1

South-South Trade

Structure of world imports (US$ mln and % of total)

Intra-North imports4,690,896

62%

Imports from the North by the South1,153,642

15%

Imports from the South by the North1,217,223

16%

Intra-South imports512,067

7%

2

Distribution of global welfare gains from complete tariff removal (US$ mln and % of total)

Gains to the North from liberalisation by the North

16,58725%

Gains to the North from libaralisation by the South

18,24428%

Gains to the South from libaralisation by the North

26,72641%

Gains to the South from libaralisation by the South

3,9076%

3

The problems with preferences

• Preferences transmit to DCs the production distortions inherent in OECD countries' tariffs.

• Current GSP schemes are so hedged with exclusions & quantitative limits & thus have only limited coverage.

• The fact that preferences might be withdrawn at any time encourages a degree of short-termism on the part of entrepreneurs.

• The desire to keep and exploit the rents inherent in preferences detract from longer-term and ultimately more productive activities.

4

More problems with preferences

• With the exception of a few of the larger developing countries, and in relation to a few products, the preference schemes have had limited success in generating significant export growth or improving the trade shares of beneficiaries.

• Rules of origin and other requirements can be costly to fulfil

• Preferences are inherently unstable and discriminatory

5

Shares of US imports by tariff treatment of exporter

Source: Calculated from U.S. Department of Commerce data.

1949 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999

0%

20%

40%

60%

80%

100%

Unconditional MFN Treatment

Preferential

Programs

Trade

Agreements

Denied MFN or

Subject to Sanctions

"Preferential Programs" includes all imports from beneficiary countries of the GSP, CBI, and ATPA.Impoprts from countries that receive GSP but are subject to conditional MFN treatment are shown in "Preferential Programs.""Trade Agreements" includes imports from the Philippines and Cuba when their trade agreements were still inh effect, automotive imports from

Canada after 1965, and all imports from Israel, Canada, and Mexico after their respective FTAs entered into effect.

Conditional

MFN Treatment

6

The future of preferences is not promising

• Preferences have not been very effective as an instrument of development, except perhaps for a restricted group of high-income developing countries.

• Because a few, relatively well-off countries have enjoyed most of the benefits available, pressures for more far-reaching graduation are bound to increase.

• Multilateral trade liberalisation efforts, such as those underway in the context of the DDA will probably continue.

• Regional free trade initiatives are likely to increase, and where these involve OECD & DCs, they wipe out unilateral preferences at a stroke.

7

New approaches to S&D

• Grant total flexibility to all countries whose non-compliance does not cause harm to other countries.

• Carry out assessment of the costs and the capacity of countries to implement WTO Agreements.

• Differentiate among developing countries using analytical criteria

8

Environmentally harmful support

• Under the Doha mandate, the WTO negotiators are currently discussing ways to improve market access and to reduce subsidies — particularly to agriculture and fisheries.

• These negotiations arise from the primary concern of the WTO: to reduce trade distortions.

• But the negotiations are also being watched closely by the environment community.

• It is, I hope, now well recognized that many forms of support can have adverse environmental effects.

• Certainly, if official exhortatory statements (e.g. at the WSSD) offer any indication, there is also a concomitant interest in doing something about them.

9

Typical recent estimate of environmentally harmful support(billions of U.S. dollars a year, late 1990s)

Sector OECD countries

non-OECD countries

Total

Agriculture 335 65 400

Water 15 45 60

Energy 80 160 240

Forestry 5 30 35

Fisheries 10 10 20

Other sectors 280 30 310

Total 725 340 1065

(% GDP) (3.4) (6.3) (4)

Scope for a “Grand Deal” 445 310 755

Source: C. van Beers and A. de Moor (2001), “Public Subsidies and Policy Failures: How Subsidies Distort the Natural Environment, Equity and Trade, and how to Reform them”, PowerPoint presentation to the 2001 World Summit on Sustainable Development. http://www.earth-summit.net/presentations/gabs_de_moor.ppt

10

Trade Facilitating

Trade Distorting

EnvironmentallyBeneficial

EnvironmentallyHarmful

Prohibitedsubsidy

disciplines

Actionableor “amber”

subsidydisciplines

Ron

ald.

Stee

nblik

, 10

Nov

embe

r 20

03

Sectoral support seen from both environmental and trade perspectives

Exempted environmental

programme (lapsed in the

SCM)

Temporary movement of service suppliers - Mode 4

OECD work on Mode 4

Labour mobility in RTAs

Definition andmeasurement

GATS commitments andactual regimes

Economic Impact Recognition

Mode 4

13

Labour mobility in RTAs

14

Recognition of qualifications