Trade preferences — the system by which developed countries give special or preferential access (such as zero tariffs) to their markets for products from developing countries – has been undergoing change and saw some milestones in 2009, with more change anticipated for 2010.  The trend, particularly on the part of the United States (US) and the European Union (EU), is to move away from a one-size-fits-all to a more differentiated approach that gives improved access to the neediest countries while “graduating” from the program those countries or products deemed able to compete.

In 2009, the United States committed itself to reform trade preferences and undertook an extensive review of its network of programs.  While free trade agreements (FTAs) have made some former programs redundant, there is still wide usage of the Generalized System of Preferences (GSP), and other regional programs continue to exist — Caribbean Basin Initiative/Caribbean Basin Trade Preferences Act (CBI/CBTPA), the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE), the African Growth and Opportunity Act (AGOA), and the Andean Trade Preference Act (ATPA).  This study is still underway.  On December 28th, President Obama signed into law a one-year extension of the GSP and ATPA programs, which were scheduled to expire on December 31, 2009.  The renewal indicates continued U.S. commitment to trade preferences while the extension of only one year emphasizes the intention to act more comprehensively on this issue in 2010.  Interested participants and observers should use every opportunity to inform the U.S. Congress and the Obama Administration about the benefits of the current programs and ways in which they can be improved.

For the African-Caribbean-Pacific (ACP) group of countries, their special trading status with the EU continues to evolve as a result of the need to conform to WTO rules, resulting in negotiation of Economic Partnership Agreements (EPAs) and extension by the EU of preferences to a broader group of countries.  On December 14, 2009, the banana-producing ACP countries (primarily eastern Caribbean and African countries) were presented with another adjustment as a result of the settlement of the long-running banana dispute between the EU and Latin America.  Under the terms of this deal, the EU will, over a 7-year period, reduce its import tariff on bananas from Latin America and pay 190 million euros in compensation to the African and Caribbean banana producers for the expected losses they will occur as a result.  The stated purpose is to mitigate the negative social consequences to the farmers of this forced adjustment and to promote crop diversification.  On the winning side of this deal are the American banana-growing corporations as well as the EU consumers, who will both benefit from the lowered tariffs.  The immediate losers are the ACP banana producers, none of whom, by the way, are among the top exporters of bananas on the world market.  Nevertheless, this product carries a social and economic importance to their local economies that is not conveyed by this statistic.  The challenge in 2010 will be to fight for the promised funding and ensure that it is put to productive use.  Such use could include not just monetary compensation to the farmers, but also assistance with exploring ways to for ACP bananas to gain special status on the world market, based not on a colonial past but rather as a product that is superior to those produced on the mechanized plantations of Latin America.

Finally, 2009 reinforced the challenges of enacting a new WTO Doha Round agreement, particularly one that adequately addresses development concerns.  The 7th Ministerial Conference, held November 30th – December 2nd, was billed as a status review rather than a negotiating session but led to commitments to conclude the round in 2010The complexity/irony for developing countries is that the ongoing delays in these negotiations create more time to understand, assimilate, and implement obligations arising out of previous Uruguay Round (concluded in 1994).  On the other hand, delays in concluding the Round also mean delays in reaching agreement on rules in areas of importance to developing countries, such as agriculture and expansion of trade in service.  Meanwhile, new and more urgent issues are pushing their way to the forefront – top at the list is the need to develop rules to prevent another global economic crisis and to address new methods by which governments try to insulate their economies from competition, such as exchange rate manipulations and requirements on government procurement.

Meanwhile, the struggle to get global agreement on climate change further illustrates just how difficult it will be to get consensus in the WTO around a trade deal that pleases every member, each of whom holds de facto veto power over a final agreement.  Accordingly, for 2010 we should expect to see countries continuing to pursue bilateral trade deals and the possible emergence of smaller “side” agreements, for example to implement the Duty-Free, Quota-Free Treatment for LDCs on which WTO members agreed in 2005.  We can expect increased focus by both the U.S. and the EU on Asia; the EU recently announced plans to negotiate an FTA with the Association of South-East Asian Nations (ASEAN) countries, while the U.S. in December announced its intentions to negotiate a Trans-Pacific Partnership (TPP) Agreement.  Whether these trends mean an end to the hopes of developing countries for improved terms of trade will depend on the continued willingness by all to search for new approaches and solutions.

What ideas or solutions can you offer?  I look forward to your contributions.