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HELP FOR POOREST COUNTRIES LIES IN WTO REVITALISATION

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WASHINGTON, Oct 1 2003 (IPS) - If the promise embodied in the name of the Doha Development Round is to be fulfilled after the WTO failure at Cancun, these negotiations must be re-vitalised, writes Ian Goldin, Vice President, External Affairs and United Nations Affairs of the World Bank. In this article, the author writes that rich countries need to take the lead in re-starting the multilateral process by making more ambitious offers than were on the table in Cancun, and developing countries should follow by showing increased flexibility to open their own markets. This will ensure that the developing countries are able to take full advantage of the benefits from investments in research and extension and rural infrastructure to enhance their global integration and trade. The potential benefits for the developing world from global trade reform are estimated to be as high as USD 349 billion per year when dynamic impacts are taken into account. The goal of Cancun was that business as usual cannot continue and that a new equilibrium needs to emerge that will give Africa a chance to benefit from the powerful engine of growth and poverty reduction that trade has proven to be in other parts of the world.

For Sub-Saharan Africa — the world’s poorest region, where almost half the population subsists on less than a US dollar a day — the failure of the World Trade Organisation (WTO) negotiations in Cancun last month was not good news.

If the promise embodied in the name of the Doha Development Round is to be fulfilled, these negotiations must be re-vitalised.

Rich countries need to take the lead in re-starting the multilateral process by making more ambitious offers than were on the table in Cancun, and developing countries should follow by showing increased flexibility to open their own markets. This will ensure that the developing countries are able to take full advantage of the benefits from investments in research and extension and rural infrastructure to enhance their global integration and trade — both with the huge markets in theNorth and with their neighbours in the South.

The potential benefits for the developing world from global trade reform are estimated to be as high as USD 349 billion per year when dynamic impacts are taken into account.

Many African countries have been carrying out reform programmes for two decades now. While these have partially reversed the negative trend, the results have been disappointing. In the 1990s, while per capita GDP in the developing world as a whole grew by 1.7 percent, Africa’s fell by 0.2 percent per year. It was hoped that the combination of improved domestic policies and global trade reform would boost Africa’s exports, particularly those of the agricultural sector, since this accounts for around 35 percent of GDP and 40 percent of export earnings. Yet the region’s share of global agricultural export value has declined almost continually from 8 percent in 1965 to 2 percent in 2000.

Some say that protectionism is not detrimental to African exports, since it primarily affects temperate products. This is misleading. One of the most important strategies for raising incomes of producers of tropical products, as well as reducing the macroeconomic vulnerability that comes from developingcountries’ high degree of commodity dependence, is diversification. This issue is of special importance for Africa: of the 26 highly indebted countries with export concentration of over 50 percent in three or fewer commodities, 20 are in Africa.

Temperate products are viable alternative crops in many countries, so policies that displace developing-country production in these markets obstruct diversification out of the tropical products. Processing of the raw materials in the country of origin would allow producing countries to capture more of the value-added of the final products. But every major developed country (and many developing countries as well) has ”escalated” tariff structures that tax these processed products more highly. These policies — especially those that operate in a counter-cyclical manner — also increase volatility in world markets, forcing producers and consumers in other countries to bear the costs of adjusting to shocks.

Increasing the productivity of African agriculture is another priority. The opportunities for investment and adoption of new research would be enhanced through trade reforms that increase market opportunities and decrease the volatility of prices facing producers, as these erode farmers’ savings and dramatically increase the risks associated with new investments.

Cotton is one of Sub-Saharan Africa’s rare success stories in the last 20 years, during which the continent’s share of world cotton trade rose by 30 percent. Moreover, cotton is a predominantly smallholder crop in Africa, with over two million poor rural households depending on it for their main source of cash income. Beginning in the late 1990s, the sector experienced a severe financial crisis caused by the poor performance of the state-owned enterprises in the West African cotton-producing countries and especially the fall in world cotton prices. This decline was caused largely by agricultural subsidies in the developed world –USD 3.7 billion per year to US cotton farmers, 0.7 billion from the EU.

The African producers in these countries are among the lowest-cost producers in the world. Yet cotton farmers are falling further into poverty. High trade barriers and huge subsidies to farmers are also the norm in many other commodities besides cotton, including rice in Japan and sugar and livestock products in the EU, Japan, and the US, to name just a few of the most egregious examples.

Overall, producer support in the OECD (Organisation for Economic Cooperation and Development) countries averaged USD 235 billion (with total transfers to the agricultural sectors of USD 315 billion) per year in recent years, compared to global official development assistance of USD 50 billion. What makes these policies especially unconscionable is their perverse distributional impacts. Like Robin Hood in reverse, they rob from the poorest of the poor and give to the rich in the richest countries, namely the largest farmers, since most of the payments are doled out in proportion to production or input use.

The goal of Cancun was that business as usual cannot continue and that a new equilibrium needs to emerge that will give Africa a chance to benefit from the powerful engine of growth and poverty reduction that trade has proven to be in other parts of the world. (END/COPYRIGHT IPS)

 
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