10 Jan, 2013

Changing Mindset, Ways of Doing Business, Helps Laos Become a WTO Member

Geneva, WTO Media release, 9 Jan 2013 – The World Trade Organisation has officially informed Laos of its acceptance as a member. The General Council formally agreed to this on 26 October 2012, paving the way for the southeast Asian country to become a member in early 2013. Travel & tourism is one of 10 economic sectors that will benefit from the market-access commitments made during the negotiations process.

The deal — the Protocol of Accession — was signed after the meeting by Laos’ chief negotiator, Industry and Commerce Minister Nam Viyaketh, and WTO Director-General Pascal Lamy. Copies will be submitted to the National Assembly in Vientiane. All that remains is for Laos — officially the Lao People’s Democratic Republic (PDR) — to ratify the membership package, and 30 days later it will become a member, over 15 years after it first applied to join the WTO.

“Laos has come a long way since it embarked on the road to membership in 1997,” said WTO Director-General Pascal Lamy. “This is never easy for any least developed country, and Laos’ first steps were slow. But it is now seriously reforming its economy and its institutions, and has shown skill in its membership negotiations.

“Even at the end there were some tricky steps,” he went on. “The ability to strike the deal says much about Laos’ own ability, the flexibility of WTO members who are now implementing a series of decisions to speed up least developed countries’ accession to the WTO, the technical assistance several of them have provided, and the invaluable mediation of the chair of the Working Party, Ambassador YI Xiaozhun of China.”

General Council chairperson Elin Østebø Johansen, who is Norway’s ambassador, told the meeting: “This year has been a particularly important one for the WTO community in the area of accessions: we welcomed four new Members, Montenegro, Samoa, and more recently, the Russian Federation and Vanuatu.

“In July, we also took a very important decision concerning the accession of least developed countries, in line with the mandate by ministers at MC8 [the eighth WTO Ministerial Conference]. I strongly believe that the forthcoming entry of Lao PDR, an LDC [least developed country], into the WTO represents a fundamental step towards its integration into world trade and into the world economy,” Ambassador Johansen said.

“From a systemic point of view, Laos’s entry will also take us a further step towards greater universality in our membership and it is yet another sign of WTO’s ability to deliver important results when members work together constructively towards a common objective.”

Laos’ Deputy Prime Minister and Foreign Minister Thongloun Sisoulith said: “In a country like the Lao PDR, the accession process is not limited to changing some laws and regulations. We had to change our way of doing business. Indeed, such a mind change is a difficult and time-consuming exercise. Given the progress we have made, both institutionally, legally and in our mindset, 15 years actually seems a very short time.”

In that period, over 90 laws and regulations were enacted, including on trading rights, import licensing, customs valuation, investment, sanitary and phytosanitary measures, technical barriers to trade, and intellectual property rights, Dr Thongloun said.

The task was not easy but Laos benefited from help and advice from WTO members, he said. But, “The negotiations at home — which have to lead to a buy-in into the process — are much more important and difficult than the negotiations here in Geneva,” he added.

Ambassador YI Xiaozhun of China, who chaired the working party, paid tribute to Laos’ efforts as he reported to the General Council: “Over this 15-year period, Lao PDR has undertaken profound domestic reforms and adjustments for its WTO accession. The negotiating team has done an admirable job in this complex and challenging process. As a former WTO accession negotiator for China, I understand the unique challenges of the WTO accession process not only for the acceding government, but also for WTO Members and the WTO Secretariat.”

Delegations also welcomed Laos’ membership. They paid tribute to Laos’ efforts and the collaboration of WTO members. They said the market opening and economic reform accompanying WTO membership, with its principles of transparency, predictability and rules, would help the country develop and make it more attractive for foreign investment. Several of them called for similar flexibility under current guidelines in the membership negotiations of other least developed countries, some referring to Yemen as the next in line to become a member.

At the end, the working party of countries negotiating the membership package with Laos had 66 participants, counting the EU’s member states as well as the EU itself. They agreed on the final deal on 28 September 2012.

Fact sheet and FAQ: Laos’ WTO membership

Is Laos a WTO member now?

Not yet. The negotiation is over. The membership package was approved by General Council (ie, all existing WTO members) on Friday 26 October. Laos still has to ratify the agreement and inform the WTO that it has done so by depositing its “Instrument of Acceptance”. Thirty days later it officially joins the WTO. Laos’ Industry and Commerce Minister Nam Viyaketh, the chief negotiator, said he is confident the National Assembly will complete ratification in December.

What will membership mean for Laos?

It allows Laos to join the international trading community on a proper legal footing. In WTO terminology, it enjoys a number of rights but also has some obligations:

• The right to have access to other WTO members’ markets according to their commitments and WTO rules. This access is considerable in the case of more developed export markets

• The right to be part of an international trading system based on agreed rules rather than everyone-for-themselves, which is transparent and predictable. Just one practical example: if countries want to restrict imports from Laos or any other member on the grounds of food safety or animal and plant health, they cannot do this arbitrarily — they have to apply internationally-agreed standards or provide scientific evidence of risk. WTO agreements also include rules for transit for a land-locked country.

• The right to use the WTO’s dispute settlement system, a legal process similar to a court in the WTO that countries can use when they believe other members are breaking their promises or the agreed rules

• The right, as a least-developed country, to more lenient terms and commitments than more developed countries.

• The obligation to comply with its commitments to open up its markets to a degree, as it has agreed in its membership package (details below).

• The obligation to abide by WTO rules. Implementing the various reforms can also help Laos to become a stronger trading nation and to attract the foreign investment that it wants.

Does the WTO believe that Laos can fulfil its goals?

“The WTO” in this case means the 157 existing WTO members. They negotiated the membership package with Laos and they believe it can comply. In any case Laos has already implemented many of its commitments and is well on the way to doing the rest.

Being a part of ASEAN’s regional trade and economic liberalization set up has helped Laos prepare for WTO membership, as has the technical assistance that Laos has received from developed countries.

What are the most important issues facing Laos as a new WTO member?

As a least-developed country, the biggest challenge is probably to develop enough knowledge and skills within the bureaucracy to handle the wide range and complexity of issues in the WTO and to implement the necessary reforms. Laos has asked for the technical assistance that it has been receiving from developed countries to continue.

ASEAN delegations in Geneva meet frequently so that is an opportunity to share information and sometimes divide tasks within the group.

Laos’ Industry and Commerce Minister Nam Viyaketh also mentioned the tough challenge of negotiating internally within the country:

“We knew that we were engaged in a difficult exercise of convincing our trade partners of our good will, but also the constraints we are facing as a least developed country with a less bargaining power and still rely on ODA [overseas development assistance]. We, however, underestimated the difficult negotiations we would have to undergo at the internal front. Quite frankly, trying to convince our trading partners of the position of Lao PDR only to go home, and to convince our internal partners of the justification of the reforms requested, was one of our most difficult and hard tasks.”

What has Laos agreed to do?

Part of the membership package contains the market access commitments that Laos is making in goods and services — tariff ceilings on goods, subsidy limits in agriculture, and access to its services markets. These are a combination of the offers Laos itself made, with additional commitments agreed in bilateral negotiations with the nine interested members — Australia, Canada, China, the EU, Japan, Rep. Korea, Chinese Taipei, the US and Ukraine — and built into the multilateral package.

The multilateral deal also contains descriptions of Laos’ trade regime, and wide-ranging commitments on laws and measures designed to ensure the regime conforms to WTO rules. Laos is also land-locked. In order to support the negotiations, Laos has received technical assistance from other WTO members, who said they would continue to provide aid after it has joined the WTO.

When it joins the WTO, Laos has agreed to the following:

Market opening

For goods, Laos is committing “bound” tariffs (effectively maximum rates) that average 18.8% for all products — 19.3% on average for agricultural products, and 18.7% for the rest.

In services, Laos has made market access commitments, subject to agreed conditions and limitations, in 10 sectors, covering 79 sub-sectors. The 10 sectors are: business services, courier and telecoms services, construction, distribution, private education, environmental services, insurance, banking and other finances, private hospital services, tourism and air transport.

Other commitments include:

• Tariffs will be “ordinary customs duties” only, within committed levels, with no additional duties and charges.

• Agricultural subsidies to be according to Laos’ “schedule” of commitments — including no export subsidies.

• WTO rules, such as rules of origin, preshipment inspection, anti-dumping measures, countervailing duty, safeguards, customs valuation, export measures including prohibitions, subsidies, trade-related investment measures, free zones, laws on transit operations, preferential trade under bilateral, regional and other agreements, to comply with WTO agreements immediately.

• Technical Barriers to Trade (product standards and labelling) and Sanitary and Phytosanitary Measures (food safety and animal and plant health) agreements fully implemented by 1 January 2015.

• Intellectual property protection to comply fully with the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement by 31 December 2016. (The agreement includes special provisions for least developed countries, see www.wto.org/trips)

• WTO rules on trading rights to apply from the date of becoming a member, with some exceptions for two years, although measures can be applied under WTO agreements on import licensing, technical barriers to trade (product standards and labelling) and sanitary and phytosanitary measures (food safety and animal and plant health).

• State enterprises to import or export broadly under commercial terms, and to notify their imports and exports to the WTO.

• Price controls will be consistent with WTO rules on trade in goods, agricultural products and services.

• Companies and individuals to have the right to legal appeal on government administrative actions covered by WTO rules, including those on trade regulations, subsidies, customs valuation, intellectual property rights and domestic regulation in services.
• Laos’ commitments and WTO rules to be applied throughout the country and enforced by the government without the need for recourse to the courts.

• Government fees and charges for services will be according to WTO agreements.

• Taxes and other charges on imports to comply with WTO agreements including national treatment (non-discrimination between imported and domestically produced products).

• No quantitative restrictions such as licensing, quotas, prohibitions, bans and other restrictions, except if for balance of payments purposes, which would follow WTO rules.

• Transparency: Laos to submit initial notifications as required within six months. All relevant laws, regulations and other measures will be notified as required by WTO rules and be made public in print and on the Internet. An Official Gazette to be set up within three years.

Background

Laos Accession Working Party members 2012: Australia, Bangladesh, Brazil, Brunei Darussalam, Cambodia, Canada, China, Dominican Rep., EU, Haiti, Honduras, Hong Kong, China, India, Indonesia, Japan, Kingdom of Saudi Arabia, Rep. Korea, Lesotho, Malaysia, Mongolia, Myanmar, Nepal, New Zealand, Nigeria, Pakistan, Panama, Paraguay, Philippines, Qatar, Singapore, Switzerland, Chinese Taipei, Tanzania, Thailand, Ukraine, United States, Viet Nam, Zambia

Chairperson: Ambassador Yi Xiaozhun of China

Secretary: Mr Dayong Yu

Co-Secretary: Ms Petra Beslać

Director of the WTO Accessions Division: Mr Chiedu Osakwe

Lao People’s Democratic Republic applied to join the WTO on 16 July 1997. The General Council agreed to set up a working party on 19 February 1998. The working party met on 28 October 2004, 30 November 2006, 15 November 2007, 4 July 2008, 14 July 2009, 24 September 2010, 29 June 2011, 16 March 2012, 12 July 2012 and 28 September 2012.

Statement by Dr Thongloun Sisoulith, Deputy Prime Minister and Minister of Foreign Affairs of the Lao PDR
at the WTO General Council meeting, Geneva, 26 October 2012

Today, 26 October 2012, is a historical moment for the government and people of the Lao PDR. The accomplishment recorded today is a result of a long period of intensive and comprehensive work. Indeed, we have been preparing for this milestone for 15 years. It has been 15 years of learning and understanding the functioning of the global trading system and how the Lao PDR could integrate into it through experiencing and practicing mutual respect. On behalf of the Lao Government, I wish to express my sincere appreciation to all WTO members for adopting the General Council Decision on the Accession of the Lao PDR. We will be so proud to share this historic news to our counterparts at the 9th Asia-Europe Summit, to be held soon on 5–6 November 2012 in Vientiane, the capital of the Lao PDR.

The principles this organization is based on, namely non-discrimination, transparency and predictability, are cherished principles of the Lao PDR. Hence, the multilateral trading system which ensures that economic relations between nations are based on fair and predictable rules is of paramount importance to a small, landlocked, and least developed country like the Lao PDR. As a new member of this organization, Madam Chairperson, the Lao PDR will do its utmost to contribute to the evolution and the functioning of the WTO by, first of all, fully abiding by its rules and obligations, and by constructively participating in its deliberations and negotiations.

In July 1997, the Lao PDR applied for WTO membership. It was a bold and logical step of moving towards market-oriented economy since the introduction of the “New Economic Mechanism” policy in 1986. The Lao PDR remains relatively young in terms of both, its legislative framework and its governance. Nevertheless, the country has strived to improve its legal framework and institutions to ensure that its population has all the necessary conditions to reach their economic potentials and to reap full benefits from our development.

Throughout the past one and a half decade, over 90 laws and regulations have been enacted covering various areas such as trading rights, import licensing, customs valuation, investment, sanitary and phytosanitary measures, technical barriers to trade, and intellectual property rights. Against this backdrop, this has never been an easy path. It requires the mobilization and the concerted efforts of all forces available in our country, and we have been fortunate to benefit from this process of collaboration. Moreover, the comments and suggestions received from our partners in the WTO have proven to be useful as they help to ensure that our new laws and regulations are fully in conformity with WTO rules.

The Lao PDR has experienced many constraints and difficulties in the process of accession, I believe, similar to most recently acceded LDC [least developed country] WTO members. In a country like the Lao PDR, the accession process is not limited to changing some laws and regulations. We had to change our way of doing business. Indeed, such a mind change is a difficult and time-consuming exercise. Given the progress we have made, both institutionally, legally and in our mindset, 15 years actually seems a very short time.

We must always remember that countries like ours desperately need a functioning multilateral trading system to protect ourselves from the exercise of discretionary powers. We therefore have a special responsibility to ensure that the system continues to work. For that, we have to be full and active members of this Organization. We have learned important lessons during these years, which we are more than willingness to share with LDCs currently negotiating their WTO accession.

The most crucial element in our accession process has been the political determination and internal coordination and cooperation. WTO guidelines and benchmarks for LDCs accessions are essential to ease this difficult exercise. However, the catalyst is always the political will to undertake the required reforms and to create the necessary internal capacity across line ministries. The negotiations at home — which have to lead to a buy-in into the process — are much more important and difficult than the negotiations here in Geneva.

The Lao PDR could not have succeeded without the support it was fortunate to receive in the forms of financial and technical assistance from bilateral and multilateral donors. Thanks to the generous assistance provided, we have been able to re-define and implement the reform programmes needed to be executed. We appreciate the effective and demand-driven use of donor support for the Lao PDR to comply with WTO obligations.

The accession process has been a guide and a pushing force towards reforms in our trade and economic framework taking into account international best practices. Working Party Members were constantly supportive, with their comments, suggestions, cooperation and understanding, allowing us to gradually introduce the necessary economic restructuring. The accession process, as I have mentioned earlier, has helped paving away to attain the Millennium Development Goals by 2015 and graduate from LDC status by 2020. We are privileged to see the benefits of our reforms already during the process. The Lao PDR has experienced a protracted period of sustained growth rates of its economy, over seven per cent on average during this past ten-year period. Foreign direct investment has increased from 25 million dollars in 2002 to almost 3 billion dollars in 2011.

In the immediate future, the Lao PDR is fully committed to ensuring that the ratification procedure will be completed within the set timeframe. The Lao PDR’s National Assembly has supported the accession process, enacting WTO-compliant legislation throughout this period. Members of the National Assembly are, in fact, part of our National Steering Committee, and have closely followed the whole accession process.

We are fully aware that implementation of our commitments requires the involvement not only of the central Government, but also all administrative levels. We have already begun the institutional set-up and planning. We will continue our efforts in disseminating the results of our negotiations with the private sector and the general public.

We have foreseen a post-accession campaign not only in Vientiane Capital, but also in the provinces, both to advocate them about the package agreed with our partners, and to mobilize their support in taking full advantage of the new opportunities that these reforms offer. This process requires training government officials in the new legislative and policy framework. Towards this end, I appeal to our development partners to continue their assistance and support in this implementation phase.

The Lao PDR reiterates its firm commitment and determination to become a full and active member of the WTO by strictly adhering to its principles as well as by participating actively and constructively in its negotiations.

In conclusion, I would like to reiterate the Lao PDR’s deep appreciation for the cooperation it has received throughout this accession process and beyond. May I also express my sincere thanks to the WTO Secretariat, particularly the Accessions Division and the ITTC [WTO Institute for Training and Technical Cooperation] for their valuable assistance and support. My special thanks also go to China, Australia and New Zealand, as well as the European Community, Switzerland/IDEAS Centre, United States/USAID, Viet Nam, ACWL [Advisory Centre on WTO Law], ITC [International Trade Centre], UNCTAD [UN Conference on Trade and Development] and the World Bank, together with other development partners for their assistance.

Moreover, may I extend my gratitude to ASEAN [Association of Southeast Asian Nations] member countries, LDCs friends and all WTO members for their continued support. Last but not least, I would like to commend our negotiation team led by the Ministry of Industry and Commerce for their dedication, perseverance and excellent work.

Thank you!