Extract from TRADE AND INDUSTRY – 24th March, 1971
UNCTAD and tariff preferences for developing countries
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The world's developed countries have declared their intention of granting tariff preferences to imports from the developing countries in order to help them to increase their export earnings and economic growth, in particular the industrial growth which they need to raise their standard of living. As reported in Trade and Industry of October 21, 1970, the developing countries have welcomed the preferential arrangements proposed by the developed countries of the Organization for Economic Co-operation and Development (OECD), which have agreed to seek the necessary legislation in 1971.
Origins of the system
THE IDEA of 'generalized' tariff preferences for imports from all developing countries was discussed at the first United Nations Con- ference on Trade and Development (UNCTAD) in 1964 when the United Kingdom, whose delegation was led by Mr. Edward Heath (then Secretary of State for Industry, Trade and Regional Develop- ment), was the first major developed country to support it. In 1965 the OECD established a Special Group of senior officials of the United States, the United Kingdom, France and Germany to examine the question.
In 1967 Ministers of the OECD countries broadly endorsed the Group's recommendations that preferences for imports from de- veloping countries should be granted on industrial manufactures and semi-manufactures (in Chapters 25 to 99 of the Brussels Tariff Nomenclature) with a minimum of exceptions, and that case-by- case consideration should be given to the inclusion of processed agricultural products (in Chapters 1 to 24).
The second UNCTAD Conference at New Delhi in 1968 unani- mously adopted a resolution (number 21 II, Cmnd. 3649 page 74) calling for the early establishment of a mutually acceptable system of generalized preferences in favour of all the developing countries, without reciprocal trade concessions from them. This resolution established a Special Committee on Preferences to enable all the UNCTAD members to take part in consultations for establishing the system.
Outline of the arrangements
Subsequently the developed countries in the OECD (the EEC, United States, United Kingdom, Japan, the four Nordic countries - Sweden, Norway, Denmark and Finland - Austria, Switzerland, Canada and the Republic of Ireland, together with New Zealand which is not a member of the Organization) have worked out arrangements and have held detailed consultations with the develop- ing countries in the UNCTAD Special Committee on Preferences. These concluded in October 1970 when the Committee welcomed the arrangements as an important success for UNCTAD and for the industrialization of developing countries. The Committee also agreed that there should be regular consultations between developed and developing countries during the operation of the schemes and that further improvements should be pursued. There are some important questions still to be settled by the preference-giving countries, in particular the developing countries to benefit have to be decided. The arrangements agreed in the Special Committee are summarized below. There are some elements common to all the proposals; the product coverage and safeguard mechanisms offered by each industrialized country are described separately.
Although agreed that they should all make equivalent efforts, the preference-giving countries in OECD did not find it possible to agree on a uniform system of preferences but decided to proceed with individual schemes which they each considered should be ex- pected to yield comparable results. They will hold regular reviews of the trade effects of the schemes and will be able to consider what modifications might be necessary to correct any serious disparities
An important consideration for the United Kingdom is the need for Commonwealth developing countries and territories to receive sufficient new advantages in the markets of other industrialized countries to compensate them for sharing with other developing countries their preferential advantages in the United Kingdom. The additional trade which the developing Commonwealth will obtain is difficult to assess in advance but, as in the case of other countries already benefiting from preferences, this will be considered at future reviews of the scheme. The UNCTAD Special Committee noted that developing countries having to share their existing preferences as the result of the schemes would expect the new access in other markets to provide export opportunities that would compensate them. The developed countries already giving preferences to cer- tain developing countries are therefore asked when reviewing their own schemes to give careful consideration to the extent to which the developing countries receiving these preferences have benefited overall.
The preference-giving countries have emphasized that the pre- ferences are temporary in nature and that their grant does not con- stitute a binding commitment, or prevent subsequent withdrawal or modification of the preferences, or the reduction of tariffs on a most favoured nation basis. The grant of preferences also depends upon the necessary waiver or waivers being obtained under existing international obligations, in particular the GATT.
The initial duration of the generalized preferences system will be ten years. There will be periodic reviews in UNCTAD and before the end of the ten-year period a comprehensive review to determine whether the system should be continued.
Safeguards
All the arrangements proposed by the industrialized countries provide for certain safeguard mechanisms (either ceilings on the amounts to be admitted at the preferential rate or escape clause type. measures). This enables the preference-giving countries to retain some control over the trade growth resulting from the preferences. In reserving the right to take safeguard action the preference-giving countries have declared that such measures will remain exceptional. They will offer opportunities for consultation when safeguard mea. sures are taken, although not necessarily before the measures are put into effect. They will also review the operation of the safe- guards with developing countries from time to time.
Origin rules
Origin rules are necessary to establish which exports from de- veloping countries should qualify for the benefits. Although it has been agreed that uniform rules of origin would be desirable, it has not been possible for all the preference-giving countries to arrive at common rules to apply to all the schemes. Countries using the Brussels Tariff Nomenclature have decided to model their origin rules as far as possible on the EEC's rules under the Yaounde Con vention. Generally these rules require a sufficient amount of pro- cessing in the reporting country to make the product classifiable under a different heading of the Brussels Tariff Nomenclature from