Advancing LDCs Interests in the WTO: Strengthening Participation, Securing Priorities

The study is being conducted by the Centre for Policy Dialogue (CPD), a TTI Grantee think tank, in collaboration with South Asia Watch on Trade, Economics and Environment (SAWTEE), a non-TTI Think Tank in Kathmandu, Nepal (an LDC) established in 1999. CPD will be the anchor institution for implementation of the programmatic activities. SAWTEE will be CPD’s strategic and knowledge partner in implementing the programme. The objectives and proposed activities envisaged under the programme are very much in line with long term institutional objectives of both CPD and SAWTEE. CPD, as a TTI grantee, has set itself the task of strengthening institutional capacity to contribute to policymaking in Bangladesh and advancing LDC interests globally, through research, outreach and policy influencing. The programme will complement and leverage CPD’s TTI support. SAWTEE’s institutional vision is to promote the cause of inclusive growth in South Asia through research, partnerships and advocacy. Trade is an important focus of SAWTEE in this regard. The programme will also be able to take advantages of two global networks hosted by the CPD, LDC IV Monitor and Southern Voice on post-2015 International Goals (SV). SAWTEE maintains a strong network with think tanks particularly in South Asia. CPD and SAWTEE will be able to draw on the strengths of these networks to involve a wider community of professionals and institutions in undertaking research, building trade-related capacities and influencing policies that will secure LDC interests in the WTO.

Expected Outcomes

• Six Working Papers articulating issues of interest, future challenges, negotiating stance of LDCs in view of WTO negotiations in Geneva.
• Six Policy Briefs based on research and emerging issues for use by policymakers.
• Ten blog posts based on research outputs, comments on relevant research issues and issues of LDC concerns for wider and popular dissemination of knowledge on LDC-related trade issues.
• YouTube streaming of dialogues and research results, lessons learned.

The proposed study is envisaged to cover a period of two years (March 1, 2016 – February 28, 2018) keeping two key milestones in the background and in perspective: WTO’s MC-10 which was held in December 2015 and MC-11 to be held in Buenos Aires, Argentina, from 10 to 13 December 2017.

Two core teams from CPD and SAWTEE separately but in coordination with each other are involved in the ongoing research works and associated activities under the programme. An advisory committee is formed to guide and monitor progress of the studies. Similarly, besides of core advisory committee there are experts involved depending on the concept of the research. Information on members of core team and advisory committee are only presented in the website.

Member of Study Team

Lead Researcher from CPD: Professor Mustafizur Rahman, Distinguished Fellow, CPD

Lead Researcher from SAWTEE: Dr. Posh Raj Pandey, Executive Chairman, SAWTEE

Associate Researchers: At CPD

1. Mr Towfiqul Islam Khan, Research Fellow, CPD
2. Mr Md. Zafar Sadique, Senior Research Associate, CPD (also Programme Coordinator of this programme)
3. Mr Estiaque Bari, Senior Research Associate, CPD
4. Ms Sherajum Monira Farin, Research Associate, CPD
5. Ms Sarah Sabin Khan, Research Associate, CPD

Associate Researchers: At SAWTEE

1. Mr Asish Subedi, Senior Programme Officer, SAWTEE
2. Ms Pragati Koirala, Research Associate, SAWTEE
3. Mr Abyaya Neopane, Intern, SAWTEE

Advisory Panel

To ensure that the programme activities are implemented according to work plan and that high standard of work is maintained, an ‘Advisory Panel’ consisting of CPD senior professionals has been constituted to guide the programme. The Panel is tasked to give appropriate advice and direction towards successful implementation of the programme in the course of the programme lifetime including in terms of identification of research themes, review of draft papers, policy influencing and dissemination of outputs. The members of the Panel are:

1. Dr Fahmida Khatun, Executive Director, CPD
2. Dr Debapriya Bhattacharya, Distinguished Fellow, CPD
3. Ms Anisatul Fatema Yousuf, Director, Dialogue & Communication, CPD

Under the TTI Opportunity Fund project, six research works are envisaged to be conducted. Of which four studies will be conducted by CPD and other two studies will be conducted by SAWTEE. As of now, four studies conducted by CPD have completed (links mentioned below) while other two by SAWTEE are in the final revision stages.

Research by CPD

Study 1: The Emerging New Trade Alliance Scenario: Why the LDCs Should be Concerned?

Study 2: WTO Decision on TRIPS and Public Health: A Window of Opportunity for Bangladesh’s Pharmaceutical Industry

Study 3: Upcoming WTO MC11 and Interests of Bangladesh as an LDC

Study 4: Value Chains in BIMSTEC Region: Current Status, Possibilities and Challenges

Research by SAWTEE

Study 5:  WTO Services Waiver: Exploring Opportunities and Challenges for Nepal

Study 6: E-Commerce in WTO: Agenda for Nepal

(i) The Emerging New Trade Alliance Scenario: Why the LDCs Should be Concerned?

The global trading regime is becoming increasingly fragmented. The vision of building a multilateral trading system anchored in the WTO has come under serious threat. Negotiations under the Doha Development Round (DDR) are practically stalled. In this backdrop, one observes a proliferation of regional trade agreements (RTAs) and mega-RTAs in the global trading scenario. In view of this emergent scenario, the CPD study examines the implications of some selected RTAs for the trade interests of Bangladesh and other LDCs. The questions asked were:

• What are the reasons for proliferation of RTAs?
• What are the implications of the mega-RTAs for market access of the LDCs?
• What these mega-RTAs mean for the WTO and multilateral trading system?
• How should LDCs strategise in view of the above?

Study findings suggest that geopolitical interest has often led countries to go for economic cooperation including PTAs and RTAs, and also emergence of mega-RTAs. The countries involved in mega-RTAs also seek to deepen market access gains by going beyond the WTO’s multilateral tariff levels. However, as the research clearly shows, these mega-RTAs will impact adversely on market access and competitiveness of LDCs that are not members of these trading blocs. Risks posed by the mega-RTAs in the form of trade diversion and preference erosion are quite formidable. The ongoing mega-RTAs were highly likely to result in preference erosion for the LDCs as deductions in MFN tariffs by the member countries will lead to a reduction in the preferential margins that are offered to the LDCs under the various GSP schemes. This will diminish the export gains currently enjoyed by the LDCs as a result of preferential treatment from the developed countries. The preference erosion will have detrimental effects on the LDCs exports and their competitiveness. GDP growth and other socio-economic indicators such as poverty reduction, industrialisation, and employment generation would be undermined as a result (Rahman and Bari, 2017). These problems are further accentuated because of the weak state of economic and political institutions in the LDCs.

Findings emanating from the study have been disseminated through various Independent Review of Bangladesh’s Development (IRBD) reports, a flagship programme of the CPD. Preliminary findings have been shared with broader audience through Op-eds and media interviews by CPD researchers.

The research came up with a number of suggestions to address the challenges LDCs are facing because of the mega-RTAs: The DF-QF product coverage should include all the LDC exports to enhance their export competitiveness. WTO should enact measures that would support the growth of services sector and services trade in LDCs by providing their services exports with preferential treatment under the WTO services waiver decision. Capacity-building initiatives for the LDCs needs to be discussed in different forums. The demand for committed aid for trade for enhancing the export competitiveness of LDCs should be voiced loudly through different forums including the WTO. LDCs should aim to enhance South-South Cooperation (SSC) as a way to strategise against the growing RTAs. If needed LDCs should take part in mega-RTA negotiations, with a view to embed S&D provisions. LDCs should also demand that market access be given to LDC products on equal footing by multilateralising the plurilateral agreements signed by key trade players.

(ii) WTO Decision on TRIPS and Public Health: A Window of Opportunity for Bangladesh’s Pharmaceutical Industry

The Doha Ministerial Decision of the WTO on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and Public Health was an important milestone in advancing the cause of better and affordable access to health in low-income countries, particularly the LDCs. The TRIPS Agreement has set mandatory standards of international obligations for innovations, but it also includes some “flexibilities”. The TRIPS Agreement allowed a transitional period for developing countries and LDCs to develop necessary regulatory and institutional capacity to be able to implement the TRIPS obligations. The LDCs enjoy two waiver periods – one till 01 July 2012 for any kind of inventions, and another one specifically for pharmaceutical products which is till 01 January 2033. This decision was subsequently endorsed at the Tenth WTO Ministerial Conference (WTO MC10) in Nairobi.

Doha decision and subsequent extensions offer a unique opportunity to the pharmaceutical sectors in the LDCs to play an essential role in providing medicine at relatively lower prices, without undermining their commercial interests.  Among all the LDCs Bangladesh has the strongest performing pharmaceutical sector, catering to both the increasing demand in the domestic market and also to the global market through export; and is thus best positioned to take advantage of the TRIPS flexibilities and waiver period. In this backdrop, the study examines a number of questions:

• What is the relevance of WTO-TRIPS decision on Public Health for the LDCs and in particular Bangladesh?
• What are the challenges that Bangladesh and other LDCs face in realising the potential benefits of the decision?
• What policies should LDCs like Bangladesh pursue towards maximising potential benefits of TRIPS decision of the WTO on pharmaceuticals?
• How best to prepare for life beyond the eligibility period?

Thanks to the TRIPS waiver and transition period, pharmaceutical companies of Bangladesh enjoy the following benefits which facilitated in developing their supply-side capacity : (i) companies can make any drug, irrespective of whether these are off-patent or on patent; (ii) companies can learn from and explore making of new drugs through imitation and follow-on innovation. Bangladeshi pharmaceutical industry has also enjoyed some level of protection, since TRIPS waiver period allowed the implementation of policies which restrict imports and operations of multinational companies (MNCs). Full implementation of TRIPS will require lifting import restrictions, introduction of pharmaceutical patents and a TRIPS-compliant regime will have implications of the price of drugs and will also restructure the market by putting pressure of competition on firms with relatively lower efficiency. Well-functioning insurance system should be established to address the price increase resulting from implementation of TRIPS Agreement. Bangladesh should develop strong research and development base, highly skilled labour force with advanced state-of-the-art technical knowledge, contract manufacturing facilities to take advantage of the transition period. To ensure a smooth transition to the time beyond the TRIPS transition period pharmaceutical companies in Bangladesh and other LDCs should focus on gaining production efficiency and should focus on strong branding to prevent loss of market share to MNCs and imported medicines. LDC governments should work with stakeholders to develop a legal framework and health care infrastructure which is able to make strategic use of the TRIPS provisions which allows countries to prioritise their national development goals in alignment to the TRIPS Agreement.

The study benefitted from the event organised under this programme by the CPD in February 2017 where a globally renowned expert, Ms Sakiko Fukuda-Parr, Professor, Graduate Program in International Affairs (GPIA), The New School, New York  shared her views on a range of issues that concern access to medicine and pharmaceutical products at affordable prices. The presentation and the subsequent discussion focused on the global regime in trade in medicines, the role of pharmaceutical sector in countries such as Bangladesh and importance of the TRIPS decision of the WTO to safeguard the interests of the LDCs.

(iii) Upcoming WTO MC11 and Interests of Bangladesh as an LDC

The Eleventh Ministerial Conference of the World Trade Oraganization (WTO MC11) took place in Buenos Aires, Argentina on December 10-13, 2017. As is known, for the increasingly globalising economy of Bangladesh and a number of other LDCs, the workings of the multilateral trading system, with its rules, regulations, disciplines, flexibilities and derogations, remains a critically important area of attention and focus on the part of policymakers and concerned stakeholders.

The study situated MC11 in the backdrop of recent global developments and articulates major areas of discussions and negotiations in the run up to MC11. The paper articulates Bangladesh’s offensive and defensive interests in view of the above and presents a set of possible strategies in pursuance of the interests of Bangladesh and other LDCs in anticipation of negotiations that were to be held during the then upcoming WTO MC11.

The paper argued that LDCs and Bangladesh should take cognisance of the unfolding scenarios, both in the context of the global developments, as also in view of the ongoing negotiations in the WTO, to (a) identify priorities, (b) assess the negotiating agendas from the perspectives of offensive and defensive interests, (c) firm up negotiating stance in view of the MC11 agendas and (d) identify strategies to pursue their interests including possible opportunities of coalition-building. The LDCs had to consider three sets of issues: (i) ongoing WTO negotiating agendas; (ii) built-in WTO agendas and (iii) new issues. For Bangladesh some of the key agendas included operationalisation of: (a) DF-QF decision (MC6 decision in Hong Kong), (b) Implementation modalities of S&D provisions (MC9 decision), (c) Services Waiver (extended till 2030: MC10 decision), (d) The Agreement on TRIPS and Pharmaceuticals (Doha declaration extended till 2032: MC10 decision); (e) Rules of origin for LDCs (MC10 decision), (f) Trade Facilitation Agreement (TFA) (MC9 decision); (g) Aid for Trade. Built-in agendas with regard to which some progress were made in the negotiations included Agreement on Agriculture (AoA) and electronic commerce (E-commerce), as also fisheries subsidies.

DF-QF market access remained a key issue of interest to Bangladesh, as also of many other LDCs, particularly from the Asia-Pacific region. One strategy that was put forward was for the LDCs to pursue the modality of number-based commitments from developed countries to extend respective coverage of DF-QF facility in export value terms. In line with MC10 Decision, LDCs should argue for flexible Rules of Origin (RoO) so that they are able to take advantage of the decision (South Centre, 2015).

The paper came up with a number of possible approaches and strategies which Bangladesh as an LDC could pursue in view of the then upcoming MC11 and also beyond:  (a) put emphasis on the Doha Round deliverables; (b) ask for an early harvest meaning that Bangladesh and other LDCs should argue for decoupling the implementation of the decisions favouring the LDCs from completion of the Doha round; (c) ensure speedy implementation of the decisions favouring LDCs; (d) an appreciation of new dynamics, new players and new issues. For example, to be prepared for the eventuality that plurilaterals could dominate the WTO discussions; (e) the overriding importance of remaining engaged with new issues such as e-commerce; (f) keep dual identity of Bangladesh (lower middle income and LDC graduation) in the perspective while negotiating, (g) importance of remains engaged in the discussion on Post-MC11 Work Plan.

(iv) Value Chains in BIMSTEC Region: Current Status, Possibilities and Challenges

Rule-based multilateral trading system under the WTO has benefited the LDCs and other lower income countries in the past. However, multilateral trading system as embodied in the WTO is losing traction in view of the changing global trading regime. In contrast, bilateral, sub-regional and mega-regional trading arrangements are receiving increasing prominence and attention in the global trade negotiations. In this vein, BIMSTEC was conceived to broaden and deepen collaboration in a few key areas and engage more effectively with regional production and value chains in Southeast and East Asia. As all four LDCs in BIMSTEC (i.e. Bangladesh, Bhutan, Nepal and Myanmar) are expected to graduate out of the LDC group over the next few years, these economies have an added interest to be more productively engaged in regional platform of the type such as the BIMSTEC.

The motivation of this particular research was to examine which strategies LDCs should pursue in the context of BIMSTEC negotiations and how they could benefit from this RTA. The research examined and assessed the state of cooperation among the BIMSTEC members, review the lessons from the experience of East and South-East Asian regions in developing GVCs and RVCs and examine the status, challenges and opportunities concerning GVCs and RVCs from the vantage point of the BIMSTEC region.

As the paper indicates, a number of products such as garments, leather, gems and jewelry, bamboo and wood, medical plants and light engineering goods had good potentials to participate in the regional production network in BIMSTEC region. As is known, majority of BIMSTEC members have been pursuing strategic trade liberalisation. However, four members of BIMSTEC are on course for graduation from the LDC group over the next few years and the resultant loss of preferential treatment will create a new trading situation for these countries. In view of this they will need to seriously reconsider their trade strategies both within BIMSTEC and outside. In this regard, they should be more proactively engaged in BIMSTEC negotiations. Deepening of physical connectivity within the region, could play a critically important role in developing regional production and value chains which could enhance productivity and competitiveness of these countries in the context of a fast moving global trading regime. After many years of slow progress in recent times the idea of developing transport connectivity within the BIMSTEC region has been gaining traction (i.e. BBIN-MVA agreement and Kaladan Multi Modal Transit Transport Project). Joint exploitation of maritime resources was also suggested as a key strategy to take BIMSTEC wide cooperation forward.

However, some of the BIMSTEC member countries are competitors rather than partners that complement each other. Considering that BIMSTEC is a region with significant size of labour force, it will be critically important to craft RVC/GVC strategies by keeping in mind the priorities in this connection. The relatively labour-intensive value-added activities are where BIMSTEC countries have comparative advantage. The paper argued that BIMSTEC could serve as a bridge between South Asia and ASEAN, and South Asian LDCs could benefit from this through market access to larger economies and by blending the opportunities of labour-intensive activities with skill and technology driven production systems. This is important because infusion of technology and skills have to be given due importance since in the near future BIMSTEC countries will have to graduate from factor-driven to technology-driven economies. The BIMSTEC Secretariat could play an important role in harnessing the potentials of closer cooperation in the region.

(v) WTO Services Waiver: Exploring Opportunities and Challenges for Nepal

Experiences of economic development in many developing countries indicate that the process of industrialisation brings changes in the structure of the economy: as industrialisation take off, the share of agriculture in output and employment falls and the share of manufacturing and services correspondingly rises. The structure of the output of Nepal shows significant change over the last few decades. The services sector has posted a growth which is almost double the corresponding rates for agriculture and industry sectors during the last decade. Decomposition of Nepal’s GDP growth by sectoral contribution shows that services sector’s contribution stood at an impressive 82 per cent. However, services sector could not generate corresponding employment to bring out structural change in the employment dynamics in the last decade. As may be recalled, the 14th Development Plan (2016/17-2018/19) of Nepal has proposed an employment focused development path and the services sector has been identified as a key high employment generating sector. The challenge is to harness the potential opportunities of developing the services sector towards structural transformation of economies such as Nepal.

Against the background, the study titled WTO Services Waiver: Exploring Opportunities and Challenges for Nepal, conducted under the TTI-OF by the SAWTEE, assessed LDC requests and WTO members’ responses in relation to the sectors and activities identified in Nepal Trade Integration Strategy 2016 (NTIS 2016). The study recommends policy interventions at the national level and negotiating strategy/ issues in the context of the WTO. Specifically, the study deals with the following issues:

• What are the sectors and destination markets to be prioritised/ focused to utilise the WTO services waiver for the LDCs?
• What are the barriers Nepalese service and service exporters face in the export of services in destination market?
• How to ensure domestic preparedness in services export for priority service sectors?
• What should be the negotiating position/ agenda in services negotiation?

Findings of the study were discussed at a workshop titled ‘WTO Services Waiver: Exploring Opportunities and Challenges for Nepal’ organised by SAWTEE in collaboration with the Government of Nepal on 9 July 2017. 35 participants including government officials, professionals and private sector stakeholders attended the workshop. Key informant interviews are in progress and is planned to be completed in two weeks. A national seminar is planned to be organised in the third week of August 2017 to disseminate and validate the findings.

(vi) E-Commerce in WTO: Agenda for Nepal

As part of the TTI-OF programme, SAWTEE undertook a study titled E-Commerce in WTO: Agenda for Nepal. The study will attempted to articulate the Nepal’s negotiating strategy on electronic commerce taking into account their economic, financial and development needs, based on the Nepalese perspective being a LDC.

Nepal is ranked 108 of 144 nations in B2B E-Commerce in 2016 as several constraints have prevented the development of E-Commerce such as low rate of internet penetration, lack of proper institutional and legal frameworks and high investment costs associated with investment in e-commerce. Promotion of E-Commerce would be an alternative policy option to promote trade for Nepal, a LDC and LLDC, by escaping the curse of geography and circumscribing traditional trade barriers. At the multilateral level, as mandated by the Second WTO Ministerial Conference, the General Council adopted the work Programme on Electronic Commerce on 25 September 1988 and four WTO bodies, namely the Council for Trade in Goods (CTG); the Council for Trade in Services (CTS); the Council for TRIPS and the Committee on Trade and Development (CTD) have been working on trade aspects of e-commerce and its development implications. However, in the Eleventh WTO Ministerial Conference, there was no consensus on how the issues of E-Commerce be taken forward- one group of Members wanted to continue the Work Programme based on the existing mandate and another group issued a joint statement to advance electronic commerce work in promoting open, transparent, non-discriminatory and predictable regulatory environments in facilitating electronic commerce.

The study has reviewed the mandate and work on E-Commerce in WTO, including post Eleventh Ministerial Conference development and the framework of Joint Statement of Electronic Commerce. It also assessed the domestic preparedness and development of E-Commerce in the context of Nepal.

The study provides policy recommendation in legal and regulatory areas along with infrastructure and human resource development for the promotion of E-Commerce in Nepal. It also proposes the elements of multilateral rules on E-Commerce and the measures to improve access of micro, small and medium enterprises (MSME) to e-commerce.

Policy Briefs by CPD

Policy Brief 1: The Emerging New Trade Alliance Scenario: Why the LDCs Should be Concerned?

Policy Brief 2: WTO decision on the TRIPS and Public Health: What does it imply for Bangladesh?

Policy Brief 3: WTO MC11 and Interests of Bangladesh as an LDC

Policy Brief 4: Value Chains in BIMSTEC Region: Current Status, Possibilities and Challenges

Dialogues

• A session titled Health and global trade regime: Is it affecting equal access to medicines? was organised by the CPD on 13th February 2017
• Public Dialogue on Towards Eleventh Ministerial of the WTO: Reclaiming the Development Agenda was organised by CPD on 30 November 2017

International Dialogue

• Dhaka Retreat on Towards Eleventh Ministerial of the WTO: Reclaiming the Development Agenda was organised by CPD on 29-30 November 2017

Expert Group Consultation/ Dissemination Seminar

• A national seminar on E-Commerce in WTO: Agenda for Nepal was jointly organised by SAWTEE and the Ministry of Commerce, Government of Nepal on 2 July 2018
• A dissemination seminar titled WTO Services Waiver: Exploring Opportunities and Challenges for Nepal was organised by SAWTEE in collaboration with the Government of Nepal on 9 July 2017
• EGM on WTO Decision on Pharmaceuticals: Realising the Potential Opportunities by LDCs was organised at Bangladesh Association of Pharmaceutical Industries (BAPI) office on 6 August 2017

Workshop

• A half day workshop titled WTO Services Waiver: Exploring Opportunities and Challenges for Nepal organised by SAWTEE in collaboration with the Government of Nepal on 9 July 2017
• A workshop on International Trade Issues and Bangladesh Interests was organised by CPD held on 29 August 2017
  Download Resources: Programme Schedule | Participants List | Presentations | Reading Materials | Workshop Photos