Trade and development: A complex future

This awareness led Peter Mandelson, EU Commissioner for Trade to observe recently that trade liberalisation is "not a silver bullet for development". Louis Michel, EU Commissioner for Development Cooperation has also urged that the objective of concluding the Doha Development Round (DDR) of WTO negotiations should not focus solely on trade policy. He has further elaborated that it requires a virtuous interaction of the development triad of aid, trade and development.

I agree with this view. Completing the DDR with a purpose of promoting sustainable development for developing countries has become paramount. This assumes significance given the fact that we now have Pascal Lamy, the former EU Commissioner for Trade as the Director General of the WTO.

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Europe and the rest of the developed world have already moved forward by signing up to the Geneva agreement concerning the phasing out of export subsidies and their equivalents for agricultural products. The Union, despite its internal problems, has signalled that it also stands ready to flesh out its plans on agriculture and to negotiate real improvements on market access to the EU. This, they want to do, only on a reciprocal basis.

It appears however that this reciprocity does not preclude special and differential treatment. It is reassuring to note that provision remains for poor countries benefits to be commensurate with the depth of liberalisation that will be agreed upon. It has also been made clear that poorer countries would benefit by signing up to international trade rules that are being crafted with a development purpose.

It is in such a scenario that the WTO can play a positive role. The WTO can further poverty reduction by using all tools in its toolbox to ensure a progressive integration of developing countries into the global economy. Bilateral agreements on trade and development, such as the European Partnership Agreements with the ACP countries could also play a crucial role. These have to be seen as a "stepping stone" to the ACP's further integration in the multilateral trading system. Such an Agreement could also be drawn up for other LDCs elsewhere. This type of agreement could be driven by the trade integration strategies developed by these countries relative to their individual needs. Consequently, this would allow for all necessary transitory steps to make market opening in LDC countries a success, despite their asymmetrical nature.

There is also another factor that needs to be addressed. Europe has been progressively opening its markets to poor countries through preferential trade agreements, but South-South trade and trade between the least developed countries (LCDs) continue to be hampered by tariffs. I feel that the EU and the rest of the developed world need to step up their efforts at capacity building and supply side development through aid for trade. This is important because while trade supports development, it also needs adequate supportive action. The time has come, I believe, for both the developed and developing world, to focus on innovative policies to facilitate trade integration and trade adjustment. There is no other option but to work together and make 2005 the year for action. The next few months will offer a unique window of opportunity with the WTO Ministerial meeting in Hong Kong.

It is true that some elements continue to pose problems. One such aspect is the debate as to whether the Generalised System of Preferences was still adequate. Some have termed this facility as "unwieldy and anachronistic". The developed world has to however understand that it is still an important development tool in their toolbox. Unfortunately, a number of EU Member States do not appreciate this approach. One can only hope that their opposition will reduce over time.

No discussion of this topic will also be complete without reference to the overall climate for international trade. Like many others, I am worried about what is happening in Europe. People's fears and anxieties are being enhanced because of globalisation. Recent weeks have shown an increasing resistance to free trade and open markets. This, in turn, is generating political populism. Democratic Europe has to understand that it cannot construct barriers to trade. The solution to growing unemployment does not lie in insulating themselves and building a fortress Europe.

The prosperity of the developed world has been built on an open market and free-trade system. Europe, in particular has to compete with emerging markets. One hopes that the EU Member States and the WTO, under its new leadership will embrace competition as a source of innovation. If this does not happen, trade talks will end up facing a 'cul-de-sac' -- a dangerous proposition for the rest of the world.

I now turn to the crucial question of capacity building. This is vital for developing countries. They have to bring their products up to international standards (sanitary, phytosanitary, etc.). These standards are in place because consumers in developed countries demand them. These are not non-tariff barriers but can sometimes end up being indirect sources of sanctions. This must not happen. In this context, the developed countries must come forward and help to strengthen existing ability in the developing countries. This needs to be done because there is a direct relationship between production, export through unfettered trade opportunities and poverty reduction through increased employment in the rural areas in developing countries. It might be helpful in this regard to give attention to the prospect of multinational companies being instrumental for capacity building. I know that this is a sensitive area for politicians, but greater discussion is called for on this subject.

In this context, it would also be useful to understand that there is need for a multilateral approach to trade. This is probably the best way to bring the benefits of open trade under fair rules to the widest group of countries and citizens. It is important that a balanced approach is taken. This will facilitate the lifting of the majority of the world's citizens out of poverty. It will also protect the environment in which these people live. Trade, aid and environment need to be part of the same package.

Trade liberalisation will also have to be underpinned by simultaneous actions on development aid and governance. An integral approach is needed, where development and trade will be linked in a mutually reinforcing way.

Any future discussion will also need to consider with greater clarity the link between trade facilitation and investment and both these factors being facilitators of growth and development. It is true that there has been a perceived tension between development, industrial policy and trade policies, but the countries in which progress and growth have been best were those, which had been allowed to manage their own industrial policies. Malaysia and Korea are excellent examples of this. Future negotiation in Hong Kong will need to heed this factor.

We must not forget that if development is the objective, then trade is the tool with which to achieve it. Developed and developing countries have to work together to achieve this goal. The governments have to serve as a helping hand in facilitating trade and maximising the benefits of market forces. Promoting growth and development, improving the standards of living and tackling poverty reduction have to be at the heart of using trade for development purposes.

International commitment to the UN Millennium Development goals has underlined that development is now the number one priority. These goals have also become a top agenda item for the international trading system and it is now recognised that the system has to be rebalanced in favour of developing countries.

The Doha Agenda had put development at the core of multilateral trade negotiations for the first time. Both developed and developing countries have to assume their responsibilities for this potential to materialise. Developed countries will have to facilitate market access in agriculture and other areas of export interest for developing countries. Similarly, developing countries will have to reform their policies to take advantage of open markets in developed countries and strengthen regional trade (i.e. South-South).

The ball is now clearly in the court of the international community. They will now have to come forward and provide the necessary support -- for developing countries in their involvement in multilateral trade negotiations; analysis and implementation of multilateral trade negotiations; trade-related legislation and regulatory reforms; trade facilitation including tariff structures and customs regimes and finally, support to regional trade arrangements.

Muhammad Zamir is Member, Advisory Council on the WTO, and also a former Secretary and Ambassador.