An informal open-ended consultation on preferential rules of origin for LDCs held on 20 October reportedly examined a formal proposal on the subject from the LDC Group, in the context of the overall Nairobi ministerial.

The proposal which aims at operationalising the 2013 WTO Bali ministerial decision on rules of origin is part of a the overall LDC package which contains other elements related to duty-free quota-free (DFQF) market access, the operationalisation of the services waiver as well as cotton issues.

The LDC Group submitted a communication on 24 September in which they called for transforming the Bali guidelines on preferential rules of origin into compulsory criteria. The communication also specifies various methodologies in order for WTO members to frame their legislation on preferential RoO accordingly.

Rules of origin specify how much processing must take place locally before goods can be considered to be the product of the exporting country. They are often considered to be overly restrictive and inflexible, making it difficult for LDCs to take full advantage of the preferences they are granted.

Currently, these rules are designed on a unilateral basis without any harmonised standard, which critics say creates additional problems for the WTO’s poorest members, forcing them to adapt to a range of rules depending on the intended export market.

According to sources, Bangladesh, on behalf of the LDC Group, reiterated that rules of origin were an integral part of the request on DFQF market access and that the proposal in its current construct reflects existing best practices and constraints facing LDCs in benefitting from preferential schemes.

Some countries expressed concerns that the LDC Group proposal went beyond the Bali decision or would require substantial changes in their national system which they were not in a position to offer at this stage. Other countries felt concerned by the push to obtain legally binding obligations as articulated in the LDC proposal.

Sources indicate that several WTO members encourages the LDC Group to set a “realistic level of ambition” by focusing on a few achievable items especially given the limited time before the WTO Ministerial Conference take place in December.

Some developing countries members reminded that the Bali decision distinguished between developed and developing members in regards to the commitment to ensure that preferential rules of origin for LDCs are transparent and simple. Other developing country stated that they would study the proposal carefully with a view to exploring what could be done in favour of LDCs.

LDC group outlines priorities ahead of WTO MC10

Bangladesh, on behalf of the WTO’s Least Developed Countries (LDC) Group, presented a draft submission last week for internal deliberations which outlines LDCs’ priorities for the upcoming WTO Tenth Ministerial Conference (MC10) to be held in Nairobi, Kenya, in December.

The draft submission offers insights about priority areas of interest to the LDC Group for agreement at the upcoming ministerial, as well as their proposals regarding the core negotiating areas of the Doha Development Agenda (DDA). At press time, the draft was still under discussion by a small group of countries and had not yet been finalised.

A source close to the process indicated that the document is still being consolidated and that the LDC group will come up with a detailed proposal shortly.

Four elements of interest to LDCs – namely, duty-free quota-free (DFQF) market access, more favourable rules of origin, the operationalisation of the services waiver, and cotton – led to the adoption of decisions during the WTO’s last ministerial conference in Bali, Indonesia two years ago. Since then, the group’s focus has mainly consisted in turning some of these outcomes into legally-binding outcomes.

“It is important that Nairobi deliver concrete legally binding decisions in favour of LDCs as a priority,” reads the working document.

WTO Director-General Roberto Azevêdo has said repeatedly over the past month that the Nairobi ministerial should deliver on development issues, particularly for LDCs.

In recent weeks, discussions on a possible Nairobi “package” have centred on the possible inclusion of deliverables relating to export competition in agriculture, some transparency-related outcomes, and development and LDC-related issues, though sources note that the talks are still ongoing and the exact contents of this package are not yet finalised.

DFQF market access

According to the draft document, WTO members agreed last month at a dedicated session of the organisation’s Committee for Trade and Development that the secretariat would complete a study on the implementation of Hong Kong ministerial decision on DFQF market access by mid-November 2015.

This study will serve as a tool to provide “necessary inputs towards finding convergence” in implementing DFQF market access “in time” for the Nairobi conference, the draft submission says.

“Preference granting countries shall make DFQF market access binding through appropriate scheduling,” the document continues.

The 2013 Bali decision on DFQF market access called on developed and developing country members in a position to do so “to improve” their existing DFQF coverage if they have not yet provided such market access for at least 97 percent of products originating from LDCs. Last year, some countries – China, India, and Chile – made announcements in that regard, with Chile submitting a formal notification.

Many LDCs benefit from non-reciprocal preferences, which are granted primarily by developed countries. Applying DFQF to all LDCs, however, could effectively result in some of these countries losing some of the competitive advantages that these preferences have provided.

With no substantial progress on DFQF in recent years, the debate has focused on the potential gains under a 97 percent DFQF scheme versus full coverage and on related rules of origin, as well as on the US’ position regarding the increase of duty-free tariff lines for LDCs.

According to some informed sources, the LDC Group is proposing to resolve the DFQF issue for all LDCs by conducting a tariff line analysis with regards to clothing. The objective is to determine which tariff lines should be included under DFQF while preserving preferences under the US’ African Growth and Opportunity Act (AGOA) and the Cotonou Partnership Agreement. These allow the US and the EU, respectively, to provide trade preferences to specific LDCs.

Services waiver

The LDC Group also praised the results of indications made at the high-level meeting held this past February regarding the planned preferential treatment to LDC services and service suppliers, in line with the 2013 Bali decision on the operationalisation of the services waiver, as well as the notifications submitted so far.

Ahead of the Nairobi ministerial, LDCs further encourage the actual notification of preferences to the Council for Trade in Services (CTS), including information about “preferential treatment made available, the sectors or sub-sectors concerned and the period of time during which the member is intending to maintain those preferences.”

Some sources indicated that LDCs have also been exploring ways of extending the waiver beyond market access. Though there is a provision in the waiver decision to allow such an extension, notifications so far – with a few exceptions – have restricted themselves to Article 16 of the General Agreement on Trade in Services (GATS), which deals with market access. Non-market access measures are not automatically covered, but can be authorised by the WTO CTS.

The LDC Group’s submission links the definition of “preferential treatment” in the context of the services waiver to “the removal of restrictions, and/or the provision of, special access or procedures, in favour of LDC suppliers over non-LDC suppliers, unless the preference is accorded to LDCs drawn from other pre-existing or future preferential arrangements.”

In this vein, the LDC group encourages preference-granting members which have already notified to improve their notifications.

According to some experts familiar with the draft submission, the inclusion of a paragraph related to the reduction of administrative procedures and reduction of fees for visas, work permits, resident permits, and licenses in favour of LDC service suppliers and independent professionals appears to be important, though will likely be very sensitive to address.

In cases where preferential treatment was given to LDCs based on existing commitments or from their applied regimes that contain restrictions, the document stipulates that WTO members “shall remove such restrictions for LDCs.”

The LDC Group also calls for a modification of the duration of the services waiver so that notified preferences can apply for 15 years from the date that a member submits its notification.

Rules of origin

The draft submission also calls upon preference-granting countries to streamline and simplify preferential rules of origin “so that these are no more barriers to LDCs to fully avail their non-reciprocal market access opportunities.”

The LDC Group submitted a communication on 24 September in which they called for transforming the Bali guidelines on preferential rules of origin into compulsory criteria. The communication also specifies various methodologies in order for WTO members to frame their legislation on preferential RoO accordingly.

Rules of origin specify how much processing must take place locally before goods can be considered to be the product of the exporting country. They are often considered to be overly restrictive and inflexible, making it difficult for LDCs to take full advantage of the preferences they are granted.

At a meeting of the Committee on Rules of Origin last week, China and Thailand presented their new preferential rules of origin programmes for LDCs, sources confirmed, with Japan also reporting clothing-related changes in its preferential rules of origin for least developed countries. These updates were reportedly welcomed by some LDC delegations, who also put forward some follow-up questions.

Regarding the negotiations for harmonising non-preferential rules of origin, sources say that the US, Canada, and Australia were among those members who are still arguing against substantive negotiations to develop common rules, on the grounds that these would impose significant administrative burdens and be unlikely to facilitate trade.

An informal open-ended consultation on preferential rules of origin for LDCs held on Tuesday reportedly examined the 24 September submission on the subject from the LDC Group, in the context of the overall Nairobi ministerial.

Cotton, agriculture

The draft submission also refers to the difficult issue of cotton, calling for a “satisfactory solution” on the subject as part of the Nairobi decisions. The document raises four points related to DFQF market access for cotton and cotton-by products specifically; the reduction and elimination of domestic support and cotton export subsidies; as well as technical and financial assistance.

Regarding food security, the draft submission calls for a ban on applying export restrictions by any non-LDC WTO member on foodstuffs imported by LDCs if the exporting member is a net exporter of the foodstuff concerned.

The text also provides for an exemption of the de minimis calculation for the purchase of food at administered prices by LDCs under public stockholding schemes for food security purposes.

The submission highlights the underutilised production potential in agriculture among LDCs and stresses the need to promote development through improving agricultural productivity and production.

On domestic support, the submission calls for a substantial reduction of all forms of market distorting subsidies, with a view toward their eventual elimination. For this purpose, the LDC Group reiterates the need to preserve their flexibilities embedded under the 2008 agriculture draft modalities, known in trade jargon as Rev. 4.

“Innovative and practical approaches should be considered to avoid box-shifting practices by members that impact trade distorting domestic support reduction commitments,” says the LDC document.

On export competition, LDCs call for eliminating all forms of export subsidies and disciplines on all export measures, with a phase-out period of three years for developed countries and six years for developing countries from the date of the decision.

NAMA

With regard to non-agricultural market access (NAMA), the communication refers to an exemption from tariff cuts and increase of the level of tariff binding commitment in the context of any agreement on NAMA during MC10. “LDCs shall also be accorded safeguard policy space for industrial development,” the document says.

The document also specifies that LDCs should not take on reduction obligations arising from commitments made by non-LDCs in the event of a shared customs union between countries from both categories.

NTBs and SPS

With regard to non-tariff barriers (NTBs), LDCs support the proposal of the African, Caribbean and Pacific (ACP) Group for a Nairobi agreement to establish a Working Group on NTBs under the auspices of the Council for Trade in Goods. This new group would examine crosscutting NTBs in importing markets on developing country exports, with a particular focus on LDCs.

Regarding sanitary and phytosanitary (SPS) measures, which can be difficult for LDCs to meet in some export markets, least developed countries plan to request the establishment of a scheme under their aid for trade programmes for the full cost recovery of SPS inspection controls on imports originating from LDCs. Doing so, they say, would help minimise their trade costs and ensure a level playing field with their competitors.

Special and Differential Treatment

Despite having previously been considered as a possible deliverable for the ministerial conference in Bali two years ago, the Special and Differential Treatment (S&DT) proposals were dropped ahead of that ministerial meet, with sources faulting the complexities that emerged in revisiting the decade-old proposals.

According to the draft submission, the LDC Group, ACP Group, and the African Group have identified 25 S&D provisions and made specific textual proposals aimed at “strengthening these S&D provisions and making them ‘more precise, effective and operational.” The document also mentions a July submission by the G-90 on this issue.

Originally created as an overarching mechanism to give preferential treatment to developing and least developed countries, the S&DT measures aimed to help these countries more easily integrate into the multilateral trading system. To this end, paragraph 44 of the Doha Ministerial Declaration granted a mandate to review all S&DT provisions with a view to making them stronger, more precise, effective, and operational.

Fisheries

With regard to fisheries, the document calls for strengthening disciplines on sea fisheries subsidies. Given that fisheries represent a crucial sector for LDCs, the document reiterates that any discipline in fisheries subsidies shall not prevent LDCs from maintaining subsidies that do not contribute to overfishing or the depletion of fish stocks. The document also reiterates the preservation of S&DT provisions for LDCs in this sector.