Trade Concerns of LDCs

At last the World Trade Organization (WTO) in its ninth ministerial conference at Bali, Indonesia could claim some success, which is facing the erosion of its credibility against its failure to produce any significant trade deal since it was formally established in 1995. The new trade agreement seeks to facilitate trade by streamlining customs procedures. Despite the limited advantage it grants the same has been received with skepticism, in particular, by some of the Least Developed Countries (LDCs).

Looking at the remarks of the Finance and Trade Minister of Nepal, who was representing a forum of LDCs as its coordinator, it appears that Nepal is happy as many other developing countries in seeing a new deal that is likely to boost global trade prospects in general. As per the estimates of the trade experts in the wake of the Bali deal the annual world trade output would augment by $400 billion through the reduction of transaction costs. This sounds optimistic.

In this regard the observation of the new Brazilian WTO Director-General Roberto Azevedo is quite euphoric. He has been quoted by the Economist in its recent coverage “Doha Delivers”. The WTO chief has said “At the heart of the deal is Trade Facilitationor measures to reduce costs by cutting red tape in customs procedures”.

Unsurprisingly the member states of the WTO have applauded the successful conclusion of the first multilateral trade agreement negotiated under the organization. It is no doubt the first fruit borne of the long barren Doha round of international trade talks. Trade negotiations launched in Doha since November 2001 have hardly been fruitful because of differences of various countries on issues ranging from agricultural subsidies to market access to the developing countries.

Although dubbed as development round Doha negotiations have remained an illusion failing to produce any package to promote global trade. The developing countries were more hopeful about the productive deals emanating from the Doha round in view of its professed emphasis on development issues. Quite contrary to what they expected the WTO has not produced any deal that could be counted as important from development point of view.

There was increasing criticism of the WTO as more and more countries were negotiating separate trade deals regionally and bilaterally. Multilateralism has been questioned because member countries’ expectations have not been met. A careful look at the recent history of trade negotiations reveals that there is growing charm for regional trade blocs rather than wait for any multilateral agreement. The Trans Pacific Partnership (TPP) is one of such glaring examples.

In addition to this regional deal which is among 12 countries of the Pacific region, negotiations for which are proceeding under the leadership of the U.S., there are a number of bilateral trade agreements struck between major trading partners in different regions. These trading arrangements are useful to the parties. But if the agreement is between a bigger economy and small country then it can seldom benefit the partners equally because the larger party will always exercise more influence in negotiating the terms of trade to its favor.

Notwithstanding the above lacuna many countries around the world are busy in agreeing to bilateral trade deals because there is almost stalemate in multilateral negotiations. Failure to conclude multilateral trade agreements has pushed many countries to embark on bilateral and regional framework.

Considering the negotiating constraints of the weaker countries multilateral trade talks offer respite and countries grouped under LDCs seem more vulnerable to high handedness of their trading partners whose economies are stronger. There is an evidence when a poor and weaker trading partner is sometimes coerced to concede more concessions by its powerful contracting party and Nepal is no exception to such bullying especially at a time when the bilateral relationship is strained for some reasons.

In consideration of the above reality there is a strong inclination especially among countries like Nepal with small economies and limited trading opportunities to go for multilateral trade agreements. The incumbent finance minister who led the country’s delegation to the Ninth Ministerial Conference of the WTO (December 3-7, 2013) was effortful to draw the attention of the international community to the needs of Nepal, a LDC, whose trade capacities are limited.

The finance minister said, “For the LDCs to truly benefit from the multilateral trading system there is a need for full and timely implementation of decision on duty free and quota free market access together with the implementation of the provisions of simplified, transparent and facilitative rule of origin.”

Furthermore, he pointed out the need of effective and scaled up support of LDCs capacity to produce and trade and he even called on the 2011 decision to grant preference to LDCs’ services be effectively and expeditiously implemented. This emphasis suggests that LDCs have been suffering from the delayed implementation of measures that are intended to meet their demands.

In terms of obtaining duty free and quota free facilities for the products of LDCs the difficulty is that some of their products in which they have competitiveness are not even included in the category of goods which enjoy such facilities. An example of this is the decision of the then American administration in 2005 when it decided to offer duty free quota free market access to 97 % of LDCs’ products but it couldn’t be that helpful for many LDCs whose exportable items were not included within the above percentage.

The Bali trade facilitation agreement aims at making international trade much easier by removing trade barriers and viewed from this angle LDC are also going to be the beneficiaries of the new deal. Nevertheless, the provision of allowing India with whom Nepal has open border, to fix Minimum Support Price for farm products and to sell staple grains to the poor at subsidized rates will have serious implications for us because of loss of competitiveness of our agricultural products. Cheaper agroproducts of India whose customers will benefit from the new trade deal may however adversely affect Nepali products as cheaper goods from India will easily penetrate into our markets.

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