Cape Town — The next six months will be crucial for the efforts of Africa and the rest of the developing world to secure easier access to markets for their products in the industrialized world. After the round of international trade negotiations which began in Doha, Qatar, in 2001 (the "Doha Round"), stalled last July, it was announced in Davos, Switzerland, last week that talks will be resuscitated.
But negotiators are working against the clock, notably because United States President George W. Bush's authority to negotiate without haggling with the U.S. Congress over every detail of an agreement expires at the end of June. They also face substantial challenges: both developed and developing countries are under pressure to eliminate or reduce measures, such as government subsidies to domestic producers, or tariffs on imports, which protect their farmers and manufacturers from foreign competition.
In the midst of the ferment created by the announcement that talks are on again, the Director-General of the WTO, Pascal Lamy, will visit East Africa beginning on Thursday. He spoke by telephone from Geneva to allAfrica.com ahead of his journey. Excerpts:
What's the objective of your trip to East Africa?
It's one of the many trips I have made and will make in Africa, and the purpose is to keep governments, leaders, parliaments, whichever interlocutors I can reach out to - this time in Kenya, Uganda and Tanzania - about the (Doha) Round: its purpose for Africa, the state of the Round, the next steps, and interacting with trade constituencies, whether pushing or resisting. You've got pushing and resisting constituencies in the north, the east, the south and the west, in China, the U.S., Europe and Africa.
And of course it happens that these three countries (Kenya, Uganda and Tanzania), individually and together have a rather well-strategized trade policy (through the East African Community). The articulation between regional integration and the multilateral system is something which is very important for them, and I want to help them in fixing the right balance.
After the last WTO general council meeting, you talked about regional trade agreements creating a "hazy" situation. Do you have a sense in which the operations of the East African Community are not consonant with the principles which the WTO would like to see? Are you going to put them under some pressure on that?
No, I make a distinction between bilateral agreements on the one side (and) regional integration processes like Mercosur (the Southern Common Market), like the Andean community, like the East African Community. On this I have said repeatedly that preference must be given to the multilateral trading system (over bilateral agreements), not least because in these North-South, or big-small bilateral trade agreements, the game is more unfair than around the WTO table. On the other side, regional integration processes are in my view positive contributions because they create regionally more homogenous, larger, economic zones, which are more favourable to development, foreign direct investment, and a better circulation of people, goods, and capital.
You were quoted a few days ago as saying with the resuscitation of the Doha Round that "the landing zone is in sight." But can one say that the developing world and the developed world are even flying in the same aircraft? There's no suggestion yet that the developed world is going to offer concessions of any substance.
The WTO is a place where we have to have everybody on board. There's no way the WTO negotiation plane can land with only part of the passengers. It won't land because the decision to land is taken by consensus, and two-thirds of WTO members are developing countries. It's not only the number. If you compare it to what it was 10 or 15 years ago, developing countries now have much more weight around the table, not least because potential elephants of the time - like India, Brazil, China, South Africa - have now become real elephants in trade. So there's no way the Round can be concluded without developing countries on board.
Now of course "developing country" is less of a homogenous category than it used to be 20 years ago. China and Senegal and Brazil and Ethiopia probably are not exactly in the same boxing category. But the truth remains that this Round has to conclude in terms that offer a clear, unambiguous, and agreed rebalancing of the trade rules of the system in favour of developing countries. Which means that developed countries, the U.S, the EU, Japan, to take these three, have to bite the bullet on things like agricultural subsidies and agricultural tariffs. The signals we got in Davos last week, both from the big leaders who were there and from the negotiators, was that they were now switching to more of an 'approach-the-landing-zone mode' than circling above the airport, which is what they've been doing for the last six months.
Does that mean that you've heard any hints, any suggestion of actual figures from developed countries which would lead you to have a level of optimism?
It's too soon for me to go into figures publicly, but what's happening is that the EU and U.S. are working discreetly, not least to test what this means for their constituencies in terms of tons of beef, wheat, sugar, pork or whatever. Brazil-EU, Brazil-U.S., India-EU, India-U.S. are working and once the big numbers start to appear between these four - they will not decide for the others, but they have a combination of offensive and defensives, notably on agriculture, which is fairly representative of the rest of the membership. The U.S. has an offensive on tariffs, a defensive on subsidies, Brazil has an offensive on both tariffs and subsidies, India has an offensive on subsidies and a defensive on tariffs, and the EU and Japan have a defensive both on tariffs and subsidies. So the game around the table is fairly representative of the various groupings of interests, whether it's G-20, G-33, G-10, the EU, or the U.S.
On agriculture, we have between these four most of what needs to be approximated in terms of numbers. They are not yet there, and obviously it will take a bit more time in terms of months for them to get there, and once they get there we have to make sure that the rest of the membership feels comfortable with these numbers. But it has started to happen for the last month, in levels of activity between negotiators, which is there, although it remains discreet at this stage. I think what we got in Davos from the various ministers who were there, including African ministers, Asian ministers, a majority of developing countries' ministers there, is that they understand this process as being necessary.
But you haven't a big window of opportunity. The French elections in April, the expiry of President Bush's freedom to act at the end of June - do those not make it difficult for a resolution before April, and almost impossible beyond June? Does that mean May and June are the key months?
I don't want to give deadlines or timelines, but the U.S. trade permission authority is obviously key, and the good news is that the U.S. President will be asking for [an extension of his trade permission authority] this week, and that's an important element in the progress of the negotiation, because you cannot negotiate with a country that does not have the authority to negotiate. So this is crucial.
As far as the French elections are concerned, this is an internal EU problem. Trade policy in the EU is decided by a qualified majority. It is not unanimity among the 27 member states. The founding fathers in the 50s were wise enough to decide at that time, given that they started as a customs union, that this sort of decision was removed from the veto constraint. But that's a problem for (EU Trade Commissioner Peter) Mandelson. You negotiate as a bloc. It's for him to get his necessary majority, as it is for Sue Schwab (U.S. Trade Representative Susan C. Schwab) to get her necessary majority in Congress.
On the side of the developing countries, you were with African Union representatives in Addis Ababa last week. What was the message you were getting from them?
The message they gave me in Addis Ababa was: we want this round, we know what's in there potentially for Africa, we know we can get a lot, and at a modest, and sometimes extremely modest price, not least because most African countries are Least Developed Countries (LDCs) who will not have to pay (to access developed markets).
For Africa, the failure of the Round is not an option. My message to them was keep as united as you can. There are issues of major importance and major visibility for you, like cotton, for instance. It's not all Africa that produces lots of cotton and has a problem with U.S. and EU subsidies, but the element of African solidarity is very important. I tried to explain to them - I was not the only one, the U.S., the EU, Japan, India, Brazil were also there - to give as much as possible an indication of the road map, knowing that there are huge specific African problems like or small and vulnerable, and landlocked economies, which are also part of this negotiation
Inasmuch as the developed world is being challenged to make progress by cutting agricultural tariffs and subsidies, is the developing world not also under pressure not to take the deal down by getting hung up on very specific individual things they want?
I know that there is a concern on the side of many African countries on this, but you know in many ways it's good that Brazil and India are doing the running for them on things like agriculture. Because again we know that whether offensive or defensive, these countries whose weight around the table is now extremely big, notably because of the existence of the G20, is a sort of insurance policy for many African countries, provided the sort of specifics they have small and vulnerable economies, or landlocked economies, are addressed, which in my view is doable.
You mentioned cotton a moment ago. Is there a real prospect of a breakthrough there?
The cotton case is pretty straightforward. Trade-distorting subsidies in agriculture have to be slashed down. There will be no deal if the U.S., EU and Japan do not accept that. It's already been agreed, in previous stages of the negotiation, that for cotton, these reductions would be quicker and bigger than on other products. So there is a sort of "deal-plus" on cotton, the principles of which have already been agreed.
Then you've got to go to the final stage of the negotiation on numbers, which is benchmarked against what will be done on the rest of the crops in terms of trade-distorting agricultural subsidies; what is the "cotton-plus" quantum, and of course this remains to be negotiated. They've already - given the fight which they've had on this with developed countries - secured this guarantee that it would be more and quicker on cotton.
The Brazilian president has talked about a "triangle" of issues to be resolved: cuts in agricultural tariffs, cuts in agricultural subsidies (to be made by developed countries) and cuts in tariffs on industrial products (to be made by the more developed countries in the developing world). As I understand it, the focus has been on the agricultural side. Is this still the case?
Yes.
Do you believe the biggest issue to be resolved is still on the agricultural side?
The basic trade-off remains between agricultural subsidies, agricultural tariffs, and industrial tariffs, but it's clear that if you take the amount of focus, engagement, negotiations, testings, what-ifs, and the rest, agriculture remains the main bottleneck issue. That has to do not so much with the huge importance of agricultural trade in international trade, it has to do with the fact that in terms of constituencies, farmers have bigger leverage on politics because they have a territorial reach bigger than other groups of the population, and this is true, north, south, east, west, China, U.S., Europe, Africa, elsewhere. And it also has to do with the fact that it's obvious that, under the existing rules of international trade, agriculture has been less disciplined than other areas. Just by coincidence this is a topic on which developing countries on average have a comparative advantage over developed countries.
The question of lowering tariffs on industrial products from Brazil, India, China, South Africa - are you optimistic or confident that in that area?
It's not solved yet, but we have an architecture in the negotiation where we know that the quantum and the formula which we will apply to reduce high tariffs more than low tariffs will bring what developing countries need from developed countries, in terms of tariff peaks elimination, which is a very important offensive for developing countries. We know that this formula has the potential to address the problem of tariff escalation, which is the offensive of developing countries
[The formula] we've agreed we would use, that reduces more high tariffs than low tariffs, has these two benefits for developing countries. We also know that whichever cuts have to take place in industrial tariffs, developing countries have specific flexibilities in order to shield a part of the tariff line from a big cut. So the architecture is there and the principles are relatively few.
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So in a way it's already been framed more precisely than agriculture, where you still have 10 or 12 parameters to fix, there (on industrial tariffs) you've got three or four parameters to fix. So it's in many ways already simpler.
The developed world has built up, over many decades and often behind protectionist policies, diversified, strong economies. Now globalization has become something that suits them in their current situation. What would you say to somebody who says: Now that it suits developed countries, they're pressing for an opening of global trade, but shouldn't developing countries be able, behind a barrier of protection, to develop their own strategic industries without competition from the already-developed world?
Firstly, if you look at that history, that is true. The problem is that you don't wind the film back. We live in a world which has changed, where the merits of international division of labor are much clearer than previously, and there is no benefit in this world for countries with five, ten, 20, even 50 million consumers to protect their market and nurture infant industries. It will not work. It did work in the 19th century; it will not work today.
If you take Senegal or Tanzania, the notion that they could grow a diversified industrial and services base, protected by high tariff barriers, will not work. They simply won't get the necessary capital or foreign direct investment to do that. So inevitably the game is now more open.
Now, secondly, this having been said, developing countries will (in the agreement contemplated by the Doha Round) keep higher protection than developed countries. The average level of protection of developed countries today in industry is probably quasi-zero - three or four percent - and it is three times higher in agriculture, which is precisely what we are trying to address in the Round. Now for developing countries, the average level of protection is probably more in the zone of ten or 20 percent for industrial tariffs and double that for agriculture. So there will remain a difference. And of course the services part is not (concerned) with tariffs. The way you open your services market is geared nationally by governments.
And thirdly, it's very much now a question of the relevant size of the markets, which is why regional integration is so crucial, notably in Africa. The right level at which to approach economic integration and a better insertion in international trade is through regional integration.
And fourthly, we are also working on a revamping and refocusing of trade capacity-building, making sure - and this is not strictly part of the Round - the development assistance community, whether bilateral or multilateral, does a better job of addressing trade capacity bottlenecks in developing countries and notably in Africa.
Could you outline in the ideal timetable, how would things develop over the next couple of months?
Given the end of June trade permission authority deadline, it's more a question of months than a question of quarters. That's depending on the substance - substance comes first, timing second - but we know roughly where the window of opportunity now is.
It's the first half of this year?
Yes.
