PROSPECTS FOR THE DOHA TRADE ROUND AND STEPS BY AFRICAN COUNTRIES TO DRAW ON THE POST-DOHA TRADING SYSTEM
BY DR. KIPKORIR ALY AZAD RANA,
WTO DEPUTY DIRECTOR-GENERAL
2004 CONFERENCE OF AFRICAN MINISTERS OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT
Kampala, Uganda,
21-22 May 2004
Thank you Chairman.
Thank you for inviting the Secretariat of the WTO to initiate the discussions at this high-level panel discussion by making a presentation on, "The Prospects for the Doha Trade Round And Steps for African Countries to Draw on the Benefits of the Post-Doha Multilateral Trading System". Upfront, let me say that this is an urgent and timely subject. As we all know, only sustained and accelerated growth rates will make it possible for Africa to meet the Millennium Development Goal (MDG) of halving poverty by the year 2015. On current trends, available estimates indicate that all regions, except Africa and parts of South Asia, are on target. Trade liberalization and growth are the main drivers for generating increased income growth and at rates that make poverty reduction more likely. The evidence is also now unquestioned that countries that are more open and trade do better than those that are closed. No economy has attained high sustainable growth rates, without trade reform. But we also know that trade liberalization does not work alone. Companion policies are necessary for trade to contribute to development.
What news from Geneva on the Doha Development Agenda (DDA) negotiations?
I am pleased to report to you that the news from Geneva is very positive and good. Negotiations have resumed and are in full swing. WTO Members are engaging constructively within the established negotiating bodies. As Members engage in Geneva, Director-General Dr. Supachai has been in regular contacts with capitals, meeting with Senior Officials, Ministers, and Heads of State and Government in a continuous effort to narrow the differences in the negotiations. We have moved on from the setback of Cancún. Although there is still some way to go, nonetheless it is clear that momentum has been restored to the Doha Development Agenda (DDA) Negotiations. Members better understand the losses from failure of the Trade Round; losses which would hurt more the vulnerable and low income countries; diminishing their prospects for poverty reduction and development.
Let me focus on three specific issues: first, the areas of focus in the resumed negotiations; second, the prospects for the Doha Round; and, finally, to point to the necessity for urgent coordination and immediate engagement by African trade ministers, and finance and economy ministers, if Africa is to benefit from improved market access and trade expansion under the Doha Trade Round.
Areas of Focus in the Resumed Negotiations:
While all WTO Members agree on maintaining the full integrity of the DDA, the immediate objectives are: i) to agree a meaningful framework by July for negotiations in Agriculture and Non-Agricultural Market Access (NAMA); ii) converge towards the launch of negotiations on Trade Facilitation, as part of the Single Undertaking (while maintaining the other Singapore Issues - Competition, Investment and Transparency in Government Procurement - within the WTO study process); and, iii) bring together a meaningful package of development considerations. Cotton, a critical aspect of the negotiations particularly for African countries will feature, on terms to be agreed by Members, within the overall framework for the Agriculture negotiations. On the Development Assistance Aspects of Cotton, reports will be periodically delivered to the membership on the implementation of the "Conclusions" following the African Regional Workshop on Cotton, organized by the WTO Secretariat, in March, in Cotonou, Republic of Benin. To expand the yield, Members are also pushing for improved scope and quality of offers in the Services Negotiations, which is work in progress.
July will not be the conclusion of the Doha Round. But July should witness the restoration of momentum to the Doha Round, placing the Round where it should have been at the Cancún Ministerial.
Specifically, on agriculture, Members converge on the point that a framework for a "fair, market-oriented system in agriculture" will include the three pillars of domestic support, market access and export competition. In the consultations amongst segments of the membership in several mini-ministerials particularly the most recent in London and on the margins of the OECD Ministerial in Paris, much progress has been made on the pillars of export competition and domestic support. The letter by Ambassador Robert Zoellick early in January this year and the more recent joint letter by Trade Commissioner Pascal Lamy and Agriculture Commissioner Franz Fischler have provided the much needed positive impetus for negotiating an agreed framework for the agriculture negotiations. A major challenge that still remains is devising an appropriate formula for agriculture market access - i.e. for the cutting of tariffs in agriculture. There is a willingness on the part of members to surmount this challenge. The prospects have been enhanced by the expressed readiness of the G-20 and Cairns to jointly propose a market access formula (before the next meeting of the Negotiating Group on Agriculture) in response to the earlier "blended formula" proposed by the EU and the US. Overall the challenges are a creative formula that will cut the highest tariffs, deal with tariff escalation, address sensitivities, and with product-specific focus such as in the area of cotton. Agriculture is an important key to unlocking progress in the Trade Round.
On NAMA, the majority of Members seem ready to work from the Derbez text in order to formulate a framework for July (on the understanding that pre and post Cancún work remain on the table. The vast majority appear to be focused on a NAMA framework that would include a non-linear formula, sectorial tariff elimination, treatment of newly acceded countries and an effective treatment of non-tariff barriers. At this stage in the NAMA, specifically for most African countries and LDCs, there would be no demand on them for reduction commitments (i.e. tariff reductions would not be involved), and their contributions would simply be limited to increased scope in tariff bindings. In the negotiations, African countries have expressed concerns in three areas of declines in revenue for tariff-revenue dependent countries; erosion of non-reciprocal trade preferences; the non-tariff barriers faced by their exports; and, for any formula to be adopted to take account of sensitive sectors such as textiles and clothing. In considering these concerns raised by African countries in the negotiations, several points need to be borne in mind. First, on revenue dependency, it appears that for the majority of African countries, they may not undertaken reduction commitments (irrespective of whether this is rational economic choice to make). Also, the contributions by African countries to "tariff bindings" is unlikely to have any impact on customs revenue in light of the fact that their "applied duties" are well below their "bound duties" - the problem of the "binding overhang". Second, on preference erosion, it needs to be borne in mind that MFN liberalization makes inevitable the erosion of non-reciprocal preferences. There is also a conflicting developing country position because there are other developing countries seeking significant tariff reductions on those very products on which African countries would like to preserve preferences. Nevertheless, African countries together, including within the framework of the LDCs' Group, are seeking for longer staging and implementation results from the NAMA negotiations. On non-tariff barriers impeding African exports, it is necessary for African countries, through a consultative process with industry to systematically identify these NTBs and to see their reduction or elimination within the NAMA negotiations.
On NAMA, the challenge is to reconcile the high level of ambition for improved market access, on the one hand, with the degree of flexibility needed such as by the African countries, least-developed countries, and the newly acceded countries, on the other. Taking account of the concerns of individual members and groups of members is difficult, because frequently these concerns are in conflict. Creative formulas and solutions will be needed. And there is a now both the political will matched by practical technical work to resolve these differences.
On the Singapore Issues, there are signs of greater flexibility on the part of the membership. There is convergence for the launch of negotiations by July on trade facilitation, within the Single Undertaking. There are also strong indications that the other three Singapore Issues (namely, competition, investment and transparency in Government Procurement) could be maintained within the WTO study process. Obviously, trade facilitation, reducing the time for clearance of goods imported or for merchandise to be exported, improvements in logistic efficiency, computerization of customs procedures, reduction of red tape; all these are important elements that make trade facilitation essential for African countries.
The development component of the package for July will be a combination of what will be achieved specifically in several areas of the negotiations and also on very specific issues as mandated in the DDA itself in 2001. Most consider that progress in agriculture is central to the development dimension for developing countries. This will be a vital ingredient of the "development package" for July. In this connection, progress on cotton will also be key, particularly for the 30 African countries that produce and trade cotton. We have made headway and progress on the Development Assistance Aspects; and, consultations are on-going amongst the membership on the terms for treating the trade policy aspects within the broader agriculture negotiations. Making special and differential treatment provisions more precise, effective and operational was a mandate from Doha. To this end, work is on-going in the dedicated body, under South Africa's chairmanship. There is reason to believe that there could be some harvest to reap as the negotiations continue. There are significant challenges in this area; where the objective is to ensure that countries have flexibility and policy space, but in a manner that is in accordance with a non-discriminatory, rules-based multilateral trading system. The Secretariat with the support of the membership have delivered in the critical area of trade capacity building. At Doha, Ministers agreed that "technical cooperation and capacity building were key elements of the development dimension of the multilateral trading system". The coalitions and partnerships that we have established with institutions and organizations like the African Development Bank (AfDB), the ECA, here in Africa, together with others) have been indispensable. The significant achievements in this regard are reflected in the Joint OECD/WTO database on the DDA; and, fully reflected in the report by Director-General Dr. Supachai to the Cancún Ministerial.
To sum up on where the negotiations stand at this moment, and the objectives of the membership for July, I must emphasise that there is a significant and evident goodwill towards African countries in the negotiations. There is a recognition of the vulnerability of most countries on the Continent; and, to that extent that the results of the Doha negotiations should not impose a high price or excessively burdensome obligations on African countries. At the same time, the benefits of trade reform and liberalization (even when undertaken on an autonomous basis, outside of the framework of multilateral concessions) need to be better understood and integrated into the process of domestic economic reforms, which are essential for drawing on the opportunities that will arise from trade expansion.
This is why, I would appeal to Finance Ministers to work with Trade Ministers by expressing explicit support for the July objectives and supporting the efforts of trade negotiators in Geneva. I would also like to note that expressed political will and support are necessary. But, what would also equally necessary would be for clear and specific guidance to negotiators engaged in technical work in Geneva to proceed on the basis of political will.
The second part of my presentation is to offer suggestions on steps that African countries need to take to draw and maximise on the benefits from the Post-Doha multilateral trading system. These benefits could be considerable. For instance, the World Bank has estimated potential welfare gains from a successful conclusion of the Doha Round. These World Bank estimates are contained in the WB Global Economic Prospects. Assuming full trade merchandise trade liberalization in all countries (i.e. full elimination of tariffs, all export and production subsidies), static gains are likely to attain the value of US$ 355 billion globally, of which US$ 184 billion would accrue to developing countries. If dynamic gains are included, the gains could reach US$ 832 billion globally and US$ 539 billion for developing countries. Sectorally, most of the gains would originate from agriculture. These estimates do not include liberalization of trade in services.
So what do African countries need to do to maximize the benefits from welfare and other efficiency gains in the Post-Doha Multilateral Trading System? I believe that the answer lies in the subject of Panel II and the theme of this conference namely: Mainstreaming Trade Priority Areas of Action into Plans for Economic Development And Strategies for Poverty Reduction.
The case for trade mainstreaming is well established. Although it is evident that higher levels of competition and the efficiencies achieved through trade liberalization and reform, enable economies to grow more rapidly and sustainably, yet other (and in many cases urgent) national priorities such as health emergencies, security issues, education, social services, etc, sometimes cause the relegation of vital trade priorities, or in some cases cause their neglect. Yet, if we, in Africa, are to achieve accelerated and sustainable growth rates for tacking poverty, it is indispensable and necessary for economic planners and those responsible for coordinating PRSPs to take urgent account of trade priorities within overall economic plans and strategies for poverty reduction.
Examples of areas of focus could include: investment regulations; competition law and policy; trade capacity building; tariff harmonization; increased coverage of tariff bindings; trade facilitation, trade infrastructure, systematic strategies to deal with adjustment costs, export promotion, calculation of the cost of domestic protection, re-structuring of trade ministries, etc.
Reflecting trade priorities in our development plans and PRSPs per se is not enough. Economic plans and strategies for poverty reduction also need to include domestic measures to provide assistance for short-term/temporary adjustment costs (which are attendant with trade reform and liberalization). In this area, national measures can frequently count on support from multilateral institutions such as the World Bank, IMF, the African Development Bank, and Regional institutions.
Finally, also, it is by now evident that even though the best designed trade liberalization and reform programmes cannot stand alone. The chances of their working effectively and producing the necessary results also depend, to a large extent, on associated policies such as pro-competitive regulations, good invest regulations, sound macroeconomic policies, transparency in government, involvement of national legislatures in the process of domestic economic reform. Fortunately, this process has begun in many African countries, but there is still much scope for improved domestic implementation.