IUST: WTO Members Reach Preliminary Non-Binding Deal On Rules Of Origin For LDCs

NAIROBI, Kenya - World Trade Organization members have reached a provisional agreement on a draft ministerial decision setting out non-binding guidelines for countries to follow for determining whether goods from least-developed countries (LDCs) meet the rules of origin to qualify for unilateral tariff preferences.

The text of the draft ministerial decision was developed by the Danish ambassador in his role as the chairman of talks on the LDC rules of origin issue and was circulated to all WTO members at an informal heads of delegation meeting on Wednesday (Dec. 16) afternoon.

The chairman's text includes less binding language than that originally sought by LDCs with respect to the key obligation for preference-granting countries to grant preferential duty treatment to LDC goods where 25 percent of the value derives from the LDC. That means 75 percent of the value of the good can come from any other country.

The text states that preference-granting countries "shall consider" using the 75 percent figure, with certain qualifications. Specifically, the text says that preference-granting members shall "[c]onsider, as the Preference-granting Members develop or build on their individual rules of origin arrangements applicable to imports from LDCs, allowing the use of non-originating materials up to 75 percent of the final value of the product, or an equivalent threshold in case another calculation method is used, to the extent it is appropriate and the benefits of preferential treatment are limited to LDCs."

The final wording of this paragraph emerged after last-minute negotiations between the U.S. and the LDC group, which had taken issue with the previous formulation. That earlier language would have stated that 75 percent threshold would apply "[t]o the extent that the Preference-granting member determines that the benefits of the preferential treatment are confined to the LDCs. . . ."

One informed source said that the language represents a political commitment, even if it does not create legally binding principles. This source noted that ministerial decisions, regardless of their wording, always carry less legal weight than agreements that are formally part of the WTO Agreement. LDCs also settled for a non-binding decision on rules of origin at the previous WTO ministerial in Bali.

Another source said this agreement on LDC rules of origin could create positive momentum that would allow members to reach a deal on other elements, such as export competition. Discussions on export competition have continued throughout the day.

But the export competition talks are still difficult, and one source said he viewed the draft decisions on LDC rules of origin and preferential treatment for LDC service suppliers as not being linked to the rest of the package.

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