WTO NEWS: SPEECHES — DG PASCAL LAMY

WTO ACCESSION AS A TOOL TO ENHANCE COMPETITIVENESS


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Excellencies,
Ladies and Gentlemen,

I am very pleased to be here with you today at this prestigious University of Addis Ababa. What better venue to discuss competitiveness in Africa — the topic of my lecture today — than a university, a place full of competitive and creative spirit of thousands of students. The presentation of the WEF's African Competitiveness Report a few days ago here in Addis is an ideal platform to reflect further on the linkages between trade, growth and competitiveness, and to discuss how countries can take advantage of the Multilateral Trading System, and especially the WTO accession process, to enhance competitiveness.

Hence, my remarks today will cover:

  • first, the benefits of WTO membership in economic policy making;
  • second, the perspectives on competitiveness in Africa; and,
  • finally, WTO accession as a tool to enhance competitiveness through domestic reforms.

 

WTO Membership

The role that trade can play as an engine for growth and development has long been recognized. By creating a competitive business environment, trade opening fosters the efficient allocation of economic resources, enhances output and productivity, and, increases overall welfare gains. The lessons of history are clear:  when severe impediments to trade — both international and domestic — exist, economic growth is hampered.  Thus, it is the more open, export-oriented economies that have generally succeeded in their development efforts, although this is not a formula. Trade policy is not a stand-alone policy and requires complementary policies.

 

Governments pursue WTO membership for a variety of reasons: 

First, at a “macro” level, WTO membership lends added credibility to government policies and sends clear signals to investors about a country's commitment to an open economy. The implementation of WTO rules is, in this sense, synonymous with the acceptance of a set of internationally-recognized best practices. In turn, this encourages the inflow of foreign investment and technological know-how. 

Second, at the “micro” level, domestic businesses stand to benefit a great deal from the establishment of a transparent and predictable trade environment, which results from the conclusion of every WTO accession process. In fact, at its core, the framework of WTO rules is aimed at improving the business environment for foreign and domestic private sector operators. For instance, for Ethiopia and many other African countries, the principal benefits of WTO membership stem, inter alia, from the adoption and application of WTO trade rules. Furthermore, also in the case of Ethiopia, export-oriented operators are likely to benefit directly from guaranteed and enhanced access to the markets of all WTO Members on an MFN basis, without the uncertainty of preferences.

Thus, in many ways, the process of WTO accession can be seen as a gradual process of investing in a country's future legal security and competitiveness.

 

Competitiveness in Africa

Africa has weathered the recent global economic crisis better than other parts of the world. Between 2001 and 2010, GDP growth in Africa averaged 5.2 per cent. The key driver of the recent growth in Africa was the increase in commodity prices, which does not necessarily translate into higher productivity. To sustain growth, African countries need to make improvements in competitiveness and productivity, and to take better advantage of international trade through deeper integration regionally and globally. 

Presently, amongst Africa's challenges in trade are: 

    (i) small national markets;

    (ii) landlocked countries with poor infrastructure; and

    (iii) historical export composition and trade patterns. Even though growth rates of African countries accelerated in the last decade, their export growth, mostly driven by natural resources, lags behind that of other developing regions. 

Intra-African trade currently stands at 12.3 per cent of the region's exports, up from 9.4 per cent in the year 2000, but this figure remains low by international standards

The picture remains mixed and there is clearly scope for expanded, more competitive regional integration. Better regional supply and logistics facilitate trade expansion, export diversification and the ability to attract FDI which contribute to competitiveness through advancing managerial skills and technological capacities. Global integration further connects a country to international markets and extends demand beyond national borders and beyond the region. The globalized economy, in turn, offers firms access to new technologies, skills and financial resources. 

Africa's competitiveness is advancing through the introduction of more sustainable fiscal policies, debt reduction and low debt levels. Governments are divesting from private sector activity and opening up some previously public dominated sectors. Telecommunications is an example. There are improvements in labour market efficiency. As a specific example, Rwanda's recent successes can be attributed to such strengths as well-functioning institutions, state-of-the-art IT, low levels of corruption, an improved security environment, efficient labour markets and relatively developed financial markets. 

Despite these recent positive trends, there should be no room for complacency and there is scope for improvements. The broader economic structure and environment within which firms operate requires improvement, so as to maximize the advantages of low labour costs and availability of natural resources.  Trade logistics, infrastructure and the business environment also require rapid and constant improvements. Law and policy with regard to land ownership and intellectual property rights protection require urgent improvements. These will assist better absorption of technology and modern managerial skills. 

Exports are hindered by bureaucratic red tape, customs and port delays and high inland transit costs. These obstacles need to be tackled to place African economies on the path of enhanced competitiveness and sustainable growth. 

The WTO accession process helps put in place a sound legal, policy and administrative framework for trade and a predictable business environment to attract FDI. Hence, the domestic reforms necessary in WTO accession can provide a foundation and a tool to enhance a country's competitiveness.

 

WTO Accession and Domestic Reforms

Over more than six decades, the rules-based Multilateral Trading System has positively assisted countries in the modernization of their economies. This has been demonstrated by the enlargement of the WTO family: from the initial 23 to the current 155 Members of the WTO. At a certain juncture in the history of each country, leaders and domestic stakeholders are confronted with the imperative of modernization and opening-up. But revamping an economy is not an easy job. Modernization often entails the opposition from “old school” groups, a reduction of the role of the State in the economy, and, enhancing transparency and ownership in domestic decision-making. 

WTO membership has proven to be a catalyst for trade-related domestic reforms. Most of the reforms of the foreign trade regime are carried out through the introduction of new legislation or amendments to existing laws, so as to ensure compliance with WTO rules. These reforms also include binding commitments on market access for goods and services.

Moreover, WTO membership also serves as a vital instrument to lock-in reforms. It opens an avenue of support for countries undertaking domestic reforms. Compliance with WTO rules drives governments towards better governance and international cooperation. Binding commitments provide cover for reformers and act as an insurance policy against the temptation to slip into the “old, uncompetitive ways”.

An open, transparent and predictable foreign trade regime can be pictured as the “intangible infrastructure” that ensures the smooth exchange of goods and services with partners worldwide. This infrastructure of openness, transparency, and predictability in the foreign trade regime establishes the environment required by investors for business decision-making. New investments that flow create jobs, transfer technology and savoir-faire, diversify the economy and exports, and increase welfare overall. 

Out of the 54 African countries, 41 are WTO Members and nine1 are in the process of acceding to the WTO. Of these nine, six are least developed countries. Accession provides acceding governments the opportunity to negotiate the terms of entry to the WTO. Ideally, accession negotiations should go hand-in-hand with domestic poverty-reduction and reform strategies. Each accession responds to the specific needs of each acceding government. There is no “one-size-fits-all”. In accession negotiations, the objective shared by WTO Members and acceding governments is to reach a “win-win” agreement that benefits everyone, reinforces the disciplines of the Multilateral Trading System and promotes faster and sustainable economic growth. 

Since 1995, the countries that have joined the WTO under the Article XII of the Marrakesh Agreement have grown faster. Also, they have, generally, been more resilient to external shocks. 

2011 was a fruitful year for WTO accessions. Four governments successfully completed their accession processes: Samoa, Montenegro, the Russian Federation and Vanuatu. 

It is important to continue building on these positive results. In this regard, I am happy to note that, at the 8th Ministerial Conference in December 2011, WTO Members took a unanimous Decision to explore ways in which to further operationalize and streamline the accession procedures for LDCs.

Let me in closing mention that there is a high level of goodwill from Members towards a rapid conclusion of Ethiopia's accession. This goodwill needs to be matched by the strong and sustained commitment from Ethiopia to conclude its accession negotiations. There is no shortcut to negotiations; there is substantive work to be done. Ethiopia is not alone and counts on the friendship and support from the international community, not only during its accession process, but beyond. 

Finally, as WTO Director-General I wish to pay tribute to Prime Minister Meles Zenawi for his leadership domestically and globally, not least, because of the recent impetus that he has injected into Ethiopia's accession process. The tide is high now, ride the wave!

Thanks for your attention.

 

Notes :

1. Algeria, Comoros*, Equatorial Guinea*, Ethiopia*, Liberia*, Libya, Sao Tome et Principe*, Seychelles and Sudan* (the asterisk indicates LDCs). Back to text

 

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