Executive summary

LDC exports of goods and services grew by an annual average of 7.6% over the 2005-2015 period and, thus, slightly more than the exports of other developing economies (7.3% average). However, this fact is due to distinctly higher growth rates in the first part of the period. In recent years, LDCs’ exports were constrained by unfavourable developments in the prices of commodities. In 2015, LDC exports of goods and commercial services decreased by 20.1% to US$195.5 billion, while LDC imports fell by 7.5% to US$303.6 billion, resulting in an overall trade deficit of US$108.1 billion.

LDCs were able to increase their share in world exports of goods and commercial services from 0.7% in 2005 to 1.03% in 2014. However, in 2015, their share stood at 0.9% and hence fell below 1% for the first time since the crisis year 2009. This recent decrease reflected lower values of merchandise exports, due to falling prices of commodities.

In 2015, merchandise exports of the LDCs contracted by 25%, a significantly bigger drop than in 2014. As a result, the share of LDCs in world merchandise exports decreased to 0.97%. As their imports declined by “only” 9% in 2015, the LDCs recorded a new high in their merchandise trade deficit (of US$87 billion in 2015).

The year 2015 has seen a steep reduction in the price of commodities, especially fuels; also due to the slow-down in the Chinese economy and an increase in world supply. For exporting countries, this decline has been partially compensated by an increase in the US dollar exchange rate.

Petroleum oils (HS 27.09) dominated LDC exports in 2015, even if their share in exports fell to 28% (48% back in 2005). The importance of clothing products has increased though: in 2015, six out of the top ten products belonged to clothing, accounting for 20% of LDC merchandise exports.

1.6. In 2015, China was the top destination for LDC merchandise exports, followed by the European Union (EU) and the United States. The EU was the largest destination for LDC exports of agricultural and manufacturing products.

In 2015, LDCs’ exports of commercial services expanded to US$36 billion, up by 1%. This trend contrasts with the performances recorded by other developing economies and developed economies, which experienced sharp declines. As a result, the share of LDCs in world exports of commercial services increased to 0.8%. LDCs’ services exports continue to be dominated by low- to middle-skilled services sectors, such as travel (tourism) and transport. In 2015, LDCs’ services exports growth was fostered by the sustained expansion of the tourism sector.

In 2015, LDCs’ services trade remained concentrated within a few economies. The top ten leading exporters accounted for more than two-thirds of the group’s services receipts, a proportion virtually unchanged since 2005. The LDCs, as a group, are net commercial services importers. Over the years, the LDCs’ services trade deficit has widened from US$16.3 billion in 2005 to US$39 billion in 2015.

Progress has continued in advancing market access opportunities for LDCs. Most of the developed country Members accord either full or nearly full duty-free and quota-free (DFQF) market access to LDC products. A number of developing country Members have significantly expanded their DFQF coverage and now offer almost comprehensive DFQF market access to LDC products. Continuous improvements are being noted in the provision of DFQF market access to LDC products, including the further easing of rules of origin conditions in certain markets. Since the last report, several Members have submitted notifications regarding preferential treatment for services and services suppliers from LDCs – pushing up the number of notifications to 23.

LDCs’ trade profile

Trends in Goods and Commercial Services

LDC exports of goods and services grew by an annual average of 7.6% over the 2005-2015 period and, thus, slightly more than the exports of other developing economies (7.3% average). However, this fact is due to distinctly higher growth rates in the first part of the period. During 2005-2010, the annual average growth rate was 14.7% for LDCs and 11.2% for other developing economies. In contrast, during 2010-2015, annual export growth was only 0.9% in LDCs as compared to 3.6% in other developing economies. After 2011, the growth in the total value of LDCs’ exports was constrained by unfavourable developments in the price of commodities, on which they depend more than the other developing economies.

In 2015, LDC exports of goods and commercial services decreased by 20.1%, down to US$195.5 billion, while LDC imports fell by “only” 7.5% to US$303.6 billion, resulting in an overall trade deficit of US$108.1 billion in 2015. In 2005, the overall trade deficit stood at US$9.8 billion, thus had increased by more than 11 times during this period – in nominal terms.

In volume terms, LDC merchandise exports grew by 7.9% in 2015, while their imports expanded by 3.1%. In comparison to 2005, the export volume increased by almost 1.5 times while the import volume more than doubled. This development in volume terms shows, inter alia, the high impact of the decrease in prices on the trade figures in nominal terms.

Regarding LDCs’ integration in global trade, LDCs were able to increase their share in world exports of goods and commercial services from 0.7% in 2005 to 1.03% in 2014. However, in 2015, their share fell to below 1.0% for the first time since the crisis year 2009. This recent decrease reflected lower values of goods, due to falling prices of commodities, particularly fuels. For exports of commercial services, LDCs were able to further increase their market share to 0.8% in 2015.

In 2015, the trade balance ratio of goods was positive for only four out of the 48 LDCs – namely for Angola, Equatorial Guinea, Chad and Guinea-Bissau. However, for all of the first three, the ratio had deteriorated in comparison to 2005; only Guinea-Bissau was in position to turn the negative ratio of 2005 into a positive one in 2015. All the other LDCs had negative ratios in both years – with the exception of Myanmar, Yemen, Guinea, and Zambia that had positive ratios in 2005. Especially Eritrea, Burkina Faso and the Solomon Islands could reduce their negative ratios markedly between 2005 and 2015. Eritrea, for example, had a ratio of -90% in 2005 (i.e. their negative trade balance of 2005 reached a value of 90% of the nominal trade turnover of 2005) and a ratio of “only” -56% in 2015. The economies with the highest negative normalised trade balances in 2015 were Timor-Leste, Afghanistan, and Sao Tome and Principe.

Regarding trade of commercial services, eleven out of the 48 LDCs showed positive normalised trade balances in 2015, with Eritrea, The Gambia and Cambodia on the top positions. Equatorial Guinea, the Democratic Republic of the Congo and Lesotho were the LDCs with the highest negative normalised trade balances in 2015, between -96% (Equatorial Guinea) and -83% (Lesotho).

Merchandise Trade Developments

Overall trend

In 2015, merchandise exports of the LDCs contracted by 25%, thus by an even more distinct degree than the 3% decrease in 2014. Merchandise imports of LDCs declined by 9% in 2015. As LDCs depend to a high degree on exports of fuels and mining products, this mirrors the general negative trend of decreased prices and demand in 2015, but concerns the LDCs more intensively than most other economic groupings.

The share of LDCs merchandise exports in world exports dropped to 0.97% in 2015 – for the first time below 1% since 2007. Their share in world merchandise imports though, slightly increased from 1.4% in 2014 to 1.5% in 2015. Taking trade of developing economies as basis, the LDC share dropped to 2.1% in 2015 (2.4% in 2014) for merchandise exports while the imports share increased to 3.4% (3.3 % in 2014). Regarding exports of manufactured goods, LDCs’ share in world exports of these products decreased from 0.5% in 2014 to 0.4% in 2015.

The LDCs’ collective trade deficit continues to increase and hit a record level of US$87 billion in 2015, 44% higher than in 2014 and 134% higher than in 2013. In 2015, the LDCs’ oil exporters registered for the first time in more than 15 years a trade deficit of US$12 billion, from an average surplus of US$38 billion during the previous nine years. The LDCs’ manufacturing and agricultural exporters recorded a US$34 billion and US$20 billion trade deficit, respectively.

Commodity price movements

The year 2015 has seen a steep reduction in the prices of commodities, especially those of fuels (-45% against 2014). For exporting countries, this decline has been partially compensated by an appreciation in the US dollar exchange rate (actually, the short term fluctuations between the US dollar and the commodity prices are often negatively correlated). But the decline in commodity prices was also due to the slow-down in the Chinese economy and an increase in world supply as many projects – fuelled by high prices after 2003 – reached maturity. Financial volatility is also responsible for higher uncertainty and lower investment worldwide, leading to a further reduction in demand for minerals and oil.

Trends in product composition

The decreased demand from emerging economies and fallen commodity prices of recent years, led to a shrinking share of primary products in total exports of LDCs – from 73% in 2005 to estimated 58% in 2015. The share of manufactured products on the other hand increased from 21% in 2005 to 35% in 2015, mainly due to an increasing importance of clothing exports. During the same period, the share of agricultural products in LDC exports increased from 11% in 2005 to 13% in 2015.

Major products and markets of LDCs

Regarding the top ten products (in HS-4-digits classification) exported by LDCs, for 2005 and 2015, petroleum oils (HS 27.09) dominated LDC exports in both years. Back in 2005, almost half (48%) of total LDCs exports were allocated to this product. In 2015, petroleum oils were still the most important export product (in value terms), but their share had distinctly fallen – down to 28% (mostly due to the fall in prices). The opposite development could be observed for petroleum gases/hydrocarbons (HS 27.11), with the share more than doubled between 2005 and 2015 (from 2% in 2005 up to almost 5% in 2015) – but on a much smaller scale (in nominal figures).

The importance of clothing products increased between the two years; in 2005, four out of the top ten export products were part of this product group, reaching a cumulative share of 11% in LDC exports. Ten years later, six out of the top ten products belonged to clothing, with a total share of 20% in LDC merchandise exports. While back in 2005, the top ten products still covered more than two-thirds of LDCs total merchandise exports, their share had gone down to less than 60% in 2015. This might be interpreted as a factual decrease in product concentration of LDCs’ exports on the first sight, but is in fact just mostly a result of price effects (of especially petroleum oils).

LDCs’ merchandise imports are less concentrated than exports. Also for imports, petroleum oils (HS 27.10) represent the most important product. However, its share in total imports is much lower (8% in both years) than in the case for exports. Otherwise, cars, trucks and other vehicles as well as ships/vessels played important roles in both years – reaching cumulative shares of 11% in 2005 and 5% in 2015. Imports of textiles such as “fabrics of cotton” (HS 52.08) reflect the LDCs’ role in global value chains, using imported fabrics as inputs into the production of final clothing products for export. Two of the top ten imported products in both years are food products (rice and wheat/meslin). The value of imports of medicaments (HS 30.04) almost tripled between 2005 and 2015.

At the level of individual economies, some heterogeneity in the product structure of exports and imports can be observed. The top exports/imports products by individual LDC are shown in Table 1 of the Addendum.

While in 2005, the EU, with an export market share of almost 30%, was the most important destination for overall LDC exports, China was the top destination in 2015 (market share of 33%). In 2015, exports of fuels and mining products to China accounted for 13% of total LDC exports and for almost half of LDC exports of fuels and mining products – in spite of fallen energy prices and lower demand from China. Regarding agricultural and manufactured products, the EU was still the most important market for the LDCs in 2015, as it was in 2005. For agricultural products, the EU’s share decreased however from 41% in 2005 to 31% in 2015, while China’s share increased from 14% in 2005 to 23% in 2015. The share of the EU as market for LDCs’ exports of manufactures increased slightly, from 53% in 2005 to 54% in 2015.

Services Trade Developments

Statistics on trade in commercial services reflect the new services classification contained in the 6th edition of the IMF Balance of Payments Manual (BPM6). Thus, data presented in this paper are not comparable to previous editions.

In 2015, LDCs’ exports of commercial services expanded to US$36 billion, up by 1%. This trend contrasts with the performances recorded by other developing economies and by the developed group, which saw sharp declines. As a result, the share of LDCs in world exports of commercial services increased to 0.8%. Although in a steady rise over recent years, LDCs’ export participation remained overall negligible. On the imports side, LDCs’ payments for services reached US$75 billion in 2015, contracting by 8%, due to dropping imports of other commercial services. Participation in global imports stood at 1.6%.

LDCs’ services exports continue to be dominated by low- to middle-skilled services sectors, such as travel (tourism) and transport. Their aggregate contribution, in 2015, reached 73.4% of total services exports compared to 56.7% for other developing economies and 37.7% for developed economies.

In 2015, LDCs’ services exports growth was fostered by the sustained expansion of the tourism sector. Travel exports rose by 6%, reaching some US$19 billion, led in particular by LDCs in Asia (+8%). Rapid growth reflected increasing inflows of international tourists in particular to leading LDC travel exporters. For example, in 2015, international tourist arrivals to Myanmar grew by 52% and in Cambodia by 6%. However, LDCs’ payments for travelling abroad also increased, estimated to have expanded by 3% in 2015. Tanzania remained the largest travel spender among the group.

LDCs’ transport receipts contracted only by 1%, much less than for the rest of the world (-10%) as exports from Ethiopia, the main LDC transport exporter, recorded positive growth. Transport imports decreased by 2%. Trade other commercial services fell, with exports down by 9%, and imports by 15%.7 Goods–related services exports grew by 6%, while imports stagnated.

Goods-related services is a new aggregation of services in BOP statistics, which includes “manufacturing services on physical inputs owned by others” and “maintenance and repair services n.i.e.”. The first category covers essentially manufacturing on a contract basis including activities such as processing, assembly, labelling, packing, etc. The second comprises maintenance and repair work by residents of an economy on goods that are owned by non-residents and vice versa. Many economies, in particular LDCs, are not yet collecting statistics for these new services arising from globalization and the fragmentation of the production process across different economies. Thus, data should be taken with caution.

In 2015, LDCs’ services trade remains concentrated within a few economies. The top ten leading exporters accounted for more than two-thirds of the group’s services receipts, a proportion virtually unchanged since 2005. Starting in 2014, Myanmar ranks as the largest exporter of services among the LDCs, boosted by rising exports of goods-related services, which, as mentioned above, are not yet recorded by most LDCs. For imports, Angola alone represented one-quarter of the group’s total commercial services payments. Annex Table 5 provides services exports for individual LDCs by sector.

The LDCs, as a group, are net commercial services importers. Over the years, the LDCs’ services trade deficit has widened reaching US$39 billion in 2015 up from US$16.3 billion in 2005. However, while both the transport sector and “other commercial services” sectors have experienced persistent trade deficits, travel (tourism) has been recording an expanding surplus since 2005. In 2015, the travel surplus attained US$11.4 billion.

Market access for products of export interest to LDCs

Duty-free market access granted by selected Members

The preferential LDC schemes of Australia, New Zealand, Norway and Switzerland provides full duty-free market access for LDC exports. For Canada, Chile, the EU and Japan, 97% or more of their tariff lines are free of duty for products originating from LDCs. In 2014, China and India considerably improved the duty-free coverage of their LDC schemes, with around 95% of their tariff lines being free of any import duty. Imports from LDCs were subject to trade-weighted average duties of 0.3% and 1.4% in China and India, respectively.

In 2014, LDCs exported the highest number of products (in terms of national tariff lines) to the EU, followed by China, Canada and the United States. In dollar terms, half of LDC exports were dutiable under the Unites States’ GSP LDC scheme, with a trade-weighted average tariff of 8.2%. However, eligible LDCs enjoy significant duty-free access to its market under the Africa Growth and Opportunity Act (AGOA) and the Caribbean Basin Initiative. For instance, the United States provided 97.5% duty-free market access to LDC beneficiaries of the AGOA. Hong Kong, China; and Singapore, have no LDC preference scheme but almost all LDC products enter their markets duty-free on an MFN basis.

Recent initiatives to improve market access for LDCs

Annex Table 6 provides a non-exhaustive list of major multilateral non-reciprocal market access schemes undertaken by Members in favour of LDCs. It updates the previous year’s information based on Members’ notifications and statements at the WTO as well as submissions made to WTO’s IDB. The Table does not include regional or bilateral agreements/initiatives under which, too, LDCs receive preferences.

A few Members notified changes or updates regarding their preference schemes. In February 2016, the United States submitted a notification regarding its GSP Programme, containing, inter alia, changes to country and product eligibility resulting from GSP annual reviews (WT/COMTD/N/1/Add.9). As a result of the 2014/2015 limited product review, the United States has designated five additional cotton products as eligible for duty-free treatment for LDCs only. At the Committee on Trade and Development (CTD) meeting on 8 July 2016, the United States informed Members that, as of 1 July 2016, duty-free status has been added for a range of travel goods imported from LDC beneficiaries of its GSP scheme, as well as from beneficiaries of the African Growth and Opportunity Act (AGOA) (WT/COMTD/M/99).

On 17 November 2015, India submitted a communication containing updated information on the product coverage and the rules of origin of its Duty-Free Tariff Preference (DFTP) scheme (WT/COMTD/N/38/Add.1).

As has been reported in the past, most of the developed country Members grant either full or nearly full DFQF market access. Developing country Members have also taken concrete steps to provide duty-free access to LDC products. In this regard, so far, six developing country Members have made notifications pursuant to the established procedure including under the Transparency Mechanism for the Preferential Trade Arrangements: Chile; China; India; Republic of Korea; Chinese Taipei; and Thailand.9 Most of them grant a significant degree of DFQF market access to LDC products, and a number of them have reached or are in the process of attaining comprehensive DFQF coverage for LDCs.

Members have continued discussions on DFQF implementation in the CTD. In this regard, on 27 June 2016, the LDC Group submitted a proposal for a Secretariat study concerning the implementation of DFQF market access for LDC products (WT/COMTD/W/218).

Continuous efforts are being made to help the LDCs with preferential rules of origin. In line with the Decision on Preferential Rules of Origin for LDCs of the Bali Ministerial Conference, the Committee on Rules of Origin (CRO) has been holding annual reviews on developments in preferential rules of origin. The last review was held in October 2015. At the Ministerial Conference in Nairobi in 2015, Ministers adopted a set of provisions with a view to further improving preferential rules of origin applicable to imports from LDCs (WT/L/917/Add.1). At the CRO meeting on 22 April 2016, the LDC Group presented a submission asking preference-granting Members specific questions about the measures they were taking to implement the Nairobi Decision (G/RO/W/159). On 19 July 2016, the LDC Group submitted a communication containing a draft template for notification of preferential rules of origin for the consideration of the CRO (G/RO/W/160).

On 3 November 2015, Japan submitted a notification concerning the simplification of its preferential rules of origin for products classified in HS Chapter 61 – Articles of apparel and clothing accessories (WT/COMTD/N/2/Add.16). At the LDC Sub-Committee meeting on 24 June 2016, the delegation of the EU reiterated that under its GSP scheme a new system of self-certification of origin, the Registered Exporter System (REX), which will enter into force on 1 January 2017 (WT/COMTD/LDC/M/78).

Progress has been made with respect to preferential treatment of services and services suppliers from LDCs. In Nairobi in 2015, Ministers decided, inter alia, to extend the life span of the Waiver, initially adopted in 2011 (WT/L/847), for an additional four years until 31 December 2030 (WT/L/982). As stipulated by the Nairobi Decision, the CTS maintains a standing agenda item to review and promote the operationalization of the Waiver.

Since the 2015 LDC market access report (WT/COMTD/LDC/W/60), eight Members have submitted new notifications. Two Members (Canada and Turkey) have revised their notifications. As of end September 2016, a total of 23 Members had notified preferences.