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Trade and Development: the road ahead

Video guest: Josephine Mwangi

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Friday, 17 June 2005

Trade and Development: the road ahead

Extracts of Commissioner Peter Mandelson, EU Trade Commissioner,to the EPC-KBF Conference on Trade and Development held today in Brussels.

Take Africa. Its plight is indeed a scar on the conscience of the world. Because of abject poverty, civil war, poor governance. Africa is a continent in dire need of capital, of investment, yet capital flight from Africa is massive. But Africa’s problems also stem from opportunities lost. Africa is not taking its share of the benefits of globalisation. The continent remains at the margins of the international trading system.

Second, the relationship between trade and poverty is not a simple one. There is, incontestably, a positive association between open markets and growth in developed countries. In recent years, no country has successfully developed by turning its back on international trade, or long term capital flows.
The link of trade to poverty is more complex. Trade liberalisation is not a silver bullet for development. It may be a necessary condition for sustainable development. But such development also requires an appropriate proper institutional framework and above all supply side capacity to facilitate trade.
The conclusion from this, is simple. In the WTO, the notion of a “development round” – our main objective, our mandate – cannot be met within one narrow policy area – ie trade policy – alone. It requires a virtuous interaction of the development triad of aid, trade and debt.
What, then, do we need to do to deliver on the development promise of the multilateral trade talks under the Doha agenda?
We must complete the Doha Development Round on a basis from which we all gain clear benefits, but has as its driving purpose the promotion of sustainable development for developing countries. This requires action from all WTO members. Including, but not exclusively, the richer countries.
Last summer, Europe, along with the rest of the developed world, made a huge in principle down payment to ensure the success of the Doha Round. We signed up to a text in Geneva that committed us to far reaching agricultural reforms, including the phasing out of export subsidies and all their equivalents. We stand ready to flesh out our plans on agriculture and to negotiate for real improvements in market access to our markets for agricultural exporters, but this can only be done on the basis of fair reciprocity.
In particular, to make the Round a success we now need from the more advanced developing countries a new willingness to make a commitment in principle to cut their industrial tariffs from the rates they currently apply, not theoretical upper limits – and genuinely to open up their markets in services in business sectors that are critical to their future successful development. One single statistics captures it all: 70% of the tariffs currently paid by developing countries are to other developing countries.
Fair reciprocity does not require equal and precisely balanced reciprocity from all developing countries alike. We are not asking for concessions to be made by the poorest developing countries or those vulnerable economies that have special problems, as a result for example of preference erosion in commodities on which they are critically dependent. I accept the argument for special and differential treatment.
But let’s be clear here: pro development outcomes require an ambitious result of the DDA. Poor countries’ benefits will be commensurate with the depth of liberalisation that will be agreed. And they will only benefit if they sign up to international trade rules, not if they shy away from them.