Development Co-operation Directorate (DCD-DAC)

Are WTO Members wrestling an octopus, did they set their sights too high? (DACNews Nov-Dec 2005)

 

Chiedu Osakwe*, Director of the Doha Development Agenda Special Duties Division.

The Doha Development Agenda Trade Round was launched in November 2001 and was the first trade round explicitly dedicated to development.  The entire global community bought into it.  Today the Doha Work Programme exists as an item on the agenda of virtually every multilateral institution, and is discussed at nearly every international conference.  This situation reflects both the success and the complexity of the agenda.  It was, and remains, a bold initiative for trade liberalization to better address the problems of unemployment, poverty and development.  Launching the Round was the right thing to do, even without the tragic stimulus of 9/11.  It was an act of global leadership on the part of WTO Members. The challenge now is to stay the course and not to bolt or lower ambitions. 

In doing so, two things need to be borne in mind.  First, the actual and potential development benefits from the Round.  Second, to think the unthinkable -  the costs of failure.  Recently in Arusha, at the African Union Trade Ministers meeting to prepare for the WTO Hong Kong Ministerial Meeting in December, African Ministers understood this point well.  They have advised against delays in completing the Round.  The "costs of further delay" equals and exceed the immediate "costs of protection".

The African Union Trade Ministers want development gains from the Doha Round.  Like other Least-Developed Countries and low-income and vulnerable WTO Members, African countries want to address the challenge of poverty, they want to grow, and they want to enjoy the benefits of rising incomes.

However, the issues are difficult, the devil remains in the details, and the different interpretations and understanding about the "true meaning" of the Development Round.  Some see it as exclusively about market access,  others as the "flexibility to pursue industrial and development objectives".  Some would like a more narrow focus to expand the universe of their preferential market access, others see it as "not undertaking any reduction commitments in the negotiations".  Some want more "stable systemic rules", while others want the Round to address the deficits in their trade infrastructure (through the Aid-for-Trade Initiative).  All these perspectives are legitimate.  But they need to be set squarely within the fundamental framework of the rules-based, non-discriminatory multilateral trading system.  Account needs to be taken of what the WTO can achieve within its competence, its resources, and its mandate, set out in the Marrakesh Agreement.

The true development gains from the Doha Round are not limited to any one sector or any one issue.  They are horizontal and systemic to the entire negotiating areas of the Round.  Nonetheless, it is a fact that agriculture is the motor, driving the negotiations.  Most of the poor are employed or unemployed in the sector of agriculture.  Within the agriculture negotiations, cotton is of special significance for poverty alleviation for farmers in West and Central Africa, for example. But it is also true that significant development yields in the Doha Round will emerge from ambitious liberalization in those sectors of export interests to developing countries in Non-Agricultural Market Access, and Services Trade – the most dynamic and fastest area of growth in the world economy.  Trade Facilitation is the area of the negotiations that holds the promise of huge gains because it is the ramp, connecting multilateral trade liberalization to the less discussed, but no less important, piece of the puzzle – domestic economic reform.

Domestic reform is vital. Trade needs to be more effectively mainstreamed into strategies for poverty reduction and plans for national economic development.  This is the basis for growth.  Stable macroeconomic policies are the essential starting point.  Pro-competitive and market-based investment and other regulatory policies are fundamental requirements.  Many countries now acknowledge the danger of corruption, and are dealing with it frontally.  Corruption makes development impossible.  The rule of law and domestic security are critical.  Stable, clean and transparent governance makes the difference.  Education and capacity building produce the expertise essential for first rank competition, both domestically and in the global economy.  On top of that, developing countries, particularly the low-income ones, need to learn to make better use of multilateral institutions.  Apprehension and diffidence of the International Financial Institutions are unjustified.  Without these domestic reforms, even the maximum attainment of the objectives of the Doha Trade Round will deliver zero development gains for developing country and other Members.

The Aid-for-Trade Mechanism was the missing component from previous trade Rounds.  When operational, it will enable WTO Members who will not immediately benefit from the opportunities of market opening, to address the challenges of trade infrastructure and other supply-side constraints.  Some of the grievances arising from previous trade rounds for low-income Members were rooted in the disappointment that, even with more open markets, they either had nothing to sell or nothing to sell competitively.  Frequently, there has been the confusion of "natural advantage" in a product with "comparative advantage" in the same product.  A "natural advantage" in a product does not necessarily translate into "comparative advantage" in the same product in international trade.  Beyond the supply-side, Aid-for-Trade should also assist WTO Members to cope with adjustment costs such as preference erosion, temporary labour dislocation from trade reform, tariff revenue losses, and balance of payment pressures that result from trade liberalization.  On Aid-for-Trade, the leadership of the World Bank is crucial.

Unforeseen at the launch in Doha, the negotiations have triggered a dialogue on the broader issues of poverty reduction and development policy;  what works, what doesn't.  The objectives of the round are now linked to a host of related issues.  Did we over-reach at Doha?  Did we set our sights too high?  Should we now "re-calibrate", lowering our sights and moderating our ambitions?  Evidently not.  To do so would be a monumental mistake.  It would set the world back:  global economic growth would falter; poverty would increase; the conflicts that inevitably arise in economies that do not grow, would escalate.  Such an unfortunate turn would impact negatively on global growth, peace and security.

The negotiations are complex – the most complex ever, and certainly at a critical stage.  Hope and optimism lie in considering the gains that have been made so far, and in the proposals (albeit conditional) that are now being made for the reduction of trade-distorting domestic support, significant tariff cuts, and the elimination of export subsidies in agriculture.  Is it conceivable that Members would decide to throw all the current gains away, because of continuing unresolved differences in several areas?  This is doubtful.  The optimism for the Hong Kong Ministerial and a successful completion of the Doha Round is that Members will in the end make the right choices.  Almost completely, Members have seen the light that will shine from a successfully completed Doha Round.  Sometimes acceleration is required, if the road is straight and clear, but sometimes also a slow-down is required, if there are tight -bends in the road to be navigated.  On the road to the Hong Kong Ministerial, progress may be best made in applying the principle embedded in the idiom:  piano piano, si va lontano (it is slowly, slowly, that we make progress).  But such progress requires strong political leadership.

WTO Director-General Pascal Lamy (one of the architects of the Round) has pointed to the development benefits that arise from trade opening.  He has made the case that all leadership should make, namely that there are significant potential benefits from trade opening, but that there are also short-term adjustment costs that arise from the reallocation of resources from less competitive sectors to the more dynamic areas of growth in any process of long-term reform.  This call should be picked up with greater conviction at national levels.  Leaders need to present the facts and argue the case in ways that count.  Unfortunately, in many quarters the orientation remains mercantilist, protection is still an unchecked challenge, and sight has been lost of the bigger picture. This is why the ongoing negotiations are vital.  It is the compass that points in the right direction. 

(*) Chiedu Osakwe is currently Director of the Doha Development Agenda Special Duties Division in the WTO Secretariat.  He had previously held the positions of Director of the Textiles Division, Director of the Technical Cooperation Division, Head of the Secretariat Working Group on the Integrated Framework and LDCs Issues, and Secretary to the Committee on Trade and Development.  The views in this piece do not necessarily represent the views of the WTO Secretariat or of its Membership, either individually or collectively.

 

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