From Africa Recovery, Vol.15 #3, October 2001, page 7

WTO Watch

Africa opposes new round of trade talks

Leaders instead urge full implementation of earlier WTO agreements

By Gumisai Mutume

On the eve of the World Trade Organization (WTO) meeting, scheduled to take place in Doha, Qatar, from 9-13 November, African countries are unified in their opposition to a new round of trade negotiations. This could again halt efforts by industrial nations to launch formal talks on further liberalizing global trade.

Together with other developing regions, Africa blocked the launch of a new "round" at the WTO's last ministerial meeting, in Seattle in December 1999, on the grounds that the continent had not seen any benefits from the agreements it had signed as part of the 1994 Uruguay Round. Some 70 per cent of gains registered have gone to industrialized nations; the remainder mostly to a few large export-oriented, developing countries, according to the UN Development Programme.

Mr. Iddi Simba, Tanzania's trade minister and chief negotiator for Africa at the WTO, notes, "Many developing countries would prefer to solve the implementation issues remaining from the Uruguay Round agreement before advancing to the next stage of multilateral negotiations." Negotiations under the Uruguay Round were launched in 1986 and ended in Marrakesh, Morocco, in 1994, culminating in a daunting list of about 60 agreements, annexes and decisions. The agreements, which are legally binding, gave birth to the WTO in 1995.

After meeting in Addis Ababa, Ethiopia, in June this year to prepare for the WTO meeting, African trade ministers concluded that they should continue to push for the "effective implementation of WTO obligations by developed countries." They noted that they had "expected that a number of trade-related issues of importance to African and other developing countries such as trade and commodities, trade and finance and transfer of technology would be taken up in the WTO work programme.... This has not materialized."

At the ministerial meeting, the 142 members of the WTO will need to resolve the concerns that have arisen from the uneven implementation of the existing agreements. Mr. Munir Akram, ambassador of Pakistan to the WTO, speaking on behalf of developing countries, noted that very few, if any, of the 50 or so most urgent implementation issues are likely to be resolved beforehand. "This justifies the evaluation that there have been no welcome advances, no positive developments, almost no headway towards positive decisions," he said.

African products face restrictions

For Africa, the most important issue remaining from the Uruguay Round is the failure of developed countries to open their markets to products from the South. Many African countries continue to face restrictions in areas in which they have a competitive advantage -- agriculture, labour, textiles and apparel. They are asking that provisions governing a practice termed "tariff escalation" be revised to allow for greater access of African products into industrial nations. Tariff escalation involves charging low tariffs on raw materials imported from the South, higher tariffs on imports of partially processed goods and much higher tariffs on fully processed products. Core exports from developing countries such as metals, textiles, cereals, leather, sugar, fish, tobacco, rubber and wood products are often targeted. Duties on these products can peak higher than 100 per cent over base duties. At the WTO, industrial nations have committed to reducing their levels of tariff escalation, but developing countries say the levels of reduction are too small and the process is too slow.

Photo: © iAfrika Photos

The World Bank estimates that if 37 sub-Saharan countries were granted duty-free access to markets in Canada, the European Union (EU), Japan and the US on goods currently subject to peak tariffs, their total annual revenue from non-oil exports could increase by 14 per cent -- or some $2.5 bn for the region.

There have been efforts to provide preferential access for African goods into industrialized markets. These include the Africa Growth and Opportunity Act signed into law in the US last year. It covers 1,800 products, but due to its onerous requirements many countries may fail to take full advantage of the act. Also, not all African countries are eligible. It is open only to nations that have strongly market-based economies, are committed to democracy and protect private and intellectual property rights (see Africa Recovery, July 2000).

Another attempt to open Northern markets to African goods was the Cotonou Agreement signed between the EU and the African, Caribbean and Pacific (ACP) states in Benin last year. The accord replaced a preferential trade agreement known as the Lomé Convention, but it can only be enforced if ratified by all EU members and two-thirds of ACP countries. By March, no EU member had ratified it and only a handful of ACP countries had done so.

In February, the EU approved an "Everything but Arms" initiative to grant tariff-free and quota-free access to European markets for all products from the world's 49 least-developed countries, except armaments.

"Unfortunately, the EU proposal was swiftly attacked by powerful vested interests that succeeded in removing commodities such as sugar, rice and bananas from the liberalization commitments," Mr. K.Y. Amoako, executive secretary of the UN Economic Commission for Africa (ECA), told the African trade ministers conference in Addis Ababa. "This has led some critics to change the name of this initiative from 'Everything but Arms' to 'Everything but Farms'." The EU began to eliminate duties and quotas in March, but those on imported sugar, rice and bananas are to be phased out over a period of years. Critics point out that the initiative is not legally binding and countries must also go through lengthy processes before it can be implemented.

Yet, under pressure from economic reforms mandated by the World Bank and International Monetary Fund (IMF), Africa reduced or removed its tariffs on developed country imports even earlier than required under its WTO commitments. This exposed African farmers to unfettered competition from countries with strong economies, from which farmers had been somewhat sheltered by a combination of high tariffs and state subsidies. Bank President James Wolfensohn states that, on average, African governments have cut tariffs in half since the early 1980s. In return, he notes, "Too many countries have been left out" of the benefits of liberalization. "For trade to promote development that really benefits the poor, we have to focus on the needs of developing countries inside the trade negotiations." Unlike African leaders, he believes implementation concerns should be dealt with in a new negotiating round.

Domestic support measures also have not been removed. Under this practice, governments support local producers, like farmers, with financial subsidies and incentives which make it possible to sell their products more cheaply. African states, together with other developing countries, want a substantial reduction in these measures in the industrialized countries, on the grounds that they flood international markets with agricultural produce from rich countries, lower global produce prices and harm small farmers. Under Uruguay, industrial nations should have reduced domestic support measures that affect trade by 20 per cent by 2001. Instead, agricultural subsidies among the 30 members of the Organization for Economic Cooperation and Development (OECD) of the industrialized countries have risen from $182 bn in 1995 just after the agreement was signed, to some $360 bn today, according to the UN Conference on Trade and Development. This equals sub-Saharan Africa's combined gross domestic product in 1999.

Among the agreements signed in 1994 at Marrakesh was a special ministerial decision under which industrialized countries undertook to compensate the poorest "net food importing countries" for the negative effects that were anticipated following the liberalization of trade in agriculture. Rich nations, together with the Bretton Woods institutions, would provide food aid, grants and technical assistance for agricultural development. By 1997, 64 countries faced with rising food import costs had qualified for such assistance, but the provision has never been implemented, developing countries say. The World Bank, however, says it is providing technical assistance to countries that ask for it.

Implementation costs money

According to the World Bank, many African countries have not been able to meet their WTO obligations because of the high costs associated with the reforms. It notes that some requirements ignore the fact that these countries do not have the financial or technical means to meet the new standards. In one study, the Bank estimates the cost of implementing three of the Uruguay agreements in developing countries would be some $150 mn. These were the Customs Valuation Agreement (which sets guidelines on determining the accurate value of imported goods), the Sanitary and Phytosanitary Measures (SPS) agreement (which sets out rules for food safety, animal and plant health) and the Trade Related Aspects of Intellectual Property Rights agreement (TRIPS).

To comply with the customs agreement, developing countries must draft new laws, computerize customs systems, recruit and train staff and provide laboratory and detection equipment to fight smuggling.

Photo: © iAfrika Photos

The SPS agreement permits importing countries to restrict trade to protect the health and lives of people, animals and plants. Experts point out that most developing countries have to overhaul their systems in order to meet these requirements, while developed countries have only to apply their domestic regulations fairly at the border. Developing countries acknowledge the need for proper sanitary standards, but find themselves facing greatly differing interpretations of the requirements among importing countries. Many feel that these standards are sometimes used by industrialized countries to block developing-country imports, as another "non-tariff" barrier to trade.

Many agree that the TRIPS agreement also makes undue demands of many African countries, requiring states to abide by conventions they have not previously chosen to sign. Most developing countries should have been "TRIPS compliant" by last year, but are not. The least developed have until January 2006 to become compliant, but most have little prospect of doing so. The US continues to state that it supports the "full and faithful implementation" of the WTO agreements, meaning that developing countries must meet the obligations they took on in Marrakesh, and within the agreed-upon time frame.

African countries have also requested the WTO to amend TRIPS by removing clauses that allow the patenting of life forms. While Africa is supported by some countries in other developing regions, the US in particular is opposing changes. Africa has also proposed that TRIPS be revised to ensure that nothing in it can be used to prevent developing countries from providing their citizens with access to medicines at affordable prices (see Africa Recovery, June 2001). The Bank study concludes that "developing countries have neither the economic incentive nor political will to implement these obligations.... From their perspective, the implementation exercise has been imposed in an imperial way, with little concern for what it will cost, how it will be done or if it will support their development efforts."

Liberalization rolls on

Even as Africa continues to press for favourable terms on the agreements of the last round, experts say it needs to fully prepare for current and future negotiations if it is to avoid repeating past problems. It is commonly accepted that the continent was hobbled by its lack of negotiating power during the Uruguay Round. Unlike wealthier countries, African nations had limited influence over what was included or excluded from the agreements.

"African countries are much wiser now, better informed, more critical, and, despite the paucity of their resources in Geneva and in the capitals, they are beginning to make a significant contribution to the debates," notes Mr. Yash Tandon, director of the International South Group Network, a Zimbabwe-based non-governmental organization. "Gone are the days when African countries could be taken for a ride."

The industrialized countries are pushing for a new round that will liberalize rules for investment, competition policy, government procurement, trade facilitation and electronic commerce -- all designed to open domestic markets to foreign companies. These countries -- home to most of the world's multinational firms -- want to limit the ability of governments to favour domestic companies over foreign firms by, for example, reserving import or distribution rights for local businesses or national government agencies. Developed countries also want the removal of "barriers to investment," such as government policies that compel foreign corporations to form partnerships with local firms or to recruit and train local professionals. The same countries would like the WTO to allow members to restrict trade with countries that fail to meet certain levels of environmental protection, do not guarantee the right to unionize and permit the employment of children.

Even if no new round is formally launched, however, the liberalization process will not stop. Ms. Sophia Murphy, of the US-based Institute for Agriculture and Trade Policy, notes that some of the most contentious agreements contain clauses that call for new talks to take place without further authorization. "Whether or not a broad round is launched this November, governments are already obliged to review the existing agreements on agriculture, services and intellectual property rights."

As part of this "built-in agenda," negotiations continue in Geneva on ways to further liberalize under the Agreement on Agriculture and expand the General Agreement on Trade in Services, both signed in 1994. Civil society activists find the negotiations in services the most troubling because the changes -- which would affect the provision of health, education, environmental protection, social security, transportation, postal and municipal services -- could radically transform and limit the role governments worldwide can play in providing public services, placing them in the hands of multinational corporations. The negotiations are scheduled to conclude in 2002 and will inevitably involve additional obligations on developing countries.

"If they care about the trade system," says Ms. Murphy, "they will also focus on how to create more equitable trade rules for poor countries and how to harmonize trade rules with social and environmental policy."

*****Box 1***** Africa's agenda for a 'development' round In July, trade ministers from 25 least developed countries (LDCs) in Africa met in Zanzibar, Tanzania, to adopt a common agenda for the WTO's meeting. It includes: Implementation of all Uruguay Round commitments: Industrialized countries must ensure "full and effective implementation" of all obligations incurred under the 1994 Uruguay agreements. These include delivery of promised financial and technical resources, as well as assistance to the poorest "net food importing" countries. Increased market access: Industrialized nations should commit to duty- and quota-free access to all LDC products, and eliminate all domestic support measures, including agricultural subsidies, that have had a negative impact on LDC exports. Exemption from TRIMs: The poorest African states are asking to be exempted from trade-related investment measures (TRIMs), set for implementation by 2003. Under these measures, they are obliged to remove legislation protecting local business and industry from open competition with foreign companies, as well as rules dictating that a percentage of local products must be sourced locally. Interpretation of TRIPs: The LDCs are seeking a formal interpretation of trade-related aspects of intellectual property rights (TRIPs) that acknowledges the right of poor countries to obtain at affordable cost medicines to combat HIV/AIDS, tuberculosis, malaria and other deadly diseases. They also want assurance that TRIPs will not be interpreted in a way that endangers food security; and clarification that it will not be used to grant patents to life forms and biological processes. Action on "built-in" agenda: The LDCs are pressing for continuing negotiations on the Uruguay Round's "built-in" agenda: the General Agreement in Trade in Services and the Agreement on Agriculture. Against opposition from the richer countries, the LDCs want the trade in services negotiations extended to allow easier movement of workers from developing to developed countries. As part of the agriculture discussions, the LDCs want industrialized countries to immediately remove export subsidies on goods that are also produced by developing countries. No new issues: The LDCs do not want new issues brought into the negotiations. Nor do they want new rules on facilitating trade. They argue that global trade can be improved through more financial and technical assistance to narrow the gap between rich and poor countries in technical knowledge and human resources.

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