Enabling zero-duty imports from developing countries

This strategy forms part of the broader efforts to enhance coherence in global economic policy making in support of trade liberalisation and development. It supports the overall aim of integrating developing countries into the global economy: developing countries' full participation in the world trading system is essential to avoid their marginalisation and help them reap the benefits of liberalisation for their economic and social development.

Most least developed country (LDC) exports go to developed countries, with sixty per cent flowing to the EU, Japan and the United States (WTO, 1998). The structure and composition of LDC's exports is typically heavily concentrated on a limited range of products. Processing is generally minimal: unprocessed and semi-processed primary products and minerals account for about 70 per cent of exports, with manufactures, essentially textiles and clothing, constituting a further 20 per cent.

Many LDC exports receive preferential market access under Generalised System of Preference (GSP) arrangements. Ninety-nine per cent of LDC exports, by value, now enter the EU market duty free. LDC beneficiaries receive duty-free access on all covered industrial and agricultural products, as well as on an additional list of selected agricultural products (UNCTAD, 1999). On average, between 80 and 90 per cent of LDCs' exports enter their major markets duty free and tariff preferences are in several cases, under-utilised (WTO, 1998).

Overall, the problem posed by tariffs on LDCs' existing structure of exports appear insignificant, with the exception of sensitive areas such as agriculture and textiles. More significant difficulties for market access to LDCs' existing exports are linked to non-tariff measures, such as quantitative restriction (textiles and clothing), SPS restrictions (fish and fish products, meat), standards (leather), and rules of origin, where the non-harmonised interpretation of 'substantial transformation' has restrictive market effects on products of export interest to LDCs.

The European Commission (EC) first suggested duty free market access for essentially all exports from least developed countries (LDCs) at the High Level Meeting on Integrated Initiatives for Least Developed Countries in October 1997, and reiterated its suggestion in the High Level Symposium on Trade and Development in 1999, inviting the more advanced developing countries to contribute according to their capacities. The EC has been in the lead on these issues and provides duty free access to about 99% of LDC exports. Enhanced export opportunities are essential for the development opportunities of the LDCs.

The European Community has expressed a commitment that "essentially all products" from the least developed countries should be assured tariff-free and quota-free market access to the industrialised countries. Such preferential access should be in place by the end of the New Round. The commitment would be based on the principle of Special and Differential Treatment embodied in Part IV of the GATT. As such, the commitment would represent non-reciprocal preferences, but could be linked to commitments from developing countries to adopt more MFN tariff bindings, and to efforts by GSP donor countries to expand the coverage of preferences (in line with measures under the New Round and Development).

The impact on the EU of granting free market access would be slight; although the EU is a major market for least developed countries these imports are a small share of the EU total. Consumers (including firms using the products as raw materials or intermediate inputs) would benefit from lower prices and, potentially, a wider range of products. There may be adjustment costs for small groups of producers of competing products (mostly in Southern Europe) but efficiency would be increased if such groups were supported by measures other than trade protection. The net welfare benefit to the EU would be positive, although a few producer groups may incur losses. The net global impact would be positive, at least in terms of economic and social effects.