Preparing Africa for the next Trade negotiations

Tuesday, September 29, 2015

The deadlock in the World Trade Organisation (WTO) so called Doha Development Round negotiations remains firmly in place.  Negotiators seem unable to meet deadline after deadline for delivering on many of the Round promises. Last year in the meeting that was held in Bali, Indonesia, there were some baby steps that were painted as a breakthrough. That optimism has evaporated since.

If development is at the heart of the Doha Round, agreement on agriculture contentious issues provide the legs on which the Round will stand or fall.  Achieving concrete results in agriculture is critical not only to fulfil the Doha mandate and unlock this main “gateway issue”, but more fundamentally because the development of African economies cannot overlook a sector which employs two thirds of its labour force, and plays a pivotal role for food security and poverty eradication.

Twenty years after the entry into force of the Agreement on Agriculture, international agricultural markets remain heavily distorted, and characterized by relatively high protection. Developed countries have continued to subsidize (mainly large) producers, ultimately at the expense of small-holder farmers in the developing world. At the same time, whilst some emerging economy countries have been able to exploit the flexibilities in the agreement and adopt their own forms of domestic support, other developing countries, including most African countries, have so far been unable to do the same, and end up being disadvantaged twice.

New challenges have also emerged since the Agreement on Agriculture was signed: from market concentration among a few large corporations (notably on products of immediate interest to Africa, such as coffee or cocoa), to the financialization of commodity markets which has failed to redress the volatility in international prices; from the impact of climate change, to the increasing weight of non-tariff barriers. So far there is no breakthrough on meaningful reductions in domestic support (or domestic subsidies) by the major subsidizers including the US, EU and Japan. Given the clear understanding that the outcome in agriculture will be calibrated with the outcome in the other areas under negotiation, including non-agriculture market access (NAMA) and services, this in effect means that the possibility of concluding the Doha Round is not in sight.  This also implies that the WTO is not yet in a position to provide impetus for a significant contribution towards the post-2015 development framework, although trade has been recognized in the new Sustainable Development Goals (SDGs) as a ‘means of implementation’for a new, bolder agenda.

However, in view of the upcoming biennial WTO ministerial conference (MC10) that is due to be held in Nairobi in mid-December, there is broad consensus on the need to deliver some development-related outcomes especially since the conference will be held in Africa for the first time. In agriculture some movement with regard to export competition (export subsidies) is likely, since the modalities for a possible agreement have been in place since 2005.  There mayalso be movement on the rules on ‘special products’ that developing countries want to protect for food security considerations; as well as on the rules on a special safeguard mechanism for agricultural products to guard against import surges.  A comprehensive agreement on cotton in the areas of market access, domestic support and export competition may also be possible.  Cotton is seen as a test for progress in other soft commodities. A permanent solution to the issue of public stockholding of food supplies which India pushed in Bali may be agreed.

On development, a package for Least Developed Countries (LDCs) that includes operationalization of the services waiver, improvements to duty-free quota-free market access and preferential rules of origin is within reach.  There may also be movement in 25 areas that have been identified by developing countries for special and differential treatment. Theyare mostly aimed at enhancing policy space for industrial development and strategies for building productive capacity.

The African negotiators are now called to show unity and leadership in light of the next meeting taking place in Africa.An informal meeting of African ministers was held on 20 July and a follow up meeting is being planned to take place soon.Coordination meetings with the African, Caribbean and Pacific (ACP) Group, the LDC Group and the G90 group of developing countries are also expected to be held. On the side lines of the Africa Growth and Opportunity Act (AGOA) Ministerial Forum that was just held in Libreville on 24-27 August, African ministers engaged the US Trade Representative. These discussions included the main issues for an acceptable outcome from Nairobi.

Meanwhile, African ministers have signalled that if agriculture as the gateway issue is not resolved in Nairobi, it should be kept on the WTO’s agenda as it remains central to a development outcome from the Doha Round. 

Africans have now to do their homework. And that homework is pressing and becoming heavier.

First, there is little evidence of strategic consistency between the trade policy framework and industrial policy objectives. Various countries have adopted a swathe of incentives to industrialize, yet they often lack focus, ushering in opaque discretionary and arbitrary practices. In this respect, there is a growing recognition that regional integration and gradual liberalization are the most promising avenues to harness trade for structural transformation of the African economies. Accordingly, the “Africa first” principle should be the polar star in the process of reconciling trade policy and industrial policy.

Secondly, all too often, there is lack of policy coherence at the different level of trade negotiations, namely bilateral, regional and multilateral.  This is also an issue that the 2015 Economic Report on Africa discusses in detail. Let me take a couple of examples: Africans fought hard to obtain the decision on preferential rules of origin for LDCs in Bali… Now, how many African countries have called for the implementation of those preferential criteria in their bilateral negotiations with the EU under the Economic Partnership Agreements or the US under AGOA,or other partners? Furthermore what is the use of hard-fought flexibilities at the WTO, if Africa forgo the same flexibilities vis-à-vis large trading partners at the bilateral level?

Thirdly, no matter how well they are designed, trade policies have little value unless they are put to good use. In 2013, LDCs obtained an extension of the transition period for the implementation of the agreement on Trade-Related Intellectual Property Rights. What have they done to leverage this window of opportunity, and aggressively foster innovation, technology transfer and acquisition?                   

These issues are to be raised because there is a need to change gear in the way Africans conceive trade and industrial policies, and – even more importantly – in the way they implement them.

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