Gloomy prospects for the least developed countries

“The outlook for LDCs is bleak.” The latest United Nations (UN) assessment of the prospects for the least developed countries (LDCs) shows recent setbacks without finding any glimmer of hope on the horizon.

Half a century ago, LDCs were first officially recognized by a resolution of the United Nations General Assembly. It was built on research, analysis and advocacy from the United Nations Conference on Trade and Development (UNCTAD). The historic 1971 declaration drew attention to the unique challenges of LDCs and pledged the support of the international community. Since then, the UN has organized four conferences on LDCs, each adopting a 10-year program of action for national governments and “development partners”. But actual progress has been disappointing, with just seven countries “graduating”. The list of LDCs has grown to 46 as most “qualified” to be included. With the fifth conference scheduled for Doha in January 2022, critical soul-searching is urgently needed so that efforts are not yet disappointed.

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The inability of development partners to meet their commitments has been a major problem for a long time. Only six of the 29 partners of the Organization for Economic Co-operation and Development (OECD) have kept their pledge to give at least 0.15% of their national income to aid to LDCs.

As the 1969 UN definition of official development assistance (ODA) has been compromised, the UN report unsurprisingly deplores the decline in aid “concessionality”. The OECD’s new aid reporting rules mean its figures do not reliably measure additional financing for sustainable development.

Systemic inconsistency

The UN uses three criteria (income, human capital and vulnerability) to classify LDCs. Although nominally belonging to the United Nations system, the World Bank and the International Monetary Fund (IMF) do not recognize LDCs.

Instead, the World Bank only uses income to rank countries, with only low-income countries eligible for concessional loans from the Bank and the IMF. Thus, “middle-income” LDCs – thus classified because of their low human resources and / or their high vulnerability – are excluded.

When the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was adopted in 1995, LDCs had more time to comply: first, until November 2005, extended to July 2013, then July 2021, and more recently, until July 2034 But such ad hoc postponements undermine long-term planning in LDCs.

Instead of the current “case-by-case” approach, LDCs need more predictability. The grace period should extend as long as a country remains an LDC, plus 12 years after graduation, as proposed by Chad. The 12-year grace period should also apply to other “international support measures”, including all types of special and differential treatment.

Limited market access

LDCs represent only 0.13% of world trade. But despite claiming that trade liberalization is necessary for development, OECD countries have not given LDCs much access to their own markets. Enabling more meaningful “duty-free and quota-free” (DFQF) access is therefore crucial for LDCs.

A useful 97 percent FDSC access for LDCs to developed country markets was agreed at the 2005 World Trade Organization (WTO) Ministerial Conference in Hong Kong. But most LDC exports are concentrated on a few tariff lines, such as agricultural products and textiles, and are still subject to constant renegotiation.

Tariff reduction alone is not a panacea, as non-tariff measures have constituted obstacles to LDC exports. Regulatory standards — for example “sanitary and phytosanitary” requirements — and rules of origin clauses limit the eligibility of LDCs for preferences. Even when the requirements are met, expensive procedures can still hamper access. In addition, preferential agreements, such as the European Union’s Everything But Arms initiative and the United States’ Generalized System of Preferences (GSP), have often been implemented arbitrarily.

The frequent need for congressional approval makes the GSP unpredictable, always subject to new and capricious conditions. Thus, some US lawmakers are demanding that the renewal of the GSP – which expired on December 31, 2020 – be subject to conditions such as particular human rights, rule of law, labor or regulatory priorities. environmental.

Trade concessions?

Despite the noble Millennium Declaration of 2000, OECD countries have conceded little since. After the African walkout at the WTO ministerial conference in Seattle in 1999, the promise of a “development round” brought developing countries back to the negotiating table. Launched in Doha after September 11, “with a lot of rhetoric about … global unity”, there was little enthusiasm among the rich countries. Still pushing developing countries to open up their markets further, rich countries demanded that they lower tariffs to near zero in sectors never before covered by multilateral trade agreements, including agriculture and services.

Refusing to recognize tariffs as a way for poor countries to protect their farmers and ensure food security, the OECD demands ignore their own hefty subsidy of food crops. In addition, the protection by LDCs of their modern services – still “in its infancy” – is considered necessary to resist transnational competition.

OECD countries became more protectionist after the global financial crisis of 2008-2009, subsequently pursuing bilateral, regional and plurilateral free trade agreements. In December 2015, the Financial Times happily proclaimed that “the Doha Round has finally died a merciful death” after being in a coma for a long time.

Preferential trade?

Despite access to the DFQF market, the margins of preference (MoP) for products from LDCs have been reduced by exports from other developing countries. MoP refers to the difference between preferential rates for LDCs and other rates. These may be “Most Favored Nation” (MFN) rates available for all countries, or preferential rates available for some.

Meanwhile, tariffs have fallen with MFN liberalization — in some cases, they have fallen to zero. Tariff cuts have deprived LDCs of significant revenues. Aid for Trade (A4T) – supposed to promote exports – has never tried to compensate developing countries for lost tariff revenue. In addition, the conditionalities of A4T make them less scalable. A4T is often used for trade policy capacity building — usually focused on encouraging LDCs to open up their markets further, as rich countries want — rather than improving capacities and productive capacities. of LDCs.

Even though trade barriers are reduced, most LDCs still lack the infrastructure and support services to export much more. OECD countries demand trade liberalization for LDCs even before they have developed sufficient productive capacities. Consequently, even “graduate” LDCs fail to become internationally competitive.

Critical international solidarity

While the plight of LDCs remains dire, new challenges have emerged. For many LDCs, global warming poses an existential threat. The pandemic has also worsened their plight. Insufficient international fiscal support and the high costs of containing the pandemic mean that 2020 has seen the worst growth for LDCs since the lost decade of the 1980s.

The UN report acknowledges that even the meager progress “painstakingly made on several dimensions of development, including on the fronts of poverty, hunger, education and health” has been reversed. In addition to emerging challenges, the conference of LDCs must also address the roots of their condition.

The development trajectories and options of LDCs are shaped by the global environment. In addition to foreign trade, concessional international financing is the key to the progress of LDCs. The latest UN report on LDCs proposes new “international support measures”, but recent trends suggest they are unlikely to materialize.

Anis Chowdhury is Assistant Professor at Western Sydney University and the University of New South Wales, Australia. Jomo Kwame Sundaram is a former professor of economics and a former deputy secretary-general for economic development at the UN.

Copyright: Inter Press Service

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