UNCTAD/CD-TFT 1 1 CIS Regional Workshop on WTO Accession WTO Accession Issues for SPECA Countries Yverdon, Switzerland, 1-2 April 2007 Anar Mammadov Economic

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CIS Regional Workshop on WTO Accession

WTO Accession Issues for SPECA Countries

Yverdon, Switzerland, 1-2 April 2007

Anar Mammadov Economic Affairs Officer, Trade Negotiations and

Commercial Diplomacy Branch, DITC/ UNCTAD

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SPECA Countries

1. Afghanistan – Landlocked LDC

2. Azerbaijan – Landlocked Transition

3. Kazakhstan – Landlocked Transition

4. Kyrgyzstan- Landlocked Transition

5. Tajikistan – Landlocked Transition

6. Turkmenistan- Landlocked Transition

7. Uzbekistan – Landlocked Transition

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SPECA COUNTRIES ACCESSIONS STATUSSPECA COUNTRIES ACCESSIONS STATUS

WT/ACC/11/Rev.6

Page 1

Goods Offer Services Offer

Country Application Working

Party Established

Memorandum

First/Latest* Working

Party Meeting

Number of

Working Party

Meetings

initial latest initial latest

Draft Working

Party Report

Afghanistan Nov 2004 Dec 2004

Azerbaijan Jun 1997 Jul 1997 Apr 1999 Jun 2002/ Jun 2005

3 May 2005 May 2005

Kazakhstan Jan 1996 Feb 1996 Sep 1996 Mar 1997/ Jun 2005

8 Jun 1997 May 2004

Sep 1997

Jun 2004

May 2005

Tajikistan May 2001 Jul 2001 Feb 2003 Mar 2004/ Apr 2005

2 Feb 2004 Apr 2005

Feb 2004

Apr 2005

Apr 2005 (FS)

Uzbekistan Dec 1994 Dec 1994 Oct 1998 Jul 2002/ Oct 2005

3 Sep 2005 Sep 2005

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Presentation outline

• Introduction

• WTO Accession – Case of SPECA. Specific accession challenges and opportunities for SPECA acceding countries

• Why demands on acceding countries increase over time? Moving the goalposts!

• What to do to minimise the accessions costs

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IntroductionComplaints of Acceding Countries:• WTO plus -commitments and obligations more

extensive and stringent than for original Members,

• WTO minus -multilateral rights less than original

Members

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WTO Plus• All tariffs bound• Lower tariffs on Agriculture• More extensive service commitments

(Social services, Energy…)

• Extra commitments (e.g. Privatisation: Article XVII of the GATT 1994 set rules and disciplines to be observed by State Trading Enterprises but no obligation for their privatisation. Indirect/ direct pressure on acceding countries to privatise public sector Enterprises.),

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WTO Plus cont’d

Most recently acceded countries have committed to regularly report to WTO on the progress of their privatisation programmes. Such notification is not part of WTO Agreements,

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WTO Plus cont’d

• Price and profit controls: on both goods and services except. WTO Agreements do not require elimination of price controls on goods and services. In the case of Services they are rather subject to market access negotiations on specific commitments (Bulgaria, Estonia, Kyrgyzstan, Panama) accepted commitment to eliminate price controls

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WTO Minus

• No S&D ( e.g. export subsidies),

• No/or shorter transition periods,

• Development and S&D provisions not systematically granted.

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Doha and Accession

• Acceding countries may participate in the negotiations (paragraph 48), make requests !

• “Resurrection” of S&D, seek to make “best endeavors” contractual

• Avoid “paying twice”, accession “entrance fee” contribution to Doha Round , acceding according to rules that are in the process of being renegotiated e.g. agriculture

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WTO Accession – Case of SPECA

• Level of development and different internal situation

• Issue of Energy• Regional agreements and

economic integration / WTO membership

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Specific accession challenges and opportunities for SPECA acceding countries (Cont’d)

• LDC (Afghanistan): limitation of resources, lack of human and institutional capacities…

• OIL producing countries (Azerbaijan, Kazakhstan, Uzbekistan): the issue of dual pricing for energy, State oil trading Enterprises, price control and monopolies…

• NFIC impact of the end of the subsidy regimes on food security and rural development objectives and policies…

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Specific accession challenges and opportunities

for SPECA acceding countries (Cont’d)

Lack of productive capacity diversification (the case of oil exporting countries),

Importance of the role and the size of the public sector,

Small and yet emerging private sector,

political considerations

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for SPECA acceding countries (Cont’d)The SPECA countries as a formerly centrally

planned economies had virtually no market for goods and services and the regulatory structure was underdeveloped. To modernize their economies and eventually access to the WTO, these countries must

strengthen competition and develop an efficient market infrastructure.

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for SPECA acceding countries (Cont’d)• SPECA acceding countries would also have to pay special

attention to their institutional setup, so that effective coordination mechanisms could be established. By the request of SPECA countries UNCTAD is conducting studies assessing the institutional mechanisms established and experiences emanating from WTO membership of other SPECA developing country members, and especially those that had acceded recently.

• Importance of consultation between the governments of countries wishing to accede to the WTO and non state actors. No one argued against such consultations. But differences in the degree to which they actually occur (or occurred) during WTO accessions

• ONE OPINION: consultation with its private sector was less than with the media, academics, and with non governmental organisations (NGOs), precisely because of the relative weakness of the former.

• ANOTHER OPINION :the private sector should be consulted more intensively before negotiators travel to Geneva for meetings of Accession Working Party.

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for SPECA acceding countries (Cont’d)None of the SPECA economies in the process of WTO

accession has ever benefited from the status of developing country (except Afghanistan) – despite the fact that some of them have a very low GDP per capita and a large proportion

of their population live in poverty. This makes the process of their WTO accession politically more difficult as negative consequences might – in the short term – deteriorate their economic and social situation. The governments therefore

primarily have to sell to the electorate the longer-term benefits of WTO accession, such as improved access to

foreign markets, improved attractiveness to FDI, external pressure on domestic producers to improve their

competitiveness, and benefits to consumers and importers arising from lower tariffs.

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In general WTO accession is considered to be an engine for reforms and an accelerator of transformation. In order to mitigate short-term negative consequences of WTO accession, the Governments must adjust the speed of accession accordingly and negotiate transition periods. On the other side excessive concentration on concessions, including protection of the interests of a few business groups in less competitive sectors, is costly as benefits from accession are postponed or not shared by the major part of the population.

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Making progress towards WTO accession is consistent with the development of bilateral Free Trade Agreements (FTAs) and

Regional Trade Agreements (RTAs).

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Motivations of RTAs

• Economic, trade and foreign policy considerations

• Lack of progress at Doha Round negotiations

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Proliferation of RTAs : Challenges and Opportunities

Opportunities

• Promotion of Free Trade• Domestic reforms and openness• Facilitation of integration into world economy• Positive impact on competitiveness and trade

liberalization at international level

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Proliferation of RTAs : Challenges and Opportunities

Challenges

• Development of complex networks of non-MFN trade relations and regulatory regimes

• Risk of undermining transparency and predictability of MTS

• Risk of altering global trade patterns with implication for WTO system (trade, investment)

• Risk of diminishing importance of MTAs

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for SPECA acceding countries (Cont’d) Current Work on RTAs at the WTO

• Doha Mandate on RTAs• WTO Committee on RTAs• State of play of ongoing negotiation

• Notification issues• Examination• Multilateral surveillance mechanisms for RTAs• Draft decision adopted by the CRTAs (June 2006)

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RTAs and SPECA Countries

• Regional structures of centrally planned economy have been replaced by RTAs

• CIS FTA & Customs union agreement (Kyrgyzstan. Russian Federation, Belarus, Kazakhstan, Tajikistan)

• Moldova, Armenia and Kyrgyzstan as WTO Members have notified number of bilateral agreements between them and their regional partners.

• Other Regional Initiatives• Economic Cooperation Organization• Shanghai Cooperation Organization• Central Asian Cooperation Organization• Eurasian Economic Community and Economic Cooperation• Central Asian Common Market

• Partnership and Cooperation agreements with the EU (Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan)

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RTAs and SPECA Countries (Cont’d)

However, membership in any RTA requires satisfaction of certain conditions for WTO Members. Specifically, WTO Members are concerned that tariffs and other regulations as applied to third parties outside the RTA are not on the whole higher or more restrictive. faced some problems as a result of its WTO membership as it bound its flat 10 per cent rate imposed before accession on all products. When Kyrgyzstan agreed to implement low tariff regulation, the other members of the Euro-Asian Custom Union (EACU), i.e Belarus, Kazakhstan and the Russian Federation immediately reacted by imposing protective measures on imports from Kyrgyzstan.

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SPECA network of acceding countries

• Every accession process had its own dynamics. Each country was a unique accession case. Therefore, no single best practice could be identified.

• Nevertheless, there was a body of experience emerging from the accession process, the sharing of which would be beneficial to acceding countries.

• A SPECA regional network of acceding countries to provide a greater networking among SPECA countries on issues related to WTO accession, as well as on other issues related to the Doha multilateral trade negotiations. Exchanges of information and experiences are critical as SPECA countries pursue their on-going efforts to further integrate themselves into the world economy and the multilateral trading system.

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Why demands on acceding countries increase over time?

Moving the goalposts!

Art. XII leaves room for interpretations by WTO Members,

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Text of WTO Art. XII on Accession

1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto.

2. Decisions on accession shall be taken by the Ministerial Conference. The Ministerial Conference shall approve the agreement on the terms of accession by a two-thirds majority of the Members of the WTO.

3. Accession to a Plurilateral Trade Agreement shall be governed by the provisions of that Agreement.

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The role and the weight of some key WTO Members

expansion of the scope and depth of

trade negotiations (commitments on new issues e.g. government procurement, privatisation, investment, optional Agreements, sectoral initiatives, IPRs, large services coverage and liberalisation …)

negotiations by anticipation to influence the current and future trade negotiations (using the newly acceded countries terms of accession, e.g. Agriculture)

- Precedent setting (four the future accessions)

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Economic and strategic considerations:

• Importance of oil and gas reserves of some SPECA producing and exporting countries for the needs of major WTO Members ,

• Importance of energy related services (potential market for related technologies detained by companies from major trading nations..)

• The competition between Key WTO trading blocs to control Energy sources

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What to do to minimise the accessions costs and to benefit from

WTO accession• Accession should not be conceived as an end in

itself, but to achieve broad and long term development policies and objectives,

• Applicants must elaborate major negotiating objectives based on an analysis of basic economic strategies and policies;

• Effective governmental machinery is needed to support negotiations;

• Applicant must make full use of observer status;• Accession negotiations and membership require

considerable strengthening of national institutional infrastructure.

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Issues and recommendations to be considered

by acceding countries • Recently acceding countries subject to strong pressures for adopting deep liberalization commitments,

• The scope of specific commitments adopted by acceding countries has continuously enlarged through time,

• Trend expected to continue in the future, placing strong demands on countries currently in the accession process,

• Acceding countries should retain the necessary flexibility «policy space » they should seek longer periods of transition, assistance for supporting supply capacity building, and when possible attaching conditions when granting market access to foreign suppliers,

• These objectives should be sought in the bilateral negotiations.

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by acceding countries (Cont’d)

• Closely following current negotiations is crucial for countries in the process of accession.

• The interface between accession negotiations and other trade initiatives, as bilateral trade agreements and participation in RTAs, should be seriously analysed by acceding countries because of possible implications for the terms of their own accession to the WTO (e.g. the AA with EU)

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by acceding countries(Cont’d)

CoherenceCoordinationContinuation

OWNERSHIP:

the whole accession process has to remain in the hands of the acceding country

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[email protected]

Documents

UNCTAD/CD-TFT 1 1 CIS Regional Workshop on WTO Accession WTO Accession Issues for SPECA Countries Yverdon, Switzerland, 1-2 April 2007 Anar Mammadov Economic