ࡱ> TVSY QFbjbjWW )X==b?_]000.^$8 4'  (222222&&&&&&&$*(*r'22222'r22 rrr2@22&2&rrx+!&2pO.r&*18 September 2000 Small Economies: The Current Status of Events in the ϲʹ Background Paper for Small States' Forum, Prague, 25 September 2000 By Peter Tulloch, Director, Development Division, ϲʹ, Geneva The concept of "small economies" (as distinct from "small States", reflecting the fact that not all Members of the ϲʹ are States) has been part of the ϲʹ framework since 1997 and is reflected in the Geneva Ministerial Declaration of 1998. However, there has to date been no acceptance by the ϲʹ membership of the particular, population-based concept of "small states" as set out by the World Bank and Commonwealth, and indeed there has been some resistance (inter alia, by other developing countries who consider themselves to be "small economies" and by larger developing countries) to the identification of such a separate grouping within the ϲʹ. As noted in the ϲʹ submission to the World Bank/Commonwealth report, there was a substantial discussion in the ϲʹ Committee on Trade and Development of issues related to small economies in 1998 and 1999. In addition, during the run-up to the Seattle Ministerial Conference, two proposals were made by groups of "small economies": one by a group of 11 small economies and a second by Jamaica and Mauritius. These contained specific proposals for measures to deal with the situation of marginalization of small economies in trade. The paper delivered by Jamaica and Mauritius recalled five main constraints faced by small economies: the absence of "critical minimum size" and consequent constraints of small domestic markets on economies of scale; greater volatility in income growth than in larger economies; the limited natural resource endowments of small economies, leading to a high degree of product and market concentration in their exports; the relatively high transaction costs of trade stemming from small size and from landlocked or island status; and the administrative, institutional and human resource limitations facing small economies. Six specific proposals were made: (a) for transitional trade preferences for "countries historically dependent on trade preferences for their principal trading partners"; (b) for longer transitional periods for trade liberalization by small economies; (c) for the adoption of concrete measures to address food security in small, net food-importing developing countries; (d) for assistance with modernization of sectors on which countries are heavily reliant (such as textiles and garments); (e) flexible arrangements for the establishment of regional trade agreements which comprise small economies; and (f) higher thresholds for the non-actionable application of export subsidies by small economies. The parallel paper by the wider group of small economies pointed to six main areas where action could be taken: Encouragement of regional trade agreements; In respect of agriculture, international measures to assist small economies whenever they are adversely affected on account of any natural disaster; assistance for diversification into products that have higher value-added; rapid implementation of the Decision on Least-Developed and Net Food-Importing Developing Countries; priority consideration to market access for small economies' agricultural products; technical and financial assistance to improve agricultural productivity; and a mechanism to provide concessional facilities when food prices exceed a particular ceiling or food production falls below a certain level; Technical and financial assistance to small developing countries to help them adjust to the integration of textiles and clothing into ϲʹ rules and the phasing out of the provisions of the Agreement on Textiles and Clothing; More favourable provisions in respect of tariff cuts and bindings to be made by small economies; Raising of the de minimis level for actionable subsidies in respect of small economies; and In respect of services, priority to removal of barriers in sectors of export interest to developing countries; incentives to improve access of small economies to technology, distribution channels and information networks, particularly via electronic commerce; and capacity building measures for the services sectors. To date, there has been little action by ϲʹ Members in respect of small economies as such. In May 2000, a number of developed and more advanced developing economies announced market access offers in favour of least-developed countries (LDCs). However, a small minority - only 13 - of the small states identified by the World Bank and Commonwealth are LDCs. Moreover, attempts by small economies to have their special concerns recognized in the ϲʹ have, so far, cut across the move to give LDCs favourable market access treatment and special assistance through the Integrated Framework, on the one hand; and, on the other, been divisive of the positions of developing countries as a whole, as they have aroused suspicion of a number of larger developing countries. At the same time, a number of other developing countries that are not identified in the World Bank/Commonwealth list have questioned the population criterion used as a basis for the list and suggested that they have also similar trade and capacity-building problems to those faced by "small" economies. How can progress be made and this potential logjam eased? This note suggests a number of approaches that might be taken. Most of these would entail recognition that many of the problems of "small" economies are also faced by certain other developing countries; identification, on a case by case basis, of goods and services that small economies export; problems that small economies face in implementation of the ϲʹ Agreements; priorities for technical assistance to small economies and others in similar situations; and interests of small economies in negotiations on Agriculture, Services and other potential areas. Community of problems between "small" and other developing countries It should be pointed out that most of the issues raised by the group of "small" economies in their two papers are also of concern to many other developing countries. For example, the consequences for developing countries of increasing support levels in developed markets, the issue of Net Food-Importing Developing Countries, the special place of agriculture in developing countries and the perceived need for flexibility in protection by certain developing countries have also been raised by others in the mandated negotiations on agriculture (see for example, the proposal to the June 2000 Special Session of the Committee on Agriculture by 11 developing countries and the statement by India at the same meeting. Secondly, implementation of the Agreement on Textiles and Clothing is a major item in the ongoing "implementation" discussion, (and an area where developing countries' views themselves differ as between those competitive suppliers that can benefit from liberalization, and those less competitive suppliers for which the maintenance of quotas gives a certain, protection). Again, we can expect that if or when negotiations on industrial tariff liberalization get under way, the basis, scope and depth of tariff cuts and bindings to be made by developing countries and of "special and differential treatment" in this regard will become a major issue. Lastly, in regard to subsidies, the proposal had been made before Seattle that the criteria for applying the "de minimis" level should apply not only to LDCs and developing countries whose GDP per capita was under US$1,000, but also to the lower- and middle-income developing countries as defined by the World Bank. Many of the areas of direct concern to small economies in the preparation for negotiations are therefore also important to other developing countries. Market access: identification of small economies' concerns One specific suggestion that has been advanced informally to the Secretariat is that identification of market access conditions and barriers for products currently exported or potentially exportable by "small" economies could be useful in clarifying and specifying some of the concerns being expressed in a general way regarding market access issues. The ϲʹ Secretariat has already done such work on a country/product basis for products exported by LDCs and a similar activity could, on request, be undertaken for any group of "small" economies. This would assist the delegations concerned in identifying their negotiating interests. It would also be for consideration whether similar precise exercises on market access could be undertaken in respect of services. Redefinition of "Special and Differential Treatment" One of the major concerns of developing countries expressed in the "implementation" context is that of the "operationalization" (redefinition and activation) of the "Special and Differential Treatment" (S&D) provisions of the ϲʹ Agreements. In this regard, developing countries' main concerns are linked to the fact that most "S&D" provisions (which cover six main elements) are not binding commitments but "best endeavour" provisions. This is an area where the interests of small economies and other developing countries strongly coincide, and where the proposals made by the group of small economies find an echo in statements and proposals made by other developing countries.. Implementation and participation particular problems of "small" economies and those with no presence in Geneva One problem that is more acute for small developing countries than for others is the difficulty for them of participating fully in ϲʹ activities. This arises from the necessarily small numbers of qualified people in the relevant administrations, multiplied by the factors of distance and other priorities (participation in FTAA or ACP/EU negotiations, regional trade agreements, etc.) At present, 19 of the ϲʹ Members or Observers identified by the Bank as "small States" have no mission in Geneva; most others have fewer than five officials in their Geneva missions. This difficulty is currently exacerbated by a double impasse in the ϲʹ General Council, and with the Swiss authorities, over questions of observer status and accreditation for intergovernmental organizations; if this impasse were resolved, the way could be opened for fuller participation by appropriate regional bodies such as CARICOM, South Pacific Forum, Caribbean Regional Negotiating Mechanism, etc, which could serve as antennae for their membership and overcome some of the cost and human resource problems associated with small economies' participation in the ϲʹ. In the light of this impasse, the ϲʹ Secretariat has taken various initiatives to help inform "non-residents" and countries with small missions about ongoing events. In particular, a regular newsletter is sent by e-mail to the Governments and European missions with ϲʹ responsibility of each country without missions in Geneva. This initiative could, if necessary, be widened to include others. Non-resident Governments are also invited to participate in the annual "Geneva Week" of briefings by the ϲʹ and other Geneva organizations; the second of these events will take place in late October 2000. Proposals have been made by some Members to establish a facility in Geneva that would help to support the work of non Geneva-based Members and Observers. In evaluating the feasibility of such a proposal, due attention is being given to the need to avoid duplication and overlap with the work of existing service providers - such as the AITIC, Commonwealth Secretariat, the Pacific Forum and the ACP (the latter two expect to open offices in Geneva in the near future) - and to exploit the synergies between these institutions. A mechanism that would allow beneficiaries to have oversight of the work undertaken needs to be established, to ensure proper accountability and that work undertaken is fully responsive to the needs to the "clients". One solution that may be envisaged is a collaborative network drawing together different service providers. Technical assistance ϲʹ technical assistance capacity currently faces severs human and financial resource constraints. It has been estimated that demand for TC activities would justify an annual budget of some US$10 million. At present, 90 per cent of ϲʹ technical cooperation activities are financed through short-term, extra-budgetary resources provided by a small number of generous Members on a trust fund basis. This inhibits coherent planning of TC activities and the development of meaningful programmes. The guidelines established in 1996 for ϲʹ technical cooperation instruct the secretariat to "keep a geographical balance, while giving priority go least-developed countries, in particular African countries, and to low-income economies". Although no mention is made of "small" economies as priority recipients of technical cooperation, there is provision for regular review by Members and for "operational directives and implementation modalities" to be established by the Committee on Trade and Development. The annual report on ϲʹ technical cooperation in 1999 shows that for a substantial number of the small economies, technical missions were sent by the ϲʹ secretariat to set up ϲʹ Reference Centres. Regional or national seminars were also held in some cases, but less frequently than the technical missions. A large number of the small economies participated in the first "Geneva Week" or briefings (noted above). Overall conclusions One of the strengths of developing countries in the ϲʹ is their ability to be flexible: to join together in pursuit of common interests where this is possible, and at the same time to identify their individual interests in the trading system. And one of the advantages of the ϲʹ Secretariat as an advisory body is its ability to deal with individual or groups of Members on particular issues as they arise. This pragmatism and flexibility, which to the extent possible avoids identifying rigid "group" interests, can be used as an actual and potential advantage of the ϲʹ system. It is in this light that work on "small" economies should be seen. There are common problems and needs that affect both "small" and other developing economies and where alliances can be struck. In this connection, there is a need to identify clearly the product-related interests of individual small economies, and clarify how these problems can be dealt with in a negotiating setting, as well as to see how systemic issues (like the "operationalization" of special and differential treatment) can be resolved. However, there are also particular problems (such as those of participation and representation) which are peculiar to small trading entities and small administrations. These need particular solutions, through individual attention and technical assistance. Many of the problems raised by small economies may not be capable of solution by the ϲʹ alone but may require common or coordinated actions to be undertaken with other institutions. For example, this is the situation in respect of the "Net Food-Importing" Declaration, which requires cooperation with the World Bank, the World Food Programme and the FAO. It is therefore to be seen how far small economies' concerns can be addressed by trade rules, and how much in other fora. These issues may be aired further on 21 October 2000, when under the aegis of he ϲʹ Committee on Trade and Development, the ϲʹ will conduct a seminar on "Small Economies in the Multilateral Trading System" at which the problems and challenges of small economies will be discussed in depth. This will in turn be a precursor to the second "Geneva Week" of briefings for non-resident ϲʹ Members and Observers, at which the interests of small economies in specific areas of ϲʹ operations can be further explored. It is hoped that these two events will assist small economies and their larger trading partners, developing and developed alike, in identifying common areas of interest and minimizing areas of potential conflict. ----------------------  WT/CG/W/361, 12 October 1999  WT/GC/W/373, 15 October 1999  G/AG/NG/W/13, 23 June 2000  G/AG/NG/W/33, 13 July 2000  See documents WT/COMTD/LDC/W/16, 16 November 1999 and W/17, 25 January 2000  These are: provisions aimed at increasing trade opportunities for developing countries; provisions enjoining ϲʹ Members to safeguard the interests of developing countries; provisions relating to flexibility of ϲʹ commitments; transitional time periods; provisions for technical assistance; and differential and more favourable treatment for least-developed countries. (See document WT/COMTD/W/66, 16 February 2000)  WT/COMTD/8, 16 October 1996 -  PAGE 2 - PAGE 1 n:\dev\peter\small 18sept 2000 n:\dev\peter\small 18 sept.2000 OP *O/0_`""$$&5&''(R)102033355/9C9bCcCCCCCCCCC(D)DEEEEEEEEEEFFF F F F FF-F.FNFQFCJ0JImH0JI j0JIUhmHjUhnH hnH OJQJhnH  j0JU6>*5FOPb{ X % (Vm  & FF  & F & FG$87OPb{ X % (VmO""&5&(R)ºzrjb1  1  1  1  1  1   F   F   F   F   F  F 1   G   G   G   G  G 1  1   1 87$O""&5&(R)-203357/9C9;>q@ICJCKCbCC$ & F  & F  & FR)-203357/9C9;>q@ICJCKCbCCCCC(DEEEEEFFF-F.FNFOFPFQFŽ嫨H  1  1  1  1  1  1  1  1  1  1  "CCCC(DEEEFF F FF-F.FNFOFPFQF$ & FHHhH&`#$G$' 0. A!"#$%J [4@4Normal $ CJmH F"F Heading 1$ & F60@&5;J2J Heading 2"$ & F70@& h:JBJ Heading 3"$ & F80@& h5FRF Heading 4"$ & F90@& h@@ Heading 5 & F:0@&6.. Heading 6 @&.. 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