Helping small, poor countries make use of WTO trade remedy rules was the subject of discussion in the rules negotiations this week, as the group of African, Caribbean, and Pacific (ACP) called for the creation of a ‘facility’ to assist developing countries in developing the institutions and expertise they need to protect domestic industries from dumped or subsidised imports.

“The rules providing for the applications of trade remedy measures are technically complex and financially burdensome thereby depriving capacity constrained developing countries, mainly [least-developed countries] and [small and vulnerable economies], the benefit of applying such measures,” the proposal (TN/RL/GEN/175), dated 24 February, noted. This inequality in members’ ability to use trade remedies “perpetuates some of the existing imbalances in the multilateral trading system which the [Doha Development Agenda] is mandated to redress,” the proposal added.

One reason a number of developing countries felt disenchanted with the negotiations that gave rise to the WTO was that they found that they had agreed to take on well- defined, often expensive-to-implement obligations on tariff reduction and a wide range of other policies, but were ill-equipped to take advantage of some of the rights conferred by the global trade body. These rights included the ability to levy extra duties on imports that were subsidised or ‘dumped’ at a price below what they commanded in their home markets. The Doha Round negotiations were supposed to redress these and other perceived imbalances.

In order to rectify the situation with regard to anti-dumping and countervailing measures, the ACP countries proposed establishing a “Trade Remedies Facility” housed in the WTO secretariat with functions such as promoting coherence among trade remedy-related technical assistance provided to developing countries by the WTO, UN and regional organisations, and bilateral donors. It would be charged with helping countries build the laws and institutional frameworks necessary for applying trade remedies, and training personnel to conduct anti-dumping or countervailing duty investigations. The facility’s work would be based on three-year programmes to provide assistance to countries on the basis of needs assessments carried out by would-be recipients.

The ACP group called for the facility to be responsible for mobilising extra money necessary to provide such assistance. The paper, which noted that several developing countries “at higher stages of development” had become successful users of anti-dumping and countervailing measures, called for greater South-South cooperation on trade remedies, suggesting that officials from developing countries would be particularly valuable in providing training. It also raised the possibility of “trilateral” arrangements under which a donor country would fund a developing country’s provision of trade remedy-related assistance to a country seeking it.

An additional function of the facility, as per the ACP proposal, would be to set up an information database on trade remedy measures within the WTO secretariat’s institute for training and technical cooperation. This database would provide information to trade officials on past dispute rulings clarifying aspects of WTO law related to trade measures; it would also serve as a means to share new research on the use of WTO trade remedy rules.

During an informal meeting of the rules negotiating group on 21 March, China, Ecuador, Egypt, El Salvador, and India broadly expressed support for the proposal. The US expressed reservations about potentially making technical assistance mandatory, and noted that many developing countries had developed sophisticated trade remedy capabilities even in the absence of such a facility. Brazil and Costa Rica raised questions about the proposal’s implicit differentiation among non-LDC developing countries, an issue that remains contentious at the WTO. The EU, Japan, Australia, Canada and Mexico indicated interest in discussing the proposal further.

Export subsidy exception: 8-year phaseout after graduation?

A separate issue linked to developing countries’ use of WTO provisions was also discussed at the meeting - albeit in this case the ability to subsidise exports rather than to levy extra import duties on goods subsidised by one’s trading partners. WTO subsidy rules generally prohibit subsidies that are linked to a product’s export performance. However, there is an exception to this rule for least-developed countries, and non-LDC developing countries with a per capita GNP of less than $1,000 (these countries, listed in Annex VII to the agreement, are Bolivia, Cameroon, Congo, Cote d’Ivoire, Dominican Republic, Egypt, Ghana, Guatemala, Guyana, Honduras, India, Indonesia, Kenya, Morocco, Nicaragua, Nigeria, Pakistan, Philippines, Senegal, Sri Lanka and Zimbabwe).

In a proposal dated 18 March, Bolivia, Egypt, Honduras, India, Nicaragua and Sri Lanka, argued that there was a lack of clarity in WTO rules on what should happen to those countries once they grow beyond that GNP threshold. For developing countries that never qualified for the exception in the first place, the Agreement on Subsidies and Countervailing Measures clearly provided for an 8-year phase-out period for export subsidies. To clarify this, they argued, the Agreement should be amended to add a provision stating that “In the case of developing country Members included in Annex VII, the 8-year period shall commence from the year in which they graduate out of Annex VII.”

The paper’s co sponsors, together with Nigeria, Ghana, China, Dominican Republic and Brazil, expressed support for the proposed amendment, sources said. The US, later backed by the EU and Turkey, argued that such an amendment would mean that some countries that now account for a significant proportion of world trade would be allowed to retain export subsidies for decades into the future.

Members are expected to meet in a variety of groups this week; a meeting of the entire rules group has been scheduled for 28 March.

23rd March 2011

Source: ICTSD reporting.