The WTO and developing countries: priorities for negotiations
policy dialogue priorities for future multilateral trade negotiations
The subject of my speech today is developing countries' priorities for negotiations at the WTO. It sounds unexceptional, and yet it is very revealing.
The multilateral trading system has changed dramatically since the Uruguay Round. Until then, developing countries hardly participated in negotiations. Most of them were not members of the GATT. And those that were members benefited from the liberalizing outcome of GATT rounds, but scarcely had to reciprocate with tariff concessions of their own. In a sense, they were passive members of the multilateral trading system.
It is different now. Developing countries have rushed to join the WTO. Among our 140 members, four out of five are from the developing world. What's more, in addition to receiving all the benefits of membership, they are now expected to offer concessions of their own in return for concessions given by developed countries. Generally, then, developing countries now participate on a reciprocal basis at the WTO.
This is good. For one thing, domestic liberalization typically does more to boost economic growth than greater market access from developed countries. That is why so many developing countries have liberalized unilaterally over the past 15 years and have reaped the benefits of faster economic growth. But perhaps more importantly from a WTO perspective, it means that developing countries are now full and active members of the multilateral trading system. And since they are expected to make concessions, they have a right to make demands. Moreover, since they make up the overwhelming majority of the WTO's membership, their demands cannot be ignored. They can set priorities for negotiations and expect to meet many of them. They no longer have to make do with the scraps tossed from the rich men's table.
The older members of the Organization are adjusting to this new world. The big players know they can no longer simply cut deals amongst themselves and expect the rest of the world to fall into line. Developing countries are adjusting too. In the past, some developing countries said no to a new round until their demands on implementation issues were met. Many claimed as well that they could not honourably enter into new obligations when, for various reasons, they could not implement the ones already agreed upon.
The tide is turning. While developing countries know they have the power to block the launch of a new round, they also increasingly realise they can most effectively achieve their trade and development objectives through a new round. They also know that no new round will ever conclude without their needs being addressed.
What, then, are developing countries' priorities for negotiations? It is impossible to speak in more than very broad-brush terms about a group that encompasses Brazil and Gabon, India and Lesotho. Nor is it appropriate for me, as WTO Director-General, to set out individual members' positions. But I can still make some general, and hopefully useful, remarks.
Let me start with agriculture, where negotiations in Geneva have just entered their second year, and which is particularly important for developing countries. If one looks at the proposals they have submitted, they are pressing for two things.
First, they want radical reforms from developed countries. This would include the eventual elimination of export subsidies and other forms of export subsidisation, drastic reductions in domestic support and very substantial improvements in market access for agricultural products of actual and potential interest to them. They point out that agricultural subsidies have increased since the Uruguay Round to about $1 billion a day; that OECD subsidies equal in dollar terms the GNP of all of Africa.
Second, a number of developing countries, particularly non-Cairns Group developing countries, want to give developing countries significantly more flexibility than under existing provisions, especially in domestic support and market access with respect to staple foods and in the context of food security concerns.
In services, negotiations are also going into their second year. Most of the negotiating proposals have been submitted by developed countries, although Venezuela has now submitted one on energy services, in addition to earlier proposals by India and CARICOM. One priority is the liberalization of the so-called “movement of natural persons”, which basically means that it should be easier and more transparent for workers from developing countries to get short-term visas to work in developed countries, be they Indian software engineers in Germany or Mexican construction workers in the United States. Another priority should be the use of the GATS to bind liberalization in important service sectors such as telecoms and financial services. This is a must if countries are to attract invaluable foreign direct investment. Every economy needs an efficient services backbone, whether it exports tomatoes or textiles.
A third priority relates to implementation-related concerns and issues. Many developing countries have concerns about the burden of implementing their Uruguay-Round commitments and its perceived inequities. They have raised a number of issues, which are being discussed in the WTO's General Council and in WTO committees. Modest progress has been made, notably at a special session of the WTO General Council last December. But there is now a growing recognition that further efforts relating to past agreements require new negotiations. As well as the in-built agenda of agriculture and services, a new WTO round must have implementation issues at its heart.
Another issue that is important to developing countries is industrial tariffs. Developed countries still have many high tariffs, mainly in textiles, clothing and leather. Moreover, most rich countries have higher tariffs on processed goods than on raw materials. This tariff escalation makes it harder for developing countries to industrialise.
The burden of these remaining barriers to industrial trade falls mainly on developing countries. Manufactures account for around three-quarters of developing-country exports, up from around 30% twenty years ago. Moreover, developing-country exports of manufactures face much higher trade barriers than exports from developed countries. In one World Bank Study it is estimated that barriers to manufacturing exports account for around 70% of the total export barriers faced by developing countries and that three-quarters of the gains from further manufacturing liberalization would go to developing countries. Clearly, then, manufacturing could be at the heart of a new round if it is truly to benefit developing countries.
Last but not least, developing countries, and least developed countries in particular, must continue to receive increased technical assistance in order to ease the burden of implementing new agreements as well as to help them reap the fullest benefits from them. I have made this one of my priorities as Director-General. We at the WTO have increased technical assistance to LDCs. With our limited budget and trade focus, the WTO can only contribute so much to export capacity building in LDCs. But our technical-cooperation programme is an unsung success that helps developing countries take greater advantage of trading opportunities at a tiny cost.
Another success story is the Integrated Framework, a strategy for inter-agency co-operation on trade-related technical assistance to the least-developed countries. It is an important step towards mainstreaming trade so that it is at the heart of countries' development plans and poverty reduction strategies. The IF had laid dormant for years. But we have now reinvented it and are in a position where we hope several countries will start to benefit from it by the time the UN conference on LDCs meets in May. I should add that at the Conference I intend to report on progress in a range of additional areas including market access (with over 20 countries offering improved access for LDCs), standard setting and accessions.
Developing countries have much to gain from a new WTO round and a wider set of negotiations. With a positive agenda and strength in numbers, they can ensure the next round has a strong focus on developmental concerns. But they will gain little unless we actually launch a round. In the absence of a round, all countries will lose, but more so the weaker and the more vulnerable.
I know that many developing countries have argued that we cannot launch a new round until the perceived injustices of previous rounds have been dealt with. I understand their concerns. But dwelling on the perceived injustices of the past does nothing to prevent even greater injustices in future. Many developing-country governments are coming round to that view. They increasingly say that the greatest threat to their economies is not globalization, but marginalization. A new round is the surest way to prevent the further marginalization of developing countries from the world economy and to deal with the problems that they may have with existing WTO agreements and the way the WTO is run. As a study by the Tinbergen Institute points out, the potential benefits of a new round to the developing world are three times what it receives each year in overseas aid.
As storm clouds threaten the world economy, the prospect of launching a new round is a ray of sunlight for everyone, not least the developing world. Now is the time to move from words of support for a new round to making the compromises needed to launch one. Now is the time to question narrow, selfish interests in the interest of the overwhelming national good. Now is the time to look beyond yesterday's battles towards tomorrow's opportunities. The world needs a new WTO round. Let's launch it as early as possible, this year.