LDCs and duty preference schemes

Developing countries and Least Developed Countries (LDCs) have been given various duty preference schemes to assist them enter and retain markets in developed countries. Such schemes were definitely useful in serving that purpose and in the past and gave most of the developing countries an edge over the LDCs as the LDCs were not up to developing country standards in manufacturing products for developed economies.

However, today, there are many LDCs which are on the threshold of becoming developing countries. Some such countries have sufficient labour resources, attractive investment regimes etc. which attract foreign investment, enabling them to manufacture sophisticated products. When studying the range of duty preference schemes available to LDCs today, it is apparent that such schemes are beneficial in promoting their exports and helping their economies to improve.

Most preferential schemes meant for LDCs offer zero duty or reduced duties in addition to having less restrictive Rules of Origin. A perusal of some of the preferential access schemes would give an idea of the advantages of such schemes. Switzerland offers duty free quota free access for LDCs. Since 2010, all tariff lines are duty free and quota free and since 2012, Rules of Origin criteria have also been relaxed.

The Canadian Market Access initiative which came into effect in 2012 allows duty free quota free access to all products other than dairy, egg and poultry products. The US GSP scheme in addition to providing market access through the US GSP scheme for 129 beneficiary countries and territories including 43 LDCs, an additional 1,400 products are eligible for GSP concessions when imported from LDCs only.

The GSP scheme of Norway allows full product coverage for LDCS. Since January 2012, the Republic of Korea offers 95% of tariff lines duty free quota free access to LDCs. The Japanese GSP scheme covers 98% of the tariff lines as duty free quota free for LDCs. Preferential treatment to services and services suppliers has been granted by a decision adopted at the eighth WTO Ministerial Conference in 2011. The WTO decision on preferential treatment to services and services suppliers of LDCs exempts WTO members from implementing equal treatment for all members (Most Favoured Nation treatment) and allows them to grant preferential market access treatment to LDC services.

Developed countries are not the only providers of preferential market access to LDCS. A number of developing countries also provide such preferential treatment. India has removed duties for over 85% of tariff lines for LDCs. Turkey has provided duty free quota free access to many LDC products.

Even agreements such as SAFTA and APTA which have both developing and LDCs as participants, give preferential treatment by developing countries to the LDCs.

In such circumstances where LDCs can offer a product at more competitive pricing due to duty preferences , for developing countries to rely long term on duty preferences to retain markets is not prudent.

What would be more beneficial is to have long term plans to be more innovative, competitive in quality, improve productivity, find niche markets, enter transnational production networks, etc. A study of the preferences available to LDCs would also help to ascertain foreign investment opportunities in such countries whereby foreign companies investing in LDCs could benefit from such duty preferences.



(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)