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3.1 Developments in trade negotiations III: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: Positions and prospects in WTO negotiations issue by issue

3.1 Developments in trade negotiations III: Economic Report on Africa 2007

Positions and prospects in WTO negotiations issue by issue

WTO negotiations have featured prominently in the headlines during the past
couple of years. However, the main protagonists, particularly EU and USA, have
not managed to bridge major differences on agriculture. This led to the deadlock
in the negotiations in July 2006, with resumptions of talks under discussion at the
moment of writing. Despite the lingering and significant disagreement among the
various parties, the negotiations have achieved some clear advances. This section
details those advances that are of special interest to African countries. It is hoped that
they will not be lost if the negotiations stall again.

Agriculture

Agriculture is a sector of key interest for African countries, as it could be a main contributor
to poverty reduction and diversification policies (UNECA 2005). Agricultural
issues have been the most contentious in the negotiations. Nevertheless, some
advances were seen in the African common positions, either in the form of agreed
principles or in bracketed text.

The main achievements of negotiations under agriculture included first and foremost
the decision to abolish all export subsidies by 2013 and by the end of 2006 for
cotton exporters. As negotiations are still blocked, the opportunity of the elimination
of cotton export subsidies by end 2006 has already been missed.

In terms of market access, the negotiations established a tiered formula with four
bands resulting in steeper cuts for higher tariffs. There were also talks of tariff cappings. UNECA research has shown that African countries overall would reap larger
benefits from a significant reduction in tariffs (UNECA 2005a). The formula applies
different sets of cuts to developed and developing countries, in line with the proportionality
principle sought by African countries (African Union 2005). Moreover,
LDCs were also exempted from reducing tariffs. This would have allowed most
African countries to preserve substantial policy space in agriculture, another major
objective of the Africa group.

The principles of sensitive products, alongside special products and special safeguard
mechanisms were also agreed despite wide disagreement on actual figures. Developing
countries, including those from Africa, had strongly argued in favour of special
products and special safeguard mechanisms that would be reserved for developing
countries and allow special treatment for goods that have a role in rural development
and the livelihoods of rural communities.

Advances were also achieved on domestic subsidies. The choice of a tiered formula
had been retained for cutting domestic subsidies, both for the blue box and the
Aggregate Measures of Support (AMS). This should translate into higher reduction
of the subsidies in countries where they are higher. Further disciplines were proposed
on de-minimis subsidies. A substantial reduction of domestic support measures
including subsidies in the North were supposed to match the long-term interests of
most African countries (UNECA 2005; Osakwe 2006).

Non-Agriculture Market Access (NAMA)

Although they had been somewhat delayed due to lack of progress on agriculture,
talks on NAMA had also made some significant advances. For example, LDCs would
be exempted from tariff cuts, an important objective for many African countries.
The talks also allowed the choice of a Swiss formula for tariff reductions, entailing
larger cuts on higher tariffs and a harmonizing effect (UNECA 2004).

The principle of proportionality in tariff cuts for NAMA products was also emphasized
in the Hong Kong Declaration. Developing countries were permitted to proceed
to smaller tariff cuts than developed countries. However, the precise level of coefficients
for the formula remained undecided. The level of these coefficients is crucial
as it determines the depth of the tariff cuts and whether or not the cut goes beyond
simply reducing “water in the tariff” and results in actual reductions in applied rates.
S&D is therefore available through the NAMA differentiated formula.

S&D treatment for developing countries was also reflected in NAMA negotiations
through another provision of the Hong Kong Declaration: paragraph 8, which enabled
developing countries to either shield a proportion of their tariffs from the effect
of the formula, or alternatively to opt for a less-than formula reduction of tariffs for
a larger number of their tariffs. Under NAMA, only those developing countries with
more than 35 per cent of bound tariff lines had to apply the formula, which means that eight African developing countries have to apply the formula.11 Other countries
had to increase their binding.

UNECA studies show that while an overly ambitious liberalization scenario in
NAMA could lead to gains in welfare for Africa, there is also a risk of de-industrialization
of the continent in favour of specialization in agricultural production
(UNECA 2006b). Apart from a few important products that are still protected by
high tariffs in developed countries, the potential gains in terms of depth of tariff
reductions appear to be greater in other developing markets (South-South trade).

Special and differential treatment (S&D)

The pro-development agenda of the Doha Round had different dimensions. These
included S&D treatment, enhanced market access, balanced rules, policy space and
flexibilities. The ability of the Round to ensure that the multilateral system strengthened
the development dimensions for the benefit of developing countries is of major
interest to African countries in the negotiations. African countries in particular
advocated for S&D treatment to be mainstreamed in all aspects of the negotiations
in order to enable them to achieve their legitimate development goals.

Such treatment relates to the preferential provisions in the final agreement in favour
of developing countries and LDCs, the two categories in which African countries
feature. For instance, through S&D treatment in agriculture negotiations, African
countries were looking for modalities that would allow them to pursue agricultural
policies in support of development, poverty reduction strategies, food security and
rural livelihood concerns.

S&D treatment underpins the quest in the Doha Round for full operationalization
of the principle of proportionality in the modalities. By taking into account the existing
tariff structure of the African countries the treatment would help to strengthen
the development dimensions of the Doha Round. With respect to the industrial
tariffs, the modalities aimed at reducing or eliminating tariff peaks, high tariffs, and
tariff escalation and would allow autonomy to African countries to pursue industrial
policy in line with their development strategies. It would also allow them to initiate
and deepen diversification of their economies.

Other issues

In services, negotiations had been initiated prior to the Doha Round by the so-called
“in-built agenda” as stipulated by paragraph 1 of Article XIX of the General Agreement
on Trade and Services (GATS). Negotiations on services resumed in January
2000, before the Doha Ministerial Conference. Noteworthy for African and other developing countries, Article XIX-2 of GATS made S&D treatment an explicit element
of the GATS negotiations. Therefore, developing countries were only expected
to undertake commitments in trade-in-services liberalization compatible with their
development levels.

Negotiations have been following a “request and offer” approach. Deadlines for submissions
have been missed but since March 2003, 69 offers have been made and 30
of them subsequently revisited.13 These offers cover both sectoral and horizontal/
multisectoral proposals. As with the negotiations on agriculture and NAMA, and
of importance to many African countries, LDCs are not expected to undertake new
commitments in services in the current Round. For other African countries, negotiations
in services represent both opportunities and challenges (UNECA 2005a,
UNCTAD 2005).

Trade in services has increased significantly worldwide and African countries do
have some potential comparative advantages in service sectors such as tourism and
in labour-intensive sectors covered by Mode 4. Moreover, the international provision
of business support and infrastructure services in sectors such as insurance,
banking, and consulting can greatly reduce the cost of doing business and increase
competitiveness in developing countries (UNCTAD 2002). On the other hand,
liberalization must be planned and sequenced carefully and requires development of
an appropriate regulatory framework (UNCTAD 2005a).

There is no “one size fits all” in international trade in services and the negotiations
in services liberalization cover a very large number and variety of industries. For
developing countries, and in particular African ones, the progress in the negotiations
– as highlighted by the small number of offers - is hindered by the lack of experience
in negotiating their interests in services. African countries need development support
both for their supply capacity in services and for their capacity to participate
effectively in negotiations on trade in services. It is suggested by several observers (for
example Sauvé, 2006) that Aid for Trade programmes should be targeted at enhancing
the capacities of African countries to respond to such challenges.

Related Articles
  3.0 Global Development Challenges for Africa in 2006: Economic Report on Africa 2007
  1.8 References: Economic Report on Africa 2007
  V. D. The Future of China-Africa Economic Relations: FACTORS INFLUENCING THE GROWING TIES
  III. C. Commercial Policies: THE ROLE OF CHINA’S PUBLIC SECTOR
  4.0 Diversification trends in Africa: Economic Report on Africa 2007

Article Tags: African countries, agriculture, export subsidies, tariff cuts, UNECA, WTO negotiations



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