REGIONAL WORKSHOP ON SDGs AND SUSTAINABLE GRADUATION OF SOUTH ASIAN LDCs

1-2 October 2019Thimphu, Bhutan

Session 4Assessing the impacts of the loss of non-reciprocal preferences

and S&D under RTAs: Policy options

Rajan Sudesh RatnaUN ESCAP, New Delhi

Email: ratna@un.org

Economic

SocialEnvironment

SDGs: 3 PILLARS

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2030 ASD and LDC’s Trade• 17.10 Promote a universal, rules-based, open, non-

discriminatory and equitable multilateral trading systemunder the World Trade Organization, including through theconclusion of negotiations under its Doha DevelopmentAgenda.

• 17.11 Significantly increase the exports of developingcountries, in particular with a view to doubling the leastdeveloped countries’ (LDCs) share of global exports by 2020.

• 17.12 Realize timely implementation of duty-free and quota-free market access on a lasting basis for all least developedcountries, consistent with World Trade Organizationdecisions, including by ensuring that preferential rules oforigin applicable to imports from least developed countriesare transparent and simple, and contribute to facilitatingmarket access

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WTO Rules on RTAs

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GATT RULES: Goods• Permitted under Article XXIV of GATT 1994.• Exception to MFN treatment within the Rules

subject to fulfillment of conditions:– items on which there is substantial trade to be

covered– the phase out of duties should be within a

reasonable length of time– it should not have trade distorting effect to non-RTA

Parties.• Enabling Clause Decision 1979 – flexibility for

developing countries and LDCs:– Unilateral preferences to LDCs by developed

countries– PTAs among developing countries – no need to

eliminate duties.

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WTO RULES

• Goods: The text of Article XXIV became partof WTO Agreement.

• During Uruguay Round an understanding wasreached on duties & other regulations ofcommerce, reasonable length of time, andprocedure for RTA notification to WTO.

• Services: Article V of GATS allows forEconomic Integration.

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Goods: Reasonable Length

• The reasonable length of time [para 5 (c)]should exceed 10 years only in exceptionalcases.

• In cases where members believe that 10years is insufficient, they shall provide a fullexplanation to the Commission for Trade inGoods of the need for a longer period.

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Rules for Services • Article V of GATS (Economic Integration Agreements)

– substantial sectoral coverage (12 sectors – 160subsectors);

– Elimination of existing discriminatory measures,and/or prohibition of new or more discriminatorymeasures either at the entry into force or on thebasis of reasonable time-frame.

• Flexibility for developing countries

• Facilitate trade between parties and to to raise theoverall level of barriers to trade in services within therespective sectors or sub-sectors compared to the levelapplicable prior to such an agreement.

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Different options and approaches• GSP

• WTO: – LDCs – DFQF

– PRoO

– Services waiver

• RTAs– Where you are parties

– Where you are not (preference erosion)

• Technical assistance & MRAs etc.

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GDP growth and export growth as a share of GDP in Bhutan, 2002-2018 (billion US dollars and per cent).

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Exports and imports of goods and services in Bhutan, 2000-2017 (billion US dollars)

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Bhutan’s merchandise exports and imports, 2000-2017 (billion US dollars).

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Destinations of exports from Bhutan, 2017

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Origins of imports to Bhutan, 2017

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India’s import and export with Bhutan in value and share, 2009-2018

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Bhutan in RTAs

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Title Members Status Scope Type

Bay of Bengal

Initiative for

Multi-Sectoral

Technical and

Economic

Cooperation

(BIMSTEC)

Bangladesh; Bhutan; India;

Myanmar; Nepal; Sri Lanka;

Thailand

Under

Negotiation

Plurilateral FTA & EIA

South Asian

Free Trade Area

(SAFTA) and

SAARC

Agreement on

Trade in

Services (SATIS)

Afghanistan; Bangladesh; Bhutan;

India; Maldives; Nepal; Pakistan;

Sri Lanka

Entry into

Force

Plurilateral FTA & EIA

Bhutan-India Bhutan; India Entry into

Force

Bilateral Free Trade

Agreement

FTA trade share

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S&D in RTAs• Long tariff liberalisation time

• Bigger size of sensitive/negative list

• Extra items liberalized by other trade partners for LDCs

• Relaxed rules of origin

• Technical assistance

• Revenue compensation - SAFTA

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SAFTA

Member State Number of Products in the Sensitive Lists (Phase-I TLP)

Afghanistan 1072

Bangladesh1233 (LDCs)1241 (NLDCs)

Bhutan 150

India480 (LDCs)868 (NLDCs)

Maldives 681

Nepal1257 (LDCs)1295 (NLDCs)

Pakistan 1169

Sri Lanka 1042

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Phase-I of the Trade Liberalization Programme (TLP) under SAFTAimplemented with effect from 01st July 2006 and scheduled to be completedby 31st December 2015.The negative lists of member states under Tde Liberalization Programme(Phase I) is as follows

SAFTA Phase II

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Member StateNumber of Products in the Revised Sensitive Lists as Per HS 2007(Phase-II TLP)

Afghanistan 858

Bangladesh987 (LDCs)993 (NLDCs)

Bhutan 156

India25(LDCs)614 (NLDCs)

Maldives 154

Nepal998 (LDCs)1036 (NLDCs)

Pakistan 936

Sri Lanka837 (LDCs)963 (LDCs)

The Phase-II of the Trade Liberalization Programme (TLP) under SAFTAimplemented with effect from 1st January 2014 and the revised negativelists of member states are as follows;

Services, Investments and ToT• Market access

– Mode 1

– Mode 2 (is it export market or domestic market?)

– Mode 3

– Mode 4

• MRAs

• Liberalizing sectors for investments – attract FDIs

• Technical assistance and capacity building.

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IPRs

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LDC Countries

Patent ApplicationsTrademark

ApplicationsIndustrial Design

Applications

ResidentsNon-

ResidentsResidents

Non-Residents

ResidentsNon-

Residents

Afghanistan

Bangladesh (2016)

77 267 8,580 3,795 1,359 97

Bhutan (2013) 3 4 653 2

Cambodia (2015)

2 65 1,182 678 9 60

Lao PDR

Myanmar (2012) 4,422 4,068

Nepal (2016) 11 26 3,215 1,863 11 23

Source: WTO Trade Profile (accessed on 28.09.2018)

Average ad valorem trade cost of APLDCs with world

Country 2010 2014 (or earlier when not available)

Afghanistan 289 197

Bangladesh 285 270

Bhutan 419 396

Cambodia 298 316

Kiribati 281 372

Lao PDR 387 366

Myanmar 569 N/A

Nepal 414 404

Timor Leste 341 313

Vanuatu 314 353

Source: derived from ESCAP-World Bank Trade Cost Database available from ARTNeT (only data from 10 APLDCs is included as data for Solomon Islands, Tuvalu is not available)

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Trade related measures• Preferential market access

– Goods• GSP

• DFQF

– Services• Services waiver in WTO

• S & DT in WTO– Accession to WTO

– Goods and services: No obligations to bind

– TRIPS: Transition period (article 66.1)

• Capacity building and technical assistance

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Article 12 of SAFTA

• Special Provision for Maldives:

“Notwithstanding the potential or actualgraduation of Maldives from the status of aLeast Developed Country, it shall be accorded inthis Agreement and in any subsequentcontractual undertakings thereof treatment noless favourable than that provided for the LeastDeveloped Contracting States.”

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Way forward

• To ensure preparedness

• Understand implications of graduation –beyond trade

• Trade related issues:

– S&D treatment : case of Maldives in SAFTA

– Transition periods

• Technical assistance needs

• Other issues

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Thank you

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