Johannesburg — Negotiations to free up international trade culminate after seven years in a round of talks this week which will be crucial for Africa. Success would be in African countries' long-term interests, writes AllAfrica guest columnist Nkululeko Khumalo, while a failure would collapse the process for years.
The meeting of trade ministers which begins in Geneva on Monday presents the last realistic opportunity for member countries of the World Trade Organisation (WTO) to salvage something out of the Doha Round of trade talks and register at least a modest success.
But what are the key issues at this stage and what could the outcome mean for Africa?
When the Doha Round began, there was a general understanding that progress depended on whether members strike agreements in four major negotiating areas: agricultural trade between nations, access to one another's markets for non-agricultural goods; the right of citizens of member countries to sell their services in one another's countries; and development issues which have a particular impact on the world's poorest countries, otherwise called poor country concerns.
Though negotiations on services are generally complex, it appears there are no serious blockages. So members are basically waiting to see what happens in the negotiations over agriculture and non-agricultural market access before they make new offers in the talks.
On poor country concerns, developed countries offered to developing countries a lot of pledges of support and market access during the Hong Kong Ministerial Conference at the end of 2005. Least developed countries (LDCs) were offered duty-free, quota-free access for 97 percent of their exports. More importantly, cotton exports from LDCs would receive duty-free, quota-free treatment which should boost the ability of West African cotton growers to export their product to developed countries.
It is therefore clear that WTO member countries must broker a deal on agriculture and non-agricultural goods if this week's meeting, which in WTO parlance is called a "mini-ministerial," is to be successful.
Agriculture remains the most heavily protected and distorted area of international trade. Developed countries have continued to subsidize their farmers to the tune of over U.S.$300 billion a year in addition to levying high tariff duties on agricultural imports. Substantial liberalization in this sector is needed to enable competitive exporters from the developing world to realize gains that could fuel economic growth and poverty reduction.
The Doha Round negotiations are expected to result in an agreement to eliminate export subsidies; to reduce greatly the payments wealthier countries make to support certain of their constituencies, such as farmers; and to cut import duties.
This week, the WTO is seeking consensus to deal with cuts on certain types of tariffs and overall trade-distorting subsidies. Accordingly the revised draft agricultural text which will be the subject of the talks aims to secure consensus on a range of outstanding measures in the field of tariffs. Against the backdrop of the current food crisis, the talks will also seek consensus on special safeguard mechanisms that developing countries need to ensure that opening up freer trade does not prejudice their people's food security.
However, it is important to note that in most African countries, agricultural trade liberalization will not in itself immediately result in windfall gains: they just do not have the capacity to supply enough produce to take full advantage of lower tariffs and duties.
In fact, some countries depend on single commodity exports and stand to suffer serious economic and social shocks as a result of losing preferential treatment for those products. Moreover, LDCs and developing countries which have to import food – many of which are in Africa – will be threatened by increases in the prices of food imports when subsidies paid in developed countries are cut, forcing up the prices they will charge.
Nevertheless, a positive outcome at this week's conference would create favourable international incentives for increased domestic production and is definitely in African countries' long-term interests. A failure of the talks would just keep the status quo, which would harm their interests.
The area of access for non-agricultural products is one in which developed countries hope to make major gains and will go on the offensive in negotiations. They aim to force developing countries – especially the emerging economies with lucrative markets, such as Brazil – to reduce their often-high industrial tariffs.
However, the actual tariffs applied by many developing countries are lower than the "bound tariffs" formally reflected in their schedules of commitments in the WTO. So even if this week's conference results in reductions of tariffs in this area, they are unlikely to be substantial enough to lower applied tariffs.
South Africa's position differs somewhat: in its case the difference between bound and applied tariffs is so small that the proposals under discussion would result in significant cuts of applied tariffs. For this reason part of the proposed deal is to allow special treatment for South Africa.
Sub-Saharan African countries have more positions to defend than on which to go on the offensive in the talks. But they do have an interest in the elimination of tariff escalation – the practice of charging higher tariffs on processed goods than raw materials – because this, when practised by their key trading partners, which are mainly developed countries, cripples their efforts to export processed, value-added goods. Here a positive outcome in talks about non-agricultural goods will be good for Africa – it would open up new possibilities on development issues and would enable them to "harvest" the Hong Kong Conference pledges.
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Again South Africa is somewhat different. It is concerned with shielding its light manufacturing sectors such as clothing, textiles, and autos, which could be threatened by reducing the cost of developed-country imports. But it has much to gain from trade liberalization in the fields of heavy chemicals, basic iron and steel, and other resource-intensive manufactures. Most of its manufacturing exports market is in developing countries, especially within Africa.
This week's conference is crucial. If it fails, the slowing of momentum which is the inevitable consequence of the transition from one United States administration to another, would, as others have put it, thrust the Doha Round of trade talks into a coma for some years.
Overall, success would generally be good for Africa, especially the least-developed countries. An even better result would be possible if poor African countries were to get "aid for trade" assistance from developed countries, donors and development institutions in order to meet excessively-stringent human and animal health standards. It would also help them if the rules used to determine the country of origin of a product for purposes of international trade – which often operate as market access barriers even where preferential tariffs are offered – were relaxed.
Nkululeko Khumalo is senior researcher on trade policy for the South African Institute of International Affairs in Johannesburg.
