TWN Info Service on WTO and Trade Issues (June10/02)
15 June 2010
Third World Network

Erosion of Doha mandate, with new demands on South, TDB told
Published in SUNS #6942 dated 11 June 2010

Geneva, 10 Jun (Kanaga Raja) -- While developed countries have lowered the level of ambition to reform agriculture, emerging economies are under growing pressure to open up their economies in industrial tariffs and services on a larger scale, thus eroding the developmental mandate of the Doha Round, the South African Trade and Industry Minister, Mr. Rob Davies, charged Wednesday.

Speaking on the Doha Round of trade negotiations at the Executive Session of the Trade and Development Board of the UN Conference on Trade and Development (UNCTAD), Davies expressed concern over this erosion of the Doha mandate, and the prevalence of huge imbalances in the multilateral trade rules that prejudice the interests of developing countries.

The South African Minister was speaking on the second day of the two-day forty-ninth executive session of the TDB, and said that South Africa was very concerned over these emerging demands, couched in terms of raising the ambition level of the Doha Round, while it actually meant that the larger developing countries are now being asked to pay more in terms of industrial tariffs and services, even as the developed countries are wanting to pay less in terms of agriculture.

The second day of the TDB executive session was devoted to the follow-up to the Millennium Summit and preparations for the high-level plenary meeting of the General Assembly on the Millennium Development Goals (MDGs) - new development paths.

At the morning session, development experts were of the view that the MDGs, including their poverty reduction targets, can best be accomplished by steps to empower the productive sectors of developing-country economies.

That way, the experts added, jobs can be created and domestic businesses and markets can do the heavy work of raising living standards broadly throughout the world's poorer populations. Moreover, they said, poverty reduction accomplished that way is more likely to last over the long term.

Speakers said that the approach taken so far to achieve the MDGs -- and the focus of development aid for the past 20 years -- has been skewed too far towards social and health concerns. Although vital, these components of well-being do not thrive sustainably without a firm economic underpinning, they said.

Speaking at the high-level panel session, Dr Supachai Panitchpakdi, Secretary-General of UNCTAD, said that all agree that the MDGs should be seen as one of the best efforts that the United Nations has made in the area of development strategies. "It's still the best effort at the moment." He also said that when looking at the overall MDG targets, "it is a disappointment to say that we may not be able to meet all the MDG targets by 2015."

Supachai highlighted several issues including growth and development-oriented macroeconomic framework, the need for domestic resource mobilization, and integrated treatment of economic and social policies.

"We have to have a balanced treatment of social and economic issues," he said, adding that "growth is a means towards human development". He also stressed the need to reform the international governance architecture, particularly to build coherence across trade, finance, and technology flows to support inclusive development.

Explaining the issue of growth and development-oriented macroeconomic policy, he said that macroeconomic policy should not be driven mainly by the traditional belief that "we must always be looking at price stability and we must be looking at the liberalization effort."

While liberalization efforts and price stability are important, they must be seen in the perspective of development, he said, citing in this context, the issue of domestic resource mobilization as part of macroeconomic policy.

Supachai also said that decades of hard-won experience on what makes countries wealthy show that more has to be done to harness domestic resources and ensure that economic growth delivers fairly equal benefits to domestic populations. He added that governments should strive to be "enabling States" that take active roles in their economies and steer investment and other resources towards broadening productive abilities, including increases in manufacturing. The targeting of official aid to poor nations should be adjusted. The share of aid focused on economic services and production sectors over the past 20 years has declined, he observed.

In a presentation of how South Africa has tried to grapple with its trade policy challenges, Trade and Industry Minister Rob Davies said that South Africa believes that the MDGs are a very progressive and critically important initiative by the United Nations, and the achievement of the MDGs would make a great difference in terms of the lot of poor people around the world.

While many of the MDGs are quite correctly defined in terms of improvements in a whole range of social indicators, it's very important "that we should not fall into the trap of seeing the achievement of the MDGs as just a product of improved social policy and of aid. It also requires economic development," he said, noting that it is significant that one of the MDGs - MDG No. 8 - does address the issue of trade.

Highlighting South Africa's approach to trade policy, Davies pointed to the adoption by South Africa of a new industrial policy action plan. Drawing attention to domestic structural challenges being faced by the country, he said that in South Africa, there is a massive problem of structural unemployment - oscillating between 22.8% in the years immediately before the recession up to 2008 and now at 25.2%.

"We cannot any longer continue to oscillate like that," he said, adding that there is need to put South Africa onto a growth path that reduces that structural unemployment.

He noted that under Apartheid, there was a great emphasis on capital-intensive production, often designed to protect the Apartheid economy from the effects of sanctions. Its exports were also largely resource-intensive and commodity-based. He further said that while there has been very significant improvements in social policies in South Africa (after Apartheid), there has been very high levels of income inequality and this has eroded the poverty reduction effects of those policies.

He also emphasized that trade policy must be informed by industrial policy and it must focus on upgrading employment, decent work and the increasing export of more sophisticated value-added products. Trade policy is also critically important in determining the terms of engagement in international trade negotiations, and one of the key objectives is to secure policy space to pursue development objectives.

On South Africa's trade reform experience, Davies said that the country undertook significant tariff reforms since 1994 - trade to GDP ratio has risen from below 40% in 1993 to over 60% in 2006. He also noted that in the Uruguay Round, South Africa was classified as a developed country.

He also said that South-South trade is important to South Africa. Following the recession, there are new emerging poles of economic power as well as new dynamic forces in the world economy that are located in the large emerging economies of the South, he said, pointing in this respect to China, India, Brazil and the African countries.

"That in itself means that there is an important need for us to achieve trade diversification," he said, noting that South Africa is looking to complementarity rather than destructive competition.

With respect to the Doha Round of trade negotiations, the South African Minister said that like many other developing countries, South Africa sees that there are huge imbalances in the multilateral rules that prejudice developing countries' interests.

"Our support for the Doha Round is in fact premised on the priority being to address those imbalances and inequities that disadvantage developing countries, and therefore secure a developmental outcome to the Round."

"We think we have seen the erosion of the mandate. The ambition to reform agriculture is being set at a very modest level, but there has been growing pressure on the emerging economies to open up on a larger scale with more ambition in the industrial tariffs and also in services."

This has particularly harsh implications for South Africa. Its own analysis showed that South Africa will gain very little commercially in agriculture but it will be required to take deeper and wider industrial tariff cuts than any other WTO Member. This emerges from the fact that South Africa (which had the Apartheid regime at that time) was classified as a developed country in the Uruguay Round. "We think that an outcome which does not factor that in would actually be neither fair nor balanced," he stressed.

"We are very, very concerned with the demands which are emerging now, couched in terms of raising the ambition of the Round but actually don't mean that, because there is no appetite for raising the ambition in agriculture and agricultural reform. But raising the ambition of the Round is actually meant that the larger developing countries will pay more in industrial tariffs and services."

"We're very concerned about that," he said, adding that it will have dire consequences.

Concluding his presentation, Davies said that for South Africa, its trade policy must complement industrial policy, and contribute to growth and industrial upgrading, export diversification and employment creation.

Trade and industrial policy has to make a meaningful and positive contribution to South Africa's desired developmental outcome. A strengthened developmental state is essential to make the structural changes required in the domestic economy and also lead and direct trade policy, he said.

Nila Moeloek, Special Envoy on the MDGs of the President of Indonesia, said there has been a "mixed level" of progress in the country. The first MDG halving extreme poverty -- already has been met. But challenges involved in reducing child mortality and improving maternal health have proved more difficult. The government has included strategies for meeting the MDGs in its medium- and long-term economic development plans, Prof. Moeloek said. Such plans include efforts to spur the development of small- and medium-sized firms - enterprises vital for broad economic growth and job creation, especially among the poor.

Philippe Egger, Deputy Director of the Office of the Director-General of the International Labour Office (ILO), said the ILO recommends "a re-thinking of the strategy" behind the MDGs. Countries that have made durable progress in reducing poverty have done so by rapidly increasing economic output; by spurring strong growth in labour-intensive sectors, especially agriculture and industry; and by strengthening programmes to improve such social factors as health and education, he said. A critical factor appears to be the creation of new jobs, especially jobs that result in more sophisticated products, as salaries for such work are higher. The strategy for achieving the MDGs should emphasize these elements, he added.

At an afternoon panel discussion, Martin Khor, Executive Director of the South Centre, said "the MDGs are a destination, but they're not a road map to where we want to go."

Economic growth and international factors affecting developing countries should be part of the road map, Khor added. There needs to be a mix between free markets and government participation in domestic economies to ensure sustainable rises in living standards. Stress should be placed on improving productive capacities and creating jobs.

On Tuesday, the executive session was devoted to the follow-up to the Third UN Conference on the Least Developed Countries (LDCs) and preparations for the Fourth UN Conference on the LDCs.

Speaking at the high-level segment Tuesday morning, Supachai said that in the run-up to the Fourth UN Conference on LDCs to be held in Istanbul next year, it is necessary to keep in mind that "only two countries have graduated from the LDC group in the last 40 years."

"A very dismal record... a total failure from all sides," he added.

"We have seen a failure to achieve structural progress. Even during short-term periods of growth in LDCs, those achievements were mainly derived from a small group of countries and based to a great extent on the growth in exports of energy goods. It is nothing to be proud of. It has actually got the LDCs dependent to a greater extent on certain commodities," said Supachai, adding: "If we go on the traditional development path, we'll end up where we always have. We need new development paths."

Ambassador Dinesh Bhattarai of Nepal, coordinator of the LDC group, told the session that the LDCs are "unreasonably hit" by the multiple challenges of the global crisis through no fault of their own. He called for a deliverable plan of action for the next decade to ensure that economic transformation occurs in the world's poorest countries.

The Nepalese envoy also highlighted amongst others the issues of Duty-Free Quota-Free Market Access remaining unrestricted for all LDC products, the need to prioritize agricultural development, the need to ensure smooth, predictable and increased flow of technical and financial assistance, and strengthening Aid for Trade, the Enhanced Integrated Framework and other mechanisms placed in support of LDCs to build productive capacity, to diversify the industrial and trade base, and to facilitate trade by removing supply side constraints. +