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Seminar on Special and Differential Treatment for Developing Countries

Statement by H. E. Ambassador D. Baichoo of the Republic of Mauritius

It has been for me, an intellectually stimulating experience, to listen since this morning to somewhat differing views that are being expressed on the relevance and usefulness of the concept of special and differential (S&D) treatment. Personally, I am happy to note that the view that the concept of S&D has become irrelevant in the fast globalising world economy or that it is not in the interest of developing countries themselves to rely on such treatment is not being supported by most of the participants in the discussions. The predominant view which seems to have emerged is that the application of the same set of rules to countries which are at widely differing stages of economic development would create inequitable results, unless the provisions for special and differential treatment incorporated in the WTO agreements are effectively implemented. The experience of implementing these provisions has been however, on the whole disappointing.

Given this somewhat unsatisfactory experience of the implementation of these provisions, what is likely to be “the future of these provision” ? It is to this question that I would like to address in my brief intervention today as a member of the panel.

In looking at the future, I would like to address, among others four main issues relating to the S&D treatment. First relates to the question whether it would be possible to improve the “enforceability” of those S&D provisions which require countries to use only their “best endeavours” to implement the rules. I argue that it may be possible and suggest some tentative mechanism that could be established for the purpose. The second issue with which I shall deal with is the steps that would have to be taken for improvements in the GSP and to provide legal cover under WTO to the renewed Lomé Convention. Thirdly, I shall explain why I do not share the appreciation of Mr Constantine Michalopulos when he argues in his paper that the S&D provision in the WTO system, which provide “flexibility” to developing countries in accepting the discipline which they impose in certain areas, are prejudicial for their long term interests, Fourthly, time permitting, I shall argue that as WTO work is extended to areas like the proposed Agreements on transparency on government procurement and trade facilitation, which would lay down essentially procedural rules, an approach that requires developing countries “to make their best endeavours” would be more suitable for securing greater willingness on their part to adopt the new rules, than one which imposes rigid and binding obligations.

Improving enforceability of S&D provisions:

A number of participants have in their interventions, emphasised that the main reason, for general “non compliance” by developed countries of these provisions is that they impose on countries to make only “their best endeavours” to comply. Since they do not impose more binding obligations than to make “best endeavours”, they are under the WTO law not enforceable under the WTO dispute settlement procedures. The countries are therefore simply indifferent, if for instance, they fail to comply with the provision of the Agreement on Textiles and Clothing for grant of higher growth rates in allocation of quotas to least developed countries or for exemption of imports from developing countries from the application of safeguard measures, which satisfy the criteria laid down in the Agreement on Safeguards.

Under the present WTO system, with its present overtones for strict legal interpretation, developing and least developed countries, which consider that such and other provisions for S&D treatment have not been implemented, are left with no remedies against countries which fail to comply. They can of course raise these issues for discussion in the Agreement Committees. However, since the obligation is in most cases only to make “best endeavours” (or uses the term “should” rather than “shall”) the response on the part of the delegation of the country in breach is to assure the complaining country that the matter will be brought to the attention of his government. The matter is then forgotten and becomes a part of the reports of the committees.

The solution often suggested is that it would be desirable to make the obligation which the S&D provisions impose more binding by using the world “shall” instead of the present words which require countries on whom the obligation is imposed to make their “best endeavours”. Is it politically possible to agree on such amendments to the provisions? Would the developed countries to which these provisions are generally addressed agree to such amendments ? Views on these issues vary.

My personal view is that the most desirable course would be of course, to make the obligations more binding. It may be, however possible to get agreements on amendments to the relevant provisions only in the context of broad based round of negotiations, even assuming that there is a political will on the part of developed countries to make at least some of the S&D provisions more binding and legally enforceable. Inevitably therefore the process is likely to take some time.

I would suggest that in the intervening period - (and without giving up the basis approach that provisions for special and differential treatment which call for action by developed countries either for improvement of access to developing countries and for safeguarding their interests, should be made more binding) — it may be necessary to establish in the WTO an independent body — perhaps a “standing panel” which would be responsible for the consideration of complaints of non compliance of the provisions for S&D treatment. The General Council could appoint such a standing panel. It could be a quasi-judicial body consisting of a jurist of standing and two senior trade policy officials. The panel shall meet periodically to consider cases, where in the discussions in the Agreement Committees or other WTO bodies complaints have been made that there has been a breach of the specific provisions providing for extension of special and differential treatment. In respect of each of such case, the standing panel, shall, on the basis of the background information provided by the Secretariat and after hearing the views of the interested parties, determine whether, taking into account the reasons given by the concerned developed country for non compliance it could be considered to have abided by its obligations to make “best endeavour” to comply. The primary aim of the examination by the standing panel would be to see, whether it would be possible to secure implementation of the provisions through conciliation among parties, on the basis of the determination by it.

The reports of the standing panel should, like reports on country consultations held under the Trade Policy Review Mechanism, be given wide publication. The findings or the recommendations made by it would not have the same degree of enforceability as those made by the dispute settlement panel or the Appellate Body. The General Council would not be able to authorise the aggrieved party to use sanctions against country, which is considered to have not fulfilled its obligations to make best endeavours. The only force which the recommendation made by the standing panel would have in securing compliance, is that of “moral persuasion”. Despite these limitations, establishment of standing panel and periodic examination by it of specific complaints of non compliance, could lead to greater improvement in the implementation of the S&D provision, as nations generally do not like to be publicly known that they are not abiding by the obligations which they have assumed at international level.

I would like to say that the idea is not entirely new. It was tried in the earlier years – I think it was in the seventies – when the main instrument providing for special and differential treatment was only the chapter on Trade and Development or Part IV of GATT. The standing panel established then came to be known as Group of Three Wise Men. The Group, according to experts on GATT law and practice like Professor Hudec, had been able to make some positive impact, even though modest, in securing implementation of the provisions of Part IV.

Improvements in preferential access to the developed country markets

Let me now turn briefly to the S&D provisions that aim at providing non-reciprocal preferential access for the export products of developing countries. As Bonapas Onguglo observes in his paper before us, analysing the experience of preference receiving countries for over three decades. The preferential access that is available under the GSP and under the limited country preferential arrangement like the Lomé Convention, in the markets of developed countries, continues to be of vital and crucial importance to the trade of a large number of developing countries, particularly those which are least developed and small economies. Taking into account this, I would suggest that as regards GSP early action be taken by preference giving countries:

to allow imports of all products from the least developed countries on a duty free basis, by eliminating all duties that are applicable to such imports under their preferential systems and removing the so called built-in limitations providing for tariff quotas and other restrictions, and

to improve the preferential access applicable to imports from small economies, by eliminating preferential duties and other restrictions on products of export interest to these countries.

It would be further necessary to ensure that the preferential access available to ACP countries under the renewed Lomé Convention is given legal cover under the WTO law by granting a waiver. Any such waiver should also contain a commitment that once a waiver is granted, the legal validity of the preferential arrangement would not be challenged during the period of its validity under the WTO law.

S & D provisions providing for flexibility in accepting obligations

This brings me to the S&D provisions which aim at providing greater flexibility to developing countries in accepting the disciplines which the WTO rules provide. In relation to this type of S&D treatment, Constantine Michalopulos from the World Bank has in his paper before us, pointed out that there is no analytical and empirical justification that trade policies in developed and developing countries should “differ in principle”. He therefore argues that it would be in the interest of developing countries not to rely on these provisions and agree to their elimination in the forthcoming rounds of negotiations.

I think many in this room would not be surprised, if I say that I disagree with his contention. It is no doubt true that there is now growing consensus than was the case in the past, on the principles and objectives of trade policy. It is now generally well accepted that open and liberal trade policies are more conducive to promoting economic development than those which are not. It is however necessary to make a distinction between these broad principles and objectives of trade policy and the measures which the governments have to take for their achievement. These measures have to be tailored taking into account the stage of development reached by a country as well as such factors as trading realities and administrative capacities to implement the rules. Countries at a lower stage of development, may need a degree of flexibility and longer time span in taking measures for liberalisation.

It is also recognised that there is a need for governmental interventions in case of market failures and such failures could be more in countries where the physical and human resource infrastructure are not adequately developed; this is generally the case in developing countries, particularly those which are least developed or small economies. In the situation, one of the challenges which officials responsible for trade policy encounter when faced with market failures, is how to use both border and domestic policy measures by drawing a judicious balance between them.. As recent UNCTAD reports have shown hasty liberalisation, unaccompanied by adequate measures to develop infrastructure and human resources and to establish effective legal and institutional mechanism for taking contingency protection measures, does not result in new investment flowing in for the establishment of new industries or for the development of agriculture, but could only lead to existing industries that are not able to face increased competition being wiped out.

Constraints of time, would not permit me to dwell on these issues more in my intervention today. I would like to however emphasise that the flexibility available to developing countries in making in trade negotiations reductions in tariffs at rates which are lower than those used for reductions by developed countries, flexibility to give ceiling bindings and the limited flexibility available to them, in regard to the use of subsidies, have important role to play in the efforts which their governments are making for promotion of their trade and development. Such flexibility should not be removed in future negotiations. Quite on the contrary these provisions may need strengthening.

Transitional periods

A related issue is transitional periods. Studies made by UNCTAD and World Bank have clearly brought out the heavy financial costs and administrative burdens which the adoption of legal and institutional framework required for the adoption and implementation of some of the Agreements like that on Customs Valuation or on Trade Related Aspects of Intellectual Property Rights, puts on governments of developing countries, particularly those of the least developed countries and of small economies. World Bank, for instance has argued that the long-term overall cost of adopting an Agreement like that on customs valuation , may for a small least developed country be as high as its one-year’s development expenditure. It is therefore no wonder that a large number of these countries have not been able to adopt the systems of some of the Agreements during the transitional periods provided by them . It would be necessary to ensure that requests made by such countries for the extension of the transitional periods are granted without putting conditions that they may find it difficult to comply.

Adoption of new techniques to provide S&D treatment

As WTO embarks on extending its rule based system to cover other trade related subjects, it would be in my view necessary to evolve techniques other than those which have been used so far, to extend S&D treatment developing countries. This may become also desirable as it is becoming increasingly realised that the rules that are developed in WTO negotiations and incorporated in its various Agreements are often based on the procedures and practices followed by major developed countries. Many of these are not suitable for adoption by developing countries where trading realities, administrative traditions and practices are vastly different. For instance, one of the papers by a World Bank expert — I think it was Michael Fingre — categorically stated that the Customs Valuation Agreement was not suitable for adoption by the least developed countries.

Against this background, it may be necessary to consider seriously, whether some of the Agreements which are likely to be developed in the coming years like those on transparency on government procurement or trade facilitation, should impose on countries, particularly the developing ones, only obligations to make their “best endeavours” to comply and not fully binding obligations. Adoption of such an approach would be desirable, as these Agreements would lay down rules that are mainly of procedural nature. Where procedures prescribed by the Agreements are vastly different than those prevailing in the country, administrative authorities often find it difficult to change over to new systems and to ensure immediate compliance when new procedures are adopted. The problems of securing compliance are likely to cause serious problems for a large number of developing countries, for instance, in the case of Agreement on Transparency in Government Procurement, where the governments would be required to oversee that rules are followed not merely by one or two agencies, but by thousands of government departments and other purchasing agencies, many of which have a degree of autonomy in making purchase decisions. The problems which are being encountered in securing compliance of such procedural rules even by developed countries, is well brought out by a recent survey by a consultancy firm which found that only 14 per cent of the purchasing agencies in the member states of the European Union had been able to abide “fully” by the rules relating to publication of procurement notices.

The adoption in the two areas mentioned above and other similar areas where rules of procedural nature, of the rules that impose obligation on governments of developing countries to make their “best endeavours” and not binding obligations, would lead to greater willingness on their part to adopt such rules. The experience of the operation of the rules would also enable WTO member countries to decide on whether any changes were required in the rules adopted. The Agreements could provide for review after say ten years or so, to decide on whether all or some of the rules, should be applied by all countries on fully biding basis.

In order to ensure that obligation to make “best endeavours” is not used by countries to postpone or delay implementation of the rules, it would be however necessary for the committees that would be established under the Agreements to provide for appropriate surveillance mechanism. It may be also possible to provide that where deliberations in the Committee do not produce satisfactory results, it should be possible for a complaining country to bring the matter before the Standing Panel, which I have proposed should be established to consider non compliance of “best endeavour” provisions. Where however the complaint is against a developing country about non-compliance of its “best endeavour” obligations, the Standing Panel should be required to examine, whether it would need technical assistance to prepare itself for abidingly the rules.

Before concluding, as a representative of a country, which is a small economy, I consider that one of the important tasks for work in this area would be to determine how more favourable and differential treatment could be extended to small economies, within the framework of S&D treatment for developing countries. Since detailed proposals regarding this have been made by my delegation and by delegations of other small economies, I would not elaborate on them further here.

Geneva, 7 March 2000