Graduating LDCs have “diverse economic profiles,” which means that graduation will affect graduating LDCs in different ways.
The report concludes that the impact of graduation “appears limited” for most graduating LDCs.
Although the report does not consider the impact of COVID-19 on LDCs, the WTO emphasizes in a press release that it remains important for understanding the trade impacts resulting from graduation.
The World Trade Organization (WTO) has released a report to help least developed countries (LDCs) understand the implications of graduation from LDC status on trade, including implications for countries’ WTO commitments and access to export markets. The report responds to a request from the WTO’s LDC Group to analyze how graduation will impact countries’ trade relations.
LDCs enjoy exclusive preferences in the implementation of WTO rules and disciplines and in market access. Once they graduate, LDCs lose this special treatment. There are currently 47 LDCs, 12 of which are at different stages of the graduation process. Angola, Bangladesh, Lao People’s Democratic Republic (PDR), Myanmar, Nepal, Solomon Islands, and Vanuatu are WTO members while Bhutan, Sao Tome and Principe, and Timor-Leste are in the process of negotiating their WTO accession. Kiribati and Tuvalu are on the graduation path but are not WTO members.
The report titled, ‘Trade Impacts of LDC Graduation,’ emphasizes the significant contribution of trade to enabling graduating LDCs to reach graduation thresholds. The report finds that graduating LDCs have “diverse economic profiles” with differences in their export structure and their utilization of and reliance on preferential market access. Further, LDCs also have varied terms of entry into the WTO; therefore, graduation will affect graduating LDCs in different ways, and support should therefore be “tailored to the needs and development strategy of each country.”
The report concludes that the impact of graduation “appears limited” for most graduating LDCs, with only “marginal increases in tariffs” due to the loss of preferences. The report finds that the biggest impact is likely to be limited to a few export items, such as clothing, fish products, and footwear, that go to a few developed country markets (Canada, the EU, and Japan).
The report considers possible actions graduating governments may need to take to adhere to their new non-LDC obligations, including identifying potential support measures that graduating LDCs can build on by working with their development partners to ensure sustainable graduation. The report also suggests graduating governments consider forging appropriate trading arrangements with trading partners and become familiar with options to seek recourse to WTO procedures and instruments if they face difficulties in meeting commitments.
The WTO developed the report with the Enhanced Integrated Framework (EIF) as part of a joint project, ‘Trade Impacts of LDC Graduation.’ The WTO and EIF completed the report before the COVID-19 pandemic and recent trade forecasts that predict a “sharp downturn in global trade this year.” Although the report does not consider the impact of COVID-19 on LDCs, the WTO emphasizes in a press release that it remains important for understanding the trade impacts resulting from graduation. The WTO Secretariat plans to undertake a COVID-19 impact analysis for graduating LDCs under the joint project. [Publication: Trade Impacts of LDC Graduation] [WTO Press Release]