14
reductions in cross-border lending. Furthermore, since
financial conditions appear to be highly correlated with
export performance, the bailouts would have had the
effect of sustaining developed countries’ exports more
than in their absence, at the expense perhaps of exports
originating from developing countries.
See page 170
F. The WTO and developing
countries
The WTO has underpinned the progress made by
many developing countries by allowing them to
take advantage of, adapt to and mitigate risks
arising from the four trends identified in this
report. It has done so through binding
commitments, flexibilities, technical assistance,
and its institutional infrastructure.
The strong economic performance of many developing
countries has been associated with reductions in their
levels of protection, a significant part undertaken in the
context of implementing WTO commitments. This has been
particularly apparent in the case of countries acceding to
the WTO. Flexibilities allowed in WTO rules, specifically
through preferential access, also played a role in buoying
the economic performance of the poorest countries.
Integration of developing countries into GVCs has been
made possible by the creation of a predictable business
environment and the reduction of trade barriers and of
trade costs. These have in turn been aided by WTO
commitments, not only in goods but importantly also in
services, given the large role the latter plays in GVCs. The
new Trade Facilitation Agreement signed at the Ninth
WTO Ministerial Conference, when implemented, would
provide further momentum for reducing trade costs
globally, helping expand the participation of developing
countries in value chains. Technical assistance can play a
vital role in this process, by directing Aid for Trade
resources to assist implementation of trade facilitation.
High commodity prices have been beneficial for many
developing country exporters. They can, at the same
time, pose a challenge for others, particularly net food
importers. WTO agreements have mechanisms that help
mitigate the problem and members are presently
negotiating flexibilities like those provided by the Bali
Decision on Public Stockholding for Food Security
Purposes. Further progress on the Doha Development
Agenda could help realize the full potential of the
agriculture sector to contribute to development.
Finally, the WTO has helped safeguard the economic
gains achieved by many developing countries despite
the world suffering from the biggest economic crisis of
the past seventy years. The WTO helped contain
protectionism through its system of trade rules and the
effectiveness of its monitoring efforts.
Economic literature supports the view that
commitments under the WTO are important for
developing countries to promote their trade
and development. At the same time, it
provides arguments why developing countries
need flexibilities because their economic
circumstances can hamper their ability to
implement obligations.
Commitments are key tenets of international trade
agreements. Several studies have shown the empirical
relevance of the GATT/WTO in this regard, including
by fostering economic growth in developing countries.
One study has found that countries undertaking
substantial reforms in the context of WTO accessions
have grown about 2.5 per cent faster for several years
thereafter.
At the same time, in order for a trade agreement to be
viable, the possibility to suspend certain commitments
temporarily under specific conditions is important – a
flexibility available to all participating countries.
Flexibility is required not for its own sake, but in order
to allow members to the trade agreement to make
deeper commitments.
In the case of developing countries, economic theory
provides a number of reasons related to market failures
typical in those economies that explain why special and
differential treatment (S&D) can be useful as long as
these market failures persist. Developing countries’
small economic size has been a long-standing rationale
for non-reciprocity and preferential market access in
developed countries. Higher levels of uncertainty,
imperfect financial markets or insufficient governmental
resources are other constraints that may make it harder
for developing countries to adjust quickly to open trade.
S&D aims at allowing developing countries to take and
implement commitments, as well as pursue trade
opportunities, in a manner and pace that reflects the
economic conditions that they confront.
Developing countries can take advantage of
many forms of special and differential treatment.
One of the principal ways in which developing countries
have been accorded special and differential treatment in
the GATT and the WTO is through less-than-full
reciprocity in commitments in the context of negotiations
on market access, in particular in tariff reduction
negotiations. Numerous provisions in the WTO
Agreement seek to address the resource limitations
of developing countries in undertaking certain