UK Department for International Development — London


Let me begin by saying how happy I am for this opportunity to interact with you this morning. It occurred to me on my way here this morning that today's interaction will be a unique one. It will be unique in that I will be addressing and interacting with the converted. I do not have to convince you about the interdependence between trade opening and development. I do not have to convince you that trade opening leads to development if the conditions are right, nor do I have to convince you that development is a pre-requisite for increased trade flows. The United Kingdom has long understood this interrelationship and DFID stands out as a global leader in advocating and actively promoting trade as an engine for growth and development.

It is this conviction that trade is good for development that motivated the majority of us in 2001 to push for a development round in the WTO. This was also based on the realisation that the multilateral trading system as it exists today contains, within its rules and disciplines, imbalances that continue to penalise developing countries, thereby limiting and frustrating their developmental aspirations. This objective to level the playing field and to provide developing countries with better conditions to enable them to reap the benefits of trade opening remains as valid today as it was in 2001 when the DDA was launched.

The challenge to reform and rebalance the multilateral trading system has now been further made more urgent by the current global economic crisis. There is no doubt that this crisis will have profound and possibly prolonged effects on developing countries, the least developed among them in particular, whose recent good economic performance has been largely driven by external factors. The reality is that their chief exports — oil, minerals, agricultural commodities, textiles and clothing as well as tourism — are already experiencing substantial reductions as global demand shrinks. Add to this the fact that the crisis is also impacting negatively on external sources of funds, such as foreign direct investment or remittances which greatly contribute to these economies and you have a recipe for a potentially explosive economic and social situation.
This week the EU Commission issued its extended interim forecast on economic growth. The forecast is gloomy as we all had expected but the magnitude of the forecast is bigger than most of us would have expected. The report states that growth fell by 1 per cent in 2008 and will fall by less than 2 per cent in 2009. This deteriorating outlook is likely to have a ripple effect that will further undermine growth prospects of a majority of developing countries who depend on the EU for their export market.

We have also recently seen world forecasts of a sharp decline in global remittances that workers send home to developing countries and this will also have a devastating impact, particularly on small Sub-Saharan countries like Senegal and Ghana where remittances are a key source of finance. Furthermore, I was in Cambodia at the end of November last year and we were informed then that 60 per cent of textiles and clothing companies in that country do not have orders beyond February 2009 as a result of the slowdown in demand in the US market. This is an industry that currently employs around 300,000 workers. The news from Southern Africa is equally disturbing. We are told that in December, exports from the textiles and clothing sector to the US market were 30 per cent down from the previous month and are expected to fall further.

Today it is clear that trade is one of the casualties of this economic crisis and that we run the risk that one of the engines of growth — in fact, one that is very important for many developing countries — stalls. With this worsening global economic situation in mind, the key question we have asked ourselves is how can we ensure that trade or rather lack of trade does not further exacerbate the negative impact of the economic crisis. And what can the WTO contribute towards mitigating the impact of this crisis, particularly on developing countries?

First and foremost, the reality is that the multilateral trading system is an insurance policy against protectionism. By investing further in this system, by strengthening it and increasing its robustness, the international community will be investing in an insurance policy against the deterioration of market conditions, such as protectionism. We all know that when the world decides to turn itself towards protectionism, the most vulnerable will suffer the most. It is therefore safe to conclude that the WTO insurance policy is even more indispensable for the poor at this juncture.

Starting from this week, we will be issuing periodic reports on global trends in international trade and trade policy developments as part of our surveillance mandate. These reports will be factual and we hope will facilitate discussions among members on how to better cope with this crisis.

Another important issue we are actively following because of its potential adverse impact on developing countries is the availability and affordability of import and export finance. In November, I convened a meeting of representatives of private banks, international financial institutions and export credit agencies which confirmed that the market for trade finance has severely deteriorated over the last six or so months, particularly since September. The shortage of liquidity to finance trade credits and the general reassessment of risks caused as much by the financial crisis as by the global economic slowdown were identified as among the two key causes of this deterioration. We have already begun to see the results of this engagement on trade finance. Recently, the World Bank announced a tripling of the ceiling, to US$ 3 billion, of the trade finance guarantees available under the IFC's trade finance facilitation programme. A second meeting is scheduled in March at the WTO to take stock of the situation since we last met and to consider additional responses.

By highlighting these challenges, I am trying to reaffirm one fundamental issue. That your support, the support of the international community, is needed now more than ever. The WTO has been a firm believer in the DFID doctrine that for developing countries to fully exploit the benefits of trade opening, there is a need for a comprehensive aid package to accompany the results of a successful Doha Agenda. Hence the Aid for Trade programme which we launched in 2005 and towards which the UK and DFID in particular, have been generous.

Your continued enthusiastic support for the Aid for Trade programme and the Enhanced Integrated Framework among others has come as no surprise to those of us who are familiar with the UK's international development credentials and leadership within the EU for example. I should also seize this opportunity to commend DFID for the support it continues to offer the WTO Least Developed Countries Group. I have to confirm that if you compare the participation of LDCs in the negotiations over the past three years with previous periods, there is a very big improvement. They are now better coordinated in their positions and have successfully ensured that treatment of their issues of interest in the DDA negotiations is frontloaded, hence why as we speak today, the only issues ready for harvest are LDC issues, including DFQF. Another good example is the conduct and outcome of their ministerial meeting in Maseru, Lesotho. That was one of the most well-organised and structured trade ministers meetings I have ever participated in. It was focused and decisive. This would not have been possible without your objective and timely interventions.

Your successful interventions in Sub-Saharan Africa, for example, are already bearing tangible results. I was happy to read about your infrastructure project in the DRC which is making it possible to move goods across this vast country and thereby boost trade. I have also learned of your trade facilitation project in Lesotho which has tripled revenue collection at the end of 2005. The associated reforms have also removed trade barriers for medium and small entrepreneurs in the informal sector which is a major driver of the Lesotho economy.

It is therefore clear that while we all appreciate the challenges the UK economy is facing as a result of this global crisis, reducing your current support to the weakest among us would have far-reaching devastating social and economic implications.

In conclusion, let me briefly tell you where we are in the DDA negotiations. In December I took a decision not to call ministers to Geneva to try and conclude negotiations on core modalities in agriculture and industrial goods market access which are needed to unlock the rest of the negotiations. This decision was based on a simple assessment that members' positions on a number of key issues were still too far apart to reach convergence over a few days. Of course, this was despite the numerous expressions of political commitment to conclude the Round, including at the G20 summit in DC. One thing though that I should state is that the UK's support for a timely conclusion of the DDA has never wavered and the leadership of your Prime Minister continues to inspire us. It is this leadership that we are counting on to ensure that the coming G20 summit in April here in London will result in a recommitment to conclude the negotiations this year. The reality is that a further delay to conclude the DDA means that issues of interest to developing countries like cotton will remain unresolved.

In addition, please note that we have set 6-7 July as the dates for the Aid for Trade global review session in Geneva. I will be participating in the regional reviews that precede this global review, including at the upcoming DFID sponsored event in Zambia in April.

We will continue to count on your continued support and leadership and the positive results that your interventions on the ground are yielding continue to inspire us.

Many thanks for your attention and I'm ready to take your questions.

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