volun-Another problem is that preferences, evenwhen effective, are likely to divert trade awayfrom other excluded developing countries be-cause the exports of developing countries tend t
Trang 1larger number of routes.) Even with open entry,
thin traffic densities and the associated lack of
economies of scale are likely to remain key
ob-stacles to lowering air freight rates in the
de-veloping world If liberalization leads airlines
to adopt hub-and-spoke networks, prices could
fall on well-connected hub routes, while rising
on some spoke routes To reduce this risk by
cross-subsidizing transport to remote and poor
areas within continents, the concept of
univer-sal service should be embraced internationally
Rich countries could offer tax breaks on air
cargo service provided to certain developing
country locations Alternatively, an
interna-tional fund for the provision of universal air
services could be established
For maritime transport, one avenue to
im-provement would be to subject the industry to
MFN treatment in routes as part of the larger
GATS discussion on services Doing so would
undermine the competition-restricting liner
codes that prevent new entries in designated
shipping routes Another avenue would be to
review exemptions in U.S and EU antitrust
law for maritime transport
Security can be increased without
jeopardizing trade flows from
developing countries
Even though the costs of compliance with new
security measures could be large and
dispro-portionate for smaller countries, all
partici-pants in the global trading system have an
in-centive to invest in counterterrorism Such
investments are likely to pay off in the long
run through efficiency gains, better
manage-ment of information, and greater use of
elec-tronic commerce To ensure that they do,
sev-eral steps must be taken
First, technical assistance must be increased
The IMO, ICAO, and other organizations
should step up their technical cooperation
ef-forts to provide more training in risk
assess-ment, customs administration, and
infrastruc-ture planning in their client countries.
Second, nations must coordinate
trade-re-lated actions not only with other countries, but
also with their own private sectors The
inter-dependence and linkages among differenttransport modes call for a coordinated ap-proach to security among sectors and modes
Regional and bilateral partnerships amongcountries can strengthen channels for informa-tion exchange and cooperation in training andsharing of best practices, resulting in mutualenhancement of security efforts Other regionscould follow APEC’s lead by looking for ways
to design collaborative programs with the vate sector to implement security measures
pri-Third, a risk-assessment template wouldensure that high-risk areas are targeted forspecial security programs The measuresadopted should be those that distort trade theleast and provide the greatest benefits, espe-cially for exports from developing nations
Fourth, a formula for cost-sharing must bedeveloped The Hong Kong Shippers Coun-cil (HKSC) and the ASEAN Federation ofForwarders Associations (AFFA) have urgedthe USCS to subsidize the cost of its newrequirements and U.S importers to share with Asian exporters the burden of providinginformation
Trade facilitation depends on capacity building and development assistance
Capacity building and development assistanceare necessary if countries are to make the most
of trade-facilitation measures—whether thosemeasures stem from security imperatives ormultilateral trade talks Attempts to build tradecapacity may require several elements—frombuilding basic transport infrastructure to mak-ing legislative changes and training regulators
Some developing countries may require onlytechnical assistance to expedite cargo clearancethrough electronic trade documentation Oth-ers will need much more help No single pack-age will meet the needs of all countries
Whether or not trade facilitation becomespart of multilateral trade negotiations, mea-sures that lower transport costs, remove barri-ers to goods and services moving across bor-ders, and build capacity in trade facilitationmust be pursued Success will depend first ongovernments and the private sector in devel-
Trang 2oping countries, but also on the G-8, UNagencies, the WCO, the World Bank, and otherinternational development institutions Multi-lateral efforts to support domestic policy re-form and institutional improvements in devel-oping countries are particularly important ifinvestments in trade facilitation are to yieldtheir full potential—a potential that is greatindeed
in-in developin-ing economies Private in-investment in-in the short run increased by 0.5 to 1 percentage point of GDP, in relatively insecure countries that adopted se- curity measures to the levels in “best practice” regions.
Moreover, economic growth received a boost by 0.5 to 1.25 percentage points per year in the long term
3 The newly created Department of Homeland curity includes Customs, Immigration and Naturaliza- tion Services (INS), Border Patrol, and the federal Agri- cultural Inspection Service The Department provided
Se-$170 million in port security grants in June 2003.
Under discussion is a plan that would include an tional $1 billion for the Transportation Security Ad- ministration, $200 million to $700 million more for the Coast Guard, and an increase in federal grants to local police and fire departments for counterterrorism training.
addi-4 Some overseas suppliers are covered under the C-TPAT because they are subsidiaries of U.S compa- nies enrolled in the initiative
5 The Swedish port of Goteborg has become the twelfth to join the Container Security Initiative (as of May 2003) Those already participating include: Rot- terdam, LeHavre, Bremerhaven, Hamburg, and Ant- werp in Europe; Singapore, Hong Kong, and Yoko- hama in Asia; and Vancouver, Montreal, and Halifax
in Canada These ports are at different stages of mentation of the CSI framework CSI is now moving into its second phase, which will include Turkey, Dubai, and about 20 other nations in Asia, Latin America, Europe, and Africa.
imple-6 On a related note, Europe’s largest air cargo riers, which are calling for a level playing field among the United States, Europe, and the rest of the world as
car-far as security and its costs are concerned, criticized U.S government aid of $10 billion to its airlines to conform to increased security measures European car- riers believe that the aid has helped U.S carriers slash rates on very competitive North Atlantic routes
7 Another proposal under consideration is the ing of a bill of lading by U.S Agricultural exporters 24 hours before loading the containerized freight
fil-8 The Agricultural Ocean Transport Coalition has urged Customs to require no more than 12 hours ad- vance notice for agricultural products and 6 hours for perishable products
9 U.S VISIT, a new entry-exit system to be stalled in U.S airports and seaports by January 1, 2004, will be based on visas that include biometric features such as fingerprints and photographs to identify foreign visitors The EU has also earmarked Euro 140 million
in-to fund biometric identification technology for visas
10 A U.S.-EU dilemma arose over reservation records demanded by the United States that violated EU’s data privacy rules An interim agreement was reached, after the United States assured the European airlines of “appropriate handling” of the records, which include not only names but also the passenger’s itinerary, contact phone number, and other details, such as credit card numbers.
11 The United States has initiated “smart border” programs with Canada and Mexico, that use modern technology to enhance security and expedite movement across borders.
12 Canada levied a C$24 (US$15) Air Traveller’s Security Charge on all round-trip tickets in April 2002,
to finance the increased airport security measures The tax—the highest security tax in the world—contributed
to a 10.2 percent decline in passenger traffic across Canada since the beginning of 2002, and resulted in a steep fall of 50 percent on some short routes
13 Recognizing the lack of resources to buy new technology, the United States intends to provide fi- nancing to developing countries with transportation security projects Two security experts from the United States have arrived in Indonesia to assist in upgrading cargo security and assess the implementation of secu- rity measures at the country’s seaports and airports The United States announced a joint initiative with Thailand to transform Laem Chabang port into a safe transportation port.
14 Given that a ship carries thousands of ers at any time, inspection of the cargo could cause de- lays While the scanning process is quite fast, the prob- lem lies with the turnaround time of the containers targeted for scanning It would take time to transport the container to and from the scanning area, and con-
Trang 3contain-tainers that are late for loading would tie up hauling
equipment and reduce stowage efficiency
15 In other developments:
• The Japanese Ministry of Land, Infrastructure,
and Transport (MLIT) is set to introduce
anti-terrorist legislation that will prevent foreign
ships from entering Japanese ports unless they
have a security crew on board and can provide
identification
• Hong Kong’s customs authorities have created a
terrorist response system, acquiring mobile x-ray
machines and a radiation detector to scan cargo
and beefing up its intelligence capabilities with
more staff and equipment
• The ICAO has adopted resolutions designed to
assure the safety of passengers, ground crew
per-sonnel, and the public Its Regulated Agent
Re-gime requires parties in the flight chain to
imple-ment measures to strengthen air-cargo security
• The Australian government’s Aviation Transport
Security Bill aims to provide screening of all
bag-gage checked on international flights A $100
million federal plan to protect the nation’s
mar-itime gateways also has been enacted
• The New Zealand government will be allocating
$5.9 million next year and $1.9 million in future
years to the Ministry of Foreign Affairs and
Trade, for security
16 A recent online survey by BDP International
in-dicated by a three to two margin that exporters believed
the implementation of the 24-hour rule would enhance
security About 23 percent of those surveyed said that
the impact was extreme, 30 percent reported moderate
to significant costs of compliance, half did not know
how to recover costs, and 42 percent plan to absorb
ex-penses With respect to implementation of the advance
manifest filing rule, USCS has issued less than 400
“No-Load” directives for violations of cargo description
re-quirements in its first three months of enforcement
17 Tea money refers to the use of illegal or unfair
means, such as bribery to gain an advantage in
busi-ness Ports and airports all over the world are places
where tea money comes in handy to expedite deliveries
and shipments.
18 Estimates by Leonard were made soon after the
events and could reflect the major disruptions faced
during the period.
19 This figure is comparable to the estimates of
$30–58 billion losses for the insurance industry by the
OECD (2002b).
20 The authors employ four alternative scenarios
to quantify the trade and welfare impacts, in which all
frictional costs are increased by 1 percent ad valorem.
However, assumptions are made regarding such creases as varying across regions and sectors according
in-to exposure in-to terrorism risks following the ber 11 attacks For example, high-risk regions (North America, Middle East, North Africa) are assumed to ex- perience increases in frictional costs that are two and a half times as high as cost increases in low risk regions.
Septem-The figure shows only the uniform increase in frictional costs to trade
21 Since a large part of the airfreight is transported
in the bellies of passenger planes, a cutback in ger flights has an impact on cargo
passen-22 Australia and New Zealand are strengthening their Pacific regions border control relationship by co- operating and exchanging information regarding smuggling, air and sea cargo security approaches, SARS, and general border protection issues.
23 In its “Cargo Security White Paper,” the tional Customs Brokers and Forwarders Association of America (NCBFAA) has outlined ways for the trading industry to assess risks, build information links to help government officials, and use technology to improve cargo security It recommends building a “chain of cus- tody dataset” to verify people connected to a shipment and assess cargo security throughout the supply chain.
Na-24 See Amjadi and Yeats (1995).
25 This part draws extensively from the WTO (1999)
26 See UNCTAD 2001, table 8, page 33.
27 APEC (1999)
28 See Global Competitiveness Report 2001–2002, World Competitiveness Yearbook 2001–2002, and Kaufmann, Kraay, and Zoido-Lobaton (2002), for the list of countries in the dataset.
29 The ICC, a nongovernmental organization that has long advocated trade facilitation, promoted the subject on the WTO agenda at the Singapore minister- ial meeting.
30 The Ministerial conference in Geneva (1998) concentrated on the perceived threat to the global economy due to the ensuing Asian financial crisis Al- though there were several proposals in favor of and against launching trade negotiations in the period prior
to the Singapore ministerial meeting in 1999, trade cilitation was overshadowed by other events at the Seattle ministerial (Woo 2002).
fa-31 The Doha declaration states: “Recognizing the case for further expediting the movement, release, and clearance of goods, including goods in transit, and the need for enhanced technical assistance and capacity building in this area, we agree that negotiations will take place after the fifth session of the ministerial on the basis of a decision to be taken, by explicit consen-
Trang 4sus, at the session on the modalities of the negotiations.
In the period until the fifth session, the Council for Trade in Goods shall review and, as appropriate, clar- ify and improve relevant aspects of Articles V, VIII, and
X of the GATT 1994 and identify the trade-facilitation needs and priorities of members, in particular develop- ing and least-developed economies We commit our- selves to ensuring adequate technical assistance and support capacity building in this area.” WTO (2001).
32 See WTO (2002) and Messerlin and Zarrouk (2000).
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Services: How Much Does Policy Matter?” World
Bank Economic Review 16(1): 81–108.
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Trang 7Build-The challenges confronting developing
countries seeking to expand their
inter-national trade are primarily domestic
Countries that have expanded their share of
global markets have generally shared certain
conditions: a progressively more open
domes-tic trade regime; a supportive investment
cli-mate; and complementary policies relating to
education, health, and infrastructure Most of
this agenda is national and requires domestic
policies to deal with prevailing constraints to
increasing trade The World Trade
Organiza-tion (WTO) negotiating agenda is necessarily
limited to a narrow subset of issues that
over-laps only partially with priority development
concerns for most countries (Finger 2001)
In this sense, the WTO is not a
comprehen-sive development institution It is a
negotiat-ing forum in which governments make trade
policy commitments that improve access to
each others’ markets and establish rules
gov-erning trade Developing countries can gain
from both functions: first, because trade
open-ness, growth, and poverty reduction are
mutu-ally reinforcing; and, second, because a
rules-based world trading system protects small
players that have little ability to influence the
policies of large countries Rules can reduce
uncertainty by placing mutually agreed limits
on the policies that governments may adopt—
thus potentially helping to increase domestic
investment and lower risks
Historically, many WTO rules evolved to flect the perceived interests of developed coun-tries in an era when the participation of devel-oping countries was limited Many rules reflectthe status quo practices that have already beenadopted in industrial countries The wider lati-tude accorded agricultural subsidization re-flects the use of such support policies in manydeveloped countries The same is true for thepermissive approach historically taken towardthe use of import quotas on textile products—
re-in prre-inciple prohibited by General Agreement
on Tariffs and Trade (GATT) rules New plines adopted in the WTO often mirror regu-latory practices of rich countries For example,the recent inclusion of rules on the protection
disci-of intellectual property rights has led to the ception that the WTO contract demands regu-latory changes in developing countries withoutany corresponding changes in regulatory poli-cies in industrial countries.1
per-As developing countries have become moreactively involved in the WTO, the challenge is
to design rules that promote development
Meeting that challenge means evaluating theimplications of various ways to achieve thisobjective Rarely is this a straightforwardprocess, especially when it comes to the
“behind-the-border” regulatory policies thatare increasingly the subject of multilateral dis-cussions Negotiating pro-development rules
in such a context requires the active ment of developing countries
engage-Development and the
Doha Agenda
Trang 8The developing countries’ traditional proach has been to seek differential treatment.
ap-“Special and differential treatment” (SDT)
pro-visions in the WTO span three core areas: erential access to developed-country markets,
pref-typically without reciprocal commitments from
developing countries; exemptions or deferrals from some WTO rules; and technical assistance
to help implement WTO mandates What stitutes a developing country is not defined inthe WTO—a country’s status is a matter of self-declaration All in all, the current system hasnot worked especially well, and many countriesare seeking a new approach
con-Trade preferences have been disappointing
in delivering market access: the dilemma
Developed countries grant preferences tarily rather than as part of a binding multilat-eral negotiation Those preferences often comeladen with restrictions, product exclusions, andadministrative rules Preference programs oftencover only a share of exports from developingcountries, and among those eligible countriesand products, only a fraction of preferences areactually utilized Products and countries withexport potential often do not receive prefer-ences, whereas eligible countries and productcategories often lack export capacity
volun-Another problem is that preferences, evenwhen effective, are likely to divert trade awayfrom other excluded developing countries be-cause the exports of developing countries tend
to overlap more with each other than withthose of developed countries
Finally, preferences do little to help themajority of the world’s poor Most of thoseliving on less than $1 per day live in countrieslike China, India, Pakistan, and Association
of Southeast Asian Nations (ASEAN) membercountries, which receive limited preferences
in products in which they have a comparativeadvantage Meanwhile, many middle-incomecountries justify relatively high barriers to trade
on SDT grounds, to the detriment of poorer veloping countries whose access is impeded
de-Nondiscriminatory trade liberalization for poor countries—and poor people—
is critical
Recent initiatives by developed countries to tend duty- and quota-free market access for theleast developed countries (LDCs) could, if fullyimplemented, make preferences more effective.But because offering deep, unilateral prefer-ences to larger countries is not politically feasi-ble, preferences can do little for the majority ofthe poor in non-LDCs Providing opportunityfor all of the world’s poor, therefore, requiresmultilateral, nondiscriminatory liberalization
ex-of trade, so that all developing countries candevelop their comparative advantage Most
of the gains from trade liberalization resultfrom a country’s own reforms As reciprocity
in the exchange of liberalization commitments
is the engine of the WTO process, both and middle-income countries should harnessreciprocity to gain market access
low-Elements of a development-supportive traderegime would include a binding commitment
by developed countries to abolish export sidies, decouple agricultural support, and sig-nificantly reduce—or eliminate—tariffs onproducts of export interest to developing coun-tries Negotiations should target tariff peaks,specific tariffs, and tariff quotas, while aimingfor a significant overall reduction in the aver-age level of applied tariffs The pursuit of theseobjectives would be more supportive of devel-opment than one that continues to emphasizenonreciprocal preferential access to markets
sub-Negotiating WTO rules that support development is a major challenge
Trade-policy disciplines that can be mented through a stroke of pen, such as tariffreductions, are fundamentally different fromregulatory disciplines and administrative rulesthat require institutional changes In contrast
imple-to tariff reforms, administrative rules mayrequire substantial resources to establish orstrengthen implementing institutions Domes-tic rules and regulations must be customized to
Trang 9local circumstances Thus, rules relating to
reg-ulatory practices are unlikely to be a
develop-ment priority for every country, nor are the
benefits to global partners likely to be
propor-tional in all countries The experience after the
Uruguay Round with implementation of
agree-ments by developing countries has
demon-strated that limiting recognition of differential
capacities and levels of development to
uni-form transition periods is inadequate, as are
nonbinding offers of technical assistance
Al-lowing for greater differentiation among
devel-oping countries in determining the reach of
WTO rules is important
Aid for trade must be complemented by
action in developing countries
Development assistance must play an
impor-tant role in helping to expand and improve the
trade capacity needed for countries to benefit
from better access to markets Low-income
countries confront many challenges in
identi-fying and addressing trade-related policy and
public investment priorities Those priorities
should be made explicit in the form of a
na-tional development strategy That strategy, not
a WTO agenda, should drive technical and
financial assistance Diagnostic
trade-integra-tion studies completed for several LDCs reveal
that action is required in areas lying far
be-yond the scope of WTO agreements Trade
fa-cilitation and logistics are especially
impor-tant Additional development assistance could
help low-income countries address such
prior-ities Such assistance should also help
coun-tries adjust and adapt to a gradual reduction
in trade preferences and address the effects of
possible increases in world food prices
Special and differential treatment
and the WTO
The idea that developing countries should
receive SDT has a long history in the
GATT/WTO system It has three related
di-mensions First, for certain products,
develop-ing countries are granted access to country markets at tariffs lower than the most-favored-nation (MFN) rates through policiessuch as the Generalized System of Preferences(GSP) Second, they may be temporarily ex-empted from certain disciplines or grantedgreater discretion to apply restrictive tradepolicies Third, they may request technical as-sistance from high-income countries to imple-ment trade rules and related reforms
developed-The intellectual foundation of SDT was laid
in the 1960s by Raoul Prebisch and HansSinger, who argued that developing-countryexports were concentrated mainly in com-modities with volatile and declining terms oftrade They called for import-substitution poli-cies, supported by protection of infant indus-tries at home, and preferential access to exportmarkets Although the rationale for these poli-cies remains controversial (see, for example,Bhagwati 1988), in 1968 the Generalized Sys-tem of Preferences (GSP) was launched underUnited Nations Conference on Trade and De-velopment (UNCTAD) auspices This called
on developed countries to provide tial access to developing-country exports on avoluntary basis.2 Because GSP programs vio-late the GATT’s MFN rule, GATT contractingparties waived the MFN requirement in 1971for 10 years, thereby placing GSP within theGATT framework In 1979, at the conclusion
preferen-of the Tokyo Round, permanent legal coverfor the GSP was obtained through the so-called Enabling Clause,3which called for pref-erential market access for developing countriesand limited reciprocity in GATT negotiatingrounds to levels “consistent with developmentneeds.” It also confirmed that developingcountries should have greater freedom to userestrictive trade policies An important feature
of the Enabling Clause was that SDT was to bephased out when countries reached a certainlevel of development That level was never de-fined, however, leaving eligibility for tradepreferences to the discretion of preference-granting countries
Trang 10The existence of the GSP and limited procity in GATT negotiations affected thepatterns of MFN trade liberalization in boththe Kennedy (1964–67) and Tokyo Rounds(1973–79) (see chapters 2 and 3) The end re-sult was larger tariff reductions in goods pri-marily of export interest to industrializedeconomies.4Average levels of trade protection
reci-in developreci-ing countries were reduced tively little Lack of engagement by developingcountries also facilitated the emergence of re-strictive quota regimes for textiles under theMulti-fiber Arrangement (MFA) and the effec-tive removal of GATT disciplines on agricul-ture-related trade policies (Hudec 1987)
rela-Under the pre-WTO trade regime, new rulesextending the original GATT treaty were ap-plied on a voluntary basis Extensions werecalled “codes,” whose disciplines bound onlythe contracting parties that signed them (Hoek-man and Kostecki 2001) This approach to ruleextension was removed with the creation of theWTO In contrast to the GATT, all WTOagreements and disciplines, with the exception
of rules on government procurement and trade
in civil aircraft, apply to all members regardless
of level of development—although in manycases transition periods apply to developingcountries A consequence of this so-called Sin-gle Undertaking and the expansion in the cov-erage of multilateral rules to new areas, such
as intellectual property and trade in services,was that developing-country governments wereconfronted with a significant implementationagenda as well as new policy constraints.5
In the runup to WTO’s 1999 Seattle terial meeting, SDT and implementation con-cerns figured prominently The 2001 DohaMinisterial Declaration emphasized the impor-tance of SDT, stating that “provisions for spe-cial and differential treatment are an integralpart of the WTO agreements.” Paragraph 44called for a review of SDT provisions with aview to “strengthening them and making themmore precise, effective, and operational.” Onthe basis of this mandate, developing countriesmade over 85 suggestions to strengthen SDT
minis-language in various WTO agreements Theproposals included calls for improved preferen-tial access to industrialized countries, furtherexemptions from specific WTO rules, andbinding commitments on developed countries
to provide technical assistance to help ment multilateral rules Despite intensive talksduring 2002, no agreement on these proposalsemerged One reason was that many of theproposals sought to convert nonbinding, “bestendeavors” language into obligations binding
imple-on developed countries Another was ment over what types of provisions would pro-mote development The latter issue is funda-mental, of course, but it was never the focus ofexplicit analysis and discussion in the relevantWTO committee (Keck and Low 2003)
disagree-Market access for development
International trade helps raise and sustaingrowth—a fundamental requirement for re-ducing poverty—by giving firms and house-holds access to world markets for goods,services, and knowledge; lowering prices andincreasing the quality and variety of consump-tion goods; and fostering specialization of eco-nomic activity in areas where countries have acomparative advantage Through the diffusionand absorption of technology, trade fosters theinvestment and positive externalities that areassociated with learning Policies that sheltereconomic agents from the world market im-pede these benefits and dynamic gains Whileadjustment costs and measures to safeguardthe interests of poor households should not beneglected in the design of policies, openness totrade is associated with higher incomes (Irwin2002) Moving toward an open trade policyand identifying the needed complementarydomestic policies should consequently figurecentrally in the design of national poverty-reduction strategies Many developing coun-tries have pursued unilateral liberalization oftheir trade regimes in the last two decades.They have also concentrated on obtaining pref-erential access to rich-country markets
Trang 11Preferences result in limited market
access and are uncertain
Trade preferences granted by developed
coun-tries are voluntary They are not WTO
obli-gations Donor countries determine eligibility
criteria, product coverage, the size of
ence margins, and the duration of the
prefer-ence Developed-country governments rarely
have granted deep preferences in sectors where
developing countries had the largest export
po-tential Indeed, preferences tend to be the most
limited for products protected by tariff peaks
(Hoekman, Ng, and Olarreaga 2002)
Developing countries often obtain only
lim-ited preferences in sectors where they have a
comparative advantage (table 6.1).6 In some
cases, developing countries face higher average
tariffs because of the composition of their
ex-ports Some subcategories include tariff peaks
that further restrict access for developing
coun-tries The primary reason for this pattern of
protection is that in some sectors there is strong
domestic opposition to liberalization in
devel-oped countries However, it is also partly a
con-sequence of the limited engagement by
devel-oping countries in reciprocal negotiations
Benefits are often limited by design Market
share or value thresholds limit the extent to
which recipients can export on preferential
terms In the United States, for example, a
country’s GSP eligibility for a given productmay be removed if annual exports of that prod-uct reach $100 million7or if there is significantdamage to domestic industry In the EuropeanUnion, products classified as “sensitive” onlybenefit from a 3.5-percentage-point reduction
of the MFN tariff rate, except for clothing, forwhich the reduction is 20 percent.8Most chem-icals, almost all agricultural and food products,and all textiles, apparel, and leather goods areclassified as “sensitive.”9The European Unionalso excludes from GSP eligibility certain prod-ucts from large countries—regardless of theirper capita income Examples include Brazil,China, India, and Indonesia Finally, the Euro-pean Union has a safeguard clause allowingpreferences to be suspended if imports “cause
or threaten to cause serious difficulties to aCommunity producer.”
In numerous instances, products or tries have been removed from GSP eligibility, ei-ther as the result of specific criteria having beensatisfied (see above) or because of lobbying bydomestic interest groups in importing coun-tries The resulting uncertainty can only have anegative impact on incentives to invest in ex-port sectors Binding multilateral liberalizationcommitments under the WTO are more secure
coun-The uncertainty of unilateral preferences alsoarises from conditions that may be attached
Table 6.1 Developing countries rarely receive significant preferences in sectors in which
they would have a comparative advantage
Import revenues, market shares, and tariff rates for key products without GSP preferences in the European Union and
United States in 2001 (percent, except where otherwise noted)
Average tariff
(billions of dollars) market share market share tariff rate GSP recipients
Note: GSP countries only; LDCs may obtain deeper preferential treatment China is included under EU GSP but excluded by the
United States.
Source: World Integrated Trade Solution.
Trang 12to eligibility Such conditions often relate toworker protection, human rights, intellectualproperty, and the environment.10
Recent initiatives by the European Union,the United States, and several other industrial-ized countries to provide either full or much in-creased duty- and quota-free access to theirmarkets for exports from LDCs clearly im-proves the situation However, excessively re-strictive rules of origin remain an importantimpediment to full use of these deeper prefer-ences, which, moreover, do not extend to manypoor countries with substantial trade capacity
The use of preferences is limited
All preferential programs, whether unilateral
or reciprocal (under free-trade agreements),impose significant administrative costs related
to enforcement of rules of origin.11These rulesare imposed to prevent transshipment—that
is, reexport of products produced in eligible countries Rule-of-origin requirementsand related inspection procedures can be quitecostly They also may be explicitly protection-ist in intent An example is the so-called tripletransformation rule in textiles, which requiresimported clothing to be made from textiles
non-produced with yarn spun in either the ence-granting or the beneficiary country Al-though rules of origin are necessary for pref-erences to work and are beneficial in ensuringthat value is added and employment created inthe recipient country, it is important to ensurethat rules of origin are not intentionally or in-advertently protectionist
prefer-Rules of origin and associated paperworkand administrative requirements are likely to
be a major reason that many eligible products
do not enter developed-country markets underpreference provisions—instead exporters paythe applicable MFN tariff Except for certainalcohols, sugar, flowers, and jewelry, less thanone-third of eligible exports from beneficiarycountries entered the United States under anypreference program in 2001 (table 6.2) An in-dicator of the restrictiveness of these rules isthat only 65 percent of eligible apparel exportsfrom the Caribbean and Central America enterthe United States under all preference pro-grams, despite a preference margin of morethan 14 percent
Limited use of preference programs is alsoobserved in other countries Sapir (1997)showed that in 1994, only one-half of Euro-
Table 6.2 Utilization rates for preference-eligible products with high MFN tariffs are low
Preference use by GSP recipients in the U.S market, 2001 (percent, except where otherwise noted)
Total imports GSP recipients Share imported all preference tariffs on Category (billions of dollars) (billions of dollars) under GSP programs all imports
Note: Table reports data on imports (at the 4-digit HS classification) of products on which the United States applied tariffs that
exceeded 4 percent in 2001, and where GSP recipient countries had significant exports to the United States.
Source: U.S International Trade Commission.
Trang 13Table 6.3 Actual use of preference programs is declining
Quad country imports from GSP beneficiaries (billions of dollars) and ratio of use of available preferences (percent), 1994–2001
Rate of use Eligible for Receiving of preferences
pean imports that could potentially benefit
from GSP entered under this preferential
regime, reflecting the combined effect of rules
of origin and tariff quotas In 2001, imports
by the Quad (Canada, the European Union,
Japan, and the United States) from GSP
bene-ficiaries totaled $588 billion, of which $296
billion were subject to duties and $184 billion
were covered under various preferential
pro-grams (table 6.3) Only $71 billion of the
eli-gible exports actually received preferential
treatment (approximately 39 percent of
eligi-ble exports) The share for LDCs, however, is
higher at approximately 60 percent (Inama
2003), reflecting less restrictive treatment
Who benefits from preferences?
A relatively small number of mostly
middle-income countries are the main beneficiaries of
preference programs These countries have the
capacity to exploit the opportunities offered
by meeting the administrative requirements In
2001, 10 of the 130 eligible countries
ac-counted for 77 percent of U.S non-oil imports
under GSP provisions (figure 6.1) The same
countries accounted for only 49 percent of all
imports from GSP-eligible countries
How-ever, some small countries have benefited
sig-nificantly from preferential access to markets
where high tariffs, subsidies, or other policies
are used to drive the domestic price of the
product to levels well above the world market
price An example is Mauritius, which has
preferential access to the EU market for sugarand has been granted a relatively large quota(Mitchell 2003) Such benefits are obtained athigh cost to EU taxpayers and consumers, and
to other excluded developing countries
There also is evidence that GSP programsare associated with success stories in countrieswith the capacity to benefit from access oppor-tunities Ozden and Reinhardt (2003b) com-pare the export performances of U.S GSPbeneficiaries with those of countries removedfrom eligibility (those said to have “graduated”)
Their results suggest that countries removed
Figure 6.1 The benefits of U.S trade preferences are distributed unequally
All other 26%
Russia 4%
Venezuela 6%
Turkey 4%
Thailand 20%
South Africa 5%
Philippines 7%
Indonesia 13%
India 11%
Chile 4%
Top 10 beneficiaries of U.S generalized system of preferences, 2001 (percentage of total GSP benefits)
Source: USITC Dataweb.
Trang 14from the GSP outperform those remaining gible for GSP treatment (figure 6.2) Countriesthat are not on GSP tend to have higher ratios
eli-of exports to GDP, as well as higher exportgrowth rates This could be interpreted as evi-dence that for some countries—the successfulones—GSP played a role in generating the ini-tial export expansion While great care is re-quired in attributing causality—clearly manyother factors will be important in determiningexport performance—one reason for the betterperformance of countries that were removedfrom GSP is probably their own trade policies
Because import protection is equivalent to taxation of exports, liberalization is a precon-dition for substantially expanding exports
Preferences have a hierarchy
The foregoing discussion has focused ily on GSP In practice, unilateral preferencesgranted by the European Union and theUnited States are implemented under manydifferent programs (box 6.1) The differences
primar-among these programs in product coverage,eligibility criteria, and administrative rules (es-pecially rules of origin) have important impli-cations, not only for the countries who benefitfrom them, but also for those excluded.The United States, for example, has imple-mented the African Growth and OpportunityAct, the Caribbean Basin Initiative, and theAndean Trade Promotion Act, as well as sev-eral reciprocal free-trade agreements (withIsrael, Jordan, and Mexico) Major EU pro-grams include the Cotonou convention cover-ing the African, Caribbean, and Pacific (ACP)countries, and the Everything-But-Arms initia-tive, which covers LDCs The European Unionalso has concluded a large number of preferen-tial trade agreements with neighboring coun-tries in Europe, North Africa, and the MiddleEast (Schiff and Winters 2003)
These unilateral and reciprocal programsdiffer in several important respects from theGSP First, they include sectors excluded bystandard GSP programs—for example, appareland food products Thus, by 2009 EverythingBut Arms will cover all exports of beneficiarycountries (the 49 LDCs) without exception—all duties and quotas will have been removed.Similarly, the Caribbean, Andean, and Africanprograms of the United States include apparel,
in contrast to its GSP program Second, the ministrative requirements of these deeper pref-erential schemes tend to be more relaxed re-garding rules of origin and competitive needstests (USTR 2002)
ad-Notwithstanding these improvements, theoverall impact of these programs has not yetbeen very significant, with the exception ofapparel exports to the United States from cer-tain African countries (more on this below).The share of LDCs in total imports of theUnited States and the European Union has notincreased significantly in recent years (figure6.3) In the case of Everything But Arms, thismay reflect, in part, that the products thatmatter most to a number of LDCs—bananas,rice, sugar—will be liberalized only in 2006
or 2009 Most of the products exported byLDCs already were eligible for duty-free entry
Figure 6.2 Countries “graduating” from U.S generalized system of preferences have better export performance than those still in program
Source: Ozden and Reinhardt (2003b).
Exports/GDP
Dropped from GSP
In GSP
Industrial exports/GDP
Growth rate
of exports 0
5 10 15 20 25 30 35 40 45 50
Export performance of countries dropped from U.S GSP program in 1976–2000 vs those remaining in program (percent)
Trang 15United States
Generalized System of Preferences (GSP): The U.S.
GSP program has existed since 1976 Criteria for
eligibility include not aiding international terrorists
and complying with international environmental,
labor, and intellectual property laws Unlike the
Eu-ropean GSP (see below), the U.S program grants
complete duty- and quota-free access to eligible
products from eligible countries China and several
“graduated” countries are not eligible—among them
Hong Kong (China), Republic of Korea, Malaysia,
Singapore, Taiwan (China), and Malaysia
Textiles and apparel, footwear, and many
agricultural products are not eligible for the GSP
Certain products from certain countries can be
ex-cluded if the total exports pass the “competitive
needs limit”—$100 million per tariff line or $13
mil-lion if the exporting country has more than a 50
per-cent share of U.S imports Total imports to the
United States under GSP provision totaled $14.5
bil-lion in 2001, or 1.5 percent of total U.S non-oil
im-ports and 13 percent of all non-oil exim-ports to the
United States from GSP recipients In most eligible
sectors where the MFN tariff rate is above 5 percent,
the share of exports entering under the program
from eligible countries is only 30–40 percent, in part
as a result of rules-of-origin requirements
Caribbean Trade Preferences: The Caribbean
Basin Economic Recovery Act (CBERA), commonly
known as the Caribbean Basin Initiative (CBI), was
enacted in 1984 and modified in 1990 Twenty-four
countries are eligible Duty-free treatment is granted
on all products other than textiles and apparel,
cer-tain footwear, handbags, luggage, petroleum and
re-lated products, certain leather products, and canned
tuna In 1998, only 18 percent of exports from
bene-ficiary countries were in eligible product categories
The 2000 Caribbean Basin Trade Partnership Act
(CBTPA), provides NAFTA-equivalent treatment for
certain items (mainly apparel) excluded from
duty-free treatment under the CBI program
Andean Trade Preferences: The Andean Trade
Preferences Act (ATPA) extends preferences to
Bo-livia, Colombia, Ecuador, and Peru Enacted in 1991
as part of U.S efforts to reduce narcotic production
and trafficking, it was modeled after the CBI and has
similar eligibility requirements and product coverage
Box 6.1 EU and U.S preference programs
Duty-free treatment is granted on all products excepttextiles and apparel, certain footwear, petroleum andrelated products, certain leather products, cannedtuna, rum and sugar, syrup, and molasses The maindifferences with GSP are that the Andean schemecovers more products, has more liberal qualifyingrules, and is not subject to competitive need limits.ATPA rules of origin permit inputs from CBERAbeneficiaries ATPA was renewed in 2002 as the An-dean Trade Promotion and Drug Eradication Act(ATPDEA) and expanded to include tuna, leatherand footwear products, petroleum products, and ap-parel—subject, however, to restrictive rules of origin.For example, if apparel is assembled from U.S fab-rics, no quotas or duties apply, but if local inputs areused, duty-free imports are subject to a cap of 2 per-cent of total U.S imports (increasing to 5 percent inequal annual installments)
African Trade Preferences: The African Growth
and Opportunity Act (AGOA), passed in 2000, fers beneficiary Sub-Saharan African countries duty-free and quota-free market access for essentially allproducts AGOA excludes textiles but extends toduty- and quota-free treatment for apparel made inAfrica from U.S yarn and fabric If regional fabricand yarn are used, there is a cap of 1.5 percent ofU.S imports, increasing to 3.5 percent over eightyears African LDCs are exempt from all rules oforigin for a limited period of time, helping to signifi-cantly expand apparel exports from countries such asLesotho
of-European Union
Generalized System of Preferences: Preferences under
GSP are available to all developing countries, cluding China Overall, 36 percent of tariff lines areeligible for reduced tariffs, and 32 percent are eligiblefor duty-free access Twelve percent of tariff lines(mostly agricultural) are excluded and subject to full MFN duty Excluded products include meat,dairy products, cereals, sugar, wine, and products forwhich the European Union sets minimum importprices Approximately 36 percent of all products areclassified as “sensitive”—often those with the highestMFN tariffs (Panagariya 2002) Sensitive products
in-(Continues on next page)
Trang 16under GSP or Cotonou provisions As a result,Everything But Arms had no immediate im-pact (Brenton 2003) In the case of the UnitedStates, export market shares of countries eligi-ble under the three primary deep preferenceprograms have not increased (figure 6.4).12The primary exception is apparel, whichshows remarkable export growth, especially inthe case of AGOA Total exports of apparelsince 1996 increased by more than 200 percentfor AGOA countries, and approximately 60percent for Caribbean and Andean countries.
As a result, in 2002, apparel exports to theUnited States from AGOA countries were ap-
proximately $1.1 billion, compared to $750million from Andean countries and $9.5 bil-lion from Caribbean countries These coun-tries accounted for some 20 percent of the
$58 billion U.S apparel import market Thisgrowth is mainly a result of exemptions fromquotas and tariffs imposed on other exporters
In the case of AGOA, rules of origin are moved temporarily for some countries for alimited period, providing an extra advantage
re-A crucial issue is how these regions will farewhen remaining quotas (mostly faced by coun-tries in South and East Asia) are phased out
at the end of 2004, as required by the WTO
are subject to a flat 3.5-percentage point-reduction
in the MFN tariff, implying that the higher the duty,
the smaller the proportionate impact of the
prefer-ence Specific duties are reduced by 30 percent; if a
product is subject to both ad valorem and specific
duties, the specific duty is not reduced
Additional tariff reductions are available under
special incentive schemes for the protection of labor
rights (an additional 5-percentage-point reduction),
the environment (an additional 5 percentage points),
and for countries that combat drug production and
trafficking (duty-free access for certain products)
Currently only one country, Moldova, has requested
and satisfied the requirement relating to labor rights
(but not the environment) A group of Latin
Ameri-can countries and Pakistan benefit from
arrange-ments relating to drugs
Countries can be excluded from the GSP (based
on their development level) or from particular
prod-uct categories Sectoral exclusions are determined by
specific criteria based on shares of EU imports from
GSP-beneficiary countries and certain indicators
of development and specialization.aFor example,
Argentina is excluded from preferences for live
ani-mals and for edible products of animal origin, while
Thailand is excluded from preferences for fishery
products
ACP countries (Cotonou Agreement): ACP
countries are granted preferences that often exceed
those available under the GSP Most industrial
prod-Box 6.1 (continued)
ucts are duty and quota free Preferences are lesscomprehensive for agricultural products In 2000duties were still applied to 856 tariff lines (837 ofwhich were agricultural products) Of these, 116lines were excluded from the Cotonou Agreement,although specific protocols govern access for sugarand bananas on a country-specific basis An addi-tional 301 tariff lines were eligible for reducedduties, subject to specific quantitative limits (tariffquotas) set for the ACP countries as a group Theremaining 439 products were eligible for reducedduties without limits on exported quantities
Everything But Arms: Introduced in March
2001, this program grants duty-free access to ports of all products from the LDCs, with the excep-tion of arms and munitions, without any quantitativerestrictions Liberalization was immediate except forthree major products: fresh bananas, rice, and sugar.Tariffs on these three items will be reduced gradually
im-to zero (in 2006 for bananas; in 2009 for rice andsugar), while tariff quotas for rice and sugar will beincreased annually Access to the EU market is gov-erned by the rules of its GSP scheme A key feature
of the program is that in contrast to the GSP, ences for the LDCs are granted for an unlimitedperiod and are not subject to periodic review
prefer-a Some ad hoc exclusions are applied to China, the CIS tries, and South Africa in the fisheries and iron and steel sectors.