Sunday, November 22, 2009

Developing countries prepare tariff deal without WTO

Reuters (Creamer Media’s Engineering News Online, Johannesburg)

As the Doha Round of the World Trade Organisation (WTO) stumbles into its ninth year, a group of 22 developing countries are poised to clinch their own deal to cut tariffs and boost trade among themselves.

The deal to expand the General System of Trade Preferences (GSTP) could be announced during the WTO’s forthcoming ministerial conference starting November 30, 2009, when trade ministers from most of the trade body’s 153 members will meet in Geneva, Switzerland.

The 22-member GSTP includes heavyweights such as Brazil, India and South Korea, as well as some of the poorest countries including North Korea and Zimbabwe. However, China and South Africa are not involved.

The likely deal would entail countries cutting their actual – or “applied” – tariffs by 20% or more on 70% of goods, trade officials and diplomats have said. This outline formula, known in trade jargon as “modalities”, would then be implemented in the coming months in detailed work applying the tariff to individual products.

Countries can also negotiate deeper cuts with each other that would then be available to the whole grouping.

According to a study conducted by the United Nations Conference on Trade and Development (UNCTAD), which is providing technical assistance to the GSTP talks, estimates that a 30% cut in tariffs by the 22 nations would boost their exports by US$11.7 billion, while a 20% cut would increase them by US$7.7 billion.

Trade among developing countries is still minimal although they are keen to expand commercial ties to take advantage of each other’s growth and reduce dependence on rich nations.

The GSTP proposals, in which participants would have the freedom to exempt 30% of goods from any tariff cuts, are also much less demanding than proposals in the current Doha round including all 153 WTO members, although these too offer special treatment for developing and least developed countries.

“One of the problems in South-South trade is the base from which you start is quite low, so you don’t have the shipping lines”, said one Latin American diplomat involved in the talks. “If you start developing, when you reach a certain critical mass of trade then things start to flow.”

International trade rules allow special treatment for developing nations, such as through preferential low tariffs providing a waiver to the normal WTO principle of non-discrimination which requires that all WTO members benefit from the same treatment.

Most such preferences are offered by rich trading powers including the United States and the European Union (EU), although developing countries also provide them.

The GSTP itself was agreed to in 1988 following negotiations which began after a meeting in 1976. An attempt to expand it in the 1990s proved fruitless.

The present round of negotiations, chaired by Argentina’s ambassador to the WTO Alberto Dumont, began in Sao Paulo, Brazil in 2004.

The 22 GSTP member countries are WTO members Argentina, Brazil, Chile, Cuba, Egypt, India, Indonesia, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Paraguay, South Korea, Sri Lanka, Thailand, Uruguay, Vietnam and Zimbabwe, and non-members Algeria, North Korea and Iran.