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Published on August 7, 2007

Author: Peppar


SDT in Regional Trade Arrangements:  SDT in Regional Trade Arrangements OECD Global Forum on Trade Special and Differential Treatment: Thinking Outside the Box Barbados, 28-29 June 2005 Iza Lejarraga OECD Trade Directorate Overview:  Overview Background and Scope SDT in South-South RTAs Africa: COMESA, SACU, ECCAS Asia and the Pacific: AFTA, ACTPA, SAFTA, PICTA Latin America and the Caribbean: AC, ALADI, CARICOM SDT in North-South RTAs Africa: Euro-Med, US-Morocco, Singapore-Jordan Asia and the Pacific: Australia-Thailand, Japan-ASEAN Americas: CAFTA, FTAA ACP countries: EPAs General Observations Background and Scope:  Background and Scope RTAs can have an important role in fostering the development and integration of developing countries In order to realize the development potential of regional arrangements, RTAs need to be sufficiently ambitious to take into account the needs and constraints of developing countries The 'development aspects' of RTAs are under discussion in the WTO Negotiating Group on Rules. In this context, the ACP Group proposes that WTO rules on RTAs shall explicitly provide SDT to developing-country parties in RTAs formed by developing and developed countries (TN/RL/W/155). Provisions for SDT govern relations between Parties of different levels of development in RTAs, both in a North-South as well as in a South-South context For the purpose of this work, we conceptualize SDT broadly as any measure or mechanism that accommodates the needs of developing countries Explicit provisions for special and differential treatment Implicit forms of special and differential treatment Many RTAs provide for mechanisms to operationalize special and differential regimes We look at RTAs that are both in force, under negotiation and at the proposal stage South-South SDT in Africa:  South-South SDT in Africa Common Market for Eastern and Southern Africa (COMESA):  Common Market for Eastern and Southern Africa (COMESA) The COMESA Treaty was signed on 5 November 1993 and entered into force on 8 December 1994. The Treaty aims to create a FTA which will be followed by the establishment of a customs union. Members: Angola, Burundi, Comoros, D.R. Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, Zimbabwe. COMESA (cont.):  COMESA (cont.) Treaty provides that Member States shall 'promote the accelerated development of least developed countries and economically depressed areas,' through the implementation of special programmes and projects in various fields of economic development [Art. 4]. Chapter XXII on Least Developed Countries and Economically Depressed Areas calls for the development of infrastructure, industry, agriculture, and services for such countries. Special Fund for Cooperation, Compensation and Development was established in May 2002 [Art. 155]. The fund consists of two components: Adjustment Facility: designed to assist countries in the implementation of their trade liberalization programs by providing budgetary support compensating for tariff revenue losses (pilot phase: 50 million Euros funded by the European Development Fund). Infrastructure Fund: A Priority Investment Plan (PIP) identifies and prioritizes what projects should be considered by the Fund based on a number of criteria. Selected projects are financed by loans from the international capital market and a Pooled Fund, made up of contributions from Member States, donors, International Financial Institutions. Cooperation with landlocked Member States in maritime transport so as to facilitate trade [Art. 88]. Southern African Customs Union (SACU):  Southern African Customs Union (SACU) Established in 1910 and later renegotiated in 1969. New SACU Agreement was signed on 21 October 2002 and entered into force on 15 July 2004. Members: Botswana, Lesotho, Namibia, South Africa, Swaziland. Agreement is mindful of the 'different levels of economic development of the Member States,' but does not include an explicit SDT principle There are flexibilities for less developed Member States: Botswana, Lesotho, Namibia and Swaziland are entitled as a temporary measure to levy additional duties on imported goods for the protection of infant industry [Art. 26]. Development Component of Common Revenue Pool 15% of the Excise Component of the Common Revenue Pool is designated as a Development Component and its distribution 'shall be weighted in favor of the less developed Member States' [Art 34], applying a formula that takes into account the relative differences in Member States’ GDP per capita [Annex A.3]. In practice South Africa is the only net contributor to the fund. The distribution of the funds are as follows: Lesotho 22%; Swaziland 21%; Namibia 20%; Botswana 19%; and South Africa 19%. Member States may individually give differential treatment to non-SACU countries by granting rebates of SACU customs duties in cases of: relief of the distress of persons in cases of famine and natural disasters; under a technical assistance programme; other purposes [Art. 20]. Economic Community of Central African States (ECCAS):  Economic Community of Central African States (ECCAS) Established on 18 October 1983, the ECCAS creates a free trade area and provides for the progressive establishment of a customs union 18 Members classified by levels of development in addition to their condition as landlocked countries and island countries. Annex XVIII of the ECCAS Treaty categorises members as follows: ECCAS (cont.):  ECCAS (cont.) ECCAS Treaty contains explicit reference to SDT, framed in Chapter XVII on Special Provisions in Respect of Landlocked, Semi-Landlocked, Island, Part-Island and/or Least Advanced Counties and Annex XVIII. Such countries are granted 'special treatment in respect of the application of some provisions of the Treaty' [Arts 71 and 72]. For 'landlocked', 'semi-landlocked' and 'partial island' countries: SDT focuses on aiding the efforts of these countries to improve and promote the establishment of an integrated transport and communications infrastructure. For 'less advanced countries': SDT consists of special measures that are to be taken to facilitate the economic and social development of these countries. Community Cooperation and Development Fund Provides financial and technical assistance for economic and social development [Art 75]. Financed by the Community Contribution to Integration (CCI), which consists of a 0.7% tax levied by Member States on imported non-ECCAS goods for domestic consumption. Specialised Technical Committee Coordinates activities and makes recommendations to the ECCAS Council of Ministers on matters relating to less advanced and geographically handicapped countries [Art 5]. Cooperation Regime Agriculture and food, industry, infrastructure, science and technology, education, and tourism. South-South SDT in Asia:  South-South SDT in Asia Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA):  Association of Southeast Asian Nations (ASEAN) Free Trade Area (AFTA) ASEAN Members signed in 1992 the Framework Agreement on Enhancing ASEAN Economic Cooperation together with the Agreement on Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (AFTA-CEPT). Categorisation of countries: ASEAN-6: Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand (founding members, 1967) New Members: Vietnam (1995), Laos, Myanmar (1997), Cambodia (1999) The AFTA-CEPT 2003 Amendment recognises the economic disparities between the original and acceding members and provides for longer transition periods of trade liberalisation for the latter. AFTA (cont.)Common Effective Preferential Tariff List for 2001:  AFTA (cont.) Common Effective Preferential Tariff List for 2001 ASEAN-China Free Trade Area (ACFTA):  ASEAN-China Free Trade Area (ACFTA) In 2002, ASEAN members and China signed the Framework Agreement on Comprehensive Economic Cooperation, which entered into force in July 2003, with a view to launching negotiations to create an FTA within 10 years. SDT is conferred on the basis of two categories: ASEAN-6 and China New ASEAN Members Agreement recognises differential stages of development and aims to 'facilitate the more effective economic integration of the newer ASEAN Member States and bridge the development gap among the Parties' [Art 1]. ACFTA (cont.):  ACFTA (cont.) For the liberalization of trade in services and investments, ACFTA provides that the negotiation and implementation of these respective agreements shall be made in accordance 'with special treatment and flexibility for the newer ASEAN Members' [Art 8]. The Agreement provides that Parties will implement capacity building programmes and technical assistance, in particular for the newer ASEAN member states, in order to adjust their economic structure and expand their trade and investment with China [Art 7]. Agreement establishes specific technical programmes with a view to further assisting the newer ASEAN Member States to build their capacity for regional integration and facilitation of the WTO accession process of the non-WTO ASEAN Member States. Agreement envisages taking advantage of the ASEAN-China Cooporation Fund. South Asian Free Trade Agreement (SAFTA):  South Asian Free Trade Agreement (SAFTA) The South Asian Free Trade Agreements (SAFTA) was created in January 2004 and will take effect in January 2006. Members: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Category of ‘Least Developed Contracting States’: Bangladesh, Bhutan, Maldives, Nepal. Without regard of Maldives’s graduation from the UN’s List of LDCs, it is accorded SDT. SAFTA [Art 12]. SAFTA explicitly exhorts that Least Developed Countries need to be accorded special and differential treatment commensurate with their development needs. The agreement calls for the adoption of concrete preferential measures in their favor on a non-reciprocal basis [Art 3]. Pacific Island Countries Trade Agreement (PICTA):  Pacific Island Countries Trade Agreement (PICTA) The Pacific Island Countries Trade Agreement (PICTA) was signed on 18 August 2001 and entered into force on 13 April 2003. Members: Cook Islands, Micronesia, Fiji, Kiribati, Nauru, Niue, Palau, PNG, Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu Two special categories of countries Least Developed Countries: as designated by UN Small Island States: Cook Islands, Kiribati, Nauru, Niue, Marshall Islands,Tuvalu PICTA provides that Least Developed Countries and Small Island States 'shall be integrated in accordance with different structures and by different time frames' [Art.3]. South-South SDT in Latin America and the Caribbean:  South-South SDT in Latin America and the Caribbean Andean Community (AC):  Andean Community (AC) The Andean Community is a customs union established by the Cartagena Agreement (1969) and amended by the Quito Protocol in 1988 and the Trujillo Declaration in 1997. Members: Bolivia, Colombia, Ecuador, Peru, Venezuela The Agreement provides that Ecuador and Bolivia will receive preferential treatment, and emphasizes the need to find solutions to the problems associated with Bolivia’s condition as a landlocked country. Chapter XV contains a Special Regime for Bolivia and Ecuador. Andean Development Corporation allocates its special and regular resources in such a way that Ecuador and Bolivia receive a substantially larger share. Latin American Integration Association (ALADI):  Latin American Integration Association (ALADI) The ALADI is established by the 1980 Treaty of Montevideo and subsequent Resolutions, creating an era of economic preferences. Member States: Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela Countries are classified according to economic-structural characteristics, and their status is reviewed periodically: Relatively Less Developed Countries: Bolivia*, Paraguay and Ecuador Intermediate Developed Countries: Chile, Colombia, Cuba, Peru, Uruguay**, Venezuela Other Member Countries: Argentina, Brazil and Mexico *Within the category of Relatively Less Developed Countries, Special Regard is given to landlocked countries **Uruguay is granted an exceptional treatment more favorable than that accorded to the other intermediate developed countries ALADI (cont.):  ALADI (cont.) ALADI enshrines the principle of differential treatment on the basis of the three categories of countries recognized by the Treaty. Actions favoring less developed countries are instrumented through regional scope and partial scope agreements. In addition, Chapter III defines a System in Favour of Countries at a Relatively Less Advanced Stage of Economic Development which established favorable conditions for the participation of these countries in the integration process, based on the principles of non-reciprocity and community cooperation. Resolution IV of ALADI provides that Parties negotiate a Special Cooperation Program in favor of less developed countries in six broad areas related to trade. In the period 1991-2003, a total of 437 projects were executed, or 34 projects per year. An Economic Promotion Unit for relatively less developed countries is put into practice to coordinate these programs and obtain the necessary technical and financial sources. The Unit also undertakes analytical work. Specialized Agreements, e.g. the Framework Agreement on Technical Barriers to Trade, also provides SDT: technical assistance for less developed members to overcome TBTs and consideration of institutional and infrastructural limitations Caribbean Community (CARICOM):  Caribbean Community (CARICOM) Caribbean Community and Common Market was established in 1973 by the Treaty of Chaguaramas, and amended by a series of protocols including Protocol VII on Disadvantaged Countries, Regions and Sectors signed in 1999; the Revised Treaty of Chaguaramas including the CARICOM Single Market and Economy was signed in 2001. Member States: Antigua andamp; Barbuda, the Bahamas, Barbados, Belize, Bolivia, Dominica, Grenada, Guyana, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, and Trinidad and Tobago Country classification according to levels of development: Less Developed Countries (LDCs): OECS countries, Belize and Haiti More Developed Countries (MDCs): others The Revised Treaty also takes into account: Levels of vulnerability to natural disasters Levels of indebtedness Countries or sectors suffering economic dislocations from CSME CARICOM (cont.):  CARICOM (cont.) Special and differential treatment is an integral part of CARICOM and is contained in the revised Regime for Disadvantaged Countries, Regions and Sectors (Chapter VII of Revised Treaty) Interventions to assist disadvantaged countries, regions or sectors should be extended on the basis of the following objectives: Special measures to attract investment and industries Transitional measures to ameliorate adverse impacts arising from CSME Special measures to assist industries to become more effective and competitive Assistance to achieve structural diversification and infrastructural development Assistance to enterprises negatively affected by removal of intraregional barriers Mechanism to monitor and assist in the discharge of obligations assumed under the Treaty Forms of SDT in CARICOM: longer time periods in the phasing of commitments additional flexibilities for tariff (e.g., the implementation of the CET) and non-tariff (e.g., quantitative restrictions, import duties, rules of origin criteria) areas; technical assistance and capacity building arrangements. Special measures for the promotion of investment Special temporary reservations in the liberalization of services Measures to ensure access to the use of technological and research facilities Development Fund North-South SDT in RTAS:  North-South SDT in RTAS North-Africa & Middle East:  North-Africa andamp; Middle East North-Asia & the Pacific:  North-Asia andamp; the Pacific North-Latin America :  North-Latin America Economic Partnership Agreements:  Economic Partnership Agreements The proposed EU-ACP Economic Partnership Agreements (EPAs) mandated by the Cotonou Agreement are 'centred on the objective of reducing and eventually eradicating poverty ' (Art 1) In the ACP Mandate for the Negotiations of EPAs (June 2002) the Commission commits to allowing 'variable speed in trade liberalization, taking into account the level of development of ACP countries' ACP Guidelines for the Negotiations of EPAs (ACP Guidelines, July 2002) explicitly provide SDT: Special treatment should be given to LDCs and to vulnerable small, landlocked and island countries In view of the level of development of ACP states and their development and economic needs, there should be flexibility on the EU side towards the ACP during the negotiations; such flexibility should also be included in WTO rules EPAs should be sustainable by maximizing and minimizing costs of implementation As a result of the implementation of EPAs, ACP countries will face a set of adjustment difficulties and challenges such as revenue loss, unemployment, etc. Additional resources will have to be provided to the ACP to assist them in meeting the inevitable adjustment costs. Creation of a financial facility additional to and distinct from the EDF. Establishment of a mechanism that will contribute to a durable solution for the problem of external indebtness of the ACP countries. Cooperation with ACP countries on development needs related to supply-side constraints, transport, energy, technologies (including information and communication technologies), among others. General Observations:  General Observations The most comprehensive frameworks providing for explicit SDT in regional arrangements are found in plurilateral RTAS (e.g., COMESA, ECCAS, SAFTA, PICTA, ALADI, AC, FTAA) Within plurilateral RTAs, SDT is more prevalent where differences in the levels of development among parties are more significant. Most bilateral RTAs do not contain formal, explicit provisions for SDT. Differential treatment is nevertheless implicitly embedded in the liberalization program of less developed members. The degree or special treatment in bilateral RTAs is greater when one of the parties is plurilateral (e.g., ACFTA, CAFTA). There is less SDT in extra-regional RTAs than in groupings among countries that are geographically contiguous. General Observations (cont.):  General Observations (cont.) General Observations (cont.):  General Observations (cont.) Overall, GATT/WTO agreements are more equipped with explicit SDT provisions than most RTAs (with exceptions). Certain RTAs go beyond the WTO in the provision of SDT for specific disciplines (e.g., rules of origin, investment). SDT also covers a broader span of trade-related areas (e.g., labor, environment, culture). RTAs tend to have a more concrete designation, review and graduation of countries who are beneficiaries of SDT. RTAs often have multiple actors who qualify for SDT (e.g., less developed, vulnerable, highly indebted, island, landlocked, case-by-case). Like in the WTO, SDT in RTAs is non-binding, cast in 'best endeavor clauses,' or apparently mandatory yet de-facto non-binding The dominant form of SDT in RTAs is technical assistance and capacity building, as opposed to provisions to safeguard the interest of developing countries which is the most prevalent SDT in the WTO Most RTAs provide for the establishment of implementation mechanisms for SDT (e.g., special funds, cooperation programs, monitoring committees) Slide31:  Thank you for your attention!

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