Development and building trade capacity
Trade Impacts of LDC Graduation
Graduation from the status of least-developed country (LDC) marks an important milestone in the development path of each LDC. At the same time the phasing-out of international support measures associated with LDC status including trade preferences and special treatment in the WTO could present challenges for graduating LDCs in their efforts to continue integration into the global economy. A quarter of LDCs were on track to graduate from LDC status prior to the outbreak of the COVID-19 pandemic. “Trade impacts of LDC graduation: Insights from countryspecific market access analyses” complements the report “Trade impacts of LDC graduation” issued in May 2020 and examines in greater detail the impact of graduation on preferential market access for each of the 12 graduating LDCs. The report looks at the export structure of graduating LDCs the likely increase of tariffs on their exported products and projected changes in trade flows employing a partial equilibrium model. It sheds light on products and destination markets that require specific attention from graduating LDCs as they prepare for graduation.
Introduction
The United Nations least-developed countries (LDC] category comprises the poorest and most vulnerable countries in the work! - those that face structural handicaps to their sustainable development. There are currently 47 LDCs of which 33 are situated in Africa 9 in Asia 4 in the Pacific and 1 in the Caribbean. The LDCs account for 12% of the global population but for less than 2% of world’s gross domestic product (GDP) and less than 1% of global exports. So far only five LDCs have graduated from the category since its inception in 1971 i.e. Botswana (1994) Cabo Verde (2007) Maldives (2011) Samoa (2014) and Equatorial Guinea (2017).
LDC graduation: Impact on development cooperation
This section outlines the main trends in the area of development cooperation over the most recent decade for which data are available. It provides an outline of the expected impact of graduation on several initiatives with a particular focus on Official Development Assistance (ODA) Aid for Trade (AfT) technical cooperation capacity building and participation in the UN system.
LDC graduation: Impact on market access
LDCs art characterized by a weak productive capacity and the concentration of exports in a limited number of sectors and markets. Therefore preferential market access plays an important role in helping LDCs Increase their participation in international trade and diversify their exports. WTO members have made efforts to provide LDCs with DFQF market access as well as preferential treatment in services. Trade preferences are a key International support measure for LDCs. LDC graduation will eventually result in the loss of LDC-specific preferences.
LDC graduation and matters related to the WTO agreements
This section assesses the impact of graduation on members’ participation in the WTO as well as implications under WTO rules. The section is structured as follows: Sections 3.1 arid 3.2 discuss tariff commitments as well as services commitments and their relation to LDC status as well as graduation; Sections 3.3-3.5 review the most pertinent LDC-specific provisions in WTO Agreements and Decisions and assesses the expected impact of graduation on graduating LDCs in terms of WTO rights and obligations; and Section 3.6 provides a summary.
Executive summary
At the request of the Group of Least-Developed Countries (LDC Group) the Secretariat of the World Trade Organization with the support of the Enhanced Integrated Framework (EIF) undertook a project to assess the trade-related implications of graduation from LDC status in particular the impacts it may have on market access currently enjoyed by the LDCs as well as their participation in the WTO. This study summarizes those impacts and looks at options for graduating LDCs to smoothly continue their integration into the global economy.
Foreword
This report on the “trade impacts of LDC graduation” responds to a specific request from the LDC Group in the WTO for an analysis of how graduating from LDC status will impact countries’ trade relations. LDCs are accorded special treatment in the WTO in particular with regard to enhanced market access opportunities and policy flexibilities. Therefore it is important to ascertain how the loss of such treatment will impact graduating LDCs. The issue has assumed special significance with a quarter of the LDCs on the path to graduation and the associated loss of benefits tied to this status.
Options for graduating LDCs
The international community is aware of the challenges associated with LDC Graduation and has been engaged with the graduating LDCs to ensure smooth transitions. The UN General Assembly has invited the graduating LDCs to prepare smooth transition strategies and to outline the steps and support needed to help them remain on a sustained path of growth and development. Several graduating LDCs have prepared or are in the process of preparing their respective strategies to embrace graduation. Recognizing LDC Graduation as an important milestone of the development progress the UN General Assembly has also called on WTO members to consider extending to a graduated country the existing S&D provisions and exemptions available to LDCs for a period appropriate to the development situation.
Trade Impacts of LDC Graduation
A new report issued by the WTO on 8 May seeks to help least developed countries (LDCs) better understand the trade-related implications of graduation from LDC status. The product of a joint effort between the WTO and the Enhanced Integrated Framework (EIF) “Trade Impacts of LDC Graduation” looks at how graduation may affect LDCs’ participation in world trade including their access to export markets and implications for their WTO commitments.