Gaps between commitments and actions

Dhaka Daily, August 21, 2007

By M. Abu Eusuf

NUMEROUS studies indicate that services have the potential to provide a significant development outcome to the Doha Round of negotiations. Unfortunately, progress in this area is directly linked to breakthroughs in Agriculture and Non-Agricultural Market Access (NAMA) negotiations. Before the suspension of the Round in July 2006, around 30 revised offers were made. There weren’t much for the least developed countries (LDCs) in those offers as modes and sectors of interest to the LDCs were not included.

Since the resumption of the negotiations this year, no revised offers were made. In the services negotiations, the negotiating architecture has provided the LDCs maximum flexibility and opportunity to seek enhanced market access in sectors and modes of supply of export interest to them. The modalities for special treatment for the LDCs were adopted in 2003.

At Hong Kong Ministerial Conference, Members decided to develop methods for the full and effective implementation of the LDC modalities, particularly through developing appropriate mechanisms for according special priority to the LDCs. In March 2006, the LDCs submitted a proposal asking developed countries, and developing countries in a position to do so, to accord non-reciprocal special priority to the LDCs in sectors and modes of supply of export interest to them. The proposal though not very clear on how special priority to the LDCs in terms of market access would be provided, alluded to preferential market access to the LDCs in the area of services. There have been a number of meetings to specifically discuss this proposal and on the overall implementation of the LDC modalities, both before and after the resumption of the negotiations. The developed countries are opposed to provide preferential market access to LDCs in the area of services within the general agreement on trade & services (GATS) framework. There is, however, limited support to go for a WTO waiver approach which the LDCs should explore further.

Another key issue for LDCs in the services negotiations is seeking commitments for semi-skilled service providers under mode 4. Mode 4 accounts for 2.0 per cent of world trade in services, and yet there is virtually no progress on the movement of natural persons under mode 4. The current offers and revised offers continue to exclude categories of interest to the LDCs. Many offers still focus on categories linked to commercial presence.

The LDC Group has submitted a collective request on mode 4 and has defined the categories they are interested in such as Independent Professionals, Business Visitors, Contractual Services Suppliers, and ‘others’. The LDCs would need to further work on this submission and make it more sector specific. Effective access to mode 4 will also require actions in the area of rules’ negotiations, particularly in Domestic Regulation. Recently, the Working Party on Domestic Regulation discussed for the first time a text by the Chairman on possible disciplines on domestic regulation pursuant to Article VI: 4 of the GATS. An agreement on horizontal disciplines on domestic regulation might be within reach but again whether that would facilitate movement of natural persons is an open question.

It is a bit disappointing that in a development Round, the work programme for operationalizing the Special and Differential (S&D) provisions has not moved much. It may be recalled that as a part of this work programme, a total of 88 Agreement-specific proposals were tabled by the African Group and the LDCs. Out of these, five decisions in favour of the LDCs were adopted at Hong Kong while 28 proposals were agreed in principle at Cancun in 2003. Developing countries have questioned the economic value of these 28 proposals but are inclined to adopt the package given a favourable movement in other areas of the negotiations. A total of 54 proposals still remain on which Members are yet to come up with recommendations. Although at Hong Kong, Ministers had instructed that work on the remaining proposals to be completed by December 2006, it could not be done due to the suspension of the negotiations. In the post Hong-Kong phase, text based discussions has taken place only for a few proposals and progress there has also been limited. The LDCs virtually has not pursued any additional proposals in the S&D negotiations, and has only been concentrating on the implementation of the DFQF decision.

It is interesting to note that negotiations on trade facilitation which was added to the Doha Round through the July Package in 2004 has witnessed rather an active period in the last two years. More than 100 proposals have been submitted in the negotiations, some of them are now called third generation proposals reflecting a mature phase of negotiations, in the areas of trade goods transit, import/export fees and formalities and trade regulations centering on Articles V, VIII and X of the GATT 1994.

Developing countries, which were not a demander of this area of negotiations, are now becoming active participants. The LDCs have also tried to engage themselves in the negotiations with few of them teaming up with other countries in submitting proposals. Although the negotiations in this field have not yet reached a full drafting mode, what is important for the LDCs to ascertain is whether the proposed measures contained in the submissions of Members are consistent with their trade, development and finance needs or administrative and institutional capacities. Careful examination is also required in respect of benefits and implementation costs of such proposals. The needs’ assessment in the LDCs for trade facilitation support is also to be pursued so as to make effective technical and financial assistance proposals in the negotiations.

Much of the negotiating energy of the LDCs in the post-Hong Kong phase was invested in negotiating the enhanced Integrated Framework (IF) for trade-related technical assistance for the LDCs. Perhaps the suspension of the Round allowed Members to devote more time to this agenda which is not a part of the single undertaking. The Ministers at Hong Kong agreed to enhance the IF on the basis of three criteria: (i) additional and predictable resources; (ii) strengthening in-country capacity to implement the programme; and (iii) enhanced global governance.

After Hong Kong, a Task Force was established to develop recommendations to implement the Hong Kong mandate. Following the recommendations (which inter alia proposed a new Secretariat for the IF), several interim bodies were set up to develop proposals for implementing those recommendations. The final package of recommendations were adopted only the beginning of this month, and there still remains some outstanding issues to resolve such as the recruitment of the Trust Fund Manager and an Executive Director for the new Secretariat of this programme. It is a bit frustrating that in the whole episode of negotiating the enhanced IF, much attention had been given to governance issues (several terms of references of the bodies that would constitute the enhanced IF and of processes to access funding were negotiated). The fundamental conceptual underpinning of the programme, the efficacy of which was questioned before, remains as such. In the past it was highlighted that mainstreaming of trade into national development plans (one of the objectives of the IF) is too indirect an approach to make a real contribution to address the needs of LDCs in trade, in particular tackling supply-side constraints. The enhanced IF is already behind schedule (was supposed to enter into force no later than December 31, 2006), and the indicative financial target of US$400 million over a period of five years is too distant to achieve. It is up to the LDCs to find out whether the model that they have negotiated will find its way in bringing true benefits for them.

Finally, let us have a quick look on the “Aid for Trade” work programme that aims to “help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO agreements and more broadly to expand their trade”. Since Hong Kong, the agenda has moved rather in a less convincing manner. A Task Force was created to develop recommendations on how to operationalize “Aid for Trade”. The recommendations, which were adopted in October 2006, fell short of some practical suggestions or mechanisms to address the trade needs of the developing countries.

What has happened is that the WTO has assumed the role of monitoring the “Aid for Trade”, which are now taking place on three levels: (i) a global review of “Aid for Trade” flows at the WTO; (ii) donors self assessment; (iii) in-country assessment by recipients. It remains to be seen how the WTO would coordinate these various levels of monitoring, and whether this approach would ultimately bring the much needed resources for building trade infrastructure in the LDCs. The LDCs made a submission in the WTO reflecting on the scope, architecture, instruments and governance of the “Aid for Trade”, prior to the adoption of the Task Force recommendations. In that submission, the LDCs, inter alia, proposed a multilateral trade facility for financing projects relating to trade enhancement. However, that proposal did not attract support from donors and thrust of the Task Force recommendations was to work through the existing channels. The LDCs should now undertake an analysis of whether, and to what extent, the aid channels are supporting projects in trade sector. The challenge here is to connect the aid or development community with the “Aid for Trade” work programme in the WTO.

From the above review, it appears that the LDC issues in the Round are so far half-cooked. Unless the commitments taken in Hong Kong are given effect through meaningful follow-up actions, the Round will not bring tangible benefits for the LDCs. Meaningful implementation of the DFQF decision taken at Hong Kong (in particular in the US market), operationalisation of some critical provisions of the LDC modalities in services negotiations, elimination of cotton subsidies, finding a mechanism to secure resources from “Aid for Trade” initiative, operationalisation of technical assistance and capacity building aspects of Trade Facilitation negotiations are some of the unfinished business of the Round.

There is now a call to complete the Round by end of 2007. The Chairs of negotiating bodies are now working towards revised text. The Round nevertheless has faltered since its launch and, with each phase of negotiations, the ambitions set at Doha are eroding gradually. The challenge for the LDCs is to ensure that the commitments made since 2001 through successive Declarations are translated into meaningful actions.

The writer is Assistant Professor, Department of Development Studies, University of Dhaka.