From Africa Recovery, Vol.11#3 (February 1998), page 19

LDCs still face tariff and trade barriers

Poorest countries get promises of better market access, as well as conditionalities

By Tim Wall

Promises of better market access and help to increase their export capacity were made to the world's poorest countries at a 27-28 October 1997 ministerial-level meeting held in Geneva by the World Trade Organization (WTO) and the UN Conference on Trade and Development (UNCTAD). But finance and trade ministers of the least developed countries (LDCs) were disappointed to see conditionalities attached to promised trade concessions, along with only slow progress on greater access for their textiles.

Strong measures are clearly needed. The 48 LDCs (of which 33 are African) have about 10 per cent of the world's population but ship only 0.37 per cent of global exports, and 1.4 per cent of developing country exports, according to a 1997 report published by UNCTAD.

The outcome fell well short of the stated goal of the LDC ministers, which was to have all tariffs and quotas on their exports lifted. But this was clearly a long-term rather than an immediate objective. WTO Director-General Renato Ruggiero had already proposed across-the-board zero tariffs on LDC products at the 1996 summit of the Group of 7 industrialized countries and again at the 1996 WTO ministerial meeting in Singapore. But requisite support was lacking (see Africa Recovery, Volume 10#4, January-April 1997). Still intent on helping LDCs to benefit from the new global trading environment, WTO member states represented in Singapore instructed the body to work with UNCTAD to set up an appropriate framework. The Geneva meeting was the result.

The European Union, which already allows duty-free access for many products from the African, Caribbean and Pacific countries through the Lomé Convention, said in Geneva that it would extend the same terms to Asian LDCs in 1998. The United States drew attention to its elimination, a few months earlier, of tariffs on 1,700 products from LDCs, and also to a bill before the US Congress which would grant trade advantages to African countries undertaking approved political and economic reforms.

The US and the EU together absorb roughly half of LDC exports, according to UNCTAD statistics. But developing countries as a whole also constitute a major market, consuming one-third of LDC exports. Therefore measures to improve access announced by Egypt, Korea, Malaysia, Mauritius, Morocco, Singapore, Thailand and Turkey set significant precedents, according to Mr. Chandra Kant Patel, UNCTAD's coordinator for LDC affairs. Other major partners such as Japan, Canada and Australia reminded the meeting of their liberal terms for imports of a wide range of LDC products.

The second phase of the plan agreed to in Geneva recognizes that without strengthened productive capacity, LDCs will not be able to take full advantage of more open export markets. An "integrated framework" sets terms for cooperation on technical assistance to LDCs among six international agencies: UNCTAD and the UNCTAD-affiliated International Trade Centre, the WTO, the International Monetary Fund, the World Bank and the UN Development Programme. The aim is to develop country-level work plans to modernize trade regimes, attract foreign investment and diversify commodity production. Eventually, a broader range of agencies, including the Food and Agriculture Organization, the UN Industrial Development Organization and regional development banks, are to be involved. Hong Kong announced a $1.25 mn contribution for technical assistance through the framework.

Promises unfulfilled

The action plan for LDCs presented to the meeting by the WTO notes that there is considerable room for improvement of existing systems for preferential market access, including implementation of the Agreement on Textiles and Clothing from the Uruguay Round of trade negotiations. Textile production is a classic start-up sector for building industrial capacity, and developing countries have long complained that Uruguay Round promises of easier access to major markets for their textile products have remained unfulfilled.

Neither will the 1,700 duty-free tariff lines added to the Generalized System of Preferences of the US help stimulate LDC textile production. Mr. Richard Rosenblum, who led the US delegation in Geneva, told Africa Recovery that one-quarter of the US tariff schedule, including textiles, is generally excluded by statute from preferential elimination of tariffs. "But we can do more for Africa," he said, referring to bills before Congress that would reward reforming African economies with, among other benefits, duty-free access for a wide range of products including textiles.

Still, much of the opposition to the otherwise generally well regarded US "African Initiative" concerns free access for African textiles, say Congressional staffers interviewed for this article. When the legislation is approved -- most likely in mid-1998 -- such access may have been bargained away.

And if there is no tangible increase in market access, African leaders may become disillusioned with an initiative that is often promoted in Congress as a substitute for wasteful foreign aid and a means to leverage greater democracy in African governments.

The emphasis in the draft US legislation on limiting preferences to countries applying approved political and economic reforms is only one instance of the conditionalities attached to trade agreements which drew complaints at the Geneva meeting from Egyptian Ambassador Munir Zahran and South African Trade Minister Alec Erwin.

Mr. Ruggiero's proposal to lift all tariffs and restrictions on LDC exports, along with other unilateral concessions, will be tabled again at the May 1998 WTO ministerial meeting, says Mr. Richard Eglin, chief WTO organizer of the Geneva meeting. "The door remains open," he said, "and anyone can step through it."

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