Hasmukh Dawda
4 November 2008
opinion
Nairobi — A consensus is emerging that the momentum towards a more open global trading system has dissipated since the Doha World Trade Organisation meetings of 2001.
On the face of it, the facts are clear. Despite two decades of trade liberalisation, often as part of Structural Adjustment Programmes supported by the IMF and the World Bank, tariff levels are highest in developing countries.
While average tariffs amount to 5 per cent of the value of trade in developed countries, they are around 15 per cent in Latin America and sub-Saharan Africa, and around 25 per cent in South Asia.
Moreover, developing countries impose tariffs on each other's goods that are as high as those they impose on goods originating in developed countries.
And thanks to a series of measures enacted by developed countries, the share of goods from developing countries that can enter duty-free is steadily growing.
The Canadian government has announced, for instance, an initiative that would see imports from the 48 least-developed countries -- with the exception of supply-managed goods such as dairy products, eggs and poultry -- enter Canada duty- and quota-free.
With this programme, Canada follows the lead of the European Union, which in February 2001 introduced its "Everything but Arms" initiative.
Clearly, there is unfinished business in reducing protectionism in developing countries. And yet, this is not why Doha is floundering. First, the volume of trade between developing countries is so low that it does not contribute to the export woes faced by developing countries.
The problem, clearly, remains how to crack the lucrative marketplaces of the industrialised West.
More important, perhaps, the logic of putting the focus on protection in developing countries ignores the crucial contextual questions of how a host of parallel policies, promoted by developed countries, makes it more difficult for their poorer trading partners to move towards lower tariff regimes.
None of this is intended to disparage the idea that lower tariffs promise significant benefits to developing countries. Fewer barriers to imports would provide people in developing nations with access to the best goods the world has to offer, at the best possible prices.
Equally important, with that flow of goods would come advantages such as technology transfer and the enhancement of productive capacity.
Current conditions, however, do not allow a quick transition to lower tariffs. An immediate impediment is the lack of a broad tax-base in developing countries that would see a greater proportion of public spending funded through consumption, income and land taxes.
In many developing countries, revenue from taxes on trade account for 10-20 per cent of government revenues. Reducing this stream of income without the necessary public finance reforms in place would be an invitation to fiscal calamity.
When it comes to market access, tariffs do not tell the full story. One area where frustration is high relates to non-tariff barriers.
It is possible to view these "technical barriers to trade" -- such as product content and packaging requirements, mandatory labelling, sanitary and phyto-sanitary measures -- as more serious impediments for products from developing countries than duties or quotas.
This is because failure to meet these standards bars developing countries from trading in those markets.
Although there are some solid scientific and public health concerns underlying the discussion of matters such as sanitary and phyto-sanitary standards, it is also clear that these concerns have been manipulated for protectionist purposes.
It has been the experience of several countries that just when they meet the requirements set by developed countries, the goalposts are shifted and a new set of standards imposed.
However, the biggest stumbling block remains agriculture. Most developing countries define their comparative advantage through this sector. And yet, this is the sector that remains the most protected in developed countries.
Some of the statistics defy imagination. Subsidies to agriculture in developed countries amount to more than Canadian $1 billion a day, about six times the level of aid to developing countries.
World Bank Chief Economist Nicholas Stern has made the point that while the average European cow is subsidised about $2.50 per day, and the average Japanese cow $7 a day, 75 per cent of the population in sub-Saharan Africa lives on less than $2 a day.
A more sensible global agricultural regime would increase incomes around the world. Ultimately, these are the issues that must be resolved before the world can expect developing countries to lower tariffs. In global trade negotiations, the low-hanging fruit has already been picked.
Mr Dawda is chairman of Global Allied Industries, manufacturers of House of Manji biscuits.
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