Trade and development in 2005: EU, WTO, G8

An action plan for trade and development in 2005: the EU, the WTO, the G8

In a speech at the London School of Economics on 4 February 2005 the European Commissioner for Trade Peter Mandelson set out a plan of concrete actions for the EU, the WTO and the G8 that could put trade policy at the service of development in 2005. Below is an extract from his speech outlining those priorities.

Priorities for the Doha Round of trade talks and the Hong Kong Ministerial in December 2005:

Delivering development through market access.

Uppermost in my mind, we have an opportunity in the Round to consolidate a major reform of the CAP and to make great strides towards open markets and away from trade distorting subsidies. This is the most concrete contribution that developed and developing countries together can make. Progress depends however on the willingness of others to match what we have undertaken to do. This is not simply a matter of persuading the Americans and Japanese to follow our example on agriculture. Only a limited number of already advanced developing countries will benefit to any great extent from the potential for greater agricultural exports to the developed world. It is also important that we open international trade in goods and services between North and South and between developing countries themselves. So it is also an issue of whether advanced developing countries are willing, in turn, to open their markets, not only to us but also to the smaller developing countries, by cutting their high industrial tariffs and removing barriers to services.

Action to convince the poorer developing countries that Doha offers them a good deal through the maximum use of special and differential treatment.

Europe will demand practically nothing from the poorest G90 countries in terms of market access, apart from some binding of tariffs. Last July’s Geneva framework is clear with regard to LDCs. By Hong Kong, we need to be clear too on what the developed countries are offering to all weak and vulnerable WTO members, who remain weak because of their dependence on preferences or their national Treasuries’ fears of loss of tariff revenue on which they depend. There must be real flexibility about the market opening commitments they are asked to enter into. Some should probably not be required to commit at all.

Special attention will have to be paid to the vulnerabilities of some countries. The most obvious example is some of the small island economies of the Caribbean, but there are other legitimate cases. In principle the WTO recognise the need for this, but progress is stalled by an argument over definitions.

In my view a “small, vulnerable economy” could be a country with a very small share of world trade, with a small population, which is at an early stage of development (i.e. not Singapore) and whose people have low incomes, which is highly dependent on factors beyond its control such as climate and commodity-dependence, and could be an island or land-locked in the middle of a continent. It is time for this definitional log jam within the WTO to be unlocked, not by trying to categorise countries but by understanding better the problems and the solutions.

Each of the principal negotiating areas should therefore be looked at separately, taking each country’s particular circumstances individually into account. That is what I mean by real and effective differentiation. It needs to be linked to more substantial aid and technical assistance programmes, without isolating individual countries or putting them into a preference dependent box from which in future they would have no easy escape. The EU needs to do more here. But so do all other richer countries.

Priority for the South-South agenda.

The meaning of this is unambiguous. It requires the G20 to accept the necessity of an ambitious market access agenda in the DDA. And it also means that advanced developing countries need to be prepared to extend preferences to the weaker part of the WTO membership, as Brazil is starting to do. Difficult – but it has to be said.

A pro-development rules and standards agenda.

Trade rules are inherently pro development. Meeting international rules and standards helps countries achieve comparative advantage. Take the example of trade facilitation. The cost for example of getting a container from Uganda to a port is eight times higher than in Europe. Simpler trade procedures help exports by reducing the cost and time of doing business and allow governments of the poorest countries both to save money and increase revenue collection from duties. But it is no good giving countries lectures about how good rules are for them. They recognise this already. The point is that they need our help to implement international rules and meet international standards – and for this we have to offer significant aid with technical assistance and capacity building. Where appropriate we, the richer countries, have to be prepared to review rules in the light of their compatibility with development goals. And we should not shy away from a debate on the standards we impose on the acceptability of their goods in our markets.

An open debate on rules exemptions

My intention is to widen the debate about the legitimacy of special treatment for poor countries in the implementation of WTO rules. Since Uruguay, this debate has become more highly charged with developing countries demanding exemptions and more space for pursuing their own autonomous policies. There is no easy solution here. Blanket exemptions, and permanent carve-outs, will be counterproductive if they end up isolating countries from the world economy. The logic of my position is to allow breathing space for countries on a case by case basis until they are in a position to comply. Differential flexibility, not permanent opting out.

We must meet legitimate concerns on preference erosion.

I want to put some fresh thinking into this. Everybody can help in this: Europe in “activating” better the preferences that will remain: other rich countries in extending new preferences.

Also, the vulnerability of the countries most affected is concentrated in a limited number of sectors. Because of this, I am convinced that if the will is there, the problem can be resolved, through enhanced trading opportunities and through readjustment assistance.

Priorities for the European Union, unilaterally and in co-operation with developing country partners:

Introduce a much stronger development focus into Economic Partnership Agreements.

I have already announced my determination that in future EPAs will have a clearer development focus. They should no longer be conceived as trade agreements in the conventional sense where both sides are seeking mutual advantage. The EU is not pursuing an equal bargain in relation to our EPA partners. The purpose of EPAs is to promote regional integration and economic development. We are ready to see their trade barriers come down for EU goods and services gradually, when liberalisation is in the interest of our EPA partners themselves as part of their development agenda. The key question is what progress the EPA countries are making in their capacity to trade, including with each other, and how we in Europe can help advance this.

New mechanisms for monitoring the effectiveness of development assistance within the EPAs.

I have agreed with my colleagues in the Commission, particularly Louis Michel, the Development Commissioner, that we will introduce a new monitoring mechanism for the capacity building efforts we are making as part of these agreements. This monitoring mechanism will require the Commission to coordinate all the different efforts that Europe is making in relation to these countries. It will require an assessment of whether the level of resource they are being offered is sufficient to meet their needs and whether our existing efforts are being well directed and effective in terms of building trade capacities.

Better coordination of Europe’s overall aid effort between the EU and Member States.

My own instinct is that this coordination may need to go further still. If we are serious in Europe about making trade and aid work hand in hand, then Member States will have to coordinate their own aid efforts much more closely with the trade policies we are pursuing bilaterally at EU level. There is still too much ‘particularism’ in the way Member States pursue their national overseas development objectives. We need more of a common approach. The EU’s own efficiency in this area will improve radically with the ratification of the Constitutional Treaty and the ‘communitisation’ of the European Development Fund. We need to have a debate about this.

Greater transparency on Europe’s trade and development record

The results of the monitoring of development progress under the EPAs should be public information. But I want to cast the net wider in benchmarking our policies against development goals. I propose that we should publish an annual White Paper to the European Parliament monitoring the take up of our trade preferences. We need to see what progress is being made in expanding our share of imports from weak and vulnerable countries and whether tariff and quota free access is proving effective.

Priorities for the G8:

The “Everything but Arms” initiative should be adopted by the United States, Japan and Canada.

In terms of market access, a crucial gesture would be for the G8 to offer tariff and quota free access to all G8 markets for LDC exports within a couple of years. Essentially this means an extension of the ‘Everything But Arms’ initiative by the United States, Japan and Canada.

Support for the necessary reforms to Rules of Origin that will improve poor countries’ abilities to make better use of their existing preferences.

“Rules of Origin” define the proportion of local content required in any good, before it can obtain quota or tariff free access. America and Europe set different rules and their impact can be restrictive. This needs to change – but in a way that avoids the rules simply being circumvented by producers who are not entitled to preferential access. I want to see origin rules designed as a way to help development, not impede it. I am for simplification and harmonisation of the rules so that ultimately the same rules apply in all markets and they are easy to use. I want Europe to bring forward proposals for new rules by the time of the Gleneagles G8 Summit. And I want the neglected WTO work on global harmonisation of origin rules also to pick up speed.

A push for greater international regulatory convergence of health and consumer standards for key developing country exports such as food and flowers.

The cost of compliance with the standards of developed countries, including the EU, is high for poorer countries. Of course the EU has to protect its citizens’ health and well being and our standards are designed to do this. But we must ensure that this does not have unintended, disproportionate side effects. EU sanitary and physosanitary standards have not prevented us from becoming the world’s largest market for food exports from developing countries. At the same time, developing countries raise these issues with me constantly and the EU must listen to their concerns. I will support collegiate debate within the Commission on this. These issues are at the heart of modern trade policy.

New funds for Aid to help the poor trade more effectively and ease the social costs of adjustment.

The G8 has a historic opportunity. It needs to determine how much additional finance it is prepared to pledge to help build poor countries’ capacity to trade and enable them to cope with the costs of adjustment to liberalisation. We need new funding for investment in trade capacities that goes beyond the ability to meet the MDG targets on malaria, tuberculosis and HIV Aids, important though these are.

There is an urgent need for the world’s richest countries to establish a special Trade Adjustment Fund. Existing efforts by the IMF and World Bank are inadequate. If the G8 is unwilling to make such a move, then it will fall to the EU to consider what it can do on its own. If the G8 fails to deliver, the EU should consider its willingness to adopt the model of the International Financing Facility as an EU instrument of its own.

There we have it then: an action plan for progress. If it sounds complicated, it is because it is. It is the price of acting in a sophisticated and differentiated way. But the goal is incredibly simple and compelling. To use all our cooperative efforts in Europe as well as the power of our trading muscle in order to make our multilateral trading system work at long last in the interests of the world’s poor. Recognising, at the same time, that only if we do this will it continue to operate in the interests of the developed world. I am convinced; all in all, we can make a breakthrough for trade and development in 2005. By doing that, we can do our own bit to make poverty history. That is itself would be no mean achievement for the European Union and a good reason in itself why every citizen of conscience should be prepared to give Europe a chance.

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