Transcript An Assessment of Special and Differential Treatment (S&DT)

An Assessment of Special and Differential
Treatment (S&DT) in SAFTA
Presented at
Regional Seminar on Economic Cooperation in South Asia
Organized by CUTS and FES
14-16 August, 2006
Kathmandu, Nepal
by
Posh Raj Pandey
South Asia Watch on Trade Economics and Environment
Presentation outline
Key Indicators
 Uneven level playing fields for LDCs
 Rationale for special and differential treatment
 Contours of S&DTs within SAFTA
 Conclusion

Key Indicators of SA LDCs
[Sources: World Development Report, 2005; Asia Pacific Regional Human
Development Report 2006]
Country
Geographic
status
Bangladesh
Coastal
Bhutan
Population
in 2004
(Millions)
GNI
capita US
$
in 2004
Aid percapita
US $ in
2003
Trade
/GDP
Ratio
Human
development
Index in 2003
rank out of
total
177 countries
140.5
440
36
33.3
139
Landlocked
0.9
680
88
64.6
134
Maldives
Small island
0.3
2,548
61
152.1
96
Nepal
Landlocked
25.2
260
19
47.0
136
Key Indicators of SA DCs (contd…)
[Source: World Development Report, 2006; Asia Pacific Regional Human
Development Report 2006]
Country
Geographic
status
India
Coastal
Pakistan
Sri Lanka
Coastal
Island
Population
in 2003
(Millions)
GDP per
capita
in 2003
(constant
2000 $)
Aid percapita
in 2003
(current
$)
Trade
/GDP
Ratio
Human
development
Index in 2003
rank out of
total
177 countries
1079.7
620
1
30.8
127
152.1
600
7
37.7
135
19.4
1010
35
79.1
93
Structural Problems of LDCs : Uneven
Level Playing Fields – I

Geographic constraints: Remoteness, inaccessibility, high
transportation costs

Exposure to international shocks: Price takers, unable to
influence the international/regional market

High export concentration ratio: Dependent on few export
commodities. E.g., Bhutan – electricity; Nepal and
Bangladesh – T&C; Maldives: tourism, tuna
Structural Problems of LDCs : Uneven
Level Playing Fields– II

Supply side constraints: Lack of infrastructure, inadequate trade
facilitation measures

Lack of competitive ability: Comparative advantage on a limited number
of products/services, high cost of inputs (except labour)

Low institutional development : public, private and civil society –
uncompetitive private sector, weak civil society to make informed
interventions and governance problems

Exclusion from knowledge based economy: Low level of digital access in an
increasingly digitized world -Digital access index Bangladesh – 0.18;
Bhutan - 0.13; Nepal - 0.19, against the global average of 0.48.
Rationale for special and differential
treatment (S&DT)




LDCs are placed differently in international trade and that
these difficulties as well as imperatives of promoting social
and economic development requires that these countries be
treated differently
Different levels of development achieved by members
require different sets of policies for development
Countries at different stages of economic development
cannot implement same rules at the same speed, even if
agreed
LDCs requires more policy flexibility to catch up other
Members.
S & DTs within SAFTA

One paragraph in Preamble

Three sub-paragraphs in Article 3 (Objectives and
principles)

Four paragraphs in Article 7 (Trade liberalisation
programme)

Entire Article 11 (Special and Differential Treatment for
the Least Developed Contracting States)

One paragraph in Article 16 (Safeguards measures)
S&DTs in Objectives and Principles
Preamble:
‘ Recognizing that Least Developed Countries in the region need to be
accorded special and differential treatment commensurate with their
development need.’
Objectives:

Article 3.1(b): “ promoting condition for fair competition …taking into
account their respective levels and pattern of economic development”

Article 3.2 (c) “ benefit equitably …respective levels of economic and
industrial development, the pattern of their external trade and tariff
policies and systems”

Article 3.2 (f) “The special needs of the Least Developed Contracting
States shall be clearly recognized by adopting concrete preferential
measures in their favour on a non-reciprocal basis”
Implementation of S&DTs – I
Trade Liberalization Programme

Article 7.1(b): reduce tariff to 30% within 2 year; as opposed to 20% for the
Non-LDC members within the same time frame

Article 7.1(d): reduce tariff to 0-5% within 8 years counted from third year; as
opposed to five years (for India, Pakistan) and six years (for Sri Lanka).

Article 7.3 (a): Maintaining a “sensitive list” flexibility to LDCs to seek
derogation in respect of the products of their export interest : Bhutan and
Maldives has lower number of tariff lines under sensitive list than DC members

Article 7.6: DCs should reduce tariff to 0-5% within three years for LDCs’
products [as opposed to 5 years provided by Article 7.1 (c)]
Implementation of S&DTs – II
Article 11: exclusively devoted to S&DTs but with weak
language and non- binding

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Anti-dumping and countervailing measures: “give special regards to”
and “to the extent practical” …price undertaking… (Art. 11.a)
“greater flexibility” in continuation of quantitative restrictions (Art.
11.b)
“consider, where practical, …. direct measures” (Art. 11.c)
“special consideration shall be given for technical assistance” to
negotiated be later (Art. 11.d)
“mechanism for revenue compensation” to be negotiated later (Art.
11.e) : to last for 4 years
S&DTs in Implementation
Other S&DT


Article 16.8 – Safeguards measures cannot be taken against
LDCs’ products as long as its share of imports of the product
concerned in the importing Contracting State does not
exceed 5 per cent
Rules of Origin: Domestic or regional value addition of at
least 30% for LDCs (as opposed to 40% for India and
Pakistan and 35% for Sri Lanka)
Developing countries, which criticize developed countries
at the WTO, could not leave upto LDCs’ expectation in
SAFTA
Way forward
Magnanimity of more developed members: lenient
rules of origin
 Change in the mind set: from protectionism to
export expansion
 Make S&D provisions precise, effective and
operational
 Review sensitive list and reduce the number
 Extend the implementation of revenue
compensation mechanism
