Development Gains from International Trade and Trade Negotiations
Senior officials and ambassadors,
Ladies and gentlemen:
It was with great pleasure that I accepted the invitation from Secretary-General Goulongana to be here this morning as you begin your preparations for the 5th WTO Ministerial Conference in Cancún, some six weeks from now. I wish to share with you some ideas on development gains from international trade and trade negotiations, in the context of the Doha work programme. I recall that when you met in November 2001 to prepare for the Doha WTO Ministerial Conference, I addressed you on the subject of how to inject the development dimension into multilateral trade negotiations. The nexus between international trade and development is central to the work of UNCTAD and indeed to our upcoming eleventh conference. I wish to take this opportunity to invite you, Honourable Ministers and Secretary-General Goulongana, to participate in the preparatory process for UNCTAD XI. I look forward to greeting you all in Sao Paulo, Brazil, next year, from 14 to 18 June.
Cancún marks a watershed in the Doha work programme. Ministers will have to take decisions, on the basis of their assessment of the progress achieved so far, on how to complete the work programme. In this exercise, the solidarity of the ACP makes it a major voice in the search for a political solution to deadlocks in the negotiations. One need only look to the Doha experience, when the ACP´s political clout helped to get the waiver granted for the Cotonou Agreement. Building on this successful experience, the cohesiveness of the ACP can be politically instrumental in mainstreaming trade into development, and development into trade, at and beyond Cancún.
Placing development at the heart of multilateral trade negotiations:
What did the Ministers at Doha have in mind when they agreed to put development at the heart of the Doha work programme?
What does it mean for ACP States?
A response to this question can be found in the Millennium Development Goals, in particular the objective of ´an open, equitable, rules-based, predictable and non-discriminatory multilateral trading and financial system´. The Doha work programme, in integrating development into the negotiations, has to contribute to each of these characteristics of the multilateral trading system. Cancún needs to make progress in these areas. I wish to provide some suggestions.
An open trading system must provide enhanced, stable and genuine market access in areas of export interest to ACP States in agriculture, manufactures and services. Developed countries need to liberalize in areas of export interest to developing countries through the removal and elimination of trade-distorting subsidies and domestic support measures; of market access barriers, notably in agriculture, textiles and processed goods; of discriminatory market entry barriers and market structures which prevent effective access; and of stringent barriers to the movement of developing-country service suppliers to their countries through Mode 4 of the GATS. These are all sensitive areas for developing countries. Experience has demonstrated that trade-distorting farm subsidies and domestic support measures have not even been effective in addressing the plight of affected sectors in the developed countries themselves. The removal of such measures would thus be of benefit to all groups of countries alike.
In this context, a decisive response to the Cotton Initiative in terms of removal of export subsidies on cotton, and financial compensation to affected countries, must be among the "deliverables" at Cancún. I referred to this problem as "the international scandal of cotton" in my address to the High-level segment of the Economic and Social Council last June.
Another attribute of openness is the accession of LDCs and developing countries to the WTO on terms that reflect their development status and that are comparable with similar current WTO members. The adoption by WTO members of guidelines for simplified accession procedures for LDCs is a noteworthy development.
An equitable trading system:
An equitable and fair trading system places the onus on WTO members to, inter alia, take fully into account the level playing field issues, such as differences in income, economic size, technological development and private sector capacities. Given these differences, the trading system must provide ACP States with greater flexibility and policy space, along with preferential treatment in market access and market entry. Special attention is needed for LDCs, landlocked countries and small economies. This is the rationale for expanded, operational, effective and mandatory S&D provisions in both new and existing agreements. Concretely, S&D and implementation issues need to be placed on the fast track so that a meaningful package can be attained at or after Cancún.
A rules-based and predictable trading system:
A rules-based and predictable trading system must ensure that these disciplines can be applied and effectively utilized, especially by the weaker members of the system. This requires an evaluation of the costs of implementing obligations and commitments by ACP States. It is particularly relevant in the case of resource-intensive agreements, such as TRIPS, customs valuation, SPS and TBT, as well as the effective use of the dispute settlement mechanism. It would also be relevant for some of the new issues being examined. Indeed, coherence is essential among the rights and obligations arising from the multilateral trading system, the capacities of ACP States to take advantage of the rights and implement the obligations, and the attendant resources for trade and development.
A non-discriminatory trading system:
A non-discriminatory trading system is in the interests of all countries, particularly the most vulnerable. Hence, the importance of the twin pillars of MFN and national treatment in the WTO. A major threat to such a system is the accelerated growth of bilateral RTAs by some major trading nations, including the EU, the United States and, recently, Japan. These are a source of concern for the multilateral trading system. There is a danger that these initiatives may encourage a retreat to protectionism and discriminatory approaches. The only assurance against the proliferation of discriminatory RTAs - even for ACP States, as they are not parties to many of the bilateral RTAs - is to strengthen the multilateral trading system.
A non-discriminatory trading system must also respond to ethical and humanitarian imperatives. Hence the need urgently to resolve the TRIPS and public health impasse with respect to access to essential drugs and other public interest issues.
Trade and development considerations for ACP States
I wish now to address five specific common development interests of ACP States.
Coherence in trade negotiations and objectives
ACP States are involved in liberalizing trade on a number of fronts. These include unilateral liberalization, or liberalization through IMF/World Bank structural adjustment programmes; liberalization through regional economic integration processes; liberalization through regional trade agreements with developed countries; and liberalization at the multilateral level under the WTO, which has moved from traditional areas of border measures to within-the-border measures.
These parallel liberalization tracks must be part of a coherent road map so that they are mutually consistent and supportive. More importantly, to generate the desired development gains, they must also be integral to, and responsive to, coherent national development strategies that link liberalization with growth, economic transformation, export value added, employment expansion, poverty eradication, key public interest issues and sustainable use of natural resources.
Trade preferences and market access
In trade negotiations, ACP States face dilemmas over the trade preferences they receive. MFN liberalization brings inevitable erosion of trade preference. Thus, the strategies available to ACP States include seeking compensation for erosion of trade preferences and/or further improvement in preferences. The effective utilization of trade preference is in fact a key factor. One apparently striking figure is the close-to-zero figure of utilization recorded by ACP LDCs under EBA in 2002. This very low utilization is a cause for concern. It is indicative of the need to strengthen supply capacities in beneficiary countries and to simplify substantive and procedural requirements for accessing preferences, such as rules of origin.
In agriculture negotiations, trade preferences pose a difficulty when it comes to the choice of a tariff cut formula. The majority of ACP agricultural exports to the EU, their main market, receive MFN or Cotonou duty-free access. There is complete liberalization for agricultural exports from LDCs under EBA (apart from sugar, rice and bananas). For ACP States which are not competitive suppliers and single or dual commodity-dependent countries, preferential market access is a lifeline to the world market. Substantial MFN tariff cuts by the EU may thus result in deterioration rather than improvement of market access for ACP States. In this light there is need for a tariff cut approach and modalities that aim not only at maximizing global welfare gains, but also at creating net welfare gains for all parties involved in the negotiations.
In negotiations on industrial products, ACP States´ interests are also related to the deeper degree of preferences available to them. ACP States whose margin of preference is eroded may face negative trade diversion unless their exports are regulated by import quotas. Thus, adjustment support to ACP States has to be a key priority in the modalities for liberalization. Conversely, with MFN liberalization, ACP States may gain from the erosion of preferences within RTAs and preference schemes to which they are not beneficiaries.
ACP States are engaged in the services negotiations under the GATS in the WTO. They would also be negotiating services agreements with the EU under the economic partnership agreements (EPAs). These negotiations provide an opportunity for ACP States to achieve commercially meaningful market access commitments in sectors and modes of interests to them. Such sectors include tourism, culture, professional services and the movement of natural persons supplying services. The negotiations also provide an opportunity to develop benchmarks for implementing the objective of increasing the participation of developing countries in services trade. Key challenges remaining to be tackled, however, are supply constraints and capacity-building.
WTO compatibility of EPAs and RTAs
The ACP-EU Partnership Agreement provides that EPAs progressively remove barriers to trade between the parties to form reciprocal free trade agreements consistent with relevant WTO provisions. In addition, the negotiations would be as flexible as possible in establishing the duration of a sufficient transitional period; the final product coverage, taking into account sensitive sectors; and the degree of asymmetry in the timetable for dismantling tariffs. The extent of the flexibility to be provided under EPAs has to be negotiated.
The main market access issue for ACP States in the ACP-EU negotiations is the reciprocal liberalization of their markets, and how this can be undertaken in a manner consistent with their development objectives. For starters, the preservation of the acquis of Lomé is essential as the ACP regional integration process evolves.
Next, the flexibility that ACP States can enjoy has to be determined, including the extent to which less-than-full reciprocity will be accepted, interpreted and applied. It would be reasonable to work towards negotiations on rules on RTAs under the Doha work programme to introduce differential and more favourable treatment for developing countries in North-South RTAs. Such work may be expedited after Cancún, and the ACP States have a major interest in it.
Need for adjustment assistance, as well as trade-related technical assistance
In the process of trade liberalization, ACP States require adjustment support to deal with competitive pressures arising from liberalization and erosion of preferences. This is particularly applicable to LDCs, small island economies and landlocked States whose export revenue depends on a few primary products. Adjustment can include gradual and progressive liberalization consistent with ACP States´ capacities to transform their economies. Adjustment also requires substantial and additional financial resources to strengthen institutions, policies and capacities to produce competitive goods and services for exports. It is noteworthy that the US recognizes the need for adjustment assistance. It has put in place huge fiscal packages to compensate those firms and workers who would be adversely affected by trade liberalization following the August 2002 adoption of the US Trade Promotion Authority. The provisions on ´Trade Adjustment Assistance´ to assist workers who lose jobs as a result of foreign competition arising from trade agreements is projected at some US$ 10-12 billion over 10 years.
In addition, the international community must provide additional, sustained and enhanced trade-related technical assistance (TRTA) and capacity-building programmes for ACP States and other developing countries. The close relationship between the ACP States and the EU allows such development relations to facilitate the provision of TRTA. UNCTAD, within its mandates and available resources, provides needs-based, demand-driven and objective technical assistance and analyses to ACP States and their regional organizations.
Commodities in the international trading system
Given the singular importance of commodities production and trade to ACP States, particularly LDCs and small economies, this area deserves consideration by the multilateral trading system. Several ACP States (Kenya, Tanzania, Uganda) proposed consideration within the WTO of the adverse impact of declining commodity prices on trade. A suggestion was also made by President Jacques Chirac at the 22nd France-Africa Meeting (February 2003) on market price support to primary agricultural exports of poor countries as a means of meeting their debt problems. Commodities deserve enlightened international consideration.
Role of UNCTAD
We value very highly the cooperation and collaboration we have established with ACP States, ACP regional organizations and the ACP secretariat. UNCTAD stands ready to continue to assist the ACP group in realizing development gains for their citizens from the international trading system and trade negotiations.