Africa's agriculture, intra-trade to benefit from the Doha talks — Lamy

Good evening, Ladies and Gentlemen,

At the outset, I wish to apologize for not being able to join you in person because of a General Council meeting we having here in Geneva during these two days. I am particularly disappointed at having missed this opportunity to interact with you, the African business leaders. I am however hopeful that another opportunity will present itself in the near future.

In addressing the key question before us tonight, that of “ what Africa can expect from a successful conclusion of the Doha Round and how to enhance intra African trade issues”. I will provide you with an overview of the state of play in the negotiations and also highlight the issues that in my view are relevant to the effort of enhancing intra Africa trade.

In July we decided to suspend negotiations to allow a period of time out for Ministers to consider how they can each contribute to breaking the remaining obstacles in the negotiations in agricultural subsidies and agricultural market access.

At present, discreet political contacts and reflections are taking place and our hope is that soon the key players in this current deadlock will begin to indicate revised levels of flexibility adequate for us to return to the negotiating table.

It is fair to note that in the current deadlock the main actors are the US on domestic subsidies, the EU on agricultural tariffs and emerging economies like India on market access also. Africa has maintained a very offensive position in the agriculture negotiations, because as you know for Africa , like other developing countries, agriculture holds a great growth potential because of its centrality to its economies.

In seeking to narrow divergences, I have been actively consulting with all stakeholders, particularly the key players I have just referred to. And I have to say that in all these consultations, the unanimous view is that a failure to successfully conclude the Round will not only be detrimental to the multilateral trading system, but will be more devastating to developing countries including Africa.

Failure to reduce the trade distorting domestic subsidies of the developed countries will mean a missed opportunity to boost the expansion of agricultural production in Africa. This is particularly the case for cotton exporters amongst you that have witnessed a significant decline in production over the past years as a result of distortions in the cotton export market.

Reduction of agricultural tariffs whether in developed countries or emerging countries will also benefit African exports, particularly in those sectors where you have comparative advantage including in cereals, vegetables and horticulture. In addition, the negotiations will address the important issue of tariff escalation which affects your exports of processed agricultural products and undermine efforts to diversify agriculture exports. A good example here is cocoa. African exports of cocoa to Japan enter duty free, but exports of cocoa paste face tariff rates of up to 25%.

A key consideration when discussing this Round is that though agriculture is an important part of the agenda, we must not forget that this Round comprises other issues all with significant potential gains for Africa.

For example, in the important area of industrial products, such as textiles and footwear, improved market access in developed countries will benefit your exports of manufactured goods. This will further enhance the export diversification efforts that most of your governments are undertaking.

Another key area of the negotiations where there are significant potential gains for Africa and which in my view, is central to the discussions on enhancing intra Africa trade, is the services negotiation.

Developing countries have reserved their right to designate the services sectors that they wish to liberalize. I am sure you will agree with me that the services industry is the most dynamic industry in many African countries including there in South Africa where services now accounts for approximately 65% of GDP and around 70% of formal employment. Africa stands to gain further by maintaining an offensive position in this sector. This will not only send positive signals to investors but it will also provide the predictability and transparency that is required to facilitate investment decisions. There cannot be a discussion on intra Africa trade without addressing the services sector. Take for example; the transport sector. According to UNCTAD, transport costs in Africa constitute over 15% of total cost of any product compared with 8% for other developing countries and 5% for developed countries. This high cost of transportation has a negative impact on trade volumes.

Among you tonight are representatives of the South African retail industry that has over the past few years expanded their operations throughout Africa. They will agree with me when I say that the absence of unified transport policies across the continent to facilitate cross border movement of cargo is a key obstacle to increasing intra Africa trade.

Another key area where if the Round is successfully concluded, there will be significant gains, is that of trade facilitation, cutting red tape at the border. Trade facilitation is at the heart of your efforts to increase intra Africa trade and to integrate Africa into the global economy. Failure to address this issue will continue to undermine every other effort that you will undertake.

Effective participation in global trade requires that all actors, be they governments, corporations, or individual firms operate on the cutting-edge of technologies not only in the production processes, but also in chain management. Globalization and further trade opening will place demands on firms, small and large, to adjust to the new trading environment. Reducing transactions costs is one important factor for a firm (and a country) to remain competitive in international and regional markets. For companies operating throughout the continent, the challenges are greater due to the various constraints and weak capacities that many African countries continue to face.

The challenges include the need to develop requisite capacities needed to implement modern techniques of doing trade. Developing the necessary infrastructure and human skills are two of the most important challenges Africa faces. Progress in these two areas is fundamental for African countries to have the capacity to effectively participate in regional and global trade.

In summary, it is essential for African countries that the issue of trade facilitation be positioned within a broader framework of the need to reduce transactions costs to both domestic and international trade in these economies, within a broader framework of engineering economic growth.

It is clear therefore, that a WTO multilateral trade facilitation agreement will significantly contribute towards the enhancement of intra Africa trade.

Another key element which in my view is also central to improving intra Africa trade flows, is that of trade infrastructure. Overall density of infrastructure in Africa still significantly lags behind the rest of the world, but there are signs that this is improving. The length of surfaced roads in Africa grew by 128% between 1991 and 2000, reflecting increased investment in road networks, but more remains to be done.

The experience of many African land-locked countries, shows that savings that can be made from improvements in transport networks in Africa. However, this aspect is more than the traditional notion of "trade facilitation". It becomes a fundamental problem of "development" in African countries.

This is why in parallel to the Round , we are putting together a comprehensive package of aid for trade to help developing countries, and African countries in particular, address some of their supply side constraints including poor transport and general trade infrastructure networks that will help enhance their ability to benefit from trade opening.

We are working together with several partners including the World Bank, IMF, UNDP, regional development Banks ( ADB) and bilateral donors to secure increased targeted aid for trade. This will support trade related infrastructure and also assist countries deal with issues related to product standards and regulations among others.

In conclusion, a successful conclusion of the Round will benefit developing countries and Africa in particular; with trade facilitation alone, significantly enhancing intra Africa trade. However, for the Round to succeed, negotiations have to resume and this is where I request your assistance. As the private sector, you are well placed to make the case to your governments to continue pushing the big players for a resumption of negotiations and a successful conclusion of the Round.

At the end of this month, African Trade Ministers will meet in Addis Ababa and this meeting will provide an opportunity for Africa to send a strong political signal for a resumption of negotiations.

I urge you to add the voice of African business to the global call for a timely resumption of the Doha Round negotiations.

Thank you very much for this opportunity.