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OUTCOMES OF HK WTO MINISTERIAL

CPD's reflections from Bangladesh perspective

DEBAPRIYA BHATTACHARYA, MUSTAFIZUR RAHMAN, UTTAM KUMAR DEB, FAHMIDA KHATUN
CONTINUED FROM DEC 30 b. Specific Issues
Agriculture
! Agriculture negotiations are related to three pillars: domestic support, market access and export subsidies. As agreed under paragraph 45 of the July Framework agreement, LDCs including Bangladesh are exempted from any tariff reduction commitment. Member countries which are not in a position to provide duty-free and quota-free market access shall provide market access for at least 97 percent of products originating from LDCs by 2008 or no later than the start of the implementation period. It is not yet clear how agricultural commodities will be selected for the exclusion list comprising 3 percent of the tariff lines. This will depend on outcomes of further negotiations to be held in Geneva by April 2006.
! On the issue of export subsidies, an end date for all export subsidies in agriculture by 2013 has been agreed. This was a major contentious issue between the EU and the developing countries. This was perceived to be a major success of the G20 countries. However, the elimination of export subsidies has limited value considering the fact that the share of export subsidies is only 3.5 percent of the overall agricultural support provided by the EU.
! On the issue of domestic support, it was agreed that there would be three bands for tariff reductions in Final Bound total AMS; in the overall cut in trade-distorting domestic support, there would be higher linear cuts in higher bands. However, the level of cuts would be decided later.
Cotton
! The HK Declaration provides a consensus on cotton issue. It was agreed that all forms of export subsidies for cotton would be eliminated by developed countries by 2006. LDCs will be provided dutyfree and quota-free market access
for cotton exports from the commencement of implementation date (to be agreed by April 2006), although they were already enjoying such preferential access. What is important is that the issue of domestic support which was not in the Revision-2 text, but was included through an amendment during the Closing Session. At the closing session members agreed that trade distorting domestic subsidies for cotton production be reduced more ambitiously than under whatever general formula is agreed, and that it should be implemented over a shorter period of time than is generally applicable. The members committed to give priority in the negotiations to reach such an outcome.
Food Aid
! On the issue of Food Aid, it was agreed that disciplines on in-kind food aid, monetization and reexports would be made so that there was no loophole for continuing export subsidisation. The disciplines on export credits, export credit guarantees or insurance programmes, exporting state trading enterprises and food aid will be completed by 30 April 2006 as part of the modalities.
! The issue of discipline in food aid remains essentially unsettled although the text mentions that the level of food aid and interests of the net food importing countries will be safeguarded. This is expected to take care of food aid receiving countries. Bangladesh and other net food importing countries will need to carefully follow the negotiations on this issue.
NAMA
! As regards negotiations on NAMA (non-agricultural market access), the ambition level has been lowered significantly in Hong Kong. It was agreed that a non-linear Swiss-type formula, with multiple coefficients, would be used for the purpose of tariff cuts. Developing countries
appear to have withstood their
position in terms of undertaking
lower commitments in NAMA.
! Although LDCs are not expected to take any reduction commitments under NAMA, any reduction in the MFN tariffs on industrial goods by the developed and developing countries is expected to lead to significant preference erosion for Bangladesh and other LDCs. Besides, LDCs are also expected to bind a substantial number of industrial tariffs.
! In some of the developed countries, under S&D provisions, LDCs will get duty-free access for all their industrial goods. However, in some others the share of goods will be 97 percent, and it is apprehended that many industrial goods of exportinterest to LDCs would be included in the 'exclusion list'. Accordingly, items such as Bangladesh's apparels will have to enter markets of some developed countries, most notably that of the USA, with MFN duties.
Services
! Service sector (including Mode 4) was not slated for negotiation at Hong Kong. The Annex C of the Declaration was adopted without much amendments.
! However, Article 3 of Annex C is an important decision which states that “members shall pursue full and effective implementation of the Modalities for the Special Treatment for Least Developed Country Members in the Negotiations on trade in Services (LDC Modalities) adopted by the Special Session of the Council for Trade in Services on 3 September 2003, with a view to the beneficial and meaningful integration of LDCs into multilateral trading system”.
! Further, Article 9 (a) of Annex C is also important for Bangladesh. It states that members shall develop appropriate mechanisms for the full and effective implementation of the LDC Modalities, including, expeditiously developing appropriate mechanisms for according special priority including to sectors and modes of supply of interests to LDCs in accordance with Article IV:3 of the GATS and paragraph 7 of the LDC Modalities.
! Finally, in Article 11 (c) ofAnnex C it is mentioned that a second round of
revised offers shall be submitted by 31 July 2006. This implies that Bangladesh has to do a lot of home work to prepare for the negotiations on implementation of LDC Modalities for services including identification of sectors of ourinterests.
Fisheries Subsidies
! Fisheries subsidies may lead to over capacity, over fishing, and finally to exhaustion of fisheries resources. This was noted at the Ministerial Conference. The Ministerial calls for identification of subsidies and prohibition of harmful subsidies. The Declaration pointed out that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the negotiations since fisheries is an important sector for livelihood and food security in these countries.
! Fishery is an important source of income and employment for a large section of poor people and plays an important role in poverty reduction in Bangladesh.
! However, the sector suffers from lack of adequate support for its development. Therefore, Bangladesh should play an active role to include the provision of special and differential treatment in the fisheries subsidies negotiation, so that it retains flexibility to develop her fisheries sector.
Aid for Trade
! It is an emerging concept. A governance structure is yet to be in place to mobilise and disburse the committed resources. The Director General of the WTO is to constitute a Task Force to design the governance structure which will provide its recommendations by July 2006 (Article 7 of main text). Once again Bangladesh needs to take adequate preparations to take advantage of these aid flows.
Major concerns in this regard are the followings:
! It is not clear whether these resources are additional or being diverted from other commitments.
! More importantly, whether there is a double or triple counting on account of resource commitments to MDGs and PRSP.
! What is also not clear is whether disbursement of these funds will fall under the IMF and the World Bank conditionalities.
! These resources are for all developing countries, and it is not clear how this will be targeted to LDCs.
Special and Differential Provisions
Annex F includes LDC specific S and D proposals. Besides proposal 36 on Decision on Measures in favour of LDCs, which deal with DF-QF market access, there are four other LDC specific proposals which the members have agreed to adopt. These are: Proposal 23 relating to
Understanding in Respect of Waivers of Obligations under the GATT 1994; Proposal 38 relating to Decision on Measures in Favour of Least Developed Countries; Proposal 84 relating to Agreement on Trade Related Investment Measures and Proposal 88 relating to Decision on Measures in Favour of LDCs Paragraph 1. The LDC-specific S&D proposals provide this specific group of countries preferential treatment in a number of areas including (a) waivers from taking obligations, (b) flexibility that allows LDCs to undertake commitments and concessions to the extent consistent with their individual development, financial and trade needs and their administrative and institutional capabilities, (c) allowing the LDCs to maintain, on a temporary basis, existing measures that deviate from their obligations under TRIMS and (d) call for coherence whereby development partners were asked not to subject LDCs to conditionalities on loans, grants and official development assistance that are inconsistent with their rights and obligations under the various WTO Agreements.
(TO BE CONTINUED)
The authors are the researchers of the Centre for Policy Dialogue (CPD), Bangladesh.