TI Special Issue Nov-Dec. 2009 25 November · 2017-10-09 · Puspa Sharma EXECUTIVE EDITOR Paras...

PUBLISHED BYSouth Asia Watch on Trade,

Economics & Environment (SAWTEE)

REGIONAL ADVISORY BOARDBangladesh

Dr. Debapriya BhattacharyaIndia

Dr. Veena JhaNepal

Dr. Posh Raj PandeyPakistan

Dr. Abid Qaiyum SuleriSri Lanka

Dr. Saman Kelegama

EDITOR-IN-CHIEFRatnakar Adhikari

EDITORKamalesh Adhikari

ASSOCIATE EDITORPuspa Sharma

EXECUTIVE EDITORParas Kharel

DESIGNEffect, 4433703

COVER & ILLUSTRATIONAbin Shrestha

PRINTED ATJagadamba Press

Lalitpur

P.O. Box: 19366254 Lamtangeen Marg

Baluwatar, Kathmandu, NepalTel: 977-1-4415824/4444438

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November 2009

Trade, climate changeand food security

ALONG with the convening of the World Summit on Food Security in Romeon 15–18 November, the year 2009 is drawing to a close with two othermajor global meetings in quick succession— the Seventh Ministerial of theWorld Trade Organization (WTO) in Geneva from 30 November to 2December and the 15th Conference of Parties (COP) to the United NationsFramework Convention on Climate Change (UNFCCC) in Copenhagenfrom 7 to 18 December.

Despite the absence of major rich nations, the World Summit on FoodSecurity was able to renew a number of commitments towards advancingagriculture, and addressing hunger and food insecurity. However, given therise in the number of undernourished people, an increase of 105 million thisyear alone, and the worsening conditions for trade and growth in the globaleconomy, mainly due to ongoing global crises including climate change, theSummit failed to address many of the crucial concerns of developing coun-tries, including those of the least-developed countries (LDCs). Among others,the neglect of farmers’ rights to plant genetic resources which constitute thebasis of world agriculture and food security and a mere focus on the need topromote private companies to deliver modern inputs to farmers could haveserious implications for the realization of the right to food in poor countries.

At a time when there is a growing need to address the global trade,environmental and developmental challenges by enhancing the inter-linkages among trade, climate change and food security issues, the interna-tional community has a responsibility to make the best use of the SeventhWTO Ministerial and the Copenhagen meet. Being held after a four-yearhiatus, the Seventh WTO Ministerial, although not a negotiating session, willbe important for taking stock of the achievements of the WTO, particularlywith regard to its role in ensuring a meaningful integration of the LDCs intothe global economy and addressing the global economic and environmentalcrises. The need to successfully conclude the Doha Round of trade negotia-tions has never been more urgent, especially due to signs of slippage towardsprotectionism, including climate protectionism, and the impacts of the globalcrises on poor economies and the wellbeing of their peoples. Thus, even if theMinisterial is not going to discuss Doha, it is an opportunity for a cool-headedreflection on what went so terribly wrong that even eight years after itslaunch, the Doha Development Agenda is yet to reach fruition. Also, WTOmembers need to discuss concrete ways to address the LDC concerns,reflected in the 84-point declaration adopted by the LDC trade ministers’meeting in Tanzania on 14–16 October.

On the climate front, the Copenhagen meet was supposed to be theculmination of climate change negotiations, yielding a new global climatechange agreement to replace the Kyoto Protocol, set to expire in 2012.Barring a miracle, the negotiation outcomes so far suggest that no bindingagreement is going to be reached at Copenhagen. But as developed countriesand advanced developing countries refuse to budge from their entrenchedpositions, Planet Earth desperately awaits a breakthrough so as to avoid theworst effects of climate change. For the LDCs, along with other vulnerablecountries—whose contribution to climate change is negligible but which areleast equipped to cope with the havoc it wreaks—this impasse means afurther delay in technology transfer on relaxed terms and conditions, andadditional and predictable financing, critical for successful adaptation andmitigation. The political agreement widely expected to emerge in Copen-hagen will have meaning only if it sets a timeline for a binding global climatepact by 2010 at the latest.

contents Trade Insight Vol.5, No.3-4, 2009

TRADE AND CLIMATE CHANGE 42

SPECIAL FEATURE 37

Views expressed in Trade Insight are of the authors and editors and do not necessarilyreflect the official position of SAWTEE or its member institutions.

BANGLADESH1. Bangladesh Environmental Lawyers’ Association

(BELA), Dhaka2. Unnayan Shamannay, Dhaka

INDIA1. Citizen consumer and civic Action Group

(CAG), Chennai2. Consumer Unity & Trust Society (CUTS),

Jaipur3. Development Research and Action Group

(DRAG), New Delhi

NEPAL1. Society for Legal and Environmental Analysis

and Development Research (LEADERS),Kathmandu

2. Forum for Protection of Public Interest (ProPublic), Kathmandu

PAKISTAN1. Journalists for Democracy and Human Rights

(JDHR), Islamabad2. Sustainable Development Policy Institute

(SDPI), Islamabad

SRI LANKA1. Institute of Policy Studies (IPS), Colombo2. Law & Society Trust (LST), Colombo

SAWTEE NETWORK

COVER FEATURE 21

Trade Agenda for

THE LDCs

Developing-countryTrade Agenda for

Copenhagen

Farmers'Rights

RomeCopenhagento

from

LEAST-DEVELOPED COUNTRIES 4

IN THE NEWS 6

FREE TRADE AGREEMENT 12EU-India FTA

REGIONAL TRADE 15NTBs Facing Bangladesh

TRANSIT AND TRANSPORT 17South Asian Transit Arrangement

MARKET ACCESS 27Certificate of Origin

TRADE NEGOTIATION 29LDCs: United They Stand

SAFTA AND INVESTMENT 31Investment Cooperation in South Asia

INTELLECTUAL PROPERTY RIGHTS 34Thailand’s Fight for Public Health

CLIMATE CHANGE DEBATE 45Should India Take the Lead?

FARMERS’ RIGHTS 47India’s Seed Bill

CIVIL SOCIETY DECLARATION 50Trade, Climate Changeand Food Security

UNDERSTANDING WTO 54Special and DifferentialTreatment for the LDCs

BOOK REVIEW 56Poor Countries in Global Economy

NETWORK NEWS 57

Trade Insight Vol.5, No.3-4, 20094

least-developed countries

The State and DevelopmentGovernance in LDCs

THE Least Developed CountriesReport 2009, published by the UnitedNations Conference on Trade andDevelopment (UNCTAD), states thatthe least-developed countries (LDCs)are likely to be particularly hard hitdue to the ongoing global crisis. Thereport adds that the combination ofhigh exposure to shocks as well asweak resilience capacity is likely tomean that the LDCs will be harder hitthan most other developing countries.The combined threat from fallingcommodity prices, the slowdown inglobal demand and the contraction infinancial flows are the major reasonsfor the increased vulnerability of theLDCs due to the economic crisis.

As a result of the crisis, privatecapital flows, including both foreigndirect investment and remittances, arepredicted to decline, and if the experi-ence of previous crises is repeated,official development assistance (ODA)will decline, too. The internationalreserves of the LDCs accumulatedduring the years of export boom mayafford insufficient protection fromsignificant and persistent currentaccount shocks associated with thedrying up of external sources offinance. Equally worrisome is thatremittances are also set to decline.Hence, official aid trends will become acentral determinant of what happens tothe LDCs. It will be critical that donorshonour their commitments forincreased aid. But unfortunately, pastexperience shows that ODA tends todecline during recessions.

In order to overcome structuralconstraints and reduce externaldependence, it is necessary to recon-sider the role of the state in the LDCs.Achieving long-term structuraltransformation requires the LDCs tostimulate investments by socializing

risk. The market has not been and willnot be able to carry out these changesalone. In that context, the reportsuggests three policy orientations:

Policies should be orientedtowards stimulating productiveinvestment, building technologicalcapabilities, and strengtheninglinkages within and across sectorsand between different enterprisesto produce a wider range of moresophisticated products;By finding new forms of develop-ment governance appropriate forthe 21st century, a new develop-mental state founded on a strategiccollaboration between the stateand the private sector should bebuilt; andRules that govern internationaleconomic relationships withregard to trade, finance, invest-ment and technology flows shouldbe designed in ways which wouldsupport development in the LDCs.Support for the LDCs should notimpose unnecessary limits to themeasures that governments cantake to promote development.

Of both national and internationalpolicies necessary to achieve these, theLDCs should aspire to such goodgovernance in which the practices ofgoverning are imbued with theprinciples of participation, fairness,decency, accountability, transparencyand efficiency in a non-culturally-specific way. They should also aspire tothat kind of good governance whichdelivers developmental outcomes, suchas growing income per capita, achiev-ing structural transformation, expand-ing employment opportunities, andreducing poverty (Adapted fromwww.unctad.org, 20.11.09).

LDC factsheet

SINCE 1971, the United Nations hasdenominated the least-developedcountries (LDCs) a category of statesthat are deemed highly disadvan-taged in their development process,and facing more than other countriesthe risk of failing to come out ofpoverty. So far, three United NationsConferences on the LDCs have beenheld—in 1981, 1990 and 2001. TheThird Conference in Brussels agreedon the Programme of Action for theLDCs for the Decade 2001–2010. Inaddition, there have been severalother global initiatives to addresstheir particular needs, includingwithin the World Trade Organization

Trade Insight Vol.5, No.3-4, 2009 5

LDC common position forthe WTO Ministerial

THE 49 least-developed countries(LDCs) are set to demand thatdeveloped countries fulfill theirpledge to provide them duty-freeand quota-free market access byearly 2010. At the Seventh Ministerialof the World Trade Organization(WTO), to be held from 30 Novem-ber to 2 December in Geneva, theLDC members will also raise astrong voice for the elimination of allforms of non-tariff barriers andprovision of meaningful aid for tradeand technical assistance.

Meeting in Dar Es Salaam,Tanzania on 14–16 October, theyadopted a 84-point declaration,which represents their unified voiceon trade issues. They also came upwith a common position on issues ofsubsidies, market access and aid.

The LDCs are to urge WTOmembers to implement duty-freeand quota-free market access facility

pledged to them in Hong Kong in2005, stop restricting agriculturetrade, open markets for workers toprovide services, and support tradefacilitation. They will also put forththeir positions on issues like LDCaccession to the WTO, trade andenvironment, increased supportunder the Enhanced IntegratedFramework and aid for trade-related infrastructure developmentand trade growth.

The declaration has also calledupon WTO members to agree on theurgent setting up, in the context ofthe current global economic crisis, ofa “safety net” mechanism by cotton-producing LDCs to address revenuelosses. African LDCs such as BurkinaFaso, Benin, Mali and Chad, in thepast, had asked for drastic cuts insubsidies provided by the UnitedStates to its producers. A dealslashing subsidies is seen as a critical

test in reaching a fair farm tradeagreement under the Doha Roundof trade talks.

While urging the developedcountries to eliminate agriculturalsubsidies, LDC trade ministers,during the Dar Es Salaam meet, alsoexpressed concern over preferenceerosion. The LDC members willalso urge all non-LDCs not to applyfood export restrictions on theLDCs.

The declaration calls on WTOmembers for a speedy conclusionof the Doha Round of tradenegotiations, which, among others,aims to free up world trade bycutting farm subsidies and tariffs onagricultural and industrial goods,and help poor countries benefitfrom the their integration into themultilateral trading system (Adaptedfrom www.businessday.co.za, 30.10.09;www.myrepublica.com, 30.10.09).

(WTO). However, the LDCs stillremain marginalized in the globaleconomy. For example, in 2008, theshare of the LDCs in world exportswas a mere 1.1 percent and in worldimports 0.97 percent. In the sameyear, seven LDCs that exported oiland readymade garments accountedfor 73.8 percent of total LDC exports.At present, out of 49 LDCs, 32 areWTO members and 10 others are inthe accession process. Afghanistan,Bangladesh, Bhutan, the Maldivesand Nepal are five South AsianLDCs. All but Afghanistan andBhutan are WTO members (Adaptedfrom www.unctad.org, 20.11.09).

low income, in thelight of a three-yearaverage estimate ofthe gross national

incomeper capita (under

US$750 for cases ofaddition to the list,above US$900 for

cases of graduation)

weak human assets,as measured througha composite Human

Assets Index

economic vulnera-bility, as measuredthrough a compos-

ite EconomicVulnerability Index

ChartUN’s three criteria for the LDCs


impasseA legally binding internationalclimate change agreement isunlikely to be reached in theUnited Nations Climate ChangeConference slated for 7–18December in Copenhagen.

The final two rounds of talksunder the United Nations Frame-work Convention on ClimateChange (UNFCCC) before the15th Conference of Parties to theUNFCCC failed to bridge differ-ences on key issues.

Lack of progress in the talks inBangkok prompted the Danishprime minister to declare, a weekbefore the final round of pre-Copenhagen talks in Barcelona,that he did “not think it will bepossible” for a legally bindingregime to be negotiated in Copen-hagen.

The objective of the twomeetings was to continue refiningdraft texts in two negotiatinggroups: one that focuses on theKyoto Protocol (KP), and anotherthat looks at other means ofachieving long-term cooperativeaction to address climate change.

One of the most contentiousissues—which triggered the

Climate

Climate changeto affect yields

The ADB made the statementafter analysing the current trendsand scenarios based on projectedtemperature increase indicated by astudy on “Addressing ClimateChange in the Asia and PacificRegion: Building Climate Resiliencein the Agriculture Sector” conduct-ed by the International Food PolicyResearch Institute.

The yields of irrigated crops—maize, wheat and paddy—areprojected to fall by 17 percent, 12percent and 10 percent, respective-ly if the current rate of climatechange persists until 2050 in SouthAsia, which is highly dependenton rain-fed agriculture and home to

THE Asian Development Bank(ADB) has said that South Asia isvulnerable to declining crop yieldsdue to deepening climate changeimpacts. It has warned that fourcountries in the region—Afghani-stan, Bangladesh, India andNepal—are particularly mostvulnerable to falling crop yieldscaused by glacier retreat, floods,droughts, erratic rainfall and otherclimate change impacts.

almost half of the world’s absolutepoor.

Changing and diversifyingagriculture practices, and develop-ing agriculture science and technol-ogy are some of the suggestedmeasures that these countries inparticular need to adopt. Moreover,South Asia needs an investment ofat least US$1.7 billion for a long-term strategic plan to deal withclimate change. The ADB also saidmelting Himalayan glaciers andother climate change impacts posea direct threat to water and foodsecurity of more than 1.6 billionpeople in South Asia (Adapted fromwww.myrepublica.com, 03.09.09).

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Africa Group to walk out andeffectively shut down the KPnegotiations for a day and a halfin the Barcelona talks in earlyNovember—was the debate overthe extent rich “Annex I” coun-tries are required to reduce theiremissions of greenhouse gases.The Africa Group, which countsmore than 50 countries as mem-bers, refused to continue discus-sions on any issue under the KPuntil the rich-country commit-ments were firmed up. Develop-ing countries repeatedly stressedthat the pledges made thus far byAnnex I parties would not go farenough to achieve the scientifical-ly established emissions levelsthat would be required to stabi-lize the climate. Developingcountries are pushing for richnations to cut their emissions toat least 40 percent of 1990 levelsby 2020, while developed coun-tries are offering cuts between 15percent and 30 percent. Chinaand the members of the G77coalition of developing nationssupported the African position.

Developed countries haveindicated their intention to ditch

the KP in favour of non-bindingnational pledges on emissioncuts, including by developingcountries. The indication wasgiven in the Bangkok talks,prompting the G77 and China toissue a statement expressingconcern over the development.Terming the KP the most impor-tant instrument embedding thecommitments of Annex I parties,they called on “developedcountries that are members of theKP to stand firmly in the KP andto engage seriously in negotia-tions for a second commitmentperiod”. They warned that theywould consider the Copenhagenmeet to be a “disastrous failure”in the absence of an outcome forthe commitments of developedcountries for the second commit-ment period of the KP, whichexpires in 2012.

Against this backdrop, apolitical commitment, instead ofa binding agreement, is expectedfrom the Copenhagen conference(Adapted from various issues ofTrade and Development Monitor,SAWTEE; Bridges News TradeNews Digest, Vol. 13, No. 39).

including the hosting of the firstmeeting to review the ClimateChange Action Plan in Delhi byMarch 2010, and finalization of aregional environment treaty fordiscussion at SAARC Summit inThimpu in Bhutan in April 2010.The proposed SAARC Summit inThimpu is also slated to finalizeand adopt a Natural DisasterRapid Response Mechanism forthe region.

The Delhi meet also agreed toset up a regional network ofSAARC weather stations tomonitor weather patterns, espe-cially storms, across the memberstates, starting with the establish-ment of 50 automatic weatherstations, three GPS Sonde stationsand a Doppler radar in Nepal,Bhutan and Bangladesh in thefirst phase. India offered US$1million to assist SAARC Meteoro-logical Research Centre’s regularfunction and agreed to provideUS$1 million each to SAARCForestry Centre, Thimphu andSAARC Coastal Zone Manage-ment Centre, Male to strengthenthose centres.

The meeting also decided toaccelerate consultations amongthe apex environmental manage-ment and pollution controlagencies of SAARC member statesand directed that they develop aregional cooperation plan onenvironmental management andpollution control within sixmonths from the date of adoption.The gathering also emphasizedthe need to identify transboundarybiodiversity zones and develop aframework for transboundarybiodiversity conservation, includ-ing exploration of potentialbiodiversity conversation corri-dors. The ministers directed theTechnical Committee on Environ-ment to examine the concept anddevelop a framework for consider-ation of member states within aperiod of six months (Adapted fromwww.financialexpress.com, 20.10.09; TheKathmandu Post, 26.10.09).

SAARC forcommon strategy

tion and Degradation (REDD) Plusprogramme to be an integral part ofany agreement on forestry underthe UNFCCC.

The environment ministers ofthe South Asian Association forRegional Cooperation (SAARC),who met in Delhi on 20 October,also agreed to work on a ClimateChange Action Plan for the regionand publish a compendium beforethe Copenhagen meet. The commonstrategy of SAARC would bepresented to COP15 by Sri Lanka.SAARC will also organize an eventat the sidelines of the Copenhagenconference and a series of eventsand actions after the conference,

SOUTH Asia has geared up todevelop a common strategy for the15th Conference of Parties (COP15)of the United Nations FrameworkConvention on Climate Change(UNFCCC) to be held in Decemberin Copenhagen. As part of thestrategy, South Asian nations planto jointly demand the need forafforestation and sustainablemanagement of forests leading toReduced Emissions from Deforesta-


AT a two-day summit in Pitts-burgh on 24–25 September,leaders from the Group of 20(G20) rich and emerging econo-mies repeated calls for the DohaRound of trade talks to be con-cluded before the end of 2010, andinstructed their trade ministers tomeet early next year to assessprogress towards a deal in theWorld Trade Organization(WTO).

“We ask our ministers to takestock of the situation no later thanearly 2010, taking into accountthe results of the work programagreed to in Geneva following theDelhi ministerial, and seekprogress on agriculture, non-agricultural market access, aswell as services, rules, tradefacilitation and all other remain-ing issues,” the G20 declarationread.

The declaration represented a

G20 calls forDOHA DEAL by 2010

compromise on proposed timelinesfor the talks. Australia, Brazil andthe European Union had fought fora commitment for negotiators tosecure an agreement on “modali-ties”—the broad outlines of aglobal tariff- and subsidy-cuttingdeal—early next year. But theUnited States resisted the push for

IN a record year for regulatoryreform worldwide, most SouthAsian economies strengthenedbusiness regulations and madethem more efficient, creating moreopportunities for local firms. Arecord 131 of 183 economiesaround the globe reformed busi-ness regulation between June 2008and May 2009, according to DoingBusiness 2010: Reforming throughDifficult Times, the seventh in aseries of annual reports published

by International Financial Corpora-tion and the World Bank.

In South Asia, six of eighteconomies reformed. Bangladesh,the region’s most active reformer,implemented an online companyregistration system cutting start-uptime by nearly a month, cut corpo-rate income taxes, and expeditedtrade by introducing an automatedcustoms clearance system at itsmain port.

India improved its score on the

South Asia steps up reform

BILATERAL InvestmentTreaties (BITs) between Pakistanand the United States (US) andbetween Pakistan and theFederal Republic of Germanyare likely to be concluded in2009. Early finalization of a BITwith the US, the largest invest-ment and trade partner ofPakistan, is expected to helpincrease US investment inPakistan. Pakistan and USauthorities are already undergo-ing a detailed review of theproposals of both sides formaking the treaty acceptable.Likewise, a BIT with Germanywould replace the outdatedagreement of 1959 and helppromote bilateral investment,especially in Pakistan. Underthe proposed BIT, clausesrelating to transparency wouldbe improved and a speedy andsimple dispute settlementmechanism would be providedto improve the confidence ofGerman investors in Pakistan.The authorities expect theproposed BIT to help increaseGerman investment in Pakistanby three to four times annually.Germany is supporting Paki-stan’s case in the EuropeanUnion for having a free tradeagreement with Pakistan and isa strong investment partner ofthe country. Pakistan is consid-ering BITs with other partnerssuch as Canada, Saudi Arabia,Kuwait, Austria, members ofEconomic Cooperation Organi-zation, Russia and Jordan(Adapted from www.dailytimes.com.pk, 28.08.09).

Pakistan tofinalizeinvestmenttreaties

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a commitment to reach modalitiesearly next year.

Besides Doha, the G20 leadersalso discussed issues as varied aspotential limits on bankers’bonuses, reforms to internationalfinancial institutions, caps onfossil fuel subsidies, and progresstowards a global climate change

deal. The G20 leaders agreed to“a fundamental realignment ofvoting weights” at the Interna-tional Monetary Fund.

The leaders also agreed thatthe G20 will become the “premierforum” for global economiccooperation, replacing the Groupof Seven, which has taken centrestage in international economicpolicy-making since the mid-1970s.

While the lack of an enforce-ment mechanism limits the G20’sinfluence on the world stage, itsleaders in the Pittsburgh summitgave it some clout by agreeing to“peer review” each other’seconomic policies. The leadersagreed to meet again in Canadain June 2010, in Korea in Novem-ber 2010, and in France thefollowing year (Adapted fromBridges Weekly Trade News Digest,Vol. 13, No. 33).

“closing a business” indicator bytaking steps to ease resolution ofinsolvency cases—a critical area intimes of crisis. A recent report,Doing Business in India 2009, whichgoes beyond Mumbai to look at theapplication of business regula-tions in 17 major cities acrossIndia, shows the tremendouspotential in India for drawing onhome-grown good practices to cutred tape and streamline regula-tion. Nepal lowered propertytransfer costs. Pakistan made iteasier to start a business byintroducing an e-service registra-tion system. And Sri Lanka im-proved access to credit information

to help expand access to finance.This year, there were 4 new

reformers among the global top 10:Liberia, the United Arab Emirates,Tajikistan and Moldova. Othersinclude Rwanda, the top globalreformer, Egypt, Belarus, theFormer Yugoslav Republic ofMacedonia, the Kyrgyz Republic,and Colombia.

Doing Business analyses regula-tions that apply to an economy’sbusinesses during their life cycles,including start-up and operations,trading across borders, payingtaxes, and closing a business(Adapted from www.worldbank.org,18.11.09).

THE United States (US) hassuggested in an unofficialmeeting that it be allowed toprotect an additional 2 percentof agricultural tariff lines as“sensitive”, a move thatsparked immediate resistancefrom exporting countriesalready concerned about theextent of market access excep-tions in the World TradeOrganization’s (WTO) troubledDoha Round of trade talks.While lesser tariff cuts forsensitive products would haveto be accompanied by expand-ed quotas, exporting countrieshave seen them as a tool thatimporters are likely to use toreduce the degree of marketopening. Under the currentdraft text, developed countrieswould be allowed to designateup to 4 percent of tariff lines as“sensitive”, although towardsthe end of last year, Canadademanded an additional 2percent of tariff lines, and Japanas much as 4 percent more. TheUS reportedly suggested thatthe greater flexibility requestedby Canada and Japan could bemade more widely available.However, exporting countriesunderscored that, if agreed, theadditional sensitive productallowance for these two coun-tries would not be “a generaloption for all”. The US was alsowarned that its idea wouldsend a wrong signal at a timewhen the Doha Round isstruggling (Adapted from BridgesWeekly Trade News Digest, Vol.13, No. 36).

US seeksmore farmprotection at the WTO


ON 27 October, a revised Nepal-India Treaty of Trade was signedin Kathmandu. The Treaty willremain valid for seven years asagainst the five-year duration ofpast treaties. The revision wasmade amid Nepal’s growingtrade deficit with India, which in2008/09 accounted for 58.2percent of Nepal’s total trade.

The revised Treaty expandsthe list of primary productseligible for duty-free and quota-free access. Though the valueaddition for Nepali manufacturedproducts to get duty-free access toIndia will be calculated on a free-on-board basis rather than ex-factory price basis, the rules oforigin criteria of 30 percent valueaddition, coupled with thechange in tariff heading at HS 4-digit level, have been retained.Tariff-rate-quotas on four Nepalimanufactured goods, imposedsince 2002, have not also beenlifted.

While the old Treaty wassilent on para- and non-tariff

barriers, the revised Treaty hasprovisions for reduction orelimination of such barriers.However, whether such non-binding provisions will beimplemented remains a majorconcern, especially for Nepal. Thescrapping of a complicated dutydrawback scheme is expected toprovide Nepal a direct controlover its customs duty revenuesfrom the import of manufacturedgoods from India.

Both countries have agreed toestablish a joint mechanism,comprising local authorities toresolve problems arising in theclearance of goods at customspoints. The revised Treaty furtherclarifies that the determination ofserious injury, under the safe-guard provision, shall be as perthe Agreement on Safeguards ofthe World Trade Organization.The Treaty also opens air trafficand four additional border pointsfor bilateral trade (Adapted fromvarious issues of Trade and Develop-ment Monitor, SAWTEE).

India to bring Food Security Act

THE Indian government, on 6 July,announced in its Union budget for2009/10 that it would enact aNational Food Security Actwhereby families below thepoverty line (BPL) will be provided25 kilograms of wheat or rice at therate of Indian rupee (INR) 3 per kgevery month.

Amid concerns about inade-quate food grain production thisyear due to a deficient monsoon,Prime Minister Manmohan Singhon 13 July constituted an Empow-ered Group of Ministers to work on

Nepal-India Trade Treaty revised

SRI LANKA was threatened on19 October with losing preferen-tial trading status with theEuropean Union (EU) overhuman rights violations. “Seriousproblems” were identified by aBrussels probe which accuses SriLanka of “breaching commit-ments” made under a deal givingits exporters easier access to theEU market. Sri Lanka, whichended a 25-year internal conflictwith Tamil Tiger rebels in May, isone of 16 countries benefitingfrom an EU deal to enhance theso-called Generalized System ofPreferences (GSP) terms offered todeveloping countries, providedsustainable development andgood governance conditions aremet. These include human rightsobligations and working practic-es, and Brussels says Colombohas still to ratify and apply themfully. A Sri Lankan foreignministry statement said Colombohad blocked a team of expertsfrom visiting the country as a“matter of principle”. The EUwill decide whether or not torenew the GSP Plus trade dealwith Sri Lanka giving duty-freeaccess to EU markets by earlyJanuary 2010, according to theEU head of delegation to SriLanka. The EU investigationreport was submitted to thegovernment and the EU Brusselsoffice on 19 October 2009. Thecountry’s textile industry is themain beneficiary of the reducedtariffs regime. Sri Lanka’sgovernment has secured aUS$2.6 billion bailout from theInternational Monetary Fund ina bid to revive its war-batteredeconomy (Adapted from AgenceFrance Presse, 19.10.09,www.lankabusinessonline.com,20.10.09).

Sri Lanka maylose EU trade perks

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AFTER six years of negotiations,India and the Association ofSoutheast Asian Nations (ASEAN)signed a free trade agreement(FTA) on 13 August amid concernsand protests from within thecabinet, state governments andnon-governmental organizationsin India.

The FTA, which comes intoeffect from 1 January 2010, aims toeliminate tariffs on 80 percent ofgoods currently traded betweenthe two countries between 2013and 2016. With the signing of thedeal, India and the 10-memberASEAN target a US$10 billionincrease in trade in the first year ofits implementation from thecurrent US$40 billion. The pactopens a market of 1.7 billionpeople to the member countrieswith a combined gross domesticproduct of US$2.3 trillion.

Kerala, a state of 32 millionpeople and a high Human Devel-opment Index, had objected toslashing duties on fish, coconut,rubber, palm oil, pepper, tea, andcoffee, arguing that cheap importsfrom ASEAN countries woulddestroy farmers’ livelihoods.Labour organizations, farmers,civil society organizations andexperts slammed the Governmentof India for pushing through theFTA without due consultationswith stakeholders. Critics arguethat ASEAN is in a more advanta-geous position compared to Indiabecause over 75 percent of Indianexports already had duty-freeaccess to the ASEAN market,which has a comparatively lowerrange of import duties. India maygain if services and investmentsectors are opened up but talks onthese have been sluggish (Adaptedfrom various issues of Trade andDevelopment Monitor, SAWTEE).

India-ASEAN FTAamid protests

the modalities of the proposed Act.The government, in the budgetspeech, had promised to put adraft bill on the internet for debateand discussion soon.

The Congress party, whichheads the coalition government,had promised to bring such an Actbefore the 2009 general elections.

At present, the central govern-ment provides 35 kg of rice orwheat per month to each BPLfamily. Wheat is supplied at INR4.15 per kg and rice at INR 5.65per kg to over 40 million BPLfamilies.

Despite robust economicgrowth in recent years, India’srecord on hunger is worse than

that of nearly 25 sub-SaharanAfrican countries and all SouthAsian countries, except Bang-ladesh. The International FoodPolicy Research Institute’s 2008Global Hunger Index shows thatwith over 200 million peopleinsecure about their daily bread,the Indian scenario is “alarming”in terms of hunger and malnutri-tion. The India Hunger Index, firstreleased in 2008, found that not asingle state in India fell in the“low hunger” or “moderatehunger” categories (Adapted fromIndian Express, 13.07.09;www.hindu.com, 06.07.09; http://cambridgeforecast.wordpress.com,28.07.09).

SOUTH Asian trade ministershave decided to fast-tracknegotiations on liberalizingservices, a move that will enablefreer movement of people withinthe region and give a boost toinvestments in areas like tourism,financial services and telecom. Intheir meeting in Kathmandu on28 October, they also decided towork on reducing the sensitivelist of items under the Agreementon South Asian Free Trade Area(SAFTA) and make the free tradeagreement more “meaningful’’.

Secretary General of SouthAsian Association for RegionalCooperation (SAARC) Sheel KantSharma said that the expertgroup constituted to draft theagreement on services had madegood progress and the agreementwould be finalized before thenext SAARC Summit in April2010.

On the need to prune thesensitive lists of SAARC coun-tries, Sharma said that it shouldbe a fixed percentage of the total

regional trade of the countriesand the next reduction shouldhappen before the SAARCSummit next year. According toa media report, SAFTA Ministe-rial Council, the apex body ofSAARC overseeing the opera-tions and implementation of theregional free trade accord, hasasked the member states todownsize the sensitive list by 20percent.

Intra-SAARC trade in thefirst six months of 2009 wasUS$377 billion, which isencouraging, as it is more thanthe traded figure for the entire2008. Intra-regional trade sharein 2008 in the case of South Asiawas 4.8 percent as against 27.06percent in the case of theAssociation of Southeast AsianNations (ASEAN).

SAARC commerce ministerswill meet next in the Maldivesin 2010 to review the status andimplementation of SAFTA(Adapted from Economic Times,29.10.09; Republica, 29.10.09).

SAFTA to cut sensitive list, free services


Of the bilateral trading arrange-ments currently under negotia-

tion, the one involving the EuropeanUnion (EU) and India has attracted con-siderable attention. A very large and fastgrowing market in India, which stillmaintains significant trade protection,constitutes a natural target for EU sup-pliers. On the other hand, India seeks toobtain preferential access to the EU, theworld’s largest single market account-ing for more than a quarter of its ex-ports. The two economies are also con-sidered to be complementary, givingrise to significant export responses frommany sectors. The mutual benefits ofthese partners, therefore, make a strong

case for a free trade agreement (FTA)between them. For the rest of the world,especially for the least-developed coun-tries (LDCs) in South Asia, there are,however, some concerns. This is partic-ularly so as these countries are current-ly receiving trade preferences in boththe markets.

Scope of the adverse implicationsfor South Asian LDCsBoth India and the EU are importantexport destinations for South Asiancountries, including the LDCs. Beinglandlocked and geographically sur-rounded by India, the export depen-dence of Bhutan and Nepal on India is

overwhelming. Nearly 60 percent ofBangladesh’s exports is destined for theEU while for Afghanistan and Sri Lan-ka, which is a non-LDC, the dependenceon Indian and EU markets are almostsimilar, accounting for more than 40percent of the two countries’ exports.Therefore, the effects of the EU-IndiaFTA will depend on the extent of mutu-al tariff cuts that India and the EU wouldoffer each other.

The level of tariffs in India is stillquite high, but under various bilateraland regional arrangements, it provideseither duty-free or preferential marketaccess to South Asian countries. There-fore, similar preferences extended to EU

free trade agreement

Mohammad A. Razzaque

EU-India FTASouth Asian LDC concerns

The proposed free trade agreement between the European Union and India can have adverseimplications for the South Asian least-developed countries, but there are opportunities too.

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suppliers by India could result in pref-erence erosion for these countries. Onthe other hand, although EU tariffs oncertain products such as textiles andclothing are generally low, its averagemost-favoured-nation (MFN) tariffs aresignificantly higher. Preferential tariffsoffered to India in these categories couldlead to loss of preference or competi-tive margins currently enjoyed by theLDCs as they obtain duty-free access tothe EU.1

Potential implicationsWinters et al. (2009)2 studied the poten-tial implications of the EU-India FTA fora number of excluded countries. Al-though the research has identified theeffects for all major country groups,only the results relevant to South Asiaare highlighted here.

At the outset, the study identifiedfour possible effects. First, if prior to theFTA, both the excluded and membercountries face zero tariffs in the EU andIndian markets, any agreement will un-likely to have any effects. Second, a tradere-orientation effect can occur when anexcluded country (such as Nepal) al-ready benefits from zero-tariff access tothe EU market, and by matching thisaccess through the EU-India FTA, Indiamanages to increase its market share atthe expense of Nepal. The third possi-bility is of a trade diversion effect. It couldoccur when an FTA partner (say India)currently faces a tariff in the EU marketequal to that faced by an excluded coun-try because the removal of tariff on im-ports from India makes it a less costlysupplier. Finally, a combination of tradere-orientation and trade diversion effect canalso take place.

Having specified the aforemen-tioned possibilities, Winters et al. (2009)worked with disaggregated EU importdata to find out the scope of such ef-fects. Their results show that Bangladesh,the Maldives and Nepal might face tradere-orientation effects in about 98 per-cent, 92 percent and 61 percent of theirrespective exports to the EU (Table 1) asIndia obtains matching tariff cuts underthe FTA. For Afghanistan and Bhutan,such effects are minimal. As 99.1 per-cent of Afghanistan’s exports to the EU

are products for which bothAfghanistan and India cur-rently face zero tariffs, theFTA would not improve In-dia’s access to the EU relativeto Afghanistan. In the case ofcountries such as Pakistan andSri Lanka, both of which arenon-LDCs but receive Gener-alized System of Preferences(GSP), there will be no tradere-orientation from matchingpreferences. Rather, the im-pact would be in the form oftrade diversion: almost 80percent of exports from Pa-kistan and 60 percent from SriLanka could be affected.

Similar effects were ex-plored in the Indian market(Table 2). By granting EU exports betteraccess in the Indian market, Bhutan andNepal, the two LDCs which trade heavi-ly with India, will be negatively affect-ed. The impacts will be in the form ofboth trade diversion and trade re-ori-entation. Regarding the impacts onBangladesh, the Maldives and Pakistan,since India is a not a significant exportdestination for these countries, the ad-verse implications for them are likely tobe limited.

Terms-of-trade effectAs FTAs tend to shift the demand forgoods from excluded to included coun-tries, prices commanded by the formerare likely to decline. However, such ef-fects for third countries are likely to besmall in the EU in most cases as its MFNaverage tariffs are low. In the Indianmarket, one could expect bigger effectsbecause of its much higher MFN tariffsand the EU’s share in the Indian marketbeing higher than that of India in theEU. However, it is difficult to predictthese price changes a priori. For exam-ple, despite low average figures, EU tar-iffs on textiles and clothing are muchhigher, which could cause considerableterms-of-trade shocks for South Asiansuppliers of such products. On the oth-er hand, despite high Indian tariffs, thecompetition with EU suppliers might bevery limited because of significant prod-uct differentiation.

Trade in servicesServices are important for both Indiaand the EU. However, as the bilateralservices trade data are weak and thecoverage of trade in services is not clear,examining the potential implications ofthe EU-India FTA on services trade isnot straightforward. Winters et al. (2009)observe that services trade under theEU-India FTA is likely to be more skill-intensive in nature and it would be diffi-cult for the EU to open up its unskilledlabour market substantially. Now, giv-en the existing comparative advantage,it would be difficult for the South AsianLDCs to compete with India in the EUmarket. Similarly, in the Indian market,the EU will also operate at a high-skilllevel, making it difficult for most exclud-ed countries to compete. On the whole,the LDCs are likely to be least affectedin services trade due to the EU-India FTA.

Foreign direct investmentThe EU-India deal could result in hugeforeign direct investment (FDI) flowsinto India, triggering investment diver-sions away from other countries. Whilethis is quite a plausible theoretical possi-bility, given the experiences of other re-gional trade agreements, there is notenough empirical evidence to support it.

OpportunitiesAny static analysis would suggest someadverse implications of the EU-India

*under an EU-India FTA on South Asian excluded countries

(% of current exports to the EU)

Source: Winters et al. (2009)

Table 1

No Trade Trade

change re-orientation diversion

Afghanistan 99.1 0.9 -

Bangladesh 2.5 97.5 -

Bhutan 94 6 -

Maldives 8.3 91.7 -

Nepal 39.1 60.9 -

Pakistan 21.3 - 78.7

Sri Lanka 41.2 - 58.8

Impacts of EU preferences to India*


FTA for India’s neighbours, as has beenhighlighted above. But, could the EU-India FTA also give rise to opportuni-ties for these countries? In fact, thereare a number of factors that seem tosuggest that the excluded South Asiancountries can also benefit from the EU-India FTA.

First, India has become a dominantsource of imports for most of the SouthAsian countries, including Bangladesh,Bhutan, Nepal and Sri Lanka. Openingup to EU suppliers could result in animproved competitive environment inIndia as a result of which the latter couldbe a cheaper source of imports. Second,India is also an important service pro-vider to the region. Increased competi-tion and inflow of FDI is likely to im-prove the standard of these services fur-ther, giving rise to welfare gains in theimporting countries. Furthermore,more efficient services can also contrib-ute to improved competitiveness in themanufacturing sector across the region.Third, if the EU-India FTA has an over-all positive effect on India’s growth, itcan exert a “pull effect” for the demandfor goods and services produced by itsneighbours. The recent literature oneconomic geography seems to suggestthat the development of regionalgrowth centres (like India in South Asia)could be vital for energizing trade andgrowth for other countries in the region.Fourth, the presence of EU investors inthe region could also promote intra-re-gional trade based on foreign invest-ment in India and other South Asian

countries in sectors covered by the re-gional free trade deals such as the Agree-ment on South Asian Free Trade Area(SAFTA) and the Bay of Bengal Initia-tive for Multi-Sectoral Technical and Eco-nomic Cooperation (BIMSTEC). Fifth,there could also be opportunities forregional cooperation in product valuechains to take advantage of export mar-kets in the EU and India.

Policy responsesThough the implementation of the EU-India FTA raises the possibility of ad-verse implications for the LDCs and oth-er developing countries in South Asia, itis important not to unnecessarily am-plify these concerns. Perhaps the mostsignificant challenge will come from In-dia obtaining matching preferences inthe EU, particularly in such products astextiles and clothing where the LDCshave some supply capacity and enjoyconsiderable tariff preferences. On theother hand, Indian preferences to theEU appear to have most significant ef-fects on Bhutan and Nepal. However,the similarity between the EU exportsand Bhutanese and Nepalese exports toIndia is likely to be very little, and assuch the overall negative effect mightnot be very serious.

Excluded countries may wish tomonitor the EU-India FTA talks to iden-tify issues of their interest in advance.Under SAFTA and other trade arrange-ments, they may negotiate concessionsto mitigate or compensate for theshocks. These may comprise asking In-

dia and the EU to extend tariff prefer-ences, relax rules of origins, and pro-vide aid to meet standards and diversi-fy into new markets. They might alsorequest for a delayed implementationof the FTA deal in certain sectors so thatthey mitigate some of the adverse im-plications.

Finally, South Asian LDCs shouldalso strive to take advantage of the like-ly opportunities. It is important for themto realize that they tend to employ morestringent trade measures against theirneighbours than the rest of the world.A study also showed that intra-regionaltrade in South Asia could greatly be in-creased by improving trade facilitationalone.3 There is a general recognitionthat extended regional cooperation inSouth Asia (involving services, tourism,energy and water resource develop-ment, etc.) could lead to enormous so-cio-economic benefits and welfare gains,particularly for the LDCs. Therefore,meaningful and extended cooperationcan constitute an effective response totrade deals involving countries withinand outside the region.

The author is Economic Adviser, EconomicAffairs Division, Commonwealth Secretariat,London.

Notes1 Currently, under the Everything but Arms

(EBA) scheme, the LDCs enjoy duty-free and quota-free market access tothe EU. Many LDCs and low-incomedeveloping countries have alsobenefited from other EU schemes likethe Cotonou Agreement, GSP and GSP-plus. Along with the LDCs, thesedeveloping countries might suffer fromsome loss of competitiveness due to anEU-India FTA arrangement.

2 This article draws on the findings ofWinters, Alan, Peter Holmes, JavierLópez González, Jim Rollo, MaximilianoMéndez Parra, Michael Gasiorek andAnirudh Shingal. 2009. InnocentBystanders: An EU-India Free TradeAgreement and Potential Implicationsfor the Excluded Countries. London:Commonwealth Secretariat.

3 Milner, C. 2007. Trading on Common-wealth Ties: A Review of the Structureof Commonwealth Trade and Scope forDeveloping Linkages and Trade in theCommonwealth. Economic Paper 79.London: Commonwealth Secretariat.

free trade agreement

Table 2

Impacts of Indian preferences to the EU*No Trade re- Trade Trade re-orien-

change orientation diversion tation/diversion

Afghanistan 0.8 35 21.3 42.9

Bangladesh 0.5 3.8 36.9 58.8

Bhutan 0.1 24.1 25.2 50.6

Maldives 0 0 99.3 0.7

Nepal 0.3 7.3 45.5 47

Pakistan 0 0 29.3 70.7

Sri Lanka 0.3 48.8 1.2 49.6

*under an EU-India FTA on South Asian excluded countries (% of current exports to India)

Source: Winters et al. (2009)


Licensing and permitsFor the export of a cross-section ofproducts, including cement, gelatine,condensed milk, electrical appliances,mineral water, steel products, leatherproducts, X-ray equipments, dry cellbattery and thermometers to bothIndia and Pakistan, prospectiveexporters are required to obtainlicences regarding compliance withquality standards from concernedagencies, which is often highly time-and cost-consuming.

In the case of agricultural products,their import into India requires importpermits that are provided on the basisof biosecurity and sanitary and phyto-sanitary (SPS) clearances. Eligibility forimport permit also requires riskanalysis of the products, which iscomplex and lacks transparency.

SPS measuresIndia continues to issue importlicences for about 600 items on theground that restrictions are needed toensure protection for “human, animalor plant life or health”. Imports ofnearly all livestock, agricultural and

regional exports. Bangladesh’s tradewith its neighbouring countries is alsohighly unequally distributed. Thecountry trades very little with Bhutan,Nepal and Sri Lanka. In South Asia,India is the major trading partner,followed by Pakistan. However, tradewith India is largely one-sided, as thevolume of imports from India isconsiderably very large.

The share of Bangladesh’s exportsin India’s total imports is a miniscule 1percent, and they consist of limitedproducts. For example, exports offertilizer and jute goods make up twothirds of Bangladesh’s exports toIndia. Although readymade garments(RMG) is the major export item ofBangladesh, its export to India is quiteinsignificant. All these have resulted inBangladesh having a huge trade deficitwith India.

Although Bangladeshi exportersface some NTBs in Pakistan, the majorNTBs they face in South Asia are in theIndian market. Some of the majorNTBs that Bangladesh’s exports face inSouth Asia, mainly in India, arediscussed below.

One of the main reasons that theAgreement on South Asian Free

Trade Area (SAFTA) has not been ableto enhance intra-regional trade at thedesired level in South Asia is thepresence of non-tariff barriers (NTBs)as the Agreement is yet to address theissues of NTBs directly. Therefore, forBangladesh—the only country inSouth Asia without any free tradeagreement (FTA) with any otherSouth Asian country—removal ofNTBs are crucial to intensify its tradeunder SAFTA. NTBs that distortexports from Bangladesh to itsneighbouring countries are mostly inthe form of standards, testing andcertification procedures, licensing,classification of goods, customvaluation and countervailing duties.Lack of trade facilitation has also beenacting as an NTB.

In the context of intra-regionaltrade in South Asia, Bangladesh standsto be the largest importer. In 2008,Bangladesh accounted for 25 percentof the total intra-regional imports. But,in contrast, its exports to the regionaccounted for only 2.9 percent of total

Non-tariff barriers facing

Bangladesh in South Asia

In order to do away with thetrade-impeding effects of non-tariff barriers, there should bemutual recognition agreementsamong the respectiveorganizations in Bangladesh andits trading partners in SouthAsia.

Selim Raihan

regional trade


food products require some kind ofphyto-sanitary or sanitary certificateand import permit that are issuedunder the general supervision of theMinistry of Agriculture of India. Forprocessed food products, compliancewith the Food Adulteration (Preven-tion) Act 1954 of India requires thatthe shelf life of those products shouldnot be less than 60 percent of theoriginal shelf life at the time of import.Determination of shelf life, however,is often done arbitrarily and in a non-transparent manner.

In the case of exports of animals oranimal products, poultry, dairyproducts and meat (frozen, chilled orfresh) can be exported to India onlyafter receiving an import permit fromthe Department of Animal Husbandryand Dairy of India.

Technical barriersIn the case of pre-packaged products(such as processed foods, cosmetics,toiletries, spices, etc.), imports intoIndia should carry the followingdeclarations: (a) name and address ofthe importer; (b) generic or commonname of the commodity packed; (c)net quantity in terms of standard unitof weights and measures (if the netquantity in the imported package isgiven in any other unit, its equivalentin terms of standard units should bedeclared by the importer); (d) monthand year when the commodity ismanufactured or packed or imported;and (e) maximum retail sale price atwhich the commodity may be sold tothe ultimate consumer (this priceshould include all taxes, local orotherwise; freight; transport charges;commission payment to dealers; andall charges towards advertising,delivery, packing, forwarding and thelike, as the case may be).

Similarly, Rule 32 of the Preven-tion of Food Adulteration Rules 1955of India deals with packing andlabelling of foods. This rule alone has30 provisos with many sub-provisos.In addition, there are also cross-references to other rules. These rulesprescribe the contents to be specifiedon the label, the size of the label, the

design of the label, the areas specifiedfor display panels, details of coloursand flavours, trade name or descrip-tion of food contained in the package,names of ingredients by weight andvolume, etc. Goods are cleared onlyon receipt of the test report, butcertificate from the country of origin isnot accepted. The results of thelaboratory tests cannot be challenged.And, separate regulations have beenenacted for different food items.

Regarding textiles and textileproducts, their exports to Indiarequire pre-shipment inspectioncertificate from the textile-testinglaboratory accredited to the NationalAccreditation Agency of the countryof origin. Non-availability of thecertificate requires testing from thenotified agencies in India for each andevery consignment. In some cases,even certificates issued by the Europe-an Union accredited laboratories havebeen rejected by Indian customsbecause of which the consignmentswere subject to repeated tests in India.In addition, the Textile (consumerprotection) Regulation of 1988imposes some strict marking require-ments for yarns, fibres and fabricsimported into India.

For the export of jute products toIndia, the exporting country shouldissue a certificate which shows thecontent of non-homogenate hydrocar-bon (jute batching oil). Such contentshould not exceed 3 percent byweight. Similarly, the export of jutebags/sacks to India needs to fulfilspecial labelling requirements in a waythat each jute bag/sack carriesmachine-stitched marking of thecountry of origin of the product.

Other barriersExports of pharmaceutical products toboth India and Pakistan have to meetstringent requirements of drugregistration with the Central DrugStandard Control Organization, whichinvolves an arduous and highly timeconsuming procedure. Moreover, inthe case of India, foreign manufactur-ers must register and subject theirpremises to inspection along the lines

of rules prepared by the Bureau ofIndian Standards.

Similarly, exports of chemicalfertilizers and lead acid batteries toIndia require an environment-relatedcertificate. And the export of leather,leather goods and melamine productsrequires chemical testing, which isoften extremely time-consuming.

There are also cases of non-acceptance of SAFTA certificatesissued by the Export PromotionBureau of Bangladesh for the exportsof hand pumps, tube well filters, castiron pipes, cast iron bends and T’swater heaters, plastic pipes of variousdiameters, power paddy thrasher,power tiller, hand spray, and so on bythe Indian customs authorities. Indiahas also banned the import of betelnuts from Bangladesh through landcustoms stations.

Way forwardTo do away with the trade-impedingeffects of NTBs for Bangladeshiexports, there should be mutualrecognition agreements among therespective organizations in Bang-ladesh and its trading partners inSouth Asia, mainly India. There is alsoa need for the harmonization oftechnical barriers to trade and SPSmeasures, for which the accreditationbodies or agencies of India can set upaccreditation centres in Dhaka incollaboration with the designatednational agency of Bangladesh.Problems of non-acceptability ofconformity assessment certificates ofany particular product, as and whenthey arise, should be resolved throughmutual cooperation programmeswithout restricting trade. Finally, it isalso important to note that the use ofpara- and non-tariff measures notnotified in the World Trade Organiza-tion should be prohibited. If the needto introduce any new such measuresarises, a code of good practice shouldbe followed.

Dr. Raihan is Associate Professor,Department of Economics, University ofDhaka and Executive Director, South AsianNetwork on Economic Modeling (SANEM),Dhaka.

regional trade


The special challenges facing the 31landlocked developing countries

(LLDCs) are well documented. Lack ofdirect access to the sea, isolation frommajor economic centres, inadequatetransport infrastructure (both in LLDCsand transit countries) and cumbersometransit procedures constrain theirgrowth prospects, especially throughthe well-worn path of internationaltrade, thus rendering the death-of-dis-tance hypothesis "more fiction thanfact".1 These factors result in high trans-port costs, inflating landed import pric-es and eroding international competi-tiveness of exports. A World Bankstudy found that the median land-

locked country experiences transportcosts 42 percent higher than the medi-an coastal economy, and halving trans-port costs increases trade volume by afactor of five.2

There is ample cross-country evi-dence that geography matters. For ex-ample, on an average, LLDCs experi-ence 1 percent slower growth than coast-al economies; being entirely landlockedsubtracts roughly 0.7 percent from adeveloping country’s annual growth;and a landlocked country with transportcosts 50 percent higher than a similarcoastal economy can expect slowergrowth of about 0.3 percent per annum.3

Barring rare exceptions like Botswa-

na, whose economy’s heavy depen-dence on diamond exports allows it tobypass its transit neighbour infrastruc-ture by utilizing air transport, LLDCsare dependent on their transit neigh-bours for access to international mar-kets. Faye et al. (2004) identify four typesof dependence of LLDCs on transitneighbours that are important in ex-plaining the poor development andtrade performance of LLDCs: depen-dence on neighbours’ infrastructure;dependence on sound cross-border po-litical relations; dependence on neigh-bours’ peace and stability; and depen-dence on neighbours’ administrativepractices.4

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Paras Kharel

Case for South Asian

Transit Arrangement


South Asian LLDCsSouth Asia has three LLDCs—Afghani-stan, Bhutan and Nepal—all of whichare also least-developed countries(LDCs). They depend on neighbouringcountries for transit for their interna-tional trade. Afghanistan depends onthe ports of Karachi (Pakistan) and Ban-dar Abbas (Iran) for overseas freight traf-fic, with the port of Bandar Abbas pri-marily used for humanitarian aid im-ports. Both Bhutan and Nepal solely useIndian ports: Bhutan uses Kolkata port;Nepal uses Kolkata port and Haldiya port(the latter mostly for imports).

South Asia does not have a regionaltransit arrangement. There are transitarrangements between the three LLDCsand their principal transit neighbours(Afghanistan-Pakistan, India-Bhutanand India-Nepal). As the Himalayanranges restrict most bilateral and all tran-sit trade through China, both Bhutanand Nepal are completely dependent onIndia for transit trade, and their foreigntrade is heavily concentrated with In-dia. Pakistan and, of late, India are themajor trading partners of Afghanistan,though the dependence is not high asthat of Bhutan and Nepal on India.

Not all bilateral transit arrangementsfunction equally well. Political relation-ship between the LLDC and its transitneighbour plays an important role. Thecases of Bhutan and Nepal offer a studyin contrast. Snow et al. (2003), in theircase studies of 30 LLDCs, conclude that

Bhutan, a protectorate of India, enjoysthe best transit procedures of all LLDCsthey studied.5 All transit trade takes placeunder Royal Bhutan Customs, with noinvolvement of Indian Customs.6 Thereis, therefore, no requirement for the in-surance of goods in transit.7 In contrast,according to Snow et al. (2003), whileNepal has a generally positive relation-ship with India, where the policies ofthe two governments have been in sig-nificant disagreement, India has had atremendous advantage over Nepal—the advantage being most evidentthrough the 1990 Indian blockade ofNepal, resulting in regime change.8

Even in normal times, Nepal does notenjoy the hassle-free transit enjoyed byBhutan. Transit to and from Nepal issubject not only to the Indian CentralGovernment regulations and formali-ties but also those that are in force inlocal governments.9 Owing to enforce-ment in the Indian states of UttarPradesh, Bihar and West Bengal of min-imum freight tariffs for the transporta-tion of Nepali cargo, Nepal has not beenable to benefit from the prevailing Indi-an road freight market, which, in gen-eral, is very competitive.10

In the case of Afghanistan, civil warand political instability have affected itstransit through Pakistan. Continuedunofficial trade including the opiumtrade and re-export trade to Pakistan isan increasing source of tension withneighbouring Pakistan.11 Afghanistan’s

political instability has also prevented itfrom fully exploiting its rich resourcesof oil, gas, coal, iron, chrome and cop-per.12 Afghanistan, due to its strategicgeographic location, has the potentialto serve as an energy transit corridor:for example, the proposed pipeline totransport Caspian Sea natural gas fromTurkmenistan through Afghanistan intoPakistan and then to India. Presently,Pakistan does not grant transit facilityfor Afghanistan’s trade with India.

Transit and transport issuesThe operationalization of an inland con-tainer depot (dry port) at Nepal’s mainborder point (Birgunj), which is connect-ed by rail link to Kolkata port through arail services agreement signed in May2004, was expected to reduce transit costsfrom 12–15 percent of cost-insurance-freight value to 8–10 percent and the jour-ney time between Kolkata and Birgunjfrom 10 days to 3 days.13 However, thefull benefits are yet to be realized as,among other problems, through bills oflading (TBLs) are still not provided. Themost important advantage of issuing andreceiving TBLs at a dry port is that theyreduce to a minimum customs and clear-ance activities at seaports, with only thetransport activities of transit being em-phasized.14 If all documents are in order,cargoes have to spend three to five daysat the port, which could be reduced ifTBLs are issued and received at the dryport.15 Other problems include: closureof the border after 10 pm, non-availabil-ity of round-the-clock customs, only themovement of a few types of wagonsbeing allowed, idling of costly reach stack-ers, non-integration of customs proce-dures, and deficiency in infrastructuredesign of the dry port.

In the case of Bhutan, transit throughIndia to Kolkata port is by road. Con-struction and effective operationalizationof a dry port at Phuentsholing on Bhu-tan’s border with India and linking it withthe Indian railways could help stimulatethe Himalayan kingdom’s external tradesector16, leading to trade diversification.

Indian ports currently used by Bhu-tan and Nepal are congested and ineffi-cient. Moreover, Kolkata port has thedisadvantage of only being able to ac-

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cept vessels with a maximum draft ofabout 7.2 metres, depending on the tide,which effectively means that Kolkata isserviced by smaller feeder containervessels from large trans-shipment portsin Singapore, and to some extent Co-lombo and Hong Kong. Nepal has longsought an alternative port in India main-ly for its trade with the western hemi-sphere. It has been estimated that usingJawaharlal Nehru Port (JNP) can reducetransit cost by US$400 per 20-foot equiv-alent unit by avoiding transshipment atSingapore and the feeder services.17

India agreed in principle in 1995 toallow Nepal to use JNP and Kandla porton its western coast for third-countrytrade. The pledge was not implement-ed. Later, another study18 recommend-ed using Visakhapatnam Port locatedon the eastern coast of India in the stateof Andhra Pradesh as an alternative toKolkata port as the port has spare ca-pacity and draft conditions permittingberthing of mother vessels of up to100,000 deadweight tonnage, and is alsomuch more efficient than Kolkata portin handling containers. In August 2008,India agreed in principle to allow Nepalto use Visakhapatnam Port but theagreement is yet to be formalizedthrough a revision to the Protocol tothe transit agreement between the twocountries that presently allows Nepal touse only Kolkata and Haldiya ports.

Nepal can potentially use Chit-tagong and/or Mongla ports in Bang-ladesh and there is a transit agreementbetween the two countries signed in1976 and a protocol to it that grant Ne-pal transit right to access overseas mar-kets through Bangladesh territory andsea-ports. However, lack of cooperationfrom India has prevented Nepal fromutilizing that option. Likewise, the tran-sit agreement between Bhutan and Bang-ladesh signed in 1980 has not resulted inBhutan using Bangladeshi ports as thereis no tripartite agreement between Bang-ladesh, India and Bhutan to enable Bhu-tan to use Bangladeshi sea ports.

In the absence of transit arrange-ments between non-landlocked coun-tries such as between India and Bang-ladesh, and India and Pakistan, the fullintra-regional trade potential has not

been realized. Not only external trade,Nepal’s trade within the region couldbe diversified through a better transitarrangement.

A 1997 agreement with India allowsNepal road and rail transit through In-dia to Bangladesh. While the absence ofa bilateral railways service agreementbetween India and Bangladesh has pre-vented Nepal from utilizing the rail tran-sit facility, a host of transit problems sty-mies Bangladesh-Nepal trade throughthe Kakarbhitta (Nepal)-Fulbari (India)-Banglabandh (Bangladesh) transit route.Transit through Indian territory forNepal’s trade with Bangladesh is al-lowed for a limited time of the day. Itcan only take place under Indian securi-ty escort and the cargo has to be un-loaded 500 m from the Bangladeshi bor-der in India. Poor implementation of aone-time lock system is combined withthe poor state of infrastructure on theIndian side of the border. Indian insur-ance companies enjoy monopoly pow-er, goods have to be transshipped at theBangladesh-India border, and there isno provision of TBLs by shipping lines.The involvement of third-party (Indi-an) customs is an additional burden .

Case for regional transit pactIt is generally argued that transit coun-tries may not have much incentive toprovide improved transit facilities toLLDCs. But the case for transit for Bhu-tan and Nepal through India to Bang-ladesh holds out the prospect of a win-win situation. India has been demand-ing transit through Bangladeshi territo-ry to access its seven northeastern states(Assam, Nagaland, Tripura, Meghalaya,Manipur, Mizoram and ArunanchalPradesh)—collectively known as the"Seven Sisters". Currently road and railtraffic between Kolkata and the SevenSisters moves through a narrow stripof land—the so-called chicken’s neck—involving a 1,500 km travel. Transitthrough Bangladesh can reduce the dis-tance by 40 percent.19 Bangladesh’s offi-cial position has been that in exchangefor granting India transit, India shouldalso facilitate transit for Bhutanese andNepali goods heading for Bangladeshand vice-versa.

There are concerns in Bangladeshthat India may use the transit facility totransport arms/supplies to fight the in-surgencies raging in the northeasternstates. Such concerns cannot be brushedaside especially in the light of the factthat India has been denying Nepal, alandlocked country, unhindered transitthrough its territory for Nepal’s tradewith Bangladesh and third countriesusing Bangladeshi ports on securitygrounds. This is despite the fact that allthree countries are members of theWorld Trade Organization (WTO) andArticle V of the General Agreement onTariffs and Trade (GATT) provides for"…freedom of transit through the terri-tory of each contracting party, via theroutes most convenient for internationaltransit, for traffic in transit to or fromthe territory of other contracting par-ties". Importantly, the Article does notrequire the transit trade to be precededor succeeded by a sea journey.

Based on a 2005/06 estimate, Bang-ladesh stands to gain US$430.79 millionthrough trade in transport services if atransit arrangement involving it, Bhu-tan, India and Nepal were to come intoeffect.20 Bangladesh’s security concernscan possibly be addressed through aprovision for a negative list of goodsthat are prohibited from being trans-ported using Bangladeshi territory andan effective seal system. A study on theeastern sub-region of South Asia—com-prising Bangladesh, Bhutan, India andNepal—suggests that a regional transitarrangement could enhance regionaltrade.21 Given that one of the major caus-es of high trade transaction costs in thesub-region is cumbersome and complexcross-border trading practices involvingtransshipment at the border and lack ofharmonization of technical standards,the study shows that a 10 percent fall intransaction costs at the border has theeffect of increasing a country’s intra-re-gional exports by about 3 percent, con-trolling for other variables.

Such a transit arrangement shouldalso rope in Pakistan, which can there-by enhance its trade with eastern SouthAsian countries such as Bangladesh,Bhutan and Nepal as well as northeast-ern parts of India through the develop-


ment of the proposed SAARC highwaycorridor linking Pakistan to Bangladeshthrough India—Lahore-New Delhi-Kolkata-Petropole/Benepole-Dhaka-Akhaura/Agartala. Likewise, Afghani-stan can increase its trade with Bang-ladesh, Bhutan, India and Nepal besidesserving as an energy transit corridor.

The gains from a South Asian tran-sit arrangement can be increased bylinking regional transit routes with oth-er regional and trans-regional routes.For example, though flows are present-ly limited, Nepal could become an im-portant transit country for cargo be-tween India and China with the exten-sion of the Asian Highway route AH42to Lhasa, China, which borders Nepal.22

A regional transit arrangement thatharmonizes rules, regulations and pro-cedures for goods and vehicles in tran-sit across countries will intensify region-al economic integration and also helpexploit trade-investment nexus. Forlandlocked countries of the region, it willhelp diversify their trade linkages with-in the region as well as beyond since afull regional transit leads to a strongermultilateral transit. For the region as awhole, it will help boost intra-regionaltrade, which has been languishing at lessthan 5 percent. Such a transit arrange-ment should have provisions reflectinginternational legal instruments on tran-sit, most notably Article V of the GATT.Further, regional investment coopera-tion on expanding, modernizing and up-grading transport infrastructure is cru-cial for a transit deal to pay rich divi-dends.

The establishment of regional trans-port corridors and the adoption of com-mon rules and standards have playedmajor roles in transit transport facilita-tion in various regions. A number ofregional organizations, including the As-sociation of Southeast Asian Nations, theAndean Community and the SouthernAfrican Development Community,have concluded transit or transportagreements or have included transittransport elements in agreements be-tween their members.23 Such agree-ments can be particularly beneficial forLLDCs as they provide a wider frame-work for harmonized procedures

through which countries can gain accessto transit facilities in a larger number ofcountries on the basis of the same legalframework, and can also act as a step-ping stone for accession to internation-al legal instruments.24

A regional transit arrangement willalso create a level playing field and ad-dress the problem of low bargainingpower of the smaller and vulnerablenations, including landlocked ones. Bi-lateral agreements involving LLDCshave often been unbalanced, with thecorresponding transit state(s) frequent-ly in a dominating position and dictat-ing the terms.23 Through a regionalagreement, the landlocked countriesstand to secure better transit rights, andthe realization of such rights will be lessdependent on their political relationshipwith any particular country as any re-striction and the resultant dispute willbe a regional issue as opposed to a bilat-eral issue.

Given that international recognitionof the special challenges facing LLDCsand the need to address them throughcooperation between LLDCs and tran-sit developing countries is alreadythere—most notably, the 2003 AlmatyProgramme of Action, adopted by theUnited Nations General Assembly—SAARC has its task cut out for it. Itshould take concrete steps for the es-tablishment and effective implementa-tion of a South Asian transit and trans-port arrangement.

Notes1 Anwarul K. Chowdhury and Sandag-

dorj Erdenebileg. 2006. Geographyagainst Development: A Case forLandlocked Developing Countries.www.unohrlls.com.

2 Limão, Nuno, and Anthony J. Venables.1999. Infrastructure, GeographicalDisadvantage and Transport Costs.Policy Research Working Paper 2257,December. Washington, D.C.: TheWorld Bank.

3 See Chowdhury and Erdenebileg. 2006.Note 1.

4 Faye, Michael L., John W. Mcarthur,Jeffrey D. Sachs and Thomas Snow.2004. The Challenges Facing Land-locked Developing Countries. Journal ofHuman Development 5 (1), March.

5 Snow, Thomas, Michael Faye, John W.McArthur and Jeffrey D. Sachs. 2003.Country Case Studies on the ChallengesFacing Landlocked DevelopingCountries. www.hdr.undp.org.

6 Chakra Infrastructure Consultants (CIC).2001. Review of Progress in theDevelopment of Transit TransportSystems in the India, Nepal and BhutanSubregion. www.unctad.org.

7 ibid.

8 Snow et al. 2003. Note 5.

9 CIC. 2001. Note 6.

10 ibid.

11 Snow et al. 2003. Note 5.

1 2 ibid.

1 3 CIC. 2001. Note 6.

1 4 ibid.

1 5 ibid.

1 6 ibid.

17 ibid.

1 8 Additional Port Facilities in India forNepal’s EXIM Traffic with ThirdCountries. Draft Report of the StudyTeam, Nepal Intermodal TransportBoard, November 2008.

1 9 Ahmed, Nazneen. 2009. Liberalizationof Trade in Transport Services: Caseof Transit through Bangladesh.Presentation made at a RegionalConference on "MainstreamingInternational Trade into NationalDevelopment: Some Perspectives fromSouth Asia", 1–2 February 2009,Dhaka, organized South Asian Networkon Economic Modeling, Dhaka.

20 ibid.

2 1 De, Prabir, Abdur Rob Khan and SachinChaturvedi. 2008. Transit and TradeBarriers in Eastern South Asia: AReview of the Transit Regime andPerformance of Strategic Border-Crossings. ARTNeT Working PaperSeries, No. 56, June.

2 2 UNESCAP. 2003. Transit TransportIssue in Landlocked and TransitDeveloping Countries. Note by theSecretariat, Special Body on LeastDeveloped and Landlocked DevelopingCountries, Sixth Session, 22–23 April,Bangkok.

2 3 UNCTAD. 2007. Regional Cooperation inTransit Transport: Solutions forLandlocked and Transit DevelopingCountries. Note by the UNCTADSecretariat, TD/B/COM.3/EM.30/2, 10July.

2 4 Chowdhury and Erdenebileg. 2006.Note 1.

2 5 UNCTAD. 2007. Note 23.

transit and transport


Trade Agenda for

THE LDCs

cover feature

Over the past two decades,trade integration of the least-developed countries (LDCs)

has been one of the most rapid inhuman history. Whether we measuretrade liberalization in the LDCs interms of policy instruments (such astariff and non-tariff barriers) or at thelevel of outcome (such as trade-to-

GDP ratio), they are generally moreliberal than some of the developingcountries.1 Despite this, their perfor-mance in terms of increasing trade(mainly export trade) with a view toachieving sustained economic growthand poverty reduction has not beenencouraging. Barring encouragingeconomic growth of select LDCs

propelled by high commodity prices,reasonably good exports and in-creased foreign direct investment(FDI) in the past few years, thegrowth rates of a significant numberof them have been abysmally low.

Of late, the LDCs have increasedtheir share in world trade. In 2008,their share in global exports reached

Ratnakar Adhikari


1.1 percent, while their share in globalimports was 0.97 percent.2 But what ishidden behind these figures, particu-larly in terms of exports, is that sevenoil- and readymade garment (RMG)-exporting LDCs, accounted for a lion’sshare of 73.8 percent of total LDCexports. This has contributed torespectable gross domestic product(GDP) growth in such LDCs.

However, neither the exportgrowth nor the GDP growth experi-enced by these LDCs can be consid-ered sustainable because of theirhighly concentrated export basket,which renders them extremelyvulnerable to external shocks.Alarmingly, for the seven major LDCexporters, one category of productaccounts for between 81 percent(Bangladesh) and 98.2 percent(Angola) of their overall exports(Table 1). In addition, oil prices areunpredictably volatile, as experiencedin 2008 and 2009.

Similarly, RMG exports of Bang-ladesh and Cambodia have alsoshown signs of lower rates of growththan what were achieved in the pastfew years. This is attributed toreduced demand for RMG in devel-oped countries, the main markets for

LDC exports, owing to the globaleconomic meltdown.

In another extreme, according toWorld Trade Profile 2009 of the WTO,the LDCs such as Comoros, Eritrea,Gambia and Samoa have experiencednegative growth in their merchandiseexports between 2000 and 2008.

These disappointing resultsnotwithstanding, the LDCs have beenmaking efforts to integrate them-selves into the global economy. But, iftheir drive towards achieving sus-tained integration into the globaleconomy is to succeed, they shoulddiversify their exports. For that, theyneed to devise negotiating positionswhich will help maximize gains fromvarious trade arrangements atmultilateral, regional and bilaterallevels. This article identifies the tradenegotiating agenda that the LDCsneed to pursue in various negotiatingforums.

Multilateral negotiationsThe Doha Development Agenda(DDA), launched in November 2001,intends to address several trade-related development concerns ofdeveloping countries and the LDCs.The 2004 July Framework and the

2005 Hong Kong Ministerialreaffirmed the Declarationsadopted in Doha. However, theDoha Round of trade negotiationshas gone through turbulentphases. The failure of the mini-ministerial conference held inGeneva in July 2008 is testimony tothe difficulties in the negotiations.One of the reasons for the failureof the negotiations to gain therequired momentum is the globaleconomic crisis, which has resultedin a surge of protectionist tenden-cies globally.

The Seventh Ministerial of theWTO, taking place against thebackdrop of these challenges, isnot likely to deliver much torevive the DDA. However, theLDCs, as a group, would do wellto prepare their negotiatingstrategies by utilizing this opportu-nity, for whatever it is worth. The

discussion below highlights some ofthe major concerns of the LDCs,dividing them into sectoral issues andcross-cutting issues.

Sectoral issues

AgricultureAgriculture has been the mostcontentious issue in multilateral tradenegotiations. Since the agriculturalsector has come under the spotlight inthe global political landscape due torecent increases in agriculture prices,concerns over the impact of liberaliza-tion have assumed even greatersalience. This sector is associated withthe livelihood of a majority of peoplein developing and least-developedcountries and makes a significantcontribution to GDP and privateconsumption expenditure in manyLDCs. Therefore, the welfare implica-tions of agricultural liberalization arelikely to vary depending on therelative strength of the sector,including the level of import depen-dence of these countries.

Under the WTO Agreement onAgriculture, members have beennegotiating for agricultural tradereforms. While little progress has been

cover feature

Table 1Share of major LDC exporters in total LDC merchandise exports

Merchandise export Major exports % of major Export

US$ billion (2-digit HS code) exports in growth

(% of LDC exports) total exports rates (%)

2008 2007 2008 2008 2000- 2007-

2008 2008

Angola 67.1 (38.1%) 39.9 (33.3%) 27 (fuels, oils, etc.) 98.2 31 51

Bangladesh 15.4 (8.8%) 12.5 (10.4%) 61, 62 (RMG) 81.0 12 23

Cambodia 4.3 (2.4%) 4.1 (3.4%) 61, 62 (RMG) 84.9 15 5

Chad 4.7 (2.7%) 3.5 (2.9%) 27 (fuels, oils, etc.) 97.3 50 27

Equatorial

Guinea 16.3 (9.3%) 10.0 (8.3%) 27 (fuels, oils, etc.) 96.0 40 60

Sudan 12.1(6.9%) 8.9 (7.4%) 27 (fuels, oils, etc.) 94.1 27 36

Yemen 10.0 (5.7%) 7.3 (6.1%) 27 (fuels, oils, etc.) 88.7 10 27

Total 129.9 (73.8%) 86.2 (71.8%)

Sources: Author’s calculation based on WTO ‘s World Trade Report 2008 and 2009; International Trade Centre’s TradeMap,www.tradmap.org, accessed 22.11.09.


made in liberalizing agriculturalmarkets, trade reforms are expectedto negatively impact the net importersof agricultural commodities.3 As perthe Revised Draft Modalities onAgriculture dated 6 December 2008,issued by Committee on AgricultureSpecial Session, the major subsidizersof agricultural products have beenurged to reduce their domesticsupport by 70–80 percent.4 If andwhen this proposal is implemented,there could be a further increase in theimport bill for net food importers,even though subsidy is not the onlydeterminant of international pricechanges.

The studies of Asian LDCssummarized in Raihan et al. (2007)found a number of agriculturalcommodities with significant exportpotential, including processed fruitsand vegetables, tea, coffee, herbs andmedicinal plants, organic rice, andcashew nuts. Tariffs and other formsof domestic support measures in mostdeveloped countries act as majorinhibiting factors against the exportexpansion of these commodities.5

Protecting the livelihood offarmers and largely agrarian ruralcommunities, which are vulnerable toimport surges, is another importantissue for these LDCs. Therefore, theproposals of G33 developing coun-tries, with major interests in agricul-tural negotiations, on the SpecialSafeguard Mechanism (SSM) andSpecial Products (SP) hold significancefor them.6 Similarly, the declarationadopted by the Sixth LDC MinisterialMeeting held in Dar Es Salaam from14 to 16 October 2009 calls for, amongothers, a restriction on food exportban, which has affected food securityin the LDCs.7

Non-agricultural market accessNon-agricultural market access(NAMA) negotiations are proceedingtowards the reduction of bound tariffrates, bringing unbound tariff ratesunder binding commitments, andidentifying and removing non-tariffbarriers (NTBs). If and when NAMAtariffs are reduced, they will provide

additional market access opportunitiesfor the LDCs. Although the LDCs areexempted from such reductioncommitments, they are expected tosubstantially increase their bindingcoverage.8 However, the LDCs areinsisting that they be given the finalsay to decide "the extent and level ofbindings of their tariff lines".9

If tariffs are reduced as part ofNAMA negotiations, it is likely tohave both positive and negativeimpacts on the LDCs. On the positiveside, the LDCs’ access to manydeveloped- and developing-countrymarkets will increase in select sectors.On the negative side, they may sufferfrom possible preference erosion incountries such as Canada and theEuropean Union (EU), where theycurrently enjoy duty-free and quota-free (DFQF) market access (discussedbelow).

Services trade liberalizationLiberalization of services trade underthe General Agreement on Trade inServices (GATS) has importantimplications for many LDCs asservices account for a significant shareof their GDP. For example, one of themajor constituents of services trade—remittances to the extent suchearnings are generated through theprovisioning of services—are impor-tant for a number of the LDCs. As anindication, measured as percentage ofGDP, the LDCs such as Tonga (38percent), Samoa (26 percent) andNepal (22 percent) figured among thetop 10 recipients of remittances in2008, while in terms of absolute figure,Bangladesh, with a receipt of US$ 9billion in 2008, was in the top 10 list.10

However, services trade liberaliza-tion under Mode 4 (movement ofnatural persons) of the GATS is largelybeing restricted by immigrationregulations and barriers related to visaand work permit. In most cases, nodistinction is made between tempo-rary and permanent movement ofworkers, and the process involvescomplicated, non-transparent andcostly steps to conform to labourmarket regulation. Furthermore, in

terms of migration regulations, whiledeveloped countries seem biasedtowards high-skilled workers, themovement of low-skilled workers,which most LDCs can competitivelysupply, is the most restrictive.11

Cotton subsidiesAlthough removal of export subsidieson and market access for cotton maynot be high on the agenda of mostLDCs, this is a non-trivial issue forfour West African LDCs: BurkinaFaso, Benin, Chad and Mali. A WorldBank study has shown that removingsubsidies would expand cottonexports from sub-Saharan Africa by 75percent, and increase developingcountries’ overall share of globalcotton exports from the current 56percent to 85 percent by 2015.12

Despite the pledge made at the WTOMinisterial in Hong Kong to removeall cotton subsidies by developedcountries by 2006 and provide DFQFmarket access to cotton exports fromthe LDCs, nothing much has hap-pened.

Therefore, the Dar Es SalaamDeclaration of the LDCs, amongothers, underscores the need toachieve, on an "early harvest" basis, anambitious, expeditious and specificoutcome for cotton trade-relatedaspects, in particular, the eliminationof trade-distorting domestic supportmeasures and export subsidies,granting of DFQF market access forcotton and cotton by-productsoriginating in the LDCs. 13 Thedeclaration also highlights thesignificance of “implementing thecommitment by WTO Memberscontained in the July Package and theHong Kong Ministerial Declarationregarding the mobilization of technicaland financial assistance to ensure thecoherence between the trade anddevelopment aspects”.14

Intellectual property rightsThe LDCs are worried that the currentintellectual property protectionregime does not take into account thecontribution of the LDCs and theircommunities in protecting and


conserving genetic resources andtraditional knowledge. They arefinding it difficult to enforce theprovision for mandatory sharing ofbenefits in the event these resourcesand knowledge are accessed andexploited for commercial purposes. Inorder to ensure that the LDCs andtheir communities get due recognitionof their contribution, a proposal torequire mandatory disclosure of thesource of origin as a condition forpatentability has been submitted by agroup of developing countries led byBrazil and India in the Council forTRIPS discussion.

Although this proposal is beingopposed by a handful of developedcountries at the behest of theircorporate lobby, the LDCs haverecently joined the call for the disclo-sure requirement. Against thisbackdrop, the Dar Es Salaam declara-tion demands that the TRIPS Agree-ment be amended to include amandatory requirement for thedisclosure of source of origin ofgenetic resources and/or associatedtraditional knowledge in cases of theiruse for inventions.

Cross-cutting issuesBesides the sectoral issues discussedabove, there are four distinct butinter-related issues of interest to theLDCs, as they cut across market accessagenda under the WTO.

DFQF market accessThe 2005 Hong Kong MinisterialDeclaration allows "members facingdifficulties" to reduce LDC productcoverage for duty-free treatment to 97percent of tariff lines. However, asLDC manufactured exports todeveloped countries are concentratedin a few categories such as RMG, mostof their export items could be poten-tially excluded from such treatmentunder this scenario. Moreover, AsianLDCs are not granted preferentialmarket access in the United States (US)and thus face high tariff rates on mostof their RMG exports.15

Since advanced developingcountries are also emerging as major

markets for the LDCs and they arelikely to maintain high tariffs evenafter the completion of NAMAnegotiations, achieving DFQF access insuch markets could be immenselybeneficial to the LDCs. For example, astudy estimates that full DFQF marketaccess in five large developingcountries (Brazil, China, India, Mexicoand South Korea) would lead toannual export gains as high as US$5.6billion for the LDCs.16

Non-tariff barriersNTBs, particularly in the form ofregulatory requirements, quotarestrictions, administrative proceduresand rules of origin (ROO), are ofmajor concern for the LDCs. Due totheir technical complexity and non-transparent nature, they are the mostdifficult barriers to challenge. Stan-dards-related NTBs such as sanitaryand phyto-sanitary (SPS) restrictionsact as major impediments to LDCexports, particularly when they arenot based on scientific evidence and/or beyond the standards set byinternational bodies.17

The studies summarized in Raihanet al. (2007) provide examples in whichdeveloped countries have imposedstringent SPS requirements and other

NTBs on agricultural exports fromselect Asian LDCs. Similarly, for non-agricultural products, standards andlabelling requirements pose insur-mountable barriers for these coun-tries. ROO is another major NTB, forexample affecting Bangladesh,Cambodia and Lao PDR, and suchbarriers have resulted in low utiliza-tion of preferences for these LDCs—their utilization rates of Everything butArms preference given by the EU arein the range of 60–70 percent.18 ROO isalso a problem for many AfricanLDCs, which have not benefittedmuch from the US African Growthand Opportunity Act due to the "yarnforward rules" and/or a complicated"short supply" provision imposed onthem to qualify for preferentialmarket access.

Preference erosionSince the LDCs enjoy preferentialmarket access in many developedcountries, tariff reductions underagriculture and NAMA negotiationswould lead to preference erosion forthem. As preference erosion largelydepends on the value of exports,preference margin and the currentrate of preference utilization, Bang-ladesh is expected to be a major loser

cover feature

ww

w.ii

sd.c

a


in the EU market. However, this losscan be offset by additional opportuni-ties arising from DFQF market accessto the US, Japan and other developedcountries as well as new opportunitiesthat tariff reductions in developingcountries would bring about. Forexample, Laborde (2008) shows thatfull DFQF treatment provided by fiveadvanced developing countries (Brazil,China, India, Mexico and South Korea)and five developed countries (Canada,Japan, Norway, Switzerland, and theUS) would not only reduce the lossesarising from preference erosionsubstantially but also result in large-scale net gains for the LDCs.

Aid for tradeThere is no denying that marketaccess issues discussed above areimportant from the perspective of theLDCs as long as tariff and non-tariffbarriers in the case of goods andregulatory barriers in the case ofservices exports pose insurmountabledifficulties for the LDCs trying todiversify their export basket. Howev-er, most LDCs suffer from supply-sideconstraints such as infrastructurebottlenecks, lack of human capital,access to technology and credit, andvirtual absence of trade facilitation

measures, and hence lack the capacityto become competitive suppliers in theinternational market.

Moreover, the LDCs find it difficultto implement some of their WTOcommitments. Since the benefitsaccruing from the implementation ofthese agreements are much lowerthan the associated cost of implemen-tation, the resource-strapped LDCscannot take this additional burden.Therefore, the LDCs are rightlydemanding support from theirdevelopment partners to implementsuch commitments. They havereceived some support from theirdevelopment partners throughIntegrated Framework for Trade-Related Technical Assistance (IF), butthe resources committed to theFramework have been insufficient,and the major focus so far has been onthe "software" part such as training,capacity building, research and studiesand not on the "hardware" part suchas infrastructure building. Realizingthis deficiency, the Hong KongMinisterial agreed to launch theEnhanced Integrated Framework andpledged to ramp up resources for thisinitiative. However, progress has beendisappointingly slow owing to thedelay in contribution of resourcespledged by some of the developmentpartners and, consequently, approvalof projects.19

Likewise, a full-fledged "Aid forTrade" initiative was also launchedduring the Hong Kong Ministerial.After a Task Force, formed by theDirector-General to prepare a guidelinefor providing aid for trade, issued itsreport in 2006, two global reviews havetaken place in 2007 and 2009. However,given the fact that the LDCs have torely on their traditional bilateral andmultilateral donors to obtain resourcesand the initiative suffers from limita-tions similar to those seen in theconventional aid delivery mechanism,the enthusiasm initially shown bythese LDCs seems to have waned.Therefore, the Dar Es Salaam declara-tion rightly urges developmentpartners to expeditiously move fromcommitment to implementation.

Negotiation dynamics and LDCpositionsThe LDCs should design their tradenegotiation strategies taking intoaccount their own ground realities aswell as the positions of other LDCs. Inthis context, the Dar Es Salaamdeclaration not only tries to strike abalance between the various positionsof the LDCs, but also provides thebasis for devising a common negotia-tion stance.

It should, however, be noted thatthe benefits arising from cross-cuttingissues such as DFQF market accessand agreement on preference erosionare not likely to be shared equally byall the LDCs. For example, AfricanLDCs could suffer from preferenceerosion in the US market, if the LDCs’proposal of full DFQF market access isimplemented. Therefore, compensato-ry mechanisms such as preferentialaccess to aid for trade resourcesshould be proposed to the prospectivelosers in order to garner a broadersupport for common positions.Similarly, an expeditious removal ofcotton subsidies, which are of greatconcern to African LDCs, will have tobe taken on board to demonstratesolidarity among the LDCs even if, asnoted above, the cotton issue haslimited significance to Asian LDCs.

RTA and BTA negotiationsOne of the likely consequences of thefailure to finalize the DDA negotia-tions is the proliferation of regional/bilateral trade agreements (RTAs/BTAs), though this may not be theonly reason why the LDCs areinclined to enter into such agreements.While the interests of the LDCs arebest protected within the multilateraltrading system, they cannot avoidnegotiating RTAs and BTAs because ofthe way various forms of tradeagreements are currently beingnegotiated. Therefore, it is equallyimportant for them to devise a wellthought-out strategy for the negotia-tion of these agreements.

All the LDCs have entered into atleast one RTA and some are membersof more than three RTAs. However,


most of these RTAs are of shallowintegration variety with provisions forthe liberalization of tariff barriers totrade in goods being the predominantfeature. Since trade in goods alone isnot likely to provide benefits to theLDCs, they need to push for LDC-friendly liberalization of servicessectors and investment regimes.

The LDCs have also been engagedin several BTA negotiations withneighbouring countries and/orcountries in the North. As for BTAnegotiations, South-South BTAs canbring benefits to the LDCs. There are,however, concerns whether North-South BTAs will be beneficial for theLDCs. Some studies have indicatedthat BTAs between developed anddeveloping countries can result intrade diversion for the weakerpartners.20 Likewise, due to theinherently asymmetric negotiatingprowess, stronger partners canimpose their will, including severalWTO-plus conditions on servicesliberalization, competition andinvestment policies, environment andlabour standards and intellectualproperty rights. Such conditions areoften seen as being detrimental to theinterest of weaker partners.

Way forwardThe LDCs, in general, have commonpositions at the multilateral level,which is reflected in most LDCministerial declarations adopted so farfor WTO negotiations. Even wheredifferences exist, they are not of themagnitude that cannot be reconciled.Since DFQF market access is the singlemajor agenda of Asian LDCs, theyshould be prepared to address AfricanLDCs’ concerns on the removal ofcotton subsidies and preferenceerosion. Sticking to common positionson issues relating to agriculture,NAMA, services negotiations, ROOand NTBs, in which all the LDCs havethe same position, is not likely toprove difficult.

Some of the LDC concerns relatingto agriculture and NAMA negotiationsare best addressed specifically throughappropriately designed sectoral

negotiating strategies; others can becomprehensively addressed throughthe cross-cutting agenda. For instance,the LDCs should specifically align theirpositions with the proposal of G33 onSSM and SP on agricultural negotia-tions. As for NAMA negotiations, theyshould demand full autonomy whileincreasing their binding coverage. Onservices, a major negotiation strategyfor the LDCs is to call for the removalof restrictions on the movement oflow- and semi-skilled workers.

On cross-cutting issues, the timelyimplementation of the DFQF pledge byboth developed and advanced devel-oping countries; and removal of NTBs,whether regulatory or otherwise, onproducts of export interest to the LDCsare of critical significance. Similarly, toaddress the problem of preferenceerosion, they should press for tradesolutions such as increased marketaccess on protected sectors and non-trade solutions such as provision ofaid for trade based on the magnitudeof preference erosion. Finally, on theissue of aid for trade, they shoulddemand significant ramping up ofsupport through Enhanced IntegratedFramework as well as aid for tradeinitiatives, and commitments fromdevelopment partners to move intoimplementation mode.

While South-South RTAs and BTAsare likely to produce benefits to theLDCs, deepening and broadening ofthe areas of economic cooperation arenecessary to realize the true potentialof these arrangements. However, dueto their trade-diverting nature andnegotiation dynamics that are tilted infavour of stronger players, the LDCsneed to be extremely cautious whilesigning North-South BTAs. Finally,given their limited institutionalcapacity and negotiating capital, theLDCs should prioritize the negotiatingforums so as to maximize the advan-tages from trade negotiations.

Notes1 Raihan, Selim, Ratnakar Adhikari and

Kamalesh Adhikari (eds.). 2007. ExportDiversification for Human Developmentin the Post-ATC Era: Perspectives from

Asian LDCs. Colombo: UNDP AsiaPacific Regional Centre.

2 WTO. 2009. World Trade Report 2009.Geneva: World Trade Organization.

3 Raihan et al. 2007. Note 1.

4 WTO. 2008. Revised Draft Modalities forAgriculture. TN/AG/W/4/Rev.4. 6December. Geneva: World TradeOrganization.

5 Adhikari, Ratnakar, Yumiko Yamamotoand Kakada Dourng. 2008. TradeNegotiation Issues and Strategies forAsian LDCs: Experience fromBangladesh, Cambodia, Lao PDR andNepal. Joint Policy Brief, Issue 3,August. UNDP Asia Pacific RegionalCentre: Colombo.

6 ibid.

7 WTO. 2009. Dar Es Salaam Declaration,Sixth LDC Trade Minsiters' Meeting, DarEs Salaam, Tanzania, 14–16 October.WT/MIN (09), 21 October. Geneva:World Trade Organization.

8 WTO. 2005. Doha Work Programme:Ministerial Declaration, MinisterialConference, Sixth Session, Hong Kong,13–18 December. WT/MIN(05)/DEC.Geneva: World Trade Organization.

9 WTO. 2009. Note 7.

10 Dilip Ratha, Sanket Mohapatra, and AniSilwal. 2009. Migration and Develop-ment. Brief 11. Washington, D.C.: TheWorld Bank.

11 Adhikari et al. 2008. Note 5.

12 See UN-OHRLLS Press Release, UN-OHRLLS/67/2005, www.un.org/special-rep/ohrlls/Press_release/14-12-05PressConf.pdf (accessed 15.11.09).

13 WTO. 2009. Note 7.

14 WTO. 2009. Note 7, p 4.

15 Adhikari et al. 2008. Note 5.

16 Laborde, David. 2008. Looking for aMeaningful Duty Free Quota FreeMarket Access Initiative in the DohaDevelopment Agenda. Issue Paper No.4. Geneva: International Centre forTrade and Sustainable Development.

17 ibid.

18 Adhikari, Ratnakar. 2008. The LocalContent Paradox at the WTO: A MinorLapse or Organised Hypocrisy?Bridges Monthly Review 12 (4).Geneva: International Centre for Tradeand Sustainable Development.

19 WTO. 2009. Note 7.

20 UNESCAP. 2007. Economic and SocialSurvey of Asia and the Pacific 2007.Bangkok: United Nations Economic andSocial Commission for Asia and thePacific.

cover feature


Certificate of Origin determinesthe originating status of a manufactured

good meant for exports. It is normally requiredby the importing country to prevent tradedeflection, especially when it is providingpreferential duty concessions as part of abilateral or regional trade agreement.

The Agreement on South Asian Free TradeArea (SAFTA) requires the Certificate of Originto be issued by the designated authority in theexporting country after the goods have met theprescribed criteria and are eligible for preferen-tial treatment in the importing country. Theeligibility criteria for preferential entry into amember’s market are as follows:

The product is sufficiently processed.The final product is classified differently thanits required inputs imported from a thirdcountry.The value of third-country inputs in the finalproduct does not exceed 60 percent of thefreight-on-board (FOB) value of the finalproduct.

Regarding the third criterion, the least-devel-oped countries (LDCs) are provided specialtreatment in that their exportable manufacturedgoods should fulfil only 30 percent domesticvalue addition criterion. But taking other factorsinto consideration, the required domestic valueaddition is much higher. For example, in thecase of Nepal, transportation costs associatedwith the import of inputs from a third countryand the subsequent export of manufacturedgoods to other South Asian countries are soexorbitant that the value addition in effect risesto approximately 43 percent of the FOB salesprice. The reason for such a rise is that transpor-tation costs of the imported inputs are includedwhile calculating value addition whereastransportation costs associated with the exportof the finished goods are not.

Although Nepal’s major trade partner isIndia, it trades, to some extent, with other SouthAsian countries as well. During the period from2000/01 to 2006/07, Nepal‘s exports to Indiadeclined whereas its exports to other countriesof the South Asian Association for RegionalCooperation (SAARC), except Bangladesh,remained static. On the import front, Nepal‘simport from India grew exponentially whileimports from other SAARC countries remainedeither static or non-existent.

Therefore, in order to reduce its huge tradedeficit, Nepal needs to reduce its trade depen-

Certificateof Origin

market access

Nepal’sconcerns Jagdish Prasad Agrawal

http://fashioninganethicalindustry.org


dence with India and increase itsexports to other SAARC countries.Such a strategy requires Nepal’sexports to be competitively cheaperfor which the issue of the Certifi-cate of Origin should be addressed.

Certificate of Origin as a mecha-nism to prevent trade deflection haslost its relevance in the wake ofsubstantial reductions in tariffbarriers in the region. But the othercomponents of the concept ofCertificate of Origin, that is, trans-formation of imported raw materialsinto finished products in theexporting country, is relevant eventoday, especially in the context ofthe developmental role it plays andthe preferential tariff concessionsprovided mutually. However, thetransformation aspect has beenrelegated to a back seat whereas thevalue addition test has been givenutmost importance. This has breddistortions, such as undervaluationof products and discretionaryimplementation of rules at theborder. Fluctuation in exchangerates and volatility of commodityprices render the eligibility of thegoods to be exported to change on aday-to-day basis. Moreover, thenecessity that the Certificate ofOrigin be issued by a third partyhas also increased cost and time.

The system of determining theorigination of goods for export isnot deemed necessary under themost-favoured-nation dispensationbecause duty concessions are notinvolved in the importing countryand the vulnerability of re-exportsare negligible. Likewise, in the caseof wholly produced goods whichare sought to be promoted for intra-regional trade, it has been observedthat agricultural harvests andproducts are facing non-tariffbarriers of multiple dimensions.Almost all SAARC countries areagriculture-driven and theircomparative advantages are also inagricultural products. Trade flowsof agricultural harvests and theproducts thereof within the regiontake place on the basis of topical

demand and supply situationacross the border. But these prod-ucts too are subject to the sameformalities of the issuance ofCertificate of Origin as are manu-factured goods.

Exports of agricultural productsfrom Nepal cannot meet the costs ofpre-export inspections, issuance ofCertificate of Origin and customsclearance of goods not only inNepal but also in India and otherimporting countries. In addition tothese costs and hassles, theseproducts also face additional non-tariff barriers in the forms ofquarantine, phyto-sanitary inspec-tion and quality certification.Because of these formalities and thecosts involved, under SAFTA, it ismuch easier to export manufac-tured goods than to export agricul-tural products.

Problem arises in the definitionof wholly produced goods as it isinconceivable that products madeout of agricultural harvests do notcontain any input from non-originating state. Had Nepal’sagricultural sector been moreorganized, it would have beenpossible for the country to followinternational practices in theissuance of Certificate of Origin,and also fulfil other formalities.But, because the country’s agricul-ture is in a very unorganized state,individually driven and of smallscale, the sector is unable to bearthe burden of exporting under avery formal and rigid trade regime.If green channels are not created bydifferentiating and facilitatingwholly produced Nepali agricul-tural produce and products fromthird-country non-originatinginput-based manufactured prod-ucts, the temptation of findingaccess to the adjoining marketsthrough unauthorized routes willalways be there.

In this context, there is a need toreconsider the issue of the Certifi-cate of Origin by expanding thedefinition of wholly producedgoods to include:

a minimal quantity of goodsfrom non-originating country.any other products such ashandicrafts, agro-products, etc.which are non-sensitive and thetrade of which the membercountries want to promotemutually on a preferential basis.

There is also a need to introducea green channel for the export ofwholly produced goods with, amongothers, the following provisions:

Certificate of Origin to be issuedby the exporter him/herself.Export of less than US$1,000 perconsignment to be allowed on asingle document of bill ofexports issued by the exportingcountry.Value addition criteria to begiven the back seat and transfor-mation in tariff classification bethe main criteria for preferentialtariff eligibility purposes.Wholly produced goods to begiven national treatment inrespect of quarantine and othernon-tariff issues.Accredited third-party pre-shipment inspection certificateto suffice for the verification oftransformation in HarmonizedSystem Code.Payment of countervailingduties and clearance of goodsallowed to be made in advanceand vehicles carrying goodsunder the green channel allowedaccess up to the warehouses inthe destination country withoutany additional permission.

So far, the emphasis on increas-ing intra-regional trade in SouthAsia has been on the macroconcepts of doing business.However, any smooth trade flowcalls for addressing very basicrequirements like Certificate ofOrigin. It is high time that SouthAsia paid more attention to thisissue.

The author is Chairman, Nimbus Group ofCompanies, Kathmandu.

market access


In the Sixth Ministerialof the World Trade Organization

(WTO) held in Hong Kong inDecember 2005, developed coun-tries committed to providing duty-free and quota- free (DFQF) marketaccess to least-developed country(LDC) exports on 97 percent oftariff lines. But progress in thatregard has been almost negligibleso far. And now, after four years ofhiatus, the Seventh WTO Ministeri-al is going to be held in Geneva,Switzerland from 30 November to 2December 2009. The theme of theSeventh Ministerial is “The WTO,the Multilateral Trading Systemand the Current Global EconomicEnvironment”.

Unlike previous ones, theSeventh Ministerial is “not intend-ed to be a negotiating session” andnegotiations on the Doha Develop-ment Agenda (DDA) are on aseparate track. However, the

Conference is an opportunity totake into consideration two criticalissues that have cast a shadow onthe future of the multilateral traderegime––the global financial crisisand climate change.

As a response to the globaleconomic recession of 2009, therehas been a surge of protectionisttendencies, especially in developedcountries. Many of the economicstimulus packages introduced bythese countries to fight the reces-sion contain provisions thatencourage spending on localproducts in preference over im-ports. With such tendencies on therise, the crisis is going to hit hardmainly the LDCs.

The WTO has estimated that in2009, the volume of global tradewill fall by 9 percent, which meansthat LDC exports too are likely tosuffer. The slowdown in the exportearnings of the LDCs has already

been visible. For example, theexport earning of Bangladesh in2008/09 registered a growth ofonly 10.3 percent over the previousyear, which fell short of the annualtarget by 4.5 percent. The exportprice index also dropped by 1.6percent, reflecting a fierce competi-tion among exporters to maintaintheir market share.

The United Nations Conferenceon Trade and Development hasalso projected that in 2009, LDCexports are likely to contract by 9 to16 percent and the real growth rateof their gross domestic product(GDP) would drop to 2.7 percent.Such a sharp decline in the GDPgrowth rate from an average of 7.4percent during 2003–2008 impliesthat the LDCs are going to be hithard the most by the crisis.

It is evident that although theLDCs are not the cause of thefinancial crisis, they are dispropor-

Least-developed countries

United they stand

trade negotiation

At the Seventh WTOMinisterial, the LDCs areprepared to raise theircommon concerns but whethertheir counterparts are ready toaddress what they want out ofthe Doha deal remains to beseen.

Asjadul Kibria


tionately affected by it. Worse, theglobal measures initiated to curbthe financial crisis are mostlybiased towards developed coun-tries. The G20 meeting held inApril of this year announced theinjection of US$1.1 trillion into theInternational Monetary Fund, theWorld Bank Group and regionaldevelopment banks to boost theresources of these internationalfinancial institutions. But there ishardly any possibility that theLDCs would stand to gain from it.

Besides the financial crisis,climate change has also become anissue of global concern. But inter-estingly, as is the case in multilater-al trade negotiations, advanceddeveloping countries are in a rowwith developed countries on issuesof climate change. For instance,

China and India have rejected thedeveloped countries’ proposal thatadvanced developing countries tooput a cap on their carbon emis-sions. Developing countries havebeen consistently arguing that it isthe responsibility of the wealthyindustrialized nations to fightclimate change by reducing theircarbon emissions.

During 7–18 December 2009,the environment ministers andconcerned officials from all over theworld are meeting in Copenhagenfor a climate change conferenceunder the United Nations Frame-work Convention on ClimateChange. They intend to thrash outa successor to the Kyoto Protocol.Because the climate change agenda

has also become part of tradenegotiations, and the Seventh WTOMinisterial as well as the Copen-hagen meet are going to take placeat around the same time, there is apossibility that the climate changeagenda will find an importantplace in the Ministerial. Whilepowerful players fight for theirinterests, the LDCs might not gainanything substantial. At the WTO,the LDCs have two core demands––ensuring an early implementationof the DFQF market access provi-sion, and opening up of services indeveloped countries under Mode 4of the General Agreement on Tradein Services (GATS). But there islittle hope that their demands willbe met.

The LDCs have not takenadequate initiatives to strategizeand get prepared for the GenevaMinisterial. However, it is encour-aging that, patching up divergen-cies among themselves on variousissues, the recent Dar Es Salaammeeting of the trade ministers of theLDCs came up with a declarationoutlining their common demandsand positions for the WTO Ministe-rial. That they are now pressing forDFQF market access and removalof cotton subsidies by developedcountries with one voice makestheir case stronger.

For a meaningful DFQF marketaccess, the issue of product coverageis extremely important. Coverage ofonly 97 percent of tariff lines allowsdeveloped countries to protect theirso-called sensitive products, liketextiles and clothing, which are themajor export items of many LDCs.

For South Asian LDCs, marketaccess to the United States (US) isthe most important of all issues.The US is reluctant to offer full-fledged market access to the SouthAsian LDCs, mainly Bangladesh,Nepal and Bhutan. It imposeshigher import tariffs on Bang-ladesh’s exports than on theexports from the United Kingdom(UK) and France. For instance, in2007, while the export of British

goods worth US$57 billion to theUS raised only US$412 million inrevenue to the US, Bangladesh’sexports (mostly clothing) worthUS$3.4 billion faced a tariff ofabout US$500 million.

The average rate of tariffimposed by the US on goodsimported from the Asia-PacificLDCs is 15.6 percent while it is just3.9 percent for all other LDCs. Therates for the UK, members of theOrganisation for Economic Cooper-ation and Development andmembers of the Organization ofPetroleum Exporting Countries are0.9 percent, 0.7 percent and 0.6percent, respectively. This clearlyshows the discriminatory behav-iour of the US towards the LDCs,especially Asian LDCs.

Therefore, the LDCs shouldstick to a common position inmultilateral forums. The stringentrules of origin, trade remedymeasures and safeguard rules aresome of the crucial areas in whichthe LDCs have a common stake tocollectively demand relaxation ofrules and non-discrimination.

It is likely that the Obamaadministration in the US might bemore sympathetic towards AfricanLDCs. If so, in a race for securingthe US market share, the earlier riftamong the LDCs might resurface.Consequently, the LDCs might findit difficult to negotiate on a com-mon platform. However, it isimportant to keep in mind that theLDC concerns will not be properlyaddressed under the DDA unlessthey get united.

It is very unlikely that anagreement on agriculture subsidyand industrial tariff cuts will bereached before 2010. The LDCsshould optimally use the availabletime to pressure both developedand developing countries toexclude LDC issues from the“single undertaking” initiative,under which nothing is agreeduntil everything is agreed.

The author is an economic journalist basedin Bangladesh.

At the WTO, the LDCs havetwo core demands––ensuring

an early implementation ofthe DFQF market access

provision, and opening up ofservices in developed

countries under Mode 4 ofthe GATS.

trade negotiation


Does investment follow trade oris it the other way round? Till

fairly recently, received wisdom hadit that investment followed trade.But globalization and the freneticneed for companies to constantlylower costs in a fiercely competitiveworld have increasingly ledcorporates to invest overseas to takeadvantage of cheap raw materialsand/or cheaper skills even wheretrade links are, at best, tenuous.

Trade has then followed suchinvestment. For instance, it isestimated that a significant part ofChinese exports are from multina-tional corporations that haveestablished their base in China.With sovereigns now joining thegame to garner cheaper naturalresources, especially in Africa—China being a prime exampleagain—it is clear the old order haschanged. Investment will increas-ingly lead, not follow, trade.

Despite growing evidence of thesymbiotic links between investmentand trade, the members of theSouth Asian Association forRegional Cooperation (SAARC) asa whole have been slow to exploitthe potential of such links withinthe region.

Trade integrationSouth Asia is the least-integratedregion in the world. If on thepolitical plane, there is considerabledistrust between neighbouringcountries, especially India andPakistan, in the economic arena, allcountries in South Asia adoptedhighly interventionist trade regimesin the early years of their growth.

This began to change in the late1970s when Sri Lanka became thefirst to liberalize, followed byothers in the 1980s. SAARC wasestablished in 1985 as a first steptowards closer regional integration.The process of economic integra-tion finally culminated in a tradi-tional regional trade agreementaimed at reducing trade barriers––the Agreement on South Asian FreeTrade Area (SAFTA).

Scope for

investmentcooperation in

South Asia

Mythili Bhusnurmath

safta and investmentw

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safta and investment

In addition to SAFTA, there arefour free trade agreements (FTAs)among South Asian countries:India-Bhutan, India-Nepal, India-Sri Lanka, and Pakistan-Sri Lanka;and two sub-regional preferentialarrangements: the Asia-PacificTrade Agreement and the Bay ofBengal Initiative for Multi-Sectoral,Technical and Economic Coopera-tion (BIMSTEC). Four FTAs areunder negotiation: India-Pakistan,India-Bangladesh, Sri Lanka-Maldives and Pakistan-Bangladesh.

All these are traditional FTAsaimed at reducing or eliminatingbarriers only in trade in goods,excluding services, competition,intellectual property rights, govern-ment procurement and investment.In this respect, South Asia is a bit ofan outlier in a world where mostFTAs, in recent years, have movedbeyond reducing barriers in goodstrade to involve specific commit-ments on investment.

Investment integrationIf the situation of intra-regionaltrade flows in South Asia isdisappointing, the picture of intra-regional investment flows is farworse. The participation of SouthAsian countries in other forms offoreign direct investment (FDI)undertakings such as BilateralInvestment Treaties (BITs) andDouble Tax Avoidance Treaties(DTTs) is negligible. AlthoughSouth Asian countries are involvedin 109 BITs overall, there are onlyfour BITs in the region. Similarly,DTTs are in force primarily amongIndia, Pakistan, Bangladesh andNepal. Bhutan and the Maldives arenot members of any such treaties.

In a bid to promote and protectinvestments in the region, a DraftRegional Agreement on Promotionand Protection of Investmentwithin SAARC has been underconsideration since September1997. However, progress has beenexcruciatingly slow.

FDI in South AsiaIn line with the much higher level

of global investment flows in recentyears (except last year when theyfell dramatically following theglobal financial crisis), FDI toSouth Asia has also been increas-ing over the years. According to theUnited Nations Conference onTrade and Development(UNCTAD), from an average ofUS$2.5 billion per year during1990–2000, FDI to the regionincreased to an incredible US$51billion in 2008. Surprisingly,despite the global meltdown, allcountries (with the exception ofBhutan, Nepal and Pakistan, thelatter two possibly because ofpolitical instability during the year)received more FDI in 2008 than inthe previous year.

Within these overall trends,individual countries performedhighly unevenly (Table 1). Thedriving force behind the receipt ofmost FDI from developed-countrysources is related to the industrialsophistication of the host country,availability of cheap skills, the sizeof the home market and of course,infrastructure. It is no surprise,therefore, that India, which is themost advanced country in theregion industrially, should attractmost of the FDI inflows from thedeveloped world to the region. AnUNCTAD survey ranks Indiaamong the five-most attractiveplaces for FDI globally.

The sources of FDI are highlydiversified in most SAARC coun-tries. Though the dominant tenden-cy is still for the FDI to originate in

developed countries, the share ofdeveloping countries is also fairlysignificant. During 2006–2007,Organisation for Economic Cooper-ation and Development (OECD)countries contributed only 27percent of the total FDI to India.However, this ignores the fact thatthe FDI which is routed throughMauritius and Singapore for taxreasons and accounts for 49percent of FDI inflows to India alsooriginates primarily in developedcountries.

In Sri Lanka, a middle-incomecountry, the major investors arefrom the United States (US), theUnited Kingdom (UK) and Austra-lia. The share of the non-OECDinvestment in Pakistan, during2006–2008 was 60.5 percent, and itwas 51.2 percent in Bangladeshduring 2005–2006. In Nepal, until2005/06, of the 50 countries thathad their commercial presence inthe country, 33 were developingcountries, accounting for 66percent of the FDI in the country.Very few FDI projects have beencommissioned in Bhutan.

Determinants of FDILocational proximity is seen to bean important determinant ofinvestment decisions for develop-ing-country firms, including thosein South Asia. Fifty-six percent ofthe non-OECD investment inPakistan during the past two yearsoriginated from neighbouring WestAsia. In Bangladesh, closelysituated South and Southeast

Table 1Inward FDI flows

US$ million as % of gross fixed

capital formation

1999–00 2005 2006 2007 2008 1999–00 2006 2007 2008

India 1,705 7,606 20,336 25,127 41,554 1.9 6.9 6.5 9.6

Pakistan 463 2,201 4,273 5,590 5,438 5.1 16.1 18.3 18.3

Sri Lanka 159 272 480 603 752 5.0 6.8 7.5 7.3

Bangladesh 218 845 793 666 1,086 2.9 5.3 4.0 5.9

Maldives 9 9 14 15 15 7.0 2.8 2.9 2.5

Nepal 6 2 -7 6 1 0.9 -0.3 0.2 n.a.

Bhutan n.a. 9 6 73 30 0.4 1.2 10.9 3.9

Source: UNCTAD’s World Investment Report 2009, www.unctad.org


Asian countries were the majordeveloping-country investorsaccounting for more than 24percent of the total FDI in the pasttwo years. In recent years, Egyptand the United Arab Emirates havealso emerged as major investors inthe country. In Nepal, India andChina accounted for about 60percent of the country’s total FDIduring 2005–2007. Similarly, SriLanka has a large commercialpresence of firms from close-at-hand Singapore, Malaysia, SouthKorea, Hong Kong and India.

Apart from locational proximityand, to some extent, cultural andreligious links (Saudi Arabia, forinstance, is a fairly big investor inPakistan), ease of doing business,quality of infrastructure, size of themarket and its sophistication, aswell as the availability of skilledhuman resource also appear to bepowerful determinants of FDIinflows to South Asia.

Have FTAs made a difference?If only geographical proximity isconsidered an important determi-nant of FDI flows into developingcountries, one should expect largeintra-regional FDI flows in SouthAsia. Although intra-regional FDIflows in South Asia have increasedin the post-2000 period, with a fewexceptions, they remain rathersmall. Regional FDI flows into thethree largest recipients of FDI,namely India, Bangladesh andPakistan, are negligible. However,Nepal, and since 2002, Sri Lanka,have been attracting substantialFDI from India (Table 2).

The Sri Lankan experience isone of the best examples of theintra-regional investment potentialin South Asia. Historically, Indiahas not been a major investor in SriLanka. In 2000, India’s share wasjust about 2 percent of Sri Lanka’stotal FDI stock and it did not evenfigure among the top 10 investorsin Sri Lanka. But in the next fiveyears, it ranked the fourth largest.Such a dramatic increase in FDIflows from India into Sri Lanka

was due to the coming into effect ofthe India-Sri Lanka FTA.

Sri Lanka also has an FTA withPakistan that came into operationon 12 June 2005. This has thepotential to not just promote tradebetween the two countries, but alsobetween India and Pakistan.Currently, Indo-Pak trade takesplace mostly via Singapore orDubai. By encouraging Pakistaniinvestors to set up operations in SriLanka in order to trade with Indiausing the Indo-Sri Lanka FTA, theisland nation can graduallyacquire an entrepot status in SouthAsia. This can further promote FDIinflows to Sri Lanka.

Pakistan has opened all itssectors for FDI. However, invest-ment inflows from within theregion are still negligible, althoughBangladesh’s investment inPakistan has increased in the pasttwo years. So far, Bangladesh andPakistan do not have an FTA witheach other but are working towardsputting one in place. The countries,however, have formed a JointEconomic Commission, a JointWorking Group and a Joint Busi-ness Council, as well as a JointInvestment Company to financejoint ventures in several key areas.

In the case of Bangladesh,during the period 1995–2006,regional FDI accounted for anaverage of 2.25 percent of the totalFDI flows into the country. But, in

the past two years, it increased to2.82 percent, primarily owing toincreased FDI from Pakistan.Investment from Sri Lanka has alsoincreased to some extent. In Nepal,until the end of 2006, there were atotal of 1,067 foreign projects. Ofthem, more than one third werefrom the region itself, with Indiaaccounting for the lion’s share.

ConclusionThough new investment opportu-nities are emerging in South Asiaand intra-regional FDI flows areincreasing, the pace of growth isvery slow, especially when com-pared to the potential that exists.Neither multilateral liberalizationnor regional integration hassucceeded in making a significantimpact on intra-regional FDI flows.While shallow regional integrationremains a key deterrent to in-creased intra-regional investmentflows, part of the reason is thatSAFTA, limited as it is, does notinclude investment within itsscope.

South Asia could learn from theexperiences of other regional blocssuch as the Association of South-east Nations and the EuropeanUnion, and instead of confiningitself to agreements on goods trade,expand their scope to cover invest-ments as well.

The author is Consulting Editor, TheEconomic Times, New Delhi.

Table 2Intra-regional FDI flows (% of country total)

India Bangladesh Pakistan Nepal Sri Lanka

2001– 2006– 1995– 2005– 2001– 2006– Upto 2006– 2005

2003 2007 1996 2006 2005 2008 2006 2007

India - - 0.620 0.540 0.001 0.002 40.710 46.600 6.200

Bangladesh - - - - 0.050 0.100 0.750 - 0.180

Pakistan - - 1.400 1.870 - - 0.470 - 0.600

Nepal - - - - - - - - -

Sri Lanka 0.009 0.014 0.230 0.410 - - 0.130 - -

Bhutan - - 0.005 - - - 0.010 - -

Maldives 0.008 0.009 0.000 - - - 0.000 - n.a.

Share of

South Asia 0.017 0.023 2.250 2.820 0.060 0.102 41.800 46.600 7.000

Sources: Board of Investment for Pakistan and Bangladesh; Department of Industry for Nepal;Secretariat for Industrial Assistance for India; UNESCAP for Bhutan.


intellectual property rights

In 2001, trade ministers adopted theMinisterial Declaration on the TRIPS

Agreement and Public Health at theWorld Trade Organization (WTO) Min-isterial in Doha. The result of an acrimo-nious debate at the WTO, wherein de-veloping countries had pressed for a le-gal clarification that the Agreement onTrade-Related Aspects of IntellectualProperty Rights (TRIPS) does not pre-vent them from taking measures to en-sure access to affordable medicines, theDeclaration confirmed that countries arepermitted to take measures to limit ex-clusive patent rights, when the interestsof public health and the need to ensureaccess to affordable medicines so re-quire. These measures include compul-sory licensing and parallel imports,which are often collectively referred toas the "TRIPS flexibilities".

Despite the legal clarity provided bythe Declaration and the urgency of pro-viding access to affordable essentialmedicines in developing countries, onlya small number of developing countrieshave made actual use of the TRIPS flex-ibilities. This is in contrast to the devel-oped world, where compulsory licens-ing has been "part of the law and prac-tice of many industrial countries" forover a century.1

This article analyses Thailand’s useof the TRIPS flexibilities in order to draw

lessons that can be useful in addressingsome of the key factors preventing orhindering the use of the flexibilities inother developing countries.

Use of the TRIPS flexibilitiesIn 2006 and 2007, the Government ofThailand granted a series of govern-ment use authorizations to enable theimport of generic equivalents of sevenpatented medicines at a fraction of theirprice. The medicines were: efavirenz andlopinavir/ritonavir combination (bothof which are antiretroviral (ARV) ther-apy for HIV), clopidogrel (which is usedin the treatment of coronary artery dis-ease), and four cancer medicines usedin the treatment of leukaemia, lung andbreast cancers (imatinib, erlotinib, letro-zole and docetaxel). The case of Thai-land is worthy of study for a number ofreasons.

Type of diseaseThe government use authorizations inThailand are significant for the fact thatthey were granted not only for HIV/AIDS medicines, but also for medicinesto treat heart disease and cancer. A pop-ular misconception about the use of theTRIPS flexibilities is that they may onlybe used to address public health crisis inpandemic or emergency situations. Nei-ther the TRIPS Agreement nor the Doha

Declaration places any restrictions onthe type of disease or products for theuse of the TRIPS flexibilities. While someparties have raised the argument thatThailand’s government use authoriza-tions for clopidogrel and the cancerdrugs did not meet the criteria of an "ur-gent public health concern", it does nothold true. Further, it should be notedthat no attempt has yet been made tochallenge the decision in the courts, norhas any complaint been made againstThailand for contravention of the TRIPSAgreement.

Legal validityThailand justified the government useauthorizations on the grounds that theywere needed to address serious publichealth concerns in the country, and toensure access to essential medicines thathave proven effective and necessary forthe treatment of diseases with highprevalence in the country.

Since 2002, Thailand has provideduniversal health coverage for its 64 mil-lion population. Thais are covered byone of three national public health in-surance schemes, which accord themaccess to drugs on the National List ofEssential Medicines (NLEM). ARV ther-apy for the treatment of HIV/AIDS wasnot initially included in the NLEM dueto high prices and inadequate govern-

Thailand’s fight for

public healthThe way Thailand capitalized on the TRIPS flexibilities to addressits national public health concerns provides lessons for otherdeveloping countries to benefit from the WTO system.

Cecilia Oh


ment budget. But when the governmentsought to provide universal access toHIV/AIDS treatment in 2003, the sus-tainability of the HIV programme be-came a major concern, given the cost ofthe patented medicines. Meanwhile,epidemiological evidence also indicateda rising trend of cardiovascular diseasesand cancer in Thailand.2 Yet, the publichealth insurance system was not able toensure sufficient access to the provenand effective treatments due to highprices.

The use of generic equivalents of thepatented medicines was thus identifiedas a sustainable cost-containment mea-sure for public health. Although the es-timated cost savings would be substan-tial,3 the Thai government maintains thatthe government use authorizations arenot intended to reduce health expendi-ture but to enable greater access to med-icines under its health insurance scheme.

The TRIPS Agreement and the DohaDeclaration, as mentioned above, do notrestrict the use of the TRIPS flexibilitiesto specific diseases. Under TRIPS , mem-bers are only limited with regard to theprocedure to be followed and the con-ditions met in the grant of compulsorylicences or government use authoriza-tions, such as the requirement for priornegotiations with the patent holder forthe grant of a voluntary licence and pay-

ment of adequate compensation. In thecase of the government use of patents,where it is for public and non-commer-cial purposes, the condition for priornegotiations is waived.4

Article 51 of the Thai Patent Act 19795

authorizes the government use of pat-ents in the general public interest, so that"any ministry, bureau or department ofthe Government" may exercise therights in any patent "to carry out anyservice for public consumption". It fur-ther provides that the government mayuse a patent, either by itself or throughothers, subject to the condition of a roy-alty payment to the patent holder. WhileArticle 51 requires prompt notificationto the patent holder about the govern-ment use authorization, it does not re-quire negotiations with the patent hold-er prior to the grant of the governmentuse authorization.

The government use authorizationsin Thailand were, thus, in compliancewith the provisions of the domestic lawin Thailand, as well as the TRIPS Agree-ment. The generic medicine importedunder the government use authoriza-tion was only for the use of patientsunder the public health insurancescheme. Compensation was also pro-vided in accordance with the legal pro-visions, wherein compensation in therange of 0.5–5 percent of the sale valueof the generic medicine would be paidto the patent holders.

Decision-making andimplementation systemThe decision to grant the governmentuse authorizations took a considerablelength of time. This was because the Thaiauthorities had sought to negotiate pricediscounts with the patent-holding phar-maceutical companies before consider-ing the use of the TRIPS flexibilities, al-though there was no legal requirementto do so.

In 2005, the Ministry of Public Health(MOPH) established an ad hoc WorkingGroup on Medicine Price Negotiation,chaired by the Secretary General of theFood and Drug Administration (FDA),to undertake price discounts on theneeded medicines. The Working Groupidentified a list of priority medicines for

which access was lacking, includingtreatments for cancer, cardiovasculardiseases and HIV. When negotiationsto reduce the prices of the priority med-icines did not succeed, the NationalHealth Security Office (NHSO) set up asub-committee a year later in 2006, todevelop recommendations for the im-plementation of the government use ofpatents. Chaired by the Secretary Gen-eral of the NHSO, the sub-committee’smembership comprised senior officialsfrom MOPH, FDA, and the Departmentof Intellectual Property, as well as rep-resentatives from health and consum-er-protection groups in Thailand. Thesub-committee was tasked with consid-ering the need for the government useauthorization as well as developing thecriteria for the selection of medicinesand the conditions for the implementa-tion of the government use authoriza-tion.

The fact that the decision-makingprocess involved different agencies indeveloping the criteria and guidelinesfor implementation helped to delineateand define the roles and responsibilitiesof different government agencies. This,in large part, ensured the speedy andeffective implementation of the govern-ment use authorizations when theywere eventually granted.

Ensuring transparency andaccountabilityThe government use authorizations, notsurprisingly, provoked strong objec-tions from the patent-holding pharma-ceutical companies whose products wereaffected and the governments of thecountries where the companies areheadquartered.

The strongest reaction came fromAbbott Laboratories, which decided towithdraw its applications for marketregistration of 10 new drugs in protestof the government use authorization onits product, Kaletra (the lopinavir/ritonavir ARV combination). This actraised concerns in Thailand about therisk of losing access to new medicines,particularly if other multinational phar-maceutical companies were to followsuit. Civil society groups in Thailand andelsewhere organized protests and boy-


cotts of Abbott products. The negativepublicity forced the company to even-tually reinstate its applications for mar-ket registration. The involvement of civilsociety groups in the decision-makingprocess was critical for mobilizing theirsupport.

On the political front, the Office ofthe United States Trade Representative(USTR), in its Special 301 Report of 2007which is the annual review of the stateof IPR protection and enforcement,downgraded Thailand’s ranking fromthe Watch List to the Priority Watch List,indicating its concerns over deficienciesin IPR protection and enforcement inThailand. A reason given for this changein Thailand’s status was that "in late 2006and early 2007, there were further indi-cations of a weakening respect for pat-ents, as the Thai Government an-nounced decisions to issue compulsorylicences for several patented pharma-ceutical products. While the UnitedStates acknowledges a country’s abilityto issue such licenses in accordance withWTO rules, the lack of transparency anddue process exhibited in Thailand rep-resents a serious concern". In addition,in a move widely speculated to be re-taliation against the government useauthorizations, the USTR announcedthat privileges under the GeneralizedSystem of Preferences (GSP) would be

removed for three Thai export products.In an effort to inform the public and

to garner support, MOPH and NHSOpublished a series of so-called "WhitePapers"6, which detailed the rationale for,as well as the legal issues and the deci-sion-making process of, the governmentuse authorizations. These White Paperswere widely circulated both within andoutside Thailand. A further detailed studywas conducted by an independent re-search arm of MOPH, the InternationalHealth Policy Programme, with the aimof documenting the policy processes in-volved in the decision to grant the gov-ernment use authorizations.7

The Minister of Public Health alsosought support from World Health Or-ganization (WHO) members at theWorld Health Assembly (WHA) in 2007.It is significant that the WHA that yearadopted a resolution, which urged theWHO Director General to provide tech-nical and policy support to countries onthe use of the TRIPS flexibilities.8 Thai-land became the first country to requestWHO support under this resolution. AWHO-led mission comprising expertsfrom the WTO, the United Nations De-velopment Programme and the UnitedNations Conference on Trade and De-velopment produced a technical reportin 2008, which has been widely inter-preted as confirming the government

intellectual property rights

use authorizations’ validity and compli-ance with the TRIPS Agreement.

ConclusionThe ability of developing countries tomake effective use of the TRIPS flexibili-ties has gained increased importance.Valuable lessons can be drawn from themanner in which Thailand handled thecriticism and political pressures directedat the government use authorizations.

Aware that the decision would bemuch scrutinized, the government au-thorities were at pains to ensure thatthe decision-making and implementa-tion processes were well-documentedand, hence, transparent. The govern-ment also sought the technical and legaladvice of international organizationsand civil society groups. These effortswere aimed at demonstrating the trans-parency of the policy decision and theaccountability of the government. Thesefactors were extremely helpful in elicit-ing support for the government useauthorizations and in countering thecriticism leveled against the measures.

The author is a freelance consultant basedin Bangkok.

Notes1 http://hdr.undp.org/en/reports/global/

hdr2001/.

2 http://ihppthaigov.net/index.php?option=com_wrapper&Itemid=105.

3 The use of generic ARV drugs andclopidogrel (for heart disease) wouldresult in savings of 800 million baht peryear. Note 2.

4 See Article 31 of TRIPS Agreement.

5 Thai Patent Act BE 2522 (A.D. 1979) asamended by the Patent Act (No. 3) B.E.2542 (A.D. 1999)

6 MOPH and NHSO. 2008a. The 10 BurningQuestions regarding the GovernmentUse of Patents on the Four Anti-cancerDrugs in Thailand. Ministry of PublicHealth and the National Health SecurityOffice, Thailand; and MOPH and NHSO.2008b. The Facts and Evidences on the10 Burning Questions related to theGovernment Use of Patents on threepatented Essential Drugs in Thailand.Ministry of Public Health and the NationalHealth Security Office, Thailand.

7 Tantivess et al. 2008. Note 2.

8 WHA Resolution 60.30, dated 24 May2007.

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special feature

farmers' rights

The neglect of farmers’rights is at the cost of therealization of people’s rightto food in developing andleast-developed countries.

Kamalesh Adhikari

The international community, atdifferent levels and in different

times, has made numerous commit-ments to addressing global foodinsecurity. But the reality is: the worldis still in a race against the clock in thewar against hunger.

In 1996, at the World Food Summitin Rome, world leaders made ahistoric global pledge to halve thenumber of undernourished peoplefrom the then level of more than 800million and eventually achieve foodsecurity for all by 2015. At the dawn of

a new millennium in September 2000,based on the outcomes of a decade ofmajor United Nations conferences andsummits, they scaled down theirpledge under the Millennium Devel-opment Goal 1 by setting out a time-bound target to halve the proportionof people who suffer from hunger byno later than 2015.

Unfortunately, the world is noteven near the achievement of thescaled-down millennium target.Instead, with an estimated increase of105 million hungry people in 2009, as

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are in a majority in total populationand rely on traditional farming andseed systems for livelihood, this issueis critically important.

Farmers’ rights: Why the neglect?Since the early 1980s, the issue offarmers’ rights pertaining to plantgenetic resources for food andagriculture has been receivingwidespread attention and recognitionin global negotiations as well asinternational instruments. Forexample, the International Treaty onPlant Genetic Resources for Food andAgriculture (ITPGRFA), which cameinto being in 2001 after a series ofnegotiations that started in 1983under the auspices of the FAO,provides for the protection offarmers’ rights (Box 1).

Enabling the Contracting Partieswhich may want to protect farmers'

the Food and Agriculture Organiza-tion of the United Nations (FAO)estimates, there are now 1.02 billionmalnourished people in the world,representing more hungry peoplethan at any time since 1970.

In the words of FAO DirectorGeneral Jacques Diouf, it is "our tragicachievement in these modern days"that "in some developed countries,two to four percent of the populationare able to produce enough food tofeed the entire nation and even toexport, while in the majority ofdeveloping countries, 60 to 80 percentof the population are not able to meetcountry food needs".

At a time when a number ofpoverty- and hunger-sricken develop-ing and least-developed countries arereeling under the global fuel and foodcrises, another global crisis, in theform of financial-turned-economiccrisis, is aggravating food insecurity.Estimates reveal that due to this crisis,developing and least-developedcountries have been facing declines inremittances, export earnings, foreigndirect investment and foreign aid,leading to loss of employment andincome. Moreover, in these countries,the already-felt impacts of climatechange have created harsh socio-economic and environmental condi-tions for poverty reduction and foodsecurity.

But as the FAO report titled “TheState of Food Insecurity 2009” alsoadmits, the fact that hunger was onthe rise even before the global crisessuggests that present efforts are noton track and future efforts need to beunprecedented in scale and effective inimplementation to make a differencein global food insecurity trends.

It is thus high time world leadersmoved beyond renewing commit-ments and, in partnership with allactors and agencies, made real actions.One of such actions is the implementa-tion of farmers’ rights to plant geneticresources which constitute the basis offood and agriculture production forpresent and future generations. Atleast in developing and least-devel-oped countries where poor farmers

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Box 1

Article 9 of the ITPGRFA has the fol-lowing sub-articles on farmers' rights:

9.1 The Contracting Parties recognisethe enormous contribution that thelocal and indigenous communities andfarmers of all regions of the world,particularly those in the centers of or-igin and crop diversity, have made andwill continue to make for the conser-vation and development of plant ge-netic resources which constitute thebasis of food and agriculture produc-tion throughout the world.

9.2 The Contracting Parties agree thatthe responsibility for realising Farm-ers’ Rights, as they relate to plant ge-netic resources for food and agricul-ture, rests with national governments.In accordance with their needs andpriorities, each Contracting Party

should, as appropriate, and subject toits national legislation, take measuresto protect and promote Farmers’Rights, including: (a) protection of tra-ditional knowledge relevant to plantgenetic resources for food and agri-culture; (b) the right to equitably par-ticipate in sharing benefits arisingfrom the utilisation of plant geneticresources for food and agriculture;and (c) the right to participate in mak-ing decisions, at the national level, onmatters related to the conservationand sustainable use of plant geneticresources for food and agriculture.

9.3 Nothing in this Article shall be in-terpreted to limit any rights that farm-ers have to save, use, exchange andsell farm saved seed/propagatingmaterial, subject to national law andas appropriate.

Provisions on farmers' rights in Article 9 of the ITPGRFA

Source: FAO. 2002. International Treaty on Plant Genetic Resources for Food and Agricul-ture. Adopted by the Thirty-First Session of the Conference of the Food and AgricultureOrganization of the United Nations on 3 November 2001. Rome: The Food and AgricultureOrganization of the United Nations.

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rights through national measures, theITPGRFA recognizes the enormouscontribution that the local andindigenous communities and farmersof all regions of the world have madeand will continue to make for theconservation and development ofplant genetic resources which consti-tute the basis of world food security.Notwithstanding some differencesduring negotiations among its Parties,it is encouraging to see that the two ofthe Treaty’s Governing Body sessions,held in 2007 in Spain and in 2009 inTunisia, have attempted to exploreand help the Parties implementmeasures to address farmers’ rights.This is also evident from the fact thatboth of these sessions led to theadoption of separate resolutions onfarmers’ rights, which, among others,sought global contributions ingathering views and experiences on

the implementation of farmers’ rights.However, if we look at how

developed countries, at the behest ofthe corporate lobby, have beenstrengthening intellectual propertyright (IPR) rules in global trade andenvironmental agreements, we cometo know that farmers’ rights are yet tobe realized in their whole spirit,though such rights form the basis ofthe realization of the right to food in amajority of developing and least-developed countries.

While the neglect of farmers' rightsin the Agreement on Trade-RelatedAspects of Intellectual Property Rights(TRIPS) of the World Trade Organiza-tion (WTO) and the Convention of theInternational Union for the Protectionof New Varieties of Plants (UPOV) hasbeen widely debated and understood,their non-recognition in the FAO's listof challenges that were identified forthe World Summit on Food Security,held from 16 to 18 November 2009 inRome, and in the declaration of theSummit is perplexing.

Key challenges, for whom?Ahead of the convening of worldleaders for the World Summit onFood Security at its headquarters inRome, the FAO had identified thefollowing key challenges to theSummit:

eradicating hunger from the earth.Not only to ensure sufficient foodproduction to feed a world popula-tion that will grow by 50 percentand reach 9 billion by 2050, but alsofind ways to guarantee thateveryone has access to the foodthey need for an active and healthylife.putting in place a more coherentand effective system of governanceof food security at both nationaland international levels.making sure developing countrieshave a fair chance of competing inworld commodity markets and thatagricultural support policies do notunfairly distort international trade.finding ways to ensure that farmersin both developed and developing

Box 2

At least 1.5 billion people in the worlddepend on small-scale farming fortheir livelihoods. Developing agricul-ture by ensuring that farmers, particu-larly small-scale farmers, have accessto improved varieties of seeds has beena central component of a model of ag-ricultural development sometimescalled the "green revolution" model.Support to these farmers often takesthe form of the provision of inputs,particularly seeds and fertilizers. How-ever, since small-scale farmers are poorand cannot move beyond subsistencefarming, this form of support can cre-ate problems.

First, although commercial seedvarieties may improve yields in theshort term, their higher performanceoften has been a response to inputs andto water availability. It is difficult forsmall-scale farmers to access such in-puts and reap benefits. Those who ac-quire inputs with their own means,

Can farmers benefit from commercial seeds?

often encouraged to do so during aninitial period of subsidized inputs, mayfind themselves trapped in the viciouscircle of debt as a result of a bad har-vest and the consequent impossibilityto reimburse input loans. This mayoccur particularly when they haveswitched to monocropping leading torevenues which may be higher in cer-tain seasons but less stable across theyears, and diminish resilience in the faceof climate change.

Second, commercial seed varietiesmay be less suited to the specific agro-ecological environments in whichfarmers work, and for which landrac-es (traditional farmers’ varieties) maybe more appropriate. Finally, the ex-pansion of surfaces cultivated withcommercial seeds accelerates crop di-versity erosion, as an increasing num-ber of farmers grow the same crops,using the same, "improved" varietieson their fields.

Source: United Nations. 2009. Report of the Special Rapporteur on the Right to Food. A/64/170,23 July. Submitted in accordance with Paragraph 36 of General Assembly Resolution 63/187.


countries can earn incomes compa-rable to those of secondary andtertiary sector workers in theirrespective countries.mobilizing substantial additionalpublic and private sector invest-ments in agriculture and ruralinfrastructure and ensuringfarmers’ access to modern inputs toboost food production and produc-tivity in the developing world,particularly in low-income andfood-deficit countries.agreeing on more effective mecha-nisms for early reaction to foodcrises.ensuring that countries are pre-pared to adapt to climate changeand mitigate negative effects.

These challenges undoubtedlyindicate the major action areas forworld leaders, but largely tend tounderestimate the crucial need ofrealizing farmers’ rights to plantgenetic resources for food andagriculture.

For instance, the crucial need of"mobilizing substantial additionalpublic and private investments inagriculture and rural infrastructure,and ensuring farmers’ access tomodern inputs" has been identified asone of the major challenges. Broadly,there can be no disagreement thattackling this challenge has a significantbearing on boosting food productionand productivity. But if the focus ismore on ensuring sustained access tocompetitive, transparent and privatesector-led markets for moderninputs—the notion that treats farmersas consumers and not as breeders andproducers of seeds—farmers' tradi-tional seed systems, which still formthe basis of agriculture and foodsecurity in many countries, will bedismantled for the benefit of a fewseed and agrochemical companies.

Therefore, it is important that theinternational community protectfarmers’ rights that have beenlegitimized by a number of interna-tional instruments and also imple-mented by some developing countriesat the national level. As seen in some

holding 57 percent of global commer-cial seed sales. It is indeed an irony thatwhile poor countries are agriculture-driven and genetic resources-rich, lessthan a dozen multinationals of a few de-veloped countries hold a majority ofIPRs on seeds, and benefit even in theperiod of the global food crisis by com-mercializing global hunger.

Declaration of the Summit: Doesit address farmers' rights?Despite the near total absence ofmajor rich nations in the Summit,there were expectations that the headsof state and government or theirrepresentatives would decide onmeasures and mechanisms to eradi-cate global hunger. However, asOxfam International viewed, thedelegates left Rome without tackling"many of the biggest challenges" anddid not also focus on "the need toincrease support to the kind ofsustainable farming methods thatwould help poor farmers".

Following deliberations on severalaspects of food security and insecurity,they came up with a declaration. Butthe seven-page document does not

countries, such an unbalanced focustowards modern inputs may haveserious political-economy implicationsfor farmers' livelihoods and foodsecurity in developing and least-developed countries (Box 2).

Moreover, it is important to notethat the identification of corporate in-terest-oriented issues in the list of chal-lenges that influences an important glo-bal gathering like the World Summit onFood Security and their strong recogni-tion in the Summit’s declaration are ofsignificance to multinational seed andagrochemical companies. Known as the"gene giants", the large share of suchcompanies in global seed and agro-chemical markets has already enabledthem to transform farmers from seedowners to mere licencees and consum-ers of IPR-protected seeds.

Thanks to developed countries, andglobal agencies and rules that supportthem, in 2008, when the global food cri-sis was pushing more farmers into pov-erty, as reported by Agro World CropProtection News of August 2008, onlyfive multinational seed companies—three from the United States and twofrom the European Community—were

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anywhere mention farmers' rights andtheir significance in relation to therealization of the right to food—though it lists a number of commit-ments towards helping smallholders,including women farmers, andstrengthening the capacity of farmersand their organizations.

One might argue that the WorldSummit on Food Security is not theright forum to dwell upon farmers'rights and its declaration does notneed to deal with such rights. But onecannot fathom why a declaration ofthe FAO Summit can express commit-ments to "increase the resilience ofagricultural producers to climatechange" and to "support the conserva-tion of, access to, and fair and equita-ble sharing of the benefits arisingfrom the use of genetic resources"without mentioning the need torealize farmers' rights. It is, in fact, amatter of concern how "the progres-sive realization of the right to ade-quate food in the context of nationalfood security", which is a commitmentunder the declaration, can be ensured,if there is no global call and supportfor farmers' rights in a gathering like

the World Summit on Food Security.Thus, a mere focus on the right to

food by the Summit and its declara-tion and non-mention of the need toprotect farmers' rights add to theevidence that there are vestedinterests who do not want to see theimplementation of farmers' rights bydeveloping and least-developedcountries. Such vested interests arevery much visible in global negotia-tions, for example, within the Councilfor TRIPS of the WTO, the GoverningBody sessions of the ITPGRFA, theWorld Intellectual Property Organiza-tion (WIPO), the United Nations, etc.

Notwithstanding these issues,developing and least-developedcountries should not leave any stoneunturned for defending their interestsand rights. Since the Summit has atleast committed to making actionstowards investing in "country-ownedplans", countries that aim to protectand promote farmers' rights shouldnot miss the opportunity of address-ing this unaddressed agenda in theirnational policies and programmes. Atthe same time, they also need todevelop negotiation strategies for

other global forums that might helpthem advance their national interests.

Copenhagen conference: Will itaddress farmers' rights?As recent trends in climate changenegotiations reveal, a legally bindinginternational climate change agree-ment is unlikely to be reached in theClimate Change Conference, to beheld from 7 to 18 December inCopenhagen. However, it is not thatthe Copenhagen gathering will nothold significance for future climatechange trends and deals.

As climate change continues toaffect biodiversity and change thegeography of agriculture all over theworld, pressures are mounting forstates as well as farmers to developstrategies needed to address theimplications of the unpredictable,unclear and inconsistent climaticconditions for agriculture and foodsecurity.

At the same time, multinationals,with their own corporate standardsfor the use, reproduction and market-ing of seeds, are now making everyattempt to commercialize climatechange, as they claim that they haveboth financial and technical capacitiesto make available seeds that adapt tochanging environments. In view ofthe already-felt impacts and predictedimplications, while there is a need toenhance the role of private sector invariety development and research, theCopenhagen meet should notundermine the role that the realizationof farmers' rights can play in address-ing climate change impacts onagriculture and food security.

The recognition of farmers' rightsin climate change adaptation andmitigation strategies and programmesby the Parties to the United NationsFramework Convention on ClimateChange (UNFCCC) could also help inmaking the TRIPS Agreement and theUPOV Convention supportive of foodsecurity goals in developing and least-developing countries. Although notimpossible, in view of the currenttrends and practices, this remains anuphill task.

As climate change continuesto change the geography ofagriculture all over theworld, pressures aremounting for states as wellas farmers to developstrategies needed to addressthe implications of theunpredictable, unclear andinconsistent climaticconditions for agriculture.


Trade can work as a means for theintroduction and diffusion of cli-

mate-friendly technologies. Technol-ogies embodied in goods and servic-es can reach countries that trade withthose that invent such technologies.Closer trade relations among nationscan also promote awareness of theexistence of climate-friendly technol-ogies even when such technologiesare not embodied in tradable goodsand services. This is quite important,particularly in the context of devel-oping countries, as the 2007 Inter-governmental Panel on ClimateChange study estimated that usingcurrently available technologies, if20 percent of energy is conserved indeveloping countries, the increase incarbon dioxide (CO2) emissions fromdeveloping countries from 2000 to2020 would decline to almost half ofwhat it would be without energy-sav-ing measures.

However, it is doubtful if technol-ogies can be the only solution to cli-

mate change. Although developedcountries can be assumed to havegood access to technologies and fi-nancial resources, the emissions inthese countries are 5 to 10 times high-er than acceptable levels. It is note-worthy that while North Americaand Western Europe have similarlevels of standard of living as wellas access to technologies, the emis-sion level in North America is almostdouble that in Western Europe. Eco-nomic and environment policies aswell as the attitude of the people playan important role in this regard.

International trade can lead tospecialization across nations, pro-moting efficiency. However, what isoften seen in practice is not so muchspecialization as intra-industrytrade. Nevertheless, intra-industrytrade can also play a positive role inpromoting competition and therebyenhancing efficiency as well as pro-viding more choices for consumers.But such benefits may involve envi-

ronmental costs through transporta-tion and associated pollution. Suchcosts can be quite significant as oneEuropean Union (EU) estimate saysthat by 2020, ships are set to emitmore greenhouse gases than all landsources combined unless some mea-sures are taken.

Such concerns may be valid evenwhen international specializationdominates or replaces intra-industrytrade. The comparative advantagetheory typically does not take intoconsideration transport costs. Inpractice, however, when economicagents make their decisions, they dotake account of transportation costs.But do they take into account thecosts imposed on the environment orclimate? There is no reason that thisshould happen on its own unlesstrade policy factors this into account.

The issue of emissions from ship-ping has also drawn the attention ofthe global community and there aretalks of imposing a tax on shipping.

trade and climate change

Nitya Nanda

Developing-country TradeAgenda for

Copenhagen

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However, such an approach may notbe appropriate. There is a need todistinguish between avoidable andunavoidable trade. For example, if acountry cannot produce certaingoods, it has to import them. On theother hand, some countries may havesuch resource endowments that theycan produce only a few goods andexport much of them. Moreover, a taxon shipping only will not take careof the emissions caused by transpor-tation over land.

Global rulesWhether trade can be restricted onthe basis of the climate friendlinessof production processes is still a con-tested territory. There has been a de-mand that if developed countrieshave to make emission cuts, theymust have some border tax adjust-ment mechanism to deal with im-ports coming from countries that donot take on emission-cutting commit-ments. These measures may be tar-geted at the way products are pro-duced rather than the inherent qual-ities of the products. The general ap-proach under the World Trade Or-ganization (WTO) rules has been toacknowledge that some degree oftrade restriction may be necessary toachieve certain policy objectives aslong as a number of carefully craftedconditions are respected. The WTOAppellate Body, in the Shrimp-Tur-

tle case, has opened the door to thepossibility of using trade measureson environmental grounds. Thoughthe issue is still not very clear, it maybe noted that the recent academic lit-erature in Europe has been more sup-portive of such trade measures. In-terestingly, neither the United Na-tions Framework Convention on Cli-mate Change (UNFCCC) nor the Ky-oto Protocol provides for specifictrade measures. In fact, the UNFC-CC stipulates that the measures tak-en to combat climate change, includ-ing unilateral ones, should not con-stitute a means of arbitrary or unjus-tifiable discrimination or a disguisedrestriction on international trade.

However, such a measure wouldbe difficult to implement in a fairmanner. Emissions would be differ-ent for different producers andwould also be difficult to measure.Thus, a single adjustment rate for allproducers is likely to be discrimina-tory. Moreover, such a single ratewould be a serious disincentive forproducers adopting energy-efficien-cy measures on their own. The casefor border tax adjustment may not bevery strong as a study has shownthat the overall impacts of domesticpolicies like carbon tax and energyefficiency standards on competitive-ness have not been substantive.While the impacts have been nega-tive in some sectors, in others, due to

subsidies and exemptions, they haveactually been positive.

The issue here is of governmentpolicies and measures that can re-strict trade. Individual purchasers,however, are free to make their buy-ing decisions that may include sus-tainability criteria. In fact, there are,albeit extremely limited, evidencesthat such measures are being adopt-ed by individual buyers in the devel-oped world.

Exports from developing coun-tries to developed countries—for ex-ample, the EU and the United States(US)—get considerably affected bythe practice of eco-labelling. Eco-la-belling, by looking at the entire lifecycle of the product and analysingthe production- and process-relatedcriteria, tries to ensure that exportsfrom a country are harmless for con-sumers and the environment of theimporting country. Therefore, emis-sion norms will enter the eco-label-ling criteria in the future with great-er measure.

Recently, in the US, product stan-dards introduced by companies andnon-governmental organizationshave been gaining importance, asthere is a price premium for labelledproducts. This means that develop-ing countries will be forced to sharethe burden of emission reductions indeveloped countries through thetrade route, even if they do not have

Neither the United NationsFramework Convention onClimate Change nor theKyoto Protocol provides forspecific trade measures.

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any emission reduction targets assuch, or developed countries do nottake border tax adjustment measures.

Meanwhile, the issue of climatechange has already entered the WTOthrough its trade and environmentagenda. WTO members have beendiscussing the liberalization of tariffand non-tariff barriers to trade inenvironmental goods and services,and there is now a call for a specialfocus on climate-friendly goods. AWorld Bank study has identified 43goods that can be climate-friendly.However, there is little understand-ing on the extent to which they canreduce the emission of greenhousegases. Many find this approach tobe not so useful. Moreover, technolo-gy being dynamic in character, a stat-ic list may not be of much value andrevising the list on a regular basiswould not be easy.

Surprisingly, the issue of technol-ogy transfer has not received muchattention in the WTO discussion ontrade and environment though it isan important component of the UN-FCCC agenda. Nevertheless, the is-sue of the role of intellectual proper-ty rights (IPRs) in access to environ-ment-friendly technologies has beenraised by some countries in the WTOCommittee on Trade and Environ-ment. Most notably, Cuba has de-manded the shortening of the patentprotection period to facilitate thetransfer of clean technologies. How-ever, as the issue of IPRs is not ex-plicitly mentioned in the Doha Agen-da on trade and environment, itwould be difficult to make any sub-stantial progress on this at the WTO.Similarly, there is also a WorkingGroup on Trade and TechnologyTransfer at the WTO wherein notmuch has happened that could havea bearing on this issue. Since an im-portant item on the WTO trade and

environment agenda is the clarifica-tion of the relationship between theWTO agreements and the multilat-eral environmental agreements, is-sues like border tax adjustment canalso be addressed here.

Stake of developing countriesFor climate change implications, itis important to look at the stock ofgreenhouse gases in the atmosphere.It is, of course, also true that flow islinked to stock. Nevertheless, if coun-tries are allotted emission entitle-ments as a stock concept and on thebasis of population size, most devel-oped countries have already ex-hausted their quota. Developed coun-tries now cannot take back their con-tribution to the stock of greenhousegases, but it then becomes incumbentupon them to take the responsibilityof mitigation and adaptation, evenin developing countries. The globaldiscourse on climate change, how-ever, is focusing more on the flow ofemissions and the stock concept isalmost missing.

Developing countries are not themajor contributors to the stock ofgreenhouse gases present in the at-mosphere. But a huge majority of thepeople living in these countries havebeen adversely affected by climatechange since they are mostly depen-dent on climate-sensitive sectors likeagriculture and fisheries for theirlivelihoods. In seasonally dry andtropical regions, crop productivity isprojected to decrease for even smalllocal temperature increases of 1 to 2degree celsius. It has been estimatedthat by 2020, in some African coun-tries, yields from rain-fed agriculturecould be reduced by up to 50 percent.For many countries, these sectors arealso the source of their exports. Cli-mate change is thus likely to adverse-ly affect the macroeconomic perfor-

mance of developing countries aswell as the livelihood and food secu-rity of their people.

Much of the discussion on tech-nology transfer in the context of cli-mate change has been concernedwith mitigation. However, for devel-oping countries, technology wouldprobably be more important for ad-aptation. These countries are in needof technology in agriculture so thatcrops can withstand the impacts ofclimate change. They are also in needof technology that could deal withwater stress as well as a greater oc-currence of existing diseases and thearrival of new ones.

Agenda for CopenhagenDeveloping countries’ trade agendawould be better addressed at theWTO than at the climate change con-ference in Copenhagen. Neverthe-less, by reiterating the already exist-ing UNFCCC provision of not usingtrade-restricting measures, it may beworthwhile to preempt the possibil-ity of using trade measures on cli-mate change grounds which mightnegatively affect developing-countryinterests without serving any sub-stantial environmental purpose.

Another important issue that theCopenhagen conference may consid-er is the issue of IPRs in climate ad-aptation and mitigation technolo-gies. It is important to reform the glo-bal IPR regime under the WTO fortransfer and diffusion of climate ad-aptation and mitigation technolo-gies. Only the WTO members can takea final call on this. However, theUNFCCC can contribute to the pro-cess by highlighting the issue andoutlining the agenda for IPR reformsat the WTO.

The author is Fellow, Centre for GlobalAgreements, Legislation and Trade, The Energyand Resources Institute (TERI), New Delhi.

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India’s Environment Minister JairamRamesh is well known for raising

controversies. Now, he has stirred thehornet’s nest by his out-of-the-boxthinking, arguing for a fresh ap-proach to climate change negotia-tions. And the Indian intelligentsiahas roundly criticized his views,expressed in his letter to PrimeMinister Manmohan Singh. This istypical of a country in which persis-tence with the “tried and tested”guarantees acceptance, and out-of-the-box thinking often invites censure

and, in certain cases, even ridicule.Thus, instead of congratulating

Ramesh for his innovative think-ing, which in any case was aninput into India’s final stand andnot the stand itself, we challengethe free flow of his refreshingviews. That too when the climateissue has been caught in a dead-lock for long with developing anddeveloped countries stubbornlysticking to their stands.

Jairam’s opinions are appropri-ate from another perspective. Over

the last decade or so, India hasmade the journey from a large,impoverished and laggard nation toan emerging power almost spokenof in the same breath as China,though still beset with significantdevelopmental problems.

As an emerging power, Indiashould also assume the responsi-bility of leading by example inclimate issues. The resulting moralpressure on the rich to clean uptheir act is sure to have a greaterimpact than expressions of resolve

Pradeep S Mehta

Should Indiatake the lead?

climate change debate


to not compromise, which havehad “zero success” in mitigatingclimate change. After all, theimpacts of climate change throughdecreased agricultural yield,floods, droughts and desertifica-tion will be felt mostly in thetropical zone, and therefore onIndia, China and their neighbours.To say that India should notinnovate or adjust its negotiatingstance is probably sheer folly.

In his attempt to address thelogjam, Jairam has been reported tohave recommended a new move forIndia by “not stick(ing) to G77alone” as it is now an integral partof the G20, taking positive “initia-tives to bring the US into themainstream” and “nuance” fromdemand for financial and techno-logical support from the richcountries for climate change

mitigation. His proposal has thepotential to lead to successfulclimate change agreement(s) andalso endorse India’s image as adeal maker, otherwise known as anobstructionist country in everyinternational negotiation.

The minister’s out-of-the-boxthinking is not as impulsive aspublicized by the media andpoliticians. Although supportive ofwestern efforts towards the conclu-sion of climate change negotia-tions, he has also maintained theessential crucial elements of India’sstand—the need to preserve thedistinction between the obligationsof developed and developingnations, which has been buttressedwell by the argument that bindingemission reductions would neces-sarily slow down sustainableeconomic growth in developing

countries, which at their currentlevel of economic wellbeing is stillan imperative.

The minister is also one of thefirst international statesmen torecognize the difference between“rights” and “responsibilities”—while the South has the right toresist binding emission ceilings, ithas the responsibility to self-regulate. Should the South notdraw a lesson from the nakeddisplay of aspirations by theNorth, which saw the ceaselessuse of resources not only inproductive activities associatedwith high emissions but destruc-tive pursuits such as world wars,nuclear bombings and stockpilingof weapons? At the same time, it istrue that no climate deals boundthe North in its economic marchand so it is not difficult to see whythe South does not want to restrictits growth prospects by beinglimited by one. This is especiallythe case as southern countrieshave modelled their political,economic and resource usestructures on the North.

Yet the counterpoint arguesthat it is time for the South toproject a more enlightened standas the future of the human race isat stake. It cannot afford to beblinded by the prospects of growthat this cost. The South remainswary of the intentions behind thiscounterpoint as it feels that thenorthern emphasis on southern“responsibilities” rather than“rights”, as embodied in theglobal framework climate changeconvention, might be another ruseto project northern interests.

But wariness does not justifyinertia or the lack of realization ofone’s responsibilities to thehuman race. India and Chinahave broken the shackles of globalrecession ahead of others, and arethus bound to be more hopefulabout faster growth. At this point,if these countries are asked toeffectively put a cap on suchgrowth, a negative response is

understandable. However, theyneed to shift their motives to ahigher plane as the future of theEarth is at stake. Climate changewill ultimately drown all of us ifnone of us take unilateral initia-tives. If India takes the initiative offloating a life boat, others arebound to follow. The doubledividend to India—mitigatedclimate change and an elevatedstatus in the global league ofnations —constitutes a strongdefence of Jairam’s stand.

To conclude, the climate changenegotiations are going nowherewith countries entangled in a“prisoners dilemma”, with eachsceptic of the motives of the otherand agreeing to take measures onlyif others do so in equal measure. Toprevent a logjam in climate changenegotiations, countries shouldpresent unilateral measures inconfidence to certain chosenmembers of the Convention.

These members would definethe guidelines for the new protocol,which would essentially be basedon the common measures includedin such unilateral reports. Thisprocedure avoids the problem ofwho goes first and would beacceptable to all, with minortweaking possible through provi-sions for country-specific flexibility.

Nations need to realize thatclimate change is already upon us.They should now put their bestfoot forward to temper it and softenits impact. Consensus is needed inthis regard, and swiftly! Withnations indulging in a flurry oftalks, the urgency being attached tothe matter has become sufficientlyevident. But will countries chooseto be guided by the foresight ofleaders like Jairam Ramesh orcontinue en masse on the myopicand inflexible paths of devastationand self-destruction?

The author is Secretary General, CUTSInternational, Jaipur. A version of this articlefirst appeared in The Economic Times on28.10.09. Shruti Mittal and SiddharthaMitra contributed to this piece.

climate change debate

While the South has theright to resist binding

emission ceilings, it has theresponsibility to self-

regulate.


Trampling

on farmers’ rights

India’sSeed Bill

farmers’ rights

India’s attempt to create a balance between breeders’ andfarmers’ rights has been greatly challenged by Seed Bill 2004,which is basically corporate interest-driven.

S. Bala Ravi

With the public research institu-tions' share of 26 percent and the

private sector's share of 4 percent, theIndian seed industry is the eighth larg-est in the world. The estimated value ofseed turnover in India is US$1.06 billionper year, and is growing at the rate of12–13 percent per annum. Similarly, thehybrid seed market of India, account-ing for about 3.7 percent of the globalmarket, is also growing at the rate of 10percent against the global growth rateof 5 percent. Therefore, the private seedindustry has a huge interest in the Indi-an seed legislation and its implementa-tion, and also has the ability to influencethe legislation-making process.

On the other hand, about 70 percentof India's seed system is managed byfarmers’ traditional practices like sav-ing seed from own harvest, and usingthem for re-sowing, sharing, exchang-ing, bartering and selling. Such practic-es are also the mainstay of the conser-vation and enrichment of plant geneticresources (PGRs). But, because Indianfarmers are unorganized, they have theleast clout to influence any legislativeprocess. Therefore, any responsible leg-islative and enforcement process shouldnot ignore the interests of farmers.

In India, to regulate the seed mar-ket that saw the arrival of high-yieldingvarieties in food grain crops in the1960s, the first Seed Act was legislatedin 1966, which became operational alongwith the enactment of the Seed Rules in1968. The Seed Act and Rules wereamended in 1972, 1973, 1974 and 1981.The Seed Act and its amendments donot cover farmers’ traditional seed sys-tems.

Seed Bill 2004With a view to repealing and replacingthe Seed Act 1966, India introduced aSeed Bill in 2004. Unlike the Seed Act1966, the Seed Bill covers farmers’ tradi-tional seed systems. Among others, oneof the notable exemptions provided inthe Bill with regard to farmers’ seed is:

“Nothing in this Act shall restrict theright of the farmer to save, use, ex-change, share or sell his farm seeds andplanting material, except that he shall notsell such seed or planting material under a


Box

In 2001, India instituted the PPVFRAct with the primary goals offulfilling India’s commitment toproviding intellectual property rights(IPRs) on plant varieties to complywith the Agreement on Trade-Related Aspects of IntellectualProperty Rights (TRIPS) of the WorldTrade Organization (WTO). The Actwas also instituted to protectfarmers’ rights to seeds. It was alsoassumed that the Act would be

PPVFR Act 2001

brand name or which does not conform tothe minimum prescribed limit of germina-tion, physical purity, genetic purity” (Ital-ics added).

Despite the coverage of the farm-ers’ seed system, the Seed Bill 2004 hasignored farmers’ rights that have beenrecognized and established by the Pro-tection of Plant Varieties and Farmers’Rights (PPVFR) Act 2001 (Box).

Comparative analysis of thePPVFR Act and the Seed BillThe contradictions between the PPVFRAct and the Seed Bill have serious impli-cations in view of the fact that the Billenjoys temporal precedence over theAct. The major contradictions betweenthe Act and the Bill have been brieflydiscussed below.

Registration of seedProvisions regarding the registration ofa variety under the Seed Bill is such thata variety not registered under the PPV-FR Act can be registered under the SeedBill. Moreover, while registration underthe PPVFR Act requires detailed docu-ments to substantiate the legality of theprocess, the Seed Bill offers registrationwithout a priori establishment of legalownership of the applicant on the vari-ety. Such provision in the Seed Bill mayfreely allow a party to pick any seed,including farmers’ variety or public orprivate research variety, for registrationand carry out seed business. Moreover,the detection of such intrusive registra-

tion is also not easy as the registrationprocess is non-transparent.

Truthful disclosureOne of the essential requirements forregistration under the PPVFR Act istruthful disclosure of the pedigree of thevariety, the geographical origin of pa-rental material used, as well as an affi-davit on the lawful acquisition of theparental material. This information islinked to the benefit sharing provisionof the Act. In the case of the Seed Bill,there is no obligation whatsoever fordisclosing either the pedigree of the va-riety under registration or the geo-graphic origin of its parental materialor the process of accessing these mate-rials.

Benefit sharingThe PPVFR Act provides for the shar-ing of the economic gains accrued to theuser who registers the variety with theconservers or providers of PGR. TheSeed Bill, on the other hand, has noprovision for benefit sharing and iden-tifying persons or institutions eligiblefor the same. Thus, the Bill short cir-cuits the benefit sharing provision ofthe PPVFR Act.

Institutional system for variety testingThe eligibility test for the registration ofa variety under the PPVFR Act is thetest for distinctness, uniformity and sta-bility (DUS), and in some cases, biochem-ical test, of a seed. These tests, under

this Act, are to be carried out only byaccredited government institutions. Re-garding the Seed Bill, the important testdata required are: agronomic perfor-mance assessed from multi-location test-ing (MLT); and certification of seed qual-ity. The Bill seeks to have these testsconducted by accredited public and pri-vate organizations, including privateindividuals. The ability of the Centraland State governments to hold theseprivate institutions and individuals(some of them also associated with seedtrade) accountable for the importantdata they provide based on their tests isquestionable.

Regulation of seed priceIn countries like India, there are instanceswhere seed companies have misusedtheir monopoly on seed to levy arbi-trary and high prices. By including theprovision of compulsory licensing, thePPVFR Act seeks to regulate unreason-ably high seed prices, including unfairmethods like creating artificial seedshortages. The Seed Bill, on the otherhand, has no provision to regulate seedprices.

Farmers’ rights to seedRecognizing farmers as cultivators, con-servers and breeders, the PPVFR Actprovides a number of farmers’ rights:

the right to seeds;the right to fair and equitable bene-fit sharing when PGR conserved by

farmers’ rights

instrumental in stimulating invest-ment in research and development bythe private seed industry that wouldensure the availability of high qualityseed and planting materials tofarmers. In other words, the Actstrikes a balance between the rights offarmers and breeders. But with theSeed Bill 2004 in the offing, there arewidespread concerns that farmers’rights instituted by the Act would beinfringed.

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farmers is used to breed a new com-mercial variety;the right to register farmers’varieties;the right to recognition and rewardfrom the National Gene Fund fortheir contribution in the conserva-tion and improvement of and mak-ing available PGRs;unrestricted access to registeredseeds at reasonable prices;the right to claim compensation forunderperformance of a registeredseed;judicial protection against an inno-cent infringement of the Act; andexemption from all fees related tothe administration of the Act andjudicial proceedings.

Farmers’ right to seeds, accordingto the Act, is the right to save, use, sow,re-sow, exchange, share or sell farmproduced seeds. It is also the right tosell seeds even of registered varieties,but only in non-branded form. The SeedBill, on the other hand, renders theseseed transactions conditional. It intro-duces a rider that seeds or planting ma-terial sold by farmers have to conformto the minimum prescribed limits of ger-mination, physical purity and geneticpurity. As the traditional seed systemof farmers is practised outside the for-mal commercial seed system and with-out any legal encumbrances, the intro-duction of the above rider may lead tothe choking of the traditional seed sys-

tem or rendering the transactions there-in a punishable offence. The creation ofsuch an obstacle in the traditional seedsystem may divert the demand for seedsfrom the traditional to the formal sys-tem and thus benefit seed companies.

Registration of GM crop varietyAn application for the registration of agenetically modified (GM) crop variety,according to the Rules of the PPVFRAct, will be acceptable only if such anapplication is accompanied by a bio-safe-ty clearance certificate from the compe-tent authority. In the case of the SeedBill, it makes GM crop varieties eligiblefor provisional registration for a periodnot exceeding two years even withoutthe bio-safety clearance from the com-petent authority.

PenaltyThe Seed Bill is notable for a very softpenalty in comparison to the PPVFR Act.For instance, all offences under the PPV-FR Act are punishable with imprison-ment from three months to three yearsand fines from INR 50,000 to 500,000. Incontrast, as provisioned in the Seed Bill,the punishment for most of the offenc-es, including selling spurious seeds tofarmers, is a fine of a mere INR 5,000 to25,000, with no prison term. Compar-ing this penalty with the price of toma-to seeds at INR 25,000 to 75,000 per kgor the price of hybrid rice seeds at INR25,000 per quintal, one can infer that thelow penalty will not be able to prevent

spurious seed trade and deter fly-by-night seed traders.

Future directionDue to anti-farmer provisions of theSeed Bill, farmers and civil society ac-tors in India dubbed the Bill a legislativepiece drafted at the behest of the seedindustry to serve its end and snatchaway farmers’ rights. The strong andwide public opposition to the Bill forcedthe Government of India to refer theBill to the Parliamentary Standing Com-mittee on Agriculture for examination.

The Committee, through a consul-tative process, offerred valuable recom-mendations in 2006 for undoing mostof the deficiencies of the Bill and takemeasures to address farmers’ rights.This led to the introduction of theamended Seed Bill in the Indian Parlia-ment in 2008, but it has not been enact-ed as of now.

Given the nature of agriculture andsignificance of the need to protect farm-ers’ rights to plant genetic resources(seeds) in India, which is very much re-flected in the objectives and provisionsof the PPVFR Act, it is crucial that theGovernment of India do not create anylegal and institutional barriers for therealization of farmers’ rights. This de-mands the government to take bold in-itiatives to respond to the rising pres-sures from vested interests, mainly seedcompanies.

The author is associated with MS Swami-nathan Research Foundation, Chennai.

In countries like India, thereare instances where seedcompanies have misused theirmonopoly on seed to levyarbitrary and high prices.


We, the participants of theSouth Asian Civil Society

Consultation on Trade, ClimateChange and Food Security Agendafor Copenhagen, held from 9-11September at Gokarna ForestResort, Kathmandu, Nepal, viewthat addressing climate changeimpacts, food insecurity, and tradeconcerns in times of global econom-ic crisis has become more impor-tant than ever.

We also view that trade, climatechange and food security issues areinterlinked both positively andnegatively, and, thus, need seriousattention for harmonization ofrelated policies and practices by allgovernments, actors and agencies.We believe that trade and climatechange negotiations and deals—mainly under the aegis of theWorld Trade Organization (WTO)and the United Nations FrameworkConvention on Climate Change(UNFCCC), respectively—shouldbe mutually supportive so as tocontribute to sustained growth,food security, poverty reductionand environmental sustainability.

We also believe that such tradeand climate change negotiationsand deals, as well as all the local,national, regional and internation-al efforts in agriculture, including

those of the Food and AgricultureOrganization of the United Nations(FAO) and other United Nationsbodies, the World Bank and theAsian Development Bank, needharmonization and coordinationfor sustained world food security.

In particular, we take note of thefact that South Asian countries arehighly exposed to the adverseimpacts of climate change althoughtheir historical contribution toclimate change is insignificant. Wedraw the attention of South Asiangovernments and the internationalcommunity, including UNFCCCparties, to the past, present andfuture impacts of climate change onSouth Asia. In particular, we areconcerned about the impacts onSouth Asia projected by the FourthAssessment Report of the Intergov-ernmental Panel on ClimateChange—glacier melting in theHimalayas causing increasedflooding and affecting waterresources; compounded pressureson natural resources and theenvironment due to rapid urban-ization, industrialization, andeconomic development; decrease incrop yields by up to 30 percent bythe mid-21st century; rise inmortality due to diarrhoea primari-ly associated with floods and

droughts; and sea-level riseexacerbating inundation, stormsurge, erosion and other coastalhazards. We also note that meltingHimalayan glaciers and otherclimate change impacts pose adirect threat to the water and foodsecurity of more than 1.6 billionpeople in South Asia.

We are also concerned about theunequal playing field and unfairtrade deals at different levels,including the WTO, and take notethat there has been limited coopera-tion at the multilateral level as wellas at the level of South AsianAssociation for Regional Coopera-tion (SAARC) for harnessing thepotential of using trade as a meansto achieve growth, food securityand poverty reduction. We notethat, as a result of the globaleconomic crisis, world trade isprojected to decline by 10 percentin 2009, and there has been someslippage towards protectionism.We express our deep concern overthe threat of a new kind of protec-tionism—climate protectionism—which, if not addressed, may haveadverse ramifications for thedevelopment-friendly functioningof the multilateral trade regime, aswell as the South Asian and globaleconomies.

Trade,Climate ChangeandFood Security

civil society declaration


We also take note of the fact thatSouth Asia accounts for 23 percentof the world’s population butgenerates hardly 2 percent of theglobal income. We are concernedthat housing 40 percent of theworld’s poor and 35 percent of theworld’s undernourished people,South Asia continues to have thehighest concentration of povertyand hunger. We call for attention tothe growing vulnerability of thepoor in South Asia as they dependsignificantly on rain-fed agricul-ture and live in settlements that arehighly exposed to climate variabili-ty. We are worried that failure tomake trade and climate changenegotiations and deals mutuallysupportive will deepen foodinsecurity in South Asia withsevere implications for the region’sefforts to achieve the MillenniumDevelopment Goals, as well as theSAARC Development Goals.

Realizing the crucial roles thatthe UNFCCC, the WTO, SAARCgovernments, and other actors andagencies can play in reexamining,redefining and strengthening thelinkages among and between trade,climate change and food security,we put forth the following recom-mendations and demands that webelieve must be addressed for a

world oriented towards inclusiveand sustainable global integrationand development.

Demands at theUNFCCC level

• We demand that Annex 1countries ensure full and faithfulimplementation of the commit-ments made under the KyotoProtocol, and make a time-boundcommitment for deeper green-house gas emissions cutscompared to 1990 levels.

• We demand that developedcountries provide at least 1percent of their gross nationalproduct to climate adaptationand mitigation fund and theCOP/MOP Authority mobilizethe fund in a fair, equitable andjust manner and in the interest ofdeveloping and least-developedcountries. We also call upondeveloped countries to ensurethat a larger share of funding ismade available for adaptation.

• We demand that support to theclimate adaptation and mitiga-tion fund be over and aboveother aid commitments and inline with the PartnershipCommitments made in the ParisDeclaration on Aid Effective-

ness. We call upon UNFCCCparties to ensure an enablingenvironment for the develop-ment and implementation oflocal community-centred actionprogrammes on climate changeadaptation and mitigation, andto ensure that such programmesare measurable, reportable andverifiable, as well as accountableto the communities and societiesaffected by climate change.

• We urge developed countries toprovide financial and technicalassistance to vulnerable coun-tries, mainly developing andleast-developed countries, tocope with climate-induceddislocation and distress, andaddress the concerns relating toenvironmental refugees.

• We urge developed countries toagree on legal and institutionaloptions and make time-boundcommitments to introduceincentive mechanisms andimplement measures that removethe obstacles to and providefinancial and other incentivesfor scaling up the development,transfer and acquisition ofclimate-friendly technologies indeveloping and least-developedcountries.

• We call upon UNFCCC parties

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to recognize the impacts ofclimate change on agricultureproductivity and food security,and identify and provideenvironment-friendly agriculturesupport measures for enhancingagriculture productivity andfood security. In this regard, wealso demand that UNFCCCparties refrain from promotingfaulty solutions to climatechange such as encouragingthose biofuels that negativelyaffect food availability andprices, as well as the resourcebase.

• We also demand that UNFCCCparties agree to implementmeasures to regulate environ-ment-unfriendly use of biotech-nology and the unjust applica-tion of intellectual propertyrights (IPRs) in the area ofbiodiversity and agriculture, andimplement measures to protectthe environment and the rightsof local, indigenous and farmingcommunities over their biologi-cal resources and associatedknowledge.

• We call upon UNFCCC partiesto make a fundamental changein the manner in which theClean Development Mechanism(CDM) operates, in that itsenvironment integrity is ensured

and it benefits the least-devel-oped countries (LDCs) and thepoor. In this connection, we alsodemand that the parties imple-ment measures that harnessCDM more closely with develop-ment and sectoral priorities aswell as attract and utilize bothpublic and private funding.

• We call upon UNFCCC partiesto seek compliance of a globalclimate change deal with otherinternational conventions,treaties and agreements thatgovern trade, biodiversity,environment, etc., and necessarysupport from relevant bodies, asand when required.

Demands at theWTO level

• We demand that any outcome ofmultilateral trade negotiationson environmental goods andservices reflect the trade, devel-opment and environmentalinterests of developing and least-developed countries.

• We urge developed countriesand those developing countriesthat are in a position to do so toprovide concrete supportmeasures for building thesupply-side capacity of theLDCs in environmental goods

and services. We also demandthat the WTO’s aid for tradeinitiative be implemented forenabling the developing andleast-developed members torealize their trade potential inenvironmental goods andservices.

• We call upon WTO members toaddress the possible negativeimplications of preferenceerosion for the LDCs in the eventof the liberalization of environ-mental goods and services.

• We urge WTO members not toresort to climate protectionismby taking unilateral trademeasures to compel tradingpartners to take on emissionsreduction commitments.

• We urge developed countries tocreate incentives, includingthrough the provisioning oftechnology transfer funds andrelaxation of IPR rules, forensuring transfer of climate-friendly technologies to devel-oping and least-developedcountries. In particular, wedemand that developed coun-tries develop and implementconcrete measures for theimplementation of their commit-ments on technology transfer tothe LDC members under Article66.2 of the Agreement on Trade-

It is crucial to ensure that anyoutcome of multilateral tradenegotiations onenvironmental goods andservices reflect the trade,development andenvironmental interests ofdeveloping and least-developed countries.

civil society declarationLI

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Related Aspects of IntellectualProperty Rights (TRIPS),including for enabling develop-ing and least-developed coun-tries to use the IPR flexibilities.

• We demand that WTO membersreview the Agreement onSubsidies and CountervailingMeasures (ASCM) and agree onincentives and implementmeasures for the removal ofsubsidies on fossil fuels and thestrengthening of subsidies forrenewable energy sources, andin this regard, also address thespecial needs and developmentconcerns of developing andleast-developed members.

• We call upon WTO members toreview TRIPS Article 27.3 (b),taking into account its implica-tions for climate change, includ-ing biodiversity and the rights oflocal, indigenous and farmingcommunities in developing andleast-developed countries. Wealso demand that WTO membersaccomplish the review negotia-tions by 2010 and make TRIPScompatible with the Conventionon Biological Diversity (CBD).

Demands at theSAARC level

• We call upon SAARC countriesto develop and implement aSouth Asian Framework Agree-ment on Climate Justice, and toset up a South Asian climatechange observatory to assessand forecast climate changeimpacts, and establish a jointmonitoring system to address,among others, glacial melting,sea-level rise and impacts onriver basins.

• We urge SAARC countries tocreate and mobilize a regionalclimate change adaptation andmitigation fund and link it withnational-level climate changeadaptation and mitigationfunds.

• We urge SAARC countries toaddress the impacts of climate

change on human rights, and tocreate and implement a regionalinsurance mechanism to addressthe climate change impacts onpoor, marginalized and vulnera-ble communities.

• We urge SAARC countries to usetrade as a means to addressclimate change, food securityand development concerns bysubstantially increasing intra-regional trade, particularly inagriculture products, through,among others, the pruning ofsensitive lists, removal of non-tariff and para-tariff barriers,and prohibition of food exportban.

• We demand that SAARCcountries develop their commonunderstanding and positions onthe liberalization of trade inenvironmental goods andservices for multilateral forums,and strengthen cooperation on itat the regional level.

• We urge SAARC countries topromote public-private partner-ship for, and South-Southcollaborative research anddevelopment, and investmentprojects and programmes on, thedevelopment and transfer ofclimate-friendly technologies.

• We demand that SAARCcountries effectively operational-ize the SAARC Food Bank byimproving its governancemechanism. In particular, wedemand that its distributionsystem be made responsive toseasonal food insecurity andfood emergencies, and accessiblefor affected people and commu-nities.

• We demand that SAARCcountries reinvigorate nationalinnovation systems to strength-en and develop appropriatetechnologies for climate changeadaptation and mitigation,including for sustainablenatural resources management.We also urge SAARC countriesto document and disseminategood adaptation and mitigation

practices in agriculture, andpromote the sharing andadoption of such practiceswithin the region and outside.We also urge SAARC govern-ments to support local andindigenous technologies, andharness the potential of localand indigenous knowledge inagriculture, through community-led biodiversity managementprogrammes, including partici-patory plant breeding andvariety selection programmes.

• We urge SAARC countries toimplement policy and institu-tional measures for the establish-ment, expansion, strengtheningand effective operationalizationof community, national andregional seed systems and genebanks. In particular, we alsodemand that, strengthening andlinking with community andnational seed banks, SAARCcountries establish and opera-tionalize a SAARC Seed Bank soas to ensure an effective long-term mechanism of production,exchange and use of farmer- andenvironment-friendly qualityseeds in the region.

• We urge SAARC countries tosupport community-led on-farmconservation programmes;develop regional guidelines andframeworks on biotechnology,biopiracy, IPRs and farmers’rights; and develop and opera-tionalize a regional access togenetic resources and benefitsharing regime.

For further information, please contactSAWTEE.

SAARC countries should usetrade as a means to addressclimate change, food securityand development concernsby substantially increasingintra-regional trade,particularly in agricultureproducts.


The idea of granting developingcountries preferential tariff rates

in the markets of industrializedcountries was originally mooted in1964. In 1971, the Contracting Partiesto the General Agreement on Tariffsand Trade (GATT)––the precursor tothe World Trade Organization (WTO)––approved a waiver to the GeneralMost-Favoured-Nation (MFN)treatment of the GATT (Box 1) for 10years in order to authorize theGeneralized System of Preferences(GSP) scheme. Later, as part of theTokyo Round, the Parties decided toadopt the 1979 Enabling Clause,Decision of the Contracting Parties of28 November 1979 (26S/203)entitled "Differential and morefavourable treatment, reciprocity andfuller participation of developingcountries", creating a permanentwaiver to the MFN clause to allowpreference-giving countries to grantpreferential tariff treatment undertheir respective GSP schemes.

The Enabling Clause is stillapplicable as part of the GATT 1994under the WTO. By allowing deroga-tions to the MFN treatment in favourof developing countries, it enablesdeveloped-country members to givedifferential and more favorabletreatment to developing countries. Itis the WTO legal basis forthe GSP under which developedcountries offer non-reciprocal prefer-ential treatment (such as zero or lowduties on imports) to productsoriginating in developing countries. Indoing so, preference-giving countriesunilaterally determine which countries

and which products are included intheir schemes. The Enabling Clausealso provides the legal basisfor regional arrangements amongdeveloping countries and forthe Global System of Trade Preferenc-es (GSTP). A number of developingcountries exchange trade concessionsamong themselves as part of theGSTP.

S&DT in WTO Agreements

When the WTO was established in1995 by also including agreements onservices and intellectual propertyrights, among others, those agree-ments too contained "special anddifferential treatment (S&DT)"provisions that give developingcountries special rights. The S&DTprovisions can generally be classed infive main groups:

Provisions aimed at increasingtrade opportunities throughmarket access;Provisions requiring members tosafeguard developing-countryinterests;Provisions allowing flexibility inrules and disciplines governingtrade measures;Provisions allowing longertransitional periods; andProvisions for technical assistance.

Box 2 provides an indicative list ofthe S&DT provisions for the least-developed countries (LDCs) containedin some of the major WTO Agree-ments. Many of the agreements

understanding WTO

provide LDCs flexibility in theimplementation of certain rules andcommitments including longerimplementation periods.

In addition to the LDC-specificS&DT provisions contained in the legaltexts of the WTO, there are a numberof Ministerial decisions and declara-tions in favour of the LDCs. Forexample, the Decision on Measures infavour of the LDCs adopted in thecontext of the Uruguay Round toaddress the special concerns of theLDCs states that they will only be

The LDCs

Special anddifferential treatment for

Box 1

With respect to customs duties andcharges of any kind imposed on orin connection with importation orexportation or imposed on theinternational transfer of paymentsfor imports or exports, and withrespect to the method of levyingsuch duties and charges, and withrespect to all rules and formalitiesin connection with importation andexportation, and with respect to allmatters referred to in paragraphs 2and 4 of Article III,* any advantage,favour, privilege or immunitygranted by any contracting party toany product originating in ordestined for any other country shallbe accorded immediately andunconditionally to the like productoriginating in or destined for theterritories of all other contractingparties.Source: www.wto.org

General MFN Treatment


required to undertake commitmentsand concessions to the extent consis-tent with their individual develop-ment, financial and trade needs ortheir administrative and institutionalcapabilities. The Decision includesprovisions that require the expeditiousimplementation of S&DT provisionsfor the LDCs, the need to accordspecial consideration to the exportinterests of the LDCs, and the need forsubstantially increased technicalassistance.

In all the WTO Ministerial declara-tions, there is special reference to theneeds of the LDCs. At the first WTOMinisterial in Singapore in 1996,Ministers adopted the WTO ActionPlan for LDCs. The Plan aimed toimprove the trade opportunities of theLDCs and their integration into themultilateral trading system. In

pursuance of the Action Plan, a High-Level Meeting on Integrated Initia-tives for Least-Developed Countries'Trade Development was held inOctober 1997, organized by the WTOin close collaboration with theInternational Monetary Fund,International Trade Centre, UnitedNations Development Programme,the World Bank and UNCTAD. TheMeeting endorsed the IntegratedFramework for trade-related technicalassistance to the LDCs, which seeks toincrease the benefits that the LDCsderive from technical assistance tohelp them enhance their tradingopportunities.

Similarly, at Doha in November2001, Ministers recognized theparticular vulnerability of the LDCsand committed to addressing theirmarginalization in international trade

and improving their effective partici-pation in the WTO system. TheDeclaration on TRIPS Agreement andPublic Health, also adopted at Doha,instructed the Council for TRIPS toextend LDCs' transition period underTRIPS in respect of pharmaceuticalproducts until 1 January 2016.

Likewise, in the Hong KongMinisterial in 2005, the LDCs werepromised duty-free and quota-freemarket access on 97 percent of tarifflines in developed countries as well asdeveloping countries in a position todo so.

Despite the S&DT provisions asdefined in various WTO Agreementsand pledges and commitments madein different times, their implementa-tion so far has not been effective.

Based on information available atwww.wto.org and www.unctad.org.

Box 2

LDCs are exempt from undertaking reduction commitments.

LDCs had the possibility of delaying for up to five years, the implementationof the provisions of the Agreement with respect to their sanitary and phyto-sanitary measures affecting imports.

Particular account to be taken of LDCs in the provision of technical assistanceand in the preparation of technical regulations.

LDCs are exempted from prohibition on export subsidies. Prohibition onsubsidies that are contingent upon export performance is not applicable toLDCs for eight years.

Special priority given to LDCs in implementing Article IV of GATS and partic-ular account to be taken of the difficulties encountered by LDCs in acceptingnegotiated commitments, owing to their particular needs. Special consider-ation is given to LDCs with regard to encouraging foreign suppliers to assistin technology transfers, training and other activities for developing telecom-munications.

Delay for up to 10 years in implementing most of TRIPS obligations. Possibil-ity of extension following duly motivated request. Members to provide in-centives for encouraging the transfer of technology to LDCs.

Particular consideration should be given to the special situation of LDCs in allstages of a dispute involving an LDC. Members to exercise due restraint inraising matters involving an LDC. LDCs may request use of the good officesof the Director-General or the Chairman of the Dispute Settle Board.

S&DT provisions for the LDCs in major WTO Agreements

Agreement on Agriculture

Application of Sanitary andPhyto-sanitary Measures (SPSMeasures)

Agreement on Technical Barriersto Trade (TBT)

Agreement on Subsides andCountervailing Measures

General Agreement on Tradein Services (GATS)

Agreement on Trade-Related Aspectsof Intellectual Property Rights (TRIPS)

Understanding on Rules and ProceduresGoverning the Settlement of Disputes

Source: www.wto.org


book review

The least-developed countries(LDCs) and other poor countries

have not been able to reap benefitsfrom globalization. Why is this hap-pening? In Trade, Growth and PovertyReduction: Least Developed Countries,Landlocked Developing Countries andSmall States in the Global Economic Sys-tem, TN Srinivasan explores the linksbetween trade, growth and poverty,explaining why LDCs and small,poor states are marginalized in theglobal economic system.

Srinivasan concludes that theprimary constraints on strengthen-ing the linkages between trade,growth and poverty are largely do-mestic and basically of political econ-omy. While not denying that exter-nal constraints are absent or unim-portant, he argues they are second-ary to the domestic ones and remov-ing them is a crucial step for maxi-mizing trade liberalization benefits.

Terming trade preferences un-warranted, Srinivasan says the spe-cial and differential and “morefavourable” treatment has been tri-ply damaging—once directly,through enabling them to continuetheir costly import-substitution strat-egies; a second time by allowing de-veloped countries to retain their ownGeneral Agreement on Tariffs andTrade (GATT)-inconsistent barriers(in textiles) against developing-coun-try imports; and a third time by al-lowing industrialized countries tokeep higher-than-average most-favoured-nation tariffs on goods ofexport interest to developing coun-tries. The author believes that underthe Doha Round of trade negotia-tions at the World Trade Organiza-

tion (WTO), the LDCs should be giv-en a longer time for meeting commit-ments but allowing them to retainhigher trade barriers is counterpro-ductive. He argues that by agreeingto the demands of developing coun-tries for concessions in commitmentsand obligations, developed coun-tries are able to avoid making anyresource-transfer commitments.

Srinivasan argues that had devel-oping countries participated “fully,vigorously and on equal terms” withdeveloped countries in the GATT,and had they adopted an outward-oriented development strategy, theycould have achieved far faster andbetter-distributed growth. The expe-riences of China, India and EastAsian nations are cited as successstories. What is not mentioned,though, is that these countries large-ly grew and developed on their ownterms and—particularly in the caseof China and East Asian nations—did not reduce the role of the state toa bare minimum. Moreover, no ex-planation is offered as to why thereduction in poverty has not been asspectacular in India as in China.

At the theoretical level, the authorpoints out the pitfall of using out-come-based criteria for classifyingcountries as the LDCs. He empha-sizes that the development outcomesare the result of an interplay of en-dogenous and exogenous factors.

The issue of sovereignty inevita-bly comes up in the context of exter-nal support for poor countries. Srin-ivasan considers sovereignty “in-creasingly irrelevant” and advocatesinfringing sovereignty, if needed, inorder to “help millions living in a

poor state of development, with in-ternational agreement and propersafeguards against misuse”. This isan open invitation to powerful na-tions to intervene in domestic poli-cy-making of smaller, less powerful,poorer nations. He seems to ignorethe fact that the nation state is notdead but alive and kicking, and pow-erful nation states are driving theglobalization process.

While Srinivasan appears to be aneoliberal with absolute faith in thefree workings of the market, some ofhis recommendations for multilater-al institutions may find resonancewith even his usual critics. He wantsthe World Bank to be reconstitutedinto a smaller institution to cater toonly the needs of those developingcountries that do not have access toworld capital markets. He opposesthe International Monetary Fund’sintrusion into poverty alleviation;suggests that it confine itself to main-taining global financial stability; andcalls for a reform in its voting sys-tem. He wants the WTO’s capacitybuilding efforts to be multidimen-sional and broader based.

However, his argument thatWTO’s “ultra legalistic” dispute set-tlement mechanism (DSM) penalizesthe poorer members and recommen-dation for a reversion to the GATTsystem ignore the fact that the DSMmakes the WTO distinctively betterthan the GATT. In a glaring omission,the author makes no more than a fewpassing references to landlocked de-veloping countries (LLDCs) thoughthe book’ title implies an extensivetreatment of LLDCs, which have theirown special challenges and needs.

Poor countries inglobal economyTitle: Trade, Growth and Poverty Reduction: Least Developed Countries, LandlockedDeveloping Countries and Small States in the Global Economic SystemAuthor: T N SrinivasanPublisher: Commonwealth Secretariat and Academic FoundationISBN: 978-0-85092-896-9



network news

SYEDA Rizwana Hasan, ChiefExecutive of the BangladeshEnvironmental Lawyers Associa-tion (BELA), a member institutionof SAWTEE network, has beenfeatured as one of the Heroes ofthe Environment 2009 by Timemagazine.

It is in recognition of Hasan’sstruggle to bring better environ-mental and labour regulation toBangladesh's 36 shipbreakingyards, where labourers face healthhazards and deaths.

In 2003, Hasan petitionedBangladesh's Supreme Court tocertify that all ships arriving in thecountry for breaking were free oftoxins. In March 2009, the courtordered the closure of all yardsoperating without governmentenvironmental clearance—in otherwords, all of them. The court alsoimposed new restrictions mandat-ing that ships identified as carryingharmful chemicals be denied entryto Bangladesh; all ships allowed innow need to be "precleaned" fortoxins.

The Supreme Court has sincereneged on its ruling on noncom-pliant yards, a move that Hasan isfighting in appellate court (Adaptedfrom www.time.com).

A Hero of theEnvironment 2009

Syeda Rizwana Hasan

Roundtable onRoad to Geneva

SAWTEE, together with Ministry ofCommerce and Supplies, Governmentof Nepal, organized a RoundtableDiscussion on Road to Geneva on 23November in Kathmandu. Theobjective of the programme was todiscuss the priorities of the least-developed countries (LDCs) of SouthAsia for the World Trade Organization(WTO) Ministerial to be held inGeneva from 30 November to 2December. The event also discussedNepal’s priorities for the Ministerial.

There was a consensus that SouthAsian LDCs need to vigorouslypursue the issues identified by the DarEs Salaam Ministerial Declaration ofthe LDC trade ministers held inOctober.

Participants noted that althoughthe forthcoming ministerial is notlikely to be a negotiating forum, it willdefinitely provide a forum for movingforward the Doha DevelopmentAgenda, which has been passingthrough turbulent phase ever since itwas launched in 2001. They agreedthat multilateralism should bepreferred over regionalism orbilateralism.

South Asian LDCs should joinforces with other LDCs in demanding100 percent duty-free and quota-free

access to developed-country markets,participants said. Aid for trade iscritical for helping LDCs overcomesupply-side constraints, and such aidshould be additional and predictable.

Since there is a possibility ofpreference erosion for the LDCs, theyshould ask developed countries tocompensate through various tradeand non-trade measures. The Agree-ment on Trade-Related Aspects ofIntellectual Property Rights (TRIPS)should be compatible with theConvention on Biological Diversity(CBD), protecting traditional knowl-edge and genetic resources in devel-oping and least-developed countriesthrough a disclosure requirement.Though capacity-building measuresand other issues like sanitary andphyto-sanitary and technical barriersto trade are important for exportpromotion, LDC governments willnot be able to address them alone andit should be a joint effort of thegovernment, the private sector andother stakeholders, including civilsociety.

More than 65 stakeholders,including government officials,researchers, academicians, mediapersons, and business leaders partici-pated in the discussion.


network news

South Asian Civil SocietyConsultationSAWTEE, Oxfam Novib andClimate Change Action Network inSouth Asia (CANSA) organized aSouth Asia-level Civil SocietyConsultation for setting anddisseminating a Trade, ClimateChange and Food Security Agendafor global and regional negotiationson 9-11 September 2009 in Kath-mandu. The event broughttogether a cross-section of 72stakeholders who came up with a

Addressing Climate Change Issues in South Asia

South Asian civil societydeclaration on trade, climatechange and food security,containing demands at threelevels—the United NationsFramework Convention onClimate Change, the WorldTrade Organization and theSouth Asian Association forRegional Cooperation.

Youth Summit onClimate ChangeSAWTEE, collaborated with

the Nepalese Youth for ClimateAction, Clean Energy Nepal andseveral South Asian youth networksto organize the South Asian YouthSummit on Climate Change, held on3-6 September in Dhulikhel, Nepal.The Summit, gathering more than 100youth leaders, came up with a SouthAsian Youth Declaration on ClimateChange. The declaration, amongothers, demands that Annex I Partiesto the United Nations FrameworkConvention on Climate Changecommit to emission reduction by 45percent by 2020 and 90 percent by

2050 with base year 1990 andemission peaking no later than 2015.

Climate Change for DevelopmentTHE Institute of Policy Studies of SriLanka (IPS), together with theMinistry of Environment andNatural Resources, and Sri LankaNational Commission for UnitedNations Educational, Social andCultural Organization (UNESCO),organized a workshop on Main-streaming Climate Change forSustainable Development in SriLanka on 19–21 August in Dambulla.The workshop was divided into sixthemes: science and economics ofclimate change adaptation; agricul-ture, plantations, forestry andwildlife; fisheries, aquatic resourcesand coastal sectors; urban develop-ment, infrastructure and disastermanagement; irrigation, watersupply and drainage; and healthcareand diseases. The event identifiedissues that need urgent policyattention and prioritization foraddressing climate change impacts inSri Lanka.

INDIA'S official communication tothe World Trade Organization (WTO)with five proposals on systemicreforms in the WTO is timely anddeserves active endorsements fromother member countries, but needsmore coherence in its contents,panelists at a seminar on the Indianproposals recommended on 21November 2009 in New Delhi. Theseminar was organized by ConsumerUnity & Trust Society (CUTS) Interna-tional, Jaipur and Friedrich EbertStiftung (FES).

The Indian communication hasproposed setting up of a tradeinformation system, revitalizing ofWTO Committees, special legal

India’s Proposals on WTO Reforms

provision of market access to theleast-developed countries (LDCs) andsetting of standards and monitoring ofregional trade agreements.

These are open-ended proposalsintended to provoke a debate, and ontheir own are vital for making themultilateral trading system equitableand just as well as achieve its develop-ment objectives.

The panel examined the practicaldifficulties and political dimensionsinvolved in putting the proposals intopractice and adjudged that garneringsupport for their implementation isnext to impossible, considering thecurrent impasse in multilateral tradetalks.

Discussion on the proposals willnot be a part of the official agenda ofthe Seventh Ministerial of the WTO,which is scheduled for 30 November–2 December in Geneva, because a fewdeveloping countries did not supportthem fearing that they may lead to theintroduction of a weighted votingsystem. Concerns were also raised onwhether talks on systemic reforms atthis stage will further delay the long-awaited conclusion of the DohaDevelopment Round. A book entitled,Reforming the WTO: Developing Coun-tries in the Doha Round authored byFaizal Ismail and jointly published byCUTS and FES was released by SharadJoshi, Member of Parliament.


Nepal-IndiaTrade Treaty

IN order to mark World Food Day on16 October 2009, SAWTEE, LocalInitiatives for Biodiversity, Researchand Development (LI-BIRD), NationalAlliance for Food Security in Nepal(NAFOS), and International Develop-ment Research Centre (IDRC),Canada organized a half-day nationalawareness forum Securing Food andFarmers’ Rights in Times of Crisis inKathmandu. Over 40 participants,including agricultural scientists,academics, policy makers, economists,civil society members, media personsand students, attended the event.

Years of neglect of the agriculturesector is a major reason behind foodinsecurity in Nepal and a pro-activeintervention of the state in agriculture,together with the introduction andimplementation of farmer-friendlyplans and policies, is critical forreviving the moribund sector andaddressing food insecurity, saidparticipants of the programme.Calling for exclusive policies and lawson food security, participants stressedthat the new constitution of Nepalmust include right to food as afundamental right with concretedirectives to protect the interests andrights of poor, hungry, marginalizedand vulnerable communities, andfarmers. Based on the recommenda-tions of a paper published by SAWTEEand LI-BIRD, which was released on

the day, participants discussed thatalthough the Interim Constitution ofNepal recognizes food sovereignty asa fundamental right, there are noconcrete policy and institutionalmeasures to operationalize theprovision in the country's socio-economic context. Stating that the newconstitution would do well to enshrineright to food as a fundamental right,some participants suggested therecognition of food sovereignty in thepreamble or in the state's directiveprinciples and policies.

It was pointed out that Nepal’sfood security situation has particularlyworsened in the past three years, withthe country suffering a series ofadverse weather conditions and thestate not being able to respond to suchconditions. Participants felt that Nepalis already witnessing unpredictableclimatic conditions in different regions.Discussing the impacts of climatechange on agriculture, they called forincreasing investments in research andbreeding, and legal measures toprotect farmers' rights. They alsodiscussed why Nepal should promoteparticipatory plant breeding andcommunity seed banks. SuryaAdhikari, a farmer-cum-breeder,called for farmers’ real and effectiveparticipation in decision-making, anddemanded that the new constitutionguarantee farmers' rights over seed.

Securing Food and Farmers'

Rights in Times of Crisis

WO

RLD

FO

OD

DA

Y 20

09

SAWTEE, Local Initiatives forBiodiversity, Research and Devel-opment (LI-BIRD), and Seed QualityControl Centre (SQCC), Ministry ofAgriculture, Kathmandu organizeda core group discussion on SeedLegislation and Roadmap for theProtection of Farmers' Rights on 25-26 August 2009 in Dhulikhel, Nepal.

Likewise, SAWTEE and LI-BIRD,together with Biotech Society ofNepal, organized a NationalWorkshop on Biotechnology andDevelopment Concerns inNepal on 21 August in Kathmandu.International DevelopmentResearch Centre (IDRC), Canadawas a development partner forboth of these events, whichbrought together more than 100stakeholders.

Farmers’ Rightsand Seed Laws

AS part of its regional initiatives onresearch, capacity building and ad-vocacy on trade issues in South Asia,SAWTEE organized a discussion pro-gramme on the Revised Nepal-IndiaTrade Treaty in Kathmandu on 6 No-vember.

Trade experts, industrialists, aca-demicians, policy makers and con-sumer rights activists, among others,discussed the strengths and weak-nesses of the revised Treaty and rec-ommended further actions for thegovernment and the private sector.

Participants also discussed the cru-cial role of the Nepal-India TradeTreaty in promoting regional coop-eration in South Asia, and its rele-vance in the context of the Agree-ment on South Asian Free Trade Area(SAFTA).

www.sawtee.org

South Asia Watch on Trade,Economics & Environment(SAWTEE) is a regional networkthat operates through itssecretariat in Kathmandu and 11member institutions from fiveSouth Asian countries, namelyBangladesh, India, Nepal,Pakistan and Sri Lanka. Theoverall objective of SAWTEE is tobuild the capacity of concernedstakeholders in South Asia in thecontext of liberalization andglobalization.

Briefing Paper: Global

Economic Crisis and South

Asia

Author: Dr. Posh Raj

Pandey

Publisher: SAWTEE

Policy Brief: Farmers’

Rights: Global Contexts,

Negotiations and Strategies

Author: Kamalesh Adhikari

Publisher: SAWTEE

Civil Society Declaration:

Trade, Climate Change and

Food Security

Adopted at: Gokarna Forest

Resort, Kathmandu on 11

September 2009

TI Special Issue Nov-Dec. 2009 25 November · 2017-10-09 · Puspa Sharma EXECUTIVE EDITOR Paras...

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