​House of Commons, UK Parliament

 

 

 

Good afternoon,

 

Thank you for the invitation. It is an honor to address you today on this very topic. And I commend this House, and the UK, for its longstanding commitment to championing the trade and development agenda, helping to promote trade as a driver for poverty reduction.

 

Two basic questions can be asked about MC10: First, was it successful? And second, was it beneficial, especially for developing countries?

 

The answer to the first question, to my mind, is straightforward: Yes, MC10 was a success. MC10 was the first WTO ministerial meeting to be held on African soil, and as such, it held special significance for the developing world. I am also convinced that this fact – reflected in the very able and active leadership of Kenya's foreign minister of the meeting and the active involvement of her fellow African ministers – was a key reason for the positive outcome of the ministerial. It is worth recalling that pretty much nothing of substance was ready before the ministerial. We all went to Nairobi with a lot of question marks and anxiety about what could possibly be achieved. So it is nothing less than a remarkable achievement of WTO Members, and particularly of Foreign Minister Amina Mohamed and Director-General Roberto Azevêdo, to have brokered a deal – and in many ways a significant deal – under such poor circumstances, with the odds stacked against them.

 

The answer to the second question is, however, more important, especially as we look to the future. And here, it can be noted, opinions diverge. Whether MC10 delivered benefits to the developing world is, it seems, still a matter of interpretations and discussion. You get different answers from the New York Times than you would from the Hindu Times.

 

On one level, one should not be surprised by this. After all, trade deals will impact countries differently. Just as the interests of EU and US are not the same, developing countries are not a monolithic bloc. China, Turkey, Bangladesh, and Malawi are all developing countries, but the effects of MC10 in each country is likely to be different due to their different trading profiles and production structures.

 

For instance, the phasing out of export subsidies for cotton products meets a long-standing demand of four key African cotton producing countries (so-called C4: Benin, Burkina Faso, Mali, and Chad). The decision will benefit cotton growers in these countries, who will fetch higher prices for their goods on international markets. But the decision may harm textile producers – in Turkey, Vietnam or Bangladesh for example – in case they are faced with higher costs for cotton inputs.

 

Or take one other example.  The Nairobi package safeguards the right of developing-country governments to pay farmers above-market prices to amass food supplies for emergencies – so-called stockpiling. For least developed countries and some developing countries that are vulnerable to external shocks and struggling with food supplies, the decision may contribute to food security. But if stockpiles for domestic consumption are later released into international markets, especially in case of larger stock piles, they could jeopardize the export revenues of net food exporting developing countries, increase price volatility and even potentially harm the profitability and thus sustainability of small-holder farmers in other developing countries: with negative implications for food security.

 

So at the outset, it’s important to clarify that it would be unproductive to attempt to assess outcomes for all developing countries as a single unit.

 

Nevertheless, it is possible to generalize on the basis of a few selected outcomes and to weigh their implications for the developing world. Here today, and without being in any way exhaustive, I intend to do exactly that. I’d like to highlight three key conclusions that, in my view, should be drawn from the main outcomes of MC10 and their implications. First, I will touch upon the one or two clear-cut "wins" for developing countries from Nairobi. Second, I will identify one, as I would call it, "prospective win" from MC10. And third, I will highlight one area of "promise," although it is not without risks as well.

 

Let me unpack each of these three likely outcomes in turn:

 

First, there were few clear "wins" in Nairobi. This includes the LDC package, the accessions of Liberia and Afghanistan, and the important progress made on two out of three of the cotton producing African countries' longstanding demands. All of this was extremely useful and welcomed.

 

But, for my purposes today, I wish to highlight two particularly significant achievements, indeed real breakthroughs.

 

The first one was the conclusion of the updated Information Technology Agreement – or ITA2. Although only less than a third of WTO Members participated in this deal, and the level of participation of developing countries was very limited, ITA2 is a big thing, with global ramifications. ITA2 is estimated to cover 1.3 trillion USD, or 9% of world trade. So, if the vast majority of developing countries are not part of it, why should they care? Why is it supposedly beneficial for them? Well, the parties to ITA will reduce their tariffs to all WTO Members. This means that non-participants can capture the benefits from the zero import duty levels committed by ITA parties. And even more importantly, by covering most of global trade in ICT products, ITA2 can stimulate innovation, affordability, and accessibility of vital ICT hardware worldwide. Given that all countries, not least the developing ones, need to better exploit ICT for development as part of cutting trade costs, building productive capacity, and structurally transforming their economies, this is very good news indeed.

 

The second achievement, possibly the most significant accomplishment of all in Nairobi, was the elimination of export subsidies for agricultural products.

 

Curbing such highly distorting subsidies has been a demand of developing countries for decades. And rightly so. This form of protectionism artificially lowers prices, flooding LDC markets with cheap products that harm rural farmers. And it is not a minor problem. Between 1995 and 2004, the food deficit in LDCs grew from $2 billion to $22 billion. LDCs are importing more food than they are exporting, even though farming in these countries employs, on average, 6 out of 10 workers and contributes, on average, to a quarter of all value-added. The weak performance of rural economies is holding these economies back. It is also preventing most poor nations from seriously reducing poverty, most of which is concentrated in rural communities.

 

By scrapping export subsidies, the Nairobi package ensured the elimination of one of the measures that most distorted global agricultural markets – measures that represented one of the clearest and most egregious obstacles to fair and free trade, and to trade as an engine for development. This will provide LDCs and many other developing countries not only with opportunities for their farmers to compete, and exploit their comparative advantages, but for broader rural development.

 

Some have downplayed the decision, in part because of its transitional arrangements, and in part because it, in a sense, only codifies existing practice: Most developed countries had already stopped relying on export subsidies in favor of other forms of domestic support. This, however, misses the point. The mere fact that export subsidies have been less utilized lately does not diminish the importance of what has been achieved in Nairobi. In the context of the slump in global commodity prices, new export subsidies could be especially damaging. As recently as 2009, both the US and the EU introduced new export subsidies for certain dairy products after prices dropped. With tepid global growth, high unemployment, and growing nationalist sentiments, the decision to discipline export subsidies – offering a clear insurance for the future – should be warmly welcomed and celebrated.

 

Moreover, other commitments included in the decision will limit or at least reduce similar distorting effects associated with export credits and state trading enterprises. And it will provide a better framework for maintaining food aid without displacing domestic producers.

 

In sum, MC10 will keep a lid on export subsidies to the benefit of farmers and broader rural development in the developing world.

 

This leads me to my second point: The "prospective win" out of Nairobi and, specifically, services.

 

If you search Google for “Developing Economy,” you’ll find images of women picking cotton in the fields or of men toiling in the mines. But these traditional impressions obscure the dynamic growth of services in these countries. It is, in fact, the services sector that has been driving growth in most of Africa. Growth in services on this continent grew at more than twice the average global rate between 2009 and 2012. In 30 of Africa's 54 countries, it was services that propelled their GDP growth. The services sector now accounts for 32 percent of total employment on the continent.

 

The Nairobi package – perhaps too quietly – recognizes this trend and extends a waiver that could boost services exports from LDCs, most of which are African countries.

 

As a reminder, under WTO rules, member countries are obliged to treat each other equally. That is to say, a country cannot grant special market access to a single member without also extending the same level of access to every other WTO member. In trade parlance, this is known as the Most Favored Nation principle – or MFN. But a few years back, members decided to waive the Most Favored Nation principle in order to authorize developed countries to give access to their services markets to LDCs (without being obliged to extend the same access to the rest of the WTO).

 

In Nairobi, negotiators extended the waiver by four years, from 2026 to 2030.

 

This waiver is designed to boost services exports from LDCs and encourage them to diversify their economies. Thereby, MC10 holds the potential for encouraging growth in services in the developing world. This has all the ingredients of a "prospective win." Just look how duty-free quota-free treatment in goods has propelled exports of LDCs, including the growth of manufacturing of textiles and clothing in countries like Bangladesh. It would be significant if such a success could be replicated for services.

 

Unfortunately, however, we are still quite some way from achieving this, which is why it is – to date – only a prospective win. The potential of the waiver remains untapped.

 

Three steps now need to be taken to fully reap the benefits of the waiver and to capitalize on its potential.

 

First: Some developed countries have offered preferential access to LDC service providers, but much more could be done to make this access commercially meaningful. The preferences fall short of the level of ambition offered in the area of goods. We also need more countries to put their contributions on the table.

 

Second: we need to recognize that goods and services are not the same thing. Services market access is far trickier, involving a web of regulations that determine the value and potential utility of the access. Unlike tariffs on goods, there are no "easy wins" for market access in services. This is a challenge that should be faced head on. Countries will need to address a few non-market issues to make the services waiver work for development. For instance, some LDC service providers have – in theory – received access to a developed market, but have been thwarted by difficulties obtaining authorizations, licenses, and work permits. In other cases, professionals from LDCs have found that their professional accreditations – their degrees or diplomas – are not recognized. 

 

Third: we need to seriously step up efforts to address the supply-side constraints in LDCs that prevent them from effectively utilizing even the most generous and effective preferences. Technical assistance and capacity building are required to allow LDCs to take advantage of the waiver, including to assist them in improving their own enabling environment (such as through investment and services reforms) for future export success in services.

 

All in all: The Nairobi package takes the right step of encouraging the growth of services in the developing world. But, more is required to tap the important potential of services growth and exports for LDCs.   

 

This brings me to the third and final outcome of Nairobi: the "promise." MC10 represents an important turning point for the WTO, with potentially far-reaching implications for the developing world.

 

Let me explain what I mean.

 

In previous rounds, disagreements were rooted mainly in the substance of negotiations. But in Nairobi, disagreements emerged on the process of negotiations. The Nairobi Ministerial Declaration makes this abundantly clear.

 

After MC10, the process of negotiating multilateral rules through multi-issue rounds – under a single undertaking approach, based on the consensus of an expanding membership and universality of rules – is definitely over.

 

Members will likely pick up the issues defined in the Doha Round again, and negotiations will continue to be based on consensus. But the era of negotiations based on single undertaking – the idea that nothing is agreed until everything is agreed – is now behind us.

 

The veto power of individual members has been eroded, reducing the possibilities of "hostage taking." Thereby, the balance should tilt in favor of those who can create a critical mass around certain issues. In other words, being a member of the WTO will become less relevant than being a participant of a discrete negotiation.

 

In addition, Nairobi opens up the WTO’s negotiating agenda to the so-called new issues. Of course, most of the ones that have been mentioned are not necessarily new, such as investment or e-commerce or competition. Nor are they areas where developing countries lack interests, as shown in the extensive involvement of developing countries on these issues in UNCTAD. Whether they are ripe for proper discussions in WTO, and under what terms, however, is another story. But at least Nairobi implies that there is no a priori exclusion of any new issue of interest to members at large.

 

Neither of these changes in the process of negotiations nor the possible future negotiating agenda of WTO are without challenges or, indeed, without risks. The updated Information Technology Agreement (ITA) can be hailed as an instructive "model" of what may come, whereby WTO is gradually evolving – adding a layer of rules and commitments beyond its multilateral and universal rules – into a “club of clubs.” And this would not be unprecedented. This is the case for instance of the Government Procurement Agreement or the Agreement on Trade in Civil Aircraft, and it was a key feature of GATT prior to the Uruguay Round. But the success of such “issue-centered” plurilateral agreements, like the ITA, depends on the participation of heavyweights like the US, the EU and China. Otherwise, critical mass will be difficult to achieve. And from the point of view of the many developing countries, more selective negotiations could expose them to asymmetric bargaining positions, or even outright exclusion. The fear, ultimately, is that the concerns and interests of poorer, weaker and/or smaller countries may no longer be reflected on negotiating agendas.

 

This fear is neither illegitimate nor far-fetched. And in part for this reason, many developing countries have been reluctant to let go of the Doha Round and the “single undertaking” principle, even if they have supported and benefitted from incremental and selective delivery over the last two ministerial conferences. For some developing countries the words of former Indian Trade Minister Kamal Nath ring true: “The WTO is not a buffet that you pick up what you want and go.” They know that, in such a scenario, they run the risk of not being invited to eat at all. None of this should be confused with refusing to acknowledge that things have not been working sufficiently well to date. Most countries seem to accept that the "status quo," which has not led to the conclusion of the DDA, is no longer an option. They want progress, sometimes desperately so, and they also have interests at stake in "new" issues. And they know they are on the losing end, more than others, if negotiations are moved elsewhere. Nonetheless, for many members, the issues in DDA are still of crucial importance and so is their right to have their voices heard in the negotiating machinery.

 

Therefore, going forward, it will be decisive that any adjusted WTO negotiating agenda is reached through an inclusive process, with proper regard for developmental considerations. Developing countries must be reassured that the "old" issues and their longstanding concerns will still be properly dealt with.  If "variable geometry" is to be a solution to past impasses, which it can, it must mean simultaneous progress at different speeds, with different country constellations, on parallel tracks. It does not and cannot mean simply moving from one track to another, dropping a lot of issues and members along the way.

 

If managed properly, on the other hand, Nairobi could pave the way for reinvigoration of negotiations in WTO, reasserting the WTO as the predominant forum for global rule-making on trade issues for all countries. This is the promise, or hope, that Nairobi brought and which could bring significant benefits for developing countries going forward.

 

I have, here today, answered why I think the outcome of Nairobi was not only a success, but also tried to answer the question of whether it was generally beneficial for developing countries at large. As you will have noticed, I believe that Nairobi was beneficial – and that it can be even more so in the future, if opportunities are properly harnessed and if the membership of the WTO uses MC10 as a launching pad for renewed dialogue and cooperation. MC10 produced a number of clear wins, as well as prospective wins, and a promise for the years to come.

 

The bigger question, however, is of course: "beneficial for what"? And to answer this, the much wider context of trade, as well as trade and development, needs to be taken into account. This context is one of the role of trade for Agenda 2030, specifically how trade can effectively contribute to the elimination of poverty everywhere. It is a context that presupposes that LDCs grow faster than China's best years of growth for the next 15 years; one where we will have to find ways to unlock 2.5 trillion USD of financing annually, mainly from private sources, to fill the investment gap in developing countries for the SDGs; and one in which all of this must be achieved while the global economy is struggling, trade growth is not picking up, commodity prices have slumped, and financial markets still add uncertainty, volatility, and vulnerability.

 

Agenda 2030 is a daunting task that requires much more from all of us, and much more from our trade policies. Multilateral rule-making is key, but it cannot do it alone – not in isolation. All parts of trade and trade policy-making must come together.

 

A global rule book may give you the right to compete, but it will not automatically make you competitive. For that, and to ensure prosperity from trade, we also need to, among other things, to:

 

 

You cannot build a house with only a hammer. Instead, you need all available tools, just as you need all relevant materials. Similarly, promoting global prosperity through trade will require us to make use of all trade and trade-related instruments, as well as accompanying measures. This is ultimately the goal of UNCTAD, and our raison d'etre on trade, as a complement to the critically important role that WTO has, and should continue to have, in establishing and enforcing global trade rules. And this is also why we gathered here today: To harness the power of trade for inclusive development.

 

Thank you very much.