Doha Development
The Doha ‘Development’ Round launched in November 2001 at Doha, Qatar has progressed slowly, with periodic crises and a series of missed deadlines. A successful conclusion to the Doha Round was a key element of the trade aspect of the UK’s 2005 G8 presidency agenda on Africa. The Hong Kong ministerial round “did not deliver great progress but avoided failure.” A ‘triangle’ of three key issues emerged, required the US to further reduce agricultural subsidies, the EU to further reduce agricultural tariffs, and key industrial countries (particularly Brazil and India) to further lower tariffs and offering more services trade liberalisation.
As regards the predecessor of the Hong Kong ministerial round, Cancun was the stage of negociation which was both a public and a politicised event. The main issue was that the developing countries, believed that the agricultural subsidies provided by richer nations, clearly give these nations an unfair trading advantage, and on the other hand the more advanced countries sought for new global rules that would help them to protect their economic interests.
The developing nations also proposed the European Union to put investment and antitrust issues at the top of the agenda.
The Singapore issues - agenda put forward by the EU and some others revolved around, also added to the collapse of the talks. The Singapore issue comprised of a set of rules to protect global trading in such areas as investment, competition (antitrust law), intellectual property (e.g. patents), trade facilitation (e.g. reform of inefficient and corrupt customs practices), and transparency in government procurement.
The failure mostly occurred because developing countries wanted more progress on textiles and agriculture, while the EU was not willing to move forward without more commitments from the others about how they would treat foreign direct investment.
Part of the problem is the WTO’s structure where the majority rules, and the votes are allocated to anyone who controls a customs territory, that is, small countries have the same one vote as large countries.
There exist different perceptions and expectations among WTO members vis-à-vis global trade negotiations. For some, the Doha round is simply a continuation of the Uruguay round, aiming at the extension of multilateral trade discipline into new hitherto domestic policy areas. While others are of the opinion that multilateral trade negotiations must be of a corrective nature in order to ensure more supportive efforts of human development and the MDGs.
2.0 Analysis
WTO members do recognise that global trade is the primary engine pulling economic growth and development forward. They agreed the Doha round must emphasise development to ensure that developing countries, especially the LDCs, share in the benefits of expanding global trade.
2.1 Millenium Development Goals
The United Nations’ Millennium Development Goals (MDGs), agreed in September 2000, recognise the importance of trade. The eighth MDG is to build a “global partnership for development”, with a target to create an “open, rule-based, predictable, non-discriminatory trading and financial system” and in particular address the needs of LDCs. The DDA is part of this global agenda. It offers a unique opportunity to reduce poverty and generate growth, through substantial reductions and elimination of trade distortions, increased market access opportunities, and to rebalance multilateral trade rules in favour of development. Trade is important eradicating poverty, reducing extreme hunger and relieving the problem of debt in developing countries.
This form of assistance has even become a bargaining chip at the negotiating table and increasingly presented as a key instrument to link trade to development. However, many officials in development agencies are unsure about how this new role fits with their larger mandate of poverty reduction that has been defined in the Millennium Development Goals (MDGs). “Donors in the field may hardly claim to have reached a consensus on a strategy for development-focused trade capacity development assistance
There are two proposals that are particularly important with respect to MDG 8:
The Doha agreement mandates this reduction, “with a view to phasing out” export subsidies. This offers the possibility of agreeing on a concrete target for the phasing out of such subsidies well before 2015, and ideally by the end of the Doha Round, as part of a global partnership around MDG 8.
2.2 Agriculture
As far as regards agriculture, which is at the centre of this Round, is important since two third of the WTO members are from developing countries. This sector of particular importance to African countries does provide opportunities to enhance development in these economies given that they contribute over 20 percent to their GDP. A significant reduction in domestic support in the OECD countries would definitely allow farmers in Africa to export more at better prices, especially in sectors where it has a comparative advantage.
Countries such as Ivory Coast, Ghana, Nigeria and Cameroon, the world's top ten producers of cocoa while Ethiopia and Uganda, the world's top ten producers of coffee face tariff escalation in their products. Reducing this would certainly not only increase market access opportunities but will facilitate the diversification of their economies and reduce their dependence on export of primary commodities.
Market Access has helped Pakistan to improve its economic conditions. Its export has risen more than two-fold during the past 15 years. This outstanding performance is attributable to the top tariff reduction and trade liberalisation. It is to be noted that tariff decreased from 120 percent in 1985 to 25 percent in 2001. This has help Pakistan to be in line with the aims of reducing tariff and decreasing the rate of poverty by meeting the goals set by UN.
The DDA also gives specific attention to cotton, a commodity from which many African countries derive a substantial proportion of their GDP. Members have agreed to eliminate export subsidies; as well to reduce domestic support for cotton more ambitiously.
The decision taken at the Hong Kong Ministerial Conference that all developed-country Members and developing country Members declaring themselves in a position to do so, will provide duty free and quota free access to all LDC exports would be a vital contribution that the DDA would make towards fulfilling the MDGs. This addresses the concerns of LDCs, by providing them duty free and quota free market access.
Similarly, there are potential significant gains to be made by African countries in the area of industrial goods particularly in products such as textiles, wood products and fish exports. A successful conclusion of the Doha Round would reduce tariff peak as well as non tariff barriers, resulting in greater market access and export diversification.
2.3 Trade in Services
A third area of great potential to LDCs is trade in services. A good services infrastructure is essential for productivity growth and diversification.
GATS Article IV:3 provides special priority for LDCs.. Crucially, GATS calls on developed countries to lift restrictions in sectors and modes of supply of export interest to developing countries. Besides being net-importers of services LDCs encounter difficulties in identifying their specific sectoral interests in the negotiations and the barriers to their exports.
The pre-requisites for a strong services sector such as basic infrastructure, telecommunications, banking and financial services, entrepreneurial, and technical skills, administrative and institutional capacities, are still under-developed in most of LDCs.
Liberalisation of mode 4 has significant implications for crucial services, i.e., health and education, which have important connections with poverty alleviation. This is important for achieving the MDGs.
Paragraph 47, of the Hong Kong Ministerial Declaration calls on Members to implement the LDC Modalities and give priority to sectors and modes of interest to LDCs. Special priority market access for LDCs is a critical first step in ensuring their beneficial participation in the international services economy. This will enable LDCs to compete in international trade in services on MFN basis (equal footing) with the rest of the WTO Membership, as provided for in the GATS.
However, there is rising concern about repatriation of profits which may result in serious balance of payments crisis for LDCs. LDC governments can make concessions such as joint venture agreements or regulate this capital outflow by imposing restrictions, like investing in the local securities market, as a measure against potential balance of payments shocks.
2.4 Trade Facilitation
Trade opening should not be seen as only a North-South issue but also as a South-South trade, which often attracts the highest duties. In fact, imports duties collected from intra-African trade are much larger compared to that collected from outside the continent. Thus, equal emphasis needs to be placed on lowering barriers between developing countries, if the full potential of the DDA is to be realised.
Trade Facilitation is another area where LDCs are to gain significantly. For a country to remain competitive in international and regional markets, transaction costs need to be reduced. A successful deal on trade facilitation will not only reduce transaction costs but also address cumbersome customs procedures and high transport costs which have had a negative impact on trade volumes. For example, the most direct flight between Niger and Chad is via France, a distance of over 4000 kms. In addition it will lead to greater regional integration, which is an important for integration and liberalisation.
At the regional level, the objective of such a trade infrastructure is to facilitate and strengthen the economic integration of member States, and especially those with economies in transition, into the global economy.
Integration of the developing economy to the global economy can be beneficial to the developing nations. Yet, regional cooperation does impact on national sovereignty. Decisions formerly taken by individual States now entails consideration at a regional level. Members of the WTO, have to align or realign national laws and policies in order to be in line with the organisation legally binding agreements.
Work is also being done in the areas of Antidumping, Subsidies, including fishery subsidies, and on Trade and Environment, with development being like a red thread through all of them. The rebalancing of the rules offers an important opportunity to the multilateral trading system.
The results of a successful conclusion of the Round cannot be exaggerated, LDCs, especially the countries in Africa, have the most to gain from it. A successful conclusion can go a long way in ensuring that their efforts unlock their economic potential and integration of global trade are realised, and they are able to achieve the MDGs. However, in order to do this the DDA has to deliver on its promise of providing improved market access for both goods and services for the less developed countries.
The contribution of trade opening is indispensable in order to achieve the MDGs. Trade facilitation is the key for achieving Goal 8, Target 12 namely through the framework for an open, rule-based, predictable and non-discriminatory trading environment. Greater Coherence at global level and at the national level between domestic policies is extremely important. Complementary policies such as sound and stable macroeconomic policy framework, good competition and investment regulations, institutions that work and good physical and human infrastructure are necessary for trade to contribute towards poverty reduction and development.
Unless trade is at the heart of your development strategies, its potential to contribute towards accelerated growth remains severely limited. After all, trade policy is one of few growth policies that one can directly influence. At the same time improved rules and enhanced market access will need to be complimented with appropriate support measures to address challenges such as the lack of trade related infrastructure and productive capacity to exploit new trade opportunities, including those that may result from the successful conclusion of the DDA. It was in recognition of these challenges that the Aid for Trade agenda was launched.
2.5 Aid for trade
Trade Related Assistance and special and Differential Treatments under the Doha Development Round are a necessity particularly in favour of the poorest countries which may not be ready to face cut-throat competition around the world resulting from market liberalisation.
The Hong Kong Mandate on “Aid for Trade” is discussed paragraph 57 of the Hong Kong Ministerial Declaration. Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade.
Aid for Trade is a valuable complement for the development benefits that will result from a successful conclusion to the DDA, particularly on market access. Appropriate mechanisms to secure additional financial resources for Aid for Trade, where appropriate are being set up through grants and concessional loans.
3.0 Conclusion
In conclusion, a successful DDA can make a huge contribution towards accelerating the growth of LDCs in achieving the MDGs. However, for all these potential gains to realise, Finance Ministers must support actively the Round. MDG 8 that calls for the “global partnership for development” is accountable for both the North and South for the situation of poverty in the world today. Collaborative effort of UN, international organizations, civil society, private business and trade unions has been viewed by the UN Secretary General, Mr. Kofi Annan, as one that can greatly benefit from the “global compact”. The core areas in this partnership are international trade, debt sustainability, and development assistance. It is widely accepted that trading out of poverty is a more potent and effective tool compared to reliance on Aid.
While trade alone cannot solve development problems, openness to trade and support for supply capacity are important elements in any rational development strategy. The trade dimension should therefore be fully incorporated, for example, in the Poverty Reduction Strategy Papers (PRSPs). Implementation of trade agreements should also be given a greater focus to optimise the contribution of trade policy to all pillars of sustainable development, including poverty reduction. Trade liberalisation should be a means to achieve the ultimate objective of reducing poverty through economic development and the proper environment.
4.0 References
5.0 List of Abbreviations
