The webinar “What drives the utilization of trade preferences?” follows up on an event on the same topic which took place at the WTO in May 2021.  This second webinar further explored the factors that drive the utilization of trade preferences and provided an opportunity for additional WTO members to share their experiences in collecting preferential trade data, calculating the rates of utilization of their trade preferences, identifying the causes of low utilization, and implementing measures to promote preferential trade opportunities.

Rules of origin are a set of requirements needed to attribute a single country of origin to a product. Preferential rules of origin are a central pre-requisite for implementing trade preferences.

According to the WTO's Preferential Trade Arrangements Database,  25 WTO members have 37 schemes in place providing non-reciprocal preferential market access for products originating from developing countries and least developed countries (LDCs).

Four WTO members — the United States, Chile, Canada, and Turkey — as well as the EFTA Secretariat (Iceland, Liechtenstein, Norway, and Switzerland) — made presentations at the webinar on their current trade preferences and rules of origin under these preferences. In several of these presentations the members noted variances among beneficiary countries and product groups in the use of preferences which were difficult to explain. 

The Secretariat has been monitoring the utilization of trade preferences by least developed countries (LDCs) since the adoption of the 2015 Nairobi Decision on Preferential Rules of Origin for LDCs. The 2015 decision set out multilaterally agreed guidelines to facilitate LDC exports that qualify for preferential market access granted by WTO members. 

High levels of utilization indicate that firms are able to comply with preferential rules of origin and origin requirements and hence qualify for preferential tariff treatment. On the contrary, low utilization rates may indicate that certain factors hinder the ability or willingness of firms from making full use of preferential agreements and duty saving opportunities.

Such hindering factors identified by both the Secretariat and members could include restrictive or complex origin criteria, difficulties related to certification of origin, or strict direct shipment obligations. Other factors include a lack of incentives (low preferential tariff margins), lack of awareness by businesses or operators that a preference is available, or the perception that risks or compliance costs are too high.

Better understanding of these factors and identifying them with precision can be a key tool in the context of export promotion strategies, policies to build the capacity of the private sector and trade facilitation reforms.

More information about the webinar, including the presentations and video recording, is available here.

The webinar took place at the margins of the formal meeting of the WTO committee on rules of origin on 7 April.  Many members at the committee meeting encouraged the WTO Secretariat to keep organizing such sessions in the future in consultation with the chair and delegations.

Laura Gauer, the vice-chair of the committee, said the session were “useful tools. They inform and complement the work of our committee to help keep us informed of relevant developments and trends. They make good use of expertise of members, the committee, and the Secretariat.”

The committee once again reviewed recent developments in relation to preferential rules of origin for LDCs as well as efforts by preference-granting members to implement the 2015 Nairobi Decision.  

Members also reviewed a Secretariat note on the status of notifications from members regarding their preferential rules of origin for LDCs as well as data concerning their preferential imports from LDCs.  The Secretariat noted several positive developments over the past year, including comprehensive notifications from India; China; Iceland; Turkey and the United Kingdom. These notifications significantly improve the ability of the Secretariat to conduct research analysis on trade from LDCs. The data is being integrated in WTO databases and will be used in the notes that the Secretariat presents to the CRO on preference utilization by the LDCs.

Senegal, speaking on behalf of the LDC Group of members, presented a group submission regarding origin-related documentary requirements, in line with paragraph 1.8 of the 2013 Bali Decision on Preferential Rules of Origin for LDCs as well as paragraph 3.1 of the Nairobi Decision.  The provisions seek to ensure that obligations related to proofs of origin (certificates of origin or self-certification) are simple and transparent and reduce the administrative burden for LDC exporting firms.

The LDC Group said that while progress has been made in achieving better transparency trough the adoption of a notification template and the notification of data for the calculation of utilization rates of duty free/quota free schemes, progress in implementing provisions of the Nairobi Decision relating to substantial transformation and certification requirements could be accelerated by establishing a constructive dialogue in the committee focusing on identifying and sharing best practices and lessons learned.

A representative from the World Customs Organization briefed the committee on the 2021 activities of the WCO's Technical Committee on Rules of Origin.

The European Union noted the launch in January of its new Rules of Origin Self-Assessment tool (ROSA 2). The EU noted that a warning has been placed on the application noting sanctions now in place on trade with Russia as a result of Russia's invasion of Ukraine.  Many members took the floor to express their strong opposition to the invasion. The Russian delegate responded by saying that the WTO was not the proper venue for a discussion of this nature.

The next formal meeting of the Committee on Rules of Origin will take place on 13 October.