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Today I want to talk to you about an urgent issue: the dangers to the
Doha Trade Round and the imperative of acting now to secure a
successful outcome of the Round. I want to spell out why this matters
so much to developing countries.
Some of the details of trade negotiations can be daunting. But I hope
you will bear with me. We need a stronger sway of public opinion
pushing OECD countries to use the round to create fairer trading
opportunities for poor countries. I hope this speech will help
provide ammunition for those who understand that the greatest
challenge to the future safety and sustainability of our planet is
current levels of abject poverty amidst so much plenty.
This leads to a sense of frustration and injustice that feeds
bitterness, division and conflict. On the grounds of both morality
and self interest, we must make international trade rules fairer so
that the poor of the world have the chance to improve their lives and
get access to the modern technology that we take for granted and
could so easily be shared more widely.
Four years ago, I made a speech calling for the international
community to launch a development round of multilateral trade talks
aimed at making trade work better for all countries and especially
the poorest. As you all know, in November 2001 at the 4th Ministerial
Conference of the World Trade Organisation in Doha, we launched
exactly that, a development agenda.
The agenda we agreed was ambitious and put development at the heart
of the negotiations.
Amongst other things, we promised to ensure that the TRIPS (Trade
Related aspects of Intellectual Property Rights) agreement would give
developing countries enough flexibility to cope with public health
crises. We promised real progress on agricultural market access and
action on export subsidies. We promised service negotiations which
offer real benefits for developing countries. We promised to tackle
tariff peaks and tariff escalation as well as non-tariff barriers.
And we promised a review of Special and Differential Treatment -
across all WTO business areas to make them more effective.
In essence, we committed ourselves to improving the global trading
system to bring benefits to the poor. We should be in no doubt that
the current system does not work for the poor. Africa s share of
world trade halved between 1980 and 1999, and economic and income
growth has been stagnating. Rich countries protectionist policies are
stopping developing countries growing their economies and therefore
improving the life of the poor.
The challenge facing us today is to turn the words of the Doha
declaration into a reality and deliver a true development Round.
Why the Doha round matters
Today, over a billion people live in abject poverty. Few of their
countries have the opportunities they need to grow their economies
and trade their way out of poverty. We all pay dearly for
protectionism. The World Bank has estimated that the annual welfare
gains from eliminating barriers to merchandised trade range from
US$250 billion to $620 billion. Up to half of these gains would
accrue to developing countries. In terms of poverty reduction, this
could lift over 300 million people out of poverty by 2015.
Strikingly, the gains to be had for developing countries from
agricultural liberalisation form the lion s share of the overall
benefits. The World Bank and IMF estimate that liberalisation of
agriculture trade would boost developing country exports by at least
US$30 billion a year and possibly by as much as US$100 billion. In
Africa this could mean an increase of a nearly 1% growth in GDP
annually across the continent. This would make an important
contribution towards raising growth to the 7% per annum needed for
the continent to reach the goal of halving poverty by 2015. Increased
investment and access to enhanced technologies would magnify these
benefits.
Multilateral trade liberalisation is an indispensable part of
development. Its essence is about providing countries with increased
opportunities to trade and therefore provide the jobs and
opportunities that allow poor people to improve their lives. More
exports mean higher economic growth, greater stimulus to domestic
reforms, and therefore, faster poverty reduction.
We must be careful, however, not to overstate the case. Trade alone
is not the answer. It is one key driver of economic growth. But
without effective states with effective institutions that pursue pro-
poor policies including investment in infrastructure, health and
education, the poor will see little benefit from trade
liberalisation. This is why we are so heavily engaged in Africa in
helping countries to strengthen their institutions and improve health
and education services for all.
We should not forget that a successful Doha Round would also provide
huge benefits for the world economy. The international economic
climate is very uncertain. Global economic growth has slowed and
stock market performance is weak. Annual growth in world trade was
barely 2% in 2002, a significant decline from the 7% annual average
in the 1990s. Meaningful progress in the Doha Round is vital to
restoring international economic confidence and growth.
So, Doha is not only about helping the world s poor but it is also in
our own self-interest. It is wrong to assume that these are always in
conflict. I firmly believe that a successful outcome to Doha would be
a win win for all concerned. Developing and developed countries alike
stand to gain from a rules-based multilateral trading system.
Failure in the Doha Round would mean a tragic missed opportunity to
tackle the distortions and unfairness in trade rules that
disadvantage the poorest producers and the poorest countries. Failure
would mean a missed opportunity for higher global economic growth and
fast progress towards the Millennium Development Goals. And it would
mean that we fall back into a proliferation of regional and bilateral
trade agreements through which the poorest and most vulnerable
countries are in danger of becoming increasingly marginalized from
the world economy.
Slow progress in the negotiations
With these very important gains at stake, it is very disappointing
that progress in negotiations has been painfully slow. There are now
less than six months until the 5th WTO Ministerial Conference in
Cancun. At the end of 2002, we missed two key development milestones
on Trade Related Aspects of Intellectual Property Rights (TRIPS) and
public health as well as special and differential treatment. And
unless we find the political conviction to deliver on our promises we
are in danger of missing other deadlines too. The March 31 deadlines
for agreement on modalities for the agriculture negotiations is fast
approaching and looks certain to be missed. This seriously endangers
the Doha agenda.
Discussions in Geneva are stalling across a range of issues
destroying trust between WTO members and dissipating their
willingness to negotiate. We need to come to the table soon with
increased political resolve and stronger efforts from the EU and the
US to work closely with developing countries and other WTO members to
find solutions to these issues. Because if we leave too many major
decisions to Cancun we will overload the agenda and run the risk of
failure. We must remember the lessons of Seattle. A successful Cancun
meeting is essential to keeping the Doha Development Agenda on track.
Most worryingly, progress has been slowest on the issues that matter
most to developing countries. This risks developing countries
becoming increasingly disaffected and turning their backs on the
negotiations. I want to suggest today that there are six key areas in
these negotiations which are of particular importance to developing
countries: firstly, TRIPS and public health; secondly, agriculture;
thirdly, textiles and clothing; fourth ensuring WTO rules make sense
from a development perspective; fifth services, and finally the new
issues of investment and competition. On each of these issues we must
make significant and rapid progress prior to Cancun. Let me take each
one in turn.
TRIPS and public health
First, we must rapidly find a solution to the current impasse on
Trade Related Aspects of Intellectual Property Rights (TRIPS) and
public health. In Doha we showed that the WTO membership could
respond to concerns about the effects of TRIPS on access to
affordable medicines by the world s poor. The Declaration clarified
the existing flexibilities in the TRIPS Agreement that can help
countries access the medicines they need. For example, countries are
allowed to override a patent to meet public health needs.
But, we also recognised that a significant number of countries were
unable to use this important flexibility because they cannot produce
the medicines themselves. We therefore promised to find a way for all
countries to be able to resort to compulsory licensing. We must
honour this promise for the millions of people affected by public
health crises such as HIV/AIDS, TB and malaria.
In December 2002, we were on the verge of a workable compromise but
the US, responding to industry concerns, blocked the deal. They
feared that the solution put forward would be used by developing
countries to override patents on non-essential medicines and that
generic medicines would be diverted from the poorest countries to
western markets. These fears are reasonable but not insurmountable. I
believe the December 2002 proposals adequately addressed these
concerns while giving developing countries the flexibility they need.
Finding a solution before Cancun is critical if we want to maintain
developing countries trust in the rules-based multilateral system.
Agriculture and CAP reform
Secondly, agriculture. This is of key importance. Three-quarters of
the world s poor live in rural areas. Agriculture accounts for about
27% of GDP and export earnings in developing countries and 50% of
employment. The dependency on agriculture is most pronounced in LDCs
and in sub-Saharan Africa, where production tends to be concentrated
on a small number of commodities.
The Doha Declaration commits developed and developing countries to
negotiations aimed at significant improvements in market access,
substantial reductions in domestic support, and all forms of export
subsidies. These negotiations are critically important for developing
countries. But they are currently stalled, mainly because of
developed countries who wish to continue protecting their domestic
agricultural markets.
Agricultural markets are among the most heavily protected. For OECD
countries, the average bound tariff for agriculture is 60% 12 times
the rate for industrial products.
Tariffs on sensitive products such as beef, sugar and rice which
could be important exports for developing countries are even higher
over 1,000% in some cases. And tariff escalation where tariffs rise
as goods are processed thus depriving developing countries of the
opportunity to process their agricultural products and get the
increased jobs and income this would lead to.
For example, the European Union s preferential arrangements for rice
and sugar exports from Africa, Caribbean and Pacific countries only
cover the unprocessed product; refined sugar and milled rice face
extremely high tariff barriers. This makes it much more difficult for
developing countries to take their first steps up the technology
ladder, to diversify and trade their way out of poverty. For example,
analysis of UNCTAD figures shows that developing countries have 90%
of the world market in cocoa beans, 44% of the world market in cocoa
liquor, 38% of cocoa butter, 29% of cocoa powder and just 4% of
global chocolate production. This is just one example of how little
of the final value is captured by developing countries.
Developed countries also protect their agriculture sector through
subsidies. OECD farmers are given Р€300 billion of taxpayer s money
every year to produce food. Then when they produce more than we can
consume the taxpayer has to pay once again to subsidise its export
whilst the consumer has to pay more for the food they buy. OECD
countries support for their farmers is equivalent to the whole of
Africa's GDP. EU taxpayers and consumers support to farmers totals
nearly 100 billion. One figure really brings home the iniquities of
this situation: every dairy farmer in the EU receives $2 a day for
each cow they own, while nearly half of humanity live on less.
These subsidies, and the high tariffs which protect rich countries
markets, make it extremely difficult for farmers in poor countries to
compete with OECD country farmers. This applies equally to their home
markets and to export markets. For example, India, home to one third
of the world s poor, is also the world s largest dairy producer with
10 million farmers working in the industry.
But competition from heavily subsidised and protected OECD dairy
exports is keeping them out of new markets in South-East Asia and the
Middle East. Liberalisation of OECD dairy regimes would enable these
farmers to increase production and exports.
Agriculture markets have been distorted for so long that developing
countries economies have become distorted too. Many of the poorest
particularly in Africa are dependent on the production of a few
commodities. Others need cheap food imports because their own farmers
have been out-competed by our heavily subsidised exports and do not
produce sufficient food themselves.
Some will say don t liberalise because liberalisation will create
losers as well as winners. This is true. But if a small number
benefit and the poor do not this argument, which has been defended by
many NGOs, is creating a barrier to improved livelihoods for the
poor. The solution is to adopt policies that benefit the poor and put
in place complementary policies to protect the losers in the
transition and ensure continued support for reform. Development
institutions and the trade community must work together to ensure
careful sequencing of reforms, support for restructuring and proper
regard for food security concerns.
Agriculture protectionism in the rich countries reduces developing
countries prospects for sustainable growth and it damages our
prospects too. As I have said, it is estimated that the gains to all
developing countries from agriculture liberalisation in developed
countries could reach between $30bn and $100bn by 2015. These gains
nearly quadruple to between $140bn and $390bn if developing countries
also liberalise their agriculture markets. The potential benefits of
agriculture liberalisation are huge but we could be about to throw
all this away.
While developing countries would benefit from liberalising their own
markets, the responsibility for progress clearly lies with the
developed countries, who are the main perpetrators of global
agriculture distortions.
And all European governments must face the reality that CAP reform is
absolutely essential to this process. Without it the European Union
will have little or no basis to reach a meaningful agreement in the
trade negotiations. Commissioner Fischler s proposals on the CAP A
Long Term Policy Perspective for Sustainable Agriculture are a good
first step on the long road to reform, although they would ideally
have gone further. The proposed shift to less trade-distorting
support is particularly important. However, while the UK Government
firmly supports the Commission s proposals, some other Member States
find even these modest proposals too ambitious. If their view
prevails, the prospects of success in the Doha Round will become very
small indeed and the EU will be the guilty party in throwing away the
prospect of a development round.
But of course EU members are not the only developed countries to
protect their agriculture sector. The US provides its export
subsidies in the guise of export credits and food aid, and uses
loopholes in the existing agreement to hide its own high levels of
domestic support. The impact of these US measures can be extremely
damaging for developing countries. For example, the International
Cotton Advisory Committee estimates that the withdrawal of US cotton
subsidies would raise the price of cotton an important developing
country export by 26%. So, the US needs to open its markets too.
The negotiations on agriculture are at a critical stage. A second
draft framework agreement has just been produced for consideration by
WTO members and is being debated as I speak. The aim is to reach
agreement by the end of this week. But the main protagonists are
still taking up opposite positions. If they do not shift and the
responsibility lies with the US and Japan as well as the EU the Doha
Development Round will be dead.
Franco-Africa Initiative
Let me turn briefly to the initiative recently launched by France to
try to and ease the agricultural trade distortions facing sub-Saharan
Africa. This consists of three elements: a temporary halt to export
subsidies affecting Africa, an enhancement of trade preference for
Africa and possible subsidies to make up for changes in commodity
prices. It is welcome news that the French are willing to acknowledge
the damaging effects of export subsidies. But a temporary moratorium
on the EU s export subsidies covering only sub-Saharan Africa is an
inadequate response. If export subsidies are damaging them, they must
be phased out, not just temporarily suspended for part of the world.
The first problem with this set of proposals is that they apply only
to Africa, but two-thirds of the world s poor live in Asia. If the
Trade Round is designed to improve the life opportunities of the poor
of the world, action cannot be confined to Africa, needy as that
continent is. The French proposals are not compatible with World
Trade Organisation rules which require rules-based equality of
treatment for all countries with similar needs. A temporary phase out
for Africa alone would in fact make the pressure from subsidised
exports even worse elsewhere. This would clearly not be right.
Let us remember that Africa has a potentially huge comparative
advantage in the heavily distorted agriculture sector, but is held
back by existing trade regimes. For instance when EU beef export
subsidies to sub-Saharan Africa were reduced by 25 to 40% between
1993 and 1995, both Mali and Burkina Faso increased their production
and exports. As a result, Burkina Faso increased its regional cattle
exports by 70%. This provides an indication of the potential that
exists for regional trade in the agriculture sector if subsidies were
to be ended.
In addition, the evidence is clear; preferences are fundamentally a
poor way of integrating developing countries into the world economy.
Indeed, they tend to fossilise primary production patterns in
developing countries, preventing diversification and a response to
changing demands in the world economy. The EU s Everything But Arms
initiative and the US Africa Growth and Opportunity Act have enhanced
access for African countries to their markets. But despite this
apparent generosity, the evidence suggests that the uptake of these
preferences is very low. In 1999 UNCTAD calculated that although 99%
of all EU imports from all least developed countries were eligible
for EU preferences, only 34% actually received them.
The lack of take up is invariably because the access that preferences
grant is highly conditional and insecure. In the EU the more
sensitive the product the less generous we are. Similarly, developing
countries are required to comply with tough product standards which
act as further barriers to entering the EU market. Likewise, complex
rules of origin restrict the sourcing of inputs from neighbouring
countries which are not eligible for preferential access, thus
discouraging regional trade and integration.
The French are right to say that although many regions of the world
have benefited from the opening up of the global economy, few African
countries have gained. The statistics show that Africa s share of
world trade declined from nearly 5% in 1990 to only 2% in 2000. It is
true that many of Africa s trading difficulties are on the supply
side, including productivity and infrastructure. But it is also clear
that preferences cannot be a substitute for full liberalisation which
will be most beneficial to Africa and other developing countries.
In terms of Doha Development Agenda, discussion to bind preferences
could serve to undermine the multilateral liberalisation that would
hold the greatest gains for poverty reduction globally. It would also
counter efforts to stimulate trade between developing countries,
locking them into traditional trading partnerships.
Textiles and Clothing
The third area of critical importance in the Doha Round to developing
countries is textiles and clothing. The remaining barriers impose a
substantial burden on developing countries. It is estimated that as
many as 27 million jobs in the South are foregone due to the combined
effect of quotas and tariffs. On average, each job saved in developed
countries by tariffs and quotas is estimated to cost 35 jobs in
developing countries. And in the textiles and clothing industries in
developing countries, these are overwhelmingly low-skilled workers
and are often poor migrants from rural areas.
The Agreement on Textiles and Clothing that came out of the Uruguay
Round gave WTO members 10 years to abolish quotas by the end of 2004.
The deepest were, however, saved for the end and thus the potential
gains have yet to be realised. But despite this step forwards and
some preferential access developing countries still face high tariffs
on textiles, clothing, and footwear both from each other and from
OECD countries. For example, the EU imposes a tariff of 17% on
footwear from China, whilst the US has a peak tariff of up to 35% on
clothing. A WTO agreement to cut these tariffs would be a big boost
to developing countries economies and life prospects for poor people.
WTO rules that make sense from a development prospective
Fourthly, I think I can safely say that we will not truly be able to
call this a development Round without trade rules that make sense
from a development perspective.
Not all developing countries have the same capacity to implement WTO
agreements. Nor, given that they are at different stages of
development, do they all have an equal ability to take advantage of
the opportunities trade liberalisation can bring.
The Doha declaration is clear about Special and Differential
Treatment (the term used for the way in which WTO rules are made more
flexible for developing countries). We made a commitment to consider
both changes to existing provisions as well as the wider question of
how to make WTO rules flexible to the needs of developing countries.
Developing countries have submitted over eighty proposals for
suggested amendments and improvements to existing S&DT provisions. A
modest proposal of 22 elements was put forward by the Chair of the
Committee on Trade and Development, of which over half were
specifically aimed at assisting the least developed countries. Only
four were agreed by the end-December deadline. This is deeply
disappointing.
I believe that we need to move this debate forwards and agree a
package of improved S&DT provisions in advance of Cancun. This is not
only because Special and Differential Treatment is a key issue for
developing countries. But also because if we don t show developing
countries that we agree the WTO needs effective mechanisms to account
for developing country issues, then countries will be unwilling to
negotiate in additional areas, such as agriculture, investment and
competition, for fear that their development-related priorities will
be ignored. And they would be right to believe so.
Services
The fifth area which I want to cover today is trade in services. We
need to do much more to make sure that the interests of developing
countries are properly met.
Key among developing country concerns is greater flexibility by the
rich nations on the movement of temporary workers, or Mode-4 in the
language of the GATS (General Agreement on Trade in Services)
agreement. Too often this issue is dominated by fears over
immigration. Current research suggests that if developed countries
increased the proportion of temporary labourers to the equivalent of
just 3% of their labour forces it would yield an increase in world
economic welfare one and a half times greater than the gains we could
expect from the liberalisation of all remaining trade restrictions.
Furthermore, most of these benefits would come from freer movement of
lower-skilled workers, not the high-skilled professionals who are the
subject of most OECD country thinking on GATS.
That is why it is so important for the developed countries to give
serious thought to enabling both skilled and less skilled people from
developing countries to come and work in developed countries legally
on a temporary basis.
New Issues
Finally, new issues. This is a full agenda with many priority
concerns for developing countries. Some argue it's too full for
developing countries to cope with any new issues. It's true that many
developing countries' are finding that all these negotiations are
overstretching their capacity. This is why DFID is supporting a range
of capacity building and technical assistance initiatives to
strengthen developing countries ability to participate effectively in
the negotiations. But framework agreements on the so-called new
issues investment, competition, transparency over government
procurement and trade facilitation could bring considerable benefits
to developing countries.
Foreign direct investment is critically important to developing
countries. A multilateral rules framework - creating a level playing
field for all WTO members - could facilitate greater investment
flows. It would particularly benefit smaller developing countries who
don't have the resources to develop an investment regime or to
negotiate numerous individual bilateral treaties, where they would
come under pressure to agree higher levels of investor protection.
Similarly, a multilateral framework agreement on competition could
help developing countries tackle abuses by international cartels as
well as domestic restrictive business practices.
Conclusion
So in conclusion, the situation is clear. For now international
political attention is inevitably focused on Iraq. But uncertainty
and the slow down in the global economy makes it even more of an
imperative to make a success of the Doha Trade Round.
The UK Government fully backs the need to inject new momentum into
the round and is strongly committed to it creating concrete benefits
for poor people in the developing world. We need renewed and stronger
political leadership from the EU, the US, and other developed
countries, if we re to realise the bold Development Agenda set out in
Doha. And above all if we are to live up to the challenge of meeting
the Millennium Development Goals by 2015.
We need early agreement on TRIPS and public health, and real movement
in the all-important agricultural negotiations. Putting back the
difficult decisions could sink Cancun.
Just as the aftermath of September 11 helped focus minds at Doha on
why trade and development matter, we need to deepen our commitment to
a just world order if we are to emerge from the current levels of
bitterness and division in the world. We urgently need stronger
resolve to make the Development Round succeed.
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