Four years after the Uruguay Round agreements came into force, the participation of the least developed countries (LDCs) in the World Trade Organization (WTO) and in the international trading system remains very limited. While 29 of the 48 LDCs are WTO members, their ability to understand and implement their commitments, and to take advantage of the opportunities offered, is weak. Positive measures should therefore be adopted to facilitate their participation through, for instance, the reworking of special and differential treatment provisions in the agreements.
LDC Governments need to become better at identifying their interests in the multilateral trading system. They must be proactive at home and abroad: defining their national interests with the participation of all stakeholders, and coordinating with other LDCs and developing countries in preparing for, as well as during, new negotiations.
LDCs face a major challenge in the near future when issues of strategic importance for them in the Uruguay Round agreements’ "built-in" agenda, notably on agriculture and services, come up for negotiation. In general, UNCTAD argues, the rules of the multilateral system should be designed to enhance LDCs’ competitiveness in global markets and their technological capability, develop their human resources and exploit their natural comparative advantages.
Remaining outside the trading system is not a viable option
In its Least Developed Countries 1998 Report, UNCTAD spells out the reasons why it is vital that developing countries, including LDCs, join WTO to defend their trade and investment interests. Remaining outside increasingly means they are missing out on opportunities. However, accession should not be viewed as an end in itself, but rather as a key element in the pursuit of national development policy objectives.
Taking part in a rules-based trading system poses two specific types of problems for LDCs, problems stemming essentially from their weak domestic institutions and limited human and financial resources. These problems relate to the rule-making and rule-implementation processes.
The Report demonstrates how LDCs have not been able to participate meaningfully either in preparatory work on the built-in agendas contained in many of the Uruguay Round agreements, or in current discussions on the so-called "new issues," such as investment, competition, and trade and environment. A contributing factor is that, even to date, eight of the 29 LDC members of WTO still do not have diplomatic missions in Geneva, and are thus unable to follow closely the busy schedule of WTO.
The need to facilitate and accelerate the accession process for LDCs was recognized at two important events over the past year: the High-Level Meeting on Integrated Initiatives for Least Developed Countries’ Trade Development, held in October 1997, and the Second WTO Ministerial Conference, held in May 1998. The Report makes three specific recommendations in this regard:
- The eligibility of all acceding LDCs for all provisions on special and differential treatment could be unconditionally recognized by WTO members;
- LDCs could be allowed a "fast-track" approach to bilateral negotiations on market access in goods and services, whereby WTO members would keep their tariff and services requests to a minimum;
- Technical assistance provided to LDCs by WTO, UNCTAD and other bodies urgently needs to be increased, requiring the provision by donors of additional funds.
As for the implementation of rules once a country has joined WTO, UNCTAD points out that, in most LDCs, their commitments are poorly understood, the necessary domestic legal infrastructure is often absent, and too few trained officials are able to deal with the issues. Implementation is frequently resource-intensive. For example, there are approximately 215 notification requirements for WTO members, posing a serious administrative burden. Similar institutional challenges are posed by the need to enact new legislation or eliminate inconsistent legislation, or to set up new domestic institutions so as to comply with WTO obligations.
To determine whether the anticipated positive impacts of the Uruguay Round agreements are being achieved, especially in poorer countries, UNCTAD thus proposes that resources be allocated to monitoring their implementation and evaluating their impact. If they have not had a positive impact, "remedial action (e.g. amendments to existing agreements) could be implemented before it is too late. One or two priority sectors could be identified for each LDC for long-term, policy-oriented technical assistance in an attempt to maximize the benefits each one derives from the agreements. These should be sectors in which each country has some existing or potential comparative advantage." (LDC 1998 Report, p. 82)
Noting that LDCs are already over-extended in coping with their existing WTO obligations, the Report signals the importance for them of the upcoming negotiations in agriculture and services. High economic stakes are involved in the agriculture negotiations, in particular, as this sector accounts for about 40 per cent of LDCs’ total output.
LDCs unable to profit from the rules of the game
The multilateral trading system is based on the twin principles of reciprocity and mutual gain. Tariff and market access concessions, in particular, are exchanged on the basis of carefully negotiated formulas, designed to achieve the maintenance of a "balance of benefits" among all WTO members. This is the glue that holds the system together.
Unfortunately, LDCs are severely handicapped in taking part in such a system; first, they have relatively little to offer in terms of immediately valuable market-access opportunities, and, second, they have difficulty in recognizing, claiming and capitalizing on the benefits to which their participation in the trading system entitles them.
Noting that the GATT/WTO system can only provide a healthy and helpful multilateral policy-making environment, UNCTAD’s proposals focus on ways in which the LDCs might become more proficient in claiming the benefits to which WTO membership entitles them. To become better at identifying their interests, "they need domestic institutional mechanisms which take into account the interests of all groups concerned with a particular issue, and which allow them to define a national position: all stakeholders have to be involved in this exercise."
LDCs’ environmental problems are often the by-product of underdevelopment and of market and policy failures. For these countries to determine whether, on balance, export-oriented production is environmentally desirable or not is especially difficult. "Greater attention needs to be given by the international community to increasing the capacities of LDCs for policy analysis and improved coordination on trade and environment issues, to help reduce some of the constraints that at present hinder the achievement of sustainable development in LDCs," according to the Report.
Services are now recognized as a key factor in development. However, the framework around which the General Agreement on Trade in Services (GATS) is structured presents LDCs with particular problems in negotiating market access commitments. The fact that their obvious comparative advantage lies in the most politically controversial "mode of delivery" -- the international movement of labour, or natural persons -- makes it inherently difficult for them to negotiate the dismantling of market access curbs.
Existing commitments must take precedence over new issues
LDCs in Africa and the net food-importing countries in particular have so far benefited the least from the Uruguay Round agreements, and they risk being marginalized further if they are unable to implement effectively their WTO commitments.
To help them and other developing countries remedy this situation, UNCTAD argues that "Issues for which there are commitments by all WTO members, including LDCs, should take precedence over those for which there are no commitments (i.e. the new issues)." Higher priority should therefore be given to the implementation of existing agreements and to technical assistance to enhance the participation of LDCs in the multilateral trading system.
UNCTAD is convinced that full participation by the LDCs in the multilateral trading system could have a positive impact on both the system itself and its individual members, from both developed and developing countries. By allowing LDCs to join, WTO members will be encouraging the liberalization of the former’s economies, and their eventual integration into the global economy. This will also serve to reaffirm the values on which the global trading system is premised.
However, to bring this about much remains to be done: by the LDCs themselves, by multilateral organizations such as UNCTAD and WTO, and by the international community as a whole.
"While significant progress has been made in the last three years in implementing the Uruguay Round Agreements," the Report concludes, "there have been serious delays in putting into effect the special and differential treatment measures and other provisions in favour of LDCs and other developing countries."
"The delays are in no small measure due to the wide-ranging nature and complexity of the concepts, principles and rules of WTO instruments. To a large extent, therefore, the traditional supply-side constraints of LDCs, which have been exacerbated by issues directly evolving from the implementation of the agreements, have yet to be adequately addressed."
