23 September 1999
Africa and the multilateral trading system: challenges and opportunities
Address by Mike Moore, at the Conference of African Trade Ministers, Algiers
Ambassador Vijay Makhan, Assistant Secretary-General, Economic Development and Regional Cooperation of the Organization of African Unity].
Minister Bakhti Belaïb, Chairman of the Conference of African Trade Ministers.
Distinguished Trade Ministers of Africa.
Can I at the outset pay tribute to Ambassador Mchumo of Tanzania, who is the first African chairman of the WTO General Council, and who is doing a fine job. He apologises for not being here. He wanted to be here but you need him at work in Geneva. He is at this moment at work, shaping the work programme for the Ministerial Meeting in Seattle.
This meeting is timely, nine weeks before the Seattle Ministerial Conference, that will launch a new trade round. I thank the Government and People of Algeria and the General Secretariat of the Organization of African Unity, for hosting this meeting and extending to me the kind invitation to address this gathering. I am honoured.
This is a historic occasion for me, because I understand that this is the first time the DG of the WTO has accepted an invitation to address you. A week ago I was the first DG to address the G77 and before that the first DG to address a gathering of ACP Ministers. This is an honour for me; it also gives me a chance to explain my priorities and principles.
I address this forum not just as the DG of the WTO, but as a friend of Africa, and a citizen of a very small country which, like so many other small countries finds the door closed to many of its products only because they are too competitive and unsubsidised.
It is my firm belief that the international trading community and the multilateral trading system have to intensify their efforts to accelerate the integration of developing countries, particularly African countries, into the global economy. Unless we bring African nations, most of which are least-developed, into the global economy, we will never enjoy full economic and social justice.
Africa is a great Continent. Its opportunities are infinite and its potential boundless. The Continent is abundantly endowed by nature, but history has not been kind to the continent. So much of the potential and the opportunities are yet to be realized. The Continent's population of 700 million people is a huge potential market. Africa has a major stake in the multilateral trading system. Of the 134-Member governments belonging to the WTO, 41 are African. Yet there has never been an African deputy Director-General. There should be. I hope to fix that over the next few weeks.
The major challenge of Africa is the timeless challenge of development, so we can reduce poverty and provide for the citizens of the continent the basics of food, shelter, clothing, education, healthcare and jobs. This can only be done if we increase national income levels. This is a simple statement, but a complex challenge. Trade is an important means of achieving these crucial goals of development, although it is not the only means.
Trade and an open trading system are central to economic success. In the past 50 years, open, liberalizing economies have grown faster than closed, trade-restrictive economies. In 1950, the ratio of global trade to GDP was approximately 7%. By 1997, the ratio stood at 23%. In several individual cases of rapidly developing countries, trade accounts for over 70% of GDP. The lesson is that trade liberalization, implemented through the systematic dismantling of trade restrictions both within economies and externally creates better paying jobs and higher living standards for the people. Countries that liberalize, develop faster because they function more efficiently and hence are more competitive. It is an old truth that needs repeating.
In the period preceding my appointment as Director-General, I spoke extensively with many African Ambassadors and Representatives in Geneva regarding the concerns of African Members of the WTO and the multilateral trading system. I have also noted the contents of several reports designed to prepare Africa for Seattle: reports from conferences in South Africa, Ethiopia, Kenya, Zimbabwe and Nigeria.
At these meetings, and in conversation with me, Africa's concerns, have been expressed honestly and with force and validity. They are:
- uneven distribution of benefits in the multilateral trading system;
- apprehension of further marginalization;
- desire for flexibility in the use of appropriate trade policy instruments;
- implementation problems;
- insufficient capacity and supply-side constraints which have prevented Africa from fully exploiting market access opportunities;
- inadequacy of technical assistance;
- weakness of Africa's participation in WTO policy-making processes; and,
- support for the regional integration process in Africa.
I would like to address some of these concerns. Africa is deeply and rightly concerned that the continent's share of global merchandise trade has been steadily declining, from 5.9% in 1980 to 4.2% in 1985 to 2.3% in 1996. It is unacceptable that on this continent of 700 million people, between 250 to 300 million people live in poverty (below US$1 a day). Average continental GDP growth rates of 3.5% are only just keeping pace with population growth. Of the 48 countries, designated as Least-Developed Countries (LDCs) by the United Nations, 33 are located in Africa. Standing still, in these terms, is going backwards. This is a time bomb. I am asking developed countries and other members of the WTO, to help resolve the problem by granting duty-free access to all products imported from least-developed countries.
The situation of enormous potential on the African continent stands in sharp contrast to the reality of poverty and misery. This must not be allowed to continue. The concerns, problems and challenges of Africa are under constant analysis in our Secretariat and every other international agency. If we are not careful we will reach the stage of paralysis by analysis. However, not all the problems are the fault of the trading system our the global institutions. Many of the solutions must be found by Sovereign Governments. However, we can help. We must; we will.
We at the WTO are investing our efforts in several areas. I have appointed a special Coordinator, a friend from Africa, whose sole focus over the next few months is to achieve the objectives of duty-free access and improvements in the Integrated Framework for Technical Assistance. Under the Coherence Work Programme with the World Bank and the IMF, we must improve, sharpen and focus on the financing of technical assistance and on improving our delivery of trade-related technical assistance. In addition, our estimates for increasing the funding for technical cooperation in the regular WTO budget have been submitted, not as an add-on, but as core business. In our relations with the World Bank, the Fund and the G-7 countries we have expressed strong support for debt relief. An UNCTAD report I read spoke of one African country that spent up to 9 times more in debt payouts than on health. The heavy hand of history has its thumb on the windpipe of Africa. Next week, when I travel to Washington to participate in the Annual IMF/World Bank Meetings I shall again make this case. If we fail here, our critics will be proved correct.
The uneven distribution of benefits in the trading system and the risk of further marginalization require action. To address these challenges, individual nations need to intensify domestic efforts for adjustment and reform. Reforms involve a complex set of requirements including fiscal stability, sound macroeconomic policies and a favourable regulatory environment that create a positive domestic setting for both domestic and foreign operators alike. National competition law, and commercial policies that are transparent and predictable, are vital. Together with an effective enforcement agency, they are indispensable in the complex process of adjustment and reform.
The desire for flexibility in the use of commercial policy instruments is legitimate and responds to a real need by countries. Scope for this flexibility is provided for in the 6 WTO categories of special and differential treatment provisions for developing countries. These are the:
- provisions for increasing the trade opportunities of developing countries;
- provisions for safeguarding the interests of developing countries;
- provisions for the flexibility of commitments by developing countries in the use of trade policy instruments;
- provisions for transitional periods;
- provisions for technical assistance; and,
- provisions for Least-Developed Countries.
Special and differential treatment provisions recognize the differences in levels of economic development. They recognize that sometimes a bit more time and "space" are needed in the implementation of WTO commitments and obligations due to different levels of economic development. Nonetheless, in a world that is rapidly globalizing and in which countries and firms are innovating, reforming and adjusting to cope with the challenge of competition, it is necessary for Members to be discriminating in the recourse to these provisions. These provisions ought to be used with care and based on a real and defined domestic need.
The WTO is a rules-based system. The benefits of a rules-based system cannot be fully realized if Members seek too many different standards, exemptions from the rules or lower levels of obligations. Together, we have to work together and must work together, to modernize the special and differential treatment provisions contained in WTO Agreements. In doing so, our common objective would be to ensure that in their formulation and application, these provisions should accelerate the integration of developing countries into the trading system, and not delay it. The use of these provisions should focus on building the necessary legal infrastructure, institutional and human capacity in Africa. They should also focus on broadening the use of Information Technology and closing the knowledge gap between Africa and the rest of the world. What Members should avoid in a non-discriminatory rules-based system are exemptions from rules which, from available evidence, produce the unintended consequence of slowing down the pace of integration into the multilateral trading system. These will do the opposite of what their authors want. Any delay in progress will slow down eventual job and community growth.
In the reports from the various African preparatory seminars for the Seattle Ministerial, the problem of the supply-side constraints for African countries in utilizing market access opportunities has stood out. The WTO spends some 12% of its funds on the ITC (International Trade Centre) for this purpose. Addressing this problem requires a combination of policies of which trade policy is just one aspect.. These would include improvements by developing Members in their market access and national treatment offers in their domestic markets, particularly in those strategic sectors that are key to rapid development such as communications, roads, financial services, health, education, tourism (for many African countries) and energy. Improved, secure and bound commitments send clear and strong signals to foreign and domestic investors on the policy of any government. In turn, this has positive effects for integration and for more rapid development. Coupled to trade policy solutions would be the application of sound macroeconomic polices, sound and complementary regulatory policies and transparency in government, including in procurement policies. A transparent procurement policy is one area where everyone wins immediately.
Technical assistance is an increasingly important core WTO activity. Between 1995 and the present, the demand for technical assistance has increased fourfold. Apart from our contribution to the ITC, only about 10% (or about CHF716,000) of current WTO technical assistance is financed from the regular WTO budget. The remaining funds come from voluntary (or extra-budgetary) donations by very few Members. They should be thanked. I am working with several WTO Members to include the funding of WTO technical cooperation in the regular budget. I have submitted budget estimates to the Budget Committee for CHF10 million to meet current annual demand. This would be a quantum increase over the present provision. Furthermore, the priority in the WTO 3-year Programme is for technical assistance delivery to Africa and other small, vulnerable economies. I, would like to appeal to Ministers to support these proposals at the Seattle Ministerial. We need technical assistance, not just up to Seattle, but beyond, during the Round and after. This is in the interest of everyone, like the serious and real problems with implementation. This question will not go away. Nor will you, nor will I.
One point that should not go unmentioned is that of human capacity-building which is an important aspect of WTO technical assistance, particularly in the trade policy courses. I would appeal that those who are trained in trade policy by the WTO are appropriately deployed. They can be used as trainers within various countries. The purpose would be defeated if those who are trained in the high quality and resource intensive trade policy courses are, thereafter, deployed to tasks unrelated to trade policy formulation, negotiations and implementation.
There has been a false separation of trade and development. UNCTAD and the WTO; we are brother and sister, wings of the same bird. We serve the same people. UNCTAD's DG, Rubens Ricupero is a great man and a great friend. We will work together to assist our people.
In my first few days I appointed a respected, retired Ambassador from a small developing country to assist me in a new project to assist the small countries that cannot afford representation in Geneva. In November, we shall have a week of briefings for Non-Resident Members (over 20 countries that cannot afford the cost of representation in Geneva). At this Seminar, there will be briefings about the WTO and its work, as well as on the work of other international organizations like UNCTAD, WIPO, the World Bank, the IMF, UNDP, the ILO and others. This Ambassador will also audit our systems to ensure they are development friendly and will consult you, our customers and owners, on how best we can improve our play.
Arising from the regional preparatory meetings is the expressed need by African countries for support for the regional integration process in Africa. WTO Members are increasingly influenced by regional agreements. These regional agreements are themselves subject to specific conditions. However, even as we acknowledge the important contributions that they make to economic development, I believe it is vital for us to re-affirm the primacy of the multilateral trading system, and ensure that the regional integration process is complementary and not harmful to the rules-based trading system. The WTO will continue to give support to the regional integration process in Africa. Tell me what I can do to assist.
Allow me to raise with you a problem most Nations face which frequently escapes public scrutiny namely, the costs that arise from protection. The cost of doing nothing is accepting the status quo. Trade protection, either through tariffs or non-tariff barriers, imposes significant and damaging costs on national economies. It leads to inefficiencies, delays adjustments, and entrenches domestic distortions. If consumers and governments calculated and evaluated the costs that arise from trade restrictions and protection, they would not protect. The cost of protecting jobs or particular sectors in national economies is so high and damaging, both in the short and long-term, that it is counterproductive and costs jobs and wealth. In the rich countries of the Organization of Economic Cooperation and Development (OECD), the cost of protection on consumers has been estimated at US$300 billion. In one country, the cost to consumers of the protection of one single job was estimated at US$600,000. I would urge the countries of Africa to avoid the mistakes of some of the "grandfather" industries in the developed countries. I also urge the wealthy nations to reconsider their policies of subsidies. Subsidies are just a battle over whose taxpayers have the most money to waste. Alas, thats always the rich nations. It's a way of exporting problems and domestic economic and political conflicts.
Distinguished Ministers, I would like to offer a few words on the preparatory process for the Seattle Ministerial Conference. The process which began in the General Council, in September, last year, is now in an advanced stage, thanks in good part to Chairman Mchumo. The process of drafting the Ministerial Declaration has begun; and in the days ahead of us, active negotiations will be underway on the substance of the draft. Seattle must be a watershed and turning-point.
The agenda of the new Round of Trade Negotiations is a matter for Members. Nonetheless, the scope of much of what the Round would contain is suggested by paragraph 9 of the Geneva Ministerial Declaration of last year. All Members have emphasised the importance of implementation. Members are already committed to negotiation in agriculture and services. There are also other issues. There is the Work Programme that arose in Singapore containing the so called "new issues" of investment, competition policy, transparency in government procurement and trade facilitation. There is the reality of electronic commerce. There are issues that will be raised by Members, including sustainable development which is one of the cardinal objectives of the Marakkesh Agreement establishing the WTO. Members are deeply divided on what this means. They are worried about the social and human costs of change. So they should be, our ultimate employers, the people, are concerned even in the richest economies with the cost of change. There is concern and anxiety.
The agenda for new negotiations must be balanced and reflect the interests of all Members. There must be something in the pie for every one. Not pie in the sky when we die, but pie on the table. Now. As soon as possible.
I urge the distinguished Trade Ministers of Africa to give their strong support for a new Round of Trade Negotiations. It would maintain the momentum for trade liberalization and hence growth, development and higher living standards for our families. A new Round would keep protectionism at bay and assist the recovery of those regions recently stricken with financial and monetary crises or undergoing recession. Imagine the implications if the markets of the North had slammed closed during the recent Asian crisis.
I have spoken at length and I would like to conclude with the priorities that I have set for myself as Director-General. It is on the basis of these priorities that I expect and want to be judged. These priorities which I stated on my first day as Director-General are:
- to facilitate and to assist all participants to get the most balanced outcome from the new negotiations, and an outcome which benefits the most vulnerable economies;
- to be an advocate for the benefits to both great and modest nations of a more open trading system, and one that can increase living standards and build a more prosperous, safer world; and,
- to strengthen the WTO and its rules, to build on and maintain its reputation for integrity and fairness, and to reshape the organization to reflect the reality of its membership and their needs.
I know you will send a message to Geneva and Seattle. This is an historic opportunity for all of us to move forward. We are all in the same boat. As President Nyerere said, "We all depend on each other's ability to purchase." Where this was once true of villages, it's now true of nations. Seattle is our best hope to advance. And the WTO is just one of the sisters of multilateral institutions that can play a role in sustainable development and in raising the living standards of our people. You have honoured me with your invitation and attention. I am profoundly grateful. I want to be your Ambassador in Geneva, your champion in the capitals and your advocate with the other international institutions. Thank you.