By Roberto Azevêdo
GENEVA, Jan 22 2016 (IPS)

In 2015 the international community took some huge strides forward on a number of vital issues.

There was the agreement on the United Nations new Sustainable Development Goals.

There was the remarkable breakthrough in Paris in the fight against climate change.

Roberto Azevêdo

And, late in December, at the World Trade Organization (WTO) ministerial conference in Nairobi, members agreed a set of very significant results. In fact, they delivered some of the biggest reforms in global trade policy for 20 years.

We must seek to capitalise on this progress in 2016.

Let me explain in a bit more detail what was delivered in Nairobi.

The Nairobi Package contained a number of important decisions ­ including a decision on export competition. This is truly historic. It is the most important reform in international trade rules on agriculture since the creation of the WTO.

The elimination of agricultural export subsidies is particularly significant in improving the global trading environment.

WTO members ­ especially developing countries ­ have consistently demanded action on this issue due to the enormous trade-distorting potential of these subsidies. In fact, this task has been outstanding since export subsidies were banned for industrial goods more than 50 years ago. So this decision corrected an historic imbalance.

Countries have often resorted to export subsidies during economic crises ­ and recent history shows that once one country did so, others quickly followed suit. Because of the Nairobi Package, no-one will be tempted to resort to such action in the future.

This decision will help to level the playing field in agriculture markets, to the benefit of farmers and exporters in developing and least-developed countries.

This decision will also help to limit similar distorting effects associated with export credits and state trading enterprises.

And it will provide a better framework for international food aid ­ maintaining this essential lifeline, while ensuring that it doesn’t displace domestic producers.

Members also took action on other developing-country issues, committing to find a permanent solution on public stockholding for food security purposes, and to develop a Special Safeguard Mechanism.

And members agreed a package of specific decisions for least developed countries, to support their integration into the global economy. This contained measures to enhance preferential rules of origin for these countries and preferential treatment for their services providers.

And it contained a number of steps on cotton ­ helping low-income cotton producers to access new markets.

Finally, a large group of members agreed on the expansion of the Information Technology Agreement. Again, this was an historic breakthrough. It will eliminate tariffs on 10 per cent of global trade ­ that’s 1.3 trillion dollars worth of trade, making it the WTO’s first major tariff cutting deal since 1996.

Altogether, these decisions will provide a real boost to growth and development around the world.

This success is all the more significant because it comes so soon after our successful conference in Bali that delivered a number of important outcomes, including the Trade Facilitation Agreement. (TFA)

The TFA will bring a higher level of predictability and transparency to customs processes around the world, making it easier for businesses ­ especially smaller enterprises ­ to join global value chains.

It could reduce trade costs by an average of 14.5 per cent – with the greatest savings being felt in developing countries.

The Agreement has the potential to increase global merchandise exports by up to 1 trillion dollars per annum, and to create 20 million jobs around the world.

That’s potentially a bigger impact than the elimination of all remaining tariffs.

So the challenge before us is very significant.

For instance, during or the last two years, we have been trying to reinvigorate the Doha agenda on development, exploring various ways of overcoming the existing difficulties. We tested different alternatives over several months of good engagement, but the conversations revealed significant differences, which are unlikely to be solved in the short term.

But the challenge is not limited only to the question of what happens to the Doha issues, it is about the negotiating function of the WTO. It is about what members want for the future of the WTO as a standard and rule-setting body. And the challenge is urgent.

The world won’t wait for the WTO. Other trade deals will keep advancing.

The wider the gap between regional and multilateral disciplines, the worse the trade environment becomes for everyone, particularly businesses, small countries and all those not involved in major regional negotiations.

But the outlook is not bleak. I said at the outset that 2016 was full of promise. I truly believe that ­ because, while we face real challenges, there are also real opportunities before us.

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By Aileen Kwa
GENEVA, Aug 6 2013 (IPS)

The current discourse on Global Value Chains by key proponents and also the World Trade Organisation (WTO) secretariat is that developing countries should liberalise – in goods and services – and conclude a trade facilitation agreement.

Some have also suggested that any restrictions on exports should be eliminated (e.g. export taxes on raw materials). According to this discourse, these strategies would help developing countries more deeply integrate into global value chains as they can import more cheaply and thus export more competitively.

The picture on closer examination, however, is not so simple.

Global value chains are not a new concept. They have been a part of trade since colonisation when developing countries were the providers of the raw materials, sent to the developed countries for use in a variety of ways, including in their production of higher-end goods.

It is true that today, these value chains are expanding, simply because of the expansion of transnational corporations across the globe. Lead firms, mostly based in developed countries, and some developing countries, use suppliers from all over the world to carry out their various functions.

Developing countries, however, are differentially placed along global value chains. Some have a share in higher value added sections of the value chains, but most do not.

Not all players can equally gain from their participation in the value chains. It all depends on where a country is lined up in terms of technological capacities, the depth of their manufacturing capacities, how developed their services sectors are, the size of their enterprises, their managerial expertise and their ability to meet the standards of the international markets – to name only a few criteria.

Due to these and other limitations, developing countries could open up, and they could become more integrated, but the quality of their integration may not be of real benefit.

As Rashmi Banga notes in her paper “Measuring Value in Global Value Chains”, countries may be linked to the chains, but they may not be “gainfully” linked to them.

In today’s value chains the value is captured in the design and conceptual stage where having the technology is important, as well as in the final sales and marketing end. However, this is not where most developing countries are located.

Developing countries are generally located in the lower value manufacturing section of the value chain; and even then, this is true for some, not all, developing countries.

Mere liberalisation will not upgrade countries’ technological or services supply-side capacities. Nor will a trade facilitation agreement – expediting the entry of imports through a range of customs procedures (some of which are very costly and administratively intensive) – be a magic bullet in catapulting developing countries into competitiveness on the global scale.

In sum: there are no shortcuts.

In any case, the central question for developing countries is not about entering value chains at any cost. The real question for developing countries is how they can deepen their production capacities, so that they can garner a bigger share of the value added.

To do so, the path of industrial development, agriculture and services development must be undertaken. We need structural transformation in industry if we want our manufacturing capacities to move beyond being assembly lines, increased production capacities in a range of services sectors, and a more vibrant agricultural sector, especially in countries with large rural populations.

The agricultural sector cannot be overlooked or bypassed if a large section of the population is engaged here and depends on agriculture for employment. Just like jobs in manufacturing, people must be provided with fair prices and wages. This is critical to create domestic purchasing power, and to fuel domestic demand and thus the demand for the growth of local industries.

Failure to engage in structural transformation and deepening of production capacities could mean that countries get caught in supplying raw materials and being sites for low value added manufacturing tasks.

Very often, the domestic or regional markets offer better opportunities than global value chains for developing countries in terms of obtaining a larger share of the value added.

Trade policies must be used strategically to support industrial development of key sectors, and should be approached dynamically, changing over time as some industries mature and new ones develop. In that context, across-the-board liberalisation will not help.

In conclusion, the global value chains, as noted by South Africa’s ambassador to the WTO Faisal Ismail, do not provide a framework for helping developing countries develop beyond their current comparative advantages. UNCTADs latest analysis of the value added trade data also shows that more exports do not mean more value-added exports.

The global value chains discourse comes from the place of wanting to further ease the operations, movement and access of transnational corporations across global markets, with real dangers for developing countries’ firms and industries.

The priority for developing countries is building their production capacities. To this end, the flexible and dynamic use of trade policy instruments (tariffs, government regulations) that support industrialisation, agricultural and services development, complemented by fairer trade rules, are necessary.

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