Prospects for LDCs in Buenos Aires and Beyond

8 November 2017

Least developed countries are confronted with significant challenges to preserve the integrity of the multilateral trade system and advance their development needs at a time when some large players seem to disengage from the WTO. What is at stake for them in Buenos Aires and beyond?

Least developed countries (LDCs) share a common set of well-known structural handicaps, including low income levels, high economic vulnerability, and weak human assets. In spite of their high dependence on international trade, these handicaps largely affect their ability to participate in the global economy and tends to confine them in the role of “deal takers” in international negotiations. Indeed, the small size of their economy and their marginal share in world exports limits their leverage in trade talks and, ultimately, their influence on final outcomes, even if LDCs represent a significant share of the WTO’s membership. As the weakest players in the system, with few other alternatives to promote their trade integration, LDCs have nonetheless a strong interest in a well-functioning rules-based multilateral system to govern economic interdependencies, provided that their concerns are effectively addressed. Based on these premises, LDCs have traditionally used different approaches to advance their development interests in WTO negotiations.

Engaging as a group

First LDCs have organised themselves as a group and participated actively in the various negotiating bodies by articulating offensive interests in areas where concessions are sought from others and seeking specific exceptions where the group has defensive interests. Unsurprisingly, such an approach has involved building alliances with other groupings and identifying where differences between large players can be bridged. This is largely how the group has engaged in most Doha Round issues so far. The upside of such an approach is that it ensures the group representation in smaller negotiating configurations and that its interests are taken into account. In the absence of significant economic leverage, however, LDCs concerns tend to be only partially reflected in the final outcome. This approach also implies that other members are willing to engage constructively in such negotiations. Otherwise, the group runs the risk of negotiating with itself.

Identifying LDC specific issues

A second strategy consists in identifying LDC specific issues and propose stand-alone solutions to address them. Examples of this approach include discussions around previous LDC packages at the Bali and Nairobi ministerial conferences built around duty free quota free market access (DFQF), rules of origin, cotton, or the services waiver. In other instances, LDCs have raised specific concerns around incentives for transfer of technology under TRIPs Article 66.2 or WTO accession by LDCs. The main rationale behind this approach is the recognition that the special handicaps faced by LDCs require special solutions. It also assumes that large players may be more likely to give concessions if these are limited to LDCs, as opposed to the broader WTO Membership or the larger traditional category of developing countries. Here again, the downside is that LDCs have limited leverage and essentially rely on the good-will of other WTO members. This may explain why only incremental steps have been achieved so far in areas such as DFQF. In other cases, designing LDC specific solutions may not be possible – cotton subsidies being a case in point.

Using number as leverage

A third approach consists in using number as leverage, for example by building linkages among different negotiating areas and conditioning progress in one area on concessions being granted in another. Currently, 36 WTO Members and 7 observers are recognised as LDCs. This represents a significant share of the total membership, making it possible – at least in theory – to block negotiations on existing or new areas and put pressure on other members. The downside here is the risk to undermine the relevance of the multilateral trading system and push larger players to disengage or go for alternative avenues such as plurilateral approaches or regional trade agreements.

Towards Buenos Aires

As we move towards the Eleventh Ministerial Conference (MC11) of the WTO in Buenos Aires, the extent to which any of the approaches described above may lead to meaningful outcomes remains highly uncertain, at least under current political circumstances. The approach consisting in crafting a small LDC package may have worked in the past but seems to have reached its limits after Bali and Nairobi, with members having exhausted the scope for incremental steps in areas such as cotton, rules of origin, or DFQF. While improvements remain needed in most of these areas, progress does not necessarily require collective action at the WTO and can be implemented unilaterally as illustrated by the case of trade preferences under the services waiver. In other areas, like cotton subsidies, most low-hanging fruits have already been harvested, and taking the next step would imply significant domestic reforms which may be difficult to envisage as a stand-alone decision.

Beyond LDC-specific concerns, prospects look similarly bleak on other aspects of the negotiations, maybe with the exception of fisheries subsidies. In agricultural domestic support and public stockholding, despite numerous submissions – including by LDCs – proposing new approaches to cut subsidies, positions remain far apart, particularly between the US, other large subsidising countries, and big emerging economies (for more on this, see the article by J. Hepburn in this issue). Tensions have further increased after the US initiated a dispute against China’s domestic support provided to rice and wheat, making prospects for a negotiated outcome in this area rather unlikely. On special and differential treatment (S&DT), another area highlighted by some as a potential deliverable for MC11, an already narrowed-down proposal by the G90 focusing on 10 areas for reform – out of the 20 discussed before Nairobi – has been unequivocally rejected by most OECD countries, partly on the ground that such proposals failed to differentiate among developing countries.

Under such circumstances, LDCs could conceivably try to put pressure on other WTO members by establishing linkages with other negotiating topics. For example, several members have expressed interest in digital trade. Others have highlighted domestic regulations as an area for a possible MC11 outcome. India has been pushing for services facilitation. Brazil has suggested a focus on investment facilitation. LDCs could condition further engagement in these areas on achieving meaningful outcomes on traditional LDC priorities. However, using such linkages as leverage can only succeed if large players are sufficiently interested in getting an outcome elsewhere to envisage possible concessions to LDCs. In practice, this may not be the case, as illustrated by the reluctance of some large WTO members to undertake potentially painful domestic reforms. Furthermore, the new mindset prevailing in the US under the Trump administration has led Washington to disengage on several fronts, amid repeated criticism of multilateral trade cooperation and the WTO as an institution. Talking about MC11, the US has already made it clear that it was not expecting any major negotiated outcome, raising significant questions about what could reasonably be achieved under such circumstances.

The way forward

Confronted with this reality, LDCs have several options which could arguably be combined. If the general sense is that large players are unwilling to engage, a logical approach for LDCs may consist in simply restating their maximalist positions in areas where they have specific interests (e.g. agriculture, cotton, S&DT) and blocking progress where they are not proponents (e.g. services, investment facilitation). This would guarantee that nothing happens in Buenos Aires, but at least it would prevent LDCs from giving anything away. It would also allow them to keep all their bargaining chips intact in anticipation of future negotiations if and when WTO members decide to re-engage sometimes after Buenos Aires. Put more simply, in light of current political uncertainties, particularly on the US front, some delegations may decide to disengage and wait until the stars realign. The downside of this approach is the high risk of further undermining the multilateral trading system upon which many LDCs rely. It will do nothing to address urgent development concerns and offers no guarantee that talks may pick up again in the near future. This approach may also underestimate the deep concerns that the US has with the WTO if it simply expects things to “go back to normal” after a 4-year parenthesis.

A second approach would consist in maintaining LDCs’ engagement, harvest what can reasonably be harvested, reaffirm the relevance of the multilateral trading system and the role of international cooperation, and prepare a possible roadmap for post-Buenos Aires negotiations. Granted, very little is likely to happen on agriculture or S&DT, but there is some constructive momentum around fisheries subsidies and a real opportunity to achieve a meaningful agreement on a topic of significant importance to LDCs from a trade, food security, and livelihood perspective (for more on this, see the article by A. Tipping in this issue). Such an agreement would also go a long way in contributing to the achievement of Sustainable Development Goal 14. Moreover, LDCs have a major stake in ensuring that large players in the WTO remain engaged under terms and conditions that fully take into account LDC concerns. To achieve this, LDCs will have to contribute to a higher-level discussion on the merit of international cooperation and the role of the WTO. Finally, the LDCs cannot afford not to participate in re-defining the terms of engagement of future negotiations. They should actively contribute to designing a clear post-Buenos Aires roadmap in which LDC priorities are front and centre. In these debates, LDCs will of course see increased pressure to address “other issues” such as digital trade or investment. They might want to show openness in exploring some of these issues, provided that their priorities are given equal prominence, not least because disciplines in those areas are increasingly crafted outside of the WTO where LDCs are not represented.

Author: Christophe Bellmann, Senior Resident Research Associate at the ICTSD

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