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Is there advantage for LDCs in new round?

by Chakravarthi Raghavan

Geneva, 17 May 2001 -- While most Least Developed Countries (LDCs) were just beginning to understand the real issues of the World Trade Organization and its agreements, the developed countries with a coordinated position were advocating a new trade round, but what is in it for the LDCs, asked the Tanzanian Minister for Trade and Industry, Mr. Iddi Simba, in Brussels Thursday at the 3rd UN Conference on Least Developed Countries.

Simba who was co-chair at an interactive session of the conference on “International Trade, Commodities, Services/Tourism” posed the question at the session, but got no real answers, from the panellists who were effusive in advocating and pushing for a new Round - - WTO Director-General Mike Moore and the EC Trade Commissioner, Pascal Lamy.

At the end of the session (webcast on the internet), Simba said it seemed that while the developed world had a coordinated position visavis another trade round, the LDCs were more open-minded, but not coordinated.

His own impression, from the interventions at the session and conversations in the corridors, said Simba, was that the positions ranged from going into one more round and “throwing into it all the failures of the past” in the hope that there would be “some kind of magic this time around” to resolve the problems or not going along with a new round. “Perhaps the existing machinery might collapse or not produce the kind of results hoped for,” he added.

In summing up the session and in providing his own perceptions, UNCTAD Secretary-General, Mr. Rubens Ricupero, seemed more sceptic and suggested that the developing countries had not really benefited from past trade rounds. There was “a critical need, said Ricupero, for a fair, balanced rules-based multiliateral trading system, which did not exist as yet.” A new trade round, he said, was welcome only “if it redressed the current imbalances in the system.”

The UNCTAD head added: “We need to build confidence, trust and justice in trade.... If that is not allowed to happen, there would be no peace.”

The Director-General of the WTO, Mr. Mike Moore told the session that the aim of the 4th WTO Ministerial at Doha in November was “to launch a new set of trade negotiations that were wider in scope and would take into account the needs of developing countries” and asked the developing world to use their power of veto they had at the WTO, “not to stop a negotiations, but to start one.”

Interestingly, even as Mr. Moore was announcing at Brussels that the aim of the Doha meet was the launch of a new round, at the informal consultations in Geneva on the Doha preparatory process, led by the General Council chair, Mr, Stuart Harbinson of Hong Kong China, it was clear that even some of the supporters of a new round were cautioning against the launch of a new round being made the objective or aim.

In opening the session, Simba said that the LDCs had seen many trade rounds before, and had even been part and parcel of them, and yet their position in all aspects of development was worsening. Over the past two decades, the UN had convened two conferences on LDCs, to agree on the means of facilitating the consequences of globalization through multiliateral agreements. In the meantime, the number of LDCs had grown. Even as the international community was stumbling to implement the decisions of the second LDC Conference (in Paris in 1991), the World Trade Organization (WTO) had come into being, giving new momentum to the twin forces of globalization and liberalization.

While most LDCs were just beginning to understand the real issues, he continued, the developed world seemed to be advocating a new round of multilateral trade negotiations. Poor countries were asking if the world was ready for that and, if not, what the alternative was.

Even if the countries went along with the new round, what was in it for the LDCs? If any new arrangements were adopted, what were the implications for the LDCs at this stage?

Had the implementation of trade arrangements created a new crisis? asked Simba.

A in-flow of cheap goods from outside had weakened domestic markets, and the competitiveness of domestic industries was weakening. Could the multilateral trading system intervene to help, he asked?

The LDCs were also still struggling with lengthy negotiations on regional cooperation. Unfortunately, progress had been slow. He was aware that, despite the recent expansion of trade flows, the share LDCs had in that trade was shrinking, because they often depended on single commodities. Their capacities were also restrained by the fluctuating prices on world markets.

As an example, the Tanzanian minister cited his country’s fish exports to the European Union, which were subject to strict standards and regulations. Not many LDCs had in place the necessary data bases, which were needed for participation in the European markets.

Assistance from international organizations, however, including the United Nations Industrial Development Organization (UNIDO), had made a big difference for his country. With assistance, LDCs could enter the world markets. While in Europe, the avocado was treated as an exotic fruit, in his country it was considered a gift of nature to be enjoyed by birds and people. That situation could be turned to the advantage of poor countries.

It was also necessary to further develop the service industry and tourism in the LDCs, he said. At present, the balance was heavily skewed, in favour of countries from which tourists came—and not of those they visited. It was important to see what could be done to address that situation.

Mr. Poul Nielson the EC’s Commissioner for Development and Humanitarian Aid, and co-Chair, said that in many LDCs there was a perception that the Uruguay Round Agreements had not been implemented. He had a number of questions. First, “how do we bridge the negotiation gap between the strongly articulated trading policies of the major trading blocks and the scattered coalitions of developing countries”? How could LDCs become participants in the WTO instead of spectators?  How could improved market access be turned into real trade flows? Also, how did one promote more investment in LDCs, when it was known that investments and trade went hand in hand?

Beyond commodities and agricultural raw exports, did LDCs produce anything that developed countries cared to buy? he asked. What were the priorities that LDCs should give to world trade and regional trade, respectively? He said the question of the fluctuation of commodity markets should also be a central theme in the discussions. Since many commodity prices were in a permanent decline, except petroleum, was reliance on commodity trade a viable development strategy?  Could it work without being complemented by an organic growth in traditional agricultural production? Was technological leapfrogging a realistic strategy for LDCs?

Tourism, said Nielson, was risky business, and bringing the wealthy to sunny beaches was a volatile venture. Tour operators from the North enjoyed great flexibility in shifting among preferred destinations in the South. Such shifting was necessary, in what was almost a fashion industry. How did LDCs choose between targeting high-priced tourism, which offered fewer visitors, or going after the cheaper mass tourism product, with all the negative environmental consequences? LDCs needed strong regulatory frameworks to strike a balance between preserving and, at the same time, allowing access to a vulnerable natural environment or wildlife habitat. Maybe some lessons could be drawn from Bhutan, which had a well defined tourism policy.

Mike Moore said this was a crucial year for the multilateral trading system. In November, there would be a fourth WTO Ministerial Conference, in Doha, Qatar, whose aim was to launch a new set of multilateral trade negotiations that were wider in scope and would take into account the needs of developing countries, which now comprised four out of five of WTO’s membership. The WTO was not the GATT, and no new round could, therefore, start or conclude without the interests of the developing countries occupying a key slot. The interests of the developing countries was at the centre of the WTO agenda., he claimed.

The WTO head said that if it was felt that the status quo was unjust, that point should be argued, especially when one considered that the status quo was just yesterday’s compromise. The WTO operated on the basis of consensus, and all the members of the power of veto. . “All of our members sit on our council and all have the power of the veto”, he said. Moore urged the LDCs and developing countries to use that power “not to stop a negotiation, but to start one”.  Unless the LDCs and developing countries had confidence that their issues were being addressed in a meaningful way, no new round would conclude, he added.

EC Trade Commissioner Pascal Lamy said the policy in development strategy could be an ongoing discussion, but that was not what the participants had come to discuss. Trade was not necessarily a case where one side won and the other lost, Lamy argued that said it was important that the LDCs open their markets in a controlled fashion. When organizing their trade policy, the developed countries needed to put their money where their mouth was. Also, a strong multilateral system was needed to determine a set of ground rules to address the current imbalances.

Lamy said that the EC’s “All but Arms” market access initiative, to provide duty- and quota-free access for all products originating in the LDCs, with the exception of arms, had become possible largely due to the Conference. Lamy agreed that the concerns of the LDCs regarding standards and rules needed to be looked into. The EU, he said, was prepared to join multilateral initiatives not to use anti-dumping measures against the LDCs. Lamy also spoke of the need to ensure the LDCs better access to essential pharmaceuticals, in order to combat communicable diseases.

Ould Nany, Minister for Economic Affairs and Development of Mauritania, said that it was necessary to realize the difference in the development levels of various countries and to increase the well- being of the LDCs. Sometimes those countries had little to offer for world markets, and assistance from industrialized countries could lead to significant results.

One thing was very clear: it was very difficult to overcome the technical and administrative policy barriers that stood in the way of LDCs, but it was really important to do it, he said. Another important element was the need for the developed world to bring the levels of official development assistance (ODA) back to reasonable levels. The conditions of trade for the LDCs were not acceptable in their present state. The LDCs themselves had been doing everything possible to improve their capacity. Now, multilateral organizations needed to take measures to allow the LDCs to participate in world trade.

A successful conclusion of new trade negotiations, Nany said, was possible if the negotiations were driven not by narrow interests, but by a broader development perspective. The LDCs had much to gain from a new round of negotiations. As the weakest, they had a special interest in the rule-driven system, provided those rules took their interests into account.

In his concluding remarks, Mr. Simba said he could not help but draw the conclusion, after the number of interventions today and after various conversations in corridors, that there was a coordinated position on behalf of the developed world vis-=85-vis another trade round. The LDCs, however, were more open-minded and were not coordinated. He had seen many rounds before, and had even been part and parcel of them. Yet, the position of LDCs in all aspects of their development was worsening. Could one draw a distinction between the trade rounds and what happened in the poor countries?

He said the impression he was getting was that the range of position ran from going for one more round and throwing into it all the failures of the past, in the hope that there would be some kind of magic this time around to resolve problems, or not going along with it. That was just an impression. Perhaps the existing negotiating machinery might collapse, or not produce the kind of results hoped for.

In international trade, he said the developing countries were not as homogeneous a group as the Western European States, the United States or the rest of the developed world. That made it difficult for LDCs to take advantage of opportunities presented by market access. – SUNS4899

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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