RULES OF ORIGIN


LDC Group seeks Nairobi outcome on preferential rules of origin

Members of the Least-developed Country (LDC) Group introduced a new proposal on 20 October which they said would build upon existing guidelines for establishing preferential rules of origin in favor of LDC exports. The group expressed hope that the proposal could be part of a “package” of initiatives for LDCs which members are contemplating for the WTO’s upcoming 10th Ministerial Conference in Nairobi.

The proposal, presented as part of an informal consultation process, seeks to go beyond the 2013 Bali Ministerial Decision on preferential rules of origin for LDCs, which the group said “remained largely non-operationalized.” The new proposal would help both LDCs and preference-granting countries give effect to the guidelines with a view to attaining effective market access for LDCs on a lasting basis.

Speaking for the group, Bangladesh said it recognises that no single system of rules of origin used by preference-giving countries is better than the other.  However, there is “unequivocal evidence” that, under certain conditions, the reform of rules of origin to reflect current global value chains and commercial realities can generate positive outcomes for LDCs. 

Some of the key elements of the proposal include:

  • Adopting simple and transparent methods for determining qualification through "substantial transformation."  For example, when using ad valorem percentage criterion, this would include adopting a maximum percentage of non-originating materials of at least 75% in the total value of the final qualifying good and allowing for the deduction of freight and insurance costs.
  • Providing LDCs with cumulation1 of working and process operations and materials with other LDCs, with preference-granting countries, with GSP beneficiaries, with countries that are members of the same regional grouping, and with countries with which the preference-granting country has concluded a regional trade agreement;
  • Abolishing certain requirements such as certificates of non-manipulation or any other form of certification for products shipped by LDCs across other countries, and recognizing self-certification of rules of origin.

In presenting the proposal on behalf of the LDC Group, Bangladesh noted that rules of origin were an integral part of the duty-free, quota-free treatment provided by preference-granting countries and that the proposal was based on existing best practices and drafted to reflect the real-world problems LDCs were facing in benefitting from such schemes.  It looked forward to credible outcomes on this issue at the Nairobi meeting in December. 

Reaction from other WTO members was mixed.  While all the countries that spoke said they were ready to work with the LDC Group on the issue in a constructive manner, several said the proposal appeared too ambitious, particularly with the little time remaining until the 15-18 December Nairobi meeting. Others said they were concerned that the proposal appeared to call for binding rules whereas the 2013 Bali Ministerial Decision granted countries flexibility in the application of the guidelines, or addressed issues which remain the subject of discussion within the WTO's rules of origin committee.

Nearly all the countries that intervened underlined the steps they have already taken, or are in the process of adopting, in order to conform to the guidelines set out under the 2013 Bali Decision.

Steffen Smidt, the facilitator for the consultations, said he would hold weekly meetings on the issue among a small group of countries starting on 27 October and would report back to the broader membership once there was progress to report.

Background

Rules of origin are the criteria used to determine where a product was made. Products that are deemed under such rules to be made in LDCs would qualify for preferential market access schemes for LDCs.

The Bali Decision sets out, for the first time, a set of multilaterally agreed guidelines to help make it easier for LDC exports to qualify for preferential market access. The Decision recognizes that each country granting trade preferences to LDCs has its own method of determining rules of origin, and it invites members to draw upon the elements contained in the Decision when they develop or build on their individual rules of origin arrangements applicable for LDCs.

The Decision also requires that members notify their preferential rules of origin for LDCs to the WTO to enhance transparency, make the rules better understood, and promote an exchange of experiences as well as mainstreaming of best practices. The WTO's relevant bodies shall also annually review these rules of origin.

Further information on the WTO’s work regarding rules of origin can be found at www.wto.org/origin.

 

Transparency in trade negotiations: How much is enough, how much is too much?

1 September 2015

Simon Lester

(http://www.ictsd.org/bridges-news/bridges-africa/news/transparency-in-trade-negotiations-how-much-is-enough-how-much-is)

Some critics of trade negotiations allege that the process is too secretive, and draft texts should be made public. This paper argues that more transparency is needed, but that releasing drafts in this way could impede the process. Instead, transparency should be expanded at an earlier stage, when policy is being formulated, and at the end, when the benefits of completed trade agreements are explained to the public.

Over the past few years, as controversial trade negotiations such as the Trans-Pacific Partnership (TPP) and Trasnatlantic Trade and Investment Partnership (TTIP) have progressed, there has been much debate has about whether trade talks are sufficiently transparent. Critics of trade agreements have stepped up their attacks on the "secrecy" of negotiations. Keeping these negotiations behind closed doors, with input only from corporate advisers, they argue, undermines democracy and the rule of law. As a partial remedy, critics have called for governments to make public the draft texts being discussed.

Governments have fought back against these charges, arguing that, in fact, they have been actively engaged with the public and with other branches of the government, keeping everyone fully informed of the state of trade negotiations.

Which side is in the right here? Are governments doing everything they should to be transparent about trade negotiations? How much secrecy is possible and desirable in this context? In this piece, I explore several aspects of the transparency issue that help inform the debate. I then offer suggestions for how governments could more effectively approach the issue.

Trade negotiations in the internet era

People who have been around trade negotiations for decades sometimes suggest that the transparency of trade talks has been getting worse over time. However, when you take into account the emergence of the internet, the current situation is actually not very surprising.

In the pre-Internet era, when trade negotiators exchanged and discussed draft texts, they could be relatively casual in their conversations with outsiders and with their distribution of documents. If a government official passed along a text to an interested party, that text might get circulated to a handful of other people, and perhaps published in a specialised news source. But that would usually be the end of it. No matter how controversial the substance, it is unlikely that the text would spread broadly and lead to any mainstream discussion and criticism.

Now, by contrast, documents that are given out in this way will, inevitably, be posted on the Internet, where they will be dissected by bloggers and activists immediately. This can impede sensitive negotiations because government officials will be overwhelmed by lobbying and criticism right in the middle of their discussions. As a result, governments have become more reluctant to disclose the details of trade talks to outsiders, and thus for some people, negotiating texts are less accessible than in the past.

Trade negotiations in the global governance era

Beyond technological issues, trade negotiations have changed in another important way too. They have evolved from being mainly about constraints on protectionism to involving broad efforts at global governance. In their early years, trade negotiations were mostly about offers and demands for lower tariffs. There were few legal texts to consider. Over time, more law was added to the process. Today, the typical trade agreement is a full-fledged global governance instrument, with wide ranging policy implications, from intellectual property protection, to labour rights, to environmental protection.

The different nature of the rules today has important implications for transparency. It might be unreasonable to expect the government to disclose publicly which of its trading partners' tariff lines it was most interested in lowering, as this has a limited public policy impact and would hinder its negotiating objectives. By contrast, issues such as intellectual property, labour and the environment are core social policies. What governments advocate in this regard affects us all in significant ways.

But full disclosure may cause negotiating difficulties. In each area, there are lengthy legal texts to consider. Governments with an interest in a particular area put forward detailed proposals, which are commented on by others. In this way, law and policy are developed by governments working together. The end result is a compromise from the initial position of each government.

This evolution from initial government negotiating positions to international compromise is a crucial time. Arguably, having a public debate during this process would undermine the whole enterprise. Governments would not just be negotiating with each other, but also with the public at large. If negotiating positions are open to debate during the process, it would be difficult to make any progress.

Towards effective transparency

These various considerations can perhaps guide a better approach to transparency. In an era where there are real time hashtag-based Twitter debates about the nuances of trade negotiating documents leaked by WikiLeaks, and where trade agreements govern a growing number of domestic policy issues, what should we expect in terms of transparency in trade negotiations?

In my view, we should expect transparency to a greater extent than it currently exists, but it should be transparency of a different kind than trade critics are demanding. In this regard, the trade negotiation process should be broken down into three stages: (1) development of a government negotiating position; (2) the negotiations themselves; and (3) domestic ratification of the completed negotiating text. Transparency should be emphasised at the beginning and end of the process; the middle needs to maintain some secrecy.

At the beginning stage, governments must get adequate input in developing a national negotiating position. It is crucial to cast a wide net in seeking out the views of interested parties. This process must be open to all.

However, governments need to have a bit of flexibility in finalising a negotiating position based on that input, and in conducting the negotiations. The input should be wide open, but the output should be less so. The negotiating position should not be subject to too much scrutiny at this stage. Once the position has been developed, trading partners should not be given too much information on areas of weakness and dissension.

Finally, the crucial point for transparency should be the end of the process. At the end, governments cannot expect to present a completed package to be rubber-stamped. There must be a convincing explanation of the merits of the compromise that was achieved.

As things stand now, there are flaws in the current process at both the beginning and the end, at least in the US (the system with which I am most familiar). With regard to the input at the beginning, it is not clear the process is working, in the sense that the government frequently takes positions in trade negotiations that are not particularly popular. A number of the major US government negotiating positions appear to generate support mainly from special-interest groups, such as corporations or labour unions, while the broader public has objections.

With regard to the corporate interests, intellectual property has been a particularly controversial issue. For example, ever longer copyright terms are pushed by business groups, while on the other side most ordinary people who are aware of this issue believe that many of the US negotiating positions on intellectual property are misguided.

Similarly, on labour issues, while unions might support the official US government position of strong and enforceable labour protections in trade agreements, popular opinion might be sceptical of tightening labour standards in this way. On the conservative side, many areas of the US are actually loosening these standards; and on the liberal side, forcing developing countries to adopt our current labour standards, when we ourselves had low standards during our development period, smacks of imperialism and imposing our values on others.

Part of the flaw in the input process may be as much about what topics should be included, rather than the substance of particular provisions. To some extent, the scope of trade negotiations seems to have been captured by special interests, who are adept at lobbying for inclusion of their issues.

Turning to the end of the process, the explanations offered by government officials are sometimes very superficial and seem designed to avoid acknowledging the complexities of the rules. In this regard, trade agreements are often portrayed as simple export initiatives. Almost every provision is touted as a way to increase exports, and as a result provide more domestic high-paying jobs.

That explanation is misleading. For example, it may be true that a longer copyright term would help a few US companies increase export sales. But presenting the issue in this way overlooks the broader policy implications, and does not constitute real engagement on the issue. Real engagement would involve, for example, an inquiry that compares different copyright term lengths and explains why one is better than the other.

Conclusion

Governments are in a difficult position balancing out all the competing domestic interests, and convincing their negotiating partners to move in their direction. They take risks in making choices for what national policy positions to take and how to push them with trading partners. If they choose incorrectly, the whole enterprise may unravel. Transparency is important, but it cannot be taken so far as to make the process entirely unworkable. There are particular stages were transparency can and should be improved, as described above. Now that trade agreements act as tools of regulation and policy-making, the debate needs to be more open at the beginning and more robust at the end than it has been. If done properly, more transparency could actually help to produce better trade agreements, and also to conclude negotiations and pass them in the domestic process.

INFORMATION TECHNOLOGY AGREEMENT

WTO members move close to deal on ITA expansion

Negotiators from 54 WTO members edged close to agreement on Saturday July 2015 on an accord which would expand the Information Technology Agreement (ITA) and eliminate tariffs on an additional list of roughly 200 products valued at about $1 trillion in annual trade. The products covered by the extension include new generation semi-conductors, GPS navigation equipment and medical equipment, including magnetic resonance imaging products and ultra-sonic scanning apparatus.

The list of products and the draft declaration which spells out how the Agreement would be implemented have been sent to capitals for review. Members have until Friday at noon Geneva time to give final approval.

“This is a big deal,” said WTO Director-General Roberto Azevêdo. “The trade covered in this agreement is comparable to annual global trade in iron, steel, textiles and clothing combined. By taking this step, WTO members will help to provide a jump-start to the global economy and underline the WTO's role as the central global forum for trade negotiations.”

While not all WTO members participated in these negotiations, all will benefit from the outcome because the participants will scrap duties on imports of these products regardless of which WTO member has produced them. Applying duties in a uniform and non-discriminatory manner across the WTO membership is known as the most favoured nation principle.

When the product list and draft declaration are approved, WTO negotiators will spend several months hammering out the technical details and the timetable for tariff elimination. The objective would be for all elements to be completed in time for Ministers of those members who are involved in this initiative to conclude the ITA expansion agreement at the 10th Ministerial Conference in Nairobi in December. It would be the first tariff-cutting agreement in the WTO for 18 years.

The Information Technology Agreement was finalized in 1997 and covers 80 WTO members. Efforts to expand the coverage of this agreement were launched in 2012.

(Source: www.wto.org)

The WTO and other organizations

The WTO works with a number of other international governmental organizations under the banner of “coherence”, a term originating in the “Decision on achieving greater coherence in global economic policy-making”, which ministers agreed in Marrakesh, April 1994. But coherence in global economic policy-making goes much beyond the WTO's formal and specific cooperation arrangements with the IMF and the World Bank. Indeed, it is now recognized that the WTO system is only one part of a much broader set of international rights and obligations that bind WTO Members. The WTO maintains extensive institutional relations with several other international organizations; there are some 140 international organizations that have observer status in WTO bodies. The WTO also participates as observer in the work of several international organizations. In all, the WTO Secretariat maintains working relations with almost 200 international organizations in activities ranging from statistics, research, standard-setting, and technical assistance and training. Although the extent of such cooperation varies, coordination and coherence between the work of the WTO and that of other international organizations continues to evolve so as to assist Members in the operation of their economic policies.


WTO extends scope of the Integrated Trade Intelligence Portal

On 23 July 2013, the WTO launched an expanded version of its Integrated Trade Intelligence Portal (I-TIP), which brings together all trade policy information relating to WTO members. I-TIP now includes, for the first time, information on services

The new application, known as I-TIP Services, consists of an integrated database that provides information on WTO members' commitments under the WTO's General Agreement on Trade in Services (GATS), services commitments in regional trade agreements (RTAs), applied measures in services, and services statistics (including the latest UNCTAD-ITC-WTO trade in services data). The database will make it easier for members and others to access information relevant for services trade policy making.

The database can be searched by member, sector, agreement, source of information and other criteria. Search results are presented in summary form as well as in more detail. It is easy for users to switch from one module to another. This new database is available at http://i-tip.wto.org/services/

The WTO has also released an updated version of I-TIP Goods, which now contains a wider range of non-tariff measure notifications, such as on safeguard measures and state trading enterprises, as well as enhanced functionalities. I-TIP Goods is available at http://i-tip.wto.org/goods/

At the presentation, the WTO Secretariat also showcased how its upgraded Air Services Agreement Projector (ASAP) will enable users to obtain information on the evolution of bilateral and plurilateral Air Services Agreements and correlated traffic flows.

I-TIP also includes information on members' accession commitments and data taken from the WTO's regular trade monitoring reports. Source www.wto.org


Building trade capacity

Developing countries face special difficulties in benefiting as they should from the multilateral trading system. This page describes the efforts made by WTO to meet their special needs by building “trade capacity” to enable them to trade more effectively.

Helping developing countries participate more fully in the global trading system is one of the WTO's most important activities. Those developing countries which trade successfully tend to be those which have made the most progress in alleviating poverty and raising living standards. But there are countries, including a large number of least-developed countries (LDCs) where trade is failing to make the contribution that it should be making to economic growth and poverty reduction.

The main thrust of WTO work to redress this is the Doha Development Agenda, but Members have recognized that building trade capacity is an essential complement to the DDA.

There are a variety of ways in which the WTO provides assistance to build trade capacity in developing countries, but instructing  developing country delegates on how their countries can gain through the trading system is the central focus of the organization's efforts. The vast bulk of WTO “technical assistance” spending is dedicated towards helping officials better understand complex WTO rules and disciplines so that they can implement WTO agreements in ways which will bolster their trading regimes and negotiate more effectively with their trading partners. Broader and more effective dissemination of such knowledge has facilitated the participation of  developing country trade officials in the Doha round and in other WTO activities.

Enhancing trade capacity involves other forms of assistance too, including building more efficient ports and road networks, providing customs officials with automated equipment and teaching entrepreneurs how to take advantage of business opportunities in the global marketplace. Work of this nature is largely the responsibility of other international organizations like the United Nations and the World Bank. Some programmes, particularly those involving infrastructure, require significant funding not only from international organizations but also direct contributions from national governments. To be truly effective, any  programme of trade capacity building requires all these elements to come together in a co-ordinated fashion. For this reason many WTO activities in this area involve close co-operation with other international organizations.

Assistance to developing countries has always been on WTO's work schedule, but the scale and scope have become much broader with the Aid for Trade initiative.

Why is building trade capacity important? 

Because many countries simply don't have the human, institutional and infrastructural capacity to participate effectively in international trade. Without that, these countries won't be able to expand the quantity and quality of goods and services they can supply to world markets at competitive prices.

  • human capacity refers to the professionals governments rely on for advice on WTO matters: trade lawyers, economists, skilled negotiators. A country that lacks these professionals is clearly at a disadvantage when implementing existing trade agreements, when negotiating new ones, and when handling trade disputes.
  • institutional capacity refers to the institutions businesses and governments rely upon for trade, such as customs, national standards authorities, and the delegation representing the country at the WTO. Trade ultimately suffers if these institutions are inadequate.
  • infrastructure refers to the physical setup required for trade to happen: roads, ports, telecommunications. Again, countries lacking infrastructure will find it difficult to develop trade.

The WTO's trade rules, negotiating forum and dispute settlement system are not  goals in themselves. They are necessary preconditions for free and predictable trade, but are not always sufficient to create results. WTO Members have recognized that the multilateral system needs to be accompanied by improvements in trade capacity.

 

The WTO Reference Center is established on the 7th floor of the Ethiopian chamber of Commerce Sectorial Associations building, aiming to serve as a source of information for the private sector, trade promotion institutions and researchers. The center is currently being equipped with WTO related electronic training materials, publications, books and other relevant resources.

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