Speakers:

Peter Kleen, formerly Director General of the National Board of Trade, Sweden
Sheila Page, Senior Research Associate, ODI

Chair:

Winston Cox, Deputy Secretary-General, Commonwealth Secretariat

1. Sheila Page spoke on what special and differential treatment (SDT) has meant in the past and what, according to a study by Sheila Page and Peter Kleen for the Swedish Foreign Ministry, might be one way forward for SDT. Peter Kleen spoke on some of the principles behind SDT and the relevance and possibility of differentiating amongst developing countries eligible for SDT.

 2. According to Sheila Page, SDT depends on what is classified as 'normal' within the WTO. As the WTO has expanded into new areas of competence, SDT has had to expand. Additionally, the meaning of development has changed, changing the use of SDT with it. It is important to keep in mind that the WTO is not the main instrument of development and development is not the main preoccupation of the WTO. Historically, SDT has tended to mean giving developing countries special privileges - rather than increasing the power of developing countries to negotiate their own objectives which could have been an alternative type of SDT.

3. Sheila Page and Peter Kleen's study identifies five different arguments for SDT; Sheila Page focused on the fifth of these: that developing countries don't have as much to gain from normal trade as developed countries, and in effect, SDT ensures that there is 'something else on the table' for them when negotiating, which could be either trade-based benefits or some other form of assistance. The other four arguments for SDT were that development requires different policies, adjusting to the new rules within the WTO may require more effort from the developing countries than from the developed countries, retaliation by developing countries against the special benefits enjoyed by the developed countries, and that some type of countries need different rules.

4. SDT is of interest now because the current preference system has given some countries real value. The countries that have gained are small countries and the highest gains were from commodities such as sugar, tobacco, fish and bananas (and in the past, clothing). Further liberalisation would help some countries (including large countries) while hurting other countries (many small and poor). The study argues that the answer to this problem is principles plus money. Application of principles would help countries in the future and money would help them in the present. Several principles were mentioned: that the WTO should be an inclusive organisation, the WTO must be flexible to the needs of all countries and that countries should be able to identify their own interests, rather than having them identified for them. There are some ways in which reform of preference could be beneficial for developing countries, including making rules of origin work better for developing countries.

5. On money, Sheila Page emphasised a shift in thinking from 'trade not aid' to 'aid for trade.' Aid for trade has two potential meanings: first, long term use of aid for building trade capacity and second, compensation for countries losing out from changes in preferences. A fund linked to the WTO could assist with these goals, but that this would require a major innovation in thinking as funding is generally not considered to be part of the WTO mandate, nor does it have sufficient expertise to administer a fund. According to Sheila Page, the first concern can be ignored, as GATT / WTO has entered many new fields. On the second aspect, there is some scope for getting other institutions involved in the distribution of money; however, the WTO will have to have legal responsibility for it as simply requiring another organisation to administer the programme would create problems of conflicting mandates. Additionally, the distribution of money in this way is difficult because it is not a traditional aid programme: money won't go to countries that would usually receive it, and cannot have conditions on use the way other aid money does. Finally, it cannot be discretionary (as aid is); it has to be a binding commitment to aid for trade unlike the language in the Uruguay Round.

6. Sheila Page closed her presentation by raising questions about the likely contours of such a fund (the UNDP has put forward specific proposals) and by saying that the idea of an Aid for Trade fund was much less unthinkable than even recently, given mentions of such a fund in proposals by the EU and others.
  
 7. Peter Kleen opened by saying that the study he conducted with Sheila Page on SDT was a result of the Swedish government's request to outline general principles and a general framework for SDT. SDT should promote integration of countries within the world trading system and therefore support the basic aim of the WTO. SDT should also be bound in some way to avoid disappointment to developing countries. While stressing the difficulties of defining a framework for SDT, Peter Kleen said a slightly expanded Enabling Clause (originally from 1979) was a 'middle path' towards achieving similar goals; and that such a clause could form the legal basis for plurilateral agreements.

8. As the Swedish government had requested, Peter Kleen and Sheila Page had looked into how countries could be further differentiated for the application of SDT. He stated that such differentiation is legally possible, economically desirable, technically possible but very sensitive politically - hence, unrealistic. There are no easy ways to measure a country's level of development which are acceptable to all parties, and thus he thought that an issue specific approach to SDT may be more feasible. By this he meant different kinds of differentiation for different types of agreements. There are examples of this in the WTO already (e.g. tariff concessions and separate agreements like the Information Technology Agreement). He additionally thought that formal 'graduation' was not practical or attractive.

9. In the discussion that followed concerns were expressed as to whether the question of SDT distracted attention from more important ongoing negotiations, especially given the opinion of Sheila Page that SDT was about products such as sugar, bananas and tobacco, many of which had already been addressed. Sheila Page responded that issues such as agriculture were in fact more important, but that SDT blocked progress on other issues (including agriculture) and thus needed to be dealt with quickly.

10. In response to a similarity being drawn between Peter Kleen's issue approach and a situational approach, Sheila Page clarified that a situational approach was more ad hoc than an issues based approach, but that they were broadly similar.

11. On the question of whether Sheila Page's 'principles + money' approach could be applied to non-tariff issues, such as TRIMs, whereby countries would receive compensation for losses in TRIMs, Sheila Page answered that compensation for losses caused from future rules should be possible. Peter Kleen added that the TRIMs Agreement, contrary to what is often stated, in reality does not imply any new obligations in addition to those already included in GATT.

12. When asked why Aid for Trade was necessary given the World Bank-IMF Adjustment fund that was announced at Cancún, Sheila Page responded that the IMF did in fact set up a fund for temporary assistance, but that the fund provides interest-bearing loans, not grant assistance. Futhermore, the World Bank had backtracked on further expansion of Aid for Trade.

13. A final question was raised as to whether the aid for trade agenda came from developing or developed countries, adding that one would have expected developing countries to ask for longer term gains rather than monetary compensation (e.g. Mode 4 in services). Sheila Page responded that the Aid for Trade idea came from developed countries, but that it had been adopted by some developing countries. Gains in other areas, such as Mode 4, would not be sufficient for some countries, which had little to gain from temporary movement of labour, but much to lose from preference erosion.

14. Concluding, Winston Cox expressed the fear that when the developing country negotiators returned from Hong Kong they would be unable to say what they had returned with. This should not be allowed to happen since a failure at Hong Kong would lead to loss of goodwill and which would ultimately lead to a setback in the development efforts.