WTO NEWS: SPEECHES — DG PASCAL LAMY
“Harnessing the Development Potential of the Regional Aid for Trade Strategy”
> Pascal Lamy’s speeches
Minister of Commerce Laleau,
Secretary-General of CARICOM LaRocque,
Ladies and Gentlemen,
Merci de m'accueillir dans cette terre de Haïti, un pays ravagé par les catastrophes naturelles, mais disposant d'un énorme trésor: la population là et sa diaspora. Ce sont les Haïtiens qui font la force de ce pays.
What gathers us here today is the shared belief that trade can be an engine for growth, for jobs and for poverty reduction. But that having trade opportunities is not enough. We must translate the “trade can” into the “trade has” by ensuring developing countries have built the necessary trade capacity. And this is what Aid for Trade is about: helping transform trade opportunities into trade realities.
I last met with the Caribbean Community on Aid for Trade in Montego Bay more than four years ago. At that regional review, my message to you was clear: Aid for Trade can be a platform for the region around which the development partners and private investors could coalesce. Since that time, the global Aid for Trade agenda has continued to mature. Testament to this is the focus of the 4th Global Review of Aid for Trade on connecting developing countries to value chains and highlighting the growing role of the private sector. I look forward to seeing you all at the Review next month.
The region has made some initial but crucial steps in concretizing the role that Aid for Trade can play in its economic development. Belize and Jamaica launched two excellent national strategies, both of which were profiled in Geneva as examples of best practice, and for the past year the region has been actively working on a regional strategy.
This strategy is an excellent assessment of the constraints and opportunities faced by the region and a clear framework of the region's priorities, effectively aligned with the priorities of the member states. It is reflective of the time and effort which was placed in its conception and is rich with the results of the in-depth national consultations which were held in the different member states. The region has delivered on its promise.
Now it is time to focus on effective implementation, monitoring of the strategy at the national and regional level and allowing this to be the blueprint for the region's dialogue with development partners and domestic and foreign investors.
This process will not be an automatic one. This strategy is being launched in a period of increasing strains on the budgets of your traditional development partners. Although the resource mobilization pillar of Aid for Trade has been successful, it is also clear that a tough period lies ahead. But as the support from traditional donors may be strained, trade support from South-South partners is increasing, as is the funding stream from the private sector.
The Caribbean region registered close to USD 1 billion in Aid for Trade commitments in 2011, which is a substantial increase over the baseline period of 2002-2005 when the region received less than USD 300 million. Disbursements have also increased from around USD 100 million during that baseline period to close to USD 600 million in 2011.
A big part of Aid for Trade to the region goes to Haiti — the only least-developed country in the hemisphere. The region's high per capita income and high debt to GDP ratio has traditionally been seen as a handicap in accessing traditional grant-based development assistance. This is unlikely to change in the future.
I am aware that the issue of using per capita income as a gauge for receiving development assistance is a sensitive one for this region and it points to the importance of exploring other forms of support and collaborative ventures, including with the private sector.
The regional strategy seeks to do this by tapping into the lever of regional integration and the growing attraction of regional projects and programmes which can deliver exponential outcomes and impacts for a wider berth of countries and people.
The strategy seeks to build on the promise of a region free of barriers by identifying transformative projects that support closer integration. The Caribbean needs closer regional integration. And as you celebrate the 40th anniversary of the signing of the Treaty of Chaguaramas this year, I think it is a fair question to ask how the region can accelerate the pace which I witnessed some ten years ago when I was still the EU Commissioner and how it can honour the ideas of Williams, Burnham, Barrow and Manley — the founding fathers of the integration movement.
The best way to honour these architects of the Caribbean Community is to recommit to regional integration as the most successful and economically viable route towards greater and sustained development for the region.
But harnessing this potential requires more efforts channelled towards increasing intra-regional trade. Today, intra-Caribbean trade stands at just 13 per cent which, as CARICOM itself notes, is on average, at 46 per cent below its trade potential. There are tremendous opportunities for increasing the role of trade in the region's growth strategy.
The outlook for growth in Latin America and the Caribbean is around 3.5 per cent for 2013, slightly up from 3 per cent last year. But for the Caribbean, high debt and weak competitiveness will constrain growth leading to projections of around 1.25 per cent in 2013. This confirms that much of the structural barriers to growth remain, such as small markets, high cost of energy, limited interconnectivity, weak logistical infrastructure, limited diversification and export markets, and high public debt. Even in the area of tourism, where the region rightly has a comparative advantage, tourist arrivals slowed in the second half of 2012 reflecting only modest demand in traditional tourism markets.
The regional strategy, with its focus on maritime transport, ICT and energy as the key sectors for intervention, will be a central pillar in helping the region's economies focus on existing gaps. The emphasis on transport issues reflects the growing importance of increased connectivity, lowering the cost and time of doing business, and creating investment-friendly economies. The cost of moving goods through the region is prohibitively high. This is as a result of the high cost of inputs — primarily because of the import-dependence of the region — but more importantly because of the need to scale up the hard and soft infrastructure related to trade facilitation between countries in the region.
A useful way to plot this is against the World Bank's Doing Business rankings and the World Economic Forum's competitiveness index. Out of 185 countries in the Doing Business rankings, St Lucia is the highest in CARICOM at number 53 and Haiti the lowest at 174. In terms of the competitiveness index of 144 countries, Barbados is ranked the highest in the region at 44, with Haiti at 142. The countries that topped these lists include Singapore, New Zealand, Hong Kong, Finland etc. Some of the factors that these countries have in common are relatively open markets, limited barriers to trade and effective facilitation of trade. Of these elements, we know that the Caribbean countries are some of the most open countries in the world, hence the wheel that probably requires the most greasing is that of the facilitation of trade.
For the WTO, this is one of the possible deliverables for the Ministerial Meeting in Bali this year. Along with some elements on agriculture, an LDC package and a few issues on the development portfolio, a Trade Facilitation Agreement is a critical injection which the WTO can deliver to the multilateral trading system. Effective and transparent trade facilitating procedures is the oil that moves the wheels of trade. It is part of the most primal DNA of global business: maximizing the efficiency and minimizing the cost and time of importing and exporting. In a world increasingly defined by a vast network of regional and global value chains where there is now little value in ‘Made in Country X’ but rather where ‘Made in the World’ is a more accurate nomenclature, trade facilitation is not a policy choice. It is a policy necessity.
One only has to look at evidence. A recent OECD study estimates that a border-related cost reduction of 1 per cent of the value of world trade would lead to welfare gains of around USD 40 billion, the majority of which would accrue to developing countries. A recent ITC simulation concluded that by improving transport infrastructure and cutting the time and cost of transporting goods by half, trade would increase 51 per cent, especially intra-regional trade.
The Caribbean regional strategy, with its focus on increasing connectivity, can be an important link to these multilateral negotiations and is why I am convinced that it is in the interest of all WTO members, especially the smallest among the membership, to deliver on a Trade Facilitation Agreement. For small economies in the Caribbean who will likely be part of the outliers in the mega-free trade agreements currently being considered, this recommitment to multilateralism is essential.
I also urge development partners to rally behind this strategy. It is a comprehensive, well-developed and articulate snapshot of what the countries in the region see as requiring the greatest financial and capacity building attention.
It should also inform dialogue with non-traditional partners, including the private sector.
The region certainly has the support of the World Trade Organization in this regard and I am confident that with the active monitoring of the CARICOM Secretariat, the Caribbean Development Bank, the Inter-American Development Bank and the many other donors supportive of this region, this strategy will lead to concrete deliverables.
Thank you for your attention.