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    Trade-related Technical Assistance to the Poorest Countries

     

     
     
    © International Trade Centre, International Trade Forum - Issue 4/2000

    The Integrated Framework and other trade-related assistance programmes were intended to reverse the growing marginalization of sub-Saharan Africa and other least-developed countries (LDCs) in the world trading system. They were launched with high hopes, but have since made little progress owing mainly to a lack of funding.

    Few economic developments over the past generation have been more disappointing than the inability of the poorest countries to share in the rapid expansion and diversification of world trade. The 48 countries that the United Nations classifies as least-developed have seen the share of exports of goods and services in their GDP fall almost continuously since 1980. Their share of world exports, already low at just 0.7% in 1980, is now well under 0.5%.

    LDCs depend heavily on exports of a few primary commodities, which leaves them vulnerable to fluctuations in world commodity prices and a secular decline in their terms of trade. Although they have managed to raise the share of manufactured goods in their exports, it remains less than half the average figure for other developing countries.

    Most problems faced by LDCs are structural and have little to do with trade. They include the familiar issues associated with underdevelopment, as well as ill-chosen economic policies, poor governance, heavy indebtedness, war and drought. Trade growth has also been hampered by the lack of investment in basic infrastructure, reflected in outdated port facilities, poor roads and inadequate communications. Nonetheless, the trade policies of the LDCs themselves and their more developed trading partners have played a part:

    • Despite some liberalization, the trade regimes of many LDCs remain biased against exports. Trade policy itself is typically given limited attention and a low priority by policy-makers.

    • High tariff escalation hampers market access to the developed and more advanced developing countries (tariffs are much higher on semi-finished and finished goods than on primary products, discouraging processing in the exporting country). Most developed countries also maintain high tariff rates in sectors such as farm goods, textiles and clothing, where LDCs have a comparative advantage. Developed country preferential-access schemes are helpful, but they often include exceptions that discourage export diversification into the labour-intensive sectors where LDCs have the greatest natural advantages.

    • The poorest countries have had little influence on multilateral trade negotiations and the other work of WTO. Their lack of influence has reflected their very limited representation at WTO's headquarters in Geneva and the poor back-up that their representatives have received from national capitals. The particular problems of LDCs have been generally recognized by other WTO members. The 1994 Decision on Measures in Favour of Least-Developed Countries states that LDCs will only be required to comply with individual commitments, obligations and concessions to the extent that these are consistent with their individual development, financial and trade needs, or their administrative and institutional capabilities. In addition to this general exemption, WTO accords confer many specific advantages and more generous transition periods on LDC members.

    WTO members consistently express their readiness to help the LDCs gain greater advantages from the multilateral system. In December 1996, WTO's First Ministerial Conference in Singapore adopted a Plan of

    Action which envisaged granting duty-free access to imports from the LDCs, and joint efforts by WTO and other international

    organizations to help LDCs

    enhance their trading opportunities. These ideas were worked out in more detail in October 1997 at a high-level meeting on Integrated Initiatives for Least Developed Countries' Trade Development. The meeting endorsed proposals for increased technical assistance efforts by WTO itself, autonomous action by WTO members to improve market access for imports from the LDCs, and the establishment by six international organizations of an Integrated Framework for their trade-related technical assistance to LDCs.

    Integrated Framework

    There were high hopes for the Integrated Framework when it was proposed in October 1997. The framework was intended to coordinate the activities of WTO, UNCTAD, UNDP, ITC, World Bank and IMF. The agencies agreed to coordinate assistance to LDCs for trade-related

    activities, "including for human and institutional capacity building". Each LDC was invited to specify its needs for technical assistance, and the agencies gave a coordinated reply indicating their support (in principle) for the proposals received.

    The agencies themselves had no funds earmarked for the Integrated Framework, so the next step should have been that the necessary funding was pledged at round-table meetings with potential donor governments. In fact, few such meetings have been held, and none has produced significant new funding. This deeply disappointing outcome has been blamed mainly on the failure to show how trade-related proposals fit into broader development plans. Attempts are being made to revamp the programme. The aim is to make trade-related projects more credible candidates for funding by building trade objectives explicitly into each LDC's agreed development strategy. However, early results are unlikely, not least because governments are so far unconvinced that the six agencies are offering the right solutions to the problems being encountered.

    Conclusion

    LDCs need financial resources as well as technical assistance in order to understand their trade obligations, participate more effectively in WTO's work, and overcome supply-side obstacles to boosting their exports. However, funding will only be forthcoming if potential donors can be convinced that trade-related assistance is central to the development process. There were hopes that donors would make at least a political commitment during the Third United Nations Conference on Least-Developed Countries next May. This now seems unlikely, since conference participants are expected to focus mainly on non-trade issues.

    This article is edited and reprinted with permission from Oxford Analytica. The full version appeared in the Oxford Analytica Daily Brief on WTO/Technical Assistance, published on 18 October 2000.