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Thursday , January 26 2023

Assessing the performance of LDCs’ trade growth focus writing

The World Trade Organization (WTO) has recently published a comprehensive report on the trading performance of least developed countries (LDCs) during the decade of 2011-20. Alongside performance, the report has also evaluated their integration with multilateral trading system, enhancement of their trading capacity, as well as graduation of some Least Developed Countries (LDCs) to the rank of developing nations. Titled ‘Boosting trade opportunities for least developed countries: Progress over the past ten years’, this report provides valuable insights about the implementation of Istanbul Programme of Action (IPoA, 2011-20) adopted during the Fourth United Nations Conference on the Least Developed Countries (LDC4, 2011), which devised a vision for growth and development of LDCs by boosting goods and services exports. IPoA had identified trade as one of the eight priority areas of actions for economic growth and sustainable development of LDCs. However, as claimed by the WTO report, the LDCs have not been able to take full advantage of the opportunities provided under multilateral trading system, and their participation in global trade could not achieve the decadal targets. Whereas the IPoA had aimed to double the share of LDCs in global exports during 2011-20, their share in fact went down from 0.95 per cent in 2011 to 0.91 per cent in 2020. As pointed out by the report, LDCs’ trade performance has been conditioned by weak productive cum institutional capacity, narrow export-base, limited market destinations, continuous and widening trade deficit, susceptibility to high price volatility of primary commodities, and lastly by the plummeting global demand and contractions resulting from the Covid-19 pandemic. The integration of LDCs into the multilateral trading system has been facilitated through progress made by WTO members in the areas of duty-free and quota-free (DFQF) markets and preferential rules of origin, along with services waiver. The call for DFQF market access has been made through the IPoA as well as target 17.2 of the sustainable development goals (SDGs) declared by the UN. Besides, WTO members have continued to provide flexibilities to LDCs while executing relevant rules. For example, the LDCs were initially allowed an implementation delay of 11 years with regard to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of WTO in 1994. However, this general transition period has been extended thrice in 2005, 2013, and 2021, and the current extension will last till 1 July 2034. The LDCs were also granted exemption from providing patent protection and undisclosed information for pharmaceutical products up to 2016, which has now been further extended until 1 January 2033. The trade facilitation agreement (TFA) under the aegis of WTO came into force in 2017. It has offered a pathway for tackling some longstanding challenges faced by LDCs including cutting trading costs by streamlining and harmonising customs procedures and speeding up the flow of goods. TFA is likely to reduce trade costs by up to 14 per cent globally and 16 per cent for LDCs when implemented fully. Besides, it will also help LDCs diversify their exports in terms of both products and markets. The WTO members have created the Trade Facilitation Agreement Facility (TFAF) to help LDCs in preparing their notifications, building capacity, and accessing implementation assistance from development partners. TFAF also extends project preparation grants (USD 30,000) and project implementation grants (USD 200,000) to LDCs and developing nations. Over the years, the WTO-LDC Group has evolved into one of the most active coalitions in advancing its priorities in the multilateral trading system. This Consultative Group is piloted by the LDC Coordinator and strives to forge shared positions on issues of common interest. Special priority has also been accorded to LDCs by WTO with regard to delivery of technical assistance over the past decade. The technical assistance plan includes annual LDC-focused Geneva-based introductory trade policy courses, thematic courses on multilateral topics, and reference centre programs. The LDCs also benefit from a greater number of national training activities sponsored by WTO. 

The Aid for Trade initiative of WTO has also been contributing to the execution of IPoA, whereby development partners are urged to increase their share of assistance to LDCs. Over USD 366.9 billion has been disbursed under this initiative since 2011, of which 30 per cent went to the LDCs. Bangladesh, for example, has consistently remained the highest recipient among LDCs under this initiative and received US$ 1,115 million, US$ 1,968 million, US$ 2,104 million and US$ 1,937 million respectively in 2016, 2017, 2018, and 2019. However, Aid for Trade commitments for LDCs have fluctuated during the previous decade as it fell to US$ 16.6 billion in 2019 after reaching a peak of US$ 20 billion during 2018. Five top recipients have been Bangladesh, Afghanistan, Ethiopia, Tanzania and Mozambique, and they accounted for over 45 per cent of disbursed aid. On the other hand, the World Bank, Japan, USA, EU institutions and African Development Bank have been the top five bilateral and multilateral aid providers channelling about two-thirds of Aid for Trade received by LDCs. This aid covered a variety of areas including global value chains, trading costs, inclusivity, connectivity, economic diversification and empowerment. Another initiative has been the Enhanced Integrated Framework (EIF) that was mentioned in the IPoA and UN Agenda for Sustainable Development. It functions as an operational partnership of 46 LDCs, 5 graduated LDCs, 24 donors and eight international organisations including WTO. It funds evidence-based analysis, contributes to institutional strengthening of LDC commerce ministries, helps build productive sectors having high export potential, and aids in overcoming most pressing supply-side constraints. Over 70 per cent of EIF investments are managed by the LDC governments, which reflect the principle of country ownership. At present, about 90 per cent LDCs have integrated trade into their development plans, while 35 have absorbed project-based trade teams in their government structures in order to ensure the sustainability of EIF interventions beyond project cycles. The EIF Strategic Plan (2019-22) adopted a granular approach to trade development in LDCs with a greater focus on fragile and conflict-ridden countries. There has also been a concomitant emphasis on enhanced engagement with the private sector as well as economic empowerment of women, youth and the MSMEs (micro, small and medium-sized enterprises). Till now, over half of the EIF beneficiaries have been women. Moreover, the EIF policy allows graduated LDCs to access EIF funds for a period of five years following graduation. A major objective of IPoA (2011-20) was to enable half of the LDCs to achieve graduation thresholds by 2020. Four LDCs (Maldives, Samoa, Equatorial Guinea, and Vanuatu) actually graduated during the decade, while 16 LDCs are currently at different stages of graduation. The latter include Angola, Bangladesh, Bhutan, Cambodia, Comoros, Djibouti, Kiribati, Lao PDR, Myanmar, Nepal, Sao Tome and Principe, Senegal, Solomon Islands, Timor-Leste, Tuvalu and Zambia. The WTO-LDC Group presented a draft ministerial decision in November 2020 on overcoming trade-related challenges for a smooth transition mechanism. Its main elements were a 12-year extension of LDC-specific special and differential treatment provisions, and a phasing-out of LDC-targeted trade preferences over a period of 12 years. The recent October 2021 submission is an interim arrangement whereby the trading partners are encouraged to extend LDC-specific preferences to graduated countries for a certain period. Efforts are now underway under the aegis of WTO for ensuring graduation in a smooth and sustainable manner. The WTO assessments of trade and healthcare impacts of Covid-19 on graduating LDCs like Bangladesh have found factors like high dependence on few commodities like tourism, limited digital readiness, and supply-chain rigidity as having significant impact on the economic performance of LDCs during the crisis. The agency now plans to organise a dedicated event on LDC graduation during the forthcoming Fifth United Nations Conference on the LDCs (LDC5) for extending support to adoption of informed policy decisions. Bangladesh, which will formally graduate from the LDC status in 2026 after remaining in the grouping for 50 years, is expected to benefit a lot from this exercise.

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