WTO NEWS: SPEECHES DG PASCAL LAMY
Johannesburg, 10 February 2006
“Concluding the WTO's Doha Round: The post Hong Kong Roadmap”
South African Institute of International Affairs
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It is a pleasure to be back in South Africa and particularly to be here
at the Institute. The last time I was here was May 2005, when I was
still a candidate for WTO Director-General. I had a lot of encouragement
from you but you forgot to tell me what it means to jump into this job
just five months before the WTO Ministerial Conference in Hong Kong
China. You will have noticed that I lost some hair and got some new
wrinkles in the meantime!
Since my last visit here, there has been some positive developments on
the trade front. South African exports of goods and services have grown
by almost 15%, GDP by nearly 5% and business confidence index stood at a
record level in January 2006. In addition, South Africa has been
pursuing a very aggressive bilateral trade programme, concluding
framework agreements with Mercusor and EFTA, initiating discussions with
China and India in addition to a number of other bilateral trade
cooperation agreements across the African continent and Middle East. All
this points to an increased commitment by government to use trade as the
driver of economic growth and development.
Let me now turn to today's discussion. As you know Hong Kong was never
meant to be the end point of the WTO negotiations under the Doha
Development Agenda which we launched in December 2001. But obviously
with less than one year to go for the conclusion of the Round, Hong Kong
was important in giving the necessary impetus for the end game.
Prior to the Hong Kong conference we decided to recalibrate our level of
expectation about what we could possibly achieve at the conference. The
reasons for this were quite straightforward. There was insufficient
convergence in member's positions on key areas of the negotiations and
therefore any attempt to force through consensus would have resulted in
a failure.
Before Hong Kong, some members were saying that they could not move
further on agricultural market access unless they saw a corresponding
movement in industrial goods market access, services or Geographical
Indications. Yet other members were saying they could only make improved
offers in industrial goods which could lead to reductions in applied
rates if there was an improvement in the agriculture market access offer
and in farm subsidies reductions. Furthermore, there were also others
that were saying they could only discuss industrial products if there
was a sufficient degree of precision on special products and the special
safeguard mechanism for agriculture products.
But even if we had to reassess our expectations for Hong Kong, all
members agreed to maintain the overall level of ambition of the Round
and in particular its development component. It is clear that
development is not an isolated box in this negotiation, rather it is a
component that we find in each and every area under negotiation, whether
on agriculture, on services, trade facilitation, industrial tariffs or
Aid for Trade to name a few.
So what happened in Hong Kong? We made progress, true it was a modest
one, but it was all in the direction of developing countries and this is
good news. Let me just give you some examples.
In agriculture, we secured a date for the elimination of export
subsidies — a key negotiating demand by South Africa and other
developing countries, by 2013 with a substantial part of them gone
by 2010. We also agreed to achieve “effective cuts” in trade distorting
domestic subsidies. There will be three bands with the EU, US and Japan
undertaking the biggest reductions. Furthermore, we addressed two key
demands from a group of developing countries that they would have the
flexibility to self-designate a number of Special Products on criteria
of food security, livelihood security and rural development to be
treated specially. Developing countries will also have to be able to
trigger a special safeguard to protect themselves against imports, based
on import quantities and prices, which they need to cope with the
volatility of farm products on international markets.
In the important area of cotton, which was considered a litmus
test by many, rich countries agreed to eliminate all export subsidies in
2006; they also agreed to make deeper and faster reductions in trade
distorting domestic subsidies for cotton than those agreed under the
general formula. Finally, rich countries and developing countries
wishing to do so agree to provide duty free and quota free access to LDC
exports of cotton.
In the area of industrial products (in our jargon NAMA), members
reaffirmed the objective of reducing barriers to world trade in
industrial products which today represent over 80% of world trade in
goods, providing for new market opportunities, while at the same time
making sure the interest and needs of developing countries are taken
into account. This is particularly the case of tariff peaks and tariff
escalation which today affect many developing country exports. It is now
admitted by everyone that the coefficient to be used to reduce tariffs
will be more favourable to developing countries than to developed
countries.
In Hong Kong we also addressed a long-standing demand from the 32 world
poorest countries (least developed countries – LDCs). Rich
countries agreed to provide duty free and quota free access for all LDC
products to their markets on a lasting basis, to be implemented over
transition even if some flexibilities are accorded in case of
difficulties.
In services, Hong Kong opened the door to plurilateral
negotiations. It strikes an important balance between opening trade in
services, which is a key and ever increasing part of WTO members
economies and maintaining flexibilities for developing countries,
including their right to regulate this sector of the economy which now
represents 70% South Africa's GDP. I am aware that this is a sensitive
issue for some of you and I would like to reassure you all that no
commitment on services is mandatory in the negotiations. Each country
has the right to choose the sectors that it will open to foreign service
providers. However, given the profile of the South African economy where
services represent 70% of GDP, 68% of employment and 74% of capital
formation, and has been the main source of growth for the economy for
more than a decade, South Africa clearly has offensive interests in this
sector. I am also aware that South Africa has not yet presented its
offer and would encourage them act swiftly.
Finally, we also agreed to ensure a solid Aid for Trade package
that would help developing countries build supply-side capacity and
trade-related capacity that would help them translate the potential of
the DDA into realities. Just this week I have created a Task Force to
help me prepare recommendations on how Aid for Trade can contribute
effectively to the development dimension of the round. I have also begun
consulting extensively among our other partners, the World Bank, IMF,
UNDP, UNCTAD and the International Trade centre and regional development
banks, including the African Development Bank to this end. But let's be
clear, Aid for Trade is not a substitute for an ambitious development
round. It is an essential complement to help developing countries reap
the benefits of the new trade opportunities offered by the Doha Agenda.
Aid for Trade will be of particular relevance in the context of the
on-going negotiation on trade facilitation, which is the name given to
measures to simplify and reduce the impact of import, export and customs
procedures. Numerous studies shown that the cost of trade procedures may
range from 2% to 15% of the value of traded goods. Halving the cost of
bureaucratic trade procedures may mean saving around €300 billion a
year. But if this is to become a reality, technical assistance and
capacity building will be essential for developing countries.
Let us now consider what remains ahead and what it will take to take us
to a successful conclusion of the Round within the next 12 months or so.
During the last weeks, in Geneva, during my recent trip to Latin America
and now here, I have received three clear messages: first, that there is
widespread commitment to making good on what was agreed at Hong Kong;
second, that there is a shared intention to move ahead across the whole
of the DDA, making progress on all issues, and third, that all
interlocutors understand that they will all have to move from their
current positions and are willing to do so by moving “in concert”.
Obviously, agriculture and industrial tariffs remain the flagships of
the convoy since ministers have agreed to reach modalities by April. But
no-one is in any doubt that our convoy is a large one. These two issues
have an important role in leading the convoy to port, but we all know
that the convoy must arrive together. Beyond Agriculture (including
cotton) and industrial tariffs, we also have services, where for the
negotiations to achieve real progress over the next weeks, the
request/offer negotiations must be intensified. And we also have Rules,
Environment, Trade Facilitation, not to forget issues such as small
economies, the treatment of commodities or the erosion of preferences.
On Agriculture, in the coming three months, members will have to agree
on the specific formulae for cutting tariffs and subsidies and flesh out
the details of the final agreement on special products, special
safeguard mechanism and food aid.
As we all know, South Africa's cereal exports are in competition with
developed countries that use trade distorting support and therefore a
substantial reduction in this support will improve South African market
access for these products.
On industrial tariffs, the focus of our work will be on agreeing rapidly
on modalities, ie by how much we will cut tariffs, what will be the
flexibilities and on which products will we pursue sectoral initiatives
over and above the general cuts.
If we are to conclude this round by the end of 2006, it is therefore
imperative that over the next few months member's priorities converge.
There is very limited time and the work we do in this first three to
four months will facilitate the more difficult decisions down the track.
Let me share with you the widest shared secret in Geneva: every country
knows it will have to move! The EU will have to move on agricultural
market access. As I have often said, the best way to address this market
access issue is for members to test the water, to play with numbers as a
means to start narrowing the existing gaps. The US will also have to
move further on domestic subsidies in agriculture. The big developing
countries, Brazil and India among them, also have to lend their energy
to the train. They have to move on market access for industrial products
and on services. And as I said earlier, checking numbers and testing
hypotheses will be useful in unblocking discussions here too, and then
these moves will be conditioned to one another.
The good news is that we have already solved the question of “who makes
the first move”. All members agree they have to move in concert.
So where is South Africa in all this? The leadership role of South
Africa, in particular in Africa, will be crucial in ensuring that the
major players make significant movement in agriculture, industrial
tariffs and services to unblock negotiations and follow up on the
decisions taken at Hong Kong. South Africa has a lot of gain from the
elimination of distortions in world trade in agriculture, from the
reduction of tariff peaks and escalation for industrial products on
developed country markets, from greater trade opening on services as
well as from new rules on trade facilitation. It is therefore clear that
the final prize is worth South Africa's contribution, which should
obviously be in relation to its development. South Africa's greater
participation in the services negotiation and in the reduction of
tariffs on industrial products will be worthwhile the benefits it stands
to gain. Of course, this will imply changes and adjustments in South
Africa's economic and social fabric. But I believe this is coherent with
Accelerated and Shared Growth Initiative of South Africa.
You will agree with me that we are faced with a daunting task for the
next 12 months. But it is not insurmountable.
History has taught us that trade negotiations by definition are
difficult. Trying to balance the interests of 14 SADC members in the
negotiations for a SADC trade protocol was a headache as most of you
will attest. Now, what about 149 countries with widely different
ambitions and levels of development?
At Hong Kong ministers sent a clear signal not only that their
commitment to concluding the Doha Round in 2006 remains intact but also
that they will put their political weight behind achieving this goal.
The time has come for us turn this commitment into reality and I am very
confident that we will succeed.
Thank you.