Global Development: Views from the Center
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March 30, 2007
Delivering On The Doha Round's Development Promise Now
Posted by Kimberly Ann Elliott at 05:26 PM
The Doha Round of international trade negotiations remains at an impasse over agricultural policies in rich countries, but there are important steps that the United States and other countries could take now to deliver on the promise to make trade work better for developing countries. The declaration launching the round in Doha, Qatar, in November 2001, committed members of the World Trade Organization to "the objective of duty-free, quota-free market access for products originating from LDCs [least-developed countries]." Members went further at the ministerial meeting in Hong Kong in December 2005, agreeing to implement duty-free, quota-free access for the LDCs in developed country markets, as well as in willing emerging markets, when the round concludes. At the insistence of U.S. negotiators, however, this generosity was undercut in an annex that allows countries to exempt up to 3 percent of products. That would allow Japan and Korea to exempt rice and the United States to exempt sugar and many clothing items, all products that are major exports of many LDCs.
The United States currently provides nearly free access for the lesser-developed countries of sub-Saharan Africa, but even the African Growth and Opportunity Act (AGOA) restricts access for key agricultural products, such as sugar, and some labor-intensive manufactures (certain footwear, textiles and leather goods). And there are another dozen or so countries designated by the U.N. as least-developed that have access only to the Generalized System of Preferences, which excludes most clothing, footwear, and other key developing-country exports. As a result, Cambodia, which has an average per capita income of less than $1 per day, pays as much in tariffs on its $2 billion in exports to the United States as does France on $37 billion. Only 2 percent of Bangladesh's exports to the United States, mostly clothing, are able to enter duty-free under current rules.
Imports from the least-developed countries add up to just a little over 1 percent of total U.S. imports, so the United States could and should do better. In a comment to the U.S. Trade Representative on implementing the duty-free, quota-free pledge (pdf), several Washington groups concerned about development and poverty alleviation, including CGD, called on the U.S. government to provide 100 percent access for the poorest countries in the world -- and to do so before the conclusion of the Doha Round. To maximize the benefits of providing duty-free, quota-free market access for the LDCs, the U.S. Congress should embed this opening in a broader reform of trade preferences programs that makes them permanent and easier to use.
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Comments
The duty-free proposal will turn out to have a problem similar to that of GSP, if it is not unconditional and irrevocable. The U.S. has used the GSP as a weapon to force poor countries to do what the U.S. wants, threatening to withdraw GSP if the country fails to follow desired policies. The weapon is especially powerful when competing countries have access to GSP. The U.S. has, for example, threatened to withdraw GSP from countries that have not followed labor policies desired by the U.S., that have allegedly taken U.S. property, or that have not instituted intellectual property laws or enforcement as desired by the U.S. It has done this when it would not have been allowed under WTO rules to withdraw MFN treatment. There has been no "judicial process" to protect weak countries against withdrawal; a country's status under GSP is subject completely to the whim of the rich country that offered it. Any new program should not have this right of unilateral withdrawal of preferential treatment. Otherwise, it will be similarly abused by the strong countries.
Any retreat from the MFN (NTR) policy should be carefully evaluated before it is undertaken. MFN has served the weaker countries well. To date, both bilaterally negotiated FTAs and the GSP have undermined MFN and both have sometimes been used to exploit the weaker bargaining position of poor countries. There is a serious risk that the proposed program will be modified by Congress in ways that leave it with problems similar to those of the GSP and bilateral trade agreements.
Posted by: Louis Wells at April 3, 2007 10:31 AM