RESTRICTED
WORLD TRADE
WT/COMTD/SE/M/3
21 January 2003
ORGANIZATION
(03-0308)
Committee on Trade and Development
Third Dedicated Session
NOTE ON THE MEETING OF 4 NOVEMBER 2002
Chairman: H.E. Mr. Toufiq Ali (Bangladesh)
Subjects discussed:
A.
ADOPTION OF THE DRAFT AGENDA ............................................................................................ 1
B.
CONTINUED DISCUSSION OF PROPOSALS ................................................................................... 1
-
Submission by a group of small economies in response to a questionnaire from the
United States regarding WT/COMTD/SE/W/3 (WT/COMTD/SE/W/7) ................................... 1
-
Further consideration of submissions (WT/COMTD/SE/W/2 and
WT/COMTD/SE/W/3) ................................................................................................................ 1
C.
CONSIDERATION OF SECRETARIAT NOTES (WT/COMTD/SE/W/4,
WT/COMTD/SE/W/5 AND WT/COMTD/SE/W/6).................................................................... 6
D.
OTHER BUSINESS ...................................................................................................................... 18
A.
ADOPTION OF THE DRAFT AGENDA
1.
The Chairman extended a special welcome to the delegates from Members and Observers that
did not have resident missions in Geneva who were participants in the "Geneva Week". The date of
the meeting had been specifically chosen to coincide with the "Geneva Week". He welcomed the
Director-General, Dr. Supachai, to the meeting and said that his presence signalled his commitment to
the cause of small economies.
2.
He said that the draft agenda for
Airgram WTO/AIR/1909/Rev.1 of 1 November 2002.
the
meeting
was
contained
in
3.
The agenda was adopted.
B.
CONTINUED DISCUSSION OF PROPOSALS

Submission by a group of small economies in response to a questionnaire from the
United States regarding WT/COMTD/SE/W/3 (WT/COMTD/SE/W/7)

Further consideration of submissions (WT/COMTD/SE/W/2 and WT/COMTD/SE/W/3)
WT/COMTD/SE/M/3
Page 2
4.
The Chairman said that the Committee had three submissions before it. Two of them had
been before Members at the last Dedicated Session, but delegations had indicated that they required
more time to study them.
The inclusion of documents WT/COMTD/SE/W/2 and
WT/COMTD/SE/W/3 on the agenda gave Members another opportunity to comment them. He
suggested that the Committee began by considering the new submission (WT/COMTD/SE/W/7) made
by a group of small economies which contained responses to a questionnaire from the delegation of
the United States regarding document WT/COMTD/SE/W/3. That document (WT/COMTD/SE/W/3)
was the submission by a group of small economies containing proposals to deal with some of the
concerns of small economies. Although the new document had been submitted by the delegation of
Mauritius, he believed that it was supported by about seven delegations.
5.
The representative of Barbados said that the delegation of the United States had posed a
number of questions with respect to the paper (WT/COMTD/SE/W/3) by the group of small
economies at the Second Dedicated Session of the CTD. The group of small economies had provided
responses to those questions and circulated them to Members (WT/COMTD/SE/W/7). He hoped that
the responses provided were satisfactory. However, in the event that they were not, the group of
small economies would be willing to provide further clarifications and responses at a subsequent
meeting to any additional questions that Members might pose. He would assume that Members were
happy with the responses unless further questions were raised. He thanked the delegation of the
United States for having posed the questions and said that he would appreciate if Members raised any
additional concerns they might have as that would provide an opportunity to engage in a dialogue.
That would also make the group of small economies aware of Members' thoughts and enable them to
respond to those thoughts.
6.
The representative of Mauritius welcomed delegates from missions not based in Geneva to
the meeting and said that he was pleased that Director-General Dr. Supachai was present at the
meeting marking his commitment to the issue of small economies and their participation in the
multilateral trading system.
7.
The representative of the Maldives sought additional information with respect to question 13
of document WT/COMTD/SE/W/7. He asked why a transition period for graduating least-developed
countries (LDCs) was warranted within the WTO system. Benchmarks for a phased adoption of
normal WTO obligations could be envisaged as part of smooth transition modalities for Members
graduating from LDC status. Such benchmarks should be commensurate with the competitive and
institutional constraints faced by the graduating Member. As all potential graduation cases were cases
of small and vulnerable economies, determining smooth transition modalities should be done in light
of the peculiar circumstances surrounding the graduation of such States, wherein the economy, though
recording an improved performance, remained structurally handicapped and highly dependent on
preferential market access. That also applied to the Maldives which was presently the only Member
state near graduation, and where the viability of the fisheries sector acutely depended on the LDC
treatment in the market of the European Communities.
8.
The Chairman said that the issue of graduation from LDC status was dealt with by the
Committee on Development Policy under the Economic and Social Council of the United Nations
(ECOSOC). He asked if the representative of the Maldives was of the view that there should be a
separate graduation for LDC status in the WTO.
9.
The representative of the Maldives said that his question was whether the initial proposal by
the small economies' group envisaged a transition for LDCs that included benchmarks for a phased
adoption of full WTO obligations. He said that the Maldives faced imminent graduation from the list
of LDCs. If the Maldives were to graduate from LDC status, for example in April 2003, it would
immediately lose all its current LDC special and differential treatment (S&D) rights with effect from
that date. The reply by the small economies' group to question 13 read "Yes commensurate with their
WT/COMTD/SE/M/3
Page 3
situation and their level of development." What that meant was that a transition period of a certain
number of years should be provided within which the obligations of the LDC who had graduated
would be phased in.
10.
The representative of the European Communities said that he had two observations to make.
The first was with respect to the question of graduation that had been raised by the representative of
the Maldives. He said that that issue went beyond the work on small economies in the dedicated
sessions of the CTD. It had also been a major issue in the discussions on S&D. He said that without
providing a direct answer to the question raised, it was clear that Members needed to consider the
question of graduation, the flexibility which presently existed in the multilateral trading system, and
the type of flexibility that Members wished to see in the future. The issue of graduation out of LDC
status was not an issue for small and vulnerable economies only. His delegation wished to consider
all those issues more closely given the diversity of the Membership and the great number of issues
which the Uruguay Round agreements covered. He said that that might not be a satisfactory response
to the question posed by the representative of the Maldives. However, it was worth pointing out that
there was a real issue at stake. The other consideration that he wished to make related to the
submission by a group of small economies (WT/COMTD/SE/W/7) and the questions posed by the
delegation of the United States, in particular regarding the question of the involvement of regional
entities. Document WT/COMTD/SE/W/3 contained a number references to the question of whether
certain matters could not be better dealt with on a regional basis, by for example designating a
regional body as the competent authority with respect to the agreements relating to antidumping,
subsidies, technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS), and
whether more could be done to assist small economies to pool resources. His delegation wished to
see more work carried out on that issue, as it might be a way to improve the participation of small
economies in the multilateral trading system. The question of reciprocity was raised with respect to
Article XXIV. That was an issue which would be addressed in the rules negotiations. His delegation
supported work on those issues and on any evolution of a regional approach such as that of the
European Communities in the context of the Cotonou agreements. Members were aware that it was
difficult to build national capacity on every WTO issue to meet the standards and compliance
requirements which WTO Members faced. His delegation would be pleased to do constructive work
on regional approaches if such approaches, could prove helpful in that regard.
11.
The representative of India said that, although Members had had a brief discussion on
document WT/COMTD/SE/W/3, his delegation had not been able to comment on it. That document
had been useful in furthering the debate on small economies in the dedicated sessions of the
Committee on Trade and Development (CTD) pursuant to the mandate contained in paragraph 35 of
the Doha Ministerial Declaration. In paragraph 35, Members agreed to examine issues relating to the
trade of small economies with the objective of framing responses to the trade-related issues identified
for the fuller integration of small, vulnerable economies into the multilateral trading system without
creating another sub-category of WTO Members. He said that his delegation would study the
Secretariat documents (WT/COMTD/SE/W/4, WT/COMTD/SE/W/5 and WT/COMTD/SE/W/6) and
revert to them at a subsequent Dedicated Session of the CTD. All the background documents, the
factual analyses by the Secretariat and the submissions made by various Members had helped
Members understand the issues at hand and in furthering a constructive debate on the issue of small
economies. He said that while his delegation was still examining the proposals contained in
document WT/COMTD/SE/W/3, he wished to make some preliminary comments and seek
clarification on some of the proposals contained therein. With respect to the proposal on
Article 3:1(a) of the Agreement on Subsidies and Countervailing Measures, he asked whether the
proposal implied that small economies might be permitted to grant export subsidies which could be
countervailed or whether the purpose was to make export subsidies non actionable. His delegation
also requested more details on the proposal to designate regional bodies as competent authorities for
issues relating to anti-dumping or countervailing duties. His delegation had not had time to examine
the responses contained in document WT/COMTD/SE/W/7. His delegation agreed with the rationale
WT/COMTD/SE/M/3
Page 4
behind the proposals contained in WT/COMTD/SE/W/3 on the provisions of the Understanding on
Rules and Procedures Governing the Settlement of Disputes, including the clarification sought of the
term "substantial trade interest" so as to prevent arbitrary application of the provisions of Article 4;
greater access to consultations and panel and Appellate Body proceedings for third parties to the
dispute; and the right for compensation apart from suspension of commitments.
12.
The representative of Cuba said that the Secretariat documents were important tools for
Members deliberations. She requested that her Government be included as a co-sponsor of
document WT/COMTD/SE/W/3. She said that that document provided an initial response to some of
the issues raised in the Dedicated Sessions of the CTD. Her delegation would be happy to clarify any
doubts that existed regarding the problems small economies experienced in participating in
international trade. She drew Members' attention to document WT/COMTD/SE/W/7 and said that a
group of delegations had worked together to provide responses to the questions that had been raised
by the delegation of the United States.
13.
The representative of the United States said that it was useful that the responses to his
delegation's questions had been circulated, as they provided a useful basis for further discussions in
the Dedicated Session. The views expressed by various Members were helpful and could serve as a
basis for a constructive dialogue. He said that he would make some preliminary comments and pose
some questions with respect to the responses that his delegation had been able to examine. With
respect to the proposal which addressed anti-dumping and countervailing duties, he said that his
Government was open to the idea of regional authorities on trade remedies. His Government had
worked on a special procedure for small exporters to request a multi-year extension of their subsidy
programmes. The procedure had been discussed in the Committee on Subsidies and Countervailing
Measures and had been adopted at the Doha Ministerial Conference. The Committee on Subsidies
and Countervailing Measures was in the process of evaluating requests under that special procedure.
He said that Members could be positive about a regional authority dealing with anti-dumping, and
presumably countervailing duty cases on behalf of a requesting member. Technical assistance
resources might be devoted to the establishment of such authorities. On the issue of safeguards, he
said that it was important for Members to bear in mind that when developing countries applied trade
remedies, the exporters affected would most likely be from other developing countries, including
LDCs and small economies. If developing countries were permitted to use those remedies with lower
procedural and substantive standards, other developing countries would be the most adversely
affected. Given the proposed lower transparency in due process, and lower substantive standards,
there would be little that the affected developing countries could do to protect themselves against
abusive measures by other developing countries. With respect to section III of WT/COMTD/SE/W/7,
which addressed the Agreement on TBT and the Agreement on the Application of SPS, he said that
compliance with standards was a function of the market. Suppliers might choose, or not choose to
fulfil what purchasers and/or consumers demanded. That was a cost of doing business and exporting
to foreign markets. It was not a requirement of the Agreement on TBT. A supplier that did not
comply with the desired standards was unlikely to find a market for his/her products. The benefit of
the Agreement on TBT was that it aimed to ensure that standards were fair and not tools for trade
protectionism. Similarly, a significant benefit of that agreement was the prevention of unnecessary
obstacles created by technical regulations and mandatory conformity assessment procedures. The
provisions of the agreement aimed to ensure that the restrictions faced by suppliers were necessary to
ensure the attainment of legitimate policy objectives, such as the protection of human health, safety,
or the environment. He said it would be useful to hear from Members of specific requests for
technical assistance to comply with a specific technical regulation as foreseen under Article 11 of the
Agreement on TBT which not been fulfilled. He asked whether that had happened, whether there had
been cases where assistance provided had resolved problems and to whom such assistance had been
provided. He asked whether it had been provided to a government agency so that it in turn could
inform suppliers in its country, or whether it had been provided directly to the suppliers.
WT/COMTD/SE/M/3
Page 5
14.
He went on to say that he wished to clarify the discussion on Annex 3 of the Agreement on
TBT, which had been mentioned by the group of small economies in their response to his delegation's
sixth question. Annex 3 obliged standardizing bodies to provide 60 days for comments on draft
standards. It was Articles 2 and 5 of the Agreement on TBT which obliged Members to provide a
reasonable period of time for interested parties to make comments on proposed regulations and to take
those comments into account before a final regulation was adopted. The Committee on TBT
recommended 60 or 90 days if possible as a reasonable period of time for such regulations. With
respect to notifications, he said that his Government believed that, given the evolution of technology,
Members needed to find ways for interested parties in small economies to electronically access the
notifications which were publicly available on the Internet. His delegation agreed that reliance on the
dissemination of hard copies from Geneva to Members' capitals was not practical or timely. Some
Members might possess databases of the notifications that could be accessed by small economies, and
which were more user-friendly than having to search through the entire database of TBT notifications.
Alternatively, there might have been ways for small economies to cooperate regionally to share
information in identifying notifications of interest and in developing responses to them. For that
particular work, it was not necessary to have a resident mission in Geneva, nor to participate directly
in the meetings of the Committee on TBT. Finally, on regional cooperation he said that such
cooperation did not necessarily require the establishment of a new regional body which might
introduce bureaucratic inefficiencies. It could be carried out through electronic networks, telephone
contacts, and/or meetings between officials. Questions regarding participation in international
standard setting bodies were complex and needed to be viewed from several perspectives. It was not
only a question of having the money to attend a meeting. It should be considered from the perspective
of whether the work of a particular body was relevant for the needs of the economy; whether there
were mechanisms for participation in the activity other than through direct physical presence;
whether there were resources in the private sector which could fulfil the need, and whether the body
itself possessed resources to assist small economies. The idea of having national capacities to make
use of TBT rights and implement TBT obligations augmented by a regional body was an interesting
one that should be further explored. He concluded by saying that he hoped to continue discuss the
proposals, as well as the responses and the question that had been raised by the representative of the
Maldives.
15.
The representative of Chile said that as long as concrete proposals were tabled, Members
would be able to move towards a result. She said that her delegation had three questions relating to
document WT/COMTD/SE/W/3. The first question related to trade remedies. She said that the
proposals had been considered from the user point of view and not form the point of view of those
affected by such trade remedies. She asked whether the proposed flexibility was only going to benefit
the users and not those members that would be affected by the trade remedies. Her second question
referred to the issue of regional bodies which was mentioned in the proposals in relation to trade
remedies, SPS and TBT. She asked whether the idea was that specific regional bodies be set up for
each set of issues or whether they would be general regional bodies. It was not clear what was being
suggested in that respect. The third question related to the issue of symmetry in the context of
bilateral and regional trade agreements. She said that a certain asymmetry always was negotiated into
bilateral and regional trade agreements. Her delegation felt that part of that reality was reflected in
Article XXIV of the GATT and in the Enabling Clause. It was therefore not clear to her delegation
what the proposal sought to achieve.
16.
The representative of Paraguay said that the group of small economies that had sponsored
document WT/COMTD/SE/W/7 felt that the questions that had been posed by the delegation of the
United States were relevant and interesting. His delegation was therefore one of the delegations that
had provided responses to the questions. With respect to TBT, he said that having participated in the
meetings of the Committee on TBT, his delegation had realised the extent to which the lack of
capacity of small economy delegations prevented them from examining the issues and contributing to
the debate on technical regulations. His delegation had stated, along with other delegations in the
WT/COMTD/SE/M/3
Page 6
meetings of the Committee on TBT, that most notifying countries, of which many were developed and
some developing countries, did not abide by the procedures established according to the Agreement
on TBT. That was a major problem which had to be resolved. It was important to not only grant
S&D to small economies, but to also ensure that Members committed themselves to apply the TBT
Agreement properly. Deadlines provided for in the TBT Agreement were at times not respected.
Neither were the types of measures that were to be notified. Measures that were already in force were
in many cases included in the notifications, and that was particularly harmful for developing countries
and even more so for small economies. Due to the effects of economies of scale and the fact that
major markets for small economies' exports were in developed countries, small economies had to
totally transform their industries in order to comply with technical regulations notified essentially by
developed and some developing country Members. Turning to the issue of dispute settlement, he said
that his delegation had committed itself to table a proposal relating to dispute settlement. However,
he was not certain whether that proposal would be submitted in the framework of the debate on the
amendment of the Dispute Settlement Understanding (DSU) or whether it would be submitted in
relation to the discussions on S&D for small economies. His delegation was particularly concerned
about the plight in which landlocked countries found themselves. If a landlocked country such as
Paraguay was blocked by its neighbours from transporting its goods through their territories, it could
bring the issue to the Dispute Settlement Body (DSB). However, his Government would then have to
wait for at least three months before any conclusion could be reached. If exports from Paraguay were
blocked for three months, then his country's economy would be brought to a standstill. Those types of
practises needed to be avoided amongst the Members of the WTO. That was why his delegation was
considering submitting a proposal to that effect.
17.
The representative of Barbados said that his delegation had taken note of the positive
comments and additional questions posed and would provide the necessary responses after
appropriate consultations with the group of small economies.
18.
The Chairman suggested that document WT/COMTD/SE/W/7 be kept on the agenda for the
next meeting as several delegations said that they had not had sufficient time to consider the
document and wished to examine it further. He also suggested that the Committee take note of the
documents WT/COMTD/SE/W/2 and WT/COMTD/SE/W/3 and the comments made.
19.
It was so agreed.
C.
CONSIDERATION OF SECRETARIAT NOTES (WT/COMTD/SE/W/4, WT/COMTD/SE/W/5 AND
WT/COMTD/SE/W/6)
20.
The Chairman said that under agenda item C Members would be considering one old and two
new
notes
by
the
Secretariat
(WT/COMTD/SE/W/4,
WT/COMTD/SE/W/5
and
WT/COMTD/SE/W/6). He suggested that Members dealt with the three documents at the same time.
He said that document WT/COMTD/SE/W/4, containing an overview of how the issue of smallness
had been dealt with in economic literature, had been before Members for some time. That document
included a discussion of the different measures of smallness that has been used and an examination of
how the issue of vulnerability has been approached in economic literature. Although Members had
never discussed it in a formal meeting, it had been referred to in informal consultations. It was on the
agenda in case any Member wished to refer to it again. Document WT/COMTD/SE/W/5 entitled
"Trade and Economic Performance – The Role of Economic Size?" looked deeper into some of the
issues discussed in document WT/COMTD/SE/W/4. It also included issues that Members had
indicated as being of interest to small economies at previous meetings of the CTD. In particular, the
document discussed the share in global trade as a potential measure for economic size. After a
discussion of different measures of economic size, the document analysed a number of questions.
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Page 7
First, it analysed how economies of scale and transport costs affects small economies' competitiveness
in global markets; second, the extent to which economic size affects economies' openness to trade
and the diversification of their export structure was considered; third, it analysed what data on
volatility in export earnings and volatility in gross domestic product (GDP) showed about economies'
vulnerability to external shocks; and fourth, it looked at how economic size relates to measures of
economic performance, in particular GDP per capita and GDP per capita growth. For each of those
questions the Secretariat had collected relevant data for the WTO Membership. That data had been
analysed and the result was presented in the document. Wherever possible, the findings of that data
analysis had been compared with the results of more sophisticated econometric analyses found in
recent literature in order to control for the robustness of results. Document WT/COMTD/SE/W/6
attempted to identify provisions in the Uruguay Round Agreements and the documents emerging from
WTO Ministerial Conferences which might be of particular relevance to small economies, in the
broadest sense. However, most S&D provisions of importance to developing countries in general,
were also of importance to small economies, and the special provisions for LDCs were important to
small LDC economies. Nevertheless, provisions of interest to developing countries and LDCs in
general had not been included in the document as the Secretariat had already circulated various lists of
S&D provisions. The Secretariat had indicated that the exercise to compile provisions relating to
small economies had been a difficult one, and did therefore not claim that the list was comprehensive,
nor that it contained all provisions of practical importance to small economies. He emphasized that,
apart from those references, small economy Members also had recourse to the general S&D
provisions applicable to developing country Members. He said that Members should view the
document as an input to facilitate discussions. He welcomed delegations views on the three
documents and on the overall work programme on small economies.
21.
The representative of Barbados said that he would essentially focus on
documents WT/COMTD/SE/W/5
and
WT/COMTD/SE/W/6.
Although
document
WT/COMTD/SE/W/4 was before Members for the first time in a formal meeting, he had had the
chance to comment on it in an informal Dedicated Session of the CTD. He recalled that at that
meeting, he had pointed out that it was a myth to suggest that all that small countries had to do was to
follow the example of Luxembourg, which was a small country that had economically done well.
Luxembourg had experienced an economic "take-off" period in 1850 when it had struck large deposits
of iron-ore. It had subsequently been able to develop a substantial steel industry and build other
forms of industrialisation around it. Luxembourg's tourism benefited from intra-European travel and
from the fact that the European Union (EU) held a number of meetings every year in Luxembourg.
The structure of tourism in Barbados was different. He had pointed out at the informal meeting that,
to travel from St Lucia to Barbados one had to travel by aeroplane because the limited tourist flows
did not make it worthwhile for a boat to travel. That meant that if people were afraid to travel by
plane due to the 11 September 2001 attacks, the tourism industry in Barbados would be affected. He
had mentioned that example because in one of the tables in document WT/COMTD/SE/W/4
Luxembourg was considered to be a small economy on the sole basis of the size of its population. He
did not subscribe to the view that only population size should be considered when determining what a
small economy was. A number of other factors had to be considered. He recalled that the group of
small economies in its submission (WT/COMTD/SE/W/1) had identified a number of characteristics
of small economies and had tried to show that those characteristics brought a number of inherent
problems. Population size was only one of the many characteristics. He said that he was pleased with
document
WT/COMTD/SE/W/5.
That
document
was
an
improvement
over
document WT/COMTD/SE/W/4 and it confirmed a number of the issues that the group of small
economies had raised from the beginning of the debate. He said that when comparing Barbados with
countries like Iceland and Luxembourg, which were held up as small economies that had
economically done well, one had to consider that the size of Barbados was 160 square miles,
including its inhabitable portions. Document WT/COMTD/SE/W/5 confirmed that the landmass, in
addition to the population size, helped to determine the size of an economy because it dealt with the
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Page 8
question of endowment. There was a large distinction between Luxembourg and Barbados in that
respect as Barbados lacked resources.
22.
He continued by saying that particular attention had to be paid to the fact mentioned later in
the document, that one of the essential features of small economies was the lack of diversification.
That lack was not due to any failure to pursue the appropriate economic policies. It was simply
because the natural resources which would enable a small country like Barbados to become involved
in industrialisation were not present. Everything had to be imported and questions such as the costs of
those imports would arise. Population size therefore had to be considered along with factors such as
landmass and the scarcity of resources when determining the smallness of an economy.
Document WT/COMTD/SE/W/5 referred to the issue of transportation costs, which was an essential
issue that the group of small economies had raised from the outset. The point was that a number of
small economies experienced unusually high transport costs due to their remoteness. The document
mentioned that landlocked countries experienced higher transport costs than island states and that
island states experienced higher transport costs than other economies. It also concluded that the high
transportation costs were related to remoteness and not size. Those were all facts, but what the
document did not mention was that the high transport costs also related to small volumes traded. He
gave an example of a study that had been recently done on Barbados as a Small Island Developing
State (SIDS). That study, which was to be discussed at an UNCTAD meeting later that week, showed
that because of the small export volumes produced in the agricultural sector, they could not be
transported in a dedicated freight carrier. Space on commercial carriers, which was extremely
expensive compared to dedicated freight carriers had to be purchased. He said that no owner of a
dedicated carrier would deal with small volumes of exports. Both remoteness and small volumes
mattered. The WTO Secretariat document mentioned that small economies were essentially open
economies, a point that his delegation had made since the beginning of the discussions. Apart from
any historical reasons, small economies had to rely largely on trade due to their smallness. However,
as exports in a few areas were greater than the amount of imports for small economies, they had to
ensure that there was always a friendly external environment that facilitated their development.
23.
He went on to say that the document (WT/COMTD/SE/W/5) mentioned that openness was
probably not a negative aspect for small economies because it allowed them to make up for their small
domestic markets. That was true in theory. In practice however, it meant that there had to be
effective market access. Small economies could not export without effective market access. They
could import but, depending on what the prices were, there would be various implications. Apart
from any barriers that were created, small economies also had to face the issue of transport costs and
the absence of economies of scale. The document stated that there was no evidence to suggest that
small economies were necessarily any poorer than large economies and that small economies had not
experienced economic growth just as much as large economies. He asked whether the growth path of
Barbados's economy would be as stable as it was if all the preferential arrangements, including in
manufacturing and agriculture that his Government depended on, were excluded. The analyses that
had been carried out had been based on the present situation which included preferential
arrangements. There would be a different growth path if the preferential arrangements were excluded
and it would probably not be as stable. That was related to the issue raised in the document of the
volatility in export earnings. The document stated that there was no evidence to support that smaller
economies experienced higher volatility in their export earnings. His experience was that that was not
the case. The statement about no higher volatility in export earnings had to be verified after removing
the preferences that were in place and were important to small economies. He said that he felt that the
document would help Members to move forward in their discussions because they had the opportunity
to consider some positive outcomes that had been substantiated by the research carried out by the
Secretariat. With respect to the question of GDP he recalled that he had made the point that there
tended to be a focus on using per capita income as a measure of smallness. Many people had said to
him, including some in the Secretariat, that Barbados had a high per capita income and that it
therefore did not have any problem. The total GDP for Barbados was only US$ two billion and if that
WT/COMTD/SE/M/3
Page 9
was large then he was not certain about what was considered small. The paper rightly concluded that
the total GDP was a measure of the demand in the economy, unlike the view expressed by others that
per capita GDP measured that demand. US$ two billion was less than the annual turnover of some
small companies in certain developed countries. When that was compared to the total GDP of a
country such as Luxembourg, there was a difference. He said that the Secretariat document had
reinforced a number of points that the group of small economies had made, for instance with respect
to openness, transport costs, GDP, volatility and lack of diversification. He concluded by saying that
if Members studied the document carefully, they would discover that the issues that had been raised
by the small economies from the outset were correct. It was necessary for Members to face up to the
issue and give small economies the opportunity to make progress. When considering the question of
openness and its importance to small economies, the paper rightly stated that, due to the heavy
dependence on the export of a few products, a change in price of or demand for one or more of those
products would have serious repercussions for the entire economy. That was due to the absence of a
diversified economic structure. He reiterated that the absence of that diversification was not the result
of a failure to pursue the appropriate economic policies but was due to the paucity of resources
required. Therefore, the document was correct in stating that it was difficult and costly to make the
appropriate adjustment when small economies suffered shocks.
24.
The representative of Mauritius said that document WT/COMTD/SE/W/5 was an
improvement over WT/COMTD/SE/W/4 as had been said by the representative of Barbados. It
vindicated what had been advanced by the small economies for a number of years. He said that he
would add a few elements to what had been stated in document WT/COMTD/SE/W/5. He said that
small economies had taken a considerable number of measures and had undertaken policies to open
their economies which, admittedly, had helped them take advantage of the opportunities as they arose
to develop their industries beyond the limited local market. Those policies had been accompanied by
internal reforms and the sound management of macroeconomic factors. It was often said that
electronic commerce (e-commerce) and telecommunications could solve the problem of remoteness in
small economies. That was more easily said than done. It was easy to understand that it was difficult
to achieve the benefits of e-commerce if one considered that there was a need for significant amounts
of investment and training to be able to use information technology and telecommunications systems.
However, e-commerce would still not resolve the transport problems of certain products such as
sugar. Unfortunately, investment preferences were clearly biased towards larger economies which
offered more attractive conditions, for the mere fact that they possessed larger domestic markets. The
efforts that small economies made in terms of internal reforms and taking bold policy measures
needed to be complemented by international endeavours. For example, with respect to exports, there
was a need for enhanced, secure, and predictable market access. Many valuable points had been made
in document WT/COMTD/SE/W/5, which would take the work on small economies forward. He
wished, however, to underscore the reference to the volatility of export revenues of small economies
that seemed to have been brought out of context. He raised that point because it was directly related
to the issue of secure and predictable market access for small economy exports. A statement in
document WT/COMTD/SE/W/5 read that "The argument that smaller economies experience higher
volatility in their export earnings is not confirmed by the relevant data for the WTO Membership.
These findings are in line with those in recent economic literature." He said that his delegation did
not agree with that conclusion. He urged that further work be done on that issue because his
delegation believed that those conclusions had been reached out of context. His delegation was
prepared to bring further elements on the table to restate the facts and figures. Other work carried out
on that issue had resulted in different conclusions from those in the Secretariat document. Those
other conclusions vindicated the thinking that the volatility of export earnings in small economies was
appeased only because of the serious contribution of preferences. He drew Members attention to
work done by Walter Kennes in his book entitled "Small Developing Countries and Global Markets:
Competing in the Big League" published by Macmillan. On page 182, that book stated that if the
preferences were to be removed, the small economies would not only witness high volatility of export
earnings but would also witness dramatic declines in their rates of growth which would go down far
WT/COMTD/SE/M/3
Page 10
below the critical level required for those economies to achieve sustainable growth and prosperity.
His delegation was also concerned with the other conclusion in document WT/COMTD/SE/W/5
which stated that "openness to trade, while leading to higher volatility in small economies, also
stimulates
economic
activity
and
growth".
When
discussing
the
initial
document WT/COMTD/SE/W/4, his delegation had stated that out of context quotations and
references could lead to misleading conclusions and interpretations. His delegation was pleased that
document WT/COMTD/SE/W/5 went a long way in rectifying some of the earlier misconceptions.
He believed that more effort in that direction would be positive for the whole process to which
Members had dedicated themselves.
25.
The Chairman pointed out that document WT/COMTD/SE/W/4 was a review of the literature
and document WT/COMTD/SE/W/5 was an economic analysis of some of the issues raised in the
literature review. Inevitably, as with any kind of economic analysis, one could not prejudge what the
findings would be. He said that he had taken note of the points made and the book that the
representative of Mauritius had referred to. He suggested that the Secretariat look at it if it had not
already done so.
26.
The representative of Sri Lanka said that she would comment on both documents
(WT/COMTD/SE/W/5 and WT/COMTD/SE/W/6) at the same time. Her delegation realised the
difficulty for the Secretariat to undertake the studies, as there had not been a clear definition of
smallness. The Secretariat had therefore used population size as a general criterion in order to
organise the findings in the tables. Her delegation believed that population size had merely been used
as a method of presenting the findings and did not have any implications for a general categorisation.
The executive summary contained solid arguments, particularly in support of what the small
economies had been stating in the CTD for a number of years. The Secretariat document provided
some positive findings, particularly that an economy’s size was likely to affect its possibilities to be a
successful exporter of products subject to economies of scale. That was something that highlighted
the concerns that small economies had presented. With respect to transport costs she said that her
delegation recognised that smallness was not directly correlated to transport costs but that it rather
was the geographical location which determined transport costs. When considering the characteristics
of small economies and the table relating to transport cost, she said that the latter showed that many
small economies experienced problems related to high transport cost. Small economies were
categorised as countries that experienced high transport costs, and transport costs were reflected in
table 3. That transport costs had a significant effect on an economy's potential to export were
supported by the conclusions in the document. Findings in the Secretariat document also revealed
that smallness was likely to limit an economy’s possibilities to diversify local production. Table 6
demonstrated that most of the small economies only had one or two sectors which generated
substantial portions of their export revenue and that most small economies relied heavily on the
service sector. She gave the example of her country's heavy dependence on the two sectors of apparel
and tea which she said demonstrated small economies' limited export sector. The document also
analysed GDP volatility with respect to size and concluded that the volatility of GDP decreased with
economic size. That was an important finding. Openness to trade reflected small economies'
situation in world trade. Her delegation believed that the Secretariat document would help
delegations bring their deliberations forward.
27.
She continued by saying that she believed that other criteria for smallness would shed light on
the discussion and requested the Secretariat to consider other aspects. First, her delegation recognised
that economic size and foreign debt were relevant. The Geneva Ministerial Declaration
(WT/MIN(98)/DEC/1) of 25 May 1998 made reference to small economies. Paragraph 6 of that
Declaration read: "We remain deeply concerned over the marginalization of least-developed
countries and certain small economies, and recognize the urgent need to address this issue which has
been compounded by the chronic foreign debt problem facing many of them." That justified that
small economies experienced those problems. The other criterion was economic size and foreign
WT/COMTD/SE/M/3
Page 11
direct investment (FDI) flows. Her Government had undertaken a lot of national analysis which could
provide more direction to the Committee in identifying the characteristics of small economies. She
said that the Secretariat had identified the export sectors but that it had not adequately treated the
agricultural performance of those countries. She believed that most of the small economies, because
of their size and the linked lack of economies of scale was not very competitive in agriculture
production. What was produced in those economies was sometimes not adequate to feed their
populations. There was a trend towards small economies becoming net food importing countries and
there was therefore a link between agricultural performance and size. That was another area she
wished the Secretariat to study. She said that the Secretariat had considered openness from the point
of view of trade. She requested the Secretariat to extend the existing study and to analyse the effect of
trade liberalisation as a whole on small economies. She said that document WT/COMTD/SE/W/6
gave information as to some provisions available to small economy Members and which concentrated
on the size of their economies. In that connection, she flagged the decision reached at the Doha
Ministerial Conference on Article 27.4 of the Agreement on Subsidies and Countervailing Measures.
She said that some of those extensions were under consideration and she thanked Members for
agreeing to such a mechanism. That demonstrated that Ministers had recognised that the solution to
the trade concerns of small economies lay within the WTO.
28.
The Chairman said that the suggestion made by the representative of Sri Lanka regarding the
impact at trade liberalisation on small economies was a point that had also been raised by the
representative of Barbados in connection with the possible impact if certain concessions were not
available. It was a difficult task but the Committee needed to look into some of those issues and to
consider possible action.
29.
The representative of Grenada said that he wished to focus on the point made under the
heading "Small economies and trade: high reliance on imports and lack of export diversification" in
the second bullet point, on page 3 of document WT/COMTD/SE/W/5. Many small economies were
surprised by the conclusion that the argument that smaller economies experience higher volatility in
their export earnings could not be confirmed by the data for the WTO Membership. He said that of
all the otherwise useful conclusions in the document, that one drew particular attention. He believed
that it was carried over from the model used in generating the analysis in the paper. He said that
having done some work in the area himself, it seemed that the process of averaging out a number of
the variations that occurred within groups would cast serious doubt as to whether in fact it was
possible to accurately pick up volatility in export earnings across the various groupings. There were
ways of examining that which would call for an inclusion of the various standard deviations across
countries within a group and essentially allow the model to determine what would result in terms of
the relationship between volatility in export earnings and the other variables mentioned. He was not
surprised that the models used in generating the results did not accurately pick up what was happening
in terms of volatility. Hence, he was cautious as to the findings that had been made in the document.
That should be noted as a caveat of the model and Members should move on from there. There were
a number of other factors that related to openness which were positive, but one factor that he wished
to see added in any future iteration of the work was some measure of transaction costs. He
understood the narrow mandate before Members in terms of considering the relationship between size
and openness and transport costs. However, getting some measure of transaction costs as a variable
that significantly separated the performance of small economies from other types of economies could
be an important addition to the study. The study did well in terms of picking up distinctions based on
scale, scope and location. To the extent that it confirmed what had been argued in the various bodies
in the WTO by various developing countries, it certainly met with the satisfaction of the group of
small economies and developing countries themselves. The document provided Members with a good
basis for moving forward.
30.
The representative of Djibouti said that if small economies had problems in common those
were probably due to a number of common concerns. First, their will to become part of the
WT/COMTD/SE/M/3
Page 12
multilateral trading system and their wish to liberalise their markets, despite the size of those markets.
The concerns that had been expressed by small economies were therefore important. His delegation
concurred with the concerns that had been raised by delegations in document WT/COMTD/SE/W/3.
He said that Mauritius was a small island state that had managed to diversify its economy and its
trade. Wherever small economies were situated, they were committed to developing and diversifying
their economies and that needed to be taken into consideration by Members.
31.
The representative of the European Communities said that he would make some preliminary
comments with respect to document WT/COMTD/SE/W/5. He said that he had been surprised by
Members comments that document WT/COMTD/SE/W/4 was a bad paper and
document WT/COMTD/SE/W/5 a good one because some delegations found the latter to be closer to
their position than the former. He did not agree with those views. Document WT/COMTD/SE/W/4
was a compilation of the existing literature and document WT/COMTD/SE/W/5 simply sought to
explain the literature, rather than describing any view of the Secretariat. Members should not state
whether the Secretariat had done a good or a bad job, but rather consider questions such as whether or
not it was true to say that there was no correlation between smallness and export volatility. That was
the way in which his delegation would approach the document and Members needed to consider
whether that was a working assumption that they could live with or whether it was a wrong working
assumption. With respect to document WT/COMTD/SE/W/4, he noted that paragraph 52 concluded
that "in general small states are characterised by higher GDP volatility, greater openness to trade,
higher per capita international aid and more concentrated production and export structures. At the
same time, small states do not perform badly in terms of GDP levels, growth rates,…". He said that
most of that was also taken up in document WT/COMTD/SE/W/5. He was therefore not certain why
some Members judged the two documents so differently. Document WT/COMTD/SE/W/5 took up a
number of interesting issues that Members needed to keep in mind as a good basis on which to work.
The other basis which should not be forgotten was the mandate that Members had been given in
paragraph 35 of the Doha Ministerial Declaration which spoke about responses to trade-related
issues. Members needed to continue to ask themselves how the trade-related issues part related to
what the WTO was doing and how that related to the trade issues that Members were discussing in the
Dedicated Session. His delegation found some of the issues that had been raised interesting. Those
issues included whether size was relevant for GDP or GDP growth, whether size was relevant to
export volatility or just GDP volatility, or whether size was relevant to the problems that a Member
might have in adjusting, and that related to the status quo versus future status, which was to be
defined. Those were the right questions to ask. In addition, the question of efficiency in transport
raised in document WT/COMTD/SE/W/4 was an other interesting question. The document also
mentioned that openness had had positive effects, for small economies in particular. What stemmed
from that was that being more restrictive was not the answer. He said that he mentioned that in view
of some of the proposals that had been put forward. He fully understood the point made by many
delegations that the environment, in particular market access and the way the export dependency on
one or two products could be reduced, were pertinent to the debate. He said that market access might
also be relevant to the question of maritime transport liberalisation or transport liberalisation in
general. Those were issues that could usefully feed into the debate on small economies and into the
broader debate in the negotiations that were underway in other WTO bodies. Members needed to see
whether they agreed that the findings presented in the Secretariat documents were a basis from which
to work from a practical point of view. One of the key questions was whether it was true that small
economies did not experience higher volatility in their export earnings or whether it was not. There
had been a lot of debate on that point and Members seemed to disagree. He said that his delegation
was interested to know what Members' views were on the other findings that had been put forward. If
Members could establish some of those key parameters, then they would be able to make real progress
and discuss how to proceed.
32.
The representative of Paraguay said that he agreed with the representative of the European
Communities that documents WT/COMTD/SE/W/4 and WT/COMTD/SE/W/5 contained facts that
WT/COMTD/SE/M/3
Page 13
were not analyses but notes by the Secretariat. That information was being provided for Members to
reach their own conclusions to put before the Committee. He said that Paraguay was a landlocked
country and he referred to the conclusions reached in paragraphs 27 and 28 of WT/COMTD/SE/W/4
that higher costs could not be attributed solely to higher transportation costs, and that remoteness and
landlockedness could not be strictly considered as a source of vulnerability since those were not
unforeseen events. He had asked a former colleague from Switzerland how Switzerland had achieved
such a high level of development while being a landlocked country. The colleague had responded by
saying that Switzerland was an island in the midst of opportunities. The main consumer markets for
Swiss products were just on the other side of the Swiss border. It was easy to be a successful trader
for that kind of landlocked country. He said that the main Latin American regional consumer centres
for products from Paraguay, such as Santiago de Chile and Buenos Aires, were about 80 km away,
while Lima and Bogota were not even considered as they lay about 3000-4000 km away. That
affected the final price of products from Paraguay. Document WT/COMTD/SE/W/5 stated that
geographic location affected transport costs more than the size of the country. Landlocked economies
tended to be subject to higher transport costs than island states and transport costs had a significant
effect on an economy's potential to export. Paragraph 20 on page 7 stated that "Remoteness does have
an impact on competiveness because it increases transport costs for imports and exports". It was
important that both imports and exports were mentioned. Imports concerned purchasing capacity and
inputs for subsequent production. If the inputs were more expensive, then the final product to be
exported would be more expensive. The second bullet point in paragraph 21 read "Overland transport
costs tend to be considerably higher than sea freight costs", and the third bullet-point in the same
paragraph, which reflected the reality in his country, read "There are extra costs to inter-modal
transport (e.g. in which freight must be shipped both by land and sea), because of extra costs of
transferring between transport modes." Paragraph 23 stated that "It is clear that landlocked Members
tend to face significant disadvantages when it comes to transport costs." Figure 4 showed the
different transport costs for WTO Members. Paragraph 30 of Chapter IV, "Small Economies and
Trade: High Reliance on Imports and Lack of Export Diversification" stated that "The high degree of
openness brings real benefits that accrue from trade – consumers in small states are able to obtain a
greater variety of goods at lower costs than if their choices were confined to domestically produced
goods". That reflected the reality faced by Paraguayan consumers. The same paragraph also stated
that "producers in small states can sell on world markets – provided they have effective market access
– earning more than if they were confined to meeting limited domestic demand." He said that that did
not apply to his country because it did not enjoy that market access.
33.
He continued by saying that his Government was not asking for preferential treatment but non
discriminatory and equal treatment. He did not agree with those delegations that had said that
preferences should be maintained. He felt that preferences rather needed to be extended as that would
lead to equal competition between all developing country Members. Paragraph 31 stated that "A lack
in export diversification is considered to be a disadvantage because it makes smaller countries more
vulnerable to changes in demand for or prices of the few commodities or services they export."
Paragraph 49, on page 19 of the conclusions, read "Transport costs turn out to depend more heavily
on geographic location than on economic size. Landlocked economies tend to be subject to higher
transport costs than islands." He contrasted that with a new conclusion: if being a landlocked
economy not only implied higher transport costs but also additional foreseeable costs, the fact of
crossing a border and having to abide by the rules of the transit countries, meant that foreseeability for
providers lessened. It was not always possible to meet buyers demands because when goods were
crossing borders producers had to comply with excessive additional requirements which reduced the
possibilities of complying with those requirements. That was not quantifiable but it was sometimes
qualifiable and it needed to be covered by the Secretariat studies.
34.
The representative of Switzerland said that his delegation had not been able to thoroughly
study the new documents prepared by the Secretariat. However, his delegation appreciated the
analysis of the role of economic size and the statistics provided in document WT/COMTD/SE/W/5,
WT/COMTD/SE/M/3
Page 14
which constituted a good basis for future discussion. Some delegations had already pointed out some
issues that needed to be discussed. He said that the documents were apt to form the theoretical and
analytical background to mirror the practical problems and proposals that had been put forward by the
group of small economies. One outcome in document WT/COMTD/SE/W/5 that had struck him was
that small developing economies were not systematically poorer than other economies. Instead, it
appeared that economies that were less open to trade tended to be poorer. That had to be kept in mind
when evaluating the proposals which tended to limit exposure to foreign trade. However, his
delegation did realize that small administrations faced real practical problems in implementing some
of the complex WTO agreements. It might be necessary to look deeper into whether the broad term
"small economies" was appropriate or whether it required more precision and limitation. Since
Members were discussing greater differentiation of developing countries in other fora, he said that his
delegation wondered whether some of the concerns and proposals presented by small economies
could not be best integrated into a broader country categorisation exercise. For instance, his
delegation felt that it might be appropriate to enlarge and redefine the group of LDCs based on a set of
clear and transparent criteria. The less advanced small economies like poor island states might then
automatically become part of that group.
35.
The representative of Jamaica said that he would comment on both documents
WT/COMTD/SE/W/4 and WT/COMTD/SE/W/5 as some of the themes mentioned in
document WT/COMTD/SE/W/4 were elaborated in document WT/COMTD/SE/W/5.
He
found WT/COMTD/SE/W/5 to be an improvement over WT/COMTD/SE/W/4 although he
acknowledged that WT/COMTD/SE/W/4 was a survey of the literature. His delegation believed that
document WT/COMTD/SE/W/4 contained some findings which were worth emphasising. One such
finding was that small economies did not enjoy economies of scale, either in production or public
administration. That translated into high unit costs and a possible reduction in the degree of
competition due to small domestic market size. His delegation believed that that was an important
element to draw attention to, especially because of the implications that that would have on prices of
both intermediate and final goods. He also noted the point made that research and development
(R&D) activities were characterised by large economies of scale and that smallness therefore had
consequences for the development of local technology. That was also an important point because the
capacity of small economies to diversify production in the current global environment required that
they move into higher value added production levels. If R&D was related to economies of scale, then
small economies' possibilities to make a transition to a more diversified economic structure were
limited. Document WT/COMTD/SE/W/4 drew attention to the tax structure, which was important. It
stated that 84 per cent of small economies' tax revenue was raised from international trade and
income, and he believed that that had implications for the capacity of small economies to undertake
certain WTO obligations within the quite stringent time frames.
36.
He continued by saying that a number of other important issues were raised in that document.
Limited natural resource endowments and labour supply were constraints which resulted in the
production of a narrow range of goods and services for export. Those constraints had WTO
implications. For instance, production in some small economies could be threatened by safeguards
applied on a most-favoured nation (MFN) basis. His delegation also noted that small economies were
often perceived as being highly risky to foreign investment and that they had limited access to
international financial borrowing. That had implications for trade performance. As traded goods
were largely dependent on foreign investment, it was difficult for small economies to increase their
share of global trade. Another theme in the existing literature was that open economies were likely to
benefit most in a globalized economy. The representative of Barbados had commented on that and
Members needed to realize that openness was not necessarily identifiable with structural resilience.
Small economies' openness to the global economy could in effect magnify any negative effects of the
multilateral trading system on small economies that were not structurally diversified. He was
surprised that those who invested in and managed enterprises in the global economy were aware of
the benefit of size as an important comparative advantage, yet many did not seem to discern that size
WT/COMTD/SE/M/3
Page 15
should matter at the level of entire economies as in the documents and in some comments that had
been made. He found it difficult to understand why size would matter at the level of enterprises in a
globalized economy and not at the level of economies. Small enterprises could be compared with
small economies. As governments moved away from state driven economic growth and development,
the role of private enterprises increased. Small economies then had a competitive disadvantage
because it was more difficult for their enterprises to develop to an economically viable size. That was
one reason why export incentives were important to small economies as such incentives could help
small enterprises establish themselves in global markets. In that respect, he said that Members were
aware of the emphasis that many delegations had placed on Article 27 of the Agreement on Subsidies
and Countervailing Measures. Those were some of the linkages that his delegation wished to draw
attention to.
37.
He went on to say that his delegation noted the discussion on transport costs and the finding
in the Secretariat study that transport costs were identifiable with geography rather than with size. His
delegation found that surprising because it believed that size in many ways was linked to geography.
He said that geography could only refer to distance from large markets. Many small economies were
small island states that were geographically remote and, there was a linkage between size and
geography in that sense. The point had been made that transport costs were often linked to economies
of scale, and therefore small economies found themselves at a disadvantage in an era of super tankers.
Taking the example of Jamaica, he said that it was more difficult and costly on a per unit basis for a
manufacturer to ship cargo to the eastern Caribbean where there was a large number of small islands
that needed to be serviced than to ship the same cargo to a large market elsewhere. There were clear
implications of the link between transport cost and size. His delegation was also surprised by the
finding relating to the volatility of export earnings. He considered it a fact that the export earnings of
small economies were highly volatile as they were concentrated in a few commodities for which the
prices on the international market were volatile. Nevertheless, his delegation believed that the fact
that the volatility of exports earnings created volatility of GDP was an equally important
consideration. It was important because the volatility of GDP had implications for macroeconomic
planning and the economic management of small economies with all that that entailed. That was an
element that needed to be taken into consideration. His delegation would have liked to see data that
provided some indication of the current account deficits of small economies in relation to the averages
of other countries in the global economy. That was because his delegation believed that the reference
to high trade shares often obscured the fact that a significant proportion of the high trade share in
reality consisted of imports, and that small economies ran significant deficits that needed to be
financed in some way. The studies had already made clear that foreign investment and international
borrowing were difficult to attain. He asked how the current account deficits could then be financed.
That was a big problem that small economies faced. Those were some of the issues that his
delegation wished to see addressed as the work on small economies progressed. They were
particularly important as they were directly linked to the capacity to undertake obligations in the
WTO, the pace at which those obligations might be undertaken, and the kind of assistance that small
economies required, including the continuation of trade preferences.
38.
The representative of Cuba said that she would make some preliminary comments on
document WT/COMTD/SE/W/5. She said that her delegation endorsed the relevant comments that
had been made by the representative of Jamaica. With respect to the question of economic size and
population, she said that her delegation did not consider that population per se did define the
characteristics of a small economy. There were other factors that were of importance in the economic
development of small economies. Those factors included the high dependence on imports (small
economies were in many cases net importers of food) and the high dependence on the export of
services and commodities whose prices were constantly falling. That situation had affected and
continued to affect small economies. The service exporting small economies depended on just one
service for their export earnings. Those were some factors that her delegation considered of vital
importance when identifying small economies. Other aspects to which her delegation attached
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Page 16
importance were those relating to transport costs. In the case of Cuba, which was a small island
economy whose revenue depended on foreign trade, transport costs played an important role in export
income. Imports and exports into and out of Cuba were either by air or by sea. As other delegations
had said, the nearest region was the Caribbean and thus transport costs were high due to the transport
difficulties in the area. Another important factor that had to be taken into account when examining
the situation of small economies was the vulnerability of those economies to natural disasters. Her
country had recently been affected by three cyclones in one month which had affected the harvest and
some of Cuba's principal export goods in a significant way. That created problems for the economy's
earnings. If the economy were diversified, the effects would not have been so great. That was why
her delegation considered that the programme of work on small economies should take the specific
situation of small economies into account. Members should take the necessary measures to ensure
that small economies were involved in international trade in a way which ensured that the efforts
made by those economies to progress in the global economy had positive results. The limits of those
economies needed to be taken into account in a way which lead to an integration of small economies
into the international economy.
39.
The representative of St Lucia said that he agreed with everything that had been said by the
representative of Barbados as well as what had been said by several other delegations. He said that, at
a conference held in St Lucia in 1999 on the subject of small states, a World Bank luminary had
presented a paper entitled "Small States Small Problems?". That paper was condescending and
sought, in his view, to dismiss the study of the economic problems faced by small states as unworthy
of any serious intellectual consideration.
He had not had the opportunity to study
document WT/COMTD/SE/W/5 carefully and would not comment on its conclusions. However, the
Secretariat had in that document gone beyond the prejudice and the indifference which normally
characterised intellectual discussions on the issue of smallness. He said that the Secretariat had
perhaps become more open minded and more progressive due to the constant concerns raised by
delegations and other institutions such as the Commonwealth Secretariat and UNCTAD which had
been working on the issue of small economies. He said that the critical and most useful element in
document WT/COMTD/SE/W/5 was its analysis and its openness. It sought a new direction and did
not just look back at work that had been done in the 1990's which was in many cases prejudiced. One
clear idea in the paper was the importance of economies of scale to a country's ability to adjust. It
affected production costs and, as had been mentioned, it also affected transport costs. He was aware
of the conclusion in the paper that transport costs were not related to size. However, if one considered
the relative cost of transporting for instance a shirt that was manufactured in St Lucia to Miami, it was
more expensive than, for instance, from the Philippines to Miami, despite the shorter distance from
St. Lucia to Miami. That was the economics of transportation. Similarly, if a motor vehicle industry
could be developed in his country, it would be infinitely more expensive to ship a car from St. Lucia
to Venezuela than it would be for a Japanese manufacturer to ship a car to Venezuela, even though the
distance from Japan was longer. Another concern which stemmed from the document was that of
volatility of export earnings and the impact of export earnings on the economy. He did not fully agree
with the conclusion in the study of the limited volatility of export earnings in small economies. As
had been suggested by the representative of Sri Lanka, a more refined analysis would probably result
in different conclusions. It seemed that single commodity exporting countries or those that were
dependent on tourism would, by definition, suffer from greater volatility of export earnings. Tourism
earnings had been seriously affected since the 11 September 2001 attacks. The negative impact of the
11 September attacks on tourism might for a large country which had different sources of income be
tempered by greater stability in its other earnings. However, for those countries that were principally
dependent on tourism, the consequences were obvious. He said that the proposal made by the
representative of Switzerland was an interesting one and as Members continued to study the issue of
small economies, it was one that could be considered as a conclusion and a way forward. There had
been some discussion on preferences and, like the representative of Jamaica, he emphasised the
importance of preferences. Small economies were open and the reason for having preferences and
being so dependent on them was that small economies needed to specialise in order to produce
WT/COMTD/SE/M/3
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optimal volumes of any product. That was the challenge. When they did specialize, the output would
normally far exceed the requirements of the domestic market. Therefore in order to produce in
economically viable quantities, small economies needed to export. Hence market access was critical
to any country that was small and open. Any precipitated withdrawal of preferential access would
create a serious problem for small economies. Countries experienced different problems but the
Dedicated Session of the CTD dealt with problems that emanated from smallness. There were other
groups of countries, least-developed, landlocked and highly indebted countries which also had unique
set of problems that needed to be addressed. It was counterproductive to trivialise any one set of
problems. The problems of smallness needed to be considered on their own merit and if they
warranted attention then they should be attended to. Members would be involved in sessions where
the problems of other groups of countries would be dealt with. His delegation was willing to
participate constructively in addressing the needs of other developing country Members whose
constraints arose from other predicaments.
40.
The Chairman said that paragraph 25 on page 10 of document WT/COMTD/SE/W/5 clearly
showed that transport costs did fall with higher shares of WTO trade. In other words, if share in WTO
trade was considered to be a measure of economic size, that figure would indicate that transport costs
were indeed higher for smaller economies.
41.
The representative of the United States said that document WT/COMTD/SE/W/5 clearly
demonstrated that small economies benefited from maintaining an open market and from
liberalisation of other Members’ markets. Multilateral disciplines, adopted and implemented by all
Members, had proportionally greater benefits to small economies since small economies needed to
use foreign markets to pursue economies of scale, as had been mentioned by some delegations. He
said that WTO disciplines were generally based on common principles of good governance which
benefited Member countries of all sizes and levels of development. Given the potential benefits of the
Doha Development Agenda (DDA), his delegation hoped that small economies would be among the
most ardent supporters of those negotiations at all stages.
With respect to
document WT/COMTD/SE/W/6, he said that his delegation could appreciate the difficulties that the
Secretariat must have experienced in deciding which provisions or agreements were of particular
interest to small economies as reflected in the cover note. He noted that the document focused on
relatively few provisions of the WTO and usually those with specific links to size or share of trade
flows. He cautioned against defining too narrowly which WTO agreements were of particular interest
to small economies. With respect to the provisions listed from the Agreement on TBT, he had noticed
that Articles 2.3 and 2.4 of that agreement had been identified as potentially of particular interest to
small economies, but not other articles of that agreement. More specifically, Article 2.4 of the
Agreement on TBT was cited in the Secretariat’s list. That provision obliged a government to use
relevant international standards, if effective and appropriate for its regulatory objectives, as a basis for
its technical regulation. However, the corresponding provision for conformity assessment procedures
in Article 5.4 was not cited. He sought clarification as to the rationale behind excluding Article 5.4.
His delegation believed that all the provisions of the Agreement on TBT should be of interest to small
economies, because compliance by others with the TBT obligations should prevent unnecessary
barriers to exports from those economies. In addition, the TBT Agreement gave small economies
rights to pursue perceived violations of the rules. The Agreement’s provisions for transparency set
the pace for the WTO negotiations, providing an opportunity to comment on proposed technical
regulations and conformity assessment procedures before their final adoption. In that way, small
economies should be able to highlight proposals they believed would unduly restrict their trade. In
that regard, small economies might consider ways to cooperate regionally in implementing the
provisions of the Agreement on TBT, as well as in exercising their rights. Small economies might
find common interests in proposals notified under the Agreement and might wish to share resources in
identifying relevant proposals and submitting comments on them.
WT/COMTD/SE/M/3
Page 18
42.
The Secretariat said that Article 2.4 and Article 5.4 of the Agreement on TBT were parallel
provisions and if one was there the other should be as well. He said that that was an oversight on the
part of the Secretariat which would be rectified.
43.
The representative of Belize said that her delegation supported the comments that had been
made in support of small economies and in particular those that had been made by the delegations of
Barbados, Jamaica, Mauritius and St Lucia. She felt that document WT/COMTD/SE/W/5 was a good
attempt at encapsulating the concerns of small economies and she suggested that it be revised to
include the recommendations that had been made by various delegations.
44.
The representative of Barbados said that his delegation appreciated the comments that had
been made by Members, whether he agreed with them or not. He said that financial markets were
aware of what was small as they had determined what grade Barbados received on the basis of its
vulnerability and small size. Investors were also aware of what was small.
45.
The representative of Jamaica sought clarification with respect to whether the export volatility
referred to in the Secretariat document was in respect of price (terms of trade) or volatility measured
in terms of the quantum of overall export earnings.
46.
The Secretariat said that the figures that had been used were export earnings figures and not
unit price. The Secretariat document did not say that small economies did not experience volatility in
export earnings, only that they were not the only ones and therefore the correlations were not that
strong. A strong correlation, due to openness, was between income and export volatility. That was
without the adjustments that had been referred to by the delegations of Barbados and Mauritius. He
felt that that was a more telling reality for small economies than export volatility on its own. The
issue was the affect of export volatility on GDP.
47.
The Chairman requested Members with further suggestions to convey them to the Secretariat
and the Committee would consider any idea put forward. He said that the Dedicated Session of the
CTD would continue its consideration of the issues at the next meeting.
48.
The Committee took note of the documents and the comments made.
D.
OTHER BUSINESS
49.
No matter was raised under other business.
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