateral and bilateral agencies’ interventions to alleviate supply side constraints in many DCs. How does trade capacity building fit into this strategy, and has it been effective? Is there a case for more aid for trade?
AFTERNOON – Differentiating Developing Countries in the WTO: the Challenges of SDT for Emerging Economies
This second round table will analyze one of the key political concepts newly at stake in the development dimension of the Doha Agenda. The developed countries now ask for better differentiation between the developing countries, while the latter totally reject such a claim. Beyond political posture, the concept of differentiation itself and its feasibility within the WTO are still quite unclear. The afternoon session will try to clarify the theoretical debate and political stakes, and envision possibilities for further DCs’ differentiation within the WTO.
14: 30 – 16: 15 Session 3 – Developing Countries’ Differentiation: Legal Bases and Technical Modalities. Chairman:Patrick Low, Director of the Research Division, WTO.Is differentiation “WTOcompatible”? The session will focus on the technical, economic and political stakes of differentiation.
AnneSophie Novel and JeanMarie Paugam, IFRI– Why and How Differentiate Developing Countries within the WTO? Lessons from Theory and Solutions for Negotiations.
This presentation will overview the main arguments on differentiation. It will highlight the legal framework of the preferential system within the WTO, in light of the recent India GSP DSB ruling. It will review possible methods for differentiating developing countries and analyze the political economy of WTO SDT negotiations. Is the current SDT regime delivering optimal development benefits ? Could differentiation be based on horizontal economic criteria or other methodologies ?
Alan Matthews, Jean Monnet Professor of European Agricultural Policy, Head of the Department of Economics, Trinity College, Dublin, Ireland –A Case Study: Differentiation in the Agricultural Sector
This presentation will examine ways of establishing criteria for differentiation between developing countries’ liberalization commitments in the agricultural sector, framed under the concept of food security. The literature on the subject has highlighted how difficult it might be to define a category of foodinsecure countries: the way selected individual commodities help to define foodinsecure status may differ from country to country. How to finely assess vulnerability and development capacities of developing countries in the agricultural sector? Is is possible to base differentiation on productbased criteria?
Martina GARCIA, Principal Economist and Raed SAFADI, Chief of the Trade Policy Dialogue Division, OECD S&D: Objectives, Tools and Options for the WTO.
This intervention will focus on the role of SDT in supporting on the one hand the integration of developing countries into the multilateral trading system, and on the other, their economic development. So far the S&D toolbox provides for better than MFN treatment and special derogations from WTO rules to developing countries with a one size fits all approach. However, it does not call for, nor was it designed to ensure, the development ‘relevance’ of negotiated rules and disciplines. Can the S&D box be re tooled to include a more explicit consideration of the development implications of WTO rules? the presentation will also review the arguments for and against differentiation between developing countries, and present some ideas on the future of SDT: how best to move the system forward for the benefit of all ?
16 : 15– Coffee Break
16: 30  17: 30 Session 4 – The Political Dimension: What Future for the Principle of Differentiation ?A Debate with WTO Negotiators(to be confirmed).
Chairman:JeanMarie Metzger, Director of the Exchange Division, OECD.
Discussants(invited):Mr. Peter F. Allgeier, Deputy United States Trade Representative ; Mr. Ujal Singh Bhatia,Ambassador of India to the WTO
The majority of developing countries are opposed to any kind of differentiation within the WTO. For instance, in 2003, some WTO developing countries, who are also OECD members, blocked the launching of an OECD study on the subject. Developed countries are nevertheless increasingly asserting their determination to differentiate amongst DCs. Developed countries also implement a principle of “graduation” in the framework of their bilateral or regional preferential system.
This debate intends to critically review the theoritical arguments and focus on practical ways and means to overcome the current deadlocks on SDT negotiations.
17:30  Final Address(to be confirmed)
Delivering Development through the DDA: A Political Way Forward?