Benin, 5 August 2002
Opening Address by the Director-General to the Ministerial Conference of LDCs on:
of the Programme of Action for the LDCs and Combatting Poverty”
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Excellencies Members of the Diplomatic Corps,
Ladies and Gentlemen,
It is indeed an honour and a great pleasure for me to be here today to share and further elaborate on some ideas that I had raised just over a year ago, in Brussels, at the Third UN Conference on LDCs (LDC-III). The Brussels Declaration and Programme of Action adopted at LDC-III generated momentum and support to seriously tackle the challenge of poverty in least-developed countries (LDCs).
This is my eighth trip to Africa since I became Director-General of the WTO three years ago, and I would like to thank President KEREKOU for having made it possible by extending an invitation to me. I wish also to express my gratitude to the Government and the People of Benin for their warm welcome.
LDC-III was timely, as there was need for concerted action to meet the international goal of halving the number of people living in extreme poverty by 2015. At the start of the 21st Century, 1.2 billion people are living in extreme poverty with less than $1 a day to survive on. Another 1.6 billion people are living on less than a $2 a day. Many of these people are from the world's 49 LDCs. Recent estimates (by UNCTAD) suggest that over 50 percent of the population of LDCs live in abject poverty, and that on current trends the incidence of poverty in LDCs will increase by about a third unless steps are taken to redress the situation.
Redress the situation we must. Poverty in all its forms is the greatest challenge to the international community today. We will be judged by our response to our most vulnerable members. Their appeal to the international community and multilateral agencies to contribute in the fight against poverty must not go unanswered.
In this context, let me stress the importance of trade and the multilateral trading system. All seven of the UN Millennium Development goals – in health, education, poverty, etc — would require about US $54 billion annually. This is estimated to be just one third of the gains to be made by developing countries from trade liberalisation. The trading system has probably done more to boost living standards and lift people out of poverty than any government intervention. The 17-fold rise in world trade since 1950 has gone hand-in-hand with a 6-fold rise in world output. This has benefited countries at all levels of development. History also reminds us that countries that have done well over the past half-century, such as those in South East Asia and some Latin American countries, have been trade-oriented. Recent studies on trade and poverty have confirmed that the poor countries that are catching up with rich ones are those that are open to trade. The more open they are, the faster they are converging. The message is clear: freeing trade boosts economic growth, and so helps to alleviate poverty. Abolishing all trade barriers could boost global income by $US2.8 trillion and lift 320 million people out of poverty by 2015.
Developing-country governments increasingly recognize this. Their economic policies have changed dramatically since the mid-1980s. Countries have realized that trade and investment, not aid, are the engines of economic growth. LDCs also are doing a bit better, though clearly, we do need to do better. It is also important to stress that trade liberalization, though important for growth and development, is by no means enough. It will do little for a nation that is torn apart by war or that spends all its export revenues on weapons. Nor will it be much use if good governance is missing or if crippling debt is overhanging. Nor will trade help those poor countries who have no domestic capacity or infrastructure to take advantage of new market access opportunities.
Trade liberalization must, therefore, go hand-in-hand with other reforms, including domestic reforms. The first responsibility for solving the problems of LDCs rests with the LDCs themselves. But the international community also has an important role to play, and international institutions, such as the WTO, can make significant contributions.
I would call upon the international community to join the consensus in support of the Bank/Fund Poverty Reduction Strategy Papers (PRSPs), which are currently the best “development vehicles” for reducing poverty because they combine the essential elements of national ownership, participatory efforts by all sectors of domestic society, within coherent and sound policy frameworks. National Poverty Reduction Strategy Papers require a growth component. Trade is a viable growth component. The WTO has been working with the other core agencies to develop trade priority areas of action in the PRSPs through the Integrated Framework (IF). Mention should also be made of JITAP, another joint targeted project between ITC, WTO and UNCTAD that has helped people advance their capacity and trading interests.
Let me now turn to LDC-III.
The Third United Nations Conference on Least-Developed Countries in Brussels in May last year, gave the international community, and LDCs themselves, an opportunity to respond to the challenges faced in the globalized economy and to identify measures that can be taken to help. The Conference focussed global attention on the plight of the poorest of the poor.
WTO Members contributed to the Conference with concrete 'deliverables', that is, policies, programmes and initiatives to assist LDCs. The 'deliverables' presented to the thematic session on trade, and reflected in Commitment 5 of the Programme of Action adopted in Brussels, were in areas related to LDC's trade development. These 'deliverables' such as improving market access opportunities for LDCs, the Integrated Framework, accession of LDCs to the WTO and initiatives to assist LDC's participation in the multilateral trading system are being followed-up by WTO members, most notably in the WTO Sub-Committee on LDCs.
The Doha Ministerial Conference has attached importance to building on the results of LDC-III, and mainstreaming the relevant trade-related commitments of the LDC-III Programme of Action into the work of the WTO. This has been realised with the adoption of the WTO Work Programme for LDCs on 12 February 2002.
The WTO is ‘delivering’ in a number of areas.
First, as a result of concerted efforts by our membership, there have been significant improvements in market access opportunities for LDCs. Twenty-nine WTO Members (counting the EC as one) have now pledged market access improvements for LDCs. They join a number of other countries who already provide open markets. The average un-weighted tariff applied to LDCs exports in their main export markets has fallen from 10.6 percent in 1997 to less than 6.9 percent today. The improvements demonstrate that WTO members recognize the needs of the weakest and most vulnerable members of the multilateral trading system. Further improvements can be expected by the conclusion of the multilateral negotiations launched at Doha, with Ministers committed to the objective of ôduty-free and quota-free access” for LDCs.
This brings me to our second ‘deliverable’, in cooperation with other agencies, the successfully re-designed Integrated Framework for Trade-Related Technical Assistance (the IF). LDCs need increased, focused and sustained technical assistance and capacity building to help them take advantage of existing and potential market opportunities. At Doha, Ministers recognised the importance of technical assistance – and placed emphasis on helping poorer members to integrate into the trading system and participate fully in the negotiations. Members have acted decisively by approving an increased Secretariat budget for 2002 and pledging 30 million Swiss Francs to a new Global Trust Fund for technical assistance. The re-designed Integrated Framework will also help LDCs mainstream trade into their national development plans and strategies for poverty reduction. It will help ensure that trade, as an engine for growth, is central to development and poverty reduction plans.
Our third, ‘deliverable’ is a renewed commitment to give as much assistance as possible to those LDCs in the process of joining the WTO. We have to facilitate and accelerate negotiations with acceding LDCs. LDCs acceding to our organization, however, also have to learn and understand how the WTO works. They need to draft domestic laws that comply with WTO rules. They need to establish mechanisms for enforcing those rules. And they need to negotiate with existing members suitable conditions of entry to the WTO. LDCs need more technical assistance in this area. And WTO members need to be more flexible in their negotiations with acceding LDCs. We are making some progress. We had a useful Seminar on Accessions last month. And facilitating accessions is a central element of the WTO Work Programme for LDCs being overseen by the Sub-Committee. I expect some concrete recommendations to be agreed to by Members in the coming months – this would greatly speed up and ease the accession of LDCs into the WTO.
LDCs already account for over 20 percent of WTO's membership, and this will increase as more LDCs join the WTO. Another ‘deliverable’ is the host of initiatives we have taken to help LDCs participate more fully in the WTO and the multilateral trading system. Let me highlight some of these:
- We have launched activities for non-resident Members and Observers to ensure that those countries not represented in Geneva can still follow the daily business of the WTO and still be an integral part of our processes. We have instituted 'Geneva Week'; this is now a bi-annual event bringing together senior officials from Capitals and Europe-based missions – to learn and exchange views concerning critical areas of the WTO work.
- We have supported LDCs participation in the work of the WTO by servicing weekly meetings of the LDC Consultative Group and meetings of other informal groups such as the African Group, which has many LDCs as its members.
- We have improved the WTO's Trade Policy Review Mechanism for LDCs; as well as shedding light on a country's trade rules, it now helps trade policy capacity-building and the mainstreaming of trade priorities into national development plans and poverty reduction strategies.
- We have doubled our WTO training courses with the establishment of a WTO Training Institute.
- We have set up WTO Reference Centres connecting LDCs' capitals to WTO sources of information through the Internet.
- We have set up a new programme to fund interns within country missions in Geneva.
- we have supported increased participation of developing countries, especially LDCs, in international standard-setting bodies.
The WTO is not the only international agency working to assist LDCs in the trade area. For example, WIPO is doing excellent technical assistance work in terms of intellectual property issues. We are working to better co-ordinate our technical assistance activities with international standard-setting bodies, in order to improve LDCs' capacity to make full use of international standards. I want to pay tribute also to the splendid work of the International Trade Centre (ITC).
The ‘deliverables’ I have mentioned are a start. But they are not enough. In order to do better, we need to conclude the work we launched at Doha last year.
I'd like to say something about where the WTO is today with the “Doha Development Agenda”. I believe a successful completion of these negotiations is the best contribution that the WTO can make to foster development and reduce poverty on a world-wide basis. For instance, the gains to developing countries and LDCs alone may be about five times all the overseas development assistance and eight times all the debt relief granted thus far.
At Doha, Ministers agreed that the removal of trade barriers should continue, that their economies should continue to open up, and that international trade should continue to be governed by multilaterally agreed rules. Since Doha we have done well, but we cannot afford to sit back. The challenges lying ahead of us are considerable.
On the positive side, I can mention a few encouraging developments.
First, we have put in place the machinery for the negotiations. We can now count on an efficient negotiating structure, a dedicated set of chairpersons and a clear plan of work for the future. The Trade Negotiations Committee, which oversees the negotiations, and the individual negotiating groups are up and running.
Second, and more importantly, WTO members, including the 30 LDC Members of the WTO, are fully engaged in the negotiations. We are witnessing unprecedented participation by all countries - developed, developing and LDCs. In the negotiations on agriculture, for instance, more than 150 proposals and other written contributions have been presented so far. Half of these were tabled by developing countries, either individually or in different groupings (such as the African Group). In the negotiations on Trade in Services, it has also been the developing countries and LDCs that have taken the initiative by tabling a large number of proposals (including, for example, a recent LDC Group proposal on negotiation modalities). This development is most welcome and will be fully supported.
And third, let me elaborate a bit on the support provided. As we move on with the Doha negotiations, we are in parallel implementing our extensive mandate on technical assistance and capacity building. In doing so, we are seeking to support our LDC and developing country members so that they can effectively engage in our work. Technical assistance and capacity building, in coordination with relevant organizations such as UNCTAD and the World Bank, has become one of our core activities, and rightly so. Helping developing and least-developed countries integrate into the multilateral trading system and participate fully in the negotiations will be key to our success.
The Doha negotiations are raising a lot of expectations. We have to live up to these expectations. Fulfilling the mandate Ministers have set out for us will go a long way in stimulating economic growth and reducing poverty.
Take for instance, market access conditions for industrial goods. This is one of the key issues in the Doha negotiations: studies have shown that, despite low average tariffs, the products in which developing and least-developed countries are competitive continue to attract relatively high tariffs in major export markets. Even more negative is the impact of tariff escalation as it affects their ability to move up in the value-added production chain. Thus, properly addressing tariff peaks and tariff escalation will go a long way towards meeting some key concerns of developing countries and LDCs.
Or take agriculture, which is the backbone of almost all developing and least-developed economies. The poorest part of the population - living in the rural areas — depend for their incomes on the development of a sustainable and productive agricultural sector. Yet, massive agricultural support in OECD countries undercuts the exporters from poor countries and forces even the most efficient producers out of markets where they would otherwise be earning their living. Agricultural subsidies in OECD countries cost more than a $1 billion a day and result in job losses for poor countries, as well as pollution in rich countries due to intensive, subsidised farming inputs. Or, as Callisto Moldovo, the Vice-President of the Africa Region at World Bank has recently said, OECD agricultural subsidies, at approximately $300 billion annually, are equal to Africa's total GDP. The Common Agricultural policy continues to absorb around $46 billion per annum, or half the Europeean Union's budget. Kofi Annan wants $10 billion to fight AIDs pr year, that's just 12 days of subsidies. So, there is little doubt of the benefits to be derived by the developing world through reform of agricultural trade.
Protectionist policies distort prices and therefore economic incentives, leading to wasted resources and environmental degradation. Subsidies lead to overproduction which drives prices down and provides incentive to dump surpluses onto world markets, which in turn puts highly competitive agriculture producers in the developing world at a severe, and deeply unfair, disadvantage. Import restrictions push the domestic price of a good above the world price, domestic firms produce more, while consumers reduce their overall purchases and suffer a real income loss as a result of the higher prices.
Last year, U.S. farmers harvested a record crop of 4.38 billion kilograms of cotton, aided largely by a U.S. government check for $3.4 billion. West Africa is the third largest exporter of cotton and farmers in Mali, the largest grower in the region, posted a record harvest last year as well – 200 million kilograms. The difference was, that without subsidies, the state cotton company lost money, largely because prices have fallen by 66% since 1995 to ($0.88 per kilo) and have fallen 10% this year alone.
The World Bank and the IMF estimate that removal of U.S. subsidies could lead to a fall in production, a subsequent rise in the global price for cotton and a revenue increase of $250 million annually for the countries of West and Central Africa.
But in fact, subsidies for U.S. cotton farmers are likely to see their support increase by 16%. This for a total of 25,000 farmers whose net household worth averages about $800,000.
Agricultural trade policies like those for sugar, coffee and cotton are not just economically and politically inequitable; they prevent desperately poor countries from exporting to rich countries. Alas, a similar story could be told about the rice and fish subsidies kept in place by countries like Japan and South Korea.
Agriculture is a difficult subject in trade negotiations. But without significant reforms in agricultural trade, poverty alleviation efforts will fail. This is why the Doha Development Round is so important for many poor countries and why we must conclude it.
There is scope for some introspection as well. South/South trade in the 1990s grew faster than world trade and now accounts for more than one third of all developing country exports, or about 650 billion US dollars. The World Bank reports that 70 per cent of the burden on developing countries' manufactured exports result from trade barriers of other developing countries. The quicker these walls come down, the quicker the returns to all developing countries, and the Doha negotiations are an appropriate framework to make this happen.
The Doha negotiations also offer us the best opportunity to craft better WTO rules and to revise some of the existing ones. As witnessed during the debates on “Implementation Issues” that took place in the run-up to Doha, many developing countries and LDCs are of the view that several WTO Agreements need to be adjusted to better reflect their particular interests and concerns. So, there is a lot to negotiate here to ensure that the rules preserve their underlying rationale.
The Doha Development Agenda offers great opportunities but to realise these opportunities we must overcome big challenges.
First, protectionist pressure groups continue to exercise their influence in some of the world's leading economies. A rise in protectionism would be a particularly worrisome development at a time, when, for the first time in recent history, world trade is not growing as fast as it used to.
And second, we face a number of new, systemic challenges. The negotiations will be conducted among an unprecedented number of sovereign governments - the 144 WTO Members plus the some 28 acceding countries for which a working party has already been established or may be established in the future - thus, about 170 governments. As a result, the differences between the participants, in terms of size, economic development, trade interests and negotiating capacity will be greater than ever. A lot of effort will be necessary to maintain confidence, not least through prompt delivery on the extensive Doha commitments on technical assistance and capacity-building.
I remain optimistic that we will succeed. We know that we have to urgently move forward, firmly resist protectionism, and fulfill the Doha mandate, which contains the prescriptions of how to develop the multilateral trading system further to the benefit of the poor.
I believe the greatest threat to LDCs is not globalization, but marginalization. Open markets can play an important role in lifting millions of people out of abject poverty. This would go a long way in meeting the development goals we had set for ourselves in the new Millennium and that we had advanced through the commitments we made at Brussels, Doha and Monterrey.