Brendan Vickers
21 July 2008
opinion
Johannesburg — TODAY, as trade ministers from 30-plus leading member countries of the World Trade Organisation (WTO) begin negotiations at the Geneva mini-ministerial conference, developed and developing nations are still far apart in their positions.
Developed countries are offering little in agriculture (where the greatest trade distortions reside), while making excessive demands in industrial tariffs directed at "advanced developing countries", including SA.
After seven years of protracted negotiations, trade ministers finally aim to conclude "modalities" in the agriculture and non-agricultural market access (Nama) negotiations. Guidance will also be sought on other key "horizontal" issues, notably services, intellectual property rights, antidumping and geographical indicators.
Speculating on the possible outcomes, three scenarios seem plausible.
The first is complete failure: the meeting is premature and the political climate is simply not right. This means that some trade ministers may have travelled to Geneva armed with an exit strategy - how to not get blamed for further impasse.
The second - and most likely - scenario is that trade ministers will record further "progress" towards modalities, but not reach a complete conclusion. As happened in July 2004 in Geneva and in Hong Kong in 2005, ministers will claim "victory" by issuing a declaration, with all details annexed to the declaration. Negotiators may then decide to reconvene after the WTO's summer break.
The third scenario is the conclusion of the modalities and an attempt to finalise the round before WTO chief Pascal Lamy's mandate expires next year.
Whatever transpires in the Geneva negotiations, there are high expectations from developing countries that SA will continue to push for an equitable, proportional and balanced "developmental" outcome that rebalances the trading system more in favour of the south. Thus far, our negotiators are to be commended for the principled positions they have adopted, as part of the G-20, demanding fairer global agricultural trade and as co-ordinator of the Nama-11, which promotes tariff "policy space" for developing countries.
In terms of the Doha negotiating trajectory, South African industries -- and aspirant industrialisers in the Southern African Customs Union (Sacu) -- are particularly vulnerable in Nama. The Swiss formula to be used to prise open this sector will see deeper cuts in higher tariffs than in lower ones. This immediately places developing countries at a marked disadvantage and flouts Doha's core principles for a developmental outcome.
To give effect to Doha's original spirit and mandate, the Nama-11, led by SA, has called for a 25-point spread between coefficients for developed and developing countries. It will be a bruising battle to formally win this position.
SA is in the invidious position of having adopted deep "developed country" commitments during the previous Uruguay round. Sacu's bound tariff rates are almost half the average for comparable developing countries. To illustrate this trend: Sacu's average bound rate is 17% and the applied rate is 8%. By contrast, Brazil's is 30% and 11%; Argentina's 30% and 10%; and India's 40% and 19% respectively. Without additional flexibilities for Sacu, SA and its partners will effectively undertake applied tariff cuts on a scale far greater than any commitments made by the other WTO members in either Nama or agriculture.
There has been some sympathy from the WTO membership for the "historical injustice" of SA's misclassification as a developed country in the Uruguay round. Our negotiators have argued for at least six additional points in flexibility to shield sensitive sectors.
This will be one of the issues up for negotiation in Geneva. In doing so, we must maintain support for Sacu's position and ensure that our industries do not pay excessively in Nama for small benefits elsewhere.
But in some respects our trade policy also seems unbalanced. While the emphasis on Nama is appreciable, agriculture is given a greater priority than it deserves, while services -- which account for 70% of gross domestic product -- often appear to be neglected (or may become the proverbial "sacrificial lamb" in trade-offs).
SA's services regime is largely open, with deep commitments undertaken during the Uruguay round. In our initial offer to the WTO in 2006, SA undertook further liberalisation in the environmental, financial, legal, telecommunications and transportation sectors. The crucial question is whether our negotiators fully understand and appreciate the far-reaching implications of undertaking further binding commitments in these sectors, particularly finance. There are still many elephants in the room, particularly in the wake of the sub-prime crisis.
Some commentators argue that our domestic services sectors (particularly economic infrastructure) could benefit from greater competition. In addition, the reality is that our Sacu partners are mostly importers of services, and further liberalisation would introduce a measure of competition in these trade-facilitating fields.
The alternative argument holds that we have already given away too much and must preserve our "policy space" to develop a national and regional services strategy.
Our trade negotiators are thus advised to balance the demands of competitive domestic, regional and global production with the fundamental right of access to essential or basic social services. In the WTO's mercantilist trade-offs, it is imperative that we do not bargain away the right to regulate services in the public interest.
As an advanced developing country, SA's position in the WTO is a complex one. Finding a balance between pragmatic self-interest and seeking greater access for the country's intermediate manufacturers and service exporters to markets in the region, the continent, and abroad on the one hand, and politically supporting the more defensive, dependent and developmental interests of the poorer developing world -- represented by the G-90 -- on the other, remains a major challenge.
Dr Vickers is senior researcher: multilateral trade at the Institute for Global Dialogue.
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