Poorer nations face missed opportunity, finds WTO report

The utilisation of trade preferences by the least developed countries (LDCs), including Bangladesh, in exporting agriculture products to the developed nation is much lower than that of non-farm goods.

For instance, the utilisation of preference in case of non-agro products with above 10 per cent but equal or below 15 per cent range of preferential margin stood at 90 per cent.

In contrast, the utilisation rate for similar type of agro products was around 69 per cent in 2017.

The preference margin means absolute difference between Most Favoured Nation (MFN) tariff rate and preferential tariff rate for a similar product.

Moreover, the utilisation of tariff preferences is particularly problematic for the 'fruits, vegetables, plants' category, which is the single most important agricultural category by value of imports eligible for preferences.

Around 82 per cent of imports by preference giving countries from LDCs in this product category did not get preferential tariffs.

A report, prepared by the secretariat of the World Trade Organisation (WTO), illustrated the picture.

The report was submitted to a meeting of the Committee on Rules of Origin (CRO), which was held on May 15-16 in Geneva. Ms Thembekile Mlangeni from South Africa chaired the meeting.

The lower utilisation rates indicate that major portion of LDCs' agriculture export to preference-giving developed and developing countries is facing MFN tariffs despite being eligible for preferences under any scheme.

"Underutilisation rates show a missed opportunity to save import duties because some preferences were available," said the report. "Underutilisation rates therefore offer a more comparable and comprehensive indicator to identify products in which origin requirements have a restrictive impact."

The WTO members, who attended the meeting, made their observations on the report and tried to find out whether rules of origin played any key role in this regard.

The report, however, noted that being either primary goods or simple agro-processed goods, complex rules of origin had little to do anything with this.

Taking part in the discussion, representatives of Cambodia, Chad, Tanzania, Mali and Laos noted direct transportation or shipment and certification requirements may be the main factors behind low utilisation of preferences, a meeting insider told the FE.

Apparels exports to Switzerland

Meanwhile, more than 60 per cent of ready-made garment exports from Bangladesh to Switzerland faces MFN tariff, though it is eligible for the preferential market access to the European country.

The LDC group's latest report, which was focused on Switzerland, painted the picture. Bangladesh presented the report on behalf of the LDC group in the meeting.

It estimated that in the garment and clothing sector, US$292 million of Swiss 'imports of Chapter 61 and 62 from Bangladesh are receiving the MFN treatment' though eligible for duty-free entry.

Only $174 million exports of Bangladeshi RMG enjoyed the preferential treatment in 2017.

This value was almost $78 million for Cambodia, $21.6 million for Myanmar, $14 million for Madagascar and $6.3 million for Laos.

'Bangladesh and Cambodia are particularly affected with considerable values taxed at the MFN specific duty in Switzerland," said the report.

Though RMG exports to Switzerland are only around 1.5 per cent of the country's total annual RMG export, lower utilisation of tariff preference indicates potential market loss to some extent.

Again, in 2017, only 37 of all Bangladeshi products entered the Alpine nation through the preferential market access while the ratio for Cambodia was 32 per cent.

Cambodia is also facing difficulties to benefit from the preferential treatment in sectors like footwear and bicycles besides garments and textiles, according to the report.

The report also pointed out that the Swiss utilisation rates for garments and clothing imports (of HS Chapters 61 and 62) from all LDCs range from zero to 49 per cent and are much lower than those of the EU.

The utilisation rates average 95 per cent in case of the EU.

In fact, the preferential tariff utilisation rate of clothing in 2017 was 97 per cent for Bangladesh, 96.5 per cent for Cambodia and 93 per cent for Myanmar, though the EU and Swiss rules of origin for apparels are identical

While finding out the possible reasons for low Swiss utilisation rates, the report hinted at the Swiss certification and direct shipment requirements and related documentary evidence rather than the rules of origin needs.

In the meeting, the Swiss representative mentioned that as the country's MFN tariff rates were already low, exporters might be less interested to do additional paper work to get the marginal benefits.

The average MFN tariff rate of Switzerland is 6.40 per cent for all products, but 35.2 per cent for agriculture products and only 1.90 per cent for non-agriculture products, according to statistics available with the WTO.

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