Least Developed Countries and the WTO

In recent discussions of the Doha Round and whether or not it can be revived, calls for an ‘early harvest’ for the Least Developed Countries (LDCs) have featured prominently in the debates. Similarly, at the latest World Trade Organization (WTO) Ministerial Conference held in Geneva in December 2011, WTO members committed themselves to ensuring that the interests of the LDCs were ‘given due priority in the future work of the WTO’ (WTO, 2011f). Of the seven decisions that were made at the Ministerial Conference, three related directly to LDCs, and LDCs were explicitly mentioned in a fourth decision on the Work Programme on Electronic Commerce. The three decisions in favour of the LDCs allowed for further negotiations on the Trade-Related Aspects of Intellectual Property (TRIPS) transition period for LDCs, agreement to try and further streamline the process of accession for LDCs and importantly, a waiver allowing WTO members to treat services and service providers from LDCs more favourably than those from other members.

The norm of special treatment for LDCs began in UNCTAD in the mid-1960s, but prior to this, there was a growing recognition that developing countries required different treatment from developed countries. New norms often build on existing norms, and the norm of special treatment for LDCs grew out of the norm of special treatment for developing countries. Both norms still exist and often operate in parallel with each other. The purpose of this chapter is to demonstrate that the norm of special treatment for LDCs grew out of the existing norm of special treatment for developing countries, but became a separate norm in its own right with the creation of the category of LDC in the early 1970s. The chapter weaves an historical story of the development of the norm within the UN and UNCTAD and its manifestations from the 1960s up to the present day by providing an overview of events and decisions taken by various international organizations which have reinforced the norm of special treatment for LDCs. In doing so, it illustrates how the norm has cascaded through the international system. The strengthening of the norm is highlighted by the increasing number of international initiatives designed by various international organizations aimed at providing special treatment for LDCs.¹ The chapter begins by looking at who the LDCs are and how the category is defined before focusing specifically on the development of the norm since the 1970s.

Special treatment for LDCs by international organizations such as the GATT and the WTO provide evidence that a norm of special treatment for LDCs exists within the organization. By tracing the special treatment provided for LDCs within the GATT we can construct the lifecycle of this norm and demonstrate how it operates in the organization. Following the introduction of the norm of special treatment for LDCs into the UN in the 1970s, as discussed in Chapter 2, the norm was also introduced into the GATT largely due to the close proximity and rivalry between the GATT and UNCTAD with both organizations based in Geneva and focusing on trade.

During the 1990s within the trade regime there was a continuation of the ‘cascade’ of the norm of special treatment for LDCs and an increase in the norm’s institutionalization, particularly following the creation of the WTO in 1995. Whilst generally in the GATT, the focus had been on developing countries as a whole, with some attention paid to LDCs, with the creation of the WTO, the focus on developing countries changed to include LDCs as well. The WTO agreements reflected the increasing institutionalization of the norm of special treatment for LDCs by formally recognizing LDCs as an explicit category of WTO membership and importantly it is the only category of membership which is actually defined, as per the UN definition.¹ In addition, the WTO agreements contained several references to LDCs, and a list of provisions specifically concerning LDCs was drawn up by the Secretariat (GATT, 1994d; also see Appendix A). The Marrakesh Agreement, which established and outlined the structure of the WTO, contained three references to LDCs and emphasized the role of the WTO in assisting LDCs to increase their role in international trade.² It called for positive efforts to help LDCs ‘secure a share in the growth in international trade commensurate with the needs of their economic development’ and provided for periodic review of provisions in favour of LDCs (WTO, 1999b: 4). The WTO documents and legal texts provide evidence of the norm’s institutionalization within the trade organization.

The issue of accession and how LDCs came to be members of the WTO is a key factor in assessing whether they are receiving special treatment in the organization. If the norm of special treatment for LDCs is being applied in the WTO, we would expect LDCs to be able to join the organization relatively easily compared to other states, as was the case in the GATT. However, despite the fact that all states and separate customs territories are eligible to join the WTO, their individual accession paths vary depending on their size, their level of economic development and crucially, the demands of the existing WTO members. These demands make the accession process a contentious one. There are few rules in the process and special treatment, with the exception of technical assistance, is effectively withheld from developing countries until they have completed the accession process. Countries seeking to join the WTO are frequently asked to go beyond WTO treaty obligations and liberalize their markets more than the existing members.¹ In addition to the liberalization requested of potential members, the time taken to finalize accession packages can be lengthy.² Despite these issues with the accession process and the ongoing Doha Round, countries continue to accede to the WTO — Montenegro and Samoa being the latest to finalize their accession negotiations — demonstrating that states still want to join the organization and see it as relevant (WTO, 2011g). Most of the countries currently in the process of accession are either developing countries or LDCs, so the process is of key importance to them.

Access to other countries’ markets represents an important opportunity for LDCs, as it provides revenue and foreign currency reserves.¹ For LDCs these are often critical in order to generate revenue to pay for imports. This issue is one which has long been discussed in the GATT and the WTO. The ability of the LDCs to have complete and unrestricted market access to all countries’ markets would represent full internalization of the norm of special treatment for LDCs in trade terms. However, the fact that the norm has not yet been fully internalized is demonstrated by the fact that LDCs still do not have full duty-free and quota-free access to all WTO members markets despite progress in this area. This case study will focus on attempts within the GATT and the WTO to improve market access for LDCs’ products.² In examining the GATT, the focus will be on the early GATT days and on the discussions of market access in the GATT’s Sub-Committee on Trade of LDCs. Within the WTO, the focus will be on discussions at the LDC SubCommittee meetings and various ministerial meetings, most notably those held in Singapore and Hong Kong. The Hong Kong Ministerial was a key landmark as agreement was reached that ‘at least 97 per cent of products originating from LDCs’ would be accorded duty-free, quota-free access by the developed country members of the WTO, and those developing countries able to do so (WTO, 2005s: Ann. F, page F-1). The decision is important for three reasons, first it set a minimum figure for LDC access to foreign markets; second, it specifically involved other developing countries in assisting LDCs; and importantly this treatment has not been provided to any other category of WTO member or negotiating group.

The puzzle which this chapter investigates is how a group of the smallest and weakest states in the international system have managed to influence the negotiating agenda of an international organization in which economic power is traditionally seen as the deciding factor in negotiating outcomes.¹ The chapter looks at the special treatment that LDCs have had in the Doha Round negotiations via the case study of cotton. The case of cotton provides an example of the LDCs having a direct impact on the negotiating agenda of the Round. The chapter argues that the solution to the puzzle is the existence of the norm of special treatment for LDCs and the use of appeals to the norm by the LDCs involved in cotton. The cotton case shows that the LDCs were originally asking for fair treatment in accordance with WTO rules and special treatment in the form of compensation for their loss of earnings until the cotton subsidies were removed. However, the result of the LDCs’ activism has been special treatment as opposed to fair treatment. The case also demonstrates the inconsistency of the behaviour of developed countries, particularly the United States, which undermine their development policies through the use of agricultural subsidies. NGOs and trade bodies have also highlighted this inconsistency with the norm. Oxfam raised the issue in 2002 arguing that the cotton subsidies were undermining the HIPC Initiative while the World Bank drew further attention to the policy incoherence (Oxfam, 2002: 3; Baffes, 2003).

A norm of special treatment for LDCs exists and its institutionalization in the WTO Agreements has embedded it in the organization, but it has yet to be fully internalized so that special treatment for LDCs becomes automatic. This explains the puzzle posed in the introduction as to why the WTO focuses on LDCs and their issues and advocates positive discrimination for these countries. By looking at individual issues within the WTO such as accessions, market access and cotton, it is evident that the progress of the norm has not been as smooth as would have been anticipated from a review of the events and agreements in the trade organization relating to LDCs. The case studies of the selected issue areas important to LDCs reveal that the progress of the norm through its lifecycle has been hindered by clashes with other norms operating in the WTO and helped more recently by the LDCs themselves taking on the role of norm entrepreneurs. Full future internalization of the norm depends on the actions of the LDCs in advocating for more special treatment and highlighting issues affecting the norm, as well as the political will of the leading members of the WTO and their ability or inclination to resolve clashes between the norms of the organization.