TN/C/W/63  
 
31 May 2013  
(13-2869)  Page: 1/21  
Trade Negotiations Committee  Original: English  
 
 NINTH WTO MINISTERIAL CONFERENCE, BA LI, INDONESIA, 3-6 DECEMBER 2013 
 
LDC PACKAGE FOR BALI 
 
COMMUNICATION BY NEPAL, ON BEHALF OF THE LDC GROUP 
The following communication dated 31 May 2013, is being circulated at the request of the 
delegation of Nepal on behalf of the LDC Group. 
 
_______________ 
 
The Ninth Ministerial Conference (MC9) is to ta ke place from 3 to 6 December 2013 in Bali, 
Indonesia.  Members have started working on possible deliverables for MC9.  There is broad recognition for an LDC package, in order to further integrate the LDCs into the multilateral trading 
system.   
 It was indicated to Members earlier that the LDC Group is working on a package essentially 
involving four areas, namely: (i) implementation  of the duty-free and quota-free market access 
Decision taken by Members at the Hong Kong Mini sterial Conference in 2005 (hereafter the "DFQF 
Decision"): (ii) preferential rules of origin; (iii) cotton; and (iv) operationalization of the LDC Services waiver. 
 
Through this communication, the LDC Group is making a submission (appended herewith) to form part of the Bali outcome. While these represent so me of the priority issues of the LDC Group at 
this juncture, these are not necessarily exhaustive.   
 Members are aware that Ambassador Steffen Smidt (Denmark) has been appointed as the 
Facilitator for the LDC component at Bali.  The LDC Group requests the Facilitator to initiate 
necessary process so that these proposals could be taken up with Members for satisfactory resolution at or even before MC9:  
a. A decision on the implementation of DFQF Decision (Annex 1). 
b. Adoption of simple and flexible preferential rules of origin criteria to further enhance 
exports from LDCs, in line with the LDC proposal (Annex 2). 
c. A submission in the area of cotton, covering both trade and development assistance 
aspects (Annex 3). 
d. A submission on the operationalization of LDCs' Services waiver. (Annex 4). 
 
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  TN/C/W/63 
 
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  ANNEX 1 
[DRAFT DECISION ON IMPLEM ENTATION OF DUTY-FREE QUOTA FREE MARKET ACCESS FOR 
LEAST-DEVELOPED COUNTRIES]1 
1.1.  In the Hong Kong Ministerial Declaration,  Members adopted the Decision on Measures in 
Favour of Least Developed Countries (the "2005 Decision") contained in paragraph 36 of Annex F 
to the Declaration.  In the 2005 Decision, deve loped-country Members, and developing-country 
Members declaring themselves in a position to do so, agreed to implement duty-free and quota-
free market access for products originating from least-developed countries (LDCs) as provided for 
in paragraph 36(a).   
1.2.  Specifically, Members agreed in the 2005 Decision that developed-country Members shall, 
and developing-country Members declaring themselves in a position to do so should:  
i. Provide duty-free and quota-free market access on a lasting basis, for all products 
originating from all LDCs by 2008 or no later than the start of the implementation period 
in a manner that ensures stability, security and predictability; 
ii. Members that faced difficulties to provide market access as set out in item (i) above shall 
provide duty-free and quota-free market access for at least 97 per cent of products originating from LDCs, defined at the tariff line  level, by 2008 or no later than the start of 
the implementation period.  In addition, thes e Members shall take steps to progressively 
achieve compliance with the obligations set out above, taking into account the impact on other developing countries at similar levels of development, and, as appropriate, by incrementally building on the initial list of covered products; and  
iii. developing-country Members shall be permitted to phase in their commitments and shall 
enjoy appropriate flexibility in coverage. 
1.3.  In addition, the 2005 Decision provided th at Members shall notify the implementation of 
schemes adopted under the Decision to the Committee on Trade and Development.   
1.4.  Since the adoption of the 2005 Decision, Members have made significant progress towards 
the goal of providing duty-free and quota-free mark et access on a lasting basis for all products 
originating in LDCs. Today, most of WTO developed Members provide either full or nearly full DFQF 
Market access to LDC products. In addition, a num ber of key developing country partners of LDCs 
grant a significant degree of DFQF market access to LDC products. However, full implementation of the goal of duty-free quota-free market access for all products originating in LDCs is yet to be 
achieved.   
1.5.  It is recognised that full implementation of the Decision to provid e duty-free and quota-free 
market access on a lasting basis for all products originating from all LDCs should be accomplished 
in a manner that does not diminish the existing market access enjoyed by any LDC.   
1.6.  It is accordingly agreed that: 1.7.   Developed country Members that yet do not provide duty-free quota-free market access for 
at least 97 per cent of all products originating in LDCs shall do so by [insert date of 
implementation] ensuring enhanced and commercia lly-meaningful market access for all LDCs. In 
doing so, due care shall be taken not to diminish the existing market access enjoyed by any LDC, 
as of the date of this decision.   
1.8.  All developed country Members shall progressively work towards duty-free quota-free market 
access for all products originating from all LDCs if they have not achieved this goal on the date of this decision. The progress in this respect shall be reviewed annually, on a line by line basis, in the 
Committee on Trade and Development, and a report shall be submitted annually to the General 
Council for appr opriate action. 
                                               
1 Two LDC Members of the WTO have expressed re servation on this proposed draft Decision. TN/C/W/63 
 
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  1.9.  Developing country Members that have provided duty-free quota-free market access for 
products originating in LDCs as of the date of th is decision shall endeavour to expand the current 
duty-free quota-free coverage to the goal of providing such access for at least 97 per cent of all products originating in LDCs. Developing country Members that yet do not provide duty-free 
quota-free access will also endeavour to provide increasingly DFQF access in an expeditious 
manner and in line with the 2005 Decision. 
1.10.  For the purposes of paragraphs 5 to 7 above, the level of duty-free quota-free market 
access shall be defined as the percentage of the total number of tariff lines that are zero-rated for 
all LDCs.  
1.11.  In providing duty-free quota-free market a ccess to LDC exports, Members shall ensure that 
preferential rules of origin applicable to imports from LDCs are transparent and simple, and 
contribute to facilitating market access.   
1.12.  In order to ensure that the duty-free quota-free market access provided to products 
originating in LDCs under this decision is not nullified by non-tariff barriers to trade, sanitary and 
phyto-sanitary measures, and other technical barrier s to trade, developed- and developing-country 
Members commit to work with LDCs to ensure that they receive the necessary trade-related technical assistance, capacity building, and aid for trade to allow them to conform with any non-
tariff regulations governing imports into developed- and developing-country Members' markets. 
1.13.  The Committee on Trade and Development sh all periodically review the notifications on 
preferential regimes. TN/C/W/63 
 
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  ANNEX 2  
LEAST-DEVELOPED COUNTRIES' PROPOSAL ON RULES OF ORIGIN 
COMMUNICATION FROM NEPAL ON BEHALF OF THE LDC GROUP 
 The following communication, dated 31 May 2013, is being circulated at the request of the 
delegation of Nepal on behalf of the LDC Group1. 
 
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Rules of origin are old and have not followed evolutions in world trade. The 
present rules were initially drawn up in the 1970s and they have not materially changed much since, whereas the commercial world has. They were also based on the need to 
protect Community industry and on the premise that beneficiary countries should be 
encouraged to build up their own industries in order to comply. In most cases, this has not happened. Instead, there has been a trend towards the globalization of production, but 
rules of origin have not been adapted to this. At the same time, compliance costs are high 
and the paper-based procedures are outdated. 
 
.... Lower preferential margins combined  with high compliance costs make 
preferences unattractive . As a result of successive rounds of trade agreements, 
preferential margins are much smaller than they used to be. 
 
…The dilemma of LDC s is well illustrated by the information received from countries 
requesting derogations from rules of origin. Such countries have little or no domestic fabric production, which means they have to import it (so failing to comply with the "two stages 
of processing" rule) and add only between 27 per cent and maximum 40 per cent in value. 
 
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 From "Impact assessment on rules of origin fo r the Generalized System of Preference (GSP) 
European Commission, Brussels 25 October 2007 Taxud/GSP-RO/IA/1/07 (page 16). 
 
INTRODUCTION 
1.14.  The first sentences in the preamble of this proposal are an excerpt from a major policy 
document of the European Union, arguably the bi ggest donor in terms of preferential trade flows 
to LDCs. They reflect in a self-explanatory manner the problems of the LDCs in the area of rules of origin.  
1.15.  It is on the basis of this assessment that  the EU has inaugurated reform of unilateral rules 
of origin
2 in thirty years of operations of such ru les of origin. In 2003 the Canadian Government 
also introduced liberal rules of origin for LDCs. In 2011, Switzerland made certain changes to its rules of origin criteria for LDCs which were similar to the ones introduced by the EU.   
1.16.  The quoted text acknowledges the instances raised by the LDCs in their former submission 
of 2006
3 and previous LDCs Ministerial declarations. LDCs are not able to take advantage of 
preferential market access provisions (and  ably  use trade as a vehicle for economic growth and 
poverty alleviation) if the Rules of Origin associat ed with the preference scheme are so strict as to 
preclude the utilization of these preferences. 
1.17.  The EU reform in 2011 has liberalized rules of origin criteria at large for all EU beneficiaries 
and most importantly it has recognized the special needs of the LDCs by differentiating rules of 
                                               
1 The following is a revision of th e submission by Bangladesh, on behalf of a LDC Group, in documents 
TN/CTD/W/30/Rev.2;TN/MA/W/74/Rev.2;TN/AG/GEN/20/Rev.2. 
2 See for the official text of these changes Commission regulation (EU) No 1063/2010 
of 18 November 2010amending Regulation (EEC) No 2454/93 laying down provisions for the 
implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code council 
regulation 
3 See TN/CTD/W/29 and TN/MA/W/74 and TN/AG/GEN/18 of 6 June 2006. TN/C/W/63 
 
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  origin applicable to LDC products from those applicable products originating in developing 
countries. In addition changes have been introduced in the EU regional cumulation rules that made possible the increased use of regional inputs by removing the previous existing value condition. 
1.18.  Most notably, such reforms towards liberali zation of rules of origin would be welcomed in 
the Japanese and US rules of origin under their re spective GSP schemes.  This reform should also 
apply to the rules of origin applicable under th e Duty-Free Quota-Free (DFQF) Initiative for the 
least developed countries (LDCs) implemented by developed and developing countries.  
1.19.  In fact there is a need to move forward st arting from the  recognized challenges. After more 
than 30 years of unaltered preferential unilateral rules of Origin in spite of successive reduction of MFN tariffs, discussions at multilateral level on how to best fulfil the DFQF commitment could only be beneficial to all Members. While acknowledgin g the unilateral nature of trade preferences, the 
objective of this proposal is to provide a first input into this process. 
1.20.  The Decision reached in Hong Kong, as contained in Annex F of the Ministerial Declaration, 
states, inter alia, that WTO Members agreed to: "ensure that preferential rules of origin applicable 
to imports from LDCs are transparent and simple, and contribute to facilitating market access". 
1.21.  In order to initiate implementation of the commitment on Rules of Origin made by all 
Members in the Hong Kong Declaration, the LDC Group put forward a proposal (TN/CTD/W/29 and 
TN/MA/W/74 and TN/AG/GEN/18 of 6 June 2006) to the NAMA and Agriculture Committees and to 
the Committee on Trade and Development. The LD Cs submitted this proposal to these three 
Committees in order to promote a focused debate on Rules of Origin between LDCs and preference-giving countries on the basis of a specific text on rules of origin rather than on 
declarations of principle and statements of intent. 
1.22.  The responses from preference-giving countries to the LDC proposal have not been 
encouraging.  
1.23.  A series of meetings were held in 2007 with Delegations of preference-giving countries, 
including the US, EU and Japan. However these meetings were not particularly fruitful since the focus was on defence of the status quo rather than being aimed at discussing possible ways to 
multilaterally achieve the objectives of rules of origin that are "transparent and simple, and 
contribute to facilitating market access". 
1.24.  There were also misguided perceptions that  either LDCs did not know what they want or 
how they wanted to proceed
4. This was despite the fact that the LDC Group presented a detailed 
proposal on Rules of Origin mentioned above to the NAMA Committee a year earlier. There was 
also an assumption5 that the objective of the LDCs submission was aimed at achieving 
harmonization of preferential rules of origin. Although desirable, nowhere had and has the LDC 
Group argued for harmonizing Rules of Origin.  
1.25.  The statement on the adoption of best practices made by the NAMA chair in 2007, is in line 
with the position of preference-giving countries, wh o all believe that their particular preferential 
Rules of Origin constitute best practice, rather than in line with the clearly stated objectives of the 
LDC Group. 
1.26.  The LDC proposal for preferential Rules of Origin under the DFQF stems from the 
consideration that there are no easy short cuts or miracle solutions to the issue of rules of origin. 
The LDC proposal is centred on an ‘across the board’ Rule of Origin based on a percentage 
criterion. The proposal for an across the board criter ion is simply made to avoid the proliferation of 
product-specific rules of origin product by produc t. Rules of origin negotiated product by product 
and industry by industry open the way for organize d industries and lobby groups to devise rules of 
origin that are diminishing transparency and trad e liberalization. This has happened during RTAs 
                                               
4 In his introduction to the Draft NAMA Modalities  (JOB(07/126) on 17 July 2007 the NAMA Chair, in 
paragraph 38, stated that "On the issue of improving rules of origin  for duty-free, quot a-free market access, 
neither the proponents nor the Members more broadly have a precise idea on how to proceed" . 
5 The Chair in Draft NAMA Modalities (JOB/07/ 126) on 17 July 2007 paragraph 38, stated that "I would 
note that harmonizing preferential rules of origin may not be the optimal solution and that there are best practices among Members that could be readily adopte d to enhance the effectiveness of these programs".  TN/C/W/63 
 
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  negotiations among Developed and Developing countries and among Developing countries 6 on a 
number of occasions. 
1.27.  Reliance on an ‘across board percentage,’ does not preclude the possibility to have some 
product specific rules of origin for specific sectors where LDCs exports are most concentrated 
especially in the clothing sector of HS chapter 61 and 62. 
1.28.  The new EU rules of origin in these sect ors are based on a single transformation i.e. 
assembly operations of fabrics by sewing or otherwise assembly of fabrics. Such liberal rule of 
origin is expected to generate consid erable trade effects in some LDCs.   
1.29.   Thus it may be fairly said that a single transformation is the best practice to be used in the 
area of clothing for rules of origin to reflect industrial capacities in LDCs and attain the development objectives of trade preferences 
1.30.   Depending on the need of  LDCs other sectors specific rules may also be considered and 
such sectors specific rules of origin  may be  formulated  using other methodologies such as; change of tariff classification and specific workin g or processing requirements. It is proposed that 
these eventual exceptions should be kept to a minimum and reflect the export interest of LDCs . 
1.31.  The  proposed LDCs model  conforms with  the Kyoto Convention and international practice 
by the Main Preference Giving countries in that it  uses two main origin-conferring categories, these 
being: 
i. Wholly Produced - refers to agricultural and mining products which are collected, mined, 
grown, reared etc. in the exporting country (e.g. mineral products; vegetable products; live animals; products obtained from live animals; etc. if these products originate in the 
Member State concerned). Annex D1 of the Kyoto Convention contains a definition of 
what constitutes wholly produced and most preferential Rules of Origin follow this definition; 
ii. Substantive Transformation, defined by one or more of the following methods: 
(a) change of tariff classification; 
(b) value addition; or 
(c) specific working or manufacturing process. 
 1.32.  There are difficulties in any method used to calculate substantive transformation as discussed in the former submission made by the LD C Group.  The method recommended for use in  
this submission is the percentage criteria based on a value of materials calculation  as adopted by 
many preference giving countries, with some adaptations.  
1.33.  In fact, the percentage criteria used by certain preference giving countries are defined in a 
variety of ways but mainly they take the following forms
7: 
1.34.  -Value addition (35 per cent) calculated as  a percentage of the cost of  local originating 
material, labour and direct cost of processing out of the ex-factory price of  the finished product. 
This is the method used, for example, under the US GSP and AGOA. This method is also used, 
albeit with other level percentages required and different definitions of the numerators and 
                                               
6 See for a number of examples of restrictive prod uct specific rules of origin in North-South and 
South-South RTAs Inama, "Rules of origin In Intern ational Trade". Cambridge University press, 2009 and for 
the NAFTA case Krishna, Kala "Understanding Rules of origin" EFMA Meetings Helsinki, 2003. 
7 The intrinsic limitations and scarce trade facilitation  effect deriving from the use by preference giving 
countries of different calculations methods and different level of percentages are evident as early witnessed in 
an UNCTAD document: As earlier mentioned a preference-receivi ng country pointed out that insuperable 
obstacles were caused by the need to devise and operate an  accounting system that differed in the definition of 
concept, application of accounts, precision, scope, and control from its internal legal requirements. The system 
must provide the costing information to satisfy the rules of  the countries of destination, to check the shares of 
domestic and imported inputs in the unit cost of the exported goods, in some cases identifying the country of 
origin of the inputs and establishing direct and indirect processing costs.  TN/C/W/63 
 
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  denominators, by other preference giving countries like Australia; Canada; New Zealand and 
Eurasian Customs Union. 
a. Value addition defined as subtraction of the value of imported material out of the ex-
works (or adjusted value in US terminology). This, for example, is the "build down" 
method used under the United States - Central America Free Trade Agreement (US-
CAFTA) and it has been also used by the EU in the impact assessment study8. 
b. Allowance of a maximum amount of foreign inputs as a percentage of the ex-work price 
(EU current practice and Japan practice using the FOB price as a denominator Japan)9.  
1.35.  The nature of each formulation of the percentage criterion affects the administrative effort 
required to introduce and maintain compliance with criterion.  It also affects the substance of the criterion. There are also a series of limitations to the percentage criteria that the calculation 
method proposed by the LDC group has addressed in light with best practices and lessons learned.  
1.36.  Limitations in using the percentage criterions are well known and may be quickly 
summarized as follows: 
a. Percentages calculations are easily affected by movements in exchange rates for finished 
products that have imported raw materials, in that, when a local currency appreciates, the percentage value added tends to decline, and vice-versa;  
b. The level of percentage threshold may be arbitrar ily set and it is difficult to set it up even 
with consultations with the private sector given the number of variables costs to take into account;  
c. The costs of labour in developing countries is relatively cheap and in a value added 
calculation, it may turn an asset into a penalty; and 
d. The calculations may be difficult and may entail some accountancy expertise and a 
certain amount of discretion in assessing costs that may lead to dispute plus 
accountancy skills generally not available in most small firms in LDCs. 
1.37.  More specifically, there are three kinds of parameters for defining the percentage criteria 
that are discussed here below together with the solution proposed by the LDC Group: 
General limitations of the percentage criterion:  Value-added V. Value of materials in the  
determination of the numerator  1.38.  There are important differences in the fo rmulation of the numerator and calculation of 
percentages. The major differences in the numerator reflect two approaches, one, which places a 
maximum limit on the use of, imported material like the  EU and Japan and the other one which 
places a minimum limit of value added  as in case of the US GSP represented by cost of local 
materials + direct cost of processing. A  third variation is a valued added calculation made by 
subtraction as in the case of the EU formula used in the impact assessment and in the build-down calculation of the US-Central America Free Trade Area. 
1.39.  Lesson learned in preferential rules of origin and most recently in the net cost calculations in 
NAFTA has amply demonstrated that the formulation of percentage criterion calculations as value 
                                               
8 According to the Impact Assessment  Brussels 25 October 2007 Taxud/GSP-RO/IA/1/07  the formula of 
the valued added is as follows:  
 Value added = Ex-works price - va lue of non-originating material 
___________________________________________________   x 100 
Ex -works price
 
 
9 It has to be noted that both EU  and Japan under the current GSP rules of origin do not use the 
percentage criterion as an across the board criteria. The Percentage criterion is only used in the context of 
certain product specific rules of origin contained in  an extensive list  detailing the product specific rules of origin.With respect to the ex-works price the FOB price   in cludes inland transport to the port of embarkation.   TN/C/W/63 
 
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  added or "domestic content" are complex entailing the detailed rules to define what are allowable 
and allowable costs that can be counted as numerator a values added calculation.  
1.40.  These elements may be familiar only to accountants.  As prices, costs and quantities 
change, recalculation will be necessary to ensure compliance. While some of these tasks may form 
part of the normal accounting procedures required for commercial purposes, some may not. In 
such cases therefore additional professional ex pertise may be required. The calculation of the 
numerator in a value added calculation is complex as it entails: 
i. A distinction of costs, which could be computed as local value added; 
ii. Itemization of such cost to the single unit of production.  As a consequence it often 
requires accounting, and discretion may be us ed in assessing unit costs.  Additionally, 
currency fluctuations in beneficiary countries may affect the value of the calculation; 
iii. Low labour costs in developing countries may result in low value added and instead of 
being a factor of competitiveness may turn out to a factor penalizing producers based in Developing countries. 
1.41.  The US has progressively restricted the use of the net cost calculations to limited items in 
the automotive sector and the  EU that initially planned to use such calculation in its reform of the 
GSP rules of origin has dropped the original plans. 
Proposal by the LDC Group: Use of value of materials calculation as numerator 
 1.42.  In the light of the above mentioned lessons learned and best practices, the LDCs are proposing a calculation methodology based on a value of materials calculation. This methodology 
eliminates most of the shortcomings of a value added calculation. The value of material calculation 
is based on the WTO Customs Valuation Agreement anchoring the rules to a multilateral instrument in use by WTO Members. This method of calculation is similar to the one used by the 
US in recent FTA agreements with Australia, Singapore, Chile, Central America and other countries 
as well as to the EU  calculation currently used. 
Specific limitation of the percentage cr iterion: Calculation of denominator  
 
1.43.  As in the case of the numerator, the preference giving countries are using different formulation that can be summarized as ex-factory cost, ex-works price and FOB price. 
1.44.  These formulations of denominators have as series of pros and cons.  At present only Japan 
is using FOB price under its current GSP rules of origin. 
1.45.  Under current practice the EU is using the following definition of ex-works price:   "ex-works price" means the price paid for th e product ex works to the manufacturer in the 
Community or in "beneficiaries" states in whose undertaking the last working or processing 
is carried out, provided the price includes the value of all the materials used, minus any internal taxes which are, or may be, repaid when the product obtained is exported. 
 
1.46.  In the case of the US as pointed out above, the concept of appraised value
10 is still used 
with the related difficulties reported above. In the case of the US-CAFTA agreement, the 
denominator is based on the concept of adjusted value based on the following definition: 
For the purposes of this note, the term "adj usted value" means the value determined under 
articles 1 through 8,article 15 and the correspon ding interpretive notes of the Agreement on 
Implementation of Article VII of the General Agreement on Tariffs and Trade (the Customs 
Valuation Agreement), except that such value may be adjusted to exclude any costs, charges or 
expenses incurred for transportation, insurance and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation . 
 
                                               
10 Appraised value in US custom s practice is normally considered as  eq uivalent to  the  ex-factory price   TN/C/W/63 
 
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  1.47.  The two definitions of denominator mentioned does not differ widely since they make 
reference either by wording or by direct reference to the transaction value as contained in the WTO Customs Valuation Agreement. 
1.48.  On one hand, the formulation under the US makes explicit reference to the WTO Customs 
Valuation Agreement resulting in a transparent and predictable text of law binding and applicable 
by all WTO Members. On the other hand, the expre ssion ex-works price has been widely used by 
the majority of beneficiaries that are familiar to the ex-works price definition. At a well-attended 
workshop on rules of origin in Eastern and Southern Africa the two definitions were widely 
discussed and the majority of the participant opted for the ex-works price definition. A solution could be to take the best of the two definitions. 
Proposal by the LDC Group: Use of  ex-works price as denominator  
 
1.49.  The proposal of the LDC Group is therefore based on an ex-works price defined as follows: 
"ex-works price" means the price paid for the product ex-works to the manufacturer in the 
Community or in " beneficiaries" states in whose undertaking the last working or processing is 
carried out determined under articles 1 through 8, article 15 and the corresponding interpretive notes of the Agreement on Implementation of Arti cle VII of the General Agreement on Tariffs and 
Trade (the Customs Valuation Agreement).  
 
The percentage criterion calculation proposed by the LDCs  
1.50.  On the basis of these lessons learned, the LDCs are proposing the following percentage 
criterion.  The methodology used to calculate value addition is based on two formulas defined as value on non-originating materials and value of originating materials, using best practice from the 
US-CAFTA and the EU:  
Method Based on Value of Non-Originating Materials  
 
 LVC  = EW - VNM x 100 
            EW 
  Method Based on Value of Originating Materials  LVC = VOM x 100 
   EW  Where:  
- LVC is the LDC  value content, expressed as a percentage; 
 - EW is the ex-works price; 
 
- VNM is the value of non-originating materials that are acquired and used by the producer 
in the production of the good; VNM does not include the value of a material that is self-produced; and 
 
- VOM is the value of originating materials acquired or self-produced, and used by the 
producer in the production of the good. 
 
The issue of the level of percentages  
1.51.  Another intrinsic limitation of the percentage  criterion is the setting the level of percentage. 
The first criticism is derived from the fact that, even if determined through consultations with the private sector, setting an adequate level of percenta ge tends to be arbitrary as it may change from 
time to time due to variations in the cost of the inputs and currency fluctuations.  
1.52.  Moreover the level of the percentages may be different from product to product and the 
stringency or leniency of a given percentage depends on the calculation methodology. The LDC TN/C/W/63 
 
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  Group has assessed various literatures in this respect11 and has made use of a survey conducted 
among Eastern and Southern Africa and other evidence from recent studies conducted by researchers hired by preference giving countries.  
1.53.  Recent experience of preference giving countries has also been taken in account. In 2003 
the Canadian Government introduced changes in rules of origin, setting a 60 per cent maximum 
import content allowance (instead of the 40 per cent permitted for other developing country GSP 
beneficiaries) for LDCs. This means that to qualify for the LDC duty-free treatment, at least 
40 per cent of the ex-factory price of the goods pa cked for shipment to Canada must originate in 
one or more LDC beneficiary countries or Canada. In addition, 20 per cent of the 40 per cent qualifying content could originate from other developing countries that are beneficiaries of the Canadian GSP scheme. Special rules for textile and clothing were also introduced allowing the use 
of imported fabric from other beneficiaries of th e Canadian GSP scheme, provided that they do not 
exceed 75 of the ex-factory price of the final goods. 
1.54.  In addition to findings resulting from field research, the EU Impact Assessment contained 
simulations exercises on the trade creation deriving from using different percentages of 50 per 
cent of local content and 30 per cent. The policy implication of the simulation exercise is that the trade creation results from the simulation exercise were far greater under 30 per cent
12 level of 
percentage.  
1.55.  Hence, in drafting the latest proposal13 for changes in the GSP rules of origin the EU 
Commission used, for a number of goods, a thresh old of 30 per cent of  local value content 
equivalent to a maximum allowance of foreign import of 70 per cent.  
The level of percentages proposed by LDCs 
 1.56.  On the basis of the above mentioned best particles and lessons learned the LDCs are 
proposing a level of percentage of  15 per cent for the build-up formula and 25 per cent for the 
build-down formula. 
1.57.  The difference in the percentage among the two formulas derives from the different 
calculation methodology.        
The new element of the calculation proposed by the LDCs:  
 Inclusion of in-land transport for the calcul ation of the domestic content calculation 
(build-up) and exclusion of freight and insu rance for the calculations of the maximum 
allowance of foreign materials (build-down).  
1.58.  The formulas proposed take into account th e special situations related to the transport costs 
of input materials to Islands and landlocked LDCs. The calculations are based on adjustments made to the value of materials as contained in article 6 of the LDC proposal  permitting either the 
deduction of the CIF costs to the regional port when the value of non- originating  method is used 
or the addition of inter-regional inland costs of transport when the value of originating material  method is used. This method of calculation of the value of materials used in manufacturing will greatly facilitate LDC compliance with the Rules of Origin of the preference giving country. 
                                               
11 See for instance:,  Impact assessment on rules of orig in for the Generalized System of 
Preference(GSP) European Commission, Brussels 25 October 2007 Taxud/GSP-RO/IA/1/07, Evaluating the 
Consequences of Shift to a Value-added method for De termining Origin in EU PTAs", July 2006 (Letter of 
Contract No. 2005/103984, Framework Contract AMS/451 - LOT No. 11), Dr. Michiel Scheffer of Saxion Hogescholen, "Study on the application of value criteria for textile products in preferential rules of origin", October 2006 (Tender 06-H13). Contract Cadre FISH/2006/20, Specific Convention N° 3 "Rules of Origin in Preferential Trade Arrangements: New rules for the fi shery sector,Trade Preferences for LDCs: An early 
assessment of benefits and possible improvement in the context of WTO negotiations .  
UNCTAD/ITCD/TSB/2003/8. December 2003, An assessment of the impact of  Preferences Erosion and  Rules of Origin in Eastern and Southern Africa, a survey of ESA exporters, UNCTAD and COMESA, forthcoming 2010. 
12 See pages 36-37 Impact assessment on rules of or igin for the Generalized System of Preference 
(GSP) European Commission, Brussels 25 October 2007 Taxud/GSP-RO/IA/1/07. 
13 
http://ec.europa.eu/taxation_customs/resources/documen ts/customs/customs_duties/ rules_origin/preferential
/news_june_09.pdf. TN/C/W/63 
 
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  Product specific rules for specific sectors 
 
1.59.  As discussed above ,the LDC group is aware that the percentage criterion may not be, technically speaking, the most suitable methodology for some specific sectors of goods. This may 
be applicable to textiles and clothing that are ca tegories of products of high expert interest. The 
recent EU GSP proposed rules for chapter 61 and 62 allowing the use of imported fabrics to make originating garments in LDCs could be a valuable example with some additional flexibilities. It 
should be borne in mind the desire to limit, to full extent possible, the proliferation of  tariff line by 
tariff line  rules of origin. 
Cumulation 
 
1.60.  The LDC Group proposal contains provisions for allowing regional cumulation. These 
provisions have been elaborated in taking into account that, although laudable and highly desirable, cumulation is not a substitute for liberal rules of origin. With liberal rules of origin, the 
LDC producers may source their inputs worldwide from the most competitive producer at the best 
prices. TN/C/W/63 
 
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  Duty-Free Quota-Free Market Access Provisions 
For Least-Developed Countries 
 
Annex F of the WTO Hong Kong Ministerial Decisions 
 
Rules of Origin 
 
 
GENERAL PROVISIONS 
 
Article 1 
 For the purposes of this Agreement:  
a) "LDCs" means the countries classified within this category by the United Nations General 
Assembly. 
 
b) "manufacture" means any kind of working or processing including assembly or specific 
operations; 
 
c) "material" means any ingredient, raw material, component or part, etc., used in the 
manufacture of the product; 
 
d) "product" means the product being manufactured, even if it is intended for later use in 
another manufacturing operation; 
 
e) "goods" means both materials and products; 
 
f) "customs value" means the value as determined in accordance with the 1994 Agreement on 
implementation of Article VII of the General Agreement on Tariffs and Trade (WTO Agreement 
on customs valuation); 
 
g) "ex-works price" means the price paid for the product ex -works to the manufacturer in the 
LDCs states in whose undertaking the last working or processing is carried out determined 
under the 1994 Agreement on implementation of  Article VII of the General Agreement on 
Tariffs and Trade (WTO Agreement on customs valuation); 
 
h) "value of non-originating  materials" means the customs value at the time of importation of 
the non-originating materials used, or, if this is not known and cannot be ascertained, the first 
ascertainable price paid for the materials in the LDC except that such value may be adjusted 
to exclude any costs, charges or expenses incurred for transportation, insurance and related services incident to the international shipment of the merchandise from the country of 
exportation to the place of importation in the LDC state; 
 
i) "value of originating materials" means the value of such materials as defined in 
sub-paragraph (h)  plus  any costs, charges, or expenses incurred for transportation, 
insurance, and related services incidental to the international shipment of the merchandise from the State  of exportation to the place of importation in the  LDC state as contained in 
defined in article 4(3) b.  
 
j) "chapters", "headings" and "sub-headings" mean  the chapters, headings (four-digit codes) 
and sub-headings (six-digit codes) used in the nomenclature which makes up the Harmonised 
Commodity Description and Coding System, or HS; 
 TN/C/W/63 
 
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  k) "classified" refers to the classification of a pr oduct or material under a particular heading;  
and 
 
l) "consignment" means products which are either sent simultaneously from one exporter to one 
consignee or covered by a single transport document covering their shipment from the exporter to the consignee or, in the absence of such a document, by a single invoice. 
 
GENERAL REQUIREMENTS 
 
Article 2 
 
1. The following products shall be considered as originating in the LDCs: 
a) products wholly obtained in the LDCs within the meaning of Article 3 of this 
Agreement;  and 
b) products obtained in the LDCs incorporating materials which have not been wholly 
obtained there, provided that such materials have undergone sufficient substantial 
transformation in the LDCs within the meaning of Article 4 of this Agreement. 
2. For the purpose of implementing paragraph 1, all LDCs shall be considered as being one 
territory. 
3. Originating products made up of materials wholly obtained or sufficiently worked or 
processed in two or more LDCs shall be considered as products originating in the LDC where 
the last working or processing took place, provided the working or processing carried out there 
goes beyond that referred to in Article 5. 
WHOLLY OBTAINED PRODUCTS 
 
Article 3 
 
1. The following shall be considered as wholly obtained in the LDCs: 
a) mineral and other naturally occurring products extracted from their soil or from 
their seabed; 
b) vegetable and forestry  products harvested and grown there; 
c) live animals born and raised there; 
d) products from live animals raised there; 
e) products obtained by hunting or fishing conducted there; 
f) products of sea fishing and other products taken from the sea outside the 
territorial waters by their vessels; 
g) products made aboard their factory ships exclusively from products referred to in 
sub-paragraph (f); 
h) used articles collected there fit only for the recovery of raw materials, including 
used tyres fit only for re-treading or for use as waste; 
i) waste and scrap resulting from manufacturing operations conducted there; 
j) products extracted from marine soil or subsoil outside their territorial waters 
provided that they have sole rights to work that soil or subsoil; TN/C/W/63 
 
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  k) goods produced there exclusively from the products specified in sub-paragraphs 
(a) to (j). 
The terms "their vessels" and "their factory ships" in paragraph 1(f) and (g) shall apply only to 
vessels and factory ships which are registered or recorded in a LDC or in a country as defined in article 7. 
Notwithstanding the provisions of paragraph 2, the preference giving country shall recognise, 
upon request of a LDC, that vessels chartered or leased by the LDC be treated as "their 
vessels" to undertake fisheries activities in its exclusive economic zone. 
 
SUBSTANTIAL TRANSFORMATION 
 
Article 4 
 
1. For the purposes of these Rules of Origin, products which are not wholly obtained are considered to be sufficiently worked or processed in an LDC when the LDC value content is 
calculated on the basis of the value of non-originating materials or value of originating materials 
method described below. 
a) For the value of non-originating material method, the LDC value content of a good 
may be calculated on the basis of the formula: LVC =  P - VNM x100 
                            P 
 Where: 
LVC is the LDC value content of the good, expressed as a percentage. 
P is the ex-works price of the good. VNM is the value of non originating materials that are acquired and used by the 
producer in the production of the good, but does not include the value of a 
material that is self-produced. 
 
b) For Value of originating materials method, the LDC  value content of a good may 
be calculated on the basis of the formula: 
LVC =  VOM  x 100 
                       P 
 
Where: 
LVC is the regional value content of the good, expressed as a percentage. P is the ex-works price of the good. 
VOM is the value of originating materials that are acquired or self-produced, and 
used by the producer in the production of the good. 
 
2. A finished good is sufficiently worked or processed when: 
a) In the case where the value of non-originating material method is used the LDC 
content expressed as a percentage is equal to 25 percent. 
b) In the case where the value of originating o method is used the LDC content 
expressed as a percentage is equal to 15 percent. 
3. Value of materials 
(a) For the purpose of calculating the LDC value content of a good, the value of a material 
is: 
i. in the case of a material that is imported  by the producer of the good, the value of 
the material; 
ii. in the case of a material acquired or self-produced as defined in paragraph 4 in the 
territory in which the good is produced, the value, determined in accordance with the TN/C/W/63 
 
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  Agreement on Implementation of Article V II of the General Agreement on Tariffs and 
Trade 1994. 
(b) The following expenses, if not included in the value of an originating material calculated 
under sub-paragraph 4 (2) (b) above, may be added to the value of the originating 
material: 
iii. the costs of freight, insurance, packing an d all other costs incurred in transporting 
the material within or between the territory of one or more of the LDCs or 
neighbouring countries as defined under Article 7 to the location of the producer; 
iv. duties, taxes and customs brokerage fees on the material paid in the territory of one 
or more of the LDCs or neighbouring countries as defined in Article 7 other than duties or taxes that are waived, refunded , refundable or otherwise recoverable, 
including credit against duty or tax paid or payable; 
v. the cost of waste and spoilage resulting from the use of the material in the 
production of the good, less the value of renewable scrap or by-products. 
(c) The following expenses, if included in the value of a non-originating material calculated 
under sub-division 4 (2)(a) above, are deducted from the value of the non-originating material: 
(i) the costs of freight, insurance, packing and all other costs incurred in 
transporting the material to the location of the producer; 
 
(ii) duties, taxes and customs brokerage fees on  the material paid in the territory of 
one or more LDC or neighbouring countries as defined under Article 7, other than 
duties or taxes that are waived, refunded , refundable or otherwise recoverable, 
including credit against duty or tax paid or payable; 
 
(iii) the cost of waste and spoilage resulting from the use of the material in the 
production of the good, less the value of renewable scrap or by products; 
 
(iv) the cost of originating materials used in the production of the non- originating 
material;. 
 
4. If a product, which has acquired originating st atus by fulfilling the conditions set out above, 
is used in the manufacture of another product, the conditions applicable to the product in which it is incorporated do not apply to it and no account shall be taken of the non-originating materials 
which may have been used in its manufacture. 
 5 Notwithstanding paragraph 1 to 3 above, products which are not wholly obtained in a LDC 
State and contained in the list in Annex I are considered to be sufficiently worked or processed 
only when the conditions set out in the list are fulfilled. Those conditions indicate, for all products covered by the list, the change of tariff classification or working or processing which must be carried out on non-originating materials used in manufacturing and apply only in relation to such 
materials. 
 
INSUFFICIENT WORKING OR PROCESSING OPERATIONS 
 
Article 5 
 
1. The following operations shall be considered as insufficient working or processing to confer 
the status of originating products, whether or not the requirements of Article 4 are satisfied: 
b. operations to ensure the preservation of products in good condition during transport and 
storage (ventilation, spreading out, drying, chilling, placing in salt, sulphur dioxide or 
other aqueous solutions, removal of damaged parts, and like operations); TN/C/W/63 
 
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  c. simple operations consisting of removal of dust, sifting or screening, sorting, classifying, 
matching (including the making-up of sets of articles), washing, painting, cutting up; 
d. changes of packaging and breaking up and as sembly of packages or simple placing in 
bottles, flasks, bags, cases, boxes, fixing on cards or boards, etc., and all other simple 
packaging operations; 
e. affixing marks, labels and other like distinguishing signs on products or their packaging; 
f. simple mixing of products, whether or not of different kinds, where one or more 
components of the mixtures do not meet the conditions laid down in this Agreement to 
enable them to be considered as originating in a LDC; 
g. simple assembly of parts to constitute a complete product; 
h. a combination of two or more operations specified in sub-paragraphs (a) to (f); and 
i. slaughter of animals. 
2. All the operations carried out in the LDCs shall be considered together when determining 
whether the working or processing undergone by that product is to be regarded as insufficient 
within the meaning of paragraph 1. 
TERRITORIALITY 
 
Article 6 
 1. The conditions for acquiring originating status must be fulfilled without interruption in the LDCs. 
2. The acquisition of originating status shall not be affected by working or processing done 
outside the LDCs on materials exported from the LDCs and subsequently re-imported there, provided: 
(a) the said materials are wholly obtained in the LDCs or have undergone working or 
processing beyond the operations referred to in Article 5 prior to being exported;  and 
(b) it can be demonstrated to the satisfaction of  the customs authorities  of the preference 
giving countries that: 
i. the re-imported goods have been obtained by working or processing the exported 
materials; and 
ii. the total added value acquired outside LDCs by applying the provisions of this Article 
does not exceed 10 percent of the ex-wor ks price of the end product for which 
originating status is claimed. 
         
CUMULATION 
 
Article 7 
 
Cumulation with preference giving countries 
 1. Materials originating in the preference giving  countries shall be considered as materials 
originating in the LDCs when incorporated into a product produced in the LDCs.  It shall not be necessary that such materials have undergone su fficient working or processing, provided they 
have undergone working or processing going beyond that referred to in Article 5. TN/C/W/63 
 
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  Regional cumulation 
 
2. Products originating in any of the countries that are partners with a LDC of a regional group and used in further manufacture in a LDC shall be  treated as if they originated in the LDC of 
further manufacture. 
3 Working or processing carried in a country of  a regional group shall be treated as being 
carried out in the LDC where the last working of processing operations have taken place  
4. Notwithstanding paragraph 2 and 3, produc ts further manufactured in a LDC shall be 
considered as originating in a LDC only if the manufacturing process in the LDC are going beyond  the insufficient working or processing operation listed in article 5.   
5. The cumulation provided for in this paragraph may be applied only provided that: 
(a) A preferential trade agreement is in pl ace between a LDC and other members of the 
same regional trading arrangement;  
(b) Originating material and products of other members of the regional group and 
incorporated into a product further manufactured in a LDC have acquired originating status 
by the application of rules contained in this text . 
Cumulation with neighbouring countries (extended cumulation) 
 
6. At the request of a LDC, materials originating in a neighbouring developing country not a member of a regional trade agreement that has conc luded a FTA with a preference giving country   
shall be considered as materials originating in the LDC when incorporated into a product obtained 
there.  It shall not be necessary that such materials have undergone sufficient working or 
processing, provided that the working or processing  carried out in the  requesting LDC exceeds the 
operations listed in Article 5.  
 
UNIT OF QUALIFICATION 
 
Article 8 
 1. The unit of qualification for the application of the provisions of this Agreement shall be the particular product which is considered as the basic unit when determining classification using the 
nomenclature of the Harmonised System.  Accordingly, it follows that: 
 - when a product composed of a group or assembly of articles is classified under the 
terms of the Harmonised System in a single heading, the whole constitutes the 
unit of qualification; and 
 - when a consignment consists of a number of identical products classified under the 
same heading of the Harmonised System, each product must be taken individually 
when applying the provisions of this Agreement. 
 2. Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus 
or vehicle, which are part of the normal equipmen t and included in the price thereof or which are 
not separately invoiced, shall be regarded as one with the piece of equipment, machine, apparatus 
or vehicle in question. 
3. Sets, as defined in General Rule 3 of the Harmonised System, shall be regarded as 
originating when all component products are originating.  Nevertheless, when a set is composed of 
originating and non-originating products, the set as a whole shall be regarded as originating, provided that the value of the non-originating prod ucts does not exceed (15) per cent of the ex-
works price of the set. TN/C/W/63 
 
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4. In order to determine whether a product originates, it shall not be necessary to determine the origin of the following which might be used in its manufacture: 
j. energy and fuel; 
k. plant and equipment; 
l. machines and tools; 
m. goods which do not enter and which are not intended to enter into the final composition 
of the product. 
Annex 1 
 
HS Description  Working or processing carried 
out on non-originating 
materials that confers 
original status Explanation of the 
proposed  rule  
 
61  
Articles of apparel and 
clothing accessories; knitted or crocheted   
Manufacture from yarn or manufacture by assembling  two or more pieces of knitted or 
crocheted fabric which have been 
either cut to form or obtained directly to form 
 This rule allows the 
use of imported yarn to make  knitted 
clothing or the 
assembly operations of knitted or crocheted fabric cut or obtained 
directly to form 
62 Articles of apparel and 
clothing accessories not 
knitted or crocheted  
Manufacture from fabric or 
manufacture by assembling  two 
o r  m o r e  p i e c e s  o f  w o v e n   f a b r i c  which have been either cut to 
form or obtained directly to form 
in the country 
 This rules allows the 
use of fabric cut to 
shape in the country to assemble a finished 
article 
 
 ex 62   
Other articles of clothing 
or accessories 
,handkerchiefs 
embroidered or not   
Making-up or assembly  preceded by printing or dying or 
embroidery accompanied by at 
least two preparatory finishing operations (such as scouring, 
bleaching, mercerising, heat 
setting, raising, calendering, shrink resistance processing, 
permanent finishing, decatising, 
impregnating, mending and burling), This rule allows the 
use of imported fabric 
to make printed or 
dyed and embroidered fabric 
  
.TN/C/W/63 
 
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  ANNEX 3 
SECTORAL INITIATIVE 
IN FAVOUR OF COTTON 
GENERAL AND INDICATIVE GUIDANCE NOTE  ON THE PROPOSAL THAT THE C-4 WILL 
SUBMIT AT MC9 
 
1.61.   The 9th WTO Ministerial Conference will be held in Bali, Indonesia 3 - 6 December 2013. In preparation for this meeting and in order to agree on the issues to be submitted for 
decision by the Ministers, the Chairperson of the Negotiating Committee on Agriculture (special 
session) invited Delegations to submit for consider ation by Members in the shortest possible time, 
proposals for negotiating texts on issues of interest to their country and the groups to which they belong.  
1.62.   Among the topics that may be retained are issues of particular interest to LDCs 
(Services Waiver, Duty-free and Quota-free Ma rket Access, Rules of origin, and Cotton). 
1.63.   Regarding cotton, and in order to comply with the unanimous recommendation by  
Members to submit "reasonable and feasible" proposals, the Draft Ministerial Decision referenced 
TN/AG/GEN/32 and TN / AG/SCC/GEN/11 presented by the C-4 in November 2011, ahead of the WTO 8th  Ministerial Conference, could be re newed with amendments on the following: 
o The Commercial Component of the Cotton Issue : : item 3 on the "stand still" 
clause could be updated;  
 
o The Development Component of the Cotton Issue: item 5 will  be re-worded in 
order to take into account the outcome of the 19th Round of the Director General's 
Consultative Framework Mechanism on Cotton, scheduled for 21 June 2013, and with a view to submitting to the partners, a sub-re gional and integrating draft text building a 
bridge between such Mechanism and the Aid for Trade Undertaking.  
 1.64.  Just as in 2011, the C-4 proposal once finalized and approved by  the  C-4 Ministers  will be 
submitted to the WTO  in consultation with the LDC, African, ACP and G- 20 Groups whose support 
has always kept the cotton issue on  the WTO agenda   and every effort will be made  so that cotton becomes part of the possible outcome of the MC-9. 
 
 The Coordinator of C-4 
 TN/C/W/63 
 
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  ANNEX 4 
NOTE ON THE OPERATIONALIZATI ON OF LDCS' SERVICE WAIVER 
TRADE IN SERVICES AND LDCS 
1.65.  Trade in Services is becoming an increasi ngly important economic sector over the last few 
decades. In today's world, it is the fastest gr owing sector of the global economy accounting for 
nearly 19% share of World Trade. Service trade accounts over 70% of the world's GDP, 45% of 
the World's employment and around 40% of the World's stock of FDI. 
1.66.  The importance of trade in services for LDCs  goes beyond pure economic significance due to 
the catalytic role services sector plays for achieving social and economic development objectives and as a means of addressing poverty, upgrading welfare, improving universal availability and access to basic services, and in ensuring sustainable development, including its social dimensions. 
1.67.  Despite fast growth of this sector, the share of LDCs' in global trade in services is just 
around 0.5 percent.  
SERVICES WAIVER 
1.68.  With a view to enhance LDCs' share in world's service trade and help them reap adequate 
benefit from the liberalization of service trade, at the 8th Ministerial Conference of the WTO in December 2011, trade ministers adopted decision on "Service Waiver" in favour of LDCs. This 
decision allowed developed and developing country Members to provide preferential treatment to 
services and service suppliers of least developed country (LDCs) going beyond the notion of MFN 
treatment as contained in article II of the GATS, 1994. The Waiver, which will last initially for 15 years from the date of adoption, releases WTO members from their legal obligation to provide 
non-discriminatory treatment to all trading partners when granting trade preferences to LDCs. As 
per the decision on Service Waiver, notwithstanding the MFN requirement as provisioned in article II of the GATS, Members are freed to notify and gr ant more favourable treatment to services and 
service suppliers of LDCs with respect to certai n defined measures - those falling within the six 
categories of market access listed in Article XVI, or under other GATS provisions, if approved by the Council for Trade in Services. Services Waiver, based on the logic that it could have positive 
impacts on LDCs to enhance their trade, is deemed as a new LDC-specific "Enabling Clause". 
OPERATIONALIZATION 1.69.  One and half year after the decision, the Wa iver still waits operationalization. In order to 
operationalize it, LDCs’ trading partners will ha ve to design and effectively implement new trade 
preference schemes covering services. While nothin g stops them from binding such preferences in 
the form of scheduled commitments within the GA TS, in practice, preferences are likely to be 
unilateral in nature, as is currently the case for trade in goods. In a similar vein, the scope and 
depth of those preferences might vary substantiall y depending on the preference granting country. 
Yet, to be commercially meaningful, trade preferences will have to reflect the services sectors and modes where LDCs have existing or potential expo rt capacities. Ensuring that they match LDCs 
interests will therefore require solid analytical  work and effective consensus building. While 
services preferences might stimulate trade and invest ment, LDCs will only be able to realize their 
full export potential if they are able to addres s domestic supply side constrains and bottlenecks, 
such as the lack of infrastructure or weak regulatory regimes as well. In sum, the extent to which 
the Waiver will actually lead to development results will not only depend on the provision of 
commercially meaningful preferences but also on the LDCs’ ability to overcome their supply side 
constrains to effectively benefit from those preferences. 
1.70.  The identification of preferences for LDCs  services exporters would ideally flow from an 
analysis of economic data on LDC supply (actual and potential) in particular services, and the corresponding demand (actual and potential) in target import markets. Such an analysis would 
need to include information concerning the full legal and regulatory regime affecting trade in these TN/C/W/63 
 
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  services, distinguishing between measures with internationally bound levels (such as under the 
GATS) and those that are actually in effect – the applied regime.  
MOVING TOWARDS BALI 1.71.  As we move to the WTO Bali Ministerial Conference (MC9), the work programme established 
by the LDC group at the Montreux retreat in October 2012 stresses, as a first step, the need to 
identify potential modes and sectors of interest to LDCs for services exports in order to ‘operationalize’ the Waiver. This analysis will  focus on current and possible future LDC supply 
possibilities as well as trade barriers affecting export s of services. As noted by the Group, it should 
ultimately form the basis of a joint LDC request to potential preference granting countries, highlighting concrete options for commercially-meaningful preferences to LDCs’ services and service suppliers. Based on this, the Group recomm ended the convening of a signalling conference 
to garner political will from potential preference granting countries and prompt them to respond to 
the LDCs’ preferred modes and sectors of trade in services. 
1.72.  LDCs have already initiated homework on their part towards operationalization of the 
MC8 Decision. First is to identify potential modes and sectors of interest to LDCs for services 
exports - the current and possible future LDC supply  possibilities as well as trade barriers affecting 
exports of services. The LDC Group has envisaged work through this summer aiming to develop a 
joint LDC request to potential preference granting countries, highlighting concrete options for 
commercially-meaningful preferences to LDCs’ services and service suppliers. Our programme of work also specifies the need of a signaling conf erence wherein our trade partners can pronounce 
their preference schemes for LDCs. Announcem ent of possible preferences could make a 
meaningful commercial difference for LDC services and service suppliers. LDCs count on the 
political will on the part of their trade partners to ensure the effective operationalization of this 
important Decision made in favour of LDCs. 
 
__________