Post 2015: Global Action for an Inclusive and Sustainable Future

CHApTER EIgHT
One element of a
post-2015 agenda
for LICs should be
the promotion of
modern-sector
exports.
162
more generally (montes, 2013), strengthens the
case for trade preferences. Given this, one element
of a post-2015 agenda for lIcs should be the
promotion of modern-sector exports within an
overall growth and development agenda centred
on achieving structural transformation. although
there are various ways in which to achieve this
objective, there is a role for trade policy at the
global and regional levels. this could include (a)
making trade preferences more effective (b) trade
facilitation and (c) policy dialogue which can also
be valuable. the Eu, as a major global trading
partner for developing countries, provides a good
example to illustrate what might be done in all
three areas. other major global traders could of
course also take similar measures.
(a) Making trade preferences more effective
Well-targeted trade preferences can incentivise
investment in building productive capacity. the
ability of producers to benefit from the preferential
tariff rent depends on how it is distributed through
various channels and levels of the value chain within
which they trade, which includes across producers,
traders, transporters, retailers and consumers,
according to power relations (Stevens, 2012: 35). a
number of measures could make trade preference
more effective, including the improvement of the
roo as well as the inclusion of non-tariff issues and
trade in services.
Developed and developing countries could make
various adjustments to roo to help lIcs and lDcs
make better use of the available formal preferences
– for instance by allowing more imported inputs
and making it seamless to do so. as most lIcs and
lDcs import most of their inputs, liberal rules on
EuropEan rEport on DEvElopmEnt 2013
cumulation 119 would help them integrate into global
supply chains. With the innovation of less onerous
roo for lDcs in the GSp and for Epa signatories,
the Eu, for instance, has already accepted the
principle of such fine-tuning. Furthermore, roos
in global Ftas need to be far more developmentoriented
by incentivising the integration of lDcs
and lIcs into the supply chain. 120
the Eu is the largest provider of tariff preferences
to developing countries. Its recent reform process
to the GSp rightly focuses on lDcs and those
countries most in need, but this should not distract
attention from countries with the largest share of
people in poverty, i.e. certain lmIcs and mIcs
(bilal et al., 2011). moreover, targeted preferences
to lmIcs and mIcs could play an important role
in helping lDcs and lIcs integrate into dynamic
global supply chains 121 . but preferences alone may
not be sufficient and will have to be complemented
with adequate supply-side measures (aid for trade)
to boost the productive capacity of lDcs and lIcs.
trade preferences need to include both tariff
and non-tariff measures. the value of tariff
preferences is rapidly declining as mFn rates
move towards zero. For instance, the mFn tariff
on most of the goods afghanistan exports to
Eu is already zero, so having access to tariff
preferences under Eba provides little additional
value (carIS, 2010). but for others, for example
countries that export textiles and shoes to the Eu,
such preferences are of vital importance because
mFn rates remain substantial. Hence, the margin
of preference is more important than the absolute
value of preference, and the margins are falling.
So, trade preferences need to lower barriers that
119 cumulation allows imported inputs from some sources (often a regional trade partner) to count towards meeting the requirements for export
under the preference. It is seldom used, partly because its provisions are so restricted.
120 the aGoa innovation of light-touch roo on clothing helped countries like lesotho. the success needs to be replicated for a broader range of
products – and cumulation as part of differentiated roo is one way to achieve this.
121 one of the things that differentiate many asian lDcs/lIcs from those in africa is that the former are actively participating in value chains led
by Japan, South Korea, and now china. as the lead economies heat up, those in the lower hierarchies are picking up those tasks (see also text
box 8.1), and they are able to do so competitively because of their involvement in those value-chain in the first place. Hence, if trade preferences
are to be ‘developmental’ they need to be dynamic and in some cases not just restricted to those at the bottom of the value chain.