The multilateral trading system in support of Africa-led and Africa-owned development
High-Level Policy Dialogue
United Nations, Palais des Nations
What is required to make this African renaissance possible? After decades of experimenting with sometimes disastrous models of development, we have learned one thing: sustainable development cannot take root unless countries and communities genuinely take ownership of their own development. Initiatives recently taken by African leaders to spearhead a “Millennium Plan” for the continent and to create an African Union with a vision of a new era of unity through economic cooperation are inspiring. And it is based on this sense of ownership that a real partnership between Africa and the international community must be built.
The efforts of the UN and the Secretary-General to forge such a partnership are commendable. And it is right too that we proceed with humility. The international community and the family of international organizations have all been guilty of incoherence and of conflicting priorities, initiatives and advice in the name of development, in the past. Great challenges remain for the United Nations system, the Bretton Woods Institutions and indeed the World Trade Organization to coordinate and cooperate better.
To do justice to the efforts of African leaders and peoples, there must be coherence between the efforts of the various parts of the international system to support an Africa-owned and Africa-led era of development. The contribution of the WTO lies in improving market access and in ensuring predictability and the rule of law in trading relations between States.
When I became Director-General of the World Trade Organization, I pledged that helping developing countries, and in particular the world's poorest countries, would be a priority. I reaffirm that commitment today. At the recent Third United Nations Conference on Least Developed Countries in Brussels, I was proud to announce a set of ‘deliverables’ on market access and capacity building to help our poorest countries better integrate into the multilateral trading system. These are ‘deliverables’ and in most cases they are also ‘delivered’; done, not promised sometime in the future.
Let me highlight some areas in which I believe the multilateral trading system can do more to support Africa-led and Africa-owned development.
Poor countries need to grow their way out of poverty. Trade is a key engine for growth but currently products of developing countries face many obstacles in entering the markets of rich countries. For example, the 49 least developed countries, representing 10.5 per cent of the world population, have less than 1 per cent of world exports. History shows that open markets can play an important role in lifting millions of people out of abject poverty. We have made progress on market access for LDCs. Thirty countries have made offers. Two countries, Norway and New Zealand, have actually agreed to drop all barriers to LDC exports. They join a number of other countries who already provide open markets. The average non-weighted tariff applied by major industrial countries to LDCs exports has fallen from 10.6 percent in 1997 to 6.9 percent today. In the last 12 months, Canada, the United States, the EU and Japan have all taken significant actions to address access for LDCs.
A new round of multilateral trade negotiations would lock in this progress and advance the gift of opportunity which is all that market access is. With every Minister and leader I meet, I argue the case for market access. I will continue to do this and WTO members will continue to look to make further improvements as best they can. The UN system and the Bretton Woods Institutions have an important role to play in mobilizing support for improved market access which can now best be advanced within the framework of a new Round.
Mr. Secretary-General, I recall your call for a new Round, which must be a true development round, at the Conference for Least Developed Countries in Brussels. The case you presented there on behalf of the United Nations family was compelling. Please allow me to refer to some key points of your address as it related to LDCs, most of whom are in Africa.
You reminded us that LDCs are caught in a vicious circle: they need foreign investment but can offer little to attract such investment. You reminded us too that in order to break out of the circle, LDCs need to export and need open markets in which their goods can compete. But those exports face formidable barriers. “Agricultural tariffs still average over 40 per cent, and on some rise above 300 per cent. And then there are many non-tariff barriers: not only quotas, but also technical barriers which regulate the size and quality of imports or require them to be labelled in a certain way. And of course there are health and safety standards.”
Some of these regulations are a little difficult to understand. You gave an example: the European regulation on aflatoxions. A World Bank study has calculated that this regulation costs Africa $670 million dollars a year in exports of cereals, dried fruit and nuts. What does it achieve? It may possibly save the life of one citizen of the EU every 2 years. I agree with you, Mr Secretary-General, on the need for a sense of proportion. Every human life is important but surely a reasonable balance can be found.
In contemplating a new Round, we should look at the figures. One study by the Tinbergen Institute estimates that developing countries would gain $155 billion a year from further trade liberalisation. That is over three times the $43 billion they get annually in overseas aid. OECD agricultural subsidies in dollar terms are two-thirds of Africa's total GDP. Think of the gains to the global economy and Africa if these subsidies were removed. Mr. Annan wants $10 billion to fight Aids; that is just 12 days of subsidies in dollar terms.
There are risks in not launching a Round. The world economy is looking vulnerable. In 2001, the volume of world merchandise trade is expected to grow by 7%, a marked reduction from the estimated 12% in 2000. The US economy, motor for the world economy, is stuttering. A recession in America could export trouble to the rest of the world. An upsurge in protectionism could make things much worse. The virtuous circle of trade liberalization and economic growth could all too easily become a vicious spiral of protectionism and stagnation. The risk is that a global recession will jeopardize any chances of economic recovery and growth in Africa.
Failure to launch a new Round this year could also jeopardize the multilateral trading system itself. A global rules-based system based on non-discrimination could give way to a patchwork of discriminatory regional deals and even potentially hostile blocs, combined with aggressive unilateralism by the big guys. Everyone would lose from this. But the biggest losers would be the poor and the weak.
It need not come to that. The precariousness of the world economy provides an opportunity as well as a threat. The prospect of stagnant, or even shrinking, domestic markets increases the lure of new, foreign ones. This can help muster an export lobby powerful enough to overcome the entrenched interests opposing freer trade.
Trade liberalization is only one ingredient in the cocktail of policies required for development. A new WTO Round 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 crippling debt overhangs. Nor will a Round 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.
One of our contributions to improve coordination amongst agencies in capacity building has been in re-designing the Integrated Framework for Trade-Related Technical Assistance. A pilot scheme has already been established under the Framework and we are starting to implement it. We have set up a Trust Fund for the Integrated Framework and I want to thank those countries that together have already contributed US$6.2 million to the fund. I encourage all donor countries to contribute. I also want personally to thank the Executive Heads of the other agencies involved — IMF, ITC, UNCTAD, UNDP and World Bank — for joining me to bring this concept from its hesitant origins to a point where it could become a practical, project-driven example of intra-international cooperation, putting into effect the calls for coherence between agencies by Ministers and Leaders.
Hand in hand with the Integrated Framework, we are promoting the concept of mainstreaming trade into LDCs' development plans and poverty reduction strategies. LDCs need increased, focused and sustained technical assistance and capacity building to help them take advantage of existing and potential market opportunities. This is best done by mainstreaming trade into national development plans and strategies for poverty reduction. It will help ensure trade, as an engine for growth, is central to development plans. It will also ensure that trade-related technical assistance and capacity building is delivered within a coherent policy framework rather than on a stand-alone basis.
Mobilizing resources for development remains critical. The WTO is actively supporting the International Conference for Financing for Development to be held next year. Members of the WTO Committee for Trade and Development have met with the Bureau of the Preparatory Committee of Financing for Development. These exchanges have led to an input from the Committee on Trade and Development to the Financing for Development process. However, let me clarify that the WTO is not a development finance agency and our resources for technical assistance are very limited. Nevertheless, trade plays a role in generating foreign exchange earnings and mobilising domestic resources through economic growth. Also, WTO rules which improve transparency, predictability and stability are critical for encouraging both domestic and foreign private sector investment.
Finally, let me say a few words on our preparatory process for the 4th WTO Ministerial Conference to take place in Doha, Qatar, in November.
The WTO, once again, finds itself at a crossroads. Key decisions will be taken in the weeks and months ahead – decisions that could have a far-reaching impact on the future of the multilateral trading system. At the Conference, we must leave the WTO stronger and more vibrant, ready to play its full part in international trade relations. As I said, I believe the best way to make this advance is through the launch of a new Round or wider set of negotiations.
Recently, senior officials from capitals came to Geneva and through this initiative the process has been further energized. We will have a “reality check” at the end of this month when we will report clearly and objectively to Ministers and representatives. The agenda has to be broad enough to have something in it for everyone. It has to be detailed enough to be meaningful, but not so detailed that it becomes a pre-negotiation. I can report on one consensus that Ministers have already reached. They want a balanced agenda for Doha. We are in the hands of our owners, the Members. More leadership, more flexibility and generosity must be shown soon, so that all are accommodated.
The pursuit of an equitable, liberal and open rules-based multilateral trading system is the key contribution by the WTO in support of the efforts of African countries to achieve sustainable development. We need your support now and in the forthcoming months to ensure the Doha Ministerial is successful and that a new round with development at its core is launched.