Beyond the Doha Round: towards development facilitation in the world trading system.

AuthorLee, Yong-Shik
  1. INTRODUCTION

    The Doha Round of the World Trade Organization (WTO), which aims to advance the development interests of developing countries in the world trading system, (1) has not been completed for over a decade due to the critical differences among the Member States (Members). While international trade is essentially important for the economic development of developing countries and the rules for international trade have significant impacts on developing countries with respect to their ability to adopt development policies, (2) the current WTO system does not adequately address the development concerns of developing countries and the rules fail to facilitate economic development. The Doha Round was launched with an objective of meeting the development interests of developing countries, but its progress has been sluggish, reflecting large gaps in positions on development issues between developed and developing countries. (3)

    Even if the current Doha Round is concluded successfully, with its negotiation agendas and objectives (4) met in the final negotiations, it would not be sufficient to fill the regulatory gap in the current WTO system for development facilitation through international trade, nor does it address the fundamental problem and imbalance in the current organizational structure of the WTO. The negotiation agendas and mandates of the Doha Round are not sufficient to achieve the reform that would correct the current problem in the regulatory framework and in the institutional apparatus of the WTO. The reform will have to be considered and discussed in a subsequent round.

    This paper, based on the author's previous works, (5) provides a brief account of the "development deficit" in the regulatory framework of the WTO and its organizational apparatus and of the reform proposal to meet the development needs of developing countries, as mandated by the WTO Agreement itself. (6,) The next section discusses the issues with the current regulatory framework with a proposal for a set of development-facilitation provisions, named the Agreement on Development Facilitation (ADF). (7) Section III provides a discussion of the "development deficit" in the current WTO structure and proposes organizational reform. Section IV draws conclusions.

  2. REGULATORY REFORM

    1. Current Regulatory Imbalance

      The current rules of international trade represented by WTO disciplines apply to 195 Members of the WTO, thus constituting the global regulatory regime of international trade. (8) Various agreements and understandings (WTO agreements) concluded in the Uruguay Round (1986-1994) were added to the rules of the General Agreement on Tariffs and Trade (GATT), which had been implemented since 1947 and still remain as the core principles of the international trade law. (9) The subsequent WTO agreements reinforce the GATT rules, where applicable, by providing detailed procedures, provisions, and implementation mechanisms.

      While most of key GATT provisions have been elaborated by more detailed WTO agreements with implementation mechanisms, (10) none of the GATT's development-facilitation provisions, such as Article XVIII and Part IV provisions (Articles XXXVI ~ XXXVIII), has been reinforced by any WTO agreement. Some of the GATT principles, such as maximum tariff bindings in Article II, restrain the ability of developing countries to adopt trade-related development policies. The development-facilitation provisions in the GATT, such as Article XVIII, address this issue by enabling developing countries to adopt tariff measures beyond their previous commitments under Article II for development purposes. (11)

      Nonetheless, certain requirements under the GATT's development-facilitation provisions, including those in Article XVIII and Articles XXXVI-XXXVIII, (12) cause difficulties for developing countries to adopt those measures. Article XVIII allows developing countries, whose economies only support low standards of living and are in the early stages of development, (13) to adopt tariff measures beyond the maximum tariff bindings to which they are committed under Article II in order to promote the establishment of a particular industry with a view to raising the general standard of living of its people. (14) However, developing countries are also required to engage in negotiation with the interested Members and compensation may well be required as a result of any modification. (15) Those negotiations can be lengthy, which may not allow developing countries to adopt the necessary measures in time, or may never be concluded successfully with the interested parties. Developing countries with limited economic resources may not be able to offer compensation required by the other parties. Article XVIII allows developing countries to adopt the measure even if negotiation should not be successful, provided that they offer compensatory measure at the time of applying the measure, (16) but it is subject to retaliatory measures by the other interested Members should the WTO consider the compensation inadequate. (17)

      Another set of major development-facilitation provisions of the GATT, Articles XXXVI-XXXVIII, (18) lays out an impressive array of preferential treatments in favor of developing countries. Article XXXVI addresses the vital role of export earnings in economic development, the possible authorization of special measures to promote trade and development, and the need for more favorable and acceptable conditions of access to world markets for primary products (on which many developing countries depend). (19) Article XXXVII elaborates the commitment of developed country Members' to assist developing countries with economic development. These commitments include according high priority to the reduction and elimination of import barriers to products of particular export interest to developing Members, refraining from introducing or increasing import barriers to such products, and according high priority to the reduction and elimination of policies specifically applicable to primary products wholly or mainly produced in developing countries, which hamper the growth of consumption of those products. (20) Article XXXVIII calls for joint action and institutional effort by the WTO to assist developing countries. (21) These provisions, however, are declaratory rather than obligatory for absence of sanction in the case of violation of those duties. Article XXXVII also allows developed countries to avoid any of those obligations by legislating against them. (22)

      Subsequent WTO agreements, while reinforcing other key GATT provisions, (23) do not address the implementation and enforcement problems of the development-facilitation provisions in the GATT, including those of Article XVIII and Articles XXXVI-XXXVIII, leaving regulatory vacuum in this area. The mainstream neo-classical economic stance does not support state-led development policies, such as infant industry promotion policies embodied in Article XVIII, (24) but the policy decision has already been made to allow developing countries this option when the Article was adopted by the GATT. Thus it would be only fair and adequate that those development-facilitation provisions are reinforced by subsequent agreements with detailed implementation provisions and enforcement mechanisms. The current WTO rules offer special and differential (S&D) treatment in favor of developing countries. (25) However, it is insufficient for the S&D provisions, which are scattered throughout WTO agreements, are either temporary or limited in coverage and extent. (26) The remainder

      of this section makes brief proposals for regulatory revisions to amend this development deficit in WTO legal disciplines. (27)

    2. Reform Proposal

      The development deficit in the regulatory system can be cured by elaborating and reinforcing the development-facilitation provisions in the form of a separate WTO agreement, as has been done with other GATT provisions. (28) This agreement can be named, "The Agreement on Development Facilitation (ADF)." (29) The Agreement may include rules for new, permanent S&D treatment in the areas that have critical implications for development such as tariff bindings, subsidies, anti-dumping, trade-related intellectual property rights, and trade-related investment measures. (30) The ADF can also provide a coherent regulatory standard for determination of developing countries to benefit from regulatory preferences. (31) A separate agreement will function as exceptional rules to the other WTO agreements and its advantage is to advance development interests without potentially complex revisions to the existing agreements.

      The maximum tariff binding under GATT Article II (32) has important ramifications for development. Article II prohibits Members from raising tariff rates beyond the maximum bindings that they have agreed in the previous trade round. (33) While the requirement provides essential stability for international trading system, it also restrains the ability of developing countries to adopt tariff measures beyond the maximum bindings to promote domestic industries for development purposes. As mentioned, the GATT has adopted the policy to allow this measure by the provisions of Article XVIII, but the negotiation and compensation requirement causes a considerable difficulty for developing countries. (34)

      Development-Facilitation Tariff (DFT) has been proposed to address this issue. (35) The DFT scheme enables developing countries to set the maximum additional tariff rate beyond the tariff binding under Article II. (36) It assigns a different maximum DFT rate to an individual developing country on a sliding scale, to be...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT