The Nairobi package adopted at the WTO 10th Ministerial Conference (December 15-19, 2015) contained the Nairobi Ministerial Declaration along with five Ministerial Decisions. The three Ministerial Decisions on Agriculture were discussed in our last post. This post discusses the two Decisions on Least Developed Countries.
48 Least Developed Countries (LDCs) meet the United Nations (UN) definition as the world’s poorest countries. Together, they account for about one percent (1%) of global trade in goods and an even lower share of world trade in services. Most are eligible to participate in programs that allow their goods to enter other markets on preferential duty-free and/or quota-free terms. Nevertheless, their participation in world trade has been shrinking, or at best, stagnant.
- The Decision on Preferential Rules of Origin for Least Developed Countries adopts proposals from LDCs aimed at making it easier for goods from LDCs to comply with preferential rules of origin. Rules of origin are used to determine the country of origin of a good seeking to enter a country’s market on preferential terms.
The Decision encourages WTO members that grant preferential access for goods from LDCs to take the following measures:
In calculating Substantial Transformation:
- When using ad valorem percentage method — Include the value of materials not originating in the LDC equal to up to 75% of the total value of the finished product while deducting transportation and insurance costs for these inputs
- When using tariff classification criterion — Allow a simple change in tariff heading or sub-heading, with no exclusions or restrictions, and, where appropriate, allow inputs from the same tariff heading or sub-heading to be used
- When applying a manufacturing/processing operation criterion – Allow assembly of fabrics into finished products, chemical reactions that form a new chemical identity, processing of raw agricultural products into processed foods, and complex assembly of parts into finished products.
- For all methods – Avoid using two or more criterion for the same product.
Allow Cumulation of Inputs with Other Countries, such as:
- The country granting the preference
- Other LDCs
- Countries that benefit under the country’s Generalized System of Preferences (GSP) program
- Developing countries that are members of a regional grouping to which the LDC belongs
To Reduce Documentary Burden on LDCS:
- Require certificate of non-manipulation for products originating in the LDC but shipped across other countries in the absence of specific concerns about transshipment, manipulation, or fraud
- Reduce documentary requirements for small consignments
- Allow self-certification by LDC exporters
Countries granting these preferences committed to annually notify of existing rules and provide data on utilization rates by LDCs of their preference programs.
- The Decision on Implementation of Preferential Treatment in Favour of Services and Service Suppliers of Least Developed Countries and Increasing LDC Participation in Services Trade primarily extends the LDC Services Waiver that creates preferential access to services markets for LDCs. The LDC Services Waiver was first adopted at the 8th WTO Ministerial Conference in 2011. The “waiver” legalized a deviation from the Most Favored Nation (MFN) principle of providing equal access to all WTO Members. For the first time, WTO Members were permitted to create special rules that gave greater access by service providers from LDCs into their markets.
Few countries have actually implemented the decision. This Decision of the Nairobi Package extends the period of the LDC Services Waiver until 2030.
While LDCs have also identified the sectors and modes for service delivery of particular interest to them, the Decision merely encouraged WTO Members to provide “specific technical assistance and capacity building measures” to educate LDC service suppliers about the preference programs.
In summary, recent Ministerials have generated decisions aimed at improving the ability of LDCs to participate in world trade. WO Members have been able to find consensus around the need to increase market access for their poorest Members. With a collective world share of 1% they pose no threat to domestic markets. It is the very least that can be done.