LDCs to WTO: Retain trade facilities for 12 years after graduation

The LDC Group, including Bangladesh, has asked the World Trade Organization in a letter to continue the current duty-free export facility for 12 years even after their graduation into the rank of a developing economy.

The Least Developed Countries (LDCs) have proposed eliminating the facilities step by step rather than scrapping them at a time.

The letter also proposes that the WTO's Intellectual Property Treaty (Trips) waiver provided to the pharmaceutical industries of the LDCs be extended to 2033 and other service waiver for export services to 2030 after the graduation.

Apart from these, the Least Developed Countries also want to enjoy the benefits of their LDC status and those of developing countries following their graduation.  

The LDCs made these proposals to the WTO in two separate letters on 18 November.

The letter delineates a bleak economic picture of the countries battered by Covid-19 and awaiting graduation.

These issues could be discussed and the decision in this regard be reached at the WTO ministerial meeting in December next year.

With the transition from a LDC status to a developing status, the duty-free trade facility and Trips waiver are put to an end.

Only the European Union and Turkey offer such trade facilities to countries for an additional three years after graduation.

If the proposal of the LDC Group is implemented, Bangladesh will be able to enjoy trade facilities till 2036.

In this regard, Commerce Secretary Md Zafar Uddin told The Business Standard that "The LDCs, including Bangladesh, sent written proposals to the WTO so that existing facilities for LDCs can be enjoyed even after moving to developing status."

He said if the trade facility is canceled after graduation into the rank of a developing economy, Bangladesh's exports are likely to suffer $6 to $7 billion.

Director General of the WTO cell at the Ministry of Commerce Hafizur Rahman told The Business Standard that the Trips facility for LDCs' pharmaceutical industries will remain valid till December 2033.

The LDC Group has made the proposal so that Bangladesh and other Least Developed Countries awaiting graduation can enjoy the facilities in full even after graduation, he said.

The term to enjoy general Trips waiver in other sectors except medicine and services is coming to an end next July, Hafizur Rahman said.

"The WTO will decide in March to extend its term and we have proposed to enjoy that term even after graduation."

In the letter, it was also said graduated LDCs still face significant trade and development challenges and also risk falling back into the category of Least Development Countries if their progress is not sustained.

Leaving the LDC category also implies that graduating countries will lose access to a wide range of international support measures which have often contributed to their socio-economic development.

"Mitigating the negative impacts associated with the removal of these support measures is therefore essential to ensure a smooth transition away from the LDC category. This is particularly true in the context of the current Covid-19 crisis which may reverse many of the development progress achieved so far by the graduating LDCs," according to the letter.

The LDC Group said Covid-19 impacts will affect jobs, income and savings in graduating LDCs – all of which will be reflected in increased economic vulnerability and in Gross National Income.

Some LDCs may opt for delaying their graduations under those circumstances but for those who decide to go ahead, the risk of falling back into the LDC category may be significant in the absence of effective smooth transition measures.

In recognition of this need, the United Nations General Assembly introduced the principle of "smooth transition" under which LDC-specific support measures should be phased out in a gradual and predictable manner following the final exit of countries from LDC list so as to not disrupt the development progress of the graduating country, added the letter.

But in practice, there are no formal WTO procedures for smooth transition in relation to LDC-specific assistance measures and standard provisions as envisaged under the UN resolution.

This has put graduating LDCs in a very difficult situation, not least because of their economic vulnerabilities and their limited capacity to negotiate specific extensions on a case by case basis.