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Small
Economies: the Need for Special and Differential
Treatment (SDT) |
By: Manuel
Madriz Fornos Trade Director of the Association of
Caribbean States.
December 3, 2007: In the framework of the Association of Caribbean States (ACS)
Ministerial Council Meeting that will take place in Panama,
in January 2008, a compilation of studies will be launched
on the issue of Special & Differential Treatment (SDT), as
applied to small economies.
This issue has been at the forefront of the activities of
the Trade directorate for some time now. Indeed, a study on
special and differential treatment had been done in
collaboration with the United Nations Economic Commission
for Latin America and the Caribbean (ECLAC), and the
Economic System of Latin America and the Caribbean (SELA),
to analyze how the subject was actually being dealt with
within the framework of the regional integration agreements,
namely CARICOM and the Central American Common Market (CACM).
But how relevant is that issue of differential and more
favorable treatment, most commonly known as special and
differential treatment, particularly with respect to our
small economies?
Among the structural problems of small economies are: small
population, small markets, limited natural resources, and
vulnerability to natural disasters. In general, these
economies rely on the exports of a few varieties of primary
products. They also have limited local capital available for
productive investments. Agriculture is the backbone of many
of them, the main source of revenue, and one of the main
providers of export products. Consequently, all these
characteristics have to be taken into account. |
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As a matter of
fact, SDT provisions can be defined as the series of
measures that are meant to recognize these specificities, so
that small economies and other developing countries are not
negatively affected by trade liberalization.
Whether it is perceived as a moral obligation of the former
colonial powers, or as a politically necessary evil, as the
distinction is being made by M. Garcia & R. Safadi, two
economists from the Organisation for Economic Cooperation
and Development (OECD), authors of the introductory chapter
of the above-mentioned compilation, there is indeed a
rationale for the implementation of differential treatment
to smaller economies. And indeed, the same observations can
be made, either among the CARICOM Member states or the CACM
countries. Though they are part of a regional grouping,
asymmetries can be noted, and consequently, they will
respond differently to the demands of the globalised world
economy.
Small economies are indeed being challenged. Most of the
time their size is further exacerbated by their low level of
development and this does not allow them to be able to
fairly compete with much wealthier economies.
Indeed, the liberalization of the world trade which has been
taking place, with the reduction of trade barriers, is seen
by many as being beneficial, especially to developing
countries. It has enabled some of them to develop
competitive advantages in the manufacture of certain
products. However, this will be the case only if their
vulnerability, low level of resource endowment and economic
development are taken into account.
When it comes to SDT as applied in CARICOM Member states,
such provisions were first mentioned in the additional
treaty of 1968, and the Treaty of Chaguaramas states that
governments of the Lesser Developed Countries (LDCs) can, if
deemed necessary, as a temporary measure to promote the
development of any industry, impose quantitative
restrictions on imports from the other Member states. In so
doing, their production will be protected. There is also a
possibility for them to grant subsidies to stimulate their
exports.
Lastly, it has to be noted that the World Trade Organisation
(WTO) will receive the two studies realized by ECLAC and
SELA, so that their outcome and conclusions can be included
and taken into account in the upcoming trade negotiations. |
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