Rules of Origin (ROO) for Bali Moves Forward

The language for a draft decision on rules-of-origin is now reaching convergence, WTO Director-General Roberto Azevêdo told members at Friday’s meeting of the Trade Negotiations Committee (TNC), which is tasked with the overall Doha Round negotiations. Members will soon be able to transmit this document to their ministers for agreement at Bali, he said.

The LDC group had tabled a revised version of their original rules-of-origin proposal earlier this autumn, which was reportedly well-received by members at the time.

Rules of origin specify how much processing must take place locally before goods are considered to be the product of the exporting country. They are often considered to be overly restrictive and inflexible, making it difficult for LDCs to take full advantage of the preferences they are granted.

Currently, these rules are designed on a unilateral basis without any harmonised standard, which critics say creates additional problems for the WTO’s poorest members, forcing them to adapt to a range of rules depending on the intended export market.

The draft decision presented on Friday sets out the technical aspects of preferential rules of origin and discusses different ways to determine when substantial or sufficient transformation has taken place in the place of origin. The draft decision also details a series of provisions related to transparency and cumulation - the latter of which allows two or more parties to a preferential scheme to jointly fulfill the relevant local processing requirement.

Whether a product is eligible for any preferences offered under a trade agreement depends on the level of transformation achieved. In this context, the draft decision suggests a percentage benchmark as one way to determine transformation. This would be derived from the value of the materials used in making the products.

Considering their limited productive capacity, LDCs wish to keep the threshold level of “value addition as low as possible,” allowing foreign inputs to make up to 75 percent of a product’s value in order to qualify for preferential treatment.

However, they note that the choice of a single rule should not preclude preference for product-specific rules where these are in the interest of LDCs - for example, in the clothing sector.

On cumulation provisions, the LDC Group maintains that these should be considered as a feature of non-reciprocal preference schemes. They say that cumulation is of secondary importance to liberal rules of origin, which would allow them to source their inputs from the most competitive producer, irrespective of origin.

Cotton for DFQF Submitted by C-4

Discussions on LDC topics are now set to switch gears to the controversial topic of cotton, after Africa’s four largest cotton producers - Benin, Burkina Faso, Chad, and Mali, collectively known as the C-4 - tabled a provisional proposal on the subject last week.

According to a copy of the proposal seen by Bridges, the C-4 is requesting that cotton imports from LDC markets be granted DFQF market access from 1 January 2015 onwards. The group has also called for the elimination of cotton export subsidies, and is requesting that the WTO secretariat circulate a compilation of any trade-distorting domestic support from all cotton stakeholders over the past decade.

The current C-4 proposal has set 31 December 2014 as a deadline for the General Council to find a definite solution on the cotton issue, which has long been a difficult subject in trade circles. Under the terms of the proposal, the General Council would be expected to periodically review the proposal’s implementation throughout the coming year.

The proposal would also require that a link be made between the development aspects of the cotton issue and the WTO’s Aid for Trade Initiative.

West African producers have long lobbied for a change in the WTO’s rules on cotton, arguing that developed country subsidy schemes have kept global cotton prices low, hurting their cotton-dependent economies.

The global cotton market has experienced some notable changes in recent years, however, such as a decline in developed country subsidies to their domestic producers. Cotton prices today, though lower from the all-time peak seen in 2011, also remain high by historical standards. Given these conditions, some analysts say that any cotton deal may have a limited impact on world prices.