Preferential Market Access is necessary to boost and sustain economic growth for the least advanced economies. Many international initiatives support this concept, which was restated at the Sixth Ministerial Meeting of the World Trade Organisation, in December 2005. The objective is to allow complete duty-free and quota-free imports from LDCs by 2008 or no later than the start of the implementation period of the final package arising from the Doha Round of negotiations.

 The latest available data on market access for developing and least developed countries (2005) show positive and continued progress towards meeting this target. Average tariffs applied to imports from developing countries has been decreasing, but progress has been slow in recent years.

Indicators on market access
International efforts to remove barriers to trade from developing countries are monitored on the basis of the share of exports from developing and from the least developed countries that enter developed countries free of duty, and on the basis of trends in average tariffs imposed on exports from developing countries of agricultural products, textiles and clothing.

Excluding arms, almost 76% of exports from developing countries entered developed countries free of duty. Among them, the least developed countries enjoy a better treatment, and over 82% of their exports entered duty free into developed country market.
 

The preference given to LDCs is somewhat weakened if oil is excluded from the calculation. Excluding arms and oil, the proportion of duty-free exports from LDCs is 79%, just slightly better than the average for developing countries (75%). On this basis, the LDCs' situation has barely improved during the last ten years.
 

Opening the markets of rich or middle income economies does not always by itself benefit the poorest of the developing countries –most of them being in Africa–, because supply constraints severely limits their capacity to utilise the duty-free opportunities. African LDCs enjoy, in theory, almost full duty free market access through different initiatives. However, due to restrictive conditions –among them rules of origins and other administrative obstacles– the benefits from these preferences prove difficult to materialize.
 

In addition, when these restrictive practices are phased out, as was the case for clothing and textiles, the smaller and the poorer among the developing countries have difficulties seizing the potential and are in danger of losing ground. To raise LDCs out of poverty, market access should be complemented by a significant program of Aid for Trade, (see indicator 41 of the MDGs), a call which was reiterated in the Hong Kong WTO Ministerial Declaration in December 2005.
 

It is widely recognised that if developing countries are to fully realize the potential of international trade to enhance welfare and economic growth, the main barriers to their exports – tariff and non-tariff barriers as well as internal bottle-necks– need to be removed. For the least developed among them, additional efforts should be made to unlock their production capacity of exportable goods and services and facilitate their access to foreign markets.
 

A number of commitments for removing trade barriers for developing countries have been made in recent years. The Doha round of multilateral trade talks was promoted as a development round because it was expected to deliver long-sought trade reforms that would help developing countries to seize the full potential of their comparative advantages, thereby spurring their economic growth.
 

Initiatives in 2001 by the world’s two largest markets, the European Union’s “Everything but Arms” arrangement for the LDCs and the United States African Growth and Opportunities Act, provided increased trading opportunities for the poorest countries. Other developed countries also expanded their programs for enhanced access to their markets for LDCs' exports, with significant impact in the case of Norway after 2002, and of Australia, and Canada after 2003 (Use the Select a comparison country / territory or group function in the home page for querying detailed information on indicator 39 by Reporter).
 

These opportunities were seized by various LDCs to increase their exports, but the rate of utilization remains low at about 70%, with the minimum reported generally for the highest value-added products (e.g., 39% for industrial products in the USA), pointing to the persistence of structural barriers to export.
 

More recently, at the Sixth Ministerial Meeting of the World Trade Organization (WTO) in December 2005, developed country WTO Members committed themselves to the objective of duty-free and quota-free imports from LDCs by 2008 or no later than the start of the implementation period of the final package arising from the Doha Round of negotiations. Developed country members who are not in a position to do so for all products, will nevertheless ensure that at least 97 per cent of their tariff lines will be duty-free and quota-free for imports from all LDCs.

In addition, an increasing number of developing countries are willing to facilitate duty free access to their market. China, the fastest growing large economy, is one of them, but the list includes also more than 40 developing countries part of the Global System of Trade Preferences (GSTP) .
 

In the face of the difficulties that the Doha Round confronted during 2006, it is important to mention that this commitment to grant preferential access to LDCs is independent of the negotiations' outcome. Indeed, no major development has taken place since the WTO Ministerial Decision of December 2005, and the situation faced by LDCs imports has improved only moderately since then. On the other hand, the liberalization of existing quotas on sensitive products, like clothing and textiles with the end of the ATC in 2005, unleashed a global restructuring of trade flows which benefited some developing countries but was also prejudicial to others, including  the upper middle income countries in East Asia and several LDCs from Africa (Benin, Burkina Faso, Lesotho and Mali being the most dependant on clothing and textile exports).
 

From a statistical perspective, the Millennium Development Goal of improving market access is monitored by a series of indicators that reflect the level and structure of tariffs faced by developing countries' exports in developed markets, with a special emphasis on least developed ones. This year, the coverage of the indicators was extended with the inclusion of Norway in our list of developed import markets.
 

Duty-free access  (Indicators 38)

The degree of duty free access can be measured by the number of duty free lines and by the share of imports entering duty free.  The latter indicator is markedly influenced by the product composition of imports and its change over time. On the other hand, the number of TL can be misleading, as a small proportion of protected  TL on such "sensitive" products as food or clothing can exclude most of LDCs' export potential. For this reason, the preferred indicator is the share of imports.

Excluding arms, almost 76% of exports from developing countries entered developed countries free of duty. This indicator has risen steadily since 2002, and the overall improvement since 1996, the first year with comprehensive data, is close to 23 percentage points. As expected, the least developed countries enjoy a better treatment, and over 82% of their total exports (excluding arms) were eligible to enter duty free into developed country markets in 2005. The corresponding figure was 68.5% in 1996, indicating a slower progress compared with the other developing countries.

Nevertheless, the better relative treatment given to LDCs is less pronounced when oil is excluded from the calculation. The five oil exporters (Angola, Equatorial Guinea, Yemen, Sudan and Chad) account for more than 55% of total LDCs exports, and their weight in total LDCs' exports distort the market access analysis. Excluding arms and oil, the proportion of duty-free exports from LDCs is less than 4 percentage point higher than the average for developing countries (78.7% against 75.3% in 2005). In addition, the decennial trend does not indicate a clear upward tendency, and for the last two years, the indicator has stagnated.  As a matter of fact, when both arms and oil are excluded from the indicator on duty-free imports,  the LDCs's situation has barely improved over the 1996-2005 period. It declined after 1998, reflecting –inter alia– the increase of Asian LDCs exports on controlled products such as clothing and textiles, but bounced back after the series of initiatives in favour of LDCs that took place after 2001.

This situation may point to several factors related to the statistical effect of a change in the composition of LDCs exports affecting average applied tariff –in particular a higher share of clothing from Asia– but also to the difficulty faced by LDCs to fully use their preferences in duty-free tariff lines. As mentioned, recent years have seen many initiatives in favour of LDCs, but it seems that the poorest among these countries have not had the capacity to benefit from the increased openness, in contrast to other developing countries.

Actually, when all developing countries are included, the corresponding indicator has gained more than 20 percentage points since 1996, and reached 75.3% in 2005. Part of this increase is linked to the booming exports of IT products –mainly originating in Asian developing countries– which benefit from low tariffs according to the ITA Agreement, which entered into effect in 1997.  Nevertheless, for both developing and least developed countries, the preliminary figures for 2005 indicate a stagnation of the indicator 38 after several years of rapid improvement.
 

These differentiated trends can be explained by several issues. The tariff analysis is based on the assumption that all granted tariff preferences to exports originating from beneficiary countries are potentially utilized. However, in reality, due mainly to restrictive rules of origin and other non-tariff barriers, these preferences cannot be fully utilized. The utilization rate of GSP preferences fluctuates considerably from 40% to 100%, depending on the importing country and the sector. The low utilization of preferences is more prevalent in least developed countries where the compliance with the requirements attached to these tariff preferences can be problematic (rules of origin, affecting clothing, or sanitary and phytosanitary measures as is often the case for food products.) The best example is provided by the Sub-Saharan African countries, most of them being LDCs and enjoying theoretically almost 100% market access preference through different preferential schemes. Yet, these countries face tremendous difficulties to make use of these preferences due to the above mentioned reasons.
 

In addition, despite an increased opening as far as the number of tariff lines is concerned, developed countries still protect some sensitive products, some of which are also of crucial export interest to developing countries.
 

Tariffs on agriculture, textiles and clothing (Indicator 39)

Tariffs imposed by developed countries on imports of agricultural, textile and clothing products from developing countries declined modestly over the period 1996-2005. Some of the reductions are an outcome of the Uruguay Round of negotiations, which has resulted in a reduction in overall tariffs; the remaining are due to preferential trading agreements. More recent initiatives are being discussed in the framework of the Doha Round but progress has been slow up to now; the technical and political complexity of these issues were at the origin of the suspension of the trade negotiations in July 2006.
 

Indicator 39 shows that progress has been slow during recent years. Despite the overall reduction, developed countries’ tariffs remain high on several goods that are strategically important to least developed economies, such as clothing and farm products.

It should be noted that the most labour intensive activities, such as agriculture and clothing are the more taxed, albeit the situation is much better on agricultural products for LDCs whose food production for export, based on tropical products, usually does not compete with developed countries' farmers.

In addition, opening the markets of rich or middle income economies does not always by itself benefit the poorest of the developing countries, as illustrated by the recent evolution of the textiles and clothing sector.

Special feature: Impact of the end of WTO Agreement on Textiles and Clothing on developing countries

The end of the WTO Agreement on Textiles and Clothing (ATC) in January 2005 put an end to the last 10 years of restrictive market access practices. The ATC which had replaced the MFA in 1995 set a limit to what large producers could export to the a group of developed economies. While designed chiefly to protect the labour intensive manufacture of rich importing countries, it indirectly benefited many smaller developing economies which could attract investments motivated by the possibility of exporting under theses quotas. The end of the ATC  was expected by many analysts to benefit principally China and India, the main producers, at the expense of smaller developing economies. The exports from China were also to be boosted by its accession to WTO in 2001, generalizing the MFN treatment to its exports.
 

The statistical evidence based on two years of trade data does indeed confirm that China and India were among the main beneficiaries of the end of the ATC. China, which was already the major exporter of clothing and textiles to the developed world with 28% of the market in 2004, increased its sales by 29% during 2005. This surge of exports prompted the introduction of quotas by the European Union and the USA, and Chinese export growth slowed down to 12% in 2006.
 

In 2006, China's exports confirmed their predominance and represented more than 35% of developed countries' s imports. India's exports rose also by a hefty 19% in 2005 (11% in 2006), albeit from a much more modest base and its market share rose less than one percentage point, from 5% to 5.8%, between 2004 and 2006.
 

Nevertheless, some other Asian developing countries (Bangladesh, Cambodia, Indonesia and Vietnam) as well as Egypt were able to adjust successfully to the increased competition after an initial setback in 2005, and increased their exports by an annual average of 13% to 17% from 2004 to 2006.  By contrast, the Asian NICs (Hong Kong China, the Republic of Korea, Chinese Taipei and Singapore) clothing and textile exports fell by an average 8% annually over the same period. Latin American exports (Mexican exports dropped 7%) and Sub-Sahara Africa (-8%) faced a similar fate.
 

Excluding Bangladesh and Cambodia, the LDCs exports of clothing and textile to developed countries decreased by an annual average of 5% in 2005 and 2006. As the bulk of the drop took place in the first year after the end of the ATC(-14%) while 2006 showed some signs of recovery, there is still some hope for theses countries to recover some of the lost territory. On the other hand, the high prices of primary products sustained by the strong demand from China make it tempting for some least developed countries endowed with natural resources, especially in Africa, to lower their ambitions aimed at diversifying their export base into labour intensive types of manufactures.
 

Once again, the ATC experience stresses the importance of integrating trade liberalization with domestic reforms and development assistance, for a comprehensive and meaningful outcome. To raise LDCs out of poverty, preferential market access measures should be complemented by a significant program of Aid for Trade, (see indicator 41 of the MDGs), a call which was reiterated in the Hong Kong WTO Ministerial Declaration in December 2005.