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    The Challenges of Doha, Hong Kong and Beyond

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2005

    Photo: photos.com

    While there are advantages and disadvantages for developing countries in the Doha round of trade talks, many are trying to make the global trading system work for them.

    The Doha round of the World Trade Organization (WTO) is heading towards a critical Ministerial Meeting in Hong Kong in December. Many thorny issues remain to be resolved and some sceptics have voiced doubts that the negotiations can be wrapped up by the end of 2006, as scheduled. Many developing countries would like to ensure that an agreement does not leave their economies and their industrial and agricultural producers overly exposed to powerful competition from the rich countries and their multinational companies, nor undermines the preferential access to the markets of industrialized nations that some have enjoyed. Nevertheless, they have been participating actively in the talks. During a special session at ITC's annual meeting, the Joint Advisory Group (JAG), in April 2005, government officials, trade negotiators and private sector representatives from Africa, Asia and Latin America voiced their concerns and their ideas on how ITC can help ensure that a Doha round agreement meets its prime declared aim: boosting development.

    Countries recognize liberalization benefits

    Despite slow progress during the first nine months of 2005, developing country officials have been vociferous in their commitment to the round and the WTO.

    "Let me reiterate my deep faith in multilateralism as it applies to the trading system," Rwanda's President Paul Kagame told a symposium at the WTO in April. "In Africa," he said, "we recognize that trade and investment, and not aid, are pillars to development. […] We know that increased international trade leads to optimal resource allocation, enhances efficiency and facilitates the transfer of knowledge and know-how."

    The Indian Finance Minister P. Chidambaram was equally forthright in a speech in Dusseldorf, Germany, in June. "We believe that India needs the WTO more than the WTO needs India," he said. Writing in the International Monetary Fund's journal, Finance & Development, Sok Siphana, Cambodia's Vice Minister for Commerce (who from October 2005 is a Director at ITC) said that his country "views its participation in the multilateral trading system as a means of integrating into the global economy and maximizing the benefits from international trade".

    These leaders - and the dozens of others from the developing world who express similar views - are, of course, pragmatists rather than free-trade idealists. "Frankly speaking," S.B.C. Servansing, Ambassador of Mauritius to the WTO, told the JAG session, "my country has little to gain and a lot to lose potentially from the current multilateral trade talks. […] So why should we participate? I think the answer lies in understanding that today one has no choice but to be part of the global economy. The way to survive is to embrace change while at the same time trying to actively influence it."

    Many developing countries feel they emerged from the 1986-93 Uruguay Round with few or no benefits in return for opening up their goods and services markets. Where, then, do they fear they can lose out again this time? And what do they hope to gain from the Doha negotiations?

    Agriculture, industrial goods at focus of talks

    In Doha, to win agreement from their trading partners in Africa, Asia and Latin America to start the negotiations, the United States and the European Union had to agree to put their varying forms of farm subsidies on the table. However, the talks have yet to produce a clear vision of how these will be dismantled. Developing countries, who have wielded a collective diplomatic clout in the Doha negotiations far beyond anything they managed in the Uruguay Round, say their elimination would bring their own agricultural producers far more in terms of extra revenue than any aid programmes. Developing countries would gain from increased exports and more sales on home markets, where local farmers at present have to compete with subsidized imports from North America and Europe. Without a radical change, they say, many of them will slide further into poverty, and they insist that without a meaningful farm package there can be no overall agreement.

    Next on their list is non-agricultural market access or NAMA - lowering tariffs on industrial and consumer goods. Developing countries are seeking an end, or at least an easing, of the practice of tariff escalation, by which developed trading nations raise duties on processed goods whose components they allow in almost duty free as raw materials. This, and the linked practice of tariff peaks, ensures that poorer countries are locked into remaining producers of basic commodities. However, in return for change, industrialized powers want developing countries to lower promptly the tariffs they impose on finished goods. Poorer countries argue that they can only agree to do this over an extended period, otherwise their own manufacturers could be put out of business by foreign competitors before they have time to build up the expertise to produce goods that they can export successfully.

    In the service negotiations, there is a similar story. Only areas that WTO members agree to open up to foreign providers are on the table, but many poorer developing countries say they feel under pressure to negotiate on public services, such as electricity, water supplies, health services and even education where major international companies are keen to invest, in order to win concessions in agriculture and NAMA.


    ITC organized a special session to discuss the challenges developing countries face in the the Doha round of trade talks, during its annual meeting in April.
    Photo: Photo Bianco


    Preference erosion fears

    A further complication is "preference erosion", or the steady loss by many developing countries of special access for goods ranging from fruit and vegetables to textiles and footwear, to major Northern markets. Preferential agreements, combined with duty free import quotas, have allowed many smaller nations to build up new industries - textiles and clothing in particular - over the past two decades. But with the entry into force from January 2005 of the WTO's Agreement on Textiles and Clothing, the quotas were abolished and a new and powerful player, China, came into the global market, sharpening fears that the value of preferences will steadily diminish.

    ITC helps improve competitiveness

    A June report from the United Nations Conference on Trade and Development (UNCTAD) declared: "Countries seeking to be preferred exporters will have to improve their competitiveness and capabilities." That message was central to the discussion at the JAG special meeting, held under the theme: "Doha, Hong Kong and Beyond: Challenges and Opportunities for Business."

    "Market access is essential, but it is not enough," ITC's Executive Director J. Denis Belisle told delegates. "It goes hand in hand with producing competitive goods and services and having the ability to export them. Countries need competitive firms, capable of drive and imagination." Session chairman Francisco Lima, Ambassador of El Salvador to the WTO, drove that idea home. Even if developing countries obtain all the market access they are seeking, he said, their firms will still have to ensure that they understand international markets and can operate in them efficiently.

    Since the mid-1990s, ITC has focused on creating programmes and tools that help small and medium-sized firms in developing countries to involve themselves in this effort. Initially, it set about building business networks for sharing know-how and experience, and then moved on to shaping online tools allowing producers to study their own and others' export markets and identify where new opportunities lay. It also launched training programmes for government trade officials as well as private business people, and worked through a "Business for Development" agenda to encourage greater cooperation between the public and private sectors in preparing trade negotiating positions.

    The approach has helped bring about closer consultation between governments and their business communities as the Doha round has unfolded. However, as the JAG session showed, there is still much to do.

    For Ambassador Servansing, his country's biggest challenge had been assessing its own trade performance and the conditions of access to foreign markets that its products enjoyed in relation to its competitors. This exercise, he told the JAG, was even more vital given the erosion of the preferences that had allowed it to build a strong export-oriented clothing industry and the prospect that a Doha agreement would accelerate this process. Working with ITC's Trade Map and Market Access Map, Mauritian government and business experts developed an "index of vulnerability", which enabled them to identify markets where their exports are most under threat and how the challenge could be met. The index has also been shared with other countries in the Africa, Caribbean and Pacific group.

    Mohammed Benjelloun, Head of the WTO Department at Morocco's Ministry of Foreign Trade, said that through Market Access Map, his country's negotiators and the business community had been able to identify products - some on its current export list and others not yet marketed abroad - that had potential for expansion if duties were lowered. "This enabled us to make sure that we included everything that could be of interest to us in our 'shopping basket' for the Doha round," Mr Benjelloun told the JAG.

    Building trade capacity

    What were the overall messages from the JAG session? Certainly, delegates recognized that developing countries working with ITC had already gained knowledge and experience which were proving invaluable in the current negotiations. But suggestions also emerged to improve and expand ITC's work:

    • Preparing assessments of the impact of likely agreements on individual production sectors in ITC partner countries, and on their national economies as a whole.
    • Upgrading ITC's electronic analytical tools through widening their geographical coverage and content, including providing comparative country-by-country information on non-tariff barriers.
    • Helping textile and clothing exporters in poorer countries to become more competitive suppliers and perhaps identifying niche markets they could serve.

    All of these would fit into ITC's established work programme, and can take it and its partners in the developing world beyond a Doha round agreement into the new global trading environment it will create.

    "Building a national capacity to trade is the only way, in our view, to achieve meaningful and lasting results," Mr Bélisle told the JAG. "National capacity building has to become an obsession in everything we do."

    Robert J. Evans is a freelance writer and media consultant based in the Geneva region. He specializes in trade and WTO issues
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