UNCTAD
SPECIAL AND DIFFERENTIAL
TREATMENT:
AN UNCTAD ASSESSMENT
UNCTAD
Commercial Diplomacy Programme
April 2000
THE BASIC IDEAS BEHIND THE
CONCEPT OF
SPECIAL AND DIFFERENTIAL
TREATMENT (SDT)
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• SDT deals with compensating for structurals
inequalities between developing and
developed countries in terms of:
–
–
–
–
share of world trade;
access to financing;
access to technology;
infrastructure weaknesses.
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THE BASIC IDEAS BEHIND THE
CONCEPT OF
SPECIAL AND DIFFERENTIAL
TREATMENT (SDT)
SDT also tries to compensate for the fact that there is no
direct link between trade liberalization, participation in
the globalization process and economic growth (Latin
America presented this argument in the Havana
Conference in 1947, leading to the establishment of
art.XVIII of GATT , which allows for tariff protection and
quantitative restrictions in case of balance of payment
difficulties, and art.XXXVI:8-Part IV of 1964 on the
“non-reciprocity”).
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BASED ON THE HYPOTHESIS THAT
STRUCTURAL INEQUALITIES MUST
BE COMPENSATED FOR, VARIOUS
MECHANISMS WERE DESIGNED
SUCH AS:
• At the level of North-South trade:
– the non-reciprocity in market access;
– the Generalized Sistem of Preferences (GSP);
– the Common Fund for Commodities.
• At the level of national trade policies :
– production and export subsidies;
– tariff and non-tariff protection to the national
industry.
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AIDE MÉMOIRE ON
THE GENERALIZED SISTEMS OF
PREFERENCES
• UNCTAD II (New Delhi, 1968) led to the adoption of the
GSPs given by industrialised countries.
• The GSP is an exception to the GATT MFN principle and
authorised by a “waiver”, not by Part IV of GATT;
• Preferences within the GSP are unilateral concessions
that can be modified (i.e. not “bound” commitments);
• The “Decision on differential and more favourable
treatment”, adopted during the Tokyo Round (“Enabling
Clause”) legitimatizes the GSPs, regional agreements
among developing countries (DCs) and the special
treatment for LDCs.
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SDT INSTRUMENTS AGREED UPON
AT THE URUGUAY ROUND:
• Longer compliancy terms
for commitments (until
2005);
• more flexible criteria
and/or thresholds on
agreements on subsidies
and countervailing duties;
• technical assistance;
• certain exceptions for
compliancy with norms.
But,
• Although the GSP was
maintained, preferences
were eroded due to tariff
reductions; and
• domestic support
measures could not be as
extensive as before the
Uruguay Round with
the exception of
agriculture.
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DISTINCTIONS BETWEEN
DEVELOPING COUNTRIES WERE
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INTRODUCED DURING THE 80S,
ALLOWING FOR DIFFERENCES IN
SDT:
• Least developed countries (LDCs)
• Landlocked countries
• Island countries
• Small economies
• Net food importing countries
At the same time, the concepts of “graduation”
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and reciprocity were strengthened.
ARGUMENTS AGAINST SDT:
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Arguments against SDT were raised during the 80s in
industrialized as well as in developing countries:
At the level of trade negociations:
• diversity among developing countries makes the design
of SDT mechanisms difficult;
• SDT is part of the “ideological baggage” superseded by
the processes of liberalization and globalization;
• SDT works as an unnecessary “crutch” for developing
countries as it hinders their insertion in world trade on
competitive terms;
At the national level in developing countries:
• SDT has favoured some enterprises, distorted trade,8 and
encourages subsidies which are no longer sustainable.
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ISSUES FOR REFLECTION WHEN
DISCUSSING THE USE AND
EFFECTIVENESS OF THE GSP:
Possible points of view to be discussed:
• The elimination of the GSP and the reintroduction of
tariffs on products from developing countries would
work against the very logic of free trade;
• There is no clear evidence that the elimination of the
GSP for a developing country would favour exports of
another developing country;
• Nor is there any evidence that benefits from the GSP
have discouraged countries from increasing trade
liberalization.
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IN THE ON-GOING WTO
NEGOTIATIONS TWO CHALLENGES
HAVE EMERGED FOR DEVELOPING
COUNTRIES CONCERNING SDT:
• To consolidate a “political platform” in favor of
SDT, acknowledging the necessity of
mechanisms and criteria to compensate for
inequalities between developing and
industrialized countries.
• To update the concept of SDT and its
operational instruments, according to the new
world economic context and national economic
policies.
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REQUIREMENTS TO UPDATE THE
SDT:
• An evaluation of costs and benefits of the SDT to
identify the adequate instruments, based on criteria
such as the:
– importance of preferential access to markets;
– need for longer implementation periods and greater
flexibility in the implementation of multilateral norms;
– impact and utility of technical assistance provided for in
the SDT;
– analysis of relevant examples (Andean Community,
FTAA, Mercosur, Lomé IV, European Union, treatment
to least developed countries, etc.).
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EXAMPLE OF SDT IN THE WTO:
THE GENERAL AGREEMENT ON
TRADE IN SERVICES (GATS)
• The structure of “positive lists” allows
countries to choose, according to their level of
development, the pace and extent of their trade
liberalization by allowing them to determine
the sectors and modalities to be liberalized.
– The impact of GATS on countries will depend
very much on their capacity to negotiate offers
and concessions by service sectors according to
their development level.
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EXAMPLE OF SDT IN THE WTO:
THE GENERAL AGREEMENT ON
TRADE IN SERVICES
• Article XIX.2 of GATS acknowledges the
imbalance between developing and
industrialized countries as it allows
developing countries greater flexibility to
open fewer sectors according to their
development level (the right to nonreciprocity is acknowledged).
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EXAMPLE OF SDT IN THE WTO:
THE GENERAL AGREEMENT ON
TRADE IN SERVICES
• Article IV of GATS acknowledges asymmetry and
the need for industrialized countries to compensate
for imbalances in trade of services by:
– strengthening the national capacity of DCs’
effectiveness and competitiveness;
– improving DCs’ acccess to distribution channels
and information networks;
– liberalising market access to sectors and
modalities of interest for DC’s exports.
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EXAMPLE OF SDT IN THE WTO:
GATS ANNEX ON
TELECOMMUNICATIONS
• acknowledges the essential role of
telecommunications for the participation of DCs on
the trade of services and provides for the transfer
of information to DCs (sections 6 c and d)
concerning the telecommunications services and
information technology needed for development:
the transfer of technology clause could serve as a
reference for other agreements (to link trade
liberalization with technology transfer: refer also to
art.66.2 of TRIPS).
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EXAMPLE OF SDT IN THE WTO:
the “QUAD” proposal
(US, Canada, EU and Japan) April 7,
2000
• The background:
– Singapore Ministerial Declaration (1996);
– the proposal on LDCs in Seattle (1999);
– the language adopted at UNCTAD X in Bangkok (2000).
• The Post-Seattle context:
– developed countries need to build confidence and
credibility among developing countries;
– developed countries need to provide concrete results at
the Conference on LDCs (Brussels, 2001).
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THE CONTENT OF THE QUAD
PROPOSAL:
Provides for preference measures for LDCs and DCs concerning:
– market access (for LDCs);
– the implementation of certain Uruguay Round agreements
(for DCs and LDCs);
– technical assistance with “adequate resources”;
– measures to improve “internal and external transparency”
of the WTO.
Divergencies on this “package” give an idea of the
difficulties of reaching concensus, even among QUAD
members, and of the minimum negotiating margins of DCs.
After a consultancy process, it is expected that the General
Council of the WTO on May 3 will study this proposal together
with a counter-proposal of LDCs.
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MEASURES PROPOSED BY QUAD ON
MARKET ACCESS:
Free access to all markets for “basically all products
according to domestic requirements and
international agreements”, which implies that:
• current restrictions on textiles and agricultural
products are maintained, but the SDT provided for
under the new Lomé Convention (EU) and in the
legislation for Sub-Saharan Africa (US) and for the
Caribbean is extended to all LDCs;
• current rules of origin are maintained;
• commitments are not “bound”.
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MEASURES PROPOSED BY QUAD ON
THE IMPLEMENTATION OF
AGREEMENTS:
• TRIMS and Customs Valuation:
To act “with flexibility and in a cooperative manner in
response to properly grounded requests from DCs for the
extention of transition periods”; an extension may be granted
for a limited period of time, taking into account
implementation plans presented by requesting countries.
Requests will be considered on a case by case basis, in
accordance with current WTO agreements.
Requests from LDCs are expected to receive special
consideration.
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MEASURES PROPOSED BY QUAD
ON THE IMPLEMENTATION OF
AGREEMENTS:
• Agreement on sanitary and phytosanitary measures (SPS):
an additional extension of 3 years for LDCs, together with an implementation
programme.
• Preferential measures for DCs on the implementation of agreements on
technical barriers (TBT), SPS, Agriculture and services, such as:
– measures on norms and certification;
– identification of technical assistance needs;
– implementation of article IV of GATS;
– measures to improve the effectiveness of the Marrakech Ministerial
Declaration on the “possible negative impacts of the Reform Programme
for LDCs and net food importing countries”;
– Revise the functioning of measures in article IV.
Establishment of a working programme on the implementation of the Uruguay
Round agreements (a working plan has been agreed by the WTO General
Council on 3 May 2000).
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ANOTHER SDT EXAMPLE:
THE NEW “PARTNERSHIP
AGREEMENT” ACP-EU (COTONOU,
JUNE 2000)
• It emphasizes support for regional and sub-regional
integration among DCs.
• Trade preferences are maintained for 8 years.
• The finalization of “partnership” agreements (from
September 2000 on) is expected before 2008,
according to WTO rules.
• Duty-free to “essentially all ACP products” from
2005 onwards.
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POSITIVE AGENDA AND THE SDT:
• The issue of “graduation” (the right to SDT is lost when a
certain development level is attained): it would be possible to
graduate sectors instead of countries, that is, according to
competitiveness attained on certain sectors or products,
instead of country classifications based on indicators such as
income per capita.
This implies the establishment of multilateral evaluation
criteria of competitiveness by sectors or products for all
developing countries, or thresholds under which DCs would
not be subject to restrictions or protectionary measures.
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POSITIVE AGENDA AND THE SDT:
• The possibility to introduce the generalized
system of preferences in binding trade rules in
order to assure their stability and to ensure that
they are not applied only at the discretion of
industrialized countries.
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POSITIVE AGENDA AND THE SDT:
• To avoid conditions to attain SDT: following the
example of international institutions, some
industrialized countries have suggested that
SDT should only be granted to countries which
adopt certain economic policies.
This raises the question of how to identify an
“adequate” economic policy for a developing
country.
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POSITIVE AGENDA AND THE SDT:
• The need to take into account the fact that
some multilateral agreements have provisions
that favour developed countries: for example,
the agreement on agriculture allows for nonactionable subsidies, which industrialized
countries have the resources for, unlike
developing countries.
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POSITIVE AGENDA AND THE SDT:
• The need to maintain “room for manoeuvre” in
agreements such as TRIPS and TRIMS for the
implementation of active development policies
including performance requirements.
GATS allows the use of performance requirements to
be applied to foreign investments, which can be useful
to support development in certain sectors.
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POSITIVE AGENDA AND THE SDT:
• Extention of the transition period for the
implementation of certain agreements i.
e. subsidies, TRIPS and TRIMS not only
on an ad hoc basis to individual requests
but also on a “moratorium” basis that
can be applied to all DCs and linked to
significant measures of technical
assistance.
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POSITIVE AGENDA AND THE SDT:
• The identification and effective
implementation of technical assistance
measures which support the development of
developing countries’ export supply (for
example, article IV of GATS).
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POSITIVE AGENDA AND THE SDT:
• Backstopping of SDT in trade by providing
access to development financing for the DC’s
exports: that would require “coherence”
between trade liberalization and
development financing (i.e. between the
WTO and the financial institutions).
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SOME CONCLUDING REMARKS
It is important to:
• defend the concept of SDT for all DCs;
• establish mechanisms and operational criteria
which take into account: structural inequalities
(which cannot be solved with transition periods),
supply weaknesses of DCs; the results of the SDT
from the point of view of the insertion of DCs in
world trade (for example, through an
assessment of competitiveness at the level of
sectors or products).
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