Substantially-all-trade
With the Doha Round of negotiations incomplete and benchmarks for WTO compatibility not yet determined, the EU interpretation of the hotly contested phrase: “substantially-all-trade,” at the WTO (shared by CARIFORUM negotiators) is that according to Article xxiv of the GATT, trade in goods must cover 80-90 per cent of all goods trade to qualify in a North-South EPA. Agricultural and other sensitive products might not be covered, but the remainder must be enough to meet this overall criterion. The intention was also to cover basically all trading sectors, including services where Article V of the GATT required substantial sectoral coverage in regard to the number of sectors, the volume of services trade, and all four modes of services-delivery.
In the face of similar interpretations by other developed countries at the WTO, a large majority of developing countries have countered by advancing the claim that Special and Differential Treatment (SDT) should be embodied in a fundamental manner in the legal obligations, rules, and procedures of the WTO. In particular, the Small Island Developing States (SIDS) have posited that due to their small size, vulnerability, underdeveloped economic capacities, and relative poverty they continue to be intrinsically disadvantaged if the global trading regime is not structured around substantive legal SDT provisions.
At the WTO, the EU has stoutly resisted the infant-industry, import-substitution, managed-trade model of promoting development embodied in GATT, the WTO’s precursor for regulating global trade. Unrestrained by urgings from other developed countries which hold somewhat differing positions on these matters (especially the USA), the EU boasts of “an open, transparent and predictable framework for goods and services to move freely” as its EPA achievement.
In a recent communication (January, 2008) the EU states it has conceded tariff and quota free access for all CARIFORUM exports to its market, with short transition periods for rice and sugar (indeed this will hold true for all EPAs). This act, it argues, justifies insistence on trade coverage of substantially all goods and services along with the many unresolved issues at the incomplete Doha Round (development). Sensitive sectors and industries not presently covered are strictly time-constrained and as I have pointed out altogether cannot be substantial, since substantially-all-trade in goods and services must be covered to meet the EU/CARIFORUM criterion of substantially-all-trade.
Attention has been repeatedly drawn to the distinction between developed countries market ‘access’ offers and the ability of small, vulnerable, underdeveloped, and relatively poor countries to acquire firm entry into these markets. This intrinsic disadvantage has led small developing countries (and other developing countries) to advance Special and Differential Treatment (SDT) at the WTO.
Special and Differential
Treatment
Under the GATT, SDT was recognized as a variant of the ‘infant industry’ argument for protecting the trade of developing countries. This policy stance reflected both GATT’s focus on cross-border trade in goods and an international environment that explicitly acknowledged that the international economy was not a level playing field. Today, however, the WTO focuses on trade in goods, services, and trade-related issues. Its premise is reciprocity and national treatment in a market-driven context. This framework recognizes SDT in a limited way, described as “flexibility within reciprocity.” This distinct shift away from the earlier “development focus” of the GATT to an “adjustment focus” forces countries to integrate fully into the existing multilateral trading system.
The implementation of agreed-to global trade rules requires adjusting the domestic environment to them. This is the overriding concern The expected gains from doing this are the long-run benefits of free trade on global efficiency and output.
When undertaking a self review of SDT, WTO (2000) found essential elements of the SDT framework relate to 1) limited non-reciprocal/preferential access for some developing countries, especially LDCs to OECD markets 2) transitory exemptions from obligations through flexibility and discretion in designing policies that are related to their domestic market 3) capacity-building support for developing countries, especially LDCs.
The review identified 145 such SDT clauses, which were then grouped into six categories. It was found that 12 clauses are aimed at increasing market access for developing member states; 47 ask members to safeguard the interest of developing states; 30 give them flexibility for their commitments and in the use of policy instruments; 20 provide longer transition periods for the application of some rules; 14 relate to technical assistance and capacity building; and 22 specifically relate to the LDCs.
The general consensus is that, despite their number, these clauses are inadequate. Taken together they do not make effective and operational SDT as a core principle, as proposed in the 2001 Doha Ministerial Declaration. In fact, many of them are only obligations of conduct (the so-called best-endeavour clauses). And, as a rule the developed countries do not satisfactorily honour these clauses.
It is the view of several negotiators that the Doha Ministerial Declaration and the Decision on Implementation Issues (2001), which instituted separate calls for a Work Programme to examine issues both “relating to the trade of small economies” and SDT, may have improved the prospects for both in the WTO. If true, this would be a reversal of the trend of its refusing to recognize SDT. A year after the Doha Declaration (2002) developing countries had put forward 88 specific SDT suggestions in such areas as capacity building, preferences, and exemptions from WTO rules. These were stoutly championed by CARIFOUM, through SIDS.
To date, no WTO agreement has emerged on most of these issues, due to among other things 1) differences of interpretation in the meaning and scope of SDT 2) the reluctance of developed countries to convert best-endeavour clauses into legal obligations 3) skepticism over the usefulness of preferences, which some developed counties see as the “hard” or “robust” version of SDT. Recommendations coming out of the Work Programme were to have been reviewed at the collapsed Cancun Ministerial.
On August 1, 2004, the General Council at the WTO agreed to a Doha Work Programme to restart substantive negotiations after the Cancun collapse. In that programme it was reaffirmed that the “trade-related issues identified for the fuller integration of small, vulnerable economies into the multilateral trading system, should also be addressed, without creating a sub-category of Members.”
Conclusion
Several conclusions emerge but two are crucial at this stage. First, with the Doha Round incomplete, benchmarks for establishing “WTO compatibility” do not exist. Second, by going it alone to be ‘first’ in a bilateral arrangement with a developed region CARIFORUM has undermined the position of developing countries, (especially SIDS) in the multilateral negotiations at the WTO. This may very well be what the EU expected as the end game of the EPAs.
No doubt trade negotiations with Canada and the United States will shortly follow and in Caricom bilateralism will continue to supplant multilateralism. As we shall see the reverse occurs in Europe under its Global Europe project. Bilateralism promotes its multilateralist goals.
