WORLD TRADE
ORGANIZATION
RESTRICTED
WT/COMTD/SE/M/10
4 May 2005
(05-1842)
Committee on Trade and Development
Tenth Dedicated Session
NOTE ON THE MEETING OF 6 APRIL 20051
Chairman: H.E. Mr. Gomi Tharaka Senadhira (Sri Lanka)
A.
ADOPTION OF THE AGENDA ........................................................................................................ 1
B.
WORK PROGRAMME ON SMALL ECONOMIES ............................................................................. 1
C.
COMMUNICATION FROM A GROUP OF COUNTRIES (WT/COMTD/SE/W/12) ............................ 3
D.
OTHER BUSINESS ........................................................................................................................ 6
A.
ADOPTION OF THE AGENDA
1.
The Chairman extended a special welcome to the non-resident Members and organizations
which were participating in the 10th Geneva Week event. He expressed the hope that the presence of
the non-resident Members could be taken advantage of in order to make further progress on the work
on small economies. He pointed out that the Work Programme on Small Economies was especially
important to non-resident Members, as many of them considered themselves to be small and
vulnerable economies.
2.
He said that the draft agenda for the meeting was contained in Airgram WTO/AIR/2533 of
18 March 2005.
3.
The agenda was adopted.
B.
WORK PROGRAMME ON SMALL ECONOMIES
4.
The Chairman summarized the work that had been done since the last Geneva Week. He said
that the first meeting of the Dedicated Session following the meeting held on 3 November 2004 in
conjunction with the previous Geneva Week was held on 21 February 2005. That meeting was
conducted in both formal and informal mode and focused on two main points. The first point
concerned the three step approach for advancing the Work Programme on Small Economies. The
three steps were:
1)
to consider the use of characteristics to identify what could be accepted as small,
vulnerable economies – without naming any group of countries;
2)
to consider the trade-related problems which could reasonably be attributed to those
characteristics – without naming any group of countries; and
3)
to frame responses to those trade-related problems – without naming any group of
countries.
1
The meeting was concluded on 12 April 2005.
WT/COMTD/SE/M/10
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5.
He said that there were some differences in views about the order in which the three steps
should be addressed – that is, whether to start with one, then go to two, and then go to three, or
whether to start with one and two together before going to three. He said that on the whole Members
appeared to prefer an approach which addressed one and two together followed by three at a later
stage.
6.
The second point which was discussed at that meeting concerned a new proposal by a group
of countries – islands and landlocked nations – and which provided an indicative list of specific
characteristics and problems. The proposal was contained in document WT/COMTD/SE/W/12, and
would be discussed under the next agenda item.
7.
The Chairman said that in addition to the meeting of 21 February 2005, the Dedicated Session
had also held two informal meetings, one on 25 January 2005 and the other on 11 March 2005. These
meetings were held mainly to prepare for the present formal meeting. He said that at the previous
meeting there seemed to be a widespread opinion that the Dedicated Session needed to deliver
concrete responses to the problems faced by small economies at the Ministerial Conference in
December 2005. It remained his highest priority to fulfill this mandate and he hoped to be able to
count on the cooperation and hard work of Members.
8.
He concluded by saying that between now and the Ministerial Conference in December 2005,
it was his intention to meet frequently in informal mode, as well as in smaller groups when necessary.
He suggested that the Dedicated Session would need to have informal meetings at the pace of one a
month.
9.
It was so decided.
10.
The representative of Barbados said that the small economies proponents wished to have an
additional formal session scheduled in May.
11.
The Chairman said that in any case his intention had been to organize an informal meeting in
May. Part of that meeting could certainly be in formal mode.
12.
It was so decided.
13.
The representative of Mongolia requested information on how the Secretariat was making
efforts to involve non-resident Members to a greater extent in the Work Programme on Small
Economies.
14.
The Chairman responded that the Secretariat had provided briefings to non-resident Members
during the Geneva Week. He also invited Members, and in particular the proponents of the small
economies programme, to take advantage of the presence of non-resident Members to more actively
involve them in the work of the Committee.
15.
The representative of Colombia, with regard to the proposal of the Chairman to schedule
several informal meetings in the coming months, said that this was a busy year for meetings. Small
delegations in particular would have difficulty in attending all scheduled meetings.
16.
The Chairman recognized that the schedules of all delegations would be overloaded in the
coming months, and said he was fully aware of the constraints faced by small delegations in that
regard. He said that all efforts would be made to avoid clashes with other meetings and to rationalize
the work of the Committee in Dedicated Session.
WT/COMTD/SE/M/10
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C.
COMMUNICATION FROM A GROUP OF COUNTRIES (WT/COMTD/SE/W/12)
17.
The Chairman recalled that a submission (WT/COMTD/SE/W/12) had been received from a
group of countries– islands and landlocked nations – which provided an indicative list of specific
characteristics and problems of small economies. He said preliminary discussions on the basis of this
paper had been held at previous meetings. At the last informal meeting, in response to the comments
made by Members, he had proposed that for the next meeting of the Dedicated Session a threepronged approach be used to examine the characteristics and problems. This approach includes:
1)
Areas where a WTO solution can be found;
2)
Areas where WTO solutions may be available, but need to be combined with
assistance from other agencies; and
3)
Areas where a solution lies elsewhere (outside the WTO).
18.
He said that the intent of the categorization was to better organize the issues so that they could
be discussed in a more manageable way. He added that it should not be seen as a way to split up the
17 issues that had been presented in WT/COMTD/SE/W/12, or those identified in previous proposals.
19.
In reference to the proposal WT/COMTD/SE/W/12, the representative of Barbados made an
intervention which is reproduced below in its entirety.
Intervention by Barbados:
"It is the combination and cumulation of all seventeen elements that enhance the
vulnerability of small economies and therefore it is the combination and cumulation
of responses that will reduce the vulnerability of those countries. There are numerous
cross-linkages between these problems.
The specific characteristics and problems raised in document WT/COMTD/SE/W/12
have systemic implications on the capacity of small economies to integrate fully into
the global trading system. Solutions to these problems should be therefore found in
the WTO.
Comments on the indicative list:
1)
Physical isolation, geographical dispersal and distance from the main
markets. Many are small island or landlocked developing countries.
This results in difficulties in the trade of perishable goods and commodities
due to lengthier transportation periods. This also makes the attraction of foreign
direct investment more difficult.
2)
Insignificant participation in the multilateral trading system and a minimal
share of total world trade.
Small economies account for a minimal percentage of world trade. This lack
of trade volume results in lack of economies of scale and limited attractiveness for
foreign direct investment.
In addition, the costs of implementing WTO agreements, both financially and
institutionally, are high.
WT/COMTD/SE/M/10
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3)
Small, fragmented and highly imperfect markets
The domestic markets of small economies, as a result of their size and
physical isolation as well as other economic factors, tend to be small, fragmented, and
highly imperfect in terms of, inter alia, the ability of domestic traders to adjust
quickly to available domestic and foreign demand and supply patterns, the domestic
and export-oriented vertical and horizontal reach of domestic-based supply chains,
etc. The difficulties faced by domestic producers to quickly adjust to foreign demand
and supply patterns are exacerbated by changing, unpredictable and costly standards
imposed by developed countries on products of export interest to small economies
(e.g. TBT, SPS measures).
4)
In general, very open economies
The economic openness of small economies enhance their inability to
encourage domestic production and make adjustments to foreign competition all the
more difficult.
To try to compensate for their low productivity and supply base, and in view
of their reliance on the importation of raw materials for their domestic industries and
agriculture, small economies have tended to adopt very open trade regimes, leading to
a great exposure of their domestic industries to foreign competition. The relative
openness of these economies increases their vulnerability to external shock and
competition from imported products.
5)
Domestic markets with imperfect and highly polarized structures: either a
multitude of small and micro enterprises, or cartels/monopolies.
Similar issues to those raised with regard to small, fragmented and highly
imperfect markets are relevant in this context.
6)
Minimal or no export diversification: concentration of exports on very few
products (especially commodities, traditional products and low value added
goods).
This limits export competitiveness to only a few export markets. This is both
cause and effect of dependence upon very few export markets, low competitiveness
and lack of adequate market access opportunities. These problems are compounded
by export price volatility.
7)
Low supply of export services
Most small economies do not have or have only limited capacity to export
services. Where some competitive advantage might exist, small economies often face
market access barriers and in some cases even the imposition of unilateral standards.
8)
Dependent upon very few export markets
Similar issues to those raised with regard to minimal or no export
diversification are relevant in this context.
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9)
Inadequate Infrastructure
In view of the resource constraints caused by size, small economies tend to
have low levels of the infrastructure and capacity necessary to build sustainable
economies capable of competing effectively on world markets. It is notable that this
limited infrastructural and institutional capacity is prevalent in both the public and
private sectors.
10)
High degree of vulnerability
Small economies suffer from a lack of resilience when confronted with
external (or internal) shocks and face acute difficulties in adjustment. The economic,
physical infrastructure and human impact of natural disasters, such as typhoons or
hurricanes, earthquakes, tsunamis, drought, floods, desertification, etc. are often
significantly higher and take much longer to recover from in small economies as
compared to other larger economies. Damage to small economies' domestic
production facilities, including those producing export goods, as a result of natural
disasters often result in drastically reduced levels of exportation and hence export
competitiveness on the part of small economies. The trade-related impact of natural
disasters was highlighted recently in the WTO Director-General’s response to the
Asian tsunami.
11)
Low competitiveness
This is exacerbated by a lack of natural resources and the consequent need to
import inputs for production, which in turn renders exports very costly.
12)
Low levels of productivity and insufficient supply
The manufacturing and agricultural production bases of small economies tend
to be limited and their internal supply of agricultural or manufacturing inputs also
tends to be limited, leading to a high reliance on the importation of raw materials.
There is a clear link in this regard to the problems of low competitiveness and
reduced attractiveness to foreign direct investment.
13)
Economic rigidity with high adjustment costs
The domestic economic structures of small economies make it difficult for
them to immediately and flexibly adjust to changes in external trading and economic
conditions. Adjustment costs tend to be high and with add-on negative impacts on
other sectors of the domestic economy. These adjustment costs are exacerbated by
the lack of financial and institutional capacity. The relative higher adjustment costs
faced by small economies require relatively higher financial and institutional
capacities and also put these economies at disadvantage when negotiating new
disciplines and commitments in the WTO.
14)
Unable to sustain diversified productions
Small economies are unable to diversify, or have great difficulties doing so,
because of their low productivity and supply base, smallness and lack of
attractiveness for foreign direct investment. The lack of economies of scale, which is
inherent to a small economy, is also a relevant factor.
WT/COMTD/SE/M/10
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15)
Considerable difficulties to attract foreign investment
The small size of the domestic market of small economies, combined with
their geographical isolation and dispersal often fails to attract durable and sustainable
foreign investment, especially in manufacturing and other productive sectors of the
economy. Potential investors equate small economic size with small returns on their
investment.
16)
Lack of adequate market access opportunities to place their few export
products
Many countries maintain market access limitations that effectively restrict
small economies to exporting only a few goods which are usually lower value-added.
The few sectors or products in which small economies have developed a higher
relative level of competitiveness are traditionally highly protected in developed
countries (e.g. textiles and clothing and some agricultural products). Onerous rules of
origin also pose problems which compound the lack of adequate market access
opportunities for small economies to place their few export products.
17)
High transport and transit costs
These exacerbate the problems associated with physical isolation,
geographical dispersal and distance from main markets, and further decrease the
export competitiveness of small economies."
20.
The Chairman proposed that the meeting switch to informal mode in order to continue the
discussion of the "basket" of characteristics and problems.
21.
The meeting moved to informal mode and focused on the first four characteristics and
problems. The meeting addressed the remaining 13 items on the indicative list at its informal session
on 12 April 2005.
22.
In resuming the meeting in formal mode, the Chairman stressed the importance of the
discussions that had taken place. He also stressed more generally the importance of the Work
Programme on Small Economies for those Members with small and vulnerable economies.
D.
OTHER BUSINESS
23.
The Chairman said that he would organize a number of informal meetings in the coming
weeks. His intention was to complete the ongoing discussion and then move on to the next phase of
the work, which was to look for solutions. He said another formal session would most likely be held
in the latter half of May. He stressed the importance of moving on quickly to the solutions phase so
that the Committee in Dedicated Session would be in a position to deliver concrete results in time for
the Ministerial Conference in December 2005, which would be held in Hong Kong, China.
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