Africa and seattle World Trade Organization (WTO) ministerial conference: an ECA perspective

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Economic Commission for Africa

Africa and the Seattle World Trade Organization (WTO) Ministerial Conference

An ECA Perspective

By

Dr. K.Y. Amoako

Executive Secretary of the Economic Commission for Africa (ECA)

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I. Introduction

The Uruguay Round oLmultilateral trade negotiations launched in September 12986)in Punta del Este, Uruguay under the aegis of the GeneralAgreement on Tariffs and Trade (GATT) and formally concluded at the Ministerial Meeting held in April 1994 in Marrakesh, Morocco have had a tremendous impact in shaping the form and content of the global trading system as well as structures of the world economy. These negotiations culminated in the signing of the Marrakech Agreement and the "Final Act" which embodies the results of these negotiations and established the World Trade Organization as a successor to the General Agreement on Tariffs and Trade.

It is generally acknowledged that trade negotiations undertaken under the Uruguay Round and the World Trade Organization (WTO) have resulted in a significant liberalisation of world trade; improved framework of multilateral rules governing international trade; and further improvements in marketaccess to foreign markets for both goods and services. A number of developments during the later part of the Uruguay Round negotiations had a positive impact on both the negotiating process and its final results. These include: a shift in the trade policies of developing countries from import substitution to policies encouraging export-oriented growth; the breakdown of communism and the end of the Cold War; and the adoption of market-oriented reforms in many countries, developed and developing alike.

The end product of these developments has been a rapid expansion of world trade in goods and services, rising from US$

4.3 trillion in 1990 to US$ 6.7 trillion in 1998. Furthermore, trade volume growth (6.7 percent per annum) has continued to outpace significantly the growth of real Gross Domestic Product (GDP)(about 3 percent per year). It is worth noting that openness of national economies has continued to increase the ratio of global trade in goods and services to GOP, which has risen from 19 percent in 1990 to 23 percent in 1998, and for developing countries the ratio now stands at 30 percent.

Developing and newly industrialising countries appear to have benefited significantly from expansion of world trade and have achieved the fastest expansion of trade in the 1990s, with an average of over 10 percent. Their share in world trade

increased from 23 percent in 1990 to 27 percent by 1998.

Although the share of industrial countries in world trade declined somewhat from 72 percent in 1990 to 68 percent in 1998, nonetheless, they are still predominant in world trade in terms of absolute trade volumes and values". Furthermore, the indicated gains by developing countries from expansion of world trade conceal significant divergences among regions, groups of countries and individual countries. Many developing countries, especially Least Developed Countries, have been marginalized by these developments. For many African countries, globalisation and liberalisation has posed serious challenges and adjustment to the momentum of developments generated by the process has proven difficult.

It is also important to note that changes in the geographic and product composition of trade reflect to a large extent policy trends during the 1990s. Accordingly, the developing country regions that appear to have experienced fastest growth in trade (Asia and the Western Hemisphere) are also the ones that have implemented the most substantial trade reforms. At the same time, both developed and developing countries engaged in regional groupings have increased regional orientation of trade.

At a sectoral level, trade in services has grown slightly faster than trade in goods and accordingly countries that have been able to take advantage of liberalisation of trade in services have benefited. Trade in manufactures has continued its long- term historical trend of growing faster than trade in agricultural and mining products, both in value and in volume terms. The slower growth of trade in agricultural products can partly be attributed to the "restrictiveness of the trade regimes" that apply in this sector. World prices of traded agricultural and mining products have lagged behind those of manufactures, causing terms of trade losses for countries, particularly the Least Developed Countries (LDCs), that specialise in them.

African countries generally have been adversely impacted by the slower growth of trade in agricultural products; declining terms of trade due primarily to falling commodity prices; and restrictive trade regimes prevailing in trade in agricultural products. Furthermore, African countries have not been major beneficiaries from both the expansion of trade in manufactures and services. The weak industrial and technological bases in many of these countries have been major obstacles for these

1 International Monetary Fund; World Economic Outllook, 1999, "Trends iand Issues in the Global Trading System ^»•

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countries to take advantage of the opportunities generated by liberalisation of trade in these sectors. Broadly, therefore, African countries have been among major losers in this respect.

Most African countries have been adversely affected by these developments, with serious consequences on their development process and living standards. Accordingly, the benefits from globalisation and liberalisation of world trade have been unevenly distributed, resulting in many countries being left behind. The negotiations at the Seattle WTO Ministerial Conference and the new round of multilateral negotiations would need to address the imbalances between benefits and obligations among members of the WTO. As Professor Joseph Stiglitz, Senior Vice President and Chief Economist of the World Bank correctly observes: .

"Basic notion of equity and sense offair play require that the next round of trade negotiations be more balanced- that is, more reflective of the interests and concerns of the developing world- than has been the case in the earlier Rounds. ... Unless we achieve greater balance, we will place at peril the success of future trade negotiations. The stakes are high. There is a growing gap between the developed and the less developed countries. The international community is doing little to narrow this gap; even as the ability of developing countries to use aid effectively has increased.^"2

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2 Joseph E. Stiglitz: Two Principles for the Next Round, Or, How to Bring Developing Countries in from the Cold, 21 September 1999, Geneva, Switzerland.

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The success of the Seattle WTO Ministerial Conference and the new multilateral trade negotiations to be launched early next year will, therefore, depend on the extent to which the concerns of developing countries are heeded and taken into consideration.

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IThis brief statement looks at the challenges that lie ahead for Africa as we approach the new millenium and the Seattle WTO Ministerial Conference as well as the new round of negotiations expected to be launched early next year. The main focus of this brief is on: implementation of the Uruguay Round commitments: challenges for Africa;

integrating agriculture in the Uruguay Round and the WTO:

what have been the benefits to Africa, if any? ; industrial policy in Africa and the WTO multilateral trading system;

and the new Round of multilateral trade negotiations under the WTO framework and Africa: from a defensive to a pro- active role for the continent. THIS PAR TO BE RE-WRITTEN ON THE ES'S RETURN]

II. Implementation of the Uruguay Round Commitments:

Challenges for Africa

Mixed progress in the implementation of the VRAs and the WT rules and regulations will likely be among the highly debated issues at the Seattle WTO Ministerial Conference and the new round of multilateral trade negotiations. Many developed and developing countries alike are dissatisfied with the implementation of various provisions of the VRAs.

4 Mr. Mike Moore, Director General of the WTO : Challenges for the Global Trading System in the New millenium, Press Release, Speech to the Council on Foreign Relations of the United States of America, 28 September 1999, Washington D.C .

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The implementation of the obligations of developed countries, viewed from an African perspective, meant among others reduction in tariff for industrial and agricultural goods and provision of technical assistance to developing and least developed countries. If for industrial goods substantial liberalization has been accomplished, implementation in the other areas has been less than satisfactory.

The industrial countries at the Uruguay Round reduced the level of protection on a smaller percentage of their agricultural imports than of their industrial imports, and tariffs on agricultural products remain significantly higher than those on industrial goods.

Furthermore, "dirty tariffication" became the order of the day as developed countries tried to minimise the cost to their economies of liberalisation of agricultural trade.

Several African countries are also important traders of clothing and textiles, an area where less progress has been achieved since the entry into force of the URAs. While in the Agreement on clothing and Textiles (ATC) countries agreed to phase-out the Multi-Fibre Agreement and progressively liberalise trade in this sector, the process of implementation has been disappointing. Under the ATe, industrial countries committed themselves to liberalisation, but with delayed delivery. This allows industrial countries to delay almost all of the removal of the MFA-sanctioned quantitative restrictions until 2005.

Furthermore, the reduction of tariff in industrial countries has been accompanied by increased used of indirect protection measure such as anti-dumping. Implementation of WTO provisions in areas such as customs valuation, intellectual property rights (TRIPs) and Sanitary and phytosanitary measures (SPS) require the creation of adequate infrastructure and relevant institutions. All these require investment for the purchase and installation of equipment and procedures, the training of staff, etc, resources which African countries do not have.

The obligations on African countries have also not been fulfilled.

Implementation was low because most African countries faced considerable administrative, institutional and financial problems at several levels. First was the lack of ownership of the rules and provisions contained in the Agreements. "Ownership" of the rules is an important element in the functioning of any system of rules, particularly important in systems such as the WTO, where the central organisation has limited power to enforce. Building among members a solid sense of ownership of such rules begins with participation in establishing them, with effective participation in the negotiations in which the rules are agreed. In the context of the WTO, many African

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countries feel no sense of "ownership" 0 the rules and regulations of the WTO, mainly because they did not effectively participate in their establishment.

A study by the African Economic Research Consortium (AERC) found that participation in the rules-making exercises of the Uruguay Round by sub-Saharan African countries was minimal. These countries lacked the capacity to engage substantively on the wide range of issues that the Uruguay Round included. The AERC identified weaknesses of these countries at three levels: the Geneva- based delegations of these countries were often small and lacked person with technical backgrounds needed to participate effectively;

links between the WTO delegations and the governments at home were not well developed; and minimal involvement of stakeholders, such as business community and civil society. The implementation of the URAs led to enhanced market access for African products. Yet there has been little expansion in African trade because of weak capacity to produce sufficiently and consistent with international standards.

Secondly, because of he complexity of the entire system African countries made commitments beyond their administrative an institutional capacity. Accordingly they have been unable to exploit opportunities' offered by the WTO system. Other difficulties are related to sometime conflicting policy recommendations arising from the WTO and other institutions involved in policy formulation and implementation, notably the Bretton Woods Institutions.

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A key and often-repeated objective of the WTO is to ensure that all members share equitably in the benefits of a rule-based multilateral trading system. In addition, the Organisation's claim to universality rests on the full integration of all countries into the global trading system, irrespective of their different levels of development.

For the developing countries and the least developed countries, current thinking on development suggests that their enhanced integration into the global economy is an important mechanism for their rapid and sustainable economic growth and development. The Seattle Ministerial Conference and the new round of multilateral negotiations would need to effectively address issues of implementation of the Uruguay Round of multilateral trade negotiations and the effective participation of developing countries in the negotiations. This would mean paying particular attention to a progressive elimination of productive and institutional constraints to their participation, ensure coherence between WTO and other institutions as well as Africa's development objectives.

III. A Proactive Approach in the New Round of Multilateral Trade Negotiations

The Third WTO Ministerial Conference to be held in Seattle will most likely usher in a new round of multilateral trade negotiations.

Basic notions of equity and a sense of fair play dictate that the next round of trade negotiations be more balanced- that is, more reflective of the interests and concerns of developing countries- than has been the case in earlier Rounds. The negotiations must take in not only those sectors in which developed countries have a comparative advantage, like financial services, but also those in which developing countries have a special interest, like agriculture and construction services.

Furthermore, trade liberalisation must take into account the market disadvantage that developing countries have in participating meaningfully in the WTO negotiations. It must acknowledge the

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differences in circumstances between developed and developing countries and the fact that developing countries often face greater volatility, that opening to trade in fact contributes to that volatility, that developing countries have weak or non-existent safety nets, and that high unemployment is a persistent problem in many of these countries.

It should also be accepted that developed and developing countries play on a "playing field" that is not level. The task of the new multilateral trade negotiations has to be first and foremost to level the playing field for developed and developing countries alike. The challenge that faces Africa at Seattle and the follow-up multilateral negotiations is whether the continent will be able to extract adequate concessions from developed countries, and others, that will allow its economies to achieve sustainable development with poverty reduction.

Each African delegation is too small to address the entire negotiation agenda on its own. Contrary to past practices we confront the upcoming negotiations better prepared than in the past. For example in recent months, at the instigation of the Africa group in Geneva the ECA, OAU and ADB organized several meetings aiming at reaching a consensus on an African position to the WTO approved by the council of African Trade Ministers in Algiers in September 1999.

The conclusion 0 this exercise suggest that African countries approach the Seattle WTO Ministerial Conference and the anticipated new round of multilateral negotiations to be launched with an "open mind". Overall the negotiations in Seattle, and beyond, could be conducted stressing the willingness of African countries to open their markets, the difficulties for doing so due to weak capacity (human, financial, institutional, etc).

The idea of a developmental round should be pursued vigorously and should mean that discussions of implementation should be party of the negotiations, that capacity building/technical assistance be included in all the agreements. This could mean systematic inclusion of relevant special provisions in all agreements for developing and Least Developed Countries. The Special and Differential Treatment should be linked to the progressive elimination of supply and other constraints to full participation by African and other developing countries.

The basic and fundamental negotiating strategy for African countries should emphasise a number of important points. Firstly, there is need to point out that the current multilateral trading system is no balanced and fair for most vulnerable economies. Basic notions of equity and a sense of fair play dictate that the next round of trade negotiations be more balanced, that is more reflective of the interests

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and concerns of developing countries. Secondly, the negotiations must acknowledge that implementation of the Uruguay Round and WTO Agreements by developing countries has been rather slow due to weak human, financial and institutional capacities. There is need for the negotiations to address these issues. Technical assistance to developing countries should therefore be built-in all WTO Agreements.

Finally, the developmental dimensions will need to be at the center of negotiating strategies of

African countries.

Broadly, therefore the negotiating strategy for African countries could include the following:

Enhanced market access for African exports, with duty-free and

Quota-free market access for all products originating in Least Developed Countries (LDCs). The negotiations should take into account limitations in market access due to "contingent" protection mechanisms, such as Sanitary and Phytosanitary measures, and Technical Barriers to Trade;

_0_Transitional periods for the implementation of all WTO Agreements, should be reviewed and re-determined taking into account the capacity and availability of resources to implement those agreements;

_0_The negotiations shall ensure that Agreements are commensurate with African capacities to implement taking into consideration in the "agreed texts" African countries efforts at economic an financial reforms as well as diversification of their production and export bases;

° Likewise these Agreements shall ensure there is consistency and coherence with other policy commitments and that these do not conflict with development goals of African countries;

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Delegates shall ensure that negotiations aim to help African Countries to address structural constraints and stimulate the Development of institutional, human resources and physical Infrastructure. Accordingly an adequate capacity building and

Technical assistance components shall be built-in all WTO Agreements;

.~Africancountries need to build strategic partnerships and for Coalitions among themselves, or with other developing

Countries, in order to strengthen their negotiating position.

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This approach would indeed strengthen the position of African countries in the Seattle WTO ministerial Conference and the multilateral trade negotiations that are to follow, if agreement is reached to launch a new round of negotiations. Regional groupings have also become important rallying points for these negotiations.

Accordingly, Africa will need to utilise its existing regional economic groupings to achieve similar economies of scale in these negotiations.

The ECA is ready to assist within its mandate.

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