When a country graduates from the LDC category, it no longer benefits from LDC-specific international support measures. The practical implications and significance of that change depend on numerous factors, and thus differ among countries. The United Nations Department of Economic and Social Affairs is currently preparing reports that assess the expected effects of graduation for the six countries that are expected to meet the criteria for graduation at the next Triennial Review of the Committee for Development Policy (CDP), to take place in March 2018: Bhutan, Kiribati, Nepal, Sao Tome and Principe, Solomon Islands and Timor-Leste. These reports, referred to as “Impact Assessments”, are one of elements on which the CDP will base its decision on whether to recommend the graduation of these countries to the Economic and Social Council (ECOSOC).
Here are some of the questions the Impact Assessments answer:
– What will be the impact of graduation on preferential market access?
One of the main support measures for LDCs is preferential access to markets. The actual impact of losing LDC-specific preferences depends on what goods the country exports, as well as other factors, including any trade agreements it may be a part of. Impact Assessments compare the tariffs faced by the country’s major export and potential export products in its main markets before and after graduation. While in some cases, the loss of LDC-specific preferences may have significant impacts on the tariffs faced by a country’s exports, in others the impact may be marginal. This is the case, for example, when the Most Favoured Nation (MFN) tariffs for a country’s main exports is zero in the most important markets.
– What happens in terms of WTO commitments?
Leaving the LDC category will mean the country no longer benefits from LDC-specific special and differential treatment in the fulfillment of WTO commitments or from LDC-specific support for the WTO accession process. Impact Assessments consider the specific situations of each country, which depend on whether the country is a member of the WTO – and in that case the terms of its accession – or whether it is in the process of accession. Some countries are neither members nor in the process of accession.
– What happens to development cooperation?
The international community has made a number of commitments in support of LDCs as a group and specific instruments have been put in place to support LDCs in developing trade capacity, financing climate change adaptation and others. When a country graduates from the LDC category, it no longer has access to those specific instruments. However, development partners do not base their cooperation programmes exclusively on LDC status. Impact Assessments consider the significance of the loss of LDC-specific support measures for each country in the context of the main development cooperation programmes by identifying and consulting the main development partners on their post-graduation prospects for the country in question.
– Do a country’s contributions to the United Nations budget increase when it graduates?
LDCs benefit from discounts and maximum thresholds on their contributions to the budgets of the United Nations and United Nations system entities. Budget contributions depend on a country’s income level and other factors, and in many cases graduation has no impact on contributions as countries remain under the maximum threshold for LDCs. Impact assessments calculate the amounts of change in the contributions due based on current budgets, as an indication of the expected changes once the country graduates.
Impact assessments prepared for the CDP’s 2018 Triennial Review will be published after the CDP’s plenary meeting in March 2018.
Impact assessments for previous Triennial Reviews are available here.