Africa and the Challenges of the Hong Kong WTO Ministerial Conference

Africa and the Challenges of the Hong Kong WTO Ministerial Conference

Statement by Abdoulie Janneh, the Executive Secretary of the Economic Commission for Africa, delivered by Mbaye Diouf, Director of ECA’s East African sub-regional office.

AU CONFERENCE OF MINISTERS OF TRADE
2nd EXTRA-ORDINARY SESSION
21 – 24 NOVEMBER 2005
ARUSHA, UNITED REPUBLIC OF TANZANIA

Mr. Chairman
Honourable Ministers
Your Excellencies
Distinguished Delegates
Ladies and Gentlemen

Please permit me, on behalf of the UN Under Secretary General and Executive Secretary of the United Nations Economic Commission for Africa (ECA), Mr. Abdoulie Janneh, to thank the Government of the Republic of Tanzania and our sister regional organization, the African Union (AU), for inviting the Economic Commission for Africa (ECA) to participate in this important meeting to prepare for the Hong Kong WTO Ministerial Conference. It is indeed a privilege and an honour for us to be able to interact with you and to share with you our perspectives on the challenges that face our continent.

This meeting is taking place at an important juncture in the current round of trade negotiations, called the Doha Work Programme, in a number of aspects. Firstly, it offers unique opportunities to assess and evaluate the state of play in the negotiations, not only against the Cairo Declaration and the Roadmap, but also more importantly against the mandate agreed in Doha when this round was being launched. Secondly, it provides an opportunity for African countries to further strategize for the Hong Kong WTO Ministerial Conference and agree on a minimum package that Hong Kong needs to deliver not only for this round to remain alive and be successfully concluded by the end of 2006, but more importantly in order to deliver on the development dimensions. Finally, this meeting also provides an avenue for African countries to reiterate what they consider to be their main concerns in these trade negotiations, and the importance of this round in achieving a multilateral trading system and architecture which will assist in the effective integration of African economies in the world economy and global trading system.

History of the Current Round of Trade Talks

Mr. Chairman, we all know that the path of negotiations of the current round has not been smooth sailing, but characterized by ups and downs, with periodic successes intermingled with failures. Accordingly, many of us had hoped the failure of Cancun would be a thing of the past. We also hoped that the momentum injected into the negotiations with the adoption of the July 2004 Package by the WTO General Council would be a clear and vivid commitment by the international community to achieve a successful conclusion of the round by the agreed date of end 2006.

I need not repeat of the dangers of failure the Doha round carries, in terms of future development of African countries, despite the predicted minimal gains that would accrue to Africa from further liberalization of world trade. What is at stake cannot be underestimated. The World Bank says the Doha Round could lift millions of people out of poverty and trigger growth by injecting billions of dollars into the world economy.

It is in this context that many of our countries have invested heavily in terms of human effort and resources for the success of the Doha round. Developing countries, including African countries, are therefore extremely concerned with the uncertainty that has been injected into the outcome of the Doha Round, by the scaling back of expectations for the Hong Kong WTO Ministerial Conference. The next two months will be critical as to whether negotiations will progress far enough to allow for positive contribution of the Hong Kong WTO Ministerial Conference to the successful conclusion of the round. The world, and Africa in particular, cannot afford another “Cancun”.

The Prospects for Hong Kong

The overwhelming view that has emerged from recent negotiations in the WTO is that the Hong Kong Conference will not be able to come up with full modalities of negotiations in key areas, especially agriculture and non-agricultural market access (NAMA), as time is running out and there are still significant divergences in positions of member states. The main outcome of these meetings is that WTO members have failed to bridge key differences in the current trade negotiations and have acknowledged that the scope and expectations for the crucial Ministerial meeting scheduled for Hong Kong at the end of this year may have to be scaled back. Trade diplomats are now looking to the December Summit for 'partial modalities' and agreement on a date for finalising full modalities, possibly at a second ministerial-level gathering in early 2006 that some have dubbed "Hong Kong Two”.

The scaling back of goals for Hong Kong represents a setback in the timetable for completing the negotiations by the end of 2006. Concerns have arisen that “lowering expectations for Hong Kong, may cause the overall ambition for the trade round to fall”. This would indeed be an unfortunate development. It is very important to keep to the original aims of the Doha Development Agenda (DDA) and to ensure that the important interests of African countries are properly addressed. It is also essential to preserve the development objectives of the DDA.

Fortunately, statements from most WTO Members argue in the opposite direction of ensuring that the Round does deliver on the Doha mandate. Mr. Peter Mandelson, the EU Trade Commissioner, has stated that, “I have argued strongly this week for the keeping of our original aims. I was not in the majority. My fear is that lowering expectations for Hong Kong will cause the overall ambition for the round to fall”.

Mr. Chairman, African countries should ensure that whatever happens in Hong Kong does not lead to the scaling down of the level of ambition of the Doha Work Programme. Despite all the difficulties of the negotiations - and they are real - we need to aim high, because this is the only way to ensure that the welfare gains for all are big enough to make it worth the effort; and also because it is the only way to ensure, politically, that all players find something sufficiently attractive in the basket to bring back home. Furthermore, African countries need to remain vigilant to ensure that the development dimensions of the negotiations are not lost as the negotiations progress.

Mr. Chairman, success of agricultural negotiations remains one of the most anticipated outcomes of Doha for many African countries. Agriculture remains the mainstay most economies of these countries; while in rich nations it accounts for less than two percent of the GDP of these countries and roughly the same share of employment. Accordingly, the impasse that has emerged in these negotiations is a matter of serious concern to Africa. To quote Tony Blair: Can the world afford to allow differences over support for agriculture in rich countries to block an agreement that could give renewed hope to one in five people in the world living on less than one dollar a day?

What Should Be The Targets That Africa Should Look In the Outcome of Doha?

As to what Africa should be looking for at Hong Kong and the overall outcome of the Doha Round of negotiations, the starting point would need to be the various Ministerial Declarations and Decisions that African Heads of State and Government have adopted articulating what they consider to be key aspirations and concerns of African countries. These Declarations include the Kigali Ministerial Declaration and Consensus and more recently the Cairo Declaration and Roadmap. These encapsulate the main elements of what African countries consider to be a minimum base for them to benefit from the outcome of Doha.

As we look to the 6th WTO Ministerial Conference, we believe the overall objective must be to secure an agreement on "modalities" that matches the developmental ambitions agreed in Doha. Achieving agreed modalities by Hong Kong will be difficult, but we are convinced that Africa’s interests are best served if the development objectives set in Doha are translated into reality as soon as possible.

An early conclusion of the current round of the Doha negotiations, consistent with the mandate agreed in Doha, would deliver the best overall context for the development prospects of African countries. More open and undistorted international trade would make a positive contribution to global economic growth, creating an environment in which African economies may diversify exports by destination and in higher value production.

Correcting the profound imbalances in agricultural trade is a central element of this objective but it also requires expanding real market access for industrial products of export interest to African countries and services particularly in mode 4 for both skilled and unskilled workers. Special and differential treatment in favour of developing countries must underpin the negotiations.

For those African economies that face adjustment costs, assistance must be provided to advance processes of diversification and enhance competitiveness in order to take advantage of new trade opportunities. They must also be cushioned in the short and medium term when it comes to costs involved in the reform process. Packages such as the IMF contingency support and grant aid programmes need to be strengthened to deal with foreign currency earning adjustments and revenue loss amongst other things. Furthermore, programmes to assist African countries would need to address supply constraints and contribute towards improving competitiveness of their economies. Making the WTO deliver for Africa is critical and as some have correctly stated mercantilism should be put aside in the Doha negotiations and focus should be on what makes sense from a development perspective1.

In summary, Doha needs to deliver in a number of important aspects if it is truly to be a “development round”.

First, The Doha negotiations should fast track the elimination of tariff peaks and escalation in developed country markets on products of export interest to African countries. Similarly, fast tracking the elimination of export subsidies and trade-distorting domestic support particularly on agricultural products of export interest to developing countries would deliver early benefits. An early harvest on cotton- critical to a number of economies on this continent - is essential.

Second, all developed countries should provide non-reciprocal bound duty free and quota free access for all products from least developed countries. This together with targeted assistance to realize the opportunities created by enhanced market access will go a long way to ensuring that poorer countries benefit from the round.

Third, it will be vital to facilitate exports of African services into developed country markets. This will include providing better access for temporary movement of African workers and outsourcing. Although the movement of workers may be sensitive, serious consideration should be given as the potential benefits it offers could dwarf benefits from openings in traditional sectors.

Fourth, operationalising the principle of special and differential treatment, and targeted capacity building should assist African countries in meeting their obligations.

Fifth, it will be important to review and revise WTO agreements from a development perspective. A specific example of direct relevance and great importance for Africa is a review of Article 24. Article 24 requires signatories of Free Trade Areas (FTAs) to eliminate trade barriers on substantially all their bilateral trade flows. This is not in the interest of Africa, as it will cause trade diversion and transfer tariff revenues. This is anti-development and an example of policy incoherence.

Sixth, more effective financial and technical cooperation will need to address any erosion of preferences that will occur as a result of the Doha Round and regional arrangements. Such "compensation" should be designed to encourage sustainable diversification and to cushion any negative socio-economic effects of the reform process. Moreover, preferences need to be improved to make them meaningful. This could include deepening preferences, where feasible, to retain the margin over MFN rates.

Seventh, expanded trade capacity for African countries to more effectively address supply constraints: the so-called "aid for trade programme" which spans trade capacity building, enhancing competitiveness as well as action in importing countries to both assist African exports penetrate markets and to raise the returns accruing to Africa. It should extend to establishing appropriate regulations, enhancing industrial and technological capability, product and export diversification, and infrastructure development etc. Specific action is needed in the area of product standards, both technical product regulations and Sanitary and Phytosanitary measures. All of these would complement actions already underway under NEPAD.

Eighth, new mechanisms for generating the necessary, secure and long-term finance for Technical Assistance and Capacity Building will also be required. Further integration of African countries into the trading system needs to be complemented by a binding, credible commitment for expanded financial assistance for trade capacity.

Ninth, Policy coherence among the multilateral and bilateral donor community should be complemented with greater coordination at the implementation level, and donors should desist from employing non-trade conditions to qualify for assistance.

My final set of comments is on the state of play in the negotiations. We must continually reassert that this is a development round that must decisively address the fundamental imbalances in the global trade system, and promote the integration of developing countries into the trading system, through meaningful expansion of their exports. In this respect developing and African countries should not be expected to pay for the removal of trade distorting and anti-development subsidies on agricultural products with over-ambitious and costly market access concessions on industrial products and services. Developing country market access concessions must be commensurate with their level of economic development embodying the principle of special and differential treatment, and the bigger stronger economies - responsible for the major anti-developmental distortions in agriculture - must be expected to make the biggest adjustments.

Mr. Chairman, we, at the Economic Commission for Africa (ECA), remain committed to provide effective trade and trade-related technical assistance and capacity building, in collaboration with regional and international organizations and other UN agencies, in order for our continent to become an effective partner in the world economy and the global trading system.

I wish your meeting all the success and thank you for listening.

1 This part is a keynote speech by Minister of Trade and Industry Mandiso Mpahlwa, South Africa’s National Consultative Conference for the Sixth Ministerial Conference, Gallagher Estate, 27 October 2005.