ti 6 very final for press

REGIONAL ADVISORY BOARD

Bangladesh

Dr Debapriya Bhattacharya

India

Dr Veena Jha

Nepal

Dr Posh Raj Pandey

Pakistan

Dr Abid Suleri

Sri Lanka

Dr Saman Kelegama

EDITOR-IN-CHIEF

Navin Dahal

EDITOR

Kamalesh Adhikari

EXECUTIVE EDITOR

Shyamal Krishna Shrestha

STAFF CONTRIBUTOR

Shivendra Thapa

DESIGN

Indra Shrestha

COVER & ILLUSTRATION

Abin Shrestha

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PUBLISHED BY

South Asia Watch on Trade,

Economics & Environment

PO Box: 19366254 Lamtangeen Marg

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August 2006

Doha Round suspensionand South Asia

THE Doha Round of multilateral trade negotiations has been sus-pended indefinitely, jeopardising the aspirations of developing Mem-bers to benefit from the successful completion of the ‘Doha Develop-ment Round’. Some believe that this suspension embodies the failureof World Trade Organization (WTO) Members to complete the DohaRound and will ultimately lead to the collapse of the multilateraltrading system. We, however, believe that the Doha Round of tradenegotiations will be completed, albeit later than anticipated.

Multilateral trade liberalisation is beneficial for both developingand developed Members. No matter at what stage of development acountry is, a rules-based, transparent and democratic multilateraltrading system is much simpler and manageable compared to the‘spaghetti bowl’ of bilateral and regional trade agreements. As WTODirector General Pascal Lamy stressed, the suspension gives Mem-bers “time out to review the situation, time to examine available op-tions and time to review positions”. The South Asian countries needto do this as much as, if not more than, any other WTO Members.

The WTO functions in a ‘club mode’, i.e., negotiations are shapedby positions of influential Members, which form groupings tostrengthen their positions. Examples are the Five Interested Parties,the G-20, the African, Carribean and Pacific countries and the Afri-can Group. This is an indication of the fact that the WTO’s ‘consen-sus’ based decision making process is a façade behind which groupsof countries influence negotiations to fulfill their interests.

South Asian countries can also strengthen their negotiating posi-tions if they develop common positions at the WTO. There had beensome attempts in the past from these countries to foster common po-sitions; South Asia did have common positions for the Seattle andDoha Ministerials but this process could not be continued for theCancún and Hong Kong Ministerials.

South Asia is a diverse region, comprising four least developedcountries (LDCs) and three developing countries. Being at differentstages of development and having their own priorities, South Asiancountries do not have common views on all trade issues; there areareas of convergence as well as divergence. For example, the diver-gence in positions manifested during negotiations to grant duty-freeand quota-free market access to the LDCs at the Hong Kong Ministe-rial in 2005. However, given that they also have common views onmany issues, they can develop common positions.

The dual track approach followed by the Members of Associationof South East Asian Nations (ASEAN) could be appropriate for SouthAsian countries – the ‘first track’ on issues in which there is cover-gence and the ‘second track’ on issues in which divergence exists.South Asian countries can develop common positions to negotiatejointly on issues of common interest whereas on other issues, theycan form issue-based alliances with like-minded individual Mem-bers or groups of Members.

Given the current scenario, it is in the interest of South Asiancountries to utilise the time out to review the situation, examine avail-able options and formulate positions. It will enable them to negotiatemore effectively in future multilateral trade negotiations for their col-lective good. �

Contents Trade Insight • Vol.2, No.2, 2006

Duty-Free and Quota-Free Market Access

VIEWPOINT 11

South Asian Common Position in

Can South Asian WTO Members, atdifferent levels of development andwith different priorities, formulatecommon positions in WTOnegotiations? COVER FEATURE 14

Suspension ofDoha RoundImplications forDevelopment

What does the suspension of the Doha Round of trade negotiationsimply for the future of the multilateral trading system, in general, andthe development agenda of the Round, in particular?

The views expressed in the articles published in Trade Insight are those

of the authors and do not necessarily reflect the official position of

SAWTEE or its member institutions.

Does the Hong Kong Decision on DFQF market access really gofar enough to enable LDC products to enter into the developedcountry markets?

READERS’ FORUM 4

TRADE WINDS 5

VIEWPOINT 8Environmental Agreements andFree Trade Rules: A Case ofConflict

REGIONAL FOCUS 18Working Towards a CommonPosition for South Asia in the WTO

TRADE DISPUTE 20

US – Gambling Dispute

TRIPS 23South Asian Common Position onTRIPS Review: Situation, Optionsand Positions

AGRICULTURE 29Agriculture Collapses the DohaRound

WTO ACCESSION 31Bhutan: Knocking on WTO’s Door

NAMA 32Let the Round Collapse!

UNDERSTANDING WTO 34Regional Trade Agreements

BOOK REVIEW 36Are Asian LDCs Losing in Post-Quota World?

NETWORK ACTIVITIES 37

PUBLICATIONS 39

BANGLADESH1. Associates for Development Initiatives

(ADI), Dhaka2. Bangladesh Environmental Lawyers

Association (BELA), Dhaka

INDIA1. Citizen Consumer & Civil Action Group

(CAG), Chennai2. Consumer Unity & Trust Society (CUTS),

Jaipur3. Development Research & Action Group

(DRAG), New Delhi4. Federation of Consumer Organisation of

Tamilnadu & Pondichery (FEDCOT),Thanjavur

NEPAL1. Society for Legal & Environmental

Analysis & Development Research(LEADERS), Kathmandu

2. Forum for Protection of Public Interest(Pro Public), Kathmandu

PAKISTAN1. Journalists for Democracy & Human

Rights (JDHR), Islamabad2. Sustainable Development Policy Institute

(SDPI), Islamabad

SRI LANKA1. Law & Society Trust (LST), Colombo

DOHA ROUND 26

SAWTEE NETWORK

Promises or Lies?

WTONegotiations

4 • Trade Insight • Vol.2, No.2, 2006

READERS’ FORUM

R E Q U E S T F O R C O N T R I B U T I O N S A N D C O M M E N T STrade Insight is a quarterly publication of SAWTEE. The organisation invites scholarly contributions on trade and develop-ment issues, preferably from South Asian country perspectives. Articles are invited on issues relating to international trade,multilateral trading system, regional cooperation, regional trade agreements, and Millennium Development Goals. We alsorequest our valued readers to send comments on the magazine and letters for Readers’ Forum. All contributions and lettersshould be addressed to: The Editor, Trade Insight, SAWTEE, PO Box: 19366, Kathmandu, Nepal. Contributions and letters byemail should be sent to [email protected], mentioning Trade Insight in the ‘Subject’. All contributions and letters shouldhave the writer’s full name and address.

Interesting and usefulI found Trade Insight very inter-esting and useful. The articlesfocus on emerging trade issues,primarily from the perspective ofthe least developed countries(LDCs). SAWTEE has beeninstrumental in disseminatinginformation on what is at stakefor the LDCs in this globalisedworld. Keep up the excellentwork and all the best to theeditorial board.

Keshav P. Acharya, Executive Director,Research Department, Nepal RastraBank, Kathmandu, Nepal

Topical and elegantI appreciate Trade Insight, yourquarterly magazine. The topicsare topical and the presentationis elegant. I shall highly appreci-ate if you could send me thispublication on a regular basisincluding the previous issues.

Indra Nath Mukherji, Professor of SouthAsian Studies, School of InternationalStudies, Jawaharlal Nehru University,New Delhi, India

EnrichingI thoroughly enjoyed readingTrade Insight, Vol. 2, No.1, 2006. Itwas very enriching with infor-mation on trade and develop-ment issues concerning leastdeveloped countries (LDCs),especially the article on ‘aid fortrade’ and its link to the Millen-nium Development Goals. Since‘aid for trade’ is now an impor-tant issue in the Doha Round ofmultilateral trade negotiations,views from the LDCs willcertainly help operationalise ‘aidfor trade’ in a more desired way.

Pranav Kumar, Policy Analyst, CUTSInternational, Jaipur, India

CommendableYour magazine Trade Insight is,indeed, a commendable effort. It hasbeen able to raise debates on issuesof topical interests through incisiveand analytical writings. Thisshould contribute to the bettermentof trade and economic relations

amongst countries in South Asia. Itshould also provide a better per-spective on issues, which have thepotential to have negative spin offssuch as implications of non-tariffbarriers on market access; impact oftrade negotiations on agriculture-based economies, especially on net-food importing economies; andimplications of the Agreement onTrade Related Aspects of Intellectu-al Property Rights (TRIPS) onfarmers’ livelihood, public healthetc. I believe the magazine willcontinue to provide inputs into thepolicies and the thought processesof policymakers and researchers.

Sayed Alamgin Farrouk Chowdhury,Former Secretary, Ministry of Commerce,Government of Bangladesh, Dhaka,Bangladesh

Truly internationalstandard!“Truly international standard”.This is how I want to brand anddefine Trade Insight. It may beworthwhile if an electronic copy ofthis publication is also launched.It will help expand its reachglobally. My best wishes to thepublisher and its team.

Hemant Batra, Secretary General,SAARC LAW

Narrowing the knowledgegap in South AsiaIssues dealt in the World TradeOrganization (WTO) are not easyto grasp, particularly by stake-holders with insufficient academicbackgrounds. In view of theimportance of up-to-date knowl-edge and information regardingthe WTO and the negotiationsunder the Doha Round, there isn’tsufficient literature published inSouth Asia. In this context, TradeInsight has filled the knowledgegap since it provides crucialinformation on recent debates atthe WTO. It’s Vol. 2, No. 1 issuehad articles like ‘Flying Geese orButting Heads? South Asia at aCrossroads’, ‘Problems andProspects for Regional Coopera-tion in South Asia’, ‘Liberalisationand Food Security in Bangladesh’,‘Market Access for the LDCs:Slippery Slopes’, etc., whichsubstantially covered manyimportant issues related to tradeliberalisation and development. Ihope SAWTEE will continuouslywork on such issues to narrow theknowledge gap in South Asia ontrade liberalisation issues.

Khondaker Golam Moazzem, ResearchFellow, Centre for Policy Dialogue,Dhaka, Bangladesh

Vol.2, No.2, 2006 • Trade Insight • 5

TRADE WINDS

THE General Council (GC) of theWorld Trade Organization (WTO), atits meeting on 27-28 July 2006, sup-ported a recommendation by Direc-tor General (DG) Pascal Lamy to sus-pend the Doha Round of multilateraltrade negotiations.

The DG, as chairman of the TradeNegotiations Committee, reported onhis consultations to facilitate and ca-talyse an agreement among Members.In his report, he said that there wereno significant changes in the negoti-ators’ positions and the gaps re-mained too wide. Faced with this sit-uation, the DG recommended that theonly course of action available wasto suspend the negotiations across theRound as a whole to enable the seri-ous reflection by participants, whichwas clearly necessary.

Doha Round of trade talksregret, disappointment and frustra-tion for the lack of progress in the ne-gotiations. They agreed that a time ofreflection was needed but they alsoexpressed the hope that this ‘time-out’ would be temporary and shortsince there was a need to put the ne-gotiations back on track as soon aspossible. Members also agreed to pre-serve the achievements of the negoti-ations so far and build upon them.There was a general agreement on theneed not to modify the mandate orsplit it allowing for selective progress.

The decision to suspend the nego-tiations came after talks among sixmajor Members broke down on 23July. Ministers from Australia, Brazil,the European Union, India, Japanand the United States – the G-6 – hadmet in Geneva to try to follow up oninstructions from the St. PetersburgSummit on 17 July. The main block-age was in the two agriculture legs ofthe triangle of issues, market accessand domestic support. Reports statethat the six Members did not even dis-cuss non-agricultural market access(WTO, 24.07.06 and 29.07.06). �

THE World Trade Organiza-tion (WTO) Task Force on Aidfor Trade tabled its final rec-ommendations at a meeting ofthe General Council (GC) on27-28 July, satisfying the Julydeadline set by the HongKong Ministerial. WTO Mem-bers decided to consider thepanel’s report at the next meet-ing of the GC, scheduled forOctober. The Aid for TradeTask Force was established inFebruary 2006 with a man-date to provide Members withrecommendations for how ‘aid fortrade’ might contribute most effec-tively to the development dimensionof the Doha Development Agenda.

The panel’s nine-page final reportstates that ‘aid for trade’ is about “as-sisting developing countries to in-crease exports of goods and services,to integrate into the multilateral trad-ing system, and to benefit from liber-

alised trade and increased market ac-cess.” It aims, for example, “to en-hance growth prospects, reduce pov-erty, and distribute the global bene-fits more equitably across and withindeveloping countries.” The recom-mendations stress the need for addi-tional, predictable, and effective fi-nancing. In particular, the final ver-sion balances the interests of poten-

Aid for Trade Task Force report submitted

In their statements, Membersagreed with this assessment and en-dorsed the DG’s recommendation.There were expressions of profound

tial recipient countries anddonor countries by under-scoring the importance ofmeasuring the additionalityand adequacy of fundingavailable to meet ‘aid fortrade’ needs, as well as tak-ing stock of existing aidmechanisms.

The Task Force is com-posed of 13 Members, viz.,Barbados, Brazil, Canada,China, Colombia, the Euro-pean Union, Japan, India,Thailand, the United States

and the coordinators of the African,Caribbean and Pacific Group ofStates, the African Group and theLeast Developed Countries’ Group.

The recommendations evolvedover the course of Task Force meet-ings, as well as informal consulta-tions with other WTO Members, in-ternational organisations, and otherstakeholders (BWTND, 02.08.06). �

SUSPENDED


TRADE WINDS

IN recent years, many least developedcountries (LDCs) have achieved high-er rates of economic growth than inthe past and even higher growth ofexports and of foreign direct invest-ment inflows. But this is not translat-ing effectively into poverty reductionand improved human well-being.Moreover, the sustainability ofgrowth is fragile as it ishighly dependent ontrends in commodity pric-es, aid inflows, trade pref-erences and weather condi-tions.

UNCTAD’s Least Devel-oped Countries Report 2006argues that the develop-ment of domestic produc-tive capacities and concom-itant expansion of produc-tive employment opportunities is akey to sustained economic growthand poverty reduction in the LDCs.

Defining productive capacities as“the productive resources, entrepre-neurial capabilities and productionlinkages which together determinethe capacity of a country to producegoods and services and enable it togrow and develop”, the Report showsthat the core processes through whichproductive capacities develop – capi-tal accumulation, technologicalprogress and structural change – havebeen very weak in most LDCs. As aresult, labour productivity is low andthere is widespread underemploy-ment. This is the basic cause of per-sistent mass poverty in the LDCs.

For the LDCs as a group, the de-

THE Ninth Ministerial Meet ofthe Bay of Bengal Multi-SectoralTechnical and Economic Coop-eration (BIMSTEC), held in NewDelhi on 8-9 August, failed to an-nounce the date for implement-ing the already agreed upon freetrade agreement (FTA). Earlier,the bloc had decided to imple-ment it from 1 June 2006.

The joint declaration of thehigh-level government officials’meeting on 8 August and theMinisterial Meet on 9 Auguststated that the pact pertained tofinalisation of trading goods pri-or to the second BIMSTEC Sum-mit for implementing the FTA.The meeting had also decided tohold the second Summit in In-dia on 8 February 2007 to mark adecade of the establishment ofBIMSTEC.

Issues such as regulation onorigin of goods, negative listsand market protection have hin-dered the implementation of theaccord. Yet, another challengebefore BIMSTEC Members is toreduce customs duty to 0 percenton select products by 2017.

Bangladesh, Bhutan, India,Myanmar, Nepal, Sri Lanka andThailand are Members of BIM-STEC (THT, 10.08.06). �

LDCs asked to build capacitiescade 2000-2010 is going to be the firstdecade in which the growth of the eco-nomically active population outsideagriculture is predicted to be greaterthan the growth of the economicallyactive population within agriculture.This transition will affect more thanhalf the LDCs during the decade andmost others in the decade 2010-2020.

Substantial poverty re-duction will, thus, requirenot simply increased ag-ricultural productivity,but also the developmentof competitive businessesin manufacturing andservices, as well as in-creased dynamic inter-sectoral linkages.

The Report calls for aparadigm shift from a

consumption and exchange-orientedapproach to poverty reduction to-wards a production and employ-ment-oriented approach. It analysesthree basic constraints on the devel-opment of productive capacities inthe LDCs – poor physical infrastruc-ture; weaknesses of the domestic pri-vate sector and supporting financialsystems and knowledge systems; andinsufficient demand and thus under-utilisation of domestic resources andcapabilities as well as weak incen-tives to invest and innovate. The Re-port also identifies key policy priori-ties to overcome these constraints, in-cluding the mobilisation of underuti-lised domestic potentials and a re-balancing of the sectoral allocation ofaid (UNCTAD, 21.07.06). �

BIMSTEC

THE Association of South EastAsian Nations (ASEAN) hassuspended talks with India overa proposed free trade area (FTA)because of its reluctance to opendomestic market to goods fromASEAN.

Malaysia’s Trade andIndustry Minister Rafidah Azizsaid on 25 July that the talks had

ASEAN suspends FTA talks with Indiabecome difficult after India demand-ed that some 850 goods – which itimports from South East Asia – beexcluded from the pact. In 2005, thelist stood at nearly 1,400. The goodson the so-called exclusion listaccount for some 30 percent ofSouth East Asia’s exports to India.

Reportedly, India is keen toexpand trade ties with the 10

ASEAN nations but wants toshelter its own sensitive sectors,such as agriculture, textile andother industries, which providelivelihoods to millions of Indians.In June, India’s State Minister forCommerce and Industry JairamRamesh said that India expecteda deal with ASEAN “in a fewmonths” (FE, 26.07.06). �

fails to set date forfree trade pact


TRADE WINDS

N E W S S O U R C E S

BWTND: Bridges Weekly Trade News Digest

FE: Financial Express

PTI: Press Trust of India

THT: The Himalayan Times

TKP: The Kathmandu Post

UNCTAD: United Nations Conference on Trade

and Development

WTO: World Trade Organization

FOREIGN Ministers ofSouth Asian Associa-tion for Regional Coop-eration (SAARC) decid-ed to refer to the group-ing’s Council of Com-merce Ministers India’scomplaint that Paki-stan was not imple-menting South Asian Free Trade Area(SAFTA) in letter and spirit. Accord-ing to India, Pakistan is violating thebasic spirit of wholesome implemen-tation of SAFTA Article 23. However,

Indo-Pak trade disputereferred to council of ministers

Pakistan says that it prefers to tradewith India on a ‘positive list ap-proach’ as in the past, just to checkmassive inflow of Indian goods in itsmarket.

The decision by the Foreign Min-isterial Meeting of SAARC was re-ceived positively by the Indian side.India said Pakistan attaching condi-tionalities to trade with it under SAF-TA was against the essence of the

agreement and ‘con-tradict the commit-ment’ made by theleaders at the Thir-teenth SAARC Sum-mit in Dhaka in No-vember 2005.

SAFTA is a re-gional trading ar-

rangement among Bangladesh, Bhu-tan, India, the Maldives, Nepal, Paki-stan and Sri Lanka. It came into forcefrom 1 January 2006 (PTI, 02.08.06 andTKP, 05.08.06). �

THE United States (US) has de-termined that certain imports fromselect developing countries shouldno longer be eligible for duty-freetreatment under the Generalised System of Preferences (GSP), statingthat imports from those countriescould now compete effectively with-out preferences. As a result, US im-porters of those goods from the af-fected countries now must pay du-ties at normal tariff rates. Most af-fected by the decision are exportsof dried guavas, mangoes andmangosteen fruits from the Philip-pines and Turkey’s exports of trav-ertine stone, which is used for tiles.The decision followed a 2005 re-view of the GSP, which was estab-lished in 1974 to give developingcountries duty-free market accessto the US (United States Departmentof State, 30.06.06). �

INDIA and China re-opened a Himalayan passto border trade on 6 July, 44years after a frontier warshut down the ancientroute. At an altitude of 4,310metres (14,200 feet), NathuLa is the third border trad-ing point to be opened byIndia and China but is con-sidered the most significantas it controlled almost 80percent of their entire trade before itwas closed after their border war in1962.

The pass is part of the historic SilkRoad – a network of trails that con-nected ancient China with India,Western Asia and Europe. The re-opening came days after Beijinglinked the Tibetan capital of Lhasawith a railway, which is seen as an-other move to help modernise thelong-isolated region. Nathu La bor-der trade is expected not only to ben-efit border inhabitants in both coun-tries and promote local openness anddevelopment, but also further moti-vate and open up a new channel forthe blooming China-India trade rela-tions. Although the two countrieshave agreed to resolve their border

rows politically, talks have made slowprogress and much of their 3,500 km(2,200 mile) frontier remains disput-ed. Trade volumes, on the other hand,have soared, to US$ 18.7 billion in2005, a growth of 37.5 percent over2004. In 2006, trade is expected toreach US$ 22-23 billion. Border ex-changes account for a paltry US$ 100million of total trade with the rest be-ing accounted for by sea and air.

Senior officials from China’s TibetAutonomous Region and the tinyNortheastern Indian State of Sikkimcut a ribbon marking the border at theNathu La pass. The opening is a ma-jor event for the two countries to ex-pand and deepen trade and strength-en economic cooperation (Reuters,06.07.06). �

India and China reopen

SILK ROAD PASS

US reviews GSP


VIEWPOINT

tion, even at thecost of restrictingtrade.

An example ofthis conflict can be

seen in the Conven-tion on Trade in En-

dangered Species(CITES). It has the great-

est number of enforce-ment-related trade mea-

sures, which may be directedagainst non-complying parties

and non-parties. Though the Con-vention contains language that couldensure mutual supportiveness withWTO requirements, it requires par-ties to strictly regulate international

trade in endangered species by impos-ing strict import and export controls, tradedocumentation requirements, and even in-cluding trade bans. Article XIV (1) of CITESexpressly allows parties to adopt trade mea-sures more stringent than those provided forin CITES with respect to species that are orare not included in the CITES Appendices.Other examples are the United Nations Frame-work Convention on Climate Change (UN-FCCC) and the Kyoto Protocol. Only partiesto the Kyoto Protocol can participate in theKyoto mechanisms like emissions trading,joint implementation and the Clean Develop-ment Mechanism (CDM). As a result, marketsin emission permits or the CDM certified emis-sion reductions (CERs) would be barred tonon-parties.

Plausible remedies: Remedies in law

GATT Article XXThe standard remedy is available in ArticleXX (b) and (g) of the WTO’s General Agree-ment on Tariffs and Trade (GATT). The pro-visions under this article provide for exemp-tions from application of WTO rules. Underthis Article, WTO Members may adopt trade-restrictive measures for reasons, includingprotection of human, animal or plant life or

EnvironmentalAgreements and FreeTrade Rules

Since theinterests of freetrade rules andenvironmental

protection rulesare not

contradictory,there should be

a balance inpolicy making.

A Case of Conflict

Priyanka Kher

The Doha Declaration adopted at theFourth Ministerial of the World Trade Or-

ganization (WTO) in 2001 emphasises theneed for a mutually supportive interface be-tween ‘Free Trade Rules’ and ‘Measures forEnvironment Protection’. However, this is acomplicated task with conflicts existing be-tween these two. The most challenging con-flict is probably between the World Trade Or-ganization (WTO) principles – the mostfavoured nation (MFN) and national treat-ment; and the specific trade rules as measuresfor environment protection under the Multi-lateral Environment Agreements (MEAs). Inthis regard, the point of contention for policymakers is determining the primacy of one ofthese or identify the other possible situationsout of a state of deadlock.

The trade rules under the WTO and thetrade rules within MEAs constitute separate,distinct and co-equal international legal re-gimes. The WTO rules emphasise reductionof trade barriers and non-discrimination be-tween Members for a movement towards freeand liberalised trade whereas trade ruleswithin the MEAs call for environment protec-


VIEWPOINT

health and for conservation of exhaustiblenatural resources.

Notably, Article XX of the GATT does notuse the term ‘environment’ categorically any-where in the exception. In 1998, the WTO Ap-pellate Body (AB) decided that the interpreta-tion of Article XX must be made in light of thecontemporary concerns of the community ofnations about the protection and conserva-tion of the environment.1 Environmental reg-ulations imposed under this Article must notbe “arbitrary or unjustifiably discriminatorybetween countries where the same conditionsapply” or “a disguised restriction on inter-national trade.” These qualifiers attempt toprevent a nation from imposing environmen-tal regulations that are simply disguised pro-tectionism.

These clauses/qualifiers are open-endedin nature and involve a very subjective en-quiry. It is difficult to determinewhen a trade measure may be ‘nec-essary’ and when an environmen-tal harm is so great as to warrantthe imposition of a trade restriction.Restricting trade can have huge im-plications in terms of socio-econom-ic costs. Also, the efficacy of a regu-lation and the actual benefit to theenvironment as a result of the regu-lation are complicated factors to bejudged prior to imposition.

International lawAnother option is to take recourseto international law. Under Article 3.2 of theWTO’s Dispute Settlement Understanding(DSU), the WTO agreements are treaties to beinterpreted in accordance with customaryrules of interpretation of public internationallaw. Since MEAs are also international trea-ties, they are very much within the sphere ofpublic international law.

The AB held in the reformulated gasolinecase that the WTO agreements must not beviewed in isolation from other rules of inter-national law, including treaties.2 The logicaldeduction is that MEAs must be consideredin the interpretation of the WTO agreements,including the exceptions. Article 3.2 also sug-gests that WTO agreements cannot be inter-preted in a way that adds to or diminishesWTO rights.

Panels and the AB are under a general ob-ligation, pursuant to Article 3.2 of the DSU, topresume there is no conflict with other WTOprovisions when interpreting Article XX ofthe GATT. The legal framework suggests thatthere would be a concerted attempt to find

coherence between MEAs and WTO obliga-tions.

International norm: Lex SpecialisSome authors have suggested a resolution byplacing reliance on international norms. Itcan be argued that MEAs might form a lexspecialis, recognising their specific nature. Thestatus of lex specialis is supported by somecommentators who perceive MEAs to be morespecific treaties, since they contain specificmeasures applied to specific categories ofproducts.3

Vienna ConventionYet another approach is to take recourse tothe law of the treaties as set out in the ViennaConvention. Applicable rules in possible sit-uations under the Vienna Convention is giv-en in the box below4.

Reinforcing the hierarchySome of the aforementioned suggestions havetheir own set of complications. For instance,‘exceptions’ contained in GATT Article XXare subjective applications by the Dispute Set-tlement Body. Not only it is difficult to defineterms like ‘necessary’ or ‘least trade restric-tive’, there is also an underlying hierarchyprevalent in their application, which goesagainst the ‘separate but equal’ line of rea-soning adopted to allow countries to fullycomply with WTO and MEA obligations. Itimplies that MEAs are subordinate to WTOrules because any measure adopted to imple-ment these MEA trade rules will still have tocomply with WTO rules defining what con-stitutes a valid ‘exception’ to WTO obligationsunder GATT Article XX. This also further im-plies that WTO Dispute Settlement Panels willhave jurisdiction to determine whether the im-plementation of MEA trade rules are consis-tent with WTO rules and obligations. There-fore, an alternative to settle a conflicting situ-ation has been suggested. One option is to

MEAs aresubordinate to

WTO rulesbecause any

measure adoptedto implement theMEA trade ruleswill still have to

comply withWTO rules

Dispute Settlement

Status Applicable

Both states are parties to the MEA but not to the WTO MEA

Both states are parties to the WTO but not to the MEA WTO

One state is a party to both, while other state is a party Most likely,only to the MEA but not to the WTO MEA

One state is a party to both, while other state is a party Most likely,only to the WTO but not to the MEA WTO

Both states are parties to both the WTO and the MEA Unclear


VIEWPOINT

obtain a waiver (granted in exceptional cir-cumstances under GATT XXV) from WTO ob-ligations for MEAs (as was granted in Febru-ary 2003 for the Kimberley Process on con-flict diamonds though the application for awaiver was itself controversial amongst thestates participating in the Process5). Notably,a waiver reinforces a hierarchy of the WTOagreements over MEAs.

Policy-based and structural remediesIt is suggested that MEAs meeting certaincriteria should be exempted from challengesunder the WTO. These criteria would in-clude: a minimum number of countries assignatories, an open process of negotiation(allowing all countries to become signato-ries), some universality of environmentalbenefits and harms being addressed by theagreement, and a strong case supporting thenecessity of a trade restriction. This could bedone through an amendment to the Final Actor through a legally binding WTO settlementbody decision (requiring a simple majority).However, most developing countries see itas a way for developed countries to use en-vironmental regulations as disguised pro-tectionism.6 Another option could be to drawa list of specific MEAs, which are exemptfrom a WTO challenge. This model has beensuccessfully taken up by Canada, Mexicoand the United States, which agreed to keepcertain environmental agreements beyondNorth American Free Trade Area (NAFTA).Such a list can then be endorsed by a WTOdecision. The practical difficulty to carry outthis alternative lies in reaching a consensuson the list of MEAs. Most importantly, legit-imising trade restriction in these wayswould, in effect, be asking for a fundamen-tal reform of the WTO system.

ConclusionSince the WTO Dispute Settlement Mecha-nism is considered to be effective, it is nor-mally preferred over the MEA mechanism. Itwould be beneficial to involve the MEA in theWTO dispute settlement of environment re-lated issues (under Article 13 of the DSU).

An interpretative decision on the relation-ship of MEAs and WTO rules or even a newagreement on MEAs in the WTO, defining itsmeaning, trade measures, categories of mea-sures, linkage of burdens, etc., would clarifythe position. Till the time such structural andpolicy changes take place, certain preventivemeasures may be considered. These relate toensuring that trade restrictions in MEAs havea reasonable, close, substantial and objective

NOTES

1 Trachtman, J.P. 1998. ‘United States - ImportProhibition of Certain Shrimp and Shrimp Prod-ucts, AB-1998-4, WT/DS58/AB/R (98-0000)’in European Journal of International Law.www.ejil.org/journal/Vol10/No1/sr4.html

2 WTO. 1996. Appellate Body Report, UnitedStates - Standards for Reformulated andConventional Gasoline, WT/DS2/AB/R,adopted on 20 May , DSR 1996: I, p. 18.

3 Stilwell, M. and R. Tarasofsky. 2001.Towards Coherent Environmental andEconomic Governance. Discussion Paper. AWorld Wildlife Fund-Centre for InternationalEnvironmental Law. Gland: Switzerland.

4 Vicente P.B. 2004. The World TradeOrganization and Multilateral EnvironmentalAgreements. Discussion Paper.www.tradeobservatory.org/library.cfm?refID=25582. Also see Article 30of the Vienna Convention.

5 Most Kimberley Process signatories did notsupport the move, implying as it does thatthe Process is subordinate to WTO rule-making. It was also argued that a waiverwas unnecessary because of the text ofGATT Article XXI (c), which exempts fromGATT requirements a WTO member takingany action in pursuance of its obligationsunder the UN Charter for the maintenance ofinternational peace and security. Conflictdiamonds, also known as ‘blood diamonds’,are rough diamonds used by rebel move-ments or their allies to finance armed conflictaimed at undermining legitimate govern-ments. The Kimberley Process is aninternational certification scheme thatregulates the trade in rough diamonds. Itsaim is to prevent the trade in conflictdiamonds, while helping to protect thelegitimate trade in rough diamonds. Imple-mentation of the Kimberley Process is animportant contributor to maintaining thepeace, by helping to deny resources to rebelmovements and by strengthening legitimategovernments.

6 Many developing countries are concernedthat small groups of developed countrieswould use WTO-sanctioned MEAs to restrictimports from developing countries withdifferent (lower) environmental regulationsand standards.

MEAs meetingcertain criteria

should beexempted fromchallenges under

the WTO

relationship with the policy objective as theend to be achieved, which must be least traderestrictive. The decision to adopt and main-tain the regulatory measure must be support-ed by scientifically objective evidence. Final-ly, it must be understood that the interests offree trade and environment are not contradic-tory. A balance in policy making will benefitboth agendas equally and further the causeof sustainable development. �

Ms Kher is affiliated with Anand and Anand, alaw firm, New Delhi.


VIEWPOINT

Talking about the ways to integrate Afri-cans into the American society, Malcolm

X, an African-American activist, once said:“sitting at the table does not make you a din-ner unless you eat some of what is on thatplate”. Had trade negotiators been cognizantof Malcolm X’s ideas of integration, the WorldTrade Organization (WTO) Ministerial inHong Kong in 2005 would have made a deci-sion on duty-free and quota-free (DFQF) mar-ket access in a different way.

Economists have been debating the utilityof trade preferences, including DFQF marketaccess. They argue that such arrangementshave discriminatory properties and their tradeand global welfare effects are ‘second best’.Despite its sub-optimal nature, if preferenceis accorded to a small country or a group ofcountries that collectively are too insignificantto affect world prices, such recipients experi-ence expansion in output, growth in exportsand ‘terms of trade’ benefits.1 Improved mar-ket access may also stimulate diversificationtoward a broader range of exports and fosterexport-driven economic growth.

Therefore, the demand of the least devel-oped countries (LDCs) for special treatment,including non-reciprocal preferential marketaccess, should not be considered in isolationbut be understood as a part of their efforts tosearch a space for ‘development’ within themultilateral trading system. Its history goesback to 1960s when trade rules of the GeneralAgreement on Tariffs and Trade (GATT) in-corporated provisions of special rights of theLDCs to export markets. The LDCs reassertedthe demand of special treatment during theUruguay Round as well but the outcome wasshort of effective measures. Whalley (1999),reviewing the provisions, succinctly con-cludes: “the veritable smorgasbord of specialand differential measures were sprinkledthroughout the Uruguay Round decisions”2.

The ‘best endeavour’ nature of the provi-sions neither helped the LDCs expand theirexports nor deepened their integration intothe global economy. Therefore, the LDCs havebeen questioning the utility of these provisionsand asking for concrete and enforceable pro-

visions that could contribute to their devel-opment process. DFQF market access grant-ed under non-reciprocal preferential regimescould be one of the most concrete forms of thespecial and differential treatment (S&DT) forthe LDCs.

It was during the First WTO Ministerialheld in 1996 in Singapore where the LDCsfirst put forward the proposal on DFQF mar-ket access. In response, the Ministerial agreedto a plan of action in favour of the LDCs, in-cluding duty-free access on an autonomousbasis. During the preparation for the ThirdWTO Ministerial at Seattle in 1999, the Euro-pean Union (EU) proposed to enter into a com-mitment to ensure duty-free market access foressentially all LDC exports and requestedmost advanced developing countries to con-tribute as well3.

The Doha Declaration of 2001 committedto the objective of DFQF market access for LDCproducts. A number of initiatives were alsoundertaken by developed countries to pro-vide more favourable market access condi-tions for the LDCs such as Everything ButArms (EBA) initiative by the EU and the Afri-can Growth and Opportunity Act (AGOA)by the United States (US). In addition, the Ca-nadian Government enlarged the GeneralisedSystem of Preference (GSP) scheme by pro-viding duty-free access to all products origi-nating from the LDCs, with some minor ex-clusion of agricultural products. Japan re-vised its GSP scheme by providing duty-freetreatment to additional LDC products.

All these initiatives were unilateral andand actions were taken at the multilaterallevel on DFQF market access in December2005 in the Hong Kong Ministerial after adecade of the submission of the proposal. TheMinisterial Declaration states: “buildingupon the commitment in the Doha Ministeri-al Declaration, developed-country Members,and developing-country Members declaringthemselves in a position to do so, agree toimplement duty-free and quota-free marketaccess for products originating from LDCsas provided for in Annex F to this docu-ment”.4 The relevant section of Annex F pro-

DUTY-FREE AND QUOTA-FREE MARKET ACCESS

Promises or

Posh Raj Pandey

The Hong KongDecision on

market accessconstitutes nomore than thecurrent marketaccess facilities

and at the worst,it may run the riskof rolling back the

existingpreferences for

the LDCs.

Lies?Lies?


VIEWPOINT

vides, “we agree that developed-countryMembers shall, and developing-countryMembers declaring themselves in a positionto do so should:

• Provide duty-free and quota-free marketaccess on a lasting basis, for all productsoriginating from all LDCs by 2008 or nolater than the start of the implementationperiod in a manner that ensures stability,security and predictability.

• Members facing difficulties at this time toprovide market access as set out aboveshall provide duty-free and quota-freemarket access for at least 97 percent ofproducts originating from LDCs, definedat the tariff line level, by 2008 or no laterthan the start of the implementation peri-od. In addition, these Members shall takesteps to progressively achieve compliancewith the obligations set out above, takinginto account the impact on other develop-ing countries at similar levels of develop-ment, and, as appropriate, by incremen-tally building on the initial list of coveredproducts.

• Developing-country Members shall bepermitted to phase in their commitmentsand shall enjoy appropriate flexibility incoverage”5.

The Hong Kong Decision on DFQF mar-ket access has both commercial and diplo-matic values. Markets in Quad countries (Can-ada, the EU, Japan and the US) constitute 57.2percent of total LDC exports and about 20percent of LDC exports face customs dutiesalong with tariff peaks in a substantial num-ber of products6. It is natural to expect signif-icant trade expansion of the LDCs after itsimplementation.

On the diplomatic front, DFQF market ac-cess honours the United Nations Millenni-

um Declaration adopted in 2000. An officialindicator of Goal 8 of the United Nations Mil-lennium Development Goals (MDGs) isachieving DFQF market access for the LDCsinto developed country markets and, primafacie, it is a movement in the right direction toaddress the development needs of the LDCs.However, the Hong Kong Decision is filledwith loopholes, and one is forced to suspectthe intention of the preference providingcountries. What kind of leverage the devel-oped Members would have to exclude theproducts under the veil of 3 percent? Howcan such an exclusion change the landscapeof real market access situations for the LDCs?Why does the Decision talk about export in-terest of other developing countries ratherthan that of the LDCs in LDC-specific deci-sions? What are the modalities of progressiv-ity in achieving DFQF market access? Theseare few unanswered but crucial questions thatdetermine the utility and value of the HongKong Decision.

Trade relations and market accessThe LDCs currently account for just 0.6 per-cent of world trade, reflecting their failure toovercome structural problems. The top threeproducts account for more than 50 percent ofthe total exports of almost all the LDCs andfor some, it is 100 percent.7 Considering prod-uct concentration at individual markets, thepicture is more startling. For example, 0.5 per-cent of the tariff lines at Harmonised System(HS) 6-digit level constitutes more than four-fifth of the exports of Bangladesh and Nepalto Australia, Germany and the United King-dom (UK). In Japan and the US, the magni-tude is about three-fourth for Bangladesh andmore than four-fifth for Nepal (Table 1). Sim-ilarly, the export market is highly concentrat-ed, the EU and the US jointly account for 52percent of their total exports.

Developed countries and selected devel-oping countries grant reduced or zero tariffrates over the most favoured nation (MFN)rates on select products originating from theLDCs under GSP.8 United Nations Conferenceon Trade and Development (UNCTAD) re-ports that there are currently 13 national GSPschemes notified to the UNCTAD Secretariatmostly maintained by developed countries.But these schemes have their own definitionof country eligibility, product coverage, rulesof origin (ROO) and safeguard mechanisms.

The outcome of these schemes is that thepublished duty applicable to LDC exports iszero in majority of the products and in mostof the developed countries. However, the pic-

Table 1: Market-wise product concentration in 2003

Export markets Share of 0.5 percenttariff lines (in percent)

Bangladesh Nepal

Australia 95.14 94.23

Canada 77.47 92.52

Germany 87.79 100

Japan 79.8 84.12

United Kingdom 83.75 84.17

United States 72.17 81.28

Source: Author’s calculation based on WITS (World Integrated TradeSolution).

Markets in Quadcountries

constitute 57.2percent of total

LDC exports andabout 20 percentof LDC exports

face customsduties along withtariff peaks in a

substantialnumber ofproducts


VIEWPOINT

ture of the products entering duty-free in de-veloped countries is different. Although pub-lished duty are 85.5 percent and 81.8 percentof the tariff lines in Japan and the US, theLDCs pay MFN duty for 49 percent and 38percent of their exports (Table 2).

The Quad preference schemes excludemore than a quarter of LDC exports, mostlytextiles and clothing (T&C), and out of poten-tial coverage, only a fraction actually receivedtrade preferences at the time of customs clear-ance in the preference giving countries. Thus,the utility of the Quad initiatives recorded alow of 42 percent in 2001.9 The prime sus-pects for low utilisation of preference are theexclusion of products of export interest to theLDCs such as T&C, restrictive ROO, lack ofsecurity of market access, cumbersome admin-istrative procedures and supply capability ofthe LDCs.

The other important factor with regard toexport destination is the changing landscapeof export markets for the LDCs for primaryproducts. Fifteen LDCs from different regionsexport more than 50 percent of their productsto developing countries.10 Therefore, prefer-ential market access in developing countriesalso bears significant importance. China, Re-public of Korea, Morocco and Turkey grantduty-free market access to the LDCs on a non-reciprocal basis. However, as the depth andcoverage of these schemes are often limited,these preferences do not have a significantvalue for the LDCs.

Two caveats emerge from the discussion.Firstly, LDC exports are highly concentrat-ed in few tariff lines in their destination mar-kets. Thus, the flexibility provided to devel-oped countries to exclude 3 percent of tarifflines under DFQF initiatives may excludevirtually all exportable products of theLDCs. Secondly, mere granting of duty-freemarket access to the LDCs does not ensurethat they are effectively utilising the prefer-

ences. Such preferences should besupplemented by measures thataddress their structural problems.

Making DFQF Effective andMeaningfulIn the light of the trade structure ofthe LDCs and the past experience,one has sufficient reasons to doubtthe efficacy of the Hong Kong De-cision on DFQF market access. Ifwe go along with the existing am-biguities, it would constitute nomore than the current market ac-cess facilities that the LDCs are al-

ready granted and at the worst, it may run therisk of rolling back the existing preferences.Thus, the Hong Kong Decision needs to befurther corroborated with the following inter-pretations and explanations:

• The flexibility provided to developed Mem-bers to exclude certain products from DFQFmarket access should be interpreted as 3percent of existing non-zero tariff lines andshould also be capped by the volume ofimports (for example, not exceeding 10 per-cent of imports at tariff lines)

• Any developing Member, constitutingmore than one-fifth of the exports of anyLDC Member, should provide DFQF mar-ket access for at least half of the tariff lines,comprising half of the export value.

• The LDCs should be allowed to designatespecific percentage of tariff lines, for exam-ple, 0.5 percent in the case of developedcountries and 0.1 percent in the case of de-veloping countries, not to be included inthe exclusion lists. Immunity should beprovided to these products from the ‘im-pact test’ on other developing countries.

• The ROO for preferential market accessshould incorporate the stage of develop-ment of the LDCs and be harmonised forall preference granting countries. A prod-uct originating in any of the LDCs or anyof the regional partners should be consid-ered a product originating in the export-ing LDC.

• On other areas of negotiations under theDoha Round, particularly ‘aid for trade’and trade facilitation, special consider-ation should be given to improve supply-side capacity and reduce administrativecosts in the exports to preference grantingcountries. �

Dr Pandey is Member, National PlanningCommission, Government of Nepal.

NOTES1 Grossman, G.M.

and A.O. Sykes.2005. ‘A Prefer-ence forDevelopment: TheLaw andEconomics ofGSP’ in WorldTrade Review.Vol.4, No.4.

2 Whalley, J. 1999.‘Special andDifferentialTreatment in theMillennium Round’.The WorldEconomy. Vol.22,No.8.

3 UNCTAD. 2003.Trade Preferenc-es for LDCs: AnEarly Assess-ment of Benefitsand PossibleImprovements.Geneva: UnitedNations Confer-ence on Tradeand Development.

4 WTO.2005. DohaWork ProgrammeDraft MinisterialDeclaration WT/MIN(05)/W/3/Rev.2 18December 2005.

5 As above note 4.6 WTO. 2006.

Market AccessIssues Related toProducts ofExport InterestOriginating fromLeast DevelopedCountries. TN/MA/S/19. 22February 2006.

7 As above note 6.8 A generalised,

non-reciprocal,non-discriminato-ry system ofpreferences infavour of thedevelopingcountries,including specialmeasures infavour of theleast advancedamong thedevelopingcountries.

9 As above note 3.10 As above note 6.

Table 2: Duty-free tariff for LDC exports indeveloped countries in 2003 (in percent)

Markets Tariff lines Imports

Australia 100 100

Canada 98.9 100

European Union 99.4 99.1

Japan 85.5 50

New Zealand 99.2 100

Norway 96.4 99.5United States 81.8 62

Source: WTO (2006).


COVER FEATURE

The economies of South AsianAssociation for Regional Cooperation (SAARC) Members –

Bangladesh, Bhutan, India, theMaldives, Nepal, Pakistan and SriLanka – have experienced high eco-nomic growth since 1990 as com-pared to other developing countries.According to World Development Indi-cators 2005, the region’s gross domes-tic product (GDP) grew at the rate of5.3 percent per annum since 1995.However, they are collectively rankedthe lowest in terms of ‘trade open-ness’ (measured as the ratio of tradeto GDP), which averaged around 29percent during 1995–2004 (Figure 1).SAARC Members also have the high-est ‘trade restrictiveness index’(which takes into account tariff aswell as non-tariff barriers) despitehaving undertaken substantial uni-lateral tariff reductions. Intra-region-al trade accounts for only 5 percent oftheir total merchandise trade. Loweconomic integration, different stag-

es of development and competition insimilar markets are identified as thereasons for low intra-regional trade.

Among SAARC countries, Ban-galdesh, Bhutan, the Maldives andNepal are the least developed coun-tries (LDCs) whereas India, Pakistanand Sri Lanka are developing coun-tries. Barring Bhutan, all other coun-tries are World Trade Organization(WTO) Members. Despite being at dif-ferent levels of development, theyhave made some collective efforts topreserve their interests in multilater-al trade negotiations, e.g., they put to-gether ‘common positions’ at Seattle(1999) and Doha (2001). However,they have not done so thereafter asthey are failing to reach consensus onmany issues of the Doha Round. Var-ious factors have been thwarting theformation of South Asian common

South Asian Common Position in

WTO Negotiations

Rashmi Banga

On several issues of the Doha Round, South Asiancountries can forge common positions at the WTO butareas of divergence remain, implying the need forinnovative approaches.

positions in multilateral trade nego-tiations. Firstly, there may exist a con-flict of interest between the develop-ing countries and the LDCs. While thelatter avail of preferential market ac-cess in industrialised countries, theformer calls for disciplining tariffpeaks and tariff escalations, whichmay, in turn, erode the preferentialmarket access of the LDCs. Secondly,countries may not agree to certain sec-tor-specific provisions and negotia-tions, e.g., tariff reductions in textilesand rules of origin (ROO) are a boneof contention between more competi-tive countries like India and Pakistanand less competitive countries like


COVER FEATURE

Bangladesh and Nepal. Thirdly, dif-ferences may surface between net-food importing countries (NFICs) andnet-food exporting countries (NFECs).NFICs may not be in favour of pres-surising developed Members to re-duce their agricultural subsidies asthis may raise world food prices;whereas NFECs are concerned withthe issue of market access in devel-oped country markets vis-à-vis reduc-tion of farm subsidies. Fourthly, as aquid pro quo, some South Asian coun-tries may be ready to undertake re-ciprocal obligations while LDCs maybe exempted. Last but not the least,similar export commodities aimed atthe same destination, such as the Or-ganisation for Economic Cooperationand Development (OECD) Members,intensify competition among SouthAsian economies themselves. Thesefactors raise doubts on reaching com-mon positions in multilateral tradenegotiations of the WTO, especiallythe Doha Round.

Notwithstanding these challenges,there are sufficient grounds that couldenable SAARC Members to identify is-sues where they could have a commonposition. Firstly, South Asian econo-mies are undergoing similar structur-al changes. The share of agriculturehas declined in almost all countriesalthough the primary sector still em-ploys the majority of the workforce. Inthe cases of India, Pakistan and Bang-ladesh, the share of agricultural valueadded to GDP has declined from morethan 50 percent in the 1950s to 22 per-cent, 23 percent and 22 percent in2003. In Sri Lanka’s case, it has comedown to 19 percent in 2003. The shareof services has increased to around

half of GDP in almost all the countries(except for Bhutan and Nepal). How-ever, trade in services still remainslow. It was less than 10 percent of to-tal trade in Bangladesh, India, Nepaland Pakistan and around 17 percentin Sri Lanka in 2003. Secondly, therehas been a convergence in macroeco-nomic policies followed by these coun-tries since the early 1990s. Thirdly,South Asian countries face commondevelopment challenges with regardto poverty, inequality, unemploymentand vulnerability concerns. The regionis home to 22 percent of the world’spopulation but consists of 50 percentof the world’s population living be-low the poverty line.

Given their shared concerns, it isvital to identify areas in which SouthAsia can negotiate as a unitary bloc.For this purpose, different issues un-der the Doha Round of trade negotia-tions — agriculture, non agriculturalmarket access (NAMA), services andother issues — are dealt hereunder.

AgricultureAgriculture is linked to food securityand livelihood concerns in SouthAsia. On an average, the region is anet-food exporter, which implies thatit has the potential of being self-suffi-

cient in food (Figure 2).Two main issues arise in the case

of agriculture in multilateral trade ne-gotiations: domestic support andmarket access. Industrialised coun-tries account for 88 percent of totalglobal domestic support payments.The European Union (EU), Japan andthe United States (US) are the prima-ry users of domestic support. Thecomposition of domestic support re-veals that in the EU, total support un-der Aggregate Measure of Support(AMS) is 55 percent, 23 percent un-der the Blue Box and 22 percent un-der the Green Box. In the US, theGreen Box accounts for 83 percent ofdomestic support whereas AMS ac-counts for 12 percent. In Japan, theshare of AMS is 48 percent and thatof the Green Box, 51 percent. Trendsshow that the Amber Box commit-ment levels are much higher than ac-tual levels of subsidy but the supportlevels in other forms are increasing.

Meat, dairy products, cereals andsugar account for 82 percent of all re-ported non-exempt domestic support.Compared to 1986-88, there has beenonly a marginal reduction in supportlevels to these commodities. The sup-port as a percentage of gross farm re-ceipts is more than 35 percent in thecase of rice, sugar, milk, coarse grainand wheat. Producer Support Esti-mate (PSE) in wheat was US$ 9,498million in the EU and US$ 2,611 mil-lion in the US in 2002, while it wasUS$ 303 million and US$ 891 millionin rice. The US accounts for approxi-mately half of the world’s total pro-duction subsidies for cotton.

Developed countries providehuge amounts of domestic support tocrops like rice, wheat, sugar and cot-ton, which has led to a continuousincrease in their share in world ex-ports. These are the crops of interest

Figure 1: Trade openness (average, 1995-2004)

Figure 2: Food as a percentage of merchandiseexports and imports (average, 2000-2004)

World

South Asia

Sri Lanka

Pakistan

Nepal

India

Bangladesh

45.5

29

80.8

33.5

56

25.7

32.2

Bangladesh India Nepal Pakistan Sri Lanka

Food exports (% of merchandise exports) Food imports (% of merchandise imports)


COVER FEATURE

to India and Pakistan. A high level ofdomestic subsidy leads to over pro-duction. Hence, export subsidy isused to dispose of this surplus inworld markets at prices much lowerthan those in domestic markets.

Although the WTO Hong KongMinisterial in 2005 mandated thatexport subsidies have to be removedby 2013, this may not have a signifi-cant impact till domestic subsidiesremain high. South Asia’s subsis-tence farmers are adversely affectedby ‘dumping’, which result due tothese doles provided by developedWTO Members.

Significant and effective cuts ontotal AMS, along with product-spe-cific caps, are necessary to improvethe competitiveness of South Asiancountries in agricultural exports.South Asian economies should callfor strengthening of disciplines on theBlue Box and the Green Box to pre-vent box-shifting under a commonagenda. There is evidenceindicating that subsidiesprovided under the GreenBox in the form of directpayments are also trade dis-torting. It is necessary to re-tain only those programmesunder the Green Box thathave ‘no or minimal tradedistorting effects’. Pro-grammes of developingcountries with respect toagrarian, institutional andland reforms need to be in-cluded under the Green Box expen-ditures.

South Asian economies are undertremendous pressure to reduce theiragricultural tariffs. Lower tariff reduc-tion and higher threshold of bands(less than two-thirds for developingcountries) proposed by the G-20 arein favour of South Asia. This can beundertaken under the joint agenda soas to maintain policy space. Further-more, a common position with re-spect to Special Products and Safe-guard Measures is urgently requiredto protect subsistence farmers.

Tariff rate quotas (TRQs) enableexporters to access markets at lowertariffs. South Asian economies needto seek changes in the existing rulesrelating to TRQs in order to seek great-

er access to agricultural markets indeveloped countries. Lack of accessto TRQ allocations is a major hin-drance to South Asian countries.Most developed countries providemore or all of their TRQ amounts on apreviously negotiated country-specif-ic basis and often largely to other de-veloped countries. South Asian coun-tries can argue that quotas, which arenot globally available, should not becounted towards TRQ amounts. Sub-stantial expansion of TRQs, transpar-ency in administration and allocationof TRQs for specific products can bejointly stressed.

Industrial market accessSouth Asian countries have under-taken substantial unilateral reduc-tions in industrial tariffs. However,their tariff levels are still high com-pared to developed countries. Thesignificance of industrial tariffs tomany South Asian countries arises

from the fact that these tariffs accountfor a large proportion of central gov-ernment revenues (Figure 3).

Under the Doha Round, SouthAsian countries would be required toundertake significant tariff reduc-tions in their bound rates. The simpleaverage of South Asian bound tarifflines ranges from 19 percent to 35 per-cent. Bangladesh has bound just 3percent of its tariff lines while Nepalhas done so for 99.3 percent.

South Asian economies face tariffpeaks and tariff escalations in devel-oped Members. The US has 7 percentof its tariff lines at 8 digit level withtariff peaks while Japan has 12.1 per-cent and the EU around 12 percent.In Japan, tariff escalation is prevalentin textiles, petroleum refinery, rubber

products, metals and footwear. In theEU, tariff escalation exists in textiles,industrial chemicals, leather, woodand rubber products. To enhancemarket access in developed Members,it is important to jointly stress on re-duction of tariff peaks and tariff esca-lation. It is also vital to obtain flexi-bility to address developmental sen-sitivities. Together, South Asian coun-tries might be successful in disciplin-ing/reducing/eliminating existingnon-tariff barriers (NTBs) under a fasttrack approach.

Furthermore, under Paragraph 8of the Framework for EstablishingModalities in Market Access for Non-Agricultural Products outlined by the‘July package’, developing Membersare given two options as flexibilities.They can either apply less than for-mula cuts up to 10 percent of theirtariff lines or not apply formula cutsfor up to 5 percent of tariff lines. De-veloped Members are now seeking to

restrict these flexibilitiesthrough a higher coefficient(4–5 additional points) fordeveloping Members in thetariff reduction formula.There is a need to jointlystress caps on import valueand more transparency andpredictability with regard tothe tariff lines to be coveredby flexibilities. A common ne-gotiating strategy is essentialto retain policy space with re-spect to industrial tariffs. It is

also important to identify the NTBsin the developed Members.

ServicesSouth Asia’s commercial service ex-ports grew from US$ 7.9 billion to US$32.9 billion between 1993 and 2003, ofwhich India alone accounts for US$27 billion. Low growth from othercountries is attributed to substantialunder-estimation of actual flows. Forinstance, 40 percent of remittances toBangladesh are through illegal hundisources and in Pakistan, only US$ 1billion out of US$ 10 billion is sentthrough official channels. Sri Lanka’sremittance receipts are larger than itstea exports and in the case of Nepal,remittances contributed to 12 percentof GDP in 2004.

Figure 3: Share of taxes on internationaltrade in government revenues of

select countries in 2003 (%)World

South Asia

Sri Lanka

Pakistan

Nepal

India

Bangladesh

0 5 10 15 20 25 30


COVER FEATURE

South Asia is the second largestrecipient of remittances in the world,receiving US$ 32 billion in 2005alone. Across all the countries, remit-tances constitute between 2 percentto 12 percent of GDP. The region,therefore, has a comparative advan-tage in Mode 4 of GATS, i.e., move-ment of natural persons. However,barriers in developed Members in-clude wage-parity requirement, dis-couraging import of cheap labour;strict visa procedures; economicneeds tests; non-recognition of pro-fessional qualifications; impositionof discriminatory standards or bur-densome licensing requirements; pay-ment of social security without corre-sponding benefits like medical andpension insurance schemes; and re-quirements of registration with pro-fessional organisations.

Article VII of the General Agree-ment on Trade in Services (GATS) al-lows Members to enter into mutualrecognition agreements (MRAs), en-abling them to recognise the educa-tion/experience requirements and li-censes/certifications granted in oneor several other countries. Till date, alimited number of MRAs exists.Changing demographic conditions indeveloped countries assure a grow-ing demand for workers. By 2050, la-bour supply in industrialised nationsis projected to decline substantiallydue to early retirement, aging popu-lation, falling birth rates, increasingaffluence and time spent in higher ed-ucation of young population. For in-stance, France, Germany, Italy, andthe United Kingdom (UK) – in orderto ‘save social security’ to keep theratio of their economically active pop-ulation to the dependent populationstable – would have to increase im-migration 37 fold, by almost 9 milliona year. A common position on tempo-rary migration will benefit the regionas a whole.

Cross-border trade in services un-der Mode 1 is also important forBangladesh, India, Pakistan and SriLanka, which are also emerging asprime business process outsourcing(BPO) destinations. Although cross-border supply in areas like BPO andinformation technology enabled ser-vices is largely unregulated, legal

and regulatory frameworks are pos-ing a challenge to such exports. In2003, four bills restricting offshoresourcing — the practice of acquiringservices from a non-US vendor —were introduced in the US. In 2004,40 federal bills and 200 state billswere introduced, significantly affect-ing offshore servicing of goods orservices by the US.

In the Uruguay Round (1987-95),limited success was achieved withrespect to trade in services. Fifty per-cent of General Agreement on Tar-iffs and Trade (GATT) Members un-dertook full commitment in Mode 2,30 percent in Mode 1 and 20 percentin Mode 3. However, only 96 WTOMembers made commitments by 2000under the ‘request and offers’ ap-proach and only six proposals weretabled (by Canada, Colombia, the EU,India, Japan and the US) relating toMode 4. Sectoral coverage has alsobeen poor. It is important to bind theextent of liberalisation that exists indeveloped countries with respect toMode 1. Thus, the two most impor-tant strategies with respect to GATSare: lowering of restrictions on move-ment of natural persons under Mode4 and locking the current existing re-gime with respect to Mode 1. Timebound, employment specific and tem-porary GATS visas in Mode 4 can bejointly stressed under the commonposition. Under the plurilateral ap-proach, South Asia as a group canidentify sectors and put requests forliberalisation to the concerned groupof countries but since this would in-volve a reciprocal opening, it requiresdetailed studies.

Other issuesThere are other equally relevant is-sues on which South Asia could forgea common agenda. These relate toTrade Facilitation (TF), Agreement onTrade Related Aspects of IntellectualProperty Rights (TRIPS) and ‘aid fortrade’, among others.

Regarding negotiations on TF, theprime issue for developing countriesis whether resources will be availablefor implementing TF. Along with oth-er developing Members, South Asiamay collectively propose a commonposition for the provision of techni-

cal assistance by either the WTO Sec-retariat or aid agencies to support TFmeasures, including trade-related in-frastructure.

Article 27.3 (b) of TRIPS (relatedto patents) has emerged as highlycontroversial and its review is alreadyunderway. South Asian countriesshould negotiate for the amendmentof TRIPS to include provisions forpatent applicants to disclose thecountry of origin of genetic resourcesand traditional knowledge used inthe inventions and evidence of fairand equitable benefit sharing.

The Aid for Trade Task Force sub-mitted its recommendations to theGeneral Council by the stipulateddeadline of 31 July 2006. The recom-mendations have not addressed thequantity and modalities of the fund.Therefore, South Asian countriesshould propose that such aid flowsshould be stable, predictable and de-mand-driven. It must encompass tech-nical assistance, institutional reform,supply side capacity building and in-frastructure while covering adjust-ment costs arising out of multilateralliberalisation.

ConclusionThere exist sufficient grounds forSouth Asian countries to forge com-mon positions on various issues at theWTO. Together, they can influence thenegotiations for their collective bene-fit. Convergence of macroeconomicpolicies and common developmentalinterests strengthens the possibility ofSouth Asia reaching a consensus onvarious issues being negotiated at themultilateral level. However, differenc-es in some important issues will re-main. To pursue common goals aswell as protect national interests, thepossibility of a ‘two track’ approachas followed by the Association ofSouth East Asian Nations, i.e., the‘first track’ on common agenda andthe ‘second track’ on issues wherecountries ‘agree to disagree’, may beexplored. Greater trade integrationcould also go a long way in forgingeconomic interests in South Asia. �

Dr Banga is Economist at UNCTADIndia, New Delhi. The views expressedare personal.


When the Uruguay Round (UR)became a fait accompli and the

knowledge about the World TradeOrganization (WTO) was meagre, acommon position for the South Asiancountries in the WTO looked ideal.This is precisely what the Group ofEminent Persons (GEP) report (1998)on South Asian Association for Re-gional Cooperation (SAARC) stated,i.e., to formulate a South Asian com-mon position in international tradenegotiations.

SAARC Trade and CommerceMinisters met and adopted a commonposition for the WTO Ministerials atSeattle (1999) and Doha (2001) andthese positions clearly stated SouthAsia’s concerns: that the WTO agen-da should not be overloaded; thatnew issues should not be brought inbefore implementation issues arefulfilled; that a new round should notbe initiated until the unfinishedagenda is fully met; that theAgreement on Trade Related Aspectsof Intellectual Property Rights (TRIPS)should be made compatible with theConvention on Biological Diversity(CBD); and so on. However, SouthAsia soon realised that with new is-sues gradually emerging in the WTO,such a common position is becomingincreasingly difficult.

This realisation was aggravatedwith the differences among SouthAsian countries becoming more prom-inent, viz., the four least developedcountries (LDCs) – Bangladesh Bhu-tan, the Maldives and Nepal – havingdifferent concerns from the three de-veloping countries – India, Pakistan

Working Towards a Common Position for

Saman Kelegama

and Sri Lanka; and Sri Lanka itselfhaving differences with the two largedeveloping countries. For instance,before the expiry of the Agreement onTextiles and Clothing (ATC), SriLanka, Bangladesh, Nepal, and theMaldives preferred an extension ofthe quota regime beyond 2004, butnot India and Pakistan. The net-foodimporting countries in South Asiawere having different concerns thanthe net-food exporting countries.When some South Asian countries at-tempted to work out a free trade agree-ment (FTA) with the United States(US) around 2002-2003, they evenconsidered toying a ‘WTO-plus’ pathon some issues such as TRIPS. Clear-ly, there are different interests and allSouth Asian countries want to indi-vidually gain from the WTO. Thesefactors worked against formulatinga common position in the later yearsand this was seen at the WTO Can-cún Ministerial in 2003.

Once the ‘July package’ of 2004dictated the WTO negotiations, SouthAsian countries found it even moredifficult to harmonise their positionon an issue-based package. The factthat there is no common ground onspecial and differential treatment(S&DT) became crystal clear whenPakistan and Sri Lanka opposedduty-free and quota-free (DFQF) mar-ket access to the LDCs at the HongKong Ministerial in 2005. The factthat India wanted something morethan a plurilateral watered-down ar-rangement on liberalisation ofservices clearly showed that commonground in services liberalisation is

difficult to work out. Even in the mostoptimistic scenario, South Asian co-operation seems to be limited nowthan it was during the UruguayRound and the first five years afterthe establishment of the WTO. Thecommon denominator of the past nolonger works.

All these issues obviously raisethe question as to whether South Asiareally needs a common position in theWTO? South Asia is still a small play-er in global trade. For instance, In-dia’s share in world exports was 0.83percent in 2005 compared to 18.12percent for the European Union (EU),8.95 percent for the US and 6.18 per-cent for Japan. Similarly, its share inglobal imports was 1.03 percent in2005 compared to 18.33 percent forthe EU, 16.07 percent for the US and4.8 percent for Japan. When the globalscenario with regard to the largestSouth Asian nation is so clear, thereis no need to mention about the restof the South Asian countries. Giventhis situation, South Asia has a longway to go in integrating with globaltrade and for this purpose, a non-dis-criminatory rules-based globaltrading system is necessary and thecost of failure of the WTO is too highfor South Asia.

Given that the Doha Round hasbeen suspended, the EU and the USwill most likely form regional tradearrangements (RTAs) with friendlycountries. World trade will get furtherfragmented and RTAs will operatemore on the basis of power relation-ships and less on the basis of rules,hence squeezing the majority of South

At a time when WTO Members are forming groups to negotiate with a common agenda to influencetrade negotiations, it is important to see whether South Asia actually needs a common position forWTO negotiations.

South Asia

REGIONAL FOCUS

WTOin the


Asian countries. Trade disputes willincrease; non-tariff barriers (NTBs)will rise; larger trading nations willattempt to bully the smaller ones; andthe weaker trading nations will standto lose the most, including those inSouth Asia.

It may be recalled that with the for-mation of the WTO in 1995, large andpowerful trading nations were forcedto alter their laws and procedures,most often to the advantage of weak-er trading nations. There have beenseveral WTO Panel and AppellateBody rulings against the bigtrading powers such as the USon dumping, subsidy, safe-guards, etc. Brazil wonsome cases against the USover cotton and against theEU over sugar. The USamended its 1979 Anti-Dumping Code and theCommerce Departmentchanged its methodologiesemployed in calculatinganti-dumping margins. Allthese achievements can bea thing of the past if theWTO is weakened. SouthAsia can play a more effec-tive role to prevent this but a dif-ferent approach is needed for thispurpose. It is evident from the currenttrade negotiations that most WTOMembers do not act alone but func-tion in a ‘club mode’. For instance,the G-20; African, Caribbean and Pa-cific (ACP) nations; and the CairnsGroup, etc., work together to articu-late and defend their positions dur-ing multilateral trade negotiations. Itis this issue-based coalition buildingthat is gathering momentum in theWTO.

South Asia could make use of thisapproach to its advantage. Clearly,two or more South Asian countriescould effectively cooperate more ac-tively in the context of broader issue-based Friends Group. This could for-mally complement the WTO talks ofindividual South Asian countries informal negotiations. Where there arecommon specific interests – technicalassistance, trade facilitation, anti-dumping, etc., – South Asia can for-mulate common positions. After all,in general terms, South Asia is look-

ing forward to: redressing the pastimbalance and perceived inequity inglobal trade; enhancing market ac-cess; creating more policy space; sup-porting capacity building and tech-nical assistance; and maintainingprocedural fairness from the Doha De-velopment Agenda.

Finding a common ground is,thus, not a difficult task on generalissues. A common stand can be veryeffective during crucial times at the

WTO. For instance,the EU Trade Commissioner, Mr Pe-ter Mandelson came to the WTOHong Kong Ministerial saying that hehad no mandate to discuss EU agri-cultural subsidies but had to agree tothe 2013 phase out deadline when herealised that the G-20 had got togeth-er with the G-90 to form the G-110 tospeak with one voice on this issue.

Finding commonality amidst dif-ferent interests is challenging. Asso-ciation of South East Asian Nations(ASEAN) has been unable to find acommon position as its three LDCMembers, viz., Cambodia, Laos andMyanmar; and Singapore having itsown ‘WTO-plus’ agenda. ASEAN,thus, follows a ‘two-track’ approach,viz., the ‘first track’ on common agen-da and the ‘second track’ on issueswhere they ‘agree to disagree’, i.e.,members go their separate ways work-ing through issue-based coalitions.They follow the dual track approachwith political will and cooperationamong their WTO missions in Gene-va because they strongly believe in

REGIONAL FOCUS

some degree of unity than no unity atall.

South Asia could think of a simi-lar approach. Deeper economic inte-gration in South Asia will certainlyassist this approach. If Bangladeshis elevated from its LDC status to adeveloping country status and Bhu-tan obtains WTO membership, con-ditions would be more favourable forformulating a common position. In-dia may have to play a pivotal role inthis process as it is the most influen-

tial South Asian WTO Member.Critiques may say that WTO

has become weak after Cancúnand at present, it is in limbo with

the proliferation of RTAs. With 90odd developing countries, theWTO resembles a United Nations

(UN) system having to accommo-date a plethora of interests andpreferences, thus making effec-tive decision making elusive.

The collapse of the DohaRound of trade negoti-ations on 24 July 2006

may be highlighted as anexample. In such a situation, why

bother about a common position?One should not be too pessimis-

tic. Trade negotiations invariably takea long time; the Uruguay Round tookeight years to complete. Regardless ofthe way the negotiations proceed, itis prudent to take cognizance of thestatement by Prof. Helliner at theWorld Bank’s 2004 Annual Confer-ence: “it is more important for theWTO and other rule systems to bebroadly fair and acceptable howeverlong it may take to get them right, thanrush to further liberalisation as inter-preted by major economic powers…If the current round of WTO negotia-tions fail; it will not necessarily be, assome suggest, a disaster fordevelopment…If the DevelopmentRound fails, we shall have to tryagain”.

It is this trying that will eventual-ly bring gains to South Asian econo-mies. In this process, a common posi-tion on selected issues is certainlygoing to assist South Asia. �

Dr Kelegama is Executive Director,Institute of Policy Studies, Colombo,Sri Lanka.


TRADE DISPUTE

The General Agreement on Tradein Services (GATS) was signed in

1995 but it is surprising that only twodisputes regarding trade in serviceshave been brought to the Dispute Set-tlement Body (DSB) hitherto. In bothdisputes, viz., the Mexico Telecom-munications Dispute and UnitedStates (US) – Gambling Dispute, pan-el findings have set precedents on in-terpretations of various GATS arti-cles, concepts and qualifying terms.

This article focuses on the outcomeof the US – Gambling Dispute broughtagainst the US by Antigua and Bar-buda. Some trade experts opine thatwhile the decision of the DSB is mul-tifaceted, the dispute highlights theclash between modern technologyand decades-old trade agreements. Italso points to the speedy pace of e-commerce. This is important for de-veloping countries, which are in-creasingly supplying different kindsof services over the Internet.

This dispute has become a guidefor developing countries on issues likenecessity tests, general exceptions,scheduling guidelines and specifici-ty of commitments. It also has policyimplications, guidelines and ques-tions that are bound to crop up in the

next few years in the GATS arena.Regardless of which side in this dis-pute claims victory, all WTO Mem-bers that have either prepared a GATSoffer or are in the process of doing somust be clear on exactly what theyare offering and how they plan to reg-ulate their offers. That might seem tau-tological but this is exactly how thedispute arose.

How the dispute began?In 1998, Mr Jay Cohen, a US nationaland President of World Sports Ex-change was arrested upon his arriv-al in the US from Antigua and Barbu-da. His alleged crime was that he pro-vided gambling services to US citi-zens in violation of the Federal WireCommunications Act, 1961. The casewas heard in many courts and theUS Supreme Court refused to reviewthe matter. After serving 21 monthsin imprisonment, Cohen approachedthe government of Antigua and Bar-buda to take up his case at the WTO,which, he contended, had been aboutbusiness, specifically e-commerce.

The WTO’s Dispute SettlementMechanism (DSM) is strictly a pro-cess between states. Yet, in an increas-ing number of cases, a single compa-

ny stands behind the scenes of thestate-sponsored complaint (in thiscase, Mr Cohen and World Sports Ex-change). Moreover, businesses en-gage in what one could call ‘stateshopping’. In the US – Gambling Dis-pute, a US national and investor, losthis battle within the US itself and thenobtained the support of a foreign gov-ernment, Antigua and Barbuda, topursue the US on the same matter. TheWTO case could, thus, be seen as pit-ting a US investor against his owngovernment.

Panel proceedingsAntigua and Barbuda, on 21 March2003, requested consultations withthe US regarding measures appliedby central, regional and local author-ities in the US, which affect the cross-border supply of gambling and bet-ting services. It asserted that certainUS measures were inconsistent withthe US obligations under GATS, inparticular, Articles II, VI, VIII, XI, XVIand XVII thereof, and the US Sched-ule of Specific Commitments annexedto GATS. The crux of the contentionput forward by Antigua and Barbu-da was as follows: Certain US mea-sures prevented suppliers based out-

Hannah Irfan and Shandana Gulzar Khan

DisputeUS – Gambling


TRADE DISPUTE

side the US to export online gamblingservices to US consumers. These mea-sures constituted a violation of USGATS market access commitments forcross-border gambling services underGATS Article XVI, which is a guar-antor of market access to trade part-ners via the prohibition of quantita-tive restrictions. However, Article XVIbecomes operational only if the WTOMember has made sector-specificcommitments in its GATS schedule.Finally, it argued that the US alloweddomestic suppliers to provide onlinegambling services, discriminatingagainst foreign service suppliers inviolation of GATS Article XVII (na-tional treatment).

On its part, the US maintained: Ithad not committed in its schedule,market access commitments for cross-border gambling services. The reason-ing behind it was that under the USlaw, any supply of online gamblingservices, even by domestic suppliers,is banned. It also asserted that specif-ic commitments under GATS ArticleXVI do not render impossible the to-tal prohibition of the electronic sup-ply of certain services, given that thisGATS provision is only concernedwith avoiding specified quantitativelimitations. Finally, the US claimedthat it was invoking GATS exemp-tions under Article XIV that allows aMember to derogate from GATS mar-ket access commitments due to over-riding public policy considerations.

Panel decisionOn 10 November 2004, the report ofthe Panel was circulated to Members.The Panel found, among other issues,that: The US had submitted, withoutrealising that it had done so, in itsGATS Schedule, specific commit-ments for gambling and betting ser-vices under the sub-sector entitled‘Other Recreational Services (exceptsporting)’. Three US federal laws andthe provisions of four US state lawsprohibited means of delivery of ser-vice included in GATS Mode 1, i.e.,cross-border supply, contrary to thespecific market access commitmentsmade by the US for gambling and bet-ting services under Mode 1. The USfailed to accord services and servicesuppliers of Antigua and Barbuda,

treatment no less favorable than thatprovided for under the terms, agreedand specified in the US Schedule,contrary to GATS Articles XVI:1 andXVI:2 on market access. The US wasalso not able to invoke GATS excep-tions under Article XIV as it was un-able to demonstrate that the three fed-eral Acts are ‘necessary’ under Arti-cles XIV (a) and (c) dealing with ex-emptions from market access commit-ments, including public morals claus-es and are consistent with the require-ments of the chapeau of GATS ArticleXIV.

Appeal to the Appellate BodyBoth Antigua and Barbuda and theUS appealed to the Appellate Body(AB) on issues of law and legal inter-pretation. On 7 April 2005, the AB cir-culated its report to the membership.• The AB found that the Panel

should not have ruled on claimsadvanced by Antigua and Barbu-da with respect to eight state lawsof the US as the former had not es-tablished a prima facie case of in-consistency with GATS.

• The AB upheld the Panel’s find-ing that the US Schedule includesa commitment to grant full marketaccess in gambling and bettingservices.

• The AB upheld the Panel’s find-ing that the US acted inconsistent-ly with Article XVI:1 and sub-para-graphs (a) and (c) of Article XVI:2by maintaining certain limitationson market access not specified inits Schedule.

• Finally, the AB reversed the Pan-el’s finding on Article XIV (a) andfound that the US measures arejustified under Article XIV (a) asmeasures “necessary to protectpublic morals or to maintain pub-lic order”.

• It upheld the Panel’s finding thatthe US, had indeed failed to showthat these measures satisfy the con-ditions of the chapeau of ArticleXIV. Turning to the introductoryparagraph of Article XIV, the ABalso disagreed with the Panel’sfinding that the US enforced itsgambling laws more strictlyagainst foreigners than against USsuppliers. It confirmed one other

form of discrimination based onan apparent (but not decisivelyconfirmed) authorisation in theInter-state Horse Racing Act per-mitting domestic, but not foreign,service suppliers to offer remotebetting services in relation to cer-tain horse races.

Implementation of the rulingIn May 2005, the US stated its inten-tion to implement the DSB’s recom-mendations, indicating that it wouldneed a reasonable period of time todo so. As both parties failed to agreeon a reasonable time of period for im-plementation, in June 2005, Antiguaand Barbuda requested that the rea-sonable period of time be determinedthrough binding arbitration pursu-ant to Article XXI.III (c) of the DisputeSettlement Understanding (DSU). TheWTO Director General appointed DrClaus-Dieter Ehlermann to act as Ar-bitrator.

On 19 August 2005, the Arbitra-tor circulated his Award to the Mem-bers, determining that the reasonableperiod of time for implementationwas 11 months and 2 weeks – from20 April 2005 to 3 April 2006. On 24May 2006, the parties informed theDSB that, given the disagreement asto the existence or consistency of mea-sures taken by the US to comply withthe recommendations and rulings ofthe DSB, they had agreed on certainprocedures under Articles XXI andXXII of the DSU dealing with surveil-lance of implementation of recom-mendations and rulings and compen-sation and suspension of concessionsrespectively.

Policy implicationsThe internet has led to a growingcross-border delivery of services. TheWTO Work Programme on E-com-merce is still in limbo but the US –Gambing Dispute has authoritative-ly done away with many ambiguitiesand shed light on many rules yet tobe negotiated.

Firstly, the US – Gambling Disputehas confirmed that electronicallysupplied services are not exempt fromGATS rules and commitments, i.e.,GATS Mode 1 commitments are need-ed to secure cross-border Internet-


supplied services. Secondly, it hasclarified the definition of a ‘like’ ser-vice regardless of the mode of deliv-ery, e.g., a market access commitmentin a specific GATS mode would cov-er the right to supply the same ser-vice via telephone, Internet, snail-mail etc., unless opt outs are men-tioned in the schedule. Thirdly, it pro-vides that the methodology by whichspecific GATS commitments arescheduled must be crystal clear.Fourthly, it has clarified the scope ofGATS market access commitmentsunder Article XVI. An outright banon the means of cross-border supplyis a limitation on the number of ser-vice suppliers in the form of numeri-cal quotas within the meaning of Ar-ticle XVI and, thus, a quantitative lim-itation with a zero-quota effect. Fifth-ly, it has clarified the difference be-tween Article VI on domestic regula-tion and Article XVI on market access.Article VI stipulates that domestic reg-ulations should not “unnecessarilyand intentionally negatively” affecttrade in services. Article XVI dealswith ensuring full market access withrespect to bound commitments. It fol-lows that matters dealing with regu-lation of quality of services are notmatters that can be tackled as long asthey are non-discriminatory. Sixthly,when it comes to defining what con-stitutes ‘public morals’ and ‘publicorder’, cultural differences have beengiven weight and options given topolicymakers which can overridescheduled commitments.

Policy adviceSome of the most important guide-lines that can be gleaned from thislandmark judgment for developingcountries are:• Scheduled commitments should

be accurate and clear; they shouldexplicitly mention any conditionsrequired for fulfilling develop-ment dimensions of national pol-icy on GATS.

• Whichever system of classificationof services a WTO Member em-ploys, e.g., the GATS Services Sec-toral Classification List in conjunc-tion with the United Nations Cen-tral Product Classification (UN-CPC) and following the 2001 GATS

Scheduling Guidelines or other in-ternationally-recognised classifica-tion systems, it must clearly bespelled out as confusion can in it-self give rise to new disputes.

• Article XIV can provide policyspace for Members wishing to re-tain policy measures that can beinconsistent with their commit-ments under GATS in order tosustain policy objectives, therebyallowing room for non-trade con-cerns. This can work both for andagainst developing country inter-ests. In order to avoid misuse ofthis policy space, measures thatare applied under Article XIV (a)and (c) will only be upheld if ap-plied “in a manner that does notconstitute a means of arbitrary orunjustifiable discrimination be-tween countries where like condi-tions prevail, or a disguised re-striction on trade in services”.

Some issues related to the disputeWill future decisions on non-tradeconcerns such as gender, child labour,environment, health and other socialpolicies occupy center stage as well?For instance, how would future pan-els keep matters that should rightful-ly be in the realm of, say the Interna-tional Labour Organization (ILO) outof GATS disputes, especially regard-ing Mode 4? Some new questions thatare bound to be raised after the deci-sion in the US – Gambling Disputeare related to:• Interpretation of Members’ sched-

uled commitments that deal withmany issues, including the legalimportance of the SchedulingGuidelines and the W120 Classi-fication Lists, the importance ofstatements in the context of pre-paring a schedule, and the im-pacts on scheduling of limitations.

• Referring to the GATS objectives,the ‘unfettered’ right to regulatethe impact on the developmentprovisions in GATS.

• Interpreting GATS Article XVI, im-plications for existing and futureGATS commitments and for nego-tiations on domestic regulations.

• Interpreting Article 14, includingthe new effects of the necessity testfor general exceptions and the

ease and/or difficulty of claimingexceptions.

The future of GATSThe bottom-up approach to liberali-sation under GATS spells out flexi-bility, phased commitments and do-mestic regulation. The WTO HongKong Ministerial in 2005 proposedthe ‘plurilateral approach’ to expeditethe pace of negotiations on GATS inthe Doha Development Agenda(DDA) and might have the effect offorced liberalisation a la the GATT.The cumulative effect is a ‘minimumnumber of sectors/sub-sectors in anagreed list of priority sectors/sub-sectors and across all modes of sup-ply’ on offer by all of the membership,accompanied by its requirement toreduce (development) exemptions.

Many developing Members, hav-ing neither the negotiation capacitynor enough experience, could be fac-ing double jeopardy as this ap-proach envisages speedy commit-ments without understanding whatentails and then being called ac-countable for them at the DSB a lathe US – Gambling Dispute. It couldbe used in conjunction with ArticlesIV and XIX (increasing participationof developing countries and Part IVof GATS on progressive liberalisa-tion and negotiations of specific com-mitments respectively) to diminishthe flexibility of GATS.

ConclusionThe decisions in the US – GamblingDispute can be seen as a victory forthe binding force of GATS commit-ments and the flexibilities and excep-tions therein. It can also be viewedas an attempt to encroach upon na-tional sovereignty on matters suchas domestic regulations. Either way,combining the guidance offered bythe US – Gambling Dispute, devel-oping countries are well informedabout how to make requests and of-fers before the conclusion of theDDA. �

Ms Irfan is Legal Consultant at the WTOin the Legal Affairs Division while MsKhan is Legal Affairs Officer at thePermanent Mission of Pakistan to theWTO.

TRADE DISPUTE


TRIPS

The apprehension that WorldTrade Organization (WTO) Mem-

bers would fail to make any majorbreakthrough in trade negotiations,given the persistence divergence onissues of the Doha Round, proved tobe true. The Doha Round of multilat-eral trade negotiations has been sus-pended with no certainty on whenthe negotiations will resume.

After trade ministers from Austra-lia, Brazil, the European Union (EU),India, Japan and the United States(US) failed to bridge differences, WTODirector General (DG) Pascal Lamyhad no choice but to recommend forthe suspension of multilateral tradenegotiations. While stating a bitter re-ality that the Doha Round of tradenegotiations would not be completedby the agreed deadline, i.e., the end of2006, he, however, indicated that thesuspension of talks in all subjectsacross the Doha Round as a whole isalso meant “…to enable the seriousreflection by participants which isclearly necessary.” He also said that

the suspension of trade negotiationsgives WTO Members “time-out to re-view the situation, examine availableoptions and review positions”.

If these remarks from the DG areany indication that WTO Membershave to build consensus on the nego-tiating issues of the Doha Round, it ismore than a positive reflection of theimportance of the multilateral tradebody. Indeed, the multilateral tradebody and its rules are essential to pro-mote global trade and facilitate betterintegration of countries into the glo-bal economy. Particularly, for devel-oping and least developed countries,there is no better option than to con-duct trade through multilateralismand no better choice than to supportand sustain it.

In this context, how should thebiodiversity-rich South Asian coun-tries1 “review the situation, examineavailable options and review theirpositions” with regard to one of themost debated provisions of the WTO’sAgreement on Trade Related Aspects

of Intellectual Property Rights(TRIPS)2 – the provisions under Arti-cle 27.3 (b).

Situation reviewThe review of TRIPS Article 27.3 (b) ismandated by the TRIPS Agreement3

and started since 1999. However,during review negotiations, Memberswere indifferent to each other’s posi-tions, particularly with regard to pat-ents on life forms. While developingMembers lobbied for the incorpora-tion of Convention on Biological Di-versity (CBD)4 principles withinTRIPS, developed Members, mainlythe US and Japan, opposed it. Thisissue received wider consideration atthe Fourth WTO Ministerial in Dohain 2001. The Doha Declaration in-structed the TRIPS Council to exam-ine, inter alia, the relationship betweenTRIPS and CBD; the protection of tra-ditional knowledge (TK) and folklore;and other relevant new develop-ments raised by Members pursuantto Article 71.15 of TRIPS. The Doha

South Asian countries should develop a common positionon TRIPS Article 27.3 (b) to strengthen their voice duringreview negotiations and ensure that TRIPS does notnegate the principles of access and benefit sharing andprior informed consent.

Kamalesh Adhikari

South Asian Common Position on TRIPS Review

Situation,Options andPositions


TRIPS

Box 1: TRIPS review debate

During TRIPS review negotiations,the ideas and proposals put for-ward by different countries andgroups of countries include:

Disclosure as a TRIPS obligation:A group represented by Brazil andIndia, including Bolivia, Colombia,Cuba, Dominican Republic, Ecua-dor, Peru, Thailand, and support-ed by the African group and someother developing countries, hasproposed to amend TRIPS so thatpatent applicants are required todisclose the country of origin of ge-netic resources and TK used in theinventions, evidence that they re-ceived PIC, and evidence of fair andequitable benefit sharing.

Disclosure through WIPO: Swit-zerland has proposed an amend-ment to the regulations of WIPO’sPatent Cooperation Treaty (and, byreference, WIPO’s Patent Law Trea-ty) so that domestic laws may askinventors to disclose the source ofgenetic resources and TK. Failureto meet the requirement could holdup a patent being granted or, whendone with fraudulent intent, couldentail a granted patent being inval-idated.

Disclosure, but outside patentlaw: The EU’s position includes aproposal to examine a requirementthat all patent applicants disclosethe source or origin of genetic ma-terial, with legal consequences ofnot meeting this requirement lyingoutside the scope of patent law.

Use of national legislation, includ-ing contracts: The US has arguedthat the CBD’s objectives on accessto genetic resources and on benefitsharing, could best be achievedthrough national legislation andcontractual arrangements based onthe legislation, which could in-clude commitments on disclosingof any commercial application ofgenetic resources or TK.

Adapted from www.wto.org

Declaration also stipulated that whileundertaking this work, the TRIPSCouncil shall be guided by the objec-tives and principles set out in Arti-cles 76 and 87 of TRIPS and shall takeinto account the development dimen-sion.

Members, individually as well asin groups, have been submitting dif-ferent proposals to the TRIPS Coun-cil, in which discussions have goneinto considerable detail. Here, one cannotice a clear divide between the tech-nology-rich developed Members andbiodiversity-rich developing Mem-bers (See Box 1). Among all the pro-posals, most recently discussed arethe proposals on disclosing thesource of biological materials andassociated TK.

Broadly speaking, the review ofArticle 27.3 (b) is still under negotia-tions with persistent divergenceamong Members, particularly on theissue of the relationship betweenTRIPS and CBD. Many developedMembers argue that there is no needto incorporate any changes in the cur-rent provisions of Article 27.3 (b). Theyview that the concerns of developingMembers are not under the scope ofTRIPS and need to be addressed out-side the TRIPS system, e.g., throughnational laws, private contractual ar-rangements, the World IntellectualProperty Organization (WIPO) PatentCooperation Treaty and CBD. How-ever, most developing Members, whichdo not reject patenting of life forms,have been asking for the amendmentof Article 27.3 (b) with conditions onpatentability such as disclosure of thesource of genetic materials and asso-ciated TK, and evidence of fair andequitable benefit sharing and prior

informed consent (PIC). It is but clearthat developed Members are not yetwilling to show flexibilities to incor-porate access and benefit sharing(ABS), PIC and disclosure requirementinto TRIPS.

Options availableSouth Asian countries have got someflexibilities under TRIPS as well asCBD to develop national legislationon plant variety protection and ABS.

Under TRIPS, they can devise a suigeneris (of its own kind of system) leg-islation on plant variety protection,which is a flexibility given to WTOMembers by Article 27.3 (b). Under thislaw, they can make provisions for therights of breeders in a way that doesnot adversely affect farmers’ rightsthat are under threat due to global IPRrules. India has done the same in itssui generis law, Plant Variety Protec-tion and Farmers’ Rights Act, 2001.Therefore, other South Asian countriescan also include provisions in theirlaws to safeguard farmers’ rights tosave, exchange, reuse and sell seed; getprotection from the misappropriationof TK; obtain benefits derived from thecommercial use of their biological re-sources and associated TK; and par-ticipate in the decision making andlaw making process on matters relat-ed to their biological resources andassociated TK. However, this systemonly covers plant varieties whereaspatent provision in the TRIPS Agree-ment applies in all technologies. There-fore, South Asian countries shouldalso find ways to deal with ABS, PICand disclosure requirement in otherbroad areas of patents, in addition toimplementing a law for plant varietyprotection.


SERVICESTRIPS

Box 2: Positions of the LDCsand developing countries

LDCs’ position: The LDC groupviews that the review of Article27.3(b) should incorporate the con-ditions on patentability to disclosethe source of genetic material andrelevant TK. If we look at the pastnegotiating positions and the sub-mission of proposals by the LDCs,we find most LDCs want the evi-dence of fair, sustainable and eq-uitable benefit sharing, and PIC asa condition for patentability in or-der to stop biopiracy of genetic re-sources and TK. Also, the DhakaDeclaration – adopted at the Inter-national Civil Society Forum forAdvancing LDC Interests in theSixth WTO Ministerial in the Con-text of the Doha DevelopmentRound, held from 3-5 October 2005in Bangladesh – had demandedfor the incorporation of ABS, PICand disclosure requirement with-in TRIPS.

Developing countries’ position:Prior to the Hong Kong Ministeri-al, Commerce Minister of India, MrKamal Nath wrote a letter to 31trade ministers to support the pro-posal submitted by eight countriesto the TRIPS Council. The propos-al urges WTO Members to ensurethat TRIPS provisions do not con-flict with CBD. The proposal alsocalls upon WTO Members to en-sure that TRIPS duly recognisesand respects the spirit of ABS andPIC. In addition, the proposal asksWTO Members to ensure that dis-closure requirement be enforcedwithin TRIPS and be made man-datory for the patent applicant tocomply with.

Notes

1) The LDC group includes fourSouth Asian LDCs – Bangladesh,Bhutan, the Maldives and Nepal.2) The eight countries are Bolivia,Brazil, Cuba, Ecuador, India, Paki-stan, Peru, Thailand and Venezuela.Out of these, India and Pakistan areSouth Asian developing countries.

NOTES1 Among the seven South Asian coun-

tries, barring Bhutan, all are WTO Mem-bers. Bhutan is also in the accessionprocess.

2 This issue is not among the five negoti-ating issues, identified by Members un-der the ‘July package’, but is an impor-tant issue under the Doha Round andnegotiations on it at the TRIPS Councilwere on progress until the suspensionof trade talks in August 2006.

3 According to TRIPS, the review of Arti-cle 27.3 (b) would be done after fouryears of the implementation of TRIPS.TRIPS came into implementation from1995.

4 CBD sets out the three objectives: theconservation of biological diversity, thesustainable use of its components andthe fair and equitable sharing of bene-fits arising out of the utilisation of ge-netic resources.

5 The Council for TRIPS shall review theimplementation of this Agreement afterthe expiration of the transitional periodreferred to in paragraph 2 of Article 65.The Council shall, having regard to theexperience gained in its implementation,review it two years after that date andat identical intervals thereafter. TheCouncil may also undertake reviews inthe light of any relevant new develop-ments which might warrant modifica-tion or amendment of this Agreement.

6 The protection and enforcement of in-tellectual property rights should contrib-ute to the promotion of technological in-novation and to the transfer and dis-semination of technology, to the mutualadvantage of producers and users oftechnological knowledge and in a man-ner conducive to social and economicwelfare, and to a balance of rights andobligations.

7 1. Members may, in formulating oramending their laws and regulations,adopt measures necessary to protectpublic health and nutrition, and to pro-mote the public interest in sectors ofvital importance to their socio-econom-ic and technological development, pro-vided that such measures are consis-tent with the provisions of this Agree-ment. 2. Appropriate measures, provid-ed that they are consistent with the pro-visions of this Agreement, may be need-ed to prevent the abuse of intellectualproperty rights by right holders or theresort to practices which unreasonablyrestrain trade or adversely affect theinternational transfer of technology.

8 All the seven South Asian countrieshave ratified CBD.

9 ITPGRFA sets up a multilateral systemof ABS. The Treaty provisions are limit-ed to 64 listed plant genetic resources– food and forages – that are funda-mental to food security and are either inthe public domain or are under the holdof natural and legal persons.

Similarly, under CBD, they can de-vise national legislation dealing withbiological diversity, ABS and PIC,which is a flexibility provided by theConvention to its contracting states.In this case too, India has already de-vised a legislation, Biological Diver-sity Act, 2002. Hence, other SouthAsian countries8 too should not de-lay in implementing the national ABSlaw.

These countries should also exam-ine the pros and cons of other avail-able options. For instance, the Inter-national Treaty on Plant Genetic Re-sources for Food and Agriculture (IT-PGRFA)9, 2001 provides a flexibilityto protect farmers’ rights. The coun-tries, which have ratified this Inter-national Treaty, can devise a nation-al legislation to implement farmers’rights at the national level.

Position reviewIf we observe the common positionsof the least developed countries(LDCs) and the developing countrieswith regard to Article 27.3 (b), we findthat most South Asian countries havesimilar positions (Box 2). It means thatthere cannot be any disagreementamong them to develop a South Asiancommon position for TRIPS reviewnegotiations. It would, therefore, bein their interest if they capitalise onthe South Asian Association for Re-gional Cooperation (SAARC) forumto put forward their position onTRIPS review. It will not only helpthem effectively implement the lawsthey have enacted or are consideringto enact as part of their obligationsunder CBD and TRIPS but will alsoenable them to benefit from the vastamount of biological resources andassociated TK they possess.

If these biodiversity-rich countriesfail to negotiate for the amendment ofArticle 27.3 (b) of TRIPS in a mannerthey want or if TRIPS continues to ne-gate ABS and PIC principles and dis-closure requirement, they will certain-ly find it difficult to curb biopiracyand receive benefits from the commer-cial use of biological resources andassociated TK. It is, indeed, the “timeout to review the situation, examineoptions and review positions”. �


DOHA ROUND

Ratnakar Adhikari

Why was the Doha Round of multilateral trade negotiationssuspended? When and how will the Round resume? What willhappen to the development-friendly decisions made in the DohaRound? What are the implications for the developing and leastdeveloped countries?

The decision by the Director Gen-eral (DG) of the World Trade Or-

ganization (WTO) to suspend theDoha Round of trade negotiations on24 July 2006 came as a surprise tomany observers closely following the‘Development Round’. Some justifyby saying it is the right course of ac-tion under the given circumstancesbut others are unconvinced.

The 27 July Meeting of the Gener-al Council (GC), which was expect-ed to endorse the decision for sus-pending the Round, “took note” ofthe DG’s statement to suspend ne-gotiations. The GC Meeting was theperfect platform for WTO Membersto intervene and seek clarificationand rightfully demand a word onwhen and how the talks would re-sume.

This article attempts to trace thereason for the suspension of the talksand discusses issues relating to the

future of trade liberalisa-tion and the multilateraltrading system from de-velopment perspective.

Developing modali-ties for negotiations onagriculture and non-ag-ricultural market access(NAMA) by 31 July 2006as mandated by theHong Kong Ministerialwas in itself a tall ordergiven the divergence ofviews in the run-up tothe Hong Kong Ministe-rial. It may be recalledthat Commerce Ministerof India, Mr Kamal Nathhad walked out of the ne-gotiations on 1 July,prompting the Head ofStates of the Group ofEight (G-8) countries tohave a discussion withtheir counterparts from

five developing countries during theformers’ meeting at St. Petersburg inmid-July. The WTO DG flew to theSummit venue to obtain a politicalcommitment from the Head of Statesin favour of the Doha DevelopmentAgenda (DDA). He was able to se-cure the same but that too was short-lived.

This is the first time in the histo-

Doha RoundImplications for

Suspension of

Development


DOHA ROUND

ry of the WTO that despite the direc-tives given by the Head of States,trade ministers decided to stick totheir earlier positions, which result-ed in the suspension of the Round.The Doha Round had received a set-back even in the past when the Can-cún Ministerial collapsed due to ir-reconciable differences among theMembers on agricultural liberalisa-tion on the one hand and the possi-ble inclusion of the ‘Singapore Is-sues’ in the multilateral trading dis-cipline on the other. However, thecurrent failure is of a greater magni-tude. No date has been set for the re-sumption of talks. In order to coverup each others’ weaknesses, Mem-bers have intensifed the blame game.

In this respect, there are severalissues to be considered – the process,content and most importantly, theimplications of the decision to su-pend the Round. Some of these werealso raised at the GC Meeting of 27July by the Geneva based trade dip-lomats.

Firstly, since the WTO is a con-sensus-based system, the suspensionof the Doha Round of trade negotia-tions should have been decided byconsensus. Therefore, questionswere raised on the process followedto ‘suspend’ the negotiations. SomeMembers were exasperated with thefact that there has neither been a bot-tom up approach to negotiations,nor was the principle of ‘decision byconsensus’ respected. In the after-math of the Hong Kong Ministerial,Australia, Brazil, the EuropeanUnion (EU), India, Japan and theUnited States (US) – the G-6 – exclu-sively negotiated among themselvesto find solutions to the most conten-tious issues, viz., agriculture andnon-agricultural market access(NAMA). The fact that the Africancountries and least developed coun-tries (LDCs) were not represented inthis Group is inexcusable for a con-sensus-based organisation.

Secondly, countries have invest-ed considerable time and resourcesin the Development Round. As thesuspension has taken place withouttheir consent, they are bound to feeldiscouraged. These views were elo-quently expressed in the GC Meet-

ing by the representative of the Afri-can Group.

Thirdly, given the suspension ofnegotiations, it is not clear whetherother issues in which decisions havealready been made at the Hong KongMinisterial will have the same bind-ing power or they too will fall victimof the suspension. Issues such astrade facilitation, aid for trade, en-hanced Integrated Framework, LDCspecific special and differential treat-ments, which were unequivocallyendorsed by the Hong Kong Minis-terial fall into this category. Sincethese issues are part of the DohaRound, which is a ‘single undertak-ing’, some suspect there is no obli-gation on the part of WTO Membersto abide by these rules. However, theEU Trade Commissioner Peter Man-

delson said he is in favour of allow-ing the development friendly deci-sions made so far to be implementeddespite the breakdown of the talks.

Fourthly, although this is not thefirst time multilateral trade negotia-tions have collapsed,1 stakes aremuch higher and positions more en-trenched at the present juncture.Therefore, the Round itself could fallapart if the differences are not recon-ciled. The Doha Round is not yetdead, it is “between intensive careunit and crematorium” in the wordsof the Indian Commerce Minister.However, the prospect for reconcili-ation is not as promising as was dur-ing the Uruguay Round (UR), whereonly two parties had to agree on cer-tain issues and other parties wereminor players in trade negotiations.In this Round, the agreement within

the G-6 itself is a monumental task;let alone convincing other equallyinfluential countries – in terms oftheir stakes as well as negotiatingprowess – which are outside the G-6. A number of developed and de-veloping Members, including Cana-da, China, Indonesia, Mexico, Nor-way, Pakistan, South Africa andSwitzerland, may not easily agree tothe decisions made by the G-6. Tofurther compound the problem, theLDCs and the African Group, whichare becoming extremely vocal in theWTO platform, may also demandthat their concerns be reflected in thefinal negotiated outcomes.

Fifthly, the climate in the US isinhospitable for the completion ofthe Doha Round.2 This is mainly be-cause the Trade Promotion Authori-ty (TPA)3 provided to PresidentGeorge W. Bush is expiring in June2007. This is one of the reasons forsetting 31 December 2006 as the dead-line for the conclusion of Doha ne-gotiations. The failure of WTO Mem-bers to agree to modalities of negoti-ations means that meeting the 31 De-cember 2006 deadline for conclud-ing the Doha Round talks is impos-sible. This makes it impossible for theBush Administration to get the tradedeal emerging out of the Doha Roundapproved by the Congress. Althoughit is possible for President Bush toseek an extension of the TPA, if theDoha Round of trade negotiationswere to be concluded in early 2007,he may not get it so easily. This meansthat the revived Round will have towait until the next presidential elec-tion in 2008 even if it is finalisedwithin 2007. Moreover, the US farmbill is to be reauthorised in 2007.With Doha in abeyance, lawmakerswill do little to cut subsidies and thecurrent administration will do littleto force them. Another fat farm billwill make it even harder to restart theDoha Round talks.4

Sixthly, there is complacencyamong a number of countries sincetheir economies have been growingsatisfactorily and their trade poten-tial has not been hindered not leastbecause there exists a possibility offollowing other routes for trade lib-eralisation. Regional trade agree-

This is the first time in thehistory of the WTO that

despite the directivesgiven by the Head of

States, trade ministersdecided to stick to theirearlier positions, which

ultimately resulted in thesuspension of the DohaRound of multilateral

trade negotiations


DOHA ROUND

ments (RTAs) and bilateral tradeagreements (BTAs) are not only pro-liferating but are also emerging as al-ternatives for several WTO Members,both developing and developed. Theyhave made their intentions to followregional and bilateral routes fortrade liberalisation clear after thesuspension of the Doha Round.However, it is necessary to under-stand that BTAs, particularly North-South variety, tend to be ‘WTO plus’in nature and developing countries,in particular, are asked to complywith requirements that go well be-yond the intellectual property rights,services, investment, environment,labour and competition related agree-ments within the WTO. 5 Due toasymmetric negotiating power and/or lack of awareness of the potentialimplications, developing countriestend to readily agree to such condi-tions, which could restrict the rightsof developing countries to ensure ac-cess for HIV/AIDS patients to anti-retroviral medicines, allow farmers’to save, exchange, plant back and sellseeds, regulate investment in nation-al interests, and liberalise ‘services’as per their own development prior-ities.6

Seventhly, if the talks do not moveforward in the right direction, theWTO Dispute Settlement Bodywould be flooded by trade disputes,mainly from the developing coun-tries challenging the agriculturalsubsidies provided by the developedcountries. Despite the expiry of‘peace clause’ in 2003, which pre-vented WTO Members to resort to theDispute Settlement Mechanism fortrade disputes relating to agricultur-al support, not many cases have beenbrought against the agricultural sub-sidies so far. This was with the hopethat the Doha Round of trade nego-tiations would conclude by 1 Janu-ary 2005 or at the latest by 2006 andthe ‘peace clause’ would either be ex-tended or subsumed within a possi-ble new agreement. The only case ofthis nature brought to the WTO in2004 by Brazil against the US to pre-vent the latter from subsidising cot-ton production, has gone in favourof the former. With a number of tradedistorting and actionable subsidies

still in place, the EU and the US couldbe the major targets of such disputes.The possibility of all the verdicts go-ing in favour of developing coun-tries challenging illegal subsidies ofthe EU and the US is imminent.Should that happen, it will provideammunitions to the members of theUS Congress, some of whom are be-coming more hostile to trade agree-ments, to propose that their countrypull out of the WTO, let alone nego-tiate a trade deal under the DohaRound.

Despite these challenges, there isno alternative but to bring the DohaRound back on track. There is con-siderable interest on the part of theG-6 as well as other countries notonly to prevent the development-friendly Doha Round from sliding offbut also to preserve the single under-taking nature of the Round. At thesame time, they are also convincedthat RTAs and BTAs are no substi-tute for the multilateral trading sys-tem. This is because of two reasons.Firstly, the US, which has now be-come a major advocate of RTAs, willfind it equally difficult to sign RTAswithout the Congress makingamendments on the deal, becausewhen the TPA expires, RTAs willcome under the same level of scruti-ny as any other trade agreement. Sec-ondly, certain sectors like agriculturecan only be liberalised through amultilateral platform, as seen fromthe lacklustre agricultural deals con-

NOTES1 The eighth round of multilateral

trade negotiations under the GATT,the Uruguay Round, which startedin 1986 collapsed in 1990 due todifferences between the US andthe EU on the issue of agriculturaltrade liberalisation. Finally, the BlairHouse accord reached betweenthese two trading powers inNovember 1992, helped revive theRound and led to the conclusion oftalks in 1994, and the creation ofthe WTO.

2 The Economist. 2006. In thetwilight of Doha, 29 July.

3 Previously referred to as ‘fasttrack authority’ provided to the USPresident to sign trade agreementswithout ratification by Congress,which has to pass the agreementby a yes or no vote.

4 The Economist. 2006. As abovenote 2.

5 Gibbs, M. and S. Wagle. 2005. TheGreat Maze: Regional andBilateral Free Trade Agreementsin Asia. Colombo: UNDP Asia-Pacific Regional Centre.

6 See also M. Montes and R.Adhikari. 2005. ‘Dangerous Liaison’in South China Morning Post,Hong Kong, 12 December.

7 The Economist. 2006. As abovenote 2.

Given that the DohaRound was the first

attempt to put‘development’ in theagenda of the globaltrading system and a

successful completionwould contribute to liftingmillions of people out of

the poverty trap, thefailure of the Round

would arrest thedevelopment prospects ofa number of developing

countries

tained in various FTAs signed main-ly by the EU and Japan with otherdeveloping countries.

Given the fact that the DohaRound was the first attempt to putdevelopment in the agenda of the glo-bal trading system and a successfulcompletion of the Round would con-tribute to lifting millions of peopleout of the poverty trap, the failure ofthe Round would arrest the devel-opment prospects of a number of de-veloping countries. For the Asia-Pa-cific region, where trade has contrib-uted to lifting millions of people outof poverty and where RTAs arefraught with challenges7, failure torevive the Round in earnest wouldbe tantamount to suspending devel-opment. This sense of urgencyshould guide trade negotiations indays to come. �

Mr Adhikari is a Programme Specialistat the UNDP Asia Pacific RegionalCentre, Colombo. The opinionsexpressed in this article are personal.


AGRICULTURE

Agriculture has been at the cen-tre stage of World Trade Organi-

zation (WTO) negotiations. When theDoha Round was launched in 2001,developing Members demanded rad-ical reforms to existing WTO agree-ments to redress the massive imbal-ances arising in agricultural trade. Akey element was the comprehensivereform of agricultural trade rules toaddress structural inequities in agri-cultural trade. Five years later, hopesfor redressing the imbalances remainmore distant than ever.

In July 2006, WTO Members failedto meet the deadline to reach modali-ties for reducing tariffs and subsidieson all goods; a key step needed to con-clude the Doha Round of trade nego-tiations as mandated by the HongKong Ministerial in December 2005.Agricultural tariffs and subsidies inthe European Union (EU) and theUnited States (US) became a bone ofcontention that led to the Doha Roundbreakdown. Nevertheless, WTOMembers have pledged to revive talksbut uncertainty looms. The possibili-ty of successfully concluding theDoha Round of trade negotiations be-came remote even as talks intensifiedin the first half of 2006. This was con-firmed by the Chairs of the negotia-tions on agriculture and non-agricul-tural market access (NAMA) in thedraft texts prepared for Trade Minis-ters in Geneva at the end of June 2006.

What were the areas of divergenceamong WTO Members in relation toagriculture so that ultimately tradetalks became the casualty?

Agriculture in the Doha RoundPrior to the June mini-ministerial inGeneva, Chair of the agricultural ne-gotiations – Ambassador CrawfordFalconer of New Zealand – conduct-ed six weeks of intensive negotiationswith WTO Members to try to reach anagreement on the details of a deal. Hemet with representatives from differ-ent Member countries, listened to theirproposals and ultimately prepared atext that summarised the state of ne-gotiations.

The document was a balancedand accurate picture of the differentinterests and positions of WTO Mem-bers. It showed insurmountable dif-ferences between countries and re-vealed that there is almost no agree-ment on any of the issues. There werehundreds of areas of disagreementidentified by 760 brackets in the doc-ument. It is a stark reminder to Mem-bers of the complexity of the issues,the different approaches to deal withwide-ranging interests related totrade, and how far apart Members re-main. Some of the most contentiousissues include the percentage reduc-tion of tariffs and subsidies; the flexi-bility granted to developed and de-veloping Members; and issues such

as preference erosion, tropical prod-ucts and commodity prices.

The US took a very aggressive po-sition at the agricultural negotiations,pushing for all tariffs in all countriesreduced as much as possible (with theexception of the least developedMembers). It asked for some tariffs tobe reduced by up to 90 percent. TheUS is loathe to accept flexibilities forany Members that would lessen theimpact of the tariff cuts. The US wasalso reluctant to offer cuts in its do-mestic farm support that would forceit to reduce its current spending lev-els. The EU wanted lesser reductionsto agricultural tariffs but made hugedemands for greater access to devel-oping country markets. Some devel-oped Members, grouped as the G-10,were even more protectionist than theEU in agriculture and are seeking tonegotiate sufficient leeway to main-tain what are mostly small amountsof heavily supported agricultural pro-duction as well as flexibilities to less-en the tariff cuts (they have asked for15 percent of their agricultural tarifflines to be subject to lesser cuts undera category called sensitive products).

A few developing countries likeBrazil, Argentina and Chile demand-ed reduction in agricultural tariffsand subsidies to increase market op-portunities for their agricultural ex-porters but were concerned aboutdeep cuts to industrial tariffs askedof them. The majority of developingMembers wanted market access todeveloped Members. The G-20 askeddeveloped Members to cut their tar-iffs, on average, by 54 percent butmany developing Members wanted tomaintain tariffs to protect their do-mestic agriculture and industry.

An overwhelming majority of de-veloping Members were unhappywith the proposed radical tariff cutsbeing demanded of them by Austra-lia, New Zealand and the US. Theyview tariffs as a useful tool for raisinggovernment revenues and for allow-ing governments some measure of di-rection in nurturing particular sectorsof their economy. In agriculture, thereare serious concerns, especiallyamong the G-33 (an alliance of 46 de-veloping countries) and the 56 devel-oping country Members of the Africa,

Agriculture

collapses the

Doha Round

Carin Smaller

The Doha Round of trade negotiations broke down due to divergencein agricultural negotiations but a deal compromising the interests ofdeveloping Members would have been too high to bear.


AGRICULTURE

Caribbean and Pacific (ACP) Groupabout food and livelihood security andrural development for the millions ofsmall-scale farmers, whose livelihoodsare undermined by growing levels ofimports in their local markets. To thisend, the G-33 successfully negotiateda mechanism in Special Products toaddress these concerns. The agricul-ture document, however, reveals broaddifferences in how to use this mecha-nism. The US wanted to restrict Spe-cial Products to five tariff lines where-as the G-33 position was to designateat least 20 percent of tariff lines as Spe-cial Products (amounting to roughly400 tariff lines). Five tariff lines couldin no way adequately address foodand livelihood security concerns indeveloping countries. The US propos-al ignores the extensive range of sub-missions and proposals made by theG-33 countries over the past few yearson this issue.

The issue of preferences is anoth-er concern for many developing coun-tries; both those that receive prefer-ences and those that do not. Prefer-ence agreements exist between manyof the poorest developing countriesand some developed countries, en-abling developing countries to exportproducts without being subject to tar-iffs. As developed countries lowertheir tariffs, the margin of the prefer-ence is eroded. This is particularly aproblem in relation to the EU and ACPcountries. Therefore, many ACP coun-tries would like to see lesser tariff re-ductions on products they export tothe EU in order to maintain their mar-gin of preference. On the one hand,many Latin American countries ar-gue that their exporters are disadvan-taged because of the preferential ac-cess given to ACP countries andwould not like to see any exemptionsfor such products. The agriculturetext provides six different options todeal with preferences. To date, noneof these have been agreed and the is-sue remains highly divisive betweendeveloping countries. On the otherhand, there is an initiative by manyLatin American countries for furthertariff cuts on tropical products. Thisinitiative has also not been agreed to.

A major proposal by the AfricanGroup (an alliance of 41 African coun-

tries) on managing trade in agricul-tural commodities was on the table.The African Group proposal is a re-freshing way forward for addressingrural poverty. It emphasises the needto ensure stable, equitable and remu-nerative prices for commodity pro-ducers and to deal with structuraloversupplies in commodity markets.

Time for a new approach?The Doha Round of trade negotia-tions was suspended following theirreparable differences between de-veloped and developing Members.WTO Director General Pascal Lamystressed that an eventual agreementneeds to generate “new trade flows.”This will clearly have to wait underthe new circumstances.

This aggressive new push for mar-ket access, particularly into develop-ing country markets, triggered a pas-sionate response from developingcountries, represented by the G-20, G-33, the ACP Group, the LDCs, the Af-rican Group, the Small and Vulnera-ble Economies (SVEs), the NAMA-11,the Cotton-4 and the Caribbean Com-munity and Common Market (CARI-COM). Almost all have criticised thedeveloped Members for sidelining thedevelopment dimension of the DohaRound and for making onerous mar-ket access demands. Brazil’s ForeignMinister, Celso Amorim, said the bur-den of leadership is on the developedcountries to give more in the negotia-tions. India’s Commerce Minister, MrKamal Nath, emphasised this wasmeant to be a Round for trade flowsand trade wins for developing coun-tries and not for developed countries.Indonesia’s Trade Minister, MariPangestu, felt that the flexibilities giv-en to developing countries should notbe seen as eroding market access butas creating effective instruments toaddress food and livelihood securityand rural development. South Afri-ca’s Deputy Trade Minister, RobDavies, called for the development es-sence of the Doha Round to be re-claimed.

The collapse exposes a deep riftamong WTO Members. The assump-tion that the greatest good will comefrom the highest levels of market ac-cess is not shared by all. The idea finds

strongest support from the US, the EU,most developed countries and a fewdeveloping countries. It is a beliefstrongly supported by Pascal Lamyand much of the WTO Secretariat.However, the majority of developingMembers are against this agenda asevidenced by the radically differentpositions presented by AmbassadorFalconer in the agriculture document.Many developing countries do notbelieve their development needs willbe served solely by market access. In-stead, they are demanding tools tohelp build up different sectors of theireconomy to domestic and export de-mand. They also want ways to pro-tect vulnerable groups, particularlysmall-scale farmers.

Developing Members have ex-pressed fears that the Doha Roundcould displace local agricultural pro-duction, force factories to close, andresult in massive job losses and lossin government revenue. Larger devel-oping Members have strong domes-tic constituencies, which are growingincreasingly vocal: millions of subsis-tence farmers in India; industrialtrade unions in Argentina, Brazil andSouth Africa; fisherfolk in the Philip-pines; millions of rice farmers in In-donesia; and textile workers all overSouth Asia and Africa. The growingpower of developing countries in theglobal trade talks makes it even hard-er to ignore these voices.

The degree of conflict in the DohaRound is becoming increasingly dif-ficult to resolve. The WTO has lost itsway by creating rules that promotetrade for trade’s sake, rather than pri-oritising the lives of people and com-munities. WTO Members need traderules that allow countries to decidewhether and at what speed to libera-lise local sectors, with due allowancefor sectors that need increased pro-tection. Therefore, it is high time thatWTO Members inject some freshthinking into what kind of multilat-eral trade rules would best serve de-velopment needs. �

Ms Smaller is Project Officer at TradeInformation Project, Geneva of theInstitute for Agriculture and TradePolicy, based in Minneapolis, theUnited States.


WTO ACCESSION

B H U T A N

Bhutan’s decision to join the WorldTrade Organization (WTO) is a

carefully considered step in recogni-tion of the role that the WTO wouldplay in trade diversification and mod-ernisation of its economy. The coun-try views the accession not as an endin itself but as a key element in thepursuit of national economic devel-opment strategy under its successiveFive-Year Plans. Furthermore, to ac-commodate the growing aspirationsof its people, Bhutan must enhanceits interaction with the world. Invari-ably, Bhutan’s accession forms a keypart of its foreign economic policy.

WTO membership is expected toprovide an opportunity to frame co-herent policies so that important con-cerns arising out of trade integrationare addressed. Membership is expect-ed to enhance market access in goodsand services and provide opportuni-ties for growth and employment.However, Bhutan also has to over-come supply-side constraints, givenits low productivity and high trans-portation costs mainly arising out ofits landlocked status. Unless supplyside bottlenecks are removed, the pro-vision of any market access benefits

Sonam Tobgay

economy is predominantly agrarian.The main traded items from the agri-cultural sector, viz., horticulture prod-ucts, occupy a low share in the coun-try’s exports. Despite the potential foragro-processing industries, no head-way has been made in further expan-sion of such industries. Manufactur-ing and services sectors are incipient.Bhutan imports most of its consum-er, intermediate and capital goods.

Joining the WTO requires ade-quate preparation to shoulder respon-sibilities pertaining to obligations.WTO rules on non-discriminationand non-reciprocity prescribe compe-tition at the global level and are basedon the principle of national treatmentand reciprocity for trade in goods andservices. Free movement of capital, la-bour and technology changes exist-ing socio-economic and cultural set-tings in any country.

If Bhutan desires to uphold itsoverarching development principleof Gross National Happiness, care-ful thinking will be required towardssuch initiatives. The country will haveto create dynamic competitive advan-tages by enhancing efficiency, im-proving productivity and disman-tling supply-side bottlenecks throughappropriate policy measures. Other-wise, the gains of WTO membershipcould be elusive. �

Mr Tobgay is affiliated with the Ministryof Agriculture, Royal Government ofBhutan. The views expressed are thoseof the author and do not necessarilyreflect those of the government.

will be meaningless. Therefore, Bhu-tan must come to terms with its reali-ties as a least developed country(LDC) and frame policies to addressits development challenges.

Apart from predictable marketaccess for its products, other poten-tial benefits from accession would bethe improvement in the investmentclimate. Bhutan has already openedthe economy for foreign direct invest-ment (FDI) and demand for foreigngoods and services is growing rap-idly. It is not mandatory for a busi-ness firm to comply with FDI require-ments. However, in the sectorsopened under WTO commitments,all foreign players would be requiredto enter through the FDI channel. Be-sides, the accession would comple-ment the process of domestic reformsby providing policy stability andpredictability in the trading regime,which would be beneficial for thegrowth of the private sector.

As an LDC, Bhutan can enjoy thespecial benefits offered to such na-tions, including transition periods toimplement certain provisions of theagreement. Technical assistance canalso be availed either from the WTOSecretariat or through bilateral chan-nels to enable Bhutan to competewith other countries by improvingnational standards and other qualityparameters.

However, the prime issue iswhether Bhutan would be capable ofpursuing its national interest givenits economic position and perfor-mance in the global context. Bhutan’s

Knocking on

WTO’s door


R UND

NAMA

Multilateral trade negotiationson non-agricultural market ac-

cess (NAMA) in the World Trade Or-ganization (WTO) have been char-acterised by a slew of concessionsbeing made by developing Memberswithout anything concrete comingtheir way. These concessions aremoving from a milder to a stringenttariff reduction formula and bindingall the tariff lines.

Before one understands the sig-nificance of these concessions, it isimportant to underscore that indus-trial and consumerproducts still accountfor more than 75 per-cent of global trade.The WTO’s WorldTrade Report 2004 notesthat trade in goods isgrowing faster thanworld commercial ser-vices trade. It is in thiscontext that the draftreport of AmbassadorDon Stephenson,Chair of the NAMACommittee, and otherattendant develop-

ments on NAMA at Geneva withtheir long-term implications on sur-vival and growth of the industries ofdeveloping Members such as India,merit stock taking.

It is vital to evaluate the impor-tance of NAMA negotiations andtheir implications for developingMembers. For countries such as theUnited States (US) – where consum-er and industrial good exports alonehave been estimated at US$ 670 bil-lion per year and support 12 millionhigh paying jobs – NAMA negotia-

tions are a priority. It isprojected that a reduc-tion of tariffs by onethird can lead to morethan US$ 267 billionincrease in global eco-nomic welfare. There-fore, the US is makinga fervent pitch for am-bitious market accessin NAMA as a yard-stick for the successfulcompletion of the DohaRound. A strong pushby the European Union(EU) and the US for re-

ciprocal offers of zero tariffs in sec-toral arrangements amongst a criti-cal mass of countries should be seenin this context.

The centerpiece of the onslaughtfor increased industrial market ac-cess has been a long-drawn wran-gling over the differential scale of re-duction of tariffs through a mathe-matical formula known as the ‘pure’Swiss formula and its variants.While developed countries revealedtheir preference for the pure Swissformula known to cut higher devel-oping country tariffs steeply, Argen-tina, Brazil and India (ABI) soughtto soften the impending punchthrough their own variant known asthe ABI formula. This variant is su-perior to the pure Swiss formula asit takes into account the average tar-iff rate of a country while reducing aparticular tariff. Hence, the new tar-iff structure that will come into ex-istence is reflective of the old tariffregime and not completely indepen-dent of it as would happen if the pureSwiss formula is used for reducingtariffs.

The WTO Hong Kong Declarationof 2005 adopted a ‘Swiss formulawith coefficients’. In other words, atHong Kong, despite the deadlock,hopes of the adoption of ABI formu-la (which is a variant of Swiss for-mula and completely fits in the de-scription of ‘Swiss formula with co-efficients’ for achieving tariff reduc-tions) were kept alive and carriedforward for further negotiations atGeneva. However, as the WTO pun-dits never fail to remind us, the nameof the game is compromise andcross-sectoral trade offs in agricul-ture and NAMA or NAMA and ser-vices are necessary. Vociferouschampions of the ABI formula nowseem to be getting into a compromisemode, as is evident in the case of Bra-zil, which has signalled a shift in itsstance over the ABI formula. Thiscompromise has happened despitethe Hong Kong Declaration statingthat a ‘Swiss formula with coeffi-cients’ would be adopted. The draftreport of Ambassador Don Stephen-son, whilst mentioning that the ABIis on the negotiating table, also statesthat there is a broader and stronger

Let the

Prabhash Ranjan

NAMA negotiations are characterised by developed Membersinsisting developing Members to undertake deep reductions inindustrial tariffs as well as growing differences among the latter onthe industrial market access formula.

OC llapse!

Vociferouschampions of theABI formula now

seem to be gettinginto a compromisemode, as is evident

in the case ofBrazil, which hassignalled a shift inits stance over the

ABI formula


NAMA

support for the pure ‘Swiss formu-la’. This dangerous assertion has notbeen attacked by NAMA-11, whichcomprises of Brazil and India clear-ly showing that the pure ‘Swiss for-mula’ has been accepted and the ABIformula buried forever.

Moreover, a recent statementmade by Celso Amorin, BrazilianForeign Minister that the steep tariffcuts (with a coefficient of 30 in thepure Swiss formula) would be ac-ceptable also conveys the abandon-ment and burying of the ABI tariffreduction formula. The rider, ofcourse, is a trade off in terms of amore liberalised trading regime inagriculture. Although India hasmaintained a studied silence on thisnew development, it is officially notknown to what extent India has ex-tended its support to this stance ofBrazil. However, given that Braziland India have been negotiatingjointly on NAMA, it is not impracti-cal to assume that the shift in stancehas India’s support.

If this is, indeed, the case, it isworth considering a few scenariosand likely implications of the Brazil-ian approach in selected sectors. Cal-culations show that if a ‘coefficientof 30’ is applied, the new bound rateof fish and fish products in Indiawould come down from the present100.7 percent to 23 percent, a reduc-tion as high as 77 percent. It is easyto see that the new bound tariff ratewould be even lower than the presentapplied rate (30 percent) on fish andfish products. Similarly, in the mo-tor vehicles parts and equipmentssector, bound tariff rates of 105 per-cent in certain tariff lines will comedown to 23 percent. In stones, gemsand precious metals, electronics andelectrical goods and in textiles andclothing, the bound tariff rates of 35percent would be more than halvedto 16 percent in most of the cases.

This abandonment of the ABI for-mula by India is the latest in the se-ries of compromises made in theNAMA negotiations. In the past, In-dia compromised by giving up itsdemand for a linear formula to cuttariffs. Similarly, it compromisedagain by accepting to bind all the tar-iff lines. WTO pundits justify such

concessions by argu-ing that compromiseshave to be made in glo-bal trade talks. How-ever, India is yet to getany tangible gain forthese compromises.WTO watchers arealso quick to remindus that such conces-sions in NAMA willenable India to clincha favourable deal onservices. This is aflawed argument asdeveloped Membersdo not seem to be in themood to give anythingon services. The offersof key developedcountries such as theUS on movement of natural personsare as yet highly inadequate and withthe tightening of the immigrationlaws it may be foolhardy to expect anydramatic changes. Moreover, all po-tential gains in services are merepromissory notes in anticipation ofwhich India seemingly has alreadyconceded a lot in NAMA.

What gains can developing Mem-bers then look forward to in the cur-rent circumstances? The EU and USproposals on NAMA do not evenmake pretence of the same andwould hardly lead to any reductionin tariff peaks and tariff escalations,let alone address non-tariff barriers.Even with the end game in progress,the US continues to pitch for evensteeper tariff cuts on applied rates.This reduction from the applied tar-iff rates is to be achieved through a‘coefficient of 15’ in the pure Swissformula for developing countries. Itis worth noting that if the US ap-proach is acceded to, a bound tariffrate of 100 percent would come downto a mere 13 percent, a reduction by87 percent! Not only does thisamount to a slap on the face of theDevelopment Round but is also ille-gal since the present mandate is tocut tariffs from bound and not ap-plied levels. Needless to mention, theprinciple of ‘less than full reciproci-ty’, which is an intrinsic element ofthe negotiations and whereby devel-oping countries will cut their tariff

The principle of‘less than full

reciprocity’, whichis an intrinsic

element of thenegotiations and

wherebydeveloping

countries will cuttheir tariff ratesmuch less thanwhat developed

countries will do,has not been

conceded

rates much less thanwhat developed coun-tries will do, has notbeen conceded.

Much has beenmade of the protec-tions that would beavailable in such aliberalised trade sce-nario in the form of‘flexibilities’ wherebycertain tariff lines maynot be subjected tosimilar reductions.Following the ‘Julypackage’ of 2004 andthe Hong Kong Decla-ration, developingMembers have the op-tion of either shield-ing 5 percent of their

tariff lines from tariff reduction orsubjecting 10 percent of tariff linesto less than formula cuts. Hence, acountry like India would be able toprotect at best roughly 500 tariff linesif the 10 percent option is exercised.Even then, these 500 tariff lines willhave to undergo tariff reduction, withthe only saving grace being thatthese cuts will be less than the for-mula cuts. It is worth rememberingthat given the overall steep reductionin tariff rates, even these protectedtariff lines would have to undergo arelatively steeper reduction. The in-adequacy of the protective net is bestunderstood by noting that in fisher-ies and textile and clothing alone,sensitive sectors by any account,there are close to 1400 tariff lines inIndia!

Given scheme of things, the situ-ation appears to be gloomy for de-veloping Members. Trade liberalisa-tion can certainly not happen at anycost. In case, the adequate safeguardsare not forthcoming, the ‘develop-ment dimension’ of the Doha Roundwill not be met. Perhaps, developingMembers should allow the talks tocollapse for the time being, thus sig-naling to developed Members thatunlike in the past, they cannot be tak-en for a ride anymore. �

Mr Ranjan is Research Officer at Centrefor Trade and Development, New Delhi,India.


UNDERSTANDING WTO

Regional Trade Agreements(RTAs) are agreements to en-

hance economic ties between nations,which do not necessarily fall in thesame geographic region. Furthermore,they can be specified according totheir level of integration and could beclassified into two broad categories –shallow and deep integration – andfive sub-categories.

Shallow IntegrationPreferential Trading Agreements (PTAs)are agreements among a set of coun-tries involving preferential treatmentof bilateral trade between any twoparties to the agreement relative totheir trade with the rest of the world,e.g., Association for South East AsianNations (ASEAN) – China.

Free Trade Agreements (FTAs) are agree-ments where member countries com-pletely abolish trade barriers (bothtariff and non-tariff barriers) for goodsoriginating within the member coun-tries. However, countries do not com-pletely abolish trade barriers evenwithin FTAs and most such agree-ments tend to exclude sensitive sec-tors, e.g., South Asian Free Trade Area(SAFTA).

Customs Union is a union in whichmember countries impose a commonexternal tariff (CET)1 on goods im-ported from non-member countries,e.g., Mercado Comun del Sur (MER-COSUR).

Deep IntegrationCommon Market exists when membercountries attempt to harmonise in-stitutional arrangements as well ascommercial and financial laws andregulations among themselves. Do-ing so implies free movement of fac-tors of production, i.e., removal ofcontrols on free movement of labourand capital, e.g., Common Market forEastern and Southern Africa(COMESA).

Economic Union occurs when coun-tries adopt and implement commoneconomic policies and regulations aswell as a single currency, e.g., theEuropean Union (EU).

Growth in RTAsThere has been a surge in the num-ber of RTAs since the 1990s. WithinAsia, the number of such trade dealsis exploding.2 The RTAs that havebeen notified to the World Trade Or-ganization (WTO) have also multi-plied mainly because almost everyWTO Member, except Mongolia, isengaged in an agreement with otherMembers or non-Members. By July2005, 330 RTAs had been notified tothe WTO.3

RTAs and the WTOWTO rules on RTAs can be tracedback to the General Agreement onTariffs on Trade (GATT), 1947. Arti-cle XXIV of the GATT was further re-fined by an understanding negotiat-ed during the Uruguay Round (1986–1994), thus providing a legal founda-tion for RTAs. The Enabling Clauseadopted in 1979 provides for the mu-tual reduction of tariffs on trade ingoods among developing countrieswhile rules covering trade in servicesin RTAs are set out in Article V of theGeneral Agreement on Trade in Ser-vices (GATS).

Though the formation of RTAs de-parts from the core WTO principle ofmost favoured nation (MFN), Mem-bers are permitted to enter into sucharrangements under specific condi-tions, which are spelled out in threesets of rules:

Article XXIV of GATT: The provisionsof this Agreement allow contractingparties to form customs union or a freetrade area or the adoption of an inter-im agreement necessary for the for-mation of customs union or a freetrade area, provided that:

a) with respect to a customs union, oran interim agreement leading to a for-mation of a customs union, the du-ties and other regulations of com-merce imposed at the institution ofany such union or interim agreementin respect of trade with contractingparties not parties to such union oragreement shall not on the whole behigher or more restrictive than thegeneral incidence of the duties andregulations of commerce applicablein the constituent territories prior tothe formation of such union or theadoption of such interim agreement,as the case may be;

b) with respect to a free trade area oran interim agreement leading to theformation of a free trade area, the du-ties and other regulations of com-merce maintained in each of theconstituent territories and applicableat the formation of such free trade areaor the adoption of such interim agree-ment to the trade of contracting par-ties not included in such area or notparties to such agreement shall not behigher or more restrictive than the cor-responding duties and other regula-tions of commerce existing in the sameconstituent territories prior to the for-mation of the free trade area, or inter-im agreement as the case may be; and

c) any interim agreement referred toin subparagraphs a) and b) shall in-clude a plan and schedule for the for-mation of such a customs union or ofsuch a free trade area within a rea-sonable length of time.

Enabling Clause: This decision by sig-natories to the GATT in 1979 allowsderogations to the MFN principle infavour of developing countries. Inparticular, its paragraph 2 (c) permitspreferential arrangements among de-veloping countries in trade in goods.

Paragraph 2 (c): Regional or global ar-rangements entered into among less

Regional trade agreements


UNDERSTANDING WTO

developed contracting parties for themutual reduction or elimination of tar-iffs and, in accordance with criteria orconditions which may be prescribedby the contracting parties, for the mu-tual reduction or elimination of non-tariff measures, on products importedfrom one another. The treatments spec-ified by this exception are as follows:

a) Generalised System of Preferences(GSP), which is a system of tariff pref-erences provided by developed coun-tries to developing countries;

b) Differential and more favaourabletreatment regarding non-tariff barri-ers initially negotiated under theGATT those of which are now in theWTO framework;

c) Combined arrangements among de-veloping countries or between a fewof them; and

d) Special treatment on the least de-veloped among the developing coun-tries in the context of any general orspecial measures in favour of devel-oping countries.

Article V of GATS: This Agreement al-lows Members to enter into an agree-ment liberalising trade in services be-tween or among the parties to suchan agreement, provided that such anagreement:

a) has substantial sectoral coverage;4

and

b) provides for the absence or elimina-tion of substantially all discrimination,in the sense of Article XVII, between oramong the parties, in the sectors cov-ered under sub-paragraph (a),through: elimination of existing dis-criminatory measures, and/or prohi-bition of new or more discriminatorymeasures, either at the entry into forceof that agreement or on the basis of areasonable timeframe, except for mea-

sures permitted under Articles XI, XII,XIV and XIV bis.

Scope of RTAsThere is a widespread debate aboutwhether RTAs are ‘building blocks’or ‘stumbling blocks’ towards multi-lateral trade liberalisation. Advocatesof regionalism maintain that RTAsenable countries to liberalise tradeand investment barriers to a greaterdegree than multilateral trade negoti-ations. Others feel that RTAs can leadto discriminatory liberalisation.5

Although the formation of RTAsdeparts from the fundamental WTOprinciple of MFN, they complementthe multilateral trading system. Ser-vices, intellectual property, environ-mental standards, investment andcompetition policies are all issues thatwere raised in regional negotiationsand later developed into agreementsor topics of discussion in the WTO.

There is no definitive, empiricalassessment of RTAs on trade liberali-sation and economic growth. This re-mains ambiguous because the eco-nomic impact of an RTA depends onits particular infrastructure and thechoice of its major internal parame-ters like the depth of trade liberalisa-tion and sectoral coverage.6

Despite problems with economicassessment and the notion that theproliferation of too many RTAs canundermine the multilateral tradingsystem, the adoption of certain prin-ciples in RTAs could help promote amore effective multilateral system.This could be done in three ways7:engage in regional commitmentswhich they would be willing to ex-tend to the multilateral setting; movetowards the across-the-border elimi-nation of duties on industrial prod-ucts at an MFN level; and promote theprinciple of transparency.

Recent DevelopmentsIn order to harmonise RTAs in themultilateral setting through more

and the WTO

NOTES1 A common tariff rate applied by the

countries in a customs union.2 The 10 ASEAN countries have bilateral

deals with each other; all have, ineffect, individual bilateral deals withChina. Others are being negotiatedwith India, South Korea and in severalcases, Japan. By one estimate, EastAsia alone will have around 70 freetrade deals by 2006. See TheEconomist. 2006. In the twilight ofDoha. 29 July.

3 Of these, 206 were notified after theWTO was created in 1995; 180 arecurrently in force and several othersare believed to be operational althoughnot yet notified.

4 This condition is understood in termsof numbers of sectors, volume oftrade affected and modes or supply. Inorder to meet this condition, agree-ments should not provide for a priorexclusion of any mode of supply.

5 The kind of liberalisation that isattractive for countries seeking to reapgains from trade in product areaswhere they cannot compete interna-tionally. See J. Crawford and R.Fiorentino. 2005. ‘The ChangingLandscape of Regional TradeAgreements’, Discussion Paper 8.Geneva: World Trade Organization.

6 J. Crawford and R. Fiorentino. 2005.As above note 5.

7 J. Crawford and R. Fiorentino. 2005.As above note 5.

transparency in their functioning, adraft on the Transparency Mechanismfor Regional Trade Agreements wasprepared by the Negotiating Group onRules on 29 June 2006. Some of themeasures that the Mechanism seeksto implement are as follows:

Early Announcement: Members partic-ipating in new negotiations aimed atthe conclusion of an RTA shall in-form the WTO.

Notification: The required notificationof an RTA by Members that are partyto it shall take place no later than di-rectly following the parties’ ratifica-tion of the RTA and the parties shallalso specify under which provisionsof the WTO agreements it is notified.

Transparent Procedures: The partiesshall make available to the WTO dataon tariff concessions, MFN duty rates,product specific preferential rules oforigin and import statistics. �

Prepared by Shivendra Thapa,Research Associate, SAWTEE.


BOOK REVIEW

Global competition in the textilesand clothing (T&C) sector has

intensified since the expiry of theAgreement on Textiles and Clothing(ATC) on 1 January 2005. While someAsian economies have either im-proved or maintained their competi-tiveness, others have been margina-lised.

Sewing Thoughts: How to RealiseHuman Development Gains in the Post-Quota World – authored by RatnakarAdhikari and Yumiko Yamamoto ofthe UNDP Regional Centre in Colom-bo – tracks the performance of Bang-ladesh, Cambodia, China, Fiji, India,Indonesia, Laos, the Maldives, Mon-golia, Nepal, Pakistan, Philippines,Sri Lanka, Thailand and Vietnam ayear after the quota system ended. Thereport assesses the human develop-ment ramifications arising due tocompetition, leading to unemploy-ment in some least developed coun-tries (LDCs).

The 15 Asian economies account-ed for 41.8 percent share of US T&Cimports in 2004 (in value terms),which increased marginally to 42.1percent in 2005. As for the EU, theAsian exporters (barring Fiji, theMaldives and Mongolia) were able toincrease their market share from 47.2percent in 2004 to 53.2 percent in2005. These average figures hide in-dividual country performance andtheir implications for human devel-opment. T&C is the mainstay of man-ufacturing employment in manyLDCs such as Bangladesh, theMaldives and Nepal, wherein wom-en account for a sizeable proportionof the workforce. Failure to competehas resulted in the closure of manyfirms in Fiji, Laos, the Maldives, Mon-golia and Nepal. In others, the needto maintain competitiveness impliesemploying higher-skilled workersand clustering, both of which are bi-ased against low-skilled personneland small firms. Women are especial-

ly vulnerable to lay-offs. Thus, levelsof poverty may have arisen as a re-sult of foregone earnings.

The adverse performers blamepreferential trade agreements involv-ing the US and some Caribbean andSub-Saharan nations as the primecause of their dislocation. Domesticfactors are hardly held accountable.Preferential deals are, by nature, dis-criminatory but the preference-receiv-ing countries have been unable toconvert ‘market access’ into ‘marketentry’. Import shares declined to 1.6percent in 2005 as compared to 2.1percent in 2004 for countries benefit-ing from the African Growth and Op-portunity Act (AGOA). This under-lies the importance of addressing sup-ply-side factors.

The report concludes by makingrecommendations such as investmentin human capital, upgrading technol-ogy, speedy delivery, establishing and

operating export processing zones(EPZs), improving trade facilitation,optimising benefits of ‘aid for trade’and enhancing access to finance.

As long as LDCs depend on cheapand unskilled labour as a perennialsource of comparative advantage,they can neither experience sustainedindustrialisation nor benefit fromtrade. As Duke University sociologistGary Gereffi notes: “low cost labor –the main asset of Third World export-ers in buyer-driven commoditychains – is a notoriously unstablesource of comparative advantage”.This clearly underscores the need toinvest in training and human re-source development.

Upgrading is necessary both to in-crease workers’ skills as well as tobridge the ‘technology gap’. Speedydelivery constitutes the ‘inseparabletriad’, besides price and quality, to en-sure that products reach markets duly.EPZs facilitate industrial clustering soas to take advantage of external econ-omies, joint actions and social capital.Trade facilitation has become impera-tive to overcome trade transactioncosts and it is the primary responsi-bility of developed countries to pro-vide funds for this purpose. ‘Aid fortrade’ is vital to facilitate the insertionof LDCs into the multilateral tradingsystem. The T&C sectors are facing cri-ses in various LDCs, including accessto finance. Foreign investment couldflow out as easily as it enters an econ-omy if sectoral competitiveness doesnot improve.

Diversification alone may not en-sure the recovery of the T&C sector.Tariff peaks, tariff escalation and non-tariff barriers are hindrances. How-ever, the recommendations providean opportunity to address long stand-ing weaknesses as part of an overallindustrialisation strategy in countriesthat have failed to adjust to economicglobalisation. Experience shows thatapathy is costly. �

Are Asian LDCs losing in post-quota world?

Title: Sewing Thoughts: How to Realise

Development Gains in the Post-Quota World

Publisher: UNDP Regional Centre in Colombo

Authors: Ratnakar Adhikari and Yumiko

Yamamoto

Published Year: 2006

Shyamal Krishna Shrestha


NETWORK ACTIVITIES

SAWTEE and its network institu-tions organised two regional meet-ings during 2-5 July 2006 in Lalit-pur, Nepal. The first meeting wason “WTO Doha Round Negotia-tions and South Asia” and the sec-ond was on “Access and BenefitSharing, Prior Informed Consentand Disclosure Requirement: Is-sues for South Asia.” More than 70participants from Bangladesh, In-dia, Nepal, Pakistan and Sri Lankaparticipated in these meetings.

First regional meetingParticipants recognised that SouthAsian countries must develop re-gional consensus and consolidatetheir regional agenda on issuessuch as agriculture, industrial mar-ket access, services and ‘develop-ment dimension’, if they want tostrengthen their negotiating posi-tions during World Trade Organi-zation (WTO) negotiations. Partici-pants discussed the Doha Roundissues from the perspective of theinterest of the individual SouthAsian countries as well as the re-gion as a whole. They viewed thatSouth Asia needs to adopt a ‘twotrack’ strategy to develop a region-al position on the Doha Round is-sues. The first strategy would be todevelop a common position on is-

sues in which there is convergence.The second strategy would be to formissue-based alliances with like-mind-ed WTO Members or groups of Mem-bers. It would be crucial to safeguardnational interests on issues in whichthere is divergence among SouthAsian countries.

Second regional meetingParticipants emphasised the need todevelop a regional position on thereview of the WTO’s Agreement onTrade Related Aspects of IntellectualProperty Rights (TRIPS), especiallythe controversial Article 27.3(b) ofTRIPS that deals with ‘patent’ and‘plant variety’ protections. Partici-pants agreed that biodiversity-richSouth Asian countries must havecommon positions on issues such as

South Asian common position at the WTO

intellectual property rights (IPRs)and commercial use of biologicalresources and traditional knowl-edge (TK). They also viewed thatSouth Asian countries need to havea common position on the relation-ship between TRIPS and Conven-tion on Biological Diversity (CBD),1992. It was stressed that if biodi-versity-rich Members of the WTOfail to incorporate effective provi-sions on access and benefit shar-ing (ABS), prior informed consent(PIC) and ‘disclosure requirement’within TRIPS, it would not only bedifficult to curb biopiracy or mis-appropriation of TK, but the statesand the communities will also failto receive benefits from the commer-cial use of their biological resourc-es or associated TK. �

Regional economic cooperationCUTS Centre for International Trade, Economics & Envi-ronment (CUTS-CITEE), Jaipur and Friedrich Ebert Stif-tung (FES), India organised the final meeting of the project“Regional Economic Cooperation in South Asia” in Kath-mandu during 14-16 August 2006. Representatives of busi-ness chambers, academia, government and inter-govern-mental organisations, civil society and media from Bang-ladesh, India, Pakistan, Nepal and Sri Lanka attendedthe meeting. While analysing the future prospects of eco-nomic cooperation, participants assessed the present sta-tus of South Asian Free Trade Area (SAFTA). This meet-ing is the result of the series of national consultationsheld in various South Asian countries under this project,wherein efforts were made to gather country perspectiveson the obstacles faced by the region in enhancing eco-nomic cooperation. �

Congratulations!SAWTEE congratu-lates its former Presi-dent, Dr Posh Raj Pan-dey, on his recent ap-pointment as Memberof National PlanningCommission, Govern-ment of Nepal. Dr Pan-dey – a leading tradeeconomist of the coun-try – played a crucialrole during Nepal’s ac-cession process to theWorld Trade Organization (WTO). Nepal became theWTO’s 147th Member in April 2004. �


NETWORK ACTIVITIES

WHILE acceeding to theWorld Trade Organization(WTO), Nepal had made acommitment to complywith its Agreement on theApplication of Sanitaryand Phytosanitary (SPS)Measures and Agreementon Technical Barriers toTrade (TBT). SAWTEEconducted two research studies oneach of these two agreements to iden-tify the implementation challenges forNepal. Besides, identifying the imple-mentation challenges, these researchstudies have also reviewed the salientfeatures of the existing laws relatedto SPS and TBT agreements and pro-posed the necessary amendments tomake them compatible with SPS and

SPS and TBT: Implementation Issues for Nepal

TBT provisions.Against this backdrop, SAWTEE

and ActionAid Nepal (AAN) organ-ised the Nineteenth Forum on Global-isation and WTO with the theme “SPSand TBT Agreements: Implementa-tion issues for Nepal”. Organised on8 August 2006 in Kathmandu underthe Reform and Capacity BuildingAgenda in the Post WTO Accession

Era (RECAB) Project, theobjective of the forum wasto gather feedback on thefindings of the draft re-search reports.

After the incorporationof the comments and sug-gestions received from theparticipants, SAWTEE andAAN would finalise these

research studies and disseminate theoutputs among a wide range of stake-holders, including government au-thorities.

More than 50 participants fromconcerned government ministries,departments and related agencies,private sector, civil society, researchorganisations and media attendedthe forum. �

DURING Nepal’s accession to theWorld Trade Organization (WTO),the country had made a voluntarycommitment to enact a competitionlaw. At present, a Fair CompetitionBill has been prepared by the gov-ernment. Civil society experts andlawyers opine that if the governmentenacts the Bill in its present form, itwould not serve its purpose.

Realising that the Fair Competi-tion Bill requires changes in manyof its provisions, SAWTEE and Fo-rum for Protection of Consumer In-terest, Kathmandu organised the in-teraction programme titled “The Im-portance of Competition Law in Ne-pal” on 5 August 2006 in Lalitpur.The programme was organised withtwo main objectives: discuss theweaknesses of the Fair CompetitionBill with the Members of Parliament(MPs) and media persons; and sen-sitise the MPs on the importance ofimplementing Competition Lawand establishing ‘competition cul-ture’.

More than 35 MPs and 15 mediapersons attended the programme.Mr Subhas Chandra Nemwang,Hon’ble Speaker of the House of

Representatives, was the chief guest.In order to facilitate the discus-

sion, four presentations were made.The first presentation was on “Com-petition Law: Why and For Whom?”;the second on “The Contours of Com-petition Law”; the third on “Compe-tition Law from Consumers’ Perspec-tive”; and the fourth on “Competi-tion Law from Private Sector Perspec-tive”. During discussions, the MPsexpressed their commitment to re-view the Bill before its enactment. TheMPs also made a commitment to re-view the process through which theproposed law had been prepared.They also agreed to a recommenda-tion of a MP that the governmentshould assign a committee to reviewthe draft and make required amend-ments.

After the programme, SAWTEEand Forum for Protection of Con-sumer Interest formally providedtheir comments and suggestions onthe Bill to the Chief Whips of themajor political parties and SpeakerMr Nemwang. The Parliament hasnow sent the Bill to the concernedcommittee, pointing out the need tomake amendments. �

Importance of Competition Law IPRs and FARMERS’

RIGHTS issues

FORUM for Protection of Public Inter-est (Pro Public), Kathmandu; SAW-TEE; Genetic Resources Policy Initia-tive-Nepal (GRPI-Nepal), Kathmandu;and Local Initiatives for BiodiversityResearch and Development (LIBIRD),Pokhara organised the two day work-shop titled “Access and Benefit Shar-ing (ABS) and Prior Informed Consent(PIC)” in Pokhara on 14-15 August2006. The workshop was organised tosensitise the local communities of Ne-pal on issues of intellectual propertyrights (IPRs) and their implications onfarmers’ rights and their livelihood. Atthe workshop, participants were madeaware of the nature and scope of threemajor international instruments thatdeal with IPR, ABS and PIC issues –International Treaty on Plant GeneticResources for Food and Agriculture(ITPGRFA), 2001; Convention on Bio-logical Diversity (CBD), 1992; andAgreement on Trade Related Aspectsof Intellectual Property Rights (TRIPS)of the World Trade Organization. Morethan 50 participants from eight dis-tricts representing government bodies,farming and local communities, re-searcher groups and media attendedthe workshop. �


SAWTEE recently published the briefing paper titled“Trade Facilitation in South Asia: Doha Round and Be-yond”. The paper explains the importance of facilitatingtrade through simplification, standardisation, harmon-isation and elimination of procedures, datarequirements and administration involvedin the cross-border movement of goods andservices. At the World Trade Organization(WTO), an agreement had been reached un-der the ‘July package’ to launch negotiationson trade facilitation (TF) with the aim of im-proving relevant aspects of Articles V, VIIIand X of the General Agreement on Tariffsand Trade (GATT), 1994.

These clauses do support TF but are aburden for developing countries since thesecountries do not have adequate resourcesand infrastructure. For example, WTOMembers would have to incur high costs toensure freedom of transit under Article V,make provisions to decrease fees and for-malities under Article VII, and publish alltrade related laws and regulations under Ar-ticle X.

This briefing paper discusses the contents and theelements of the multilateral framework on TF to examinethe challenges under the Doha Round of multilateral

trade negotiations, particularly for South Asian coun-tries. Highlighting the status, concerns and approach-es of South Asia, the paper looks at particular issues forSouth Asian countries with respect to the implementa-

tion of TF measures.WTO Members have submitted sev-

eral proposals on TF but there are diver-gences in views between developed anddeveloping Members. Even though de-veloping Members do not disagree withthe merits of TF, they are concernedabout the additional obligations andburdens that are likely to arise from amultilateral commitment. The issues forSouth Asian countries with respect tothe proposals are many and varied. Likemost developing countries, the key fac-tor inhibiting most South Asian coun-tries from implementing TF are the costsassociated with those measures.

The paper states that South Asiancountries have undertaken notable mea-sures, both unilaterally and through re-gional agreements to facilitate trade.

However, they are still far from reaping benefits fromthe prospects of TF since they lack physical and servic-es sector infrastructure and regulatory environment. �

Trade Facilitation Issues for South Asia

PUBLICATIONS

Bilateral FTAs: Trade with caution

CUTS Centre for Interna-tional Trade, Economics& Environment (CUTS-CITEE) has publishedthe book titled Hangingby a Thread: Perspectiveson the WTO Ministerial inHong Kong that com-piles the various pointsand views expressed byrenowned experts andcommentators on theWorld Trade Organiza-tion (WTO). These view-points are of the tradeexperts and policymak-ers of different countriesand were expressed pri-or to, during and afterthe last WTO Ministerial. The book will be usefulfor trade negotiators and trade policy officialsas well as other concerned stakeholders, includingcivil society and media. For more information, see:http://www.cuts-citee.org/HK-book.htm �

Perspectives on the HongKong Ministerial

Title: Hanging by a Thread:

Perspectives on the WTO

Ministerial in Hong Kong

Publisher: CUTS-CITEE

BILATERAL trade agreements(BTAs), signed between a developedand a developing country, tend to cre-ate highly imbalanced outcomes be-cause of the asymmetric negotiatingpower and resources. However, ex-amples from a few developing coun-tries show that if developing coun-tries do adequate homework and useappropriate strategic negotiating tac-tics, it will not be easy for the negoti-ators of the developed countries topush their unreasonable demands.Taking a cue from such countries,South Asian countries, which are inthe process of signing BTAs with oth-er countries, need to trade with cau-tion. Analysing these different issues,this policy brief deals with how South Asian countries canprotect farmers’ livelihoods, which are under threat due tointellectual property right (IPR) rules. This policy brief alsorecommends South Asian governments to support multilat-eralism since there is relatively little room for developed coun-tries to squeeze developing countries to agree to their unrea-sonable demands, such as in relation to higher IPR stan-dards that threaten farmers’ livelihood. �

Title: Trade Facilitation in South

Asia: Doha Round and Beyond

Publisher: SAWTEE

Authors: Dushni Weerakoon

and Jayanthi Thennakoon

Title: Bilateral Free Trade

Agreements and Farmers’

Livelihood: Issues for

South Asia

Publisher: SAWTEE

Author: Ratnakar Adhikari


Launched in December 1994 at Nagarkot, Nepal by a consortium of South Asian NGOs, South Asia Watch onTrade, Economics & Environment (SAWTEE) is a regional network that operates through its secretariat inKathmandu and member institutions from five South Asian countries, namely Bangladesh, India, Nepal, Paki-stan and Sri Lanka. Registered in Kathmandu in 1999, the overall objective of SAWTEE is to build the capacityof concerned stakeholders in South Asia in the context of liberalisation and globalisation.

Title: Realising Aid for Trade in the

Doha Round

Publisher: SAWTEE

Author: Dr Posh Raj Pandey

Realising Aid for Trade in the Doha RoundTHE Sixth Ministerial of the World Trade Organization (WTO), held inHong Kong in December 2005, recognised the contribution that ‘aid fortrade’ could make to enable developing countries, especially the least de-veloped countries (LDCs), to benefit from WTO agreements and, more broad-ly, to expand their trade. A Task Force has also been constituted to providerecommendations on the operationalisation aspects of ‘aid for trade’. Amongothers, the key challenge for the Task Force is to sort out the size and scopeof the fund, institutional mechanism and the management of the fund andits linkage with the Doha Round, on which the Hong Kong MinisterialDeclaration is silent.

Keeping in consideration these challenges of the Task Force, this brief-ing paper explores some pertinent issues required for a successful ‘aid fortrade’ package. The paper stresses that the aid flows should be stable, pre-dictable and demand-driven. The aid must encompass technical assistance,institutional reform, supply-side capacity building and infrastructure whilecovering adjustment costs arising out of multilateral liberalisation. The paperalso states that preferably, new units at the existing multilateral organisa-tions should operate the aid assistance. In a broader context, ‘aid for trade’should form a part of the ‘single undertaking’ of the trade negotiationsunder the Doha Round and should be considered an essential componentof the Doha Development Agenda. The paper, however, mentions that de-veloping countries are ultimately responsible for trade-related capacitybuilding and successful global integration, with ‘aid for trade’ playing therole of a catalyst, albeit a significant one. �

Benefit Sharing Mechanisms in South AsiaTHE intellectual property right (IPR) rules under the Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) are considered oneof the most controversial provisions in the World Trade Organization(WTO). Particularly, TRIPS Article 27.3 (b), which deals with patent andplant variety protections, has been widely debated. Divergence in views iswide between technology-rich developed Members and biodiversity-richdeveloping Members, mainly on issues of ‘benefit sharing for the commer-cial use of biological resources’, ‘prior informed consent for obtaining ac-cess to biological resources and associated traditional knowledge’, and‘disclosure requirement while applying for IPR’. At the TRIPS Council,different proposals have been submitted with regard to review of Article27.3 (b), including on the relationship between TRIPS and Convention onBiological Diversity (CBD), 1992.

Dealing with these issues and the existing legal mechanisms on accessand benefit sharing (ABS), prior informed consent (PIC) and disclosurerequirement in South Asia, this book contains three chapters. The first chap-ter is on “Biodiversity in South Asia and International Legal Instrumentson ABS and PIC” and the second chapter is on “Legal Mechanisms on ABSand PIC in five South Asian Countries”. The third chapter concludes bystating that South Asian countries should implement an effective ABS re-gime at the national level and at the same time, should also develop acommon position on why TRIPS should incorporate conditions for ABS,PIC and disclosure requirement at the multilateral level. �

Title: Access, Benefit Sharing and

Prior Informed Consent: Legal

Mechanisms in South Asia

Publisher: SAWTEE

Editor: Kamalesh Adhikari

ti 6 very final for press

Documents