Thank you for inviting me to participate in this Brainstorming Meeting on the Priorities of a New Development Agenda for the Landlocked Developing Countries (LLDCs). But as we look forward we must also recognise the improvement in the economic and social situation in the LLDCs that we have seen since the Millennium Development Goals recognised the special needs of these countries. It shows how a global commitment and a smart, targeted approach can unlock levers of development. This is a useful lesson as we look into the post 2015 development agenda.
Landlocked countries have a very specific trading reality. This is as a result of geographical factors that may sometimes challenge the conventional notion of imports and exports. In the past, these factors were seen very much as obstacles to trade but with the growing role of services in the developing country portfolio and the increase in the reach of technology and transportation increasingly narrowing the distances between and to markets, I prefer to situate these “obstacles” as “opportunities” where we can map a new way of trading.
We have to ensure that trade, and trade negotiations including those at the WTO, work for LLDCs. The constraints are well known if not always as well appreciated as they should be. The on-going implementation of the Almaty programme of action and the work of the UN Office of the High Representative for Least-developed countries, Landlocked developing countries and Small island developing states (UN-OHRLLS) have succeeded in placing the priorities of the LLDCs on the international agenda. The WTO has been particularly sensitive to these needs and we participated in the recent Ministers of Trade meeting in Almaty in September 2012 and will continue to play an important role in the lead up to the 2014 Review meeting of the Almaty POA.
You are intimately aware of the constraints which you as LLDCs face: an over-reliance on transit and regional neighbours to facilitate imports and exports; comparatively less foreign direct investment than coastal states; and limited diversification both of your product base and your export markets.
Today, I want to focus not on these constraints but rather how we can make trade a force for economic growth and poverty reduction in LLDCs. And what are the new trends in trade that can be effectively harnessed by LLDCs to increase their participation in and benefit from the multilateral trading system? The evidence shows that trade openness coupled with important domestic complementary policies is an important path to growth and development. This economic growth can also have a profound impact on addressing the social dimension of development — namely health, jobs, sustainability, access to education and other institutional and governance issues linked to safeguarding human rights and gender empowerment. I believe therefore that a core element of the medium to long-term agenda of LLDCs should be in improving their “export competitiveness”.
Export competitiveness starts with trade facilitation. Trade facilitation comes in many forms. It can include the hardware of roads, bridges, ports and airports which are the necessary landing docks for the business of doing trade. It can also include the software of the transactions that allow trade to be processed: customs and border procedures; automation of processes; transparent and consistent fees and charges; and regulatory consistency in how rules at the border are applied. The WTO is seeking to address both of these angles in its negotiating and non-negotiating agenda.
The negotiations for a multilateral trade facilitation agreement are on-going at the WTO. This is seen by many WTO members as a concrete deliverable for the 9th WTO Ministerial in Bali in December. And it is not only governments who see merit in an international agreement that standardises the software of trading; national and international business has raised this as a key expectation from the WTO process. The Business-20, the 2013 Global Summit of the International Chamber of Commerce most importantly, the small and medium sized enterprises which make the backbone of many LLDC economies are clearly saying that ‘we need to reduce the thickness of borders!’
There is also growing evidence that moving towards a more harmonised system of processing trade can have concrete global economic deliverables. A trade facilitation agreement at the WTO could bring down the cost of moving trade today from roughly 10 per cent [of trade value] to 5 per cent. Globally, removing these barriers could stimulate the US 22 trillion dollar world economy by more than US 1 trillion dollars. Simply reducing this red tape by half would have the same economic effect as removing all remaining tariffs. And studies show that every dollar spent on reforming trade policy and regulations, such as customs clearance and technical barriers, can increase a country's trade by US 700 annually on that one initial dollar. Therefore, it makes sense to invest in good trade facilitation procedures.
For LLDCs, there is even greater urgency to have a set of principles agreed by all. LLDCs depend on their neighbours to have well-oiled procedures for clearing transit goods. Transparency, consistency and predictability are not just of theoretical utility to traders in your countries, they are the necessary ingredients for making trade flow in and out of your borders. By creating a common platform which all WTO members would be expected to implement and respect, these three concepts become the norm rather than the exception in the day to day trading of your producers and consumers.
This is why I urge LLDCs to play a more active role in these negotiations at the WTO. It is important that your specific concerns are on the table and that the centrality which you give to trade facilitation in this Almaty process effectively translates into the negotiations in Geneva. A WTO deal on trade facilitation is a short term deliverable in your hands.
The architecture of a possible trade facilitation agreement is also aligned with another important LLDC priority: that of trade-related capacity building. It is about Aid for Trade. It is about investing in export competitiveness.
For the first time, we have the mechanics of a trade agreement which will have capacity building as a central pillar. Not only will you be expected to implement the commitments but the expectation is that you would be provided with the necessary capacity building to allow you to undertake this implementation where necessary. Hence, a trade facilitation agreement offers you legal certainty that your neighbours and trading partners will be expected to reach similar customs and border standards while also providing you with the necessary assistance to enact and improve your own processes.
The WTO's work on Aid for Trade continues to put a focus on the needs and priorities of developing countries, especially least developed countries (LDCs). Since the Aid for Trade initiative was launched in 2005, approximately US$ 200 billion has been mobilized in Aid for Trade, with some US$ 60 billion directed to LDCs. Aid for Trade for least-developed LLDCs increased from an average US$ 3 billion in 2002-05 to US$ 6 billion in 2010.
The figures for 2011 will be formally released in a matter of weeks but it is clear that the continued tight fiscal environment and fiscal pressures in donor countries has led to a drop in Aid for Trade. However, preliminary figures show that we are still 50% over the baseline data and that assistance to LDCs has not been affected but it does send an important signal about maintaining the dual approach of resource mobilisation and the better use of available resources, with a clearer focus on results and impact.
As you are aware, the WTO will be hosting the 4th Global Review of Aid for Trade on 8-10 July in Geneva. The focus will be on connecting to value chains and will also look at how the role of the private sector as a partner in trade-related assistance can be harnessed.
This notion of value chains should have particular resonance for LLDCs. Value chains are less and less about geography. Production is multi-localised and value chains can span continents and regions allowing countries, even those that are landlocked, to become important links in the production and distribution chain. Value chains provide ‘open air space’ for smaller countries and smaller businesses to insert themselves, at a comparatively low cost entry ticket, in the world economy. Unlocking the potential of firms in LLDCs to join in value chains is therefore an important component of a future LLDCs agenda.
One final issue that I wish to address is that of services. The WTO and its partners such as the OECD have recently released statistics on trade in added value. One of the key findings of this work is that services play a greater role than we previously thought in international trade. What does this mean for LLDCs? It means that greater attention to this sector — which is not as intimately affected by ‘landlockedness’ as manufacturing or agriculture — should be a priority for the group moving forward. Engagement in the services discussions in Geneva, including the LDCs services waiver under which some of you will benefit, is one important step to better using this ‘relative comparative advantage’ to your benefit.
The WTO will continue to work closely with you on all these fronts to ensure that trade and improved export competitiveness of LLDCs can contribute to greater growth and development.