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New Study Shows WTO’s DohaRound “Development Package” Proposal Would Leave Many Poor Countries Worse Off

June 21, 2006

New Study Shows WTO’s DohaRound “Development Package” Proposal Would Leave Many Poor Countries Worse Off

Empty “Development Package” Announced at December 2005 Hong Kong WTO Ministerial Cannot Revive Stalled DohaRound

WASHINGTON, D.C. – The “Development Package” announced at the December 2005 World Trade Organization (WTO) Ministerial in Hong Kong and touted as a way to boost development in least developed countries (LDCs) could actually leave some LDCs worse off, according to a new report released today by ActionAid International and Public Citizen’s Global Trade Watch division. The report helps explain why the package – which is an attempt to revitalize the stalled Doha Round of negotiations – has not helped revive a WTO expansion that is opposed by many developing countries.

The “Development Package” proposal offers something most least developed countries already have and could leave many worse off because the United States could deny duty-free access to some of the countries’ most important exports.

“We from the developing countries and in particular, the LDCs, are very concerned that the two important powers, namely the European Union and the United States, are not able to come up with some common language on development issues, agriculture and market access,” said Love Mtesa, Zambia’s ambassador to the WTO, who participated in a telephone press conference about the report. “What is required, therefore, is for the two big powers to ensure that they include the developing countries, especially the LDCs, in all the negotiations so that together we can come up with something that will be in the interest of the developing countries and LDCs.” 

The new report, The WTO’s Empty Hong Kong ‘Development Package’: How the World Trade Organization’s 97% Duty-Free Proposal Could Leave Poor Countries Worse Off, reviews the practical implications of the Hong Kong WTO “Development Package” by examining the duty-free market access scenarios promised in the package. LDCs were promised that 97 percent of their exports to rich countries by tariff line would be given duty-free access if the Doha Round were completed. The report also looks at the “aid-for-trade” promises in the package’s terms.

“Given that only four of the WTO’s 32 least developing countries are not already eligible for duty-free treatment on more than 97 percent of their exports to the United States and that data from the World Bank and other research organizations show that many LDCs will not gain much or indeed will be net losers under the terms being proposed at the Doha trade talks, it’s not surprising that a majority of WTO countries oppose the Doha Round agenda,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division.

Among the report’s key findings:

  • Of the 32 LDC WTO signatory nations, 27 already have or could have under current policy duty-free access to the United States’ market on more than 97 percent of their exports under WTO most-favored nation (MFN) rules or various unilateral preference programs. 
  • Only four least developed countries – Bangladesh, Cambodia, Maldives and Nepal – are not already eligible for duty-free treatment on more than 97 percent of their exports to the United States. However, the textile and apparel exports of these four countries that do not now obtain duty-free entry are precisely the categories that the United States seeks to exclude in the 3 percent of tariff lines on which the United States would not be required to provide duty-free entry under the package’s terms.
  • The “Development Package’s” provision that allows the United States to decide what products would be excluded from duty-free access “defined at the tariff line level” means that the United States could select products to exclude so that minimal additional market access would be provided under this proposal. Already, of 1,538 products worth $16.3 billion that LDCs export to the U.S. market, 1,007 worth nearly $11 billion are automatically duty-free under either WTO MFN rates or preference programs such as the African Growth and Opportunity Act (AGOA), the Caribbean Basin Initiative (CBI) or the Generalized System of Preferences. Of the remaining 531 exports, nearly $1.3 billion worth also enters duty-free by meeting the rules of origin conditions of preference programs such as AGOA and CBI, while the remaining $4.4 billion worth is subject to a duty. By focusing the 3 percent exclusion on the tariff lines under which the greatest value of LDC exports enter the U.S. market, the United States could maintain tariffs on a significant share of total LDC exports that now face tariffs.
  • While many poor countries export a variety of products to the United States, their export earnings may be concentrated in only one or two products. For example, the LDC members of the WTO as a group exported 1,538 products worth a collective $16.3 billion to the U.S. market in 2005. Under the 3 percent carve-out, as many as 46 of these products could be excluded from coverage. The top-selling 46 items (i.e., the top 3 percent of tariff lines among the 1,538 different products) accounted for 92 percent of the total value of the LDC exports, or $15 billion.
  • A 97 percent duty-free offer that focuses solely on the products that LDCs currently export to the U.S. market, as the “Development Package” proposal is written to do, would leave intact the majority of U.S. tariff peaks.
  • The promises made at Hong Kong for $2.8 billion in “aid-for-trade” funding by 2010 double count some commitments that were already made by developed countries and use fuzzy math that arbitrarily counts some government expenditures as “trade capacity building.” Furthermore, countries such as Japan are offering loans rather than “aid,” and even the U.S. commitment is contingent on U.S. congressional approval, which is unlikely in the current climate of war and other budgetary pressures.

“This report shows that if the Doha Round collapses, it’s because rich countries offered us a ‘deception package’ and not a ‘Development Package,’ and have failed to use this round to deliver what they had promised in Doha,” said Aftab Alam Khan, head of ActionAid International’s trade justice campaign. “ActionAid supports developing countries’ resolve not to cave in under rich country pressure and accept a bad deal, and we urge developing countries to stay united so they have power to negotiate a better deal.”

A widely cited World Bank study, released before the WTO’s 2005 Hong Kong Ministerial, showed that developing countries as a whole will be net losers from the Doha Round proposal to eliminate agricultural export subsidies, while the meager gains from increased market access the Doha Round could establish will disproportionately go to rich countries. More recently, a study by the Carnegie Endowment for International Peace found that under virtually all possible Doha scenarios, LDCs would be net losers – with subsistence farmers in poor countries particularly negatively impacted.

Since the Doha Round’s 2005 completion deadline passed, completion of the proposed WTO-expansion remains elusive. This spring, WTO Director General Pascal Lamy was forced to cancel an ad hoc WTO mini-Ministerial because of strong opposition by a majority of WTO nations and global civil society to the anti-democratic nature of the process that Lamy used to overcome substantive opposition to the Doha agenda. On the heels of this cancellation, an April 30, 2006, deadline, set in the Hong Kong Ministerial text, was missed because WTO members could not reach an agreement on the modalities for agriculture and non-agriculture market access negotiations. Some negotiators have called for replacing the current Doha Round WTO expansion agenda with negotiations focused on remedying the problems with existing WTO rules.